Slide 1
Slide 1 text
Summary
As for the fiscal year ended March 31, 2020, we announced the
outlook for net sales of 680.0 billion yen and operating income
of 10.0 billion yen at our Financial Settlement Briefing Meeting
for the third quarter that was held in February prior to the
impact of the new coronavirus (COVID-19). However, the result
was that net sales was 651.5 billion yen, substantially below
expectations, largely due to the spread of COVID-19 in the
fourth quarter.
Meanwhile, we tried to increase operating income as much as
possible by thoroughly reducing fixed costs such as expenses
and personnel costs in particular, thereby maintaining a level of
7.1 billion yen. Although we maintained a positive level of
operating income, we posted a net loss of 44.0 billion yen, the
worst figure in NTN's history. This was mainly due to the
recording of extraordinary losses of 34.2 billion yen in particular,
including an impairment loss of 29.0 billion yen as well as the
recording of a loss of 1.8 billion yen on dissolution of
unprofitable joint ventures in China and South Korea that have
no prospect of recovery as non-operating expenses.
Impairment loss
Regarding our manufacturing business units, plants and
affiliated companies (CGU: Cash Generating Unit) that are
expected to experience a significant deterioration in
profitability in the future, we make it a rule to explain, discuss
and agree with the auditing firm on our business plan for the
average remaining depreciation periods (about 7 to 8 years) of
production machinery we have in each of our CGU mentioned
above for our impairment examination and calculation. We
calculate the business value (net present value of free cash flow
generated and net realizable value of the land and building) for
each CGU, and if it is lower than its respective current book
value of tangible fixed assets, we will write off the difference
between them. Consequently, impairment loss means that the
value of such business is less than the book value of property,
plant and equipment for its business activities, and we recorded
impairment loss of 17.0 billion yen at NTN Corporation and five
affiliated companies in Japan in the fiscal year ended March 31,
2019. In addition to external factors such as declining sales due
to changes in economic conditions, exchange-rates, steel
material prices and tariffs, as the competitive environment is
changing and becoming more intense globally, our competitive
advantage as a whole has gradually deteriorated particularly in
Japan, making us unable to create sufficient business value. We
did not estimate major impairment loss in the fiscal year ended
March 31, 2020 as in the previous year by promoting measures,
aimed at enhancing each business value, primarily at our CGUs
in Japan, such as normalizing the burden of expenses with
overseas operations, raising prices of unprofitable products,
withdrawing from unprofitable business lines, and
strengthening aftermarket business. However, after discussions
with the auditing firm, we determined that the measurement of
impairment loss would have to reflect the impact of COVID-19.
As a result, impairment loss of 29.0 billion yen was recorded, of
which 22.0 billion yen was in Japan and 7.0 billion yen was in
overseas business sites. The impairment loss of 29.0 billion yen
in the fiscal year ended March 31, 2020 was calculated on the
basis of a very conservative assumption that net sales in the
fiscal year ending March 31, 2021 would decline 20% from net
sales in the business plan prior to the impact of COVID-19, the
level of net sales in the fiscal year ending March 31, 2022 would
still not recover to 100%, and the level of net sales would not
increase and would stay flat in the remaining years of
depreciation. As a result of this impairment loss, the amount of
depreciation will be reduced by 3.5 billion yen per year in the
future.
Remaining issues to improve our financial structure
In the fiscal year ended March 31, 2020, we reduced fixed costs
by 6.9 billion in personnel costs, 9.2 billion yen in expenses, as
well as variable costs by 3.1 billion yen, including 3.6 billion yen
in our general continuous cost reduction. However, the negative
impact of the scale reduction of 33.9 billion yen was extremely
significant, and operating income decreased significantly. The
first issue is how much variable costs can be reduced through
promotion of global procurement, as the amount of cost
reduction is declining year by year. Furthermore, as for the
impact of the scale reduction effect, decreased sales volume
was 62.4 billion yen excluding the impact of exchange rates and
sales price fluctuations. On the other hand, for the entire NTN
Group, the ratio of variable costs to sales is about 55%, and
therefore our consolidated marginal profit ratio is 45%. Due to
this, the scale reduction effect on operating income will be 28.0
billion yen. However, as we have decreased inventories
drastically in line with a decrease in sales in the fiscal year ended
March 31, 2020, production volume dropped by 87.0 billion yen,
resulting in minus 33.9 billion yen due to the scale reduction
effect causing an additional reduction in the production
volume. The second issue is how to further reduce fixed costs
such as personnel costs and expenses, assuming that the
negative impact on operating income will be extremely
significant because of a further reduction of inventories to
ensure cash flow in the fiscal year ending March 31, 2021, as
sales will decrease more drastically in that fiscal year. In
particular, head office expenses need to be thoroughly
reviewed in order to concentrate on improving strategic
capabilities and shared service functions in the future. The sales
price level was down 2.5 billion yen year on year, and this came
mainly from a decrease of 5.8 billion yen in the sales price level
for automotive OEM business only. The third issue therefore is
how to differentiate ourselves from competitors in terms of
technology and services to move away from intensified price
competition, thereby reducing discounts and raising prices,
particularly in our OEM businesses, where operating margin is
noticeably declining.
