Now let's start the presentation on Nidec Corporation's performance for the Third Quarter of Fiscal Year of 2024. We would like to thank you very much for your participation despite your busy schedule. We have Mr. Mitsuya Kishida, President and Chief Executive Officer; Mr. Tatsuya Nishimoto, Executive Vice President in charge of Automation and Machinery Business Unit; Mr. Takamitsu Araki, First Senior Vice President in charge of company's M&A activities; Mr. Akinobu Samura, Senior Vice President and Chief Financial Officer.

Hi, I am Teruaki Urago, General Manager of the Investor Relations Department, and I'll serve as the moderator for this meeting. In today's presentation, we have two sections. The first section will be about the Company's latest performance results, followed by the second section, which is about the press conference of Nidec’s TOB best acquisition of Makino Milling Machine. We will have a question-and-answer session for each of these sessions. Thank you very much for your understanding. Now we would like to start the first section of the presentation. First, Mr. Samura will present an overview of the Company's latest earnings results, followed by the presentation and explanation detailed by Mr. Kishida. This first session is expected to last until 5:45 p.m. Mr. Samura, please.

Thank you very much. I would like to give an update on the financial results of this quarter three. Please take a look at the middle section of the page over here. First of all, net sales, which was up by 11.5% to JPY1.946 trillion. This is a record high result in terms of net sales. When it comes to operating profit, it was up by 5.0% to JPY175.5 billion, which is another record high result for us. When it comes to operating profit before income taxes as well as profit attributable to owners of the and these were down by 4.7% and 6.7%, respectively. This is due to the temporary effect of the depreciation of the -- and the fluctuation change in the currency exchange rate, resulted in the financial loss of JPY22.5 billion. And all the other numbers, exchange rate-related data are remaining unchanged since the first half of this fiscal year. Next, I'd like to give an update on this -- the product -- overview by product group. The demand for hard disk motor could remain to be high. And demand for the AI server has been growing rapidly. And due to the late in the delivery of the -- of some products to the customers, there has been some loss in the latest quarter, this past latest quarter. Next, automotive products, profitable situation in China remain continued. And due to some positive impact, we have been able to reduce the amount of debt. We have some sluggish situation in European and American car manufacturers. And we have done some restructuring efforts in this amount, and then we have lost some profit. And when it comes to the appliance, commercial and industrial products, we have done some consolidation of our business basis in this area. We have spent about JPY2 billion for that effort. And we have U.S. motor products, which are very profitable. There has been a seasonal temporary loss in the momentum, and there has been other effects. Due to that -- all of that, we have suffered some loss. And lastly, when it comes to machinery, we have had some ongoing sluggish situation, but there are signs of recovery in this business. We have press machines and machine tools sales have increased and the results are as you can see here on the slide. And these are the details over here on this slide. You can see the year-on-year changes. You can see the chart -- and you can see the increases and decreases from the previous fiscal year. And we have the exchange rate, which is up JPY91.5 billion in terms of net sales. And machinery -- small precision motors and machinery -- small precision motors have enjoyed increased sales and operating profit. And the other ones have enjoyed increased sales, but some of them have suffered a decreased operating profit. And when it comes to quarter-on-quarter changes, as you can see, there are some decreases in some of these businesses, including small precision motors, automotive products and appliance commercial and industrial segment. I would like to skip the detailed explanation here, which -- because this is overlaps with the previous slide situation. Next, promoting cash flow management, JPY41.1 billion for the operating cash flow. You can see the steady growth improvement from the past fiscal quarter, but slightly decreased from the previous fiscal year. And we are doing the Company-wide efforts to increase our efficiency as a business. We are continuing to accelerate our pace of cash-generating activities. And these are the major points. That is all for the summary of our financial situation. From now on, I would like to explain the major topics from quarter three of this fiscal year. And I'd like to give an update on our activities for fiscal year 2025 and thereafter. First of all, please take a look at this chart over here. This is our initial original business, hard disk drive motor business. This is our history over the past 35 years or so. we have hit the bottom in the 2023 fiscal year, and we are expecting to increase in the numbers of IDD shipment from 2024 commercial year. We -- data center-related hard disk drives are spearheading this effort. When it comes to our Nidec situation, please take a look at the chart on the right, you can see that these products account for 60% of the entire product portfolio. And this hard disk drive business continues to be a growing business for us. Let's take a look at this slide over here. This is one of our new businesses, some of our new businesses here, water cooling system business includes GPU and chipsets, and we are enjoying the growing momentum of this business over here. In Q3 and Q4, these quarters are truly important for us when it comes to the preparations for the future growth. That's what we realized once again. Here are the details of the preparations here. We need to expand our component business, includes quick coupling, LCM and other important components are included here. When it comes to quick coupling, which is something that I've touched upon last time, we need preparations for our Chinese customers as well as our American customers, and we are utilizing the Philippine factories for that. Starting from December, we have started shipping our components that are explained over here. When it comes to sales route, that's another important topic here. As of today, our water-cooling business is we are limited to direct sales of our products to server makers such as Supermicro, Fujitsu, among other companies. That's a direct business between us and them. And plus, we have data center business operators, system integrators, OEM and OEMs are strongly making a strong demand for us to ship them our products. E&O types and other types of components are what we are preparing to ship to them. Timings are very important, and we would like to give you a very detailed explanation in the future. When it comes to Q3 and Q4, we will make sure to do a very good solid development of our products. There is one more topic over here, production-related preparations. Please take a look at the photograph over here. This is our Thailand factory. We have this Rojana Industrial Park. Factory 2 and Factory 6 are the areas where we are producing -- making preparations for producing CDUs. These are the solid preparations we are making for upcoming Q1 and thereafter. That's what I'd like to report to you. Thank you.

