Nidec Corp

TSE:6594

Earnings Call Transcript 2021-Q1

[Operator]

Good day, everyone, and welcome to today's Nidec Conference Call hosted by Mitsubishi UFJ Morgan Stanley Security. Today's call is being recorded. At this time, I would like to pass the conference to Mr. Orikasa at Mitsubishi UFJ Morgan Stanley Security for the opening remarks. Mr. Orikasa, please go ahead, sir.

[Yoichi Orikasa, analyst]

Dear, everybody, thank you very much for joining this conference call, and our sincere apologies for 10 minutes delay due to technical difficulties on our side. My name is Yoichi Orikasa, General Manager of Kyoto Branch at Mitsubishi UFJ Morgan Stanley Securities. Before the meeting starts, please make sure all the materials have been distributed. If not, please download the files on Nidec's homepage at this moment.

Now may I introduce Mr. Akira Sato, First Senior Vice President and Chief Performance Officer, who will be speaking to you shortly. First, Mr. Sato will make a presentation. After his presentation, we will move on to a Q&A session. Mr. Sato now discusses the company's Q1 fiscal year 2020 results, Q2 outlook as well as management strategy. Mr. Sato, please go ahead.

[Akira Sato, executive]

Thank you very much, Mr. Orikasa. Good day, ladies and gentlemen, and welcome to today's conference call. My name is Akira Sato, Chief Performance Officer of Nidec, and I will be your main speaker for today. Joining me is Masahiro Nagayasu, General Manager of Nidec's IR team. For the forward-looking statements, please see Slide #2 of our presentation material for details.

Now I will give you the key figures. Please see Slide #3 for our first quarter's results. As summarized on Slide #4, the net sales stood at JPY 336.9 billion, 7% down year-on-year. However, despite reduced profit due to the lower sales, the operating profit increased to JPY 28.1 billion, 2% up year-on-year, mainly contribution from improvements on cost structure through WPR program. The profit attributable to owners of parent increased by 6.2 fold year-on-year to JPY 20.3 billion as fiscal year 2019 first quarter saw losses, mainly on the transfer of Secop, which is compressor business for refrigerator.

On Slide #5 and 6, you have step charts showing the net sales and operating profit year-on-year and quarter-on-quarter, respectively, by product groups with exchange rate effect, eliminations and the structural reform expenses. As you see on Slide #6, the net sales went down quarter-on-quarter due to negative exchange rate fluctuations, reduced sales of auto and appliance, commercial and industrial or ACI. However, other operating profit has improved significantly as all of the segments, except for auto, have improved quarter-on-quarter.

Please turn to Slide #9, which is showing changes in our regional production on a month-end basis, where the pre-pandemic average utilization ratio is assumed to be 100%. As of the end of April, when our previous results were announced, China and Japan were already almost fully recovered. However, as of the end of June, other regions like Europe, Americas and rest of Asia also make a significant recovery.

Please see Slide #10. While the net sales of the first quarter was just about to form the bottom due to COVID-19, the operating profit ratio is on its way to steady recovery successfully. The net sales is expected to bounce back in the second quarter, and operating profit ratio has already shown recovery as to exceed not only that of previous fourth quarter but also the third quarter last fiscal year, fiscal year '19.

Slide #11 is illustrating our automotive business, the successful example of WPR4. The graph on the left-hand side makes our year-on-year comparison of the sales and operating profit of existing businesses, excluding loss from the traction motor-related business and Nidec Mobility. Also, the graph on the right-hand side compared those of Nidec Mobility on a quarter-on-quarter basis. You will notice clearly that in both cases, we have established structure where half sales can still create positive operating profit.

Please see Slide #12. The sales volume of electric vehicle, or EVs, that have adopted our E-Axle, exceeded 58,000 units on a cumulative basis as of end of June, which consists of 6 models as you see in the table on the right-hand side.

Please see Slide #13. As a decent example, Chinese automaker, Geely, launched their new EV called Geometry C in June. Nidec's E-Axle Ni150Ex installed in Geometry C is a model that has evolved from the E-Axle that started mass production in April 2019. It's contributed -- contributes greatly to improving the power performance, electricity cost performance, sound and vibration performance and reducing vehicle weight of Geometry C by applying Nidec's unique technologies such as circuit design, light, thin, short and small motor structure, utilizing the permanent magnet and unique motor oil cooling structure and adoption of the second-generation inverter.

Also, as you see on Slide #14, GAC New Energy Automotive, or GAC NE, a brand of Chinese automaker, GAC Group, launched their new EV called Aion V in June, which has also adopted our E-Axle Ni150Ex. The first 2 models that GAC NE has already launched are also equipped with our same E-Axle. And especially the first model called Aion S has always been ranked as one of the top 3 best-selling EVs in the Chinese domestic market.

Please see Slide #15. The net sales of ACI in the first quarter went down mainly due to impact from COVID-19. However, it is showing a sign of recovery. The net sales was down 14% quarter-on-quarter while the operating profit ratio improved by 2.5 points quarter-on-quarter. ACI is currently undergoing a comprehensive review of its cost structure and is on its way to improve operating profit ratio by optimizing outsourcing costs, labor costs and fixed costs.

