Management Performance/Financial Analysis(Fiscal year ended March 31, 2025)

Operating Results and Analysis of Financial Position

Consolidated Operating Results

The global economy in the consolidated fiscal year ended March 31, 2025 continued to pick up, although there were signs of a standstill in some regions. In Japan, although personal consumption remained at a partial standstill, capital investment and employment situation showed signs of picking up or improving, and the economy recovered moderately. Overseas, the U.S. economy expanded despite concerns about the impact of trade and other policies. The Chinese economy came to a standstill despite a pickup in production due to policy effects, and other emerging economies in Asia recovered moderately, although there were signs of economic weakness in Thailand and South Korea. In Europe, the economies showed signs of picking up, although some countries, including the U.K. and Germany, showed signs of standstill.

Under these business environments, the Company will continue to drive forward transformation of our business structure as stated in the Medium-term Management Plan “DRIVE NTN100” Final, which started in April 2024, and complete “revitalization of NTN.” We will also focus on improving our “earning power” by implementing business structure reforms centered on production reorganization and strengthening “SQCCD”*¹.

1. Safety, Quality, Compliance, Cost & Cash, Delivery & Development

Net sales for the consolidated fiscal year ended March 31, 2025 amounted to 825,587 million yen (down 1.3% year on year). Operating income amounted to 22,959 million yen (down 18.4% year on year), mainly due to the impact of a decrease in the scale of operations, despite the price pass-on measures and reductions in variable costs. Ordinary income amounted to 10,475 million yen (down 47.6% year on year) mainly due to the impact of foreign exchange losses. Loss attributable to owners of parent was 23,801 million yen (profit attributable to owners of parent of 10,568 million yen in the previous fiscal year) mainly due to extraordinary losses, and the impact of tax effects.

Operating results by reporting segment (company location) were as follows:

(1) Japan

In the Bearing and Others business, sales in aftermarket applications decreased. Sales in OEM applications also decreased in both industrial machinery applications and automotive applications. In the CVJ/Axle business, sales in automotive OEM applications increased mainly due to recovered customer demand. As a result, net sales amounted to 354,480 million yen (down 2.7% year on year). Segment income amounted to 11,207 million yen (down 26.4% year on year) mainly due to the impact of a decrease in the scale of sales, despite the impact of price pass-on measures and exchange rates.

(2) Americas

In the Bearing and Others business, sales in aftermarket applications increased. Sales in OEM applications increased in industrial machinery applications and decreased in automotive applications. In the CVJ/Axle business, sales in both aftermarket applications and OEM applications decreased in automotive applications mainly due to decreased customer demand. As a result, net sales amounted to 271,889 million yen (down 1.6% year on year). Segment loss was 395 million yen (segment loss of 198 million yen in the previous fiscal year) partly due to the impact of a decrease in the scale of sales, despite price pass-on measures and the reduction of variable costs.

(3) Europe

In the Bearing and Others business, sales in aftermarket applications decreased. Sales in OEM applications also decreased in industrial machinery applications and automotive applications. In the CVJ/Axle business, sales in aftermarket applications and OEM applications increased in automotive applications mainly due to recovered customer demand. As a result, net sales amounted to 190,517 million yen (down 1.5% year on year). Segment loss was 4,163 million yen (segment loss of 2,227 million yen in the previous fiscal year) mainly due to an increase in fixed costs and a decrease in the scale of sales, despite price pass-on measures and the reduction of variable costs.

(4) Asia and other areas

In Bearings and Other business, sales in aftermarket applications decreased. Sales in OEM applications also decreased in both industrial machinery applications and automotive applications. In the CVJ/Axle business, sales in both aftermarket applications and OEM applications decreased in automotive applications mainly due to decreased customer demand. As a result, net sales amounted to 168,557 million yen (down 3.2% year on year). Segment income was 14,757 million yen (down 6.6% year on year) mainly due to the impact of a decrease in the scale of sales, despite the reduction of variable costs

Operating results by business segment were as follows.

(1) Bearing and Others

Net sales amounted to 340,703 million yen (down 1.8% year on year) mainly due to decreased customer demand. Operating income amounted to 13,680 million yen (down 22.7% year on year) mainly due to a decrease in the scale of sales, despite price pass-on measures and a decrease in common expenses resulting from a review of the allocation of expenses.

(2) CVJ/Axle

Net sales amounted to 484,883 million yen (down 0.9% year on year), mainly due to the impact of foreign exchange rate, despite decreased customer demand. Operating income amounted to 9,279 million yen (down 11.2% year on year), mainly due to the impact of a decrease in the scale of sales and an increase in common expenses resulting from a review of the allocation of expenses, despite price pass-on measures and the reduction of variable costs.

Forecast for the Year Ending March 31, 2026

The global economy is expected to continue to pick up although there are uncertainties regarding the situations in Ukraine and the Middle East, the impact of trade policies in the U.S, the impact of price increases and other factors, as well as the global monetary tightening. However, these events with high uncertainty may become an important risk.

Under such circumstances, as our full-year earnings forecast we expect net sales of 790 billion yen, operating income of 24 billion yen, ordinary income of 11 billion yen, and net loss attributable to owners of parent of 6 billion yen. We are assuming exchange rates of ¥140/US$1.00 and ¥160/EUR1.00. despite concerns about the impact of trade and other policies.

Please note that while we have estimated the impact of U.S. tariff policies on the demand for machinery and the amount of tariffs themselves based on certain assumptions, we have not factored these into our earnings forecast at this time due to the fluid nature of policy developments. We will continue our efforts to provide timely disclosure of any impact on our business performance as soon as it becomes apparent.