Next. This is the water-cooling system, including the telecom business. We are talking to Fujitsu, and we would like to further broaden this business to address the technologies with the next-generation telecommunication technology. So, what we are trying to offer with the five business pillars is that this will be necessary for all the five business pillars. Also, for that, as Nidec, we decided to participate in IOWN. For this initiative, I would like to offer you some report. Nidec has been providing the cooling system for the base stations, and we have a broad range of telecommunication-related businesses. But we'd like to make further contribution to this sector. So, for our five pillars, we are going to acquire this technology that will be a common base for five business pillars. And that's the reason for participating in IOWN. And also, MOEN is engaged in the battery energy storage system. And there are some updates that I'd like to make. Here, we are enjoying strong order taking. In this fiscal year, the business unit has expanded to roughly JPY50 billion. Going forward, we expect a CAGR of high 20% to 30%. And with that in mind, we would like to grow the business. As of today, this business is mainly focused on the European market to grow. As you can see at the bottom right, I visited this factory in December in the suburban area of Lyon, France. There are nine buildings, and we are making production in these nine buildings. But we are going to relocate to [Santien] to the new plant in order to consolidate these nine bases to expand our business. From the beginning of FY '25, this will contribute to our business. We are also making similar preparation in Italy to expand our factory. So, this is for the large capacity and large voltage control will be enabled. We believe this is a competitive edge. And we would like to utilize this high-quality production expertise to be competitive. As of today, on a project basis, we have an order of roughly $2 billion. So, we want to make sure that this business will become one of the strong contributors to the profit. And today, in the second part, we will offer you more details on this topic. Also, we made a letter of intent in order to maximize the corporate value. With a high technology and also high solution capability, we are targeting a Makino Milling Machine. And in order for us to become one of the leading machine tool manufacturers, and we want to maximize our corporate value working together with the target company. Nidec has built our technology based on 97 M&As across the world. And we'd like to work together closely with the Makino Milling Machine, leveraging on the high management capability to become one of the world's leading machine tool manufacturers. So, we'd like to be in discussion in good faith with Makino Milling Machine. And Mr. Araki, Mr. Nishimoto will offer you details in the second part of today's meeting. In the last three years, we have continued to conduct structural reform on the auto business. We are now in the final phase of the structural reform for this business. As of October 1, the automotive existing business was transferred to ACIM. The existing auto business -- as you can see on this slide, there were three; one, two, three indicated on the slide. The first one is the automotive motors manufactured in China. And the second business is automotive motors manufactured in Europe and America. And with more than 10 group companies in Japan, we have the third automotive business, which is catering to the Japanese OEMs. There are some seasonality, but each of these businesses have generated about JPY200 billion. So altogether, the automotive existing business has a size of JPY600 billion. For many years, we struggled with the second part of this auto business where we will be manufacturing in Europe and Americas. We have rolled a lot of countermeasures and there are a lot of things that we were doing for a structural reform. And from Q3, we commenced on rolling out these initiatives. So that said, as the countermeasures, what we needed to do has already been implemented. In Q3, Q4, we will continue further improvement so that the second business domain will start to make profit contributions from FY '25 and from FY '26, '27, we would like to make a double-digit profit contribution from this business. And we have put together a business plan to achieve that. And also, for many years, the traction business was causing concern of the investors. But as was indicated earlier, the traction business based in China is starting to generate profit from Q3. And for Q4 and from FY '25, we have been able to turn around the business so that they will continue to generate profit. And also, the Stellantis JV business in Q1, Q2, Q3, we're seeing improvement in reducing the losses. So finally, in Q4, we will start to generate profit. And also, two years ago, we have been communicating about the traction-related component business. And we are going to exploit this opportunity. And Stellantis is injecting money into the deep motors. And from that, we have received the order from December. And from Huawei, we were certified as the manufacturer, and we plan to ship out in February. Also, for the component business, we have made progress. So, for the traction business, we are making progress on par with the plan. For the 10 months with the new management team, we have embarked on new initiatives, but there are more that we can do. And from FY '25, we will start the business plan leading up to FY '27, and we want to turn around the business foundation so that we will be highly profitable. And for that, we are going to roll out various structural reform and the ACIM integration, automotive integration and mobility services innovation are some iconic measures that we have taken. And we will make further progress in trying to further consolidate our businesses without making any exceptions. We will consider how the business should look like to improve. And in India, where we cannot achieve enough growth on a stand-alone basis, we will conduct a group-wide measure to accelerate our growth. And on top of that, the business space consolidation will be conducted on a cross-functional basis, and we will start the fundamental reform. And we are feeling a good impact and results from those initiatives, unnecessary assets, divestitures and also the intraregional fundamental reform will be conducted in each of the regions like Europe. And as new management team, we will continue to augment the structure as an organization. The operation capability will be improved and the DX will be supporting those initiatives. The investment plan is in place for us to facilitate the structural reform. The head office functions will be globalized, and we will make a fundamental change effective April 1 in the HR area and also the global organizational team and the CFO teams. And the current organization structure will be revisited so that there will be a change in the organizational structure inviting participation from the overseas talent.

