Management Performance/Financial Analysis(Fiscal year ended March 31, 2023)
Operating Results and Analysis of Financial Position
Consolidated Operating Results
Regarding the global economy in the consolidated fiscal year ended March 31, 2023, a gradual recovery continued as economic activities normalized, although there was stagnation in some regions. As for the Japanese economy, although domestic corporate goods prices and consumer prices were rising, personal consumption recovered only moderately. Overseas, the U.S. economy, the European economy, and the economies of other emerging countries in Asia and others continued to show signs of recovery, but the Chinese economy showed signs of weakness due to the impact of the resurgence of COVID-19 infections. In addition, the situation of the global economy remained uncertain due to the effect of semiconductor shortages, supply chain disruptions, the situation in Ukraine, energy problems, and price increases, as well as global monetary tightening.
Under this business environment, the Company has been steadily implementing the measures in the Medium-term Management Plan “DRIVE NTN100” Phase 2 which started in April 2021, accelerating the transformation of our business structure, and strengthening our financial position and organization to build a business structure that can flexibly respond to changes in the business environment.
Net sales for the consolidated fiscal year ended March 31, 2023, amounted to 773,960 million yen (up 20.6% year on year). Regarding profit and loss, operating income amounted to 17,145 million yen (up 149.2% year on year), ordinary income amounted to 12,047 million yen (up 76.8% year on year), and profit attributable to owners of the parent company amounted to 10,367 million yen (41.2% year on year), reflecting price pass-on measures, sales volume, and the effects of exchange rate, although increases in steel prices and fixed costs occurred mainly in automotive businesses in the European and American markets.
Operating results by reporting segment (company location) were as follows:
(1) Japan
Sales in aftermarket applications increased in the industrial machinery sector. Sales in industrial machinery applications increased in construction machinery and aircraft, and sales in automotive applications increased due to increased customer demand. As a result, net sales amounted to 364,064 million yen (up 13.4% year on year). Segment income amounted to 17,382 million yen (up 128.1% year on year) due to price pass-on measures, an increase in sales volume, and the effects of exchange rate, although there were hikes in steel prices and increased fixed costs.
(2) Americas
Sales in aftermarket applications increased in the industrial machinery sector and decreased in the automotive sector. Sales in industrial machinery applications increased in construction machinery and agricultural machinery. Sales in automotive applications also increased due to recovered customer demand. As a result, net sales amounted to 243,569 million yen (up 36.3% year on year). Segment loss amounted to 6,854 million yen (loss of 7,427 million yen in the same period of the previous consolidated fiscal year), although there was implementation of price pass-on measures accompanied by hikes in steel prices and increased fixed costs, and effects of sales volume.
(3) Europe
Sales in aftermarket applications increased in the industrial machinery sector and decreased in the automotive sector. Sales in industrial machinery applications increased in aircraft and agricultural machinery, and sales in automotive applications increased due to recovered customer demand. As a result, net sales amounted to 172,441 million yen (up 20.2% year on year) in spite of the effects of the situation in Ukraine. Segment loss amounted to 3,411 million yen (loss of 4,265 million yen in the same period of the previous consolidated fiscal year), although there was implementation of price pass-on measures accompanied by hikes in steel prices and increased fixed costs, and the effect of sales volume.
(4) Asia and other areas
Sales in aftermarket applications increased in the industrial machinery sector. Sales in industrial machinery applications decreased in construction machinery, and sales in automotive applications decreased due to reduced customer demand. As a result, net sales amounted to 165,506 million yen (up 12.4% year on year). Segment income amounted to 12,538 million yen (down 11.0% year on year) reflecting the effects of shutdowns and lower operating rates due to lockdowns in China and other factors.
Operating results by business sector were as follows.
(1) Aftermarket applications
Due to an increase in customer demand and other factors, net sales amounted to 134,039 million yen (up 19.5% year on year). Operating income amounted to 22,270 million yen (up 51.8% year on year), reflecting price pass-on measures, sales volume, and the effects of exchange rate in spite of hikes in steel prices and increased fixed costs.
(2) Industrial machinery applications
Net sales amounted to 139,499 million yen (up 10.6% year on year) due to increased sales of construction machinery and aircraft. Operating income amounted to 7,289 million yen (up 78.9% year on year), reflecting price pass-on measures, sales volume, and the effects of exchange rate in spite of hikes in steel prices and increased fixed costs.
(3) Automotive applications
Net sales amounted to 500,421 million yen (up 24.0% year on year) due to increased customer demand. Operating loss amounted to 12,414 million yen (operating loss of 11,862 million yen in the same period of the previous consolidated fiscal year), although there was implementation of price pass-on measures accompanied by hikes in steel prices and increased fixed costs, and the effect of sales volume.
Forecast for the Year Ending March 31, 2024
The global economy is expected to recover moderately although it is still in a difficult situation due to the effects of COVID-19, the situation in Ukraine, and the shortage of semiconductor supply and other factors. However, events with high uncertainty such as the resurgence of COVID-19 infections and the situation in Ukraine may become important risks.
