Slide 2
Slide 2 text
2
This is the final page of my explanation, and I believe this is the most important page.
This chart shows the Basic Concept and Target of our Recovery Scenario that is the Precondition for the Commitment Line of 100 billion
yen.
First of all, I would like to make a clear definition of Recovery. What is Recovery?
Definition of Recovery is the Capability for NTN to Create Corporate Value, which has to be achieved in 2023, at the end of our next
Mid-Term Management Plan.
Assuming that the Expected Return of our Shareholders in Japanese Stock Market is 8%, as you know, we designed that our Consolidated
WACC, Cost of Capital is 5%, so our commitment of Consolidated ROIC, Return on Invested Capital is 5% in 2023. Our Main Bank,
Mitsubishi agreed to this target, as the minimum requirement.
Our final target of Net D/E Ratio is less than 1.0, however it will be almost impossible to achieve that level in 2023 without the major
Equity Finace that may cause the Dilution and Risk of Stock Price Decline. So our Main Bank agreed to 1.5, as the target of Net D/E
Ratio in 2023. Separately, we will keep paying attention to our Stock Price, and Finance HQ will keep studying the Possibility and
Pratical Scheme of Equity Finance.
In order to achieve ROIC 5%, we do not rely on the Volume. We basically do not need Investments to increase our Production Capacity.
The target of Sales in 2023 therefore is 700 billion yen, and Operating Income is 42 billion yen, EBIT Margin is 6%.
We are going to develop the detail action plans, and we need Structural Reform to proceed this Recovery Plan.
By the way, What are the current major problems at Global NTN Group excluding the impact of COVID-19? From my financial point of
view, the biggest problem is that NTN is not creating the Corporate Value, but destroying the Value a lot recently especially in Japan,
Americas region and European region.
Consolidated ROIC is barely positive, but way below Consolidated WACC that is 5%. Our negative FCF is causing a very high level of
D/E ratio, and our financial structure is too much leveraged and very risky.
There are 3 major factors that are causing our negative FCF situations