Starting from this fiscal, we have a technological committee, and we have touched -- discussed all the reforms on software and other issues. We will continue to do that relentlessly. Starting from 2025, we are going to launch a new system. We have this new three-year for the business plan, new three-year strategy to fiscal 2027, and we would like to give you updated in the future meetings. Structural reforms will be necessary and the consolidation of business bases will be necessary. Investment in new organizations, investment in human resources, structuring reforms were all necessary. We would like to share with everyone all the detailed information and the latest information so that we can visualize our service. This is going to be a full-fledged effort for us to globalize our service, and we are going to become a truly important world leading efficient, high-efficiency organization. This type of efforts have already started. Starting from this second half of this fiscal year, we have already started some of these actions. And for the three fiscal years starting from the next one, we would like to establish ourselves as a high-efficiency organization. That is all from me. Thank you. Thank you very much. Now, we'd like to open the floor for question-and-answer session. A - Unidentified Company Representative: Thank you very much. [Operator Instructions] First, we would like to entertain questions from securities analysts followed by people from media. First of all, does anyone among the security analysts have any questions? The person in the front row, please.

Thank you very much. And this is Takayama of Goldman Sachs Corporation. I'd like to give you three questions here. First of all, when it comes to individual products, including water cooling and traction motor related products, can you elaborate on numbers of these products for this fiscal year as well as for next fiscal year? What type of forecast do you have for these products, when it comes to sales and other important element? When it comes to non-supermicro customers or non-CDU products, how much do these other products account for in your product portfolio?

I would like to give the answer. And as necessary, I'd like to have [indiscernible] as well as Mr. Samura would like to add some information as necessary. When it comes to water cooling business, for this fiscal year, we have exchanged several numbers, JPY200 billion at the beginning of this year. And during the middle of the process, we like to -- we wanted to start aiming for JPY400 billion instead. But at this moment, we are now going back to the initial level, which is JPY200 billion. But in the end, I believe this business can become a JPY500 billion business in the future. We'd like to start the preparations for that from now. When it comes to the breakdown of the non-Supermicro customers, as of today, we are still in the planning process phase. We are working with Super Micro as well as Fujitsu. We would like to continue to grow with these companies, and we'd like to expand our sales with other customers as well for this fiscal year and thereafter. Urago-san, do you have anything to add?

No. Okay.

Here's my second question. When it comes to e-Axle related products, can you elaborate on that topic as well?

When it comes to e-Axle products, we have a Chinese business going on. Every quarter, we are at the breakeven point. When it comes to Q4 and thereafter, we are going to have production starting for other customers as well. When it comes to annual numbers, it's about 160,000 unit level. When it comes to NPE, Q1, minus 3 and Q2, JPY1.6 billion in deficit. And Q3 was about JPY600 million in deficit. So, we have a very good chance for us to go into the positive territory in Q4 and thereafter.

This is Samura speaking. When it comes to our preparations for traction motors in 2025 fiscal year, in Europe, we have established a mass production phase. This quarter, the production will be 100,000 unit level. For the next quarter, 150,000, on an annual basis, it will be 6 million unit level. So, the sales will be more than JPY100 billion or so.

Here's one thing that I'd like to confirm with you. When it comes to water cooling, and e-Axle businesses, sales will be JPY50 billion and JPY100 billion for e-Axle, are these accurate numbers?

Well, these numbers -- I believe these numbers have been subjected so far, depending on customers, but how accurate are these numbers.

We are going to promote the visualization. And one of the important elements in that regard is element of the components or parts of our products. It is very difficult to predict in the industry how much is the demand for GPUs, for example. It's very difficult to predict at this moment. It's fairly difficult to predict actual numbers for GPUs and other similar products. We are in a preparation period as far as we are concerned. As far as January through March period is concerned, we can visualize more and more of these numbers. When it comes to traction business, in China, we have destruction business taking place and visualization is very good. So accuracy of the numbers regarding this particular market is very high. But the remaining portion, which is we have NPE, which is a joint venture with Stellantis. We need to make sure to understand the business very accurately. And quarter-by-quarter, we have suffered a loss so far. I myself, I am a member of the Supervisory Board of this company, NPE joint venture, NPE. So, I would like to make sure to talk to all the people concerned about increasing accuracy.

My third question is about automotive and ACIM business unit. What is the timing for the improvement of profitability? It would be -- would it be next fiscal year, quarter one of the next fiscal year? That's what I thought that you said, but you have some suffered loss in Q3 and Q4. How is this growth curve is going to be? Can you give me some forecast on that?

When it comes to Q3 and quarter four, when it comes to existing AMEC business that was integrated into ACIM, this organic business will be -- continue to be in a very severe situation. And Q3 and Q4 will continue to take very good measures.