Along with addressing the above issues, Finance HQ will
continue to support and follow our “Global Value Creation
Activities” through our new “Decision Making System of
Investments” and “Evaluation System of Business Performances”
based on the shared concept of “Cost of Capital” for each
business location, which we introduced in the fiscal year ended
March 31, 2020.
1
Strengthen global management capabilities for decision and
follow-up of major investments that directly lead to
improvement of corporate value through thorough
implementation of our new valuation standard for
investments based on NPV and IRR
2
Monitor the status of corporate value creation in each business,
region, and company by thoroughly evaluating business
performance using EVA and ROIC, and strengthen the
organizational system to clarify issues and respond to them
3
Through the measures listed in 1 and 2 above, establish the
base of “Global Learning Organization” that implements the
most effective measures autonomously and promptly to
maximize the value in each business, region, and company
while they communicate closely with each other
Impairment loss in fiscal year
ended March 31, 2020:
29.0 billion yen
• Japan 22.0 billion yen NTN (non-consolidated) 12.7 billion yen
Affiliated company (8 companies) 9.3 billion yen
• Overseas 7.0 billion yen Americas (1 company) 5.5 billion yen
Europe (1 company) 1.5 billion yen
Impairment loss in fiscal year
ended March 31, 2019:
17.0 billion yen
• Japan 17.0 billion yen NTN (non-consolidated) 5.3 billion yen
Affiliated company (5 companies) 11.7 billion yen
NTN Revitalization Story
Executive Officer
CFO (Chief Financial Officer)
CFO Message
Toward Establishing a Management Base
to Realize Sustainable Growth
as a Global Company
Tetsuya Sogo
Financial results for the fiscal year ended March 2020
Breakdown of impairment loss
In the fiscal year ending March 31, 2021, which is regarded as the
Crisis Respond Period, we will ensure the safety of employees,
endeavor to survive on a sharply falling sales scale, and prepare
for recovery from the fiscal year ending March 31, 2022.
Securing sufficient cash
We explained our Revitalization Scenario to our main financing
bank and secured 100.0 billion yen of funds, including under
commitment line agreements with our main financing banks.
Obtaining a commitment line means that we can borrow from a
bank at any time within the amount and period of the
commitment line. It is roughly estimated that the amount of
100.0 billion yen is an additional amount, which is sufficient to
sustain ourselves in the event of a 30% decline in annual sales.
At the same time, we will consider and promote the utilization
of factoring (liquidation of receivables) not only in Japan but
also at overseas locations, and aim to collect and utilize surplus
funds globally.
Restraining outflow of funds
While securing sufficient funds, we will thoroughly restrain the
outflow of funds. To achieve this, we will first limit capital
expenditures to 20.0 billion yen. Within this scope, we thoroughly
examine the minimum investments required, but in principle, we
will freeze new investments to expand capacity and prioritize the
Major actions during the Crisis Response Period
Fiscal year ended
March 31, 2019
Fiscal year ended
March 31, 2020
Net sales 733.6 651.5
Operating income 26.9 7.1
Operating margin (3.7%) (1.1%)
Ordinary income 22.2 -1.7
Extraordinary income or loss -19.3 -32.3
Net income attributable to
shareholder (parent com-pany)
-7.0 -44.0
Exchange rates
US$ 110.9 108.7
EURO 128.4 120.8
Consolidated financial results
(Billions of yen)
Fiscal year
ended
March 31,
2020
Operating
income 7.1
Sales effects
33.9
Sales price
level 2.5 Exchange
rates 2.7
Expenses etc. 9.2
(Depreciation 0.7, Other 8.5)
-19.9
Decrease in
variable
costs 3.1
Positive factors
(19.2)
Decrease in
personnel
costs 6.9
Fiscal year ended March 31, 2019 vs Fiscal year ended March 31, 2020
Fiscal year
ended
March 31,
2019
Operating
income
26.9
Negative factors
(39.1)
Analysis of Operating Income *All figures are in billion yen
NTN Report
NTN Report
23 24
2020 2020
Company/Stock Information
Financial Data
ESG Strategies
Business Strategies
NTN Revitalization Story
About Us