NSK : Presentation Material with Script (fis2025q3s)

About this update from Nsk Ltd.

Thank you for joining our FY2025 Third Quarter (Q3) Financial Conference. Today, I will explain our Q3 consolidated business results and full-year forecast. Contents Consolidated Business Results for the Third Quarter Ended December 31, 2025 Consolidated Business Forecast for the Year Ending March 31, 2026 (Supplementary Information) Copyr ight NSK Ltd. All Rights Reserved. Consolidated Business Results for the Third QuaJer Ended December 31, 2025 Copyright NSK Ltd. AII Rig hts Reserved. The Steering Business was consolidated as a subsidiary on September 1, 2025, with financial results disclosed as an independent segment starting with the results for the fiscal year ending March 31, 2026 (FY2025). Accordingly, equity method investment gains/losses related to the Steering Business included in the Automotive Business for FY2024 (ended March 2025) and FY2025 through August have been reclassified and presented under the Steering Business segment. Page 4 highlights the key points of our business results. For FY2025 Q3, sales was ¥658.5 billion and operating income was ¥27.4 billion. This represents a year-on-year increase of ¥61.5 billion in sales and ¥11.8 billion in operating income. Within the sales and profit growth, the Steering Business contributed ¥57.7 billion to sales and ¥5.0 billion to operating income. Reflecting the FY2025 Q3 results and the current business environment, we have revised our full-year forecast upward. The revised forecast is ¥900.0 billion in sales and ¥37 billion in operating income. Compared to the November forecast, this represents an increase of ¥15.0 billion in sales and ¥7.0 billion in operating income. Regarding the year-end dividend, we plan ¥17 per share, maintaining the annual dividend at ¥34 per share. Q3 results increased year-on-year by ¥61.5 billion in sales and ¥11.8 billion in profit, representing 91% progress against the forecast announced in November. Three key factors contributed: foreign exchange, operational improvements, and the reacquisition of the Steering Business. Each factor accounted for roughly one-third of the progress exceeding our forecast. Furthermore, profitability improvements, including structural reforms, are progressing as planned year-on-year. On page 6 we have the factors behind change in Q3 operating income year on year. Operating income for FY2024 Q3 was ¥15.6 billion, while FY2025 Q3 was ¥27.4 billion, an increase of ¥11.8 billion. Excluding the impact of the Steering Business, the increase was ¥6.8 billion. The foreign exchange impact was +¥1.6 billion, while volume/mix had an impact of -¥1.1 billion. Excluding Steering, profitability improvements (sales price improvements, cost reductions, productivity gains, and structural reform effects) offset inflation and other cost increases, resulting in a net profitability improvement of +¥6.4 billion. This represents the improvement in the core business excluding Steering. Additionally, as shown on the right side of the page, the Steering Business contributed +¥5.0 billion. On page 7 we have the breakdown for the Industrial Machinery Business. As shown, sales performance through Q3 reached ¥275.4 billion, an increase of ¥4.3 billion compared to the previous year. Excluding the ¥2.0 billion negative impact from foreign exchange, this represents a ¥6.3 billion increase, or a 2.4% rise in operating income, indicating a continued, albeit gradual, improvement. Regarding profits, the cumulative total for the first three quarters reached ¥8.6 billion. While showing an improvement trend since bottoming out in FY2025 Q1, operating income only recovered to 4% in Q3. We recognize that improving profitability in this area remains a challenge, and we are still on the path to where we need to be. Page 8 covers the Automotive Business. Sales amounted to ¥302.6 billion, with operating income of ¥12.7 billion. Compared to the previous year, this represents an increase of ¥2.4 billion in sales and ¥4.3 billion in profit. Excluding foreign exchange effects, sales grew by 1.6%. We attribute this to expanded sales in China and increased pass-through of tariff costs in the Americas, which offset the sales decline in Europe. Focusing solely on Q3, as shown in the bar graph, sales were ¥101.4 billion with operating income of ¥3.8 billion. Q3 included ¥2.3 billion in restructuring costs, and we assess that fundamental improvements are progressing steadily. Page 9 presents cumulative results by region for Q3 in FY2023, FY2024, and FY2025. In Europe, shown in the upper left of the slide, the decline in industrial machinery and automotive sales has not yet bottomed out. China, after bottoming out in FY2023, is on the path to recovery, and this quarter also saw increased sales, driven by economic stimulus measures and sales expansion in the Automotive Business. The Americas region is viewed as performing steadily. As for Japan, industrial machinery sales are flat, while automotive sales showed a slight decrease. Consolidated Business Forecast for the Year Ending March 31, 2026 copyright NSK Ltd. AII R ights Reserved. Next we have an update on