That's what I wanted to understand. In Q1 of the next fiscal year and thereafter, I would like to make sure that this segment will be able to start making contributions profit-wise to the Nidec Group so that they can eventually achieve the double-digit operating profit ratio thereafter next year and onward. How about automotive? I believe you have just talked about ACIM business or I just talked about AMEC Organic business unit that has been integrated into ACIM business unit. How about MOEN, which is more profitable than the other business of the ACIM business unit? I believe our profit ratio seems to be down. Is this because of the restructuring cost? I believe when it comes to Q3 and Q4 performance, you have BESS business and alternator business, other businesses as well, how much contribution do you think these businesses can make?

At the beginning of this year, when it comes to MOEN and ACIM business units, we have the seasonal factors are different from the past. Prior to that, we have the restructuring efforts and organizational changes so that we can start a very good pace from the beginning of this year -- calendar year. And we are making results for that.

When it comes to Q3, you have -- ACIM has suffered some loss. We have this 10% decrease has been recorded when it comes to sales. And this area, profitability is very high. That's one of the reasons for the loss. When it comes to Q4, we have positive seasonal factors including HVAC whose business is going to be more profitable. When it comes to structuring reform, which has been repeating, which have European. When it comes to -- especially in the area of the C&I business, the effects of the restructuring will take effect from Q4 and thereafter. That's my prediction here.

And lastly, for the overall picture, I think you will be disclosing the midterm target when you announce the full year results. But for the initiatives that you are rolling out, if they work out for all the segments, I think on a full year basis, that will give you an incremental profit of like JPY60 billion. And when would you aim for JPY70 billion? What kind of trajectory are you foreseeing for the consolidated performance?

Well, we want to achieve double-digit profitability as soon as possible. From FY '25, we would like to achieve that target. But having said that, we need to have specific initiatives. And after that, we believe we can achieve JPY10 billion each quarter.

So, would that be like back end of next year?

Yes, like JPY60 billion, JPY70 billion towards the back end of the next fiscal year?

Yes. Any other questions? Are there any questions? The person on the left?

This Akizuki from Nomura Securities. I want to confirm some numbers first. Looking at the free cash flow, Q3 was very good. On the other hand, looking at the inventory level, I think because of the currency, superficially, inventory went up. But I think in reality, inventory level came down. In Q2, you had a buildup of inventory. So, with that, you reduced the production and Q-on-Q, the profit went down is my take. Is that the correct interpretation? And you mentioned about the U.S. motors and there is a change in that mix. But was the fact that I mentioned reflected in your numbers?

Yes, as you pointed out, with the currency, at the first glass, our inventory looks like it went up, but we have seen some improvement in reality. In Q3, we made efforts led by myself, Kishida, to reduce the inventory across the different business units. So, we expect to see further improvement going forward.

But that trend continued in Q4. So, is inventory coming down in Q4 as well?

Yes. And that will kind of accelerate in Q4. The current level is still for deviating from the optimal level. So, we have accelerated our efforts, but it's not enough yet.

And then you may have to sacrifice the operating profit to a certain extent. Also, the OP shortfall, how are you going to compensate for that shortfall? Sorry to be short-term minded. But could you give me a sense of what you plan to do?

Yes. Looking out into Q4, we are doing restructuring initiatives, including the business base consolidation. So those are undertaken. And as we consolidate the basis, we will have some idle spaces, which can be divested to generate cash. So, some of that will be put into practice in Q4 to compensate for the shortfall in OP.

I see. And now looking at the strategy, I have a question to Mr. Kishida. The headquarter restructuring is something that you intend to achieve. And I think this is something new. What are the intention? Are you going to -- you mentioned about augmenting the CFO functions? But from your perspective, where do you want to augment from the current organizational structure? And what kind of initiatives would you be rolling out?

Yes. Over the last 10 months, I went to many different business spaces across the world and met many good talents. So, I felt that we should not just have the team in Japan put together the strategy. And also, we have to work out a new compensation structure across the globe. So, there are many things that we need to revisit. So, I confirm that by visiting the business basis. So, what I would like to do is from April 1, I want to first work on the globalization of the HR capacity. And for the strategy team, like the M&A strategies and as business strategies, we have different teams working on these initiatives. We would like to consolidate that so that the global talent will be coming on board to that team. So that's the second initiative. And third is to work on the CFO functions. Mr. Samura is leading the way, and we have close exchanges with the CFOs of different businesses across the world. But conceptually, Mr. Samura would like to have an integrated operation of different CFOs from different bases. Also, we would like to build a true engenuine global CFO organization. And we think we can start the discussion over that measure. And I'm sure that you will be talking about the Makino Milling Machine TOB in the next session.

But from a different perspective, I have this question. For the machine tool business, I think I can ask the question in the second section of this meeting. But by getting together with Makino Milling Machine, Nidec production technology will be elevated and I think that can be achieved through this transaction. But more specifically, by having Makino come onboard the group, what would be the positive impact for the Nidec organization?

Yes. Nishimoto-san, please.