Please Slide #16. This is the same slide as the one we used in April. But just to make sure, these are Nidec's solutions for the common programs of humankind which have been exposed by COVID-19. They are 5G and thermal solutions, decarbonization, manpower saving, digital data explosion and power saving. We will capture these new 5 big waves as our growth drivers for now and going forward.

Please slide -- please see Slide #17. The shipment of ultra-thin and ultra-small fan motor, UltraFlo FDB, or UFF, which is used mainly for PC application, marked a record-high level in the first quarter. UFF family supports the demand for teleworking, which started as 1 of the new 5 big waves in the wake of COVID-19.

Please see Slide #18. Our product lineups continue to expand into robotics as manpower saving, which is 1 of the new 5 big waves, is becoming even more important in the wake of COVID-19. As you see on this slide, we are ready to cope with manpower-saving needs through such products as modules, motors, reducers, automated guided vehicles and drones, in the field of service and communication robots, commercial and industrial robots and logistics and agriculture.

Please see Slide #19. In light of spreading of COVID-19, Nidec has made a declaration of health-oriented management in order to enhance employees' health, motivate and encourage employees and ultimately, enhance our corporate value for the productivity default. As concrete measures, firstly, Health Promotion Committee has been established to facilitate liaising with the management the corporate health insurance association in industrial doctors and employees. Secondly, in order to reduce the risk of COVID-19 infection, phased reduction of smoking hours is underway, and a total smoking ban on Nidec's premises is expected by the end of fiscal year 2021. Thirdly, further improvement and measures for health promotion will be implemented through analysis of our employees' health conditions and other issues.

Lastly, on behalf of the entire management team, I would like to thank our customers, partners, suppliers for their support and the commitment as well as our shareholders. At this time, we would like to open up the call for your question, and thank you very much for your attention.

[Yoichi Orikasa, analyst]

Thank you very much, Mr. Sato. Now we would like to turn to the Q&A session. Mr. Sato will be pleased to answer questions from the participants.

[Operator]

[Operator Instructions] Our first question today comes from Mr. Aaron Rakers, Wells Fargo.

[Aaron Rakers, analyst]

Just on the small precision motor business, I'm curious, as we see you guys referenced the impact of the pandemic and some shutdowns in, I think, Philippines and Malaysia. With shipments down 19% year-over-year, I'm just curious, can you help us frame how much of an impact those shutdowns have had on your hard disk drive business? And what your kind of outlook expectations are over the next couple of quarters as far as HDD is, particularly in near line?

[Masahiro Nagayasu, executive]

Okay. Thank you, Aaron. First of all, we are just going to be talking about the -- our June quarter results, number one. Then as we said that we had a policy that we are not going to talk about our future numbers but maybe just a direction. So we shipped the spindle motor for hard disk drive in March quarter, 55.7 million, and it really came down in the number in this June quarter, 50.4 million. So 55.7 million down to 50.4 million, the volume is down. And as you suggested, there is some supply chain disruptions among our HDD customers. So this is a major reason that the volume is coming down.

But we do see some recovery in this September quarter and onward because we believe this 50 million number in the June quarter shipment will be somewhat the bottom or -- maybe this year. That's how we are looking at the current situation. Is that fine? Aaron? [Foreign Language]

[Operator]

So the next question will be go to James Pulsford from Alma Capital.

[James A. Pulsford, analyst]

My question is on traction motors, and you've given a lot of very detailed information of what's happened in practical terms in the last quarter. But has there been any developments, if you'd like to comment on, in terms of new orders you may have won, new customers you may have won, some developments that have implications for the longer-term growth of that business? Have there been any changes you could comment on that have happened over the last quarter, please?

[Masahiro Nagayasu, executive]

Okay. Number one, as we explained in the previous announcement, there are 2 business, E-Axle business and traction motor business. The total of the motor or system unit, which we do have a so-called order backlog, was something like 16 million last time. And this time, we say almost same number, 16 million. But if you look inside the E-Axle business, again, and the traction motor business, E-Axle business, clearly, the volume -- the total order backlog volume is increased by 0.5 million. But unfortunately, the traction motor business is down by almost a similar number, 0.7 million. So roughly, we say the total volume is the same as we announced 3 months ago, that's number one.

But on the other hand, we say that the E-Axle business, there were 7 customers at the end of April. Today, at the end of July, we say 15 customers, so the customer number increased by 8. That 8 will compose of 7 Chinese and 1 Japanese, okay? Then the traction motor customer, there are 6 customers at that time. Today, we do have 7 customers. So we have new 1 customer, which is Japanese. So those are the main points that we mentioned for our current traction motor business status. Is that fine, James?

[James A. Pulsford, analyst]

That's great. And the decline in traction motor, these are future -- this is order backlog so less influenced by what's happened in the short term. Why has the number of -- why is it the number of traction motor orders have fallen over the period, please?