our full-year forecast for FY2025. The yen has trended weaker than we expected in the forecast announced in November. While the business environment is largely as anticipated, the outlook remains uncertain regarding risk related to export restrictions on rare earths and semiconductors. Furthermore, the structural reforms currently underway and the pass-through of U.S. tariffs to sales prices are progressing as planned. For Q4 outlook, we anticipate continued weakness in the Industrial Machinery Business in Europe. For Automotive, while global vehicle production volumes are in line with expectations, we are factoring in some impact of rare earth export restrictions and inventory adjustments due to the termination of subsidies in the Chinese market. The exchange rate assumption for Q4 is ¥150 to the US dollar. Regarding US tariff policy, we have factored in ¥11.0 billion, including increased costs in the Steering Business, and anticipate a roughly one-month delay in recovering increasing costs through transfer to sales prices. We have factored in a ¥1.0 billion risk of delayed recovery due to timing differences in tariff reporting with customers and subsequent price adjustments. Regarding structural reforms, following the reduction of 600 employees in FY2024, we plan to reduce our labor force by an additional 400 employees in FY2025 and expect to fully complete this plan. We have factored in a positive effect of ¥1.2 billion in Q4 and one-time expenses of ¥2.5 billion. Regarding our full-year forecast, in November the forecast was for full year sales of ¥885.0 billion and operating income of ¥30.0 billion. We have now revised our forecast upward to sales of ¥900.0 billion and operating income of ¥37.0 billion, representing an increase of ¥15.0 billion in sales and ¥7.0 billion in profit. The assumed exchange rates for Q4 are ¥150 to the US dollar, ¥180 to the euro, and ¥21 to the Chinese yuan. Regarding the Steering Business, we anticipate full-year sales of ¥97.0 billion and operating income of ¥5.0 billion. Compared to the previous year, as shown in the far right column of the table, this represents an increase of ¥103.3 billion in sales and an increase of ¥8.5 billion in operating income. We will provide supplementary explanation on the next slide. On page 13 we have the factors behind change in operating income from the FY2024 result to the FY25 full year forecast. First, this details the ¥7 billion upward revision of operating income from ¥30.0 billion to ¥37.0 billion. This revision includes a ¥6.0 billion positive impact from foreign exchange rates, a ¥1.5 billion positive impact from steering, and unfortunately, a ¥1.5 billion negative impact due to slightly lower volume resulting from the current business environment. Additionally, structural improvements, including sales prices, cost reductions, and productivity, contributed a positive ¥1.0 billion, resulting in a total upward revision of ¥7.0 billion. Compared to the previous year's results, the ¥37.0 billion in operating income represents an improvement of ¥8.5 billion. Excluding Steering, the improvement is ¥4.9 billion. As shown in the chart, the ¥1.5 billion positive impact from exchange rates is offset by the slight volume shortfall. Regarding operational improvements, we achieved an additional ¥1.0 billion improvement beyond the initially projected ¥6.2 billion. Inflation/labor cost increases are -¥14.3 billion, increase/decrease in costs are -¥4.5 billion, we expect to achieve +¥7.2 billion through operational improvements and structural reforms. Regarding the change in one-time expenses, structural reform costs and other items total -¥1.7 billion. For the Steering Business, comparing FY2024 and FY2025, there is a +¥3.6 billion increase. Page 14 breaks down the forecast by business segment. For the full-year forecast, the Industrial Machinery Business is projected to generate ¥373.0 billion in sales and ¥15.5 billion in operating income. H1 results were ¥180.8 billion in sales and ¥4.9 billion in operating income. The H2 forecast is ¥192.2 billion in sales and ¥10.6 billion in operating income, with an operating income at 5.5%. Regarding the business environment, while it remains within expectations, the sluggishness in the European aftermarket continues. Although not yet significantly reflected in the H2 forecast, we see some movement emerging in semiconductor-related demand. We are advancing sales expansion and structural improvements, aiming to recover to an operating income of 5% or higher in H2. For the Automotive Business, full-year sales are projected at ¥400.0 billion, with operating income at ¥16.5 billion or 4.1%. Compared to the H1 results of ¥201.2 billion in sales and ¥8.9 billion in operating income, the H2 forecast is ¥198.8 billion in sales and ¥7.6 billion in operating income. While sales are expected to peak in Q3 due to seasonal factors, H2 sales are expected to be slightly lower than H1. Although the operating income margin will be 3.8%, we will work to improve profitability through structural reforms and other measures, aiming to restore profitability to over 5% excluding one-time expenses. Finally, we briefly touch on the