Sorry, this is Nishimoto from the Machine & Automation business unit. Within the machine tools business, machining center accounts for 40% of our business. Globally, the machine tools market is JPY11 trillion and 40% is machining center. And Makino's machines are highly precise, and they are addressing a very big part of the market. Nidec uses a huge amount of machine tools from motors and others. Also, we are a mass consumer of the machine tools. Also, by working together with the machine tool company, this would dramatically change the speed of business development. As an example, Nidec Machine tools, the former MHI machine tools joined the group in '21. And from thereafter, we are making gearboxes and reducers. And we were not able to get the optimal machine tools when we needed. So, when the economic cycle is good, we were not able to procure those machines. And we were not able to cooperate with the machine tool companies. But with Nidec Machine tools, we were able to improve that. For the robot applications, we have the small-sized reducers. And now we have a global market share of 25%, and we started from scratch. And this was accelerated by the gearbox team of the former MHI Machine tool company. And for the press business, the important press machine is the five-axis press company and the horizontal boring nodes. MHI was doing this and also Pharma was doing this. We acquired these companies. And after that, the business became more sophisticated, and we were able to manufacture what we wanted to get. And for the gear machines and the life science ones, it's 2%, 3% of the market of the machine tool industry. Makino is making the best quality machining centers in the industry. And if they work together with us, we can be like the pilot case for Makino machine for them to make external sales. So, there will be a lot of benefits. And on top of that, for Nidec, as Kishida-san mentioned earlier, for the water-cooling system, we have Takisawa in the group for the latches, and we have been able to manufacture quite a coupling together with Takisawa. Also, we were able to reduce the number of machines required. And -- so if Makino comes on board, we believe that the opportunity will be huge.

To be more specific, we have -- we are now better as the user of the machines, and we can aim high when it comes to profit. We are truly excited about this opportunity. Thanks for very much for your answer.

Does anyone have any questions from among the securities analysts, the person over there, please?

This is Goto of Mizuho Securities. I'd like to give you one question here. When it comes to organic AMEC Organic, which has been integrated into ACIM business unit, which has been a quarter ago, do you have any new findings about what has been a problem and what has been improved since then? What is your opinion about that, Mr. Kishida? According to your explanation, you will be -- you are confident that you will be able to -- this new organization will be able to achieve a 10% operating profit ratio. And now you can understand the reality and you can see the light at the end of the tunnel, so to speak.

This is probably a very basic thing about the business, but there are two things that I'd like to mention here. When you got risks and issues have been visualized on a global basis, which is a very huge gain for us. When it comes to visualization of risks, we have some risks related to our customers. We have internal risks. All of these risks have been visualized. All of these risks have been something we can see now as a person involved in the business. This is a very important step forward. One more thing that I'd like to add is that we are currently able to make solutions to solve these risks-related issues. So far, we have this organic business of AMEC business unit, and we have issues in Poland and Mexico. We have been very region-specific so far. But now as the new -- part of the new organization is in business, we can make global solutions for Nidec as a group. There is one factory, not just for one specific region, but we have operation system in which we can offset some problems of one specific factory by borrowing some resources from other places. That's a major step forward in my opinion.

Is there any other questions? Now we'd like to entertain question. Please go ahead, sir in the middle.

This is Nita of Nikkei Newspaper. When it comes to machine tool business that you have mentioned, for this fiscal term, your products have been increased -- the sales have increased. In specific areas -- which specific areas -- in which specific areas do you have -- have you been able to enjoy the increased sales, if that's okay.

Moti-san, do you want to answer the question? Well, Samura-san, please answer the question.

You need to be very aggressive in answering questions. When it comes to regions, -- when it comes to this overall machine tool market, it has been fluctuating, changing very steadily and the order intake has been growing very dramatically. On the order intake basis, it has increased by 1.5x, including Japan and all around the world, in China and the United States, all the other areas have been enjoying the increase in the order intake. When it comes to sales, it will be -- they will be recorded only in the next fiscal year and thereafter. Please look forward to that.

Now, we like -- we have 5:45 p.m. now. Therefore, we would like to finish the first section of this presentation. And now we would like to go into a second section about this -- that we intend -- regarding acquisition of Makino Machine tools, we would like to have this second session until 6:15 p.m.