R&D and Capital Expenditures

R&D Expenditures

In the fiscal year under review, research and development expenditures for the entire Group were 19,656 million yen (an increase of 1,422 million yen from the previous fiscal year), with a ratio to net sales of 2.4%.

Through the practice of our corporate philosophy “We shall contribute to international society through creating new technologies and developing new products,” the NTN Group aims to contribute to solving social issues worldwide and to realize a sustainable “NAMERAKA Society.”

Effective from April 2024, the Medium-term Management Plan “DRIVE NTN100” Final began, and to accelerate the transformation of business structure, which is the basic policy of “DRIVE NTN100,” we changed our organizational structure from a market-based to a product-based one. In the bearing business, OEM and aftermarket operations were integrated to strengthen supply capabilities and solution proposals, while the CVJ/axle business has been restructured to increase profits and respond to new needs such as electrification.

In research and development, we operate on dual axes of “strengthening core products and core technologies” and “developing in new fields” with the aim of realizing sustainable growth for the company. We are also working on product development by leveraging our core competencies.

Capital Expenditures

The NTN Group (the Company and its consolidated subsidiaries) makes capital investments that are primarily focused on improving production capacity, labor-saving rationalization, maintaining and updating existing facilities, improving the safety environment, and researching and developing new products.

In Japan, we made 15,102 million yen in capital investments, including the installation of bearing manufacturing equipment at Kuwana Works, the installation of bearing manufacturing equipment at Wakayama Works, construction of buildings at NTN Kinan Corporation, and the installation of bearing manufacturing equipment at NTN Mie Corporation.

In the Americas, we made capital investments of 3,402 million yen, including the installation of Constant Velocity Joint (CVJ) manufacturing equipment at NTN Driveshaft Anderson, Inc.

In Europe, we made capital investments of 9,523 million yen, including construction of buildings at NTN Europe S.A.

In Asia and other regions, we made capital investments of 4,191 million yen, including the introduction of solar power generation equipment at NTN Manufacturing (Thailand) Co., Ltd., construction of buildings at NTN NEI Manufacturing India Private Ltd., and the introduction of Constant Velocity Joint (CVJ) manufacturing equipment.

In addition to the above, we recorded an adjustment of minus 58 million yen on the intersegment transfer of equipment, resulting in total capital investments of 32,162 million yen for the current consolidated fiscal year.

The funds required were financed by our own capital and loans.

Financial Position and Cash Flow

Assets, Liabilities, and Net Assets

Current assets decreased 29,067 million yen (down 5.2%) from the previous fiscal year end and amounted to 533,861 million yen. This is mainly due to a decrease of 8,943 million yen in finished goods & purchased goods, a decrease of 8,592 million yen in notes and accounts receivable - trade, and a decrease of 6,333 million yen in work in process. Fixed assets decreased 24,761 million yen (down 7.1%) from the previous fiscal year end and amounted to 322,563 million yen. This is mainly due to a decrease of 11,196 million yen in machinery, equipment and vehicles, a decrease of 5,673 million yen in intangible assets, and a decrease of 5,177 million yen in buildings and structures, a decrease of 3,961 million yen in deferred tax assets, and an increase of 965 million yen in investment securities. As a result, total assets decreased 53,827 million yen (down 5.9%) from the previous fiscal year end and amounted to 856,425 million yen.

Current liabilities increased 62,607 million yen (up 17.4%) from the previous fiscal year end and amounted to 422,513 million yen. This is mainly due to an increase of 40,000 million yen in current portion of bonds payable, an increase of 22,035 million yen in current portion of convertible bonds, an increase of 15,578 million yen in short-term loans, and a decrease of 2,664 million yen in other items, including accrued expenses. Fixed liabilities decreased 84,310 million yen (down 31.3%) from the previous fiscal year end and amounted to 185,213 million yen. This is mainly due to a decrease of 50,000 million yen in bonds, a decrease of 22,084 million yen in current portion of convertible bonds and a decrease of 13,599 million yen in long-term loans. As a result, total liabilities decreased 21,704 million yen (down 3.4%) compared to the end of the previous fiscal year and amounted to 607,726 million yen.

Total net assets decreased 32,123 million yen (down 11.4%) from the previous fiscal year end and amounted to 248,699 million yen. This is mainly due to a decrease of 29,383 million yen in retained earnings and a decrease of 1,989 million yen in translation adjustments.

Cash Flows

Net cash provided by operating activities amounted to 45,623 million yen (down 19,480 million yen, or 29.9%, year on year). This was mainly due to the cash inflow factors of 42,379 million yen in depreciation and amortization and the cash outflow factors of 10,793 million yen in income taxes paid.

Net cash used in investing activities amounted to 25,960 million yen (up 990 million yen, or 4.0%, year on year). This was mainly due to the expenditure of 23,535 million yen in purchase of property, plant and equipment.

Net cash used in financing activities amounted to 18,708 million yen (down 11,504 million yen, or 38.1%, year on year). This was mainly due to the cash outflow factor of 46,723 million yen in repayment of long-term loans, partially offset by the cash inflow factor of 34,000 million yen in proceeds from long-term loans.

After adjusting for the minus 508 million yen of the effect of exchange rate changes, cash and cash equivalents as of March 31,2025 was 127,712 million yen, an increase of 445 million yen (up 0.3%) from the end of the previous fiscal year.