The Nidec Group’s consolidated net sales increased 24% to ¥1,488.1 billion, and operating profit increased 20% to ¥166.8 billion for the fiscal year ended March 31, 2018 (FY2017), compared to the prior fiscal year, both recording the highest figures in our history. In addition, profit before income taxes increased 16%, and profit attributable to owners of the parent increased 18% compared to the prior year, both of which were record-high results. The forecasts for the year ending March 31, 2019 (FY2018) are net sales of ¥1,600 billion and operating profit of ¥195 billion.
Increasing likelihood of achieving mid-term strategic goal, Vision 2020
Vision 2020, our mid-term strategic goal that we announced in April 2015 aims to achieve annual sales of two trillion yen, operating profit ratio of 15% or higher, and a return on equity (ROE) of 18% or higher in FY2020 (fiscal year ending March 2021). The annual sales target of two trillion yen is becoming sure as the growth of our two key growth areas, i.e., Automotive and Appliance, Commercial & Industrial, are driving the group’s overall sales growth. As for operating profit target of 300 billion, we are taking three actions to expedite the process. The first action is to enhance the management system, which will be shifted to a new management that Mr. Yoshimoto, the new president and Chief Operating Officer will supervise the overseas business operations. The second action is to implement a structural reform to further transform the business portfolio by, for example, reorganizing existing factories to manufacture products with growing demands. The third action is to actively invest in growing businesses by spending ¥500 billion over the coming three years with a focus on starting up factories to mass-produce traction motors used for EVs and PHEVs, as well as expanding capacity to produce speed reducers used for compact robots.
Four big waves drive our growth
In the past, we achieved a significant growth with the expansion of the demand for small precision motors driven by the global diffusion of personal computers. Assuming this was the largest wave in our history, we are now experiencing as many as four waves that are even larger.
The first wave is automotive electrification. In addition to the hydraulic mechanism replaced by electric one, the world is seeing the internal-combustion engines are replaced by motors. This is creating an urging need for electric motors, for which Nidec will play important roles. The second wave is the expansion of robot applications. Factory automation is advancing at a fast pace due to the increasing labor cost across the world. We are expanding production capacity due to an increasing number of inquiries about speed reducers, important components applied for six-axis robots which are used for factory automation. The third wave is home appliances driven by brushless DC motors. As home appliances are becoming cordless and high-functioned, conventional AC motors are increasingly replaced by high-efficient brushless DC motors. We are one of the world’s largest brushless DC motor manufacturers, and receiving orders from major home appliance makers all over the world. The fourth wave is the man-power saving in agriculture and logistics. For example, drones are nowadays used to spray pesticide over rice paddies and fields. The motors used for these drones need to be light-weight and electrically efficient to fly the drones for long hours. Nidec’s light, high-efficient motors can make the difference for the drones that are expected to be used to solve labor shortages in delivery and moving businesses as well.
We will concentrate our management resources in these truly promising and growing areas, and ride these four waves through careful navigation.
Prelude to Achieve FY2030 Net Sales Target of ¥10 Trillion
Mr. Hiroyuki Yoshimoto, the new President and Chief Operating Officer took office after the resolution was reached at the shareholder meeting and the meeting of the board of directors held on June 20, 2018. Here is how the new president was elected for the first time since Nidec’s foundation, and the company’s policy going forward.
I, Shigenobu Nagamori, started looking for candidates three years ago and chose Mr. Yoshimoto from the five final candidates. I requested him to succeed my presidential duties in December 2017 based on two standards for selection: whether he will be able to improve the company’s performance, and whether he will be able to bring positive changes in the company. The best way to see if someone has these abilities is to assign the person to rebuild a struggling business. Right after joining Nidec group, Mr. Yoshimoto was assigned to revive Nidec Tosok, a Nidec group company, and accomplished the task in only one year. Through this successful turnaround of Nidec Tosok, Mr. Yoshimoto demonstrated his management philosophies that were very close to my three management philosophies, “micro-management,” “hands-on approach,” and “delegate your responsibility, but not too much.” Mr. Yoshimoto can work at a failing, poorly performing organization to thoroughly improve its performance through a detailed, tenacious, and comprehensive approach. He is also a type of person who can further motivate such a company’s employees when its performance starts to improve. In addition, Mr. Yoshimoto, now at the age of 50, before joining Nidec Tosok, successfully managed a larger organization than the one I led when I was his age.
For the time being, I will be managing Nidec’s business with Mr. Yoshimoto, and shift the company into a collective executive leadership over time. I will continue to manage the Nidec group as a whole, with a focus on major management decisions such as those regarding mid- and long-term growth strategy and M&As. Mr. Yoshimoto, on the other hand, will lead domestic and overseas Nidec group companies, as well as post-merger integration of acquired companies.
This latest appointment of a new president is, in a way, just an introductory chapter for Nidec group to achieve its FY2030 (fiscal year ending March 31, 2031) net sales target of 10 trillion. Until we achieve this major target, I will continue to closely manage the company as its Chairman and Chief Executive Officer, while as its founder I will train Mr. Yoshimoto. It is my largest responsibility to train him to be the true manager, anticipating a future transfer my status as CEO to Mr. Yoshimoto.
To achieve our FY2030 annual net sales target of 10 trillion, Nidec has been enhancing its business system, using “fundamental R&D capability, production engineering capability, and global talent” as the key phrase. This effort led to the completion of Nidec Research and Development Center, Japan in Kanagawa in June 2012, a new learning center ANNEX Global Learning Center in Kyoto in March 2017, and the first-phase building of Nidec Center for Industrial Science (NCIS) in Kyoto in February 2018. Since its inauguration in 2015, NCIS has been creating world-class technologies via improvement of the manufacturing capability, and joint research with universities, research institutes, and other companies, with a focus on robots and their element technologies (control, sensor, etc.); new materials, methods, and processes; and IoT
and AI. Also, dedicating its resources to training its employees to be competent engineers, NCIS plans to expand its inaugural staff of 350 people to the scale of 1,000 eventually around at the completion of its second-phase building.
Ongoing efforts to increase dividends
We uphold shareholder-oriented management and pursue high growth, high profitability, and high share value to build long-term, sustainable growth in shareholder value. Placing importance on regular dividend payments, we seek to increase our dividend payout to around 30% of our consolidated net income. The annual dividend for FY2017 increased by ¥10 to ¥95 per share compared to the prior fiscal year. We are targeting to increase the annual dividend amount by ¥10 to ¥105 per share for FY2018. We will continue to take measures to return more profits to our shareholders by considering the fluctuation of our company’s stock price as well as requests from our individual shareholders.
We will not rest on our laurels, and continue on this road to become a 10 trillion-yen company. I truly appreciate our shareholders’ and investors’ continued support.
Founder, Chairman and CEO