This is Nishimoto speaking. I'm in charge of the Machine and Automation Department, and Mr. Araki will be making a presentation together with me. Please take a look at this information over here. This is a summary of our letter of intent, and please take a look at this part. Please go to the next slide. And this is about the premium 40%. It's about 41.9% to be exact. -- we have this profitability power. That's what we need and synergies are what we can expect from having this company joining Nidec Group. This is the type of premium that we believe is very appropriate when it comes -- given this type of synergies. I'd like to give you some explanation over here about my business unit, Machinery & Automation business unit, we have six different business units in the Nidec Group. And we have this sixth one, the youngest one business unit is this my business unit, Machinery & Automation, which was established two years ago, April 2 years ago. We have a machine tool business, press machine business and a gearbox business. When it comes to machine tool business, we have Nidec Machine tool. This joined Nidec Group August 2021, Nidec OKK, which become a part of Nidec Group in February 2022, PAMA February 2023; and Takisawa November of 2023. And you can see the overall sales on this slide, JPY224.4 billion past the fiscal -- previous fiscal year, 17% for Gearbox business, 30% for press machine business and 53% for machine tool business. One thing that I'd like to explain here and emphasize here is as follows. It was 51 years ago, Nidec was founded by four people. And it has grown to this big this size through M&A and also based on organic growth. It's the same thing can be said about our business unit, machinery and automation business unit. First, we purchased the largest press machine company in the United States Minister. All of these -- almost all these companies, owner found owner the owned companies, and we convinced these owners, which is usually difficult to do, but we eventually -- and these flower marks indicate that these companies are owner-owned companies. And blue ones are the reducer companies, manufacturers, and yellow ones machine tool companies or the orange ones or brown ones of machine tool companies. When it comes to M&A at Nidec, we usually -- in principle, we have the owners of these purchased companies act as such even after the purchase. And these people stay there at the top. And we have [indiscernible] on top of that, this person is the owner son. And we have [indiscernible], which just said the last one. And this is -- this person has been the President since before being purchased by Nidec. All of these companies are people from the leaders of these companies are the leaders even before being purchased by Nidec. In press machine, Japan accounted for 60%. Now Japan is down to 80% of the entire press machine business. Reducers, 20% now, which used to be 60%, that's for gearbox business. When it comes to machine tool business, we are in the middle of a change. Makino is yet to be included in this chart. We are in the middle of the change. Japan used to be 43%. Now it's down to 35% according to the chart. And this number is going to go down further in the future. Please go to the next slide. This is about the sales and operating profit of the machine and automation business of the Makino Group. When it comes to sales, a little over JPY20 billion in 2012. And as you can see, the numbers have been growing larger and larger towards 2023, as you can see. And here's the business strategy, including why we decided to purchase Makino Milling Machines. One-stop solution is very important factor for us when it comes to purchasing Makino Milling Machine. We have been able to offer everything from small ones to large one lays to other milling machines and other products at one stop when it comes to our customers. The larger, the better because the purchasing power, it becomes larger as we grow larger. And investment capability will become larger, and we can diversify our risks by purchasing many machine tool companies. When it comes to reducers and other products, we have been able to diversify our businesses in Europe, Asia and in the United States as well as other part of the North America. And we have quite a few customers. We are not depending upon automotive customers alone. This is how we like to secure our very good stable businesses.

Also, for the product, this is the product mapping for machine tools, vertical lines indicate the size of the market. The upward section is larger and the downward section is smaller. And the horizontal is the level of precision in the functions. So, let's say commodity rate is highly advanced. So, we have the PAMA Nidec Machine Tools and Nidec Machine Tool large. These are highly profitable, but the market size is small. Makino Milling Machine is addressing the machine milling centers, which is a huge market and highly profitable. So not just with the product lineup, we would like to create a synergy in other areas. And also, our Chinese companies are catching up very quickly. Also, Taiwanese companies and also the Mainland Chinese companies are addressing the general purpose and lower-priced machine tools. These are the other machines for manufacturing machine tools. And if we cannot manufacture in Japan, what's going to happen? As Kishida-san said, we will not be able to manufacture something of high quality. So, we have to work together to protect our competitive edge. So right now, these products are mapped in different sweet spots, but we should not lose against the Chinese players. Also, we want to establish a strong machine tool company. This is the revenue side. The DMG Mori Seiki is the largest company, followed by Okuma, Makino Milling and J-Tec. It's not indicated here, but Haas and also Yamazaki Mazak in Japan are private companies, and they also have similar revenue size. And if we join together with Makino Milling Machine, we will be the second largest, and there will be a much bigger investment capacity. And we have acquired many machine tool companies, and each time, we were able to generate good synergy. There were multiple loss-making companies, but they turn into profitable companies. Nidec Machine tool now is generating over 10% operating margin. And for distribution channels, we have a very strong distribution channel, especially in China. So, machine tools are selling very strongly using our existing distribution channel. As Samura-san mentioned earlier, compared to two years ago, the sales of machine tools in China has increased by 1.5x. And Nidec is using a lot of machine tools, including the water -- sorry, the cooling system. So, we can be the pilot case. We can be the showroom to sell to the customers. And this will be a huge benefit for Makino Milling Machine. And this slide explains the potential synergies with Makino for technology and development, sales and services and production and management. And for production, Makino is strong in Asia, but Europe and U.S. are markets where they do not have their own production sites. We have strong production capabilities in these regions. And what's important for building this plant is securing the people and also partnering with the local municipalities. And procurement is very difficult. So, starting from scratch is very complicated, but we have these production bases across the globe, and Makino will be able to capitalize on our production capabilities. And next slide indicates that there is a very little overlap between Makino Milling Machine and Nidec. With OKK, there are some overlaps, but the product types are different, like highly resilient products, and we have different product offering. So great synergy can be expected. And the market address is very different. We are strong for the large size and Makino is also strong in pharmaceuticals and aerospace. Robots and energy is something that we overlap, but these are growing markets. So, working together, we can grow in this market as well. And on top of that, not just in the machine tools, but Nidec is making a variety of products where machine tools are required. So, working together with us, Makino can also grow. And this is a similar explanation. This is a bit specific. Makino is strong in the machining center. compared to our five face milling machines or the onboarding machines, their machines center is relatively small. So, by having a wide range of product offering, we can be a one-stop solution for the customers in procuring the necessary product. And this is our global production footprint. Makino is strong in Asia. We also have basis in Asia, but we also are strong in Europe and U.S. as well. And regarding how we have conducted these M&As at Nidec and also why we are successful in our M&A strategy is that we maintain the existing management team. Even after acquiring the Company, we do not break them down like HR, accounting, sales and the procurement development, everything stays in place. And they will have the independent strategy to come up with competitive new products. Some people may think that this is very inefficient, but we were very persistent in maintaining our post integration strategy. So that's all from me. I'll hand over to Mr. Araki.