next mid-term management plan on page 15. We are currently working to create our mid-term management plan one year ahead of schedule for disclosure in May. The plan will be created with a view toward where we want the company to be in 2036, and we intend to outline how we will achieve the targeted profitability level over the next three years. In the current mid-term plan, we anticipated profit improvement based on post-pandemic market growth. However, we must acknowledge that business environment growth has slowed. While we have seen some results from new product expansion and are initiating structural reforms in Europe, fixed costs have also been rising, and our ROE remains below the 8% target. Therefore, we intend to reset our approach in the next mid-term plan to achieve the 8% ROE target. The key points of this plan do not differ significantly from the current mid-term plan. However, to further improve profitability, we will accelerate portfolio transformation and consistently advance production restructuring and fixed cost improvements beyond the European structural reforms. Regarding capital, we plan to incorporate appropriate equity capital control into the next medium-term plan. Furthermore, anticipating growth areas three years beyond that, we will expand our lineup of new products for electric vehicles and grow our business combining MRO and condition monitoring within the Industrial Machinery Business. Additionally, we aim to achieve growth in new fields, particularly in robotics and automation where we hold high expectations, by promoting M&A and strategic partnerships. This concludes our presentation. Thank you. (Supplementary Information) Copyr ight NSK Ltd. All Rights Reserved. Supplementary Information Financial Results by Business Segment (FY2025 Q3) "Equity method investment gains/losses related to the Steering business for FY2024 and FY2025 through August have been reclassified and presented under the Steering Business segment. Copyright NSK Ltd. All Rights Reserved. 17 3.2 36.1 36.2 111.6 3S.6 160.0 3&6 46 47.6 1A 8 +17.3 +16.6% zumpo 27.1 N.8 23.0 73.9 26.1 100.0 23.6 27.5 35.9 C7J *13.3 *1&0% cnina 40 d 2 48.4 131.6 41.2 176 d 2 47.7 6A7 14&7 *W2 *10.0% Supplementary Information: Sales by Customer Location 21.6 20.0 b.2 20.0 20.6 Copyright NSK Ltd. All Rights Reed. 18 Ex. Rate End of FY2024 End of FY202S Q3 1USD 149.5 156.5 1EUR 162.0 184.3 1CNY 20.6 22.4 Supplementary Information: Consolidated Balance Sheet Due in part to the consolidation of the Steering Business as a subsidiary on September 1, 2025, assets and liabilities have increased from the previous fiscal year-end balance. Asset """""""""""" Liabilities/ Total equity (Billions of yen) (Billions of yen) *83.0 """""""""""" +83.0 1,219.5 1,302.5 1,219.5 1,302.5 Current liabilities 301.3 +17.1 Current assets 636.7 +,t,t g 681.5 Non-Current liabilities 249.1 +36.2 285.2 Non-Current assets Raio of equity attributable to ownem of the parent to total assets *38.2 +29.7 Total equity End of FY2024 End of FY2025 Q3 End of End of Copyright NSK Ltd. All Rights Reserved. FY2024 FY2025 Q3 19 Ex. Rate End of FY2024 End of FY2025 Q3 1USD 149.5 156.5 1EUR 162.0 184.3 1CNY 20.6 20.9 Supplementary Information: Inventories/ Interest-Bearing Dept Due in part to the consolidation of the Steering Business as a subsidiary on September 1, 2025, assets, inventory, and interest-bearing debt have increased from the previous fiscal year-end balances. Inventodee Interest-Baadng Dept (Billions of yen) 4.3 Inventory turnover 4.3 (Billions of yen) o.3s Net D/E ratio 0.29 +44.0 , 185.9 " 3 ' 2 220.1 350.4 306.4 Non-Japan +8.3 Non-Japan +28.9 +35.7 Japan Japan -I- 5.4 End of FY2024 End of FY2025 Q3 End of Copyright NSK Ltd. All Rights Reserved. FY2024 FY2025 Q3 End of 20 (Billions of yen) Full year Actual Q1 Actual Q2 Actual Q3 Actual Revised full year forecast Capital Expenditures 56.5 9.5 7.4 11.9 58.0 Capital Expenditures 51.0 9.0 7.0 11.3 55.0 Depreciation and 52.4 12.7 13.4 14.6 54.0 Depreciation and Amortization 47.6 11.6 12.3 13.3 49.0 (excluding lease) R&D Expenses 27.5 7.0 8.1 9.3 35.0 R&D Expenses 16.3 3.6 4.3 4.7 18.0 Copyright NSK Ltd. All Rights Reserved. 21 Supplementary Information : Capital Expenditures, Depreciation and Amortization, R&D Expenses Due to the consolidation of the Steering Business as a subsidiary on September 1, 2025, we are revising our full-year forecasts for capital expenditures and other items FY2024 FY2025 FY2025 (excluding lease) Amortization (on a managerial basis) (on a statutory basis) MOTION & CONTROL" NSK contributes to a safer, smoother society and helps protect the global environment through its innovative technology integrating Motion & Control TM . As a truly international enterprise, we are working across national boundaries to improve relationships between people throughout the world. SETTING THE FUTURE IN MOTION We bring motion to life, to enrich lifestyles, and to build a brighter future. Dedicated to uncovering society's needs, we set ideas in motion, to deliver solutions beyond imagination. We're NSK. And, we're setting the future in motion. Copyright NSK Ltd. 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