Under such circumstances, as our full-year earnings forecast we expect net sales of 810.0 billion yen, operating income of 30.0 billion yen, ordinary income of 23.0 billion yen, and profit attributable to owners of the parent company of 11.0 billion yen. We are assuming exchange rates of ¥130/US$1.00 and ¥140/EUR1.00.
R&D and Capital Expenditure
R&D Expenditure
Groupwide R&D expenditure for the fiscal year under review amounted to 18,678 million yen, (up 1,234 million yen year on year) and the ratio of R&D expenditure to net sales was 2.4%.
NTN has been working on its Mid-term Management Plan “DRIVE NTN100” Phase 2 since April 2021. “DRIVE NTN100” Phase 2 sets 13 materiality items for the realization of a sustainable society, three of which are “Reduce energy loss,” “Realize a sustainable society using natural energy,” and “Provide safety and comfort,” and we are working to strengthen our positive impact on society through the creation of our original technologies.
In response to the above three materiality items, we are pursuing research and development activities based on the two axes of “Strengthen core technologies and products” and “Develop businesses in new areas” with the aim of achieving sustainable growth for our company. In “Develop businesses in new areas,” we have identified six target areas that are expected to grow, and we are working to develop products in these areas by leveraging our core competencies.
Capital Expenditure
At the NTN Group (NTN Corporation and its consolidated subsidiaries), we make capital investments primarily for the improvement of production capacity, rationalization by labor-saving, maintenance and upgrading of existing facilities, improvement of safety environment, and R&D of new products.
In Japan, capital investment of 9,293 million yen was made for the construction of a building and the introduction of bearing manufacturing facilities at Wakayama Works and the expansion of CVJ manufacturing facilities at Iwata Works. In the Americas, capital investment of 4,176 million yen was made for the expansion of CVJ manufacturing facilities at NTN DRIVESHAFT, INC. and CVJ manufacturing facilities at NTN DRIVESHAFT ANDERSON, INC. In Europe, capital investment of 5,841 million yen was made for the expansion of bearing manufacturing facilities at NTN Europe S.A. In Asia and other regions, capital investment of 3,005 million yen was made for the expansion of CVJ manufacturing facilities at NTN NEI Manufacturing India Private LTD. After adjusting for inter-segment transfers of -63 million yen, total capital investment for the current fiscal year amounted to 22,253 million yen.
The required funds are self-financed and borrowed.
Financial Position and Cash Flow
Assets, Liabilities, and Net Assets
Total current assets increased by 16,993 million yen (up 3.3%) from the end of the previous fiscal year, totaling 529,024 million yen. This was mainly due to increases of 11,181 million yen in finished goods & purchased goods, 7,045 million yen in raw materials and supplies, 6,317 million yen in work in process, and 4,253 million yen in notes and accounts receivable-trade, partially offset by a decrease of 16,986 million yen in cash and deposits. Total fixed assets decreased by 2,649 million yen (down 0.8%) from the end of the previous fiscal year, totaling 340,802 million yen. This was mainly due to decreases of 4,335 million yen in machinery, equipment, and vehicles, partially offset by an increase of 1,867 million yen in construction in progress. As a result, total assets increased by 14,344 million yen (up 1.7%) from the end of the previous fiscal year, totaling 869,827 million yen.
Total current liabilities increased by 47,869 million yen (up 14.9%) from the end of the previous fiscal year, totaling 369,074 million yen. This was mainly due to increases of 27,714 million yen in short-term loans, 7,459 million yen in electronically-recorded monetary claims, and 6,250 million yen in notes and accounts payable-trade. Non-current liabilities decreased by 54,526 million yen (down 17.2%) from the end of the previous fiscal year, totaling 263,327 million yen. This was mainly due to a decrease of 50,453 million yen in long-term borrowing. As a result, total liabilities decreased by 6,656 million yen (down 1.0%) from the end of the previous fiscal year, totaling 632,402 million yen.
Total net assets increased by 21,000 million yen (up 9.7%) from the end of the previous fiscal year, totaling 237,425 million yen. This was mainly due to increases of 12,054 million yen in translation adjustments and 9,039 million yen in retained earnings.
Cash Flows
Cash flows from operating activities amounted to 34,219 million yen (up 25,263 million yen, or 282.1%, year on year). This was mainly due to the cash inflow factors of 42,048 million yen in depreciation, and 11,443 million yen in increased trade payables, partially offset by the cash outflow factor of 15,044 million yen in increased inventories.
Cash flows used in investing activities amounted to 13,858 million yen (proceed of 2,512 million yen in the previous consolidated fiscal year). This was mainly expenditure of 19,705 million yen in purchase of property, plant, and equipment, and 4,020 million yen in purchase of intangible assets, partially offset by 8,709 million yen in proceeds from the withdrawal of time deposits.
Cash flows used in financing activities amounted to 33,258 million yen (down 8,042 million yen, or 19.5%, year on year). This was mainly due to an expenditure of 52,832 million yen in repayments of long-term borrowings, partially offset by 22,541 million yen in proceeds from long-term loans.
After adding 2,112 million yen due to the effect of exchange rate changes, cash and cash equivalents at the end of March 31, 2023, amounted to 110,675 million yen, a decrease of 10,785 million yen (down 8.9%) from the end of the previous fiscal year.