[Masahiro Nagayasu, executive]

Okay. Always, we say that contract. We contracted a total amount of the -- a motor, which we have to deliver over the life in 3 years, 4 years and sometimes, 5 years. Then also, we contracted a peak volume. Then our customer can choose when those motors to be delivered. So as you see, most of the current customers are concentrated in 2025. If they're going to be postponed 1 year, then that's going to be out because we are just limiting our total order backlog from 2019 to 2025. Is that fine?

[James A. Pulsford, analyst]

That's very clear.

[Operator]

The next person will be Mr. Brad Snyder from Egerton Capital.

[Brad Snyder, analyst]

I just -- maybe I had a couple of questions. But first, just if I could follow up the first 2 questions. On the hard disk drive, could you tell us what were the EBIT margins for hard disk drive in the June quarter, please? And any trends on pricing?

[Masahiro Nagayasu, executive]

Okay. We are not using EBIT. We are using OP margin, operating profit margin. That's something like roughly around 30%.

[Brad Snyder, analyst]

Okay. I think I remember last quarter, you had said you had some pricing gains in there. Is that still the case or do you expect that going forward?

[Masahiro Nagayasu, executive]

Well, what did you say? The last time we said the disk business...

[Brad Snyder, analyst]

Yes. I think you said impact on price...

[Masahiro Nagayasu, executive]

You mean the COVID-19 impact?

[Brad Snyder, analyst]

Some price increases on the hard disk drive.

[Masahiro Nagayasu, executive]

We will not use the word price increase but we are trying to correct the profit structure of our business. That's the word that we used.

[Brad Snyder, analyst]

Got you, okay. That makes a lot of sense. I think -- and then I think on the traction motors, I guess my understanding is you've had no change to the volume of orders but maybe some of them were pushed beyond 2025. I just want to make sure I understood that correctly. And then I think you said you've added -- you went from 7 E-Axle customers and you now have 15 customers.

[Masahiro Nagayasu, executive]

Yes.

[Brad Snyder, analyst]

I guess I would have expected the order book to go up quite a lot for E-Axle. Or is it the same sort of situation there as in the traction motor where -- maybe there's been some postponement?

[Masahiro Nagayasu, executive]

Yes. As I said on the E-Axle business, as the customer number increased from 7 to 15, then we say the total lifetime volume or all -- so-called the order backlog after 2025, increased by 0.5 million. That's what we say, okay?

So always, there is a pushback or somewhat come for -- we usually, at this moment, the pushback, right, is happening in the Chinese EV market. This is mainly because the order or the demand is very difficult to read, especially the EV is really used by a so-called car sharing service, like Uber or DiDi or whatever. And that volume is going to change because of the COVID-19. So those are the reasons that we understand the EV recovery in China is a little bit slower than the AIC (sic) [ ACI ] in cars, okay?

[Brad Snyder, analyst]

Okay, okay. All right. Great. And obviously, the cost cuts have been going very well. I was just hoping, could you go into maybe some more detail or kind of separate how much of that is coming from kind of more permanent cost structure changes than with the sales volume being down, how much is variable cost that you might expect to return when sales go up?

[Akira Sato, executive]

Through the WPR program, we just reduced around JPY 10 billion of cost in June quarter and mainly coming from the procurement cost reduction, which is around 60% of the JPY 10 billion and the other probably 10% from direct labor cost reduction and the remaining portion is to reduce the fixed cost. That's the kind of structure of the cost savings in the quarter.

[Brad Snyder, analyst]

Okay, great. And I guess, well, I was a bit surprised, I guess, but the R&D expense was a lot lower than I would have thought. Is this -- is that a timing difference or are you happy with the R&D expense staying at that level going forward for the next few quarters or...

[Akira Sato, executive]

Probably 2 reasons. One is time difference, as you mentioned. And the second one is some kind of change of the business because we have got kind of a big order, for instance, for our traction motors. In that case, maybe our customer will pay the -- our R&D cost upfront. In that case, we can reduce the R&D cost in kind of a first phase of the kind of a development phase. And that's why, June quarter, R&D cost has been reduced to some extent. That's kind of a good news for us because we are spending a lot of money for R&D. So that's why, that's 2 reasons there behind reducing the R&D cost.

[Brad Snyder, analyst]

Okay. Was -- and I -- so -- sorry, you said that was more for the traction motor. I guess if you had -- I was thinking maybe if you had 8 new E-Axle customers, is that an area where you need to spend R&D going forward as they get further along in the design process? Or is it mainly for the traction motor?

[Masahiro Nagayasu, executive]

So it depends, okay. As I say, these customers, maybe the product launch will be something like 2024, 2025. Then we want to really start the R&D process and how much we're going to spend for those particular customers, mainly depending on the timing. Okay? That's number one.

Number two, we try to -- maybe we are trying to standardize our product lines, as you understand. So we will try to use, as much as possible, the product that we're already serving to the current customer. For the new customer, it might be much cheaper because they can save a lot of R&D costs. So thereby, the total R&D cost, which is going to be used -- which is going to be required for those new customers, clearly depending on the