Yes. This is Araki speaking. After announcing the TOB at the end of December, as you can see here, on January 10, Makino Milling Machine set up a special committee, and there was a request for arranging a meeting. So, on the 15th of January, from the special committee, they sent a request letter to extend the date of the commencement of the TOBs. And on the 17th, the technical -- at the Makino’s Technical Center, we met with the four members of special committee. And regarding the response to the request letter, we have made a press release. And also yesterday, we received another request letter. And as a process, yesterday, for each market and regions, we are proceeding for the approval, and now we got the clearance under the U.S. antitrust law.

And we have made a proposal when it comes to the M&A method. I believe this has been a focus for everyone. I'd like to give an explanation on that. When it comes to M&A in general, this is very known for non-listed companies. But when it comes to proposals for listed companies, this is -- there is no statistical data on this, but first of all, we need to understand what type of discussions need to take place and what type of conclusion that are made. These things are highly disclosed to the public in many cases. In the United States, in such a circumstance, when such a proposal is made, you have to be able to disclose that's a legal requirement to disclose such information to the public upon being made such a request. But there is no such a legal requirement in Japan back in August of 2023 that there has been a directive issued by Japan Ministry of Economic Trade and Industry, they established the guidelines for us to follow as companies. There are mainly three principles guidelines is the principle on the mutual profit and the trust what we need to respect the shareholders of the companies to be purchased. The transparency principle is also an important factor. We made a takeover proposal, and we made announcement on this proposal that we made. We have stakeholders, stakeholders are the core part of the shareholders, but we have other shareholders, including employees, business partners, customers, suppliers as well as people of the local community of the Company to be purchased. All of these stakeholders have to be able to express themselves. We need to understand how they feel about this type of purchasing. We need to establish secure places and opportunities for these people to express their opinions about the purchase -- such a purchase. Based on these guidelines, based on these three principles, we want to make sure to follow these guidelines. So, we -- this is how we come up with this strategy method to purchase this company, Makino Milling Machine. Nishimoto-san has already explained this part when it comes to the special committee. What he has explained is exactly what we explained to the people of the special committee. This is the first time for us to explain this to the public. This is the type of the proposal that we have made. This is what I want you, everyone here in the public to understand. We have already met with them once so far only. But, if possible, we would like to meet with the current members of the executive management of the Company of Makino Milling Machine. We would like to meet with them more frequently by having such opportunities. That's what we strongly hope for. By having dialogues frequently, we would like to eventually make sure that we will be able to convince Makino Milling Machine and eventually, they will be able to make their final decision about our offer to them. As has been explained by Nishimoto-san a few minutes ago, this offer is a very mutually profitable merit mutual for Makino Milling Machine and Nidec. I'm truly convinced of that. Next slide, please. We have received their opinion letter, as has been explained in our press release recently. There are some important points here that are included in our reply to them. These are the points that have been part of their questions to us for us. We have explained this to them, and these are all technical information. So, if you have any questions, please let me know after. We have Mr. [indiscernible] of the Company from the Company which has been serving as our partner and adviser for us. Now, we'd like to have a question-and-answer session here. If you have any questions, please raise your hand and receive the microphone from our staff. Please. Person in the middle. Thank you. In the front row.

This is Nita of Nikkei Newspaper.

When it comes to this method over here, Japanese M&A is going to change because of this new method. I would like to ask a question over here. What is the mean what is the merit? And what is the determination about this -- utilizing this method? I believe you are going -- you are going to have received some kind of request for postponement of dialogue with you from Makino?

One thing that I want to say is as follows. When it comes to this method, this is a relatively new method. That's for sure. But in addition to that, when it comes to our M&A, this is a very different method from our past method that we have utilized. Here's why. So far, our M&A software has been targeting companies that are on the verge of collapse, we were able to turn these businesses around. But from this time onward, we are trying to purchase an already successful company. We're not sure about the market's reputation of such company, but we are targeting already successful company. We would like to further create a better corporate value by purchasing such an already successful company. We like to grow our businesses, but not only that, we would like to further enhance the competitiveness of this industry compared with the rest of the world. We like to go one step further upward. That's what we are aiming to achieve. We truly respect their managing capability of the Company's executive management, Makino Milling Machines. And we would like to continue to have and consult with the members of the special committee of this company, Makino Milling Machine. That is all.

There's one more question for you. If you fail to obtain approval from the Company, what if you receive posing opinions from them? What are you going to do?

We will do our very best to try to work to convince them with sincerity. Even if you are posted, we would like to continue to work on purchasing the Company even if there are some opposing opinions.

Next, other questions from anyone? The person in the front row, to the left, please.

This is Takayama of Goldman Sachs. This is my second time to raise my hand here. Related to the previous person's question, you are going to meet with the members of the executive management going forward, and you'll continue to follow your plan even if there are some opposing opinions according to what you have just said. If there is any other company of your interest, are you still going to stick to Makino Milling Machines? You usually -- you target the EBITDA, the number of 8 to 12, do you continue to have the same strategy when it comes to EBITDA? Or do you really disregard such EBITDA ratio and you are going to stick to purchasing Makino Milling machine no matter what. What is your strategy for that?

Akinobu, please answer the question.

This is Akinobu speaking. As has been explained by Nishimoto-san a few minutes ago slightly, but this is not about every single case. But we have been able to turn many businesses around. We have such cases a lot in the past. It's not an apple-to-apple comparison when it comes to this purchasing offer and our past purchasing offers. But this company, Makino Milling Machines is already established company. And this is going to be -- this is a TOB takeover bid. still, it is -- the EBITDA ratio is less than 10. And we have had the analysis internally and this is a premium is necessary and sufficient. Compared with the other issues of turnaround related issues on the surface, this EBITDA ratio may be higher than the past cases, but it's still an appropriate level. The market value is the value that we have. And when it comes to true value of the Company, you have to think about all the different assumptions based on which the true value changes. But when it comes to Makino's stand-alone value, you need to think about synergies with us. That's a different valuation I'm talking about when it comes to stand-alone type method comparison market price is the base of our evaluation of the Company.

So, I guess you have some discipline on the price and you feel that this is a sufficient level as a TOB price.

Yes.

I see. And also, it may be a little bit too early to ask, but if this is completed successfully, I think your portfolio will reach the next level also to achieve your ideal vision, what are the other pieces of business that you want to acquire? So, for the latches, I think you have Takisawa, but you may want something larger. So, what are the gaps that you want to fill in for your business portfolio for the machinery business?

Well, at this point, for the latch, Takisawa is generating a synergy that's higher than expected. Takisawa's product lineup will be increased going forward. So not just utilizing the existing products. But as Kishida-san mentioned, the fueling system and also the coupling latches were produced. And also, at this point, we don't have an intention to buy a large company. But for machining centers, also earlier, we talked about 40% of the machine tools business with machining centers and 30% is latches. And then we will be discussing and coordinating together with Makino to determine the direction going forward because Makino's European sales is about 8%. So, we will be in discussion with them. And if they can grow, we will work together to grow. But if that's not the case, we have other options. And after announcing this Makino potential transactions, I was approached by a few different companies. How about ourselves in Europe. where the purchase. Of course, we will not decide on a stand-alone basis, and we will discuss with Makino. And when we bought the former MHI machine tools business, we did not mention this earlier, but after the acquisition, Nidec go through a very thorough communication. As you know, Mr. Nagamori visited Takisawa 26 times, and I went over to their office, more than that. And the second time Mr. Nagamori visited them, he talked about what do we need to do to grow your business? Do you need a plant? And then the plant was built in China and then he asked Takisawa, which company do you want to acquire? So, this kind of discussion takes place with the acquired company to identify the missing part to fill that in. And then we work together with [indiscernible] san's team for M&A opportunities. Also, we try to have a very thorough discussion together with the partner for the future direction. And for the others, I cannot disclose at this point. But there are a few options on our mind, but we cannot share this at this point.

Yes. Maybe we can entertain one more question. The person in the middle, please.

My name is [Ishino] from the Major Market Media. I have two questions. Regarding this approach, you mentioned about the transparency as a positive implication. I think going forward, for the future TOBs, would you consider this approach? Also, may I confirm your policy on that? And also, my second question is you talked about how the existing management team is maintained after the M&A. Did you communicate to the Makino's management that you want them to stay?

Well, the first point, after Takisawa, we want to make this a successful transaction so that for us, this will not just be a common M&A practice for ourselves, but this will be a common practice for the market in Japan. And the second question, yes, I definitely want them to stay. They have a big organization in Singapore, and we want them to stay. And in China, they have a strong team. We want them to stay as well. And then I -- myself and Nagamori-san will visit them to talk to them to communicate their intention to work together.

Mr. Araki then this will be your basic approach without the prior communication. So, this is the standard that we would like to apply going forward.

Maybe the last question from the person in the back row, please. Can you raise your hand again?

My name is [Kobayashi] from Jiji Press. I also have a question around this approach. Can you explain the reason why you did not give them prior communication? For the Takisawa's case, so you do not want to have like a hostile aspect like you had with Takisawa. So, the prior communications have implied some hostility. And Mr. Nagamori made a comment that even if there is a white knight, Nidec is intended to acquire Makino and the white knight as well that the view of the firm.

Well, when we make proposals behind the curtain, they may accept, but we never know how they will respond. So ultimately, even if we can reach an agreement, this kind of process will take time. So, for that, we decided to take this approach this time without making the prior communication. And regarding your second question, I don't know under what circumstances Mr. Nagamori made that comment. But in the machine tools market, to proceed with the market consolidation and structural reform, if there is a possibility that we may take a similar approach, I think, is what Mr. Nagamori intended to mean. He did not -- was not talking about any specific deals or issues.

So now we'd like to conclude today's session. Thank you very much for joining us despite your busy schedule. Thank you very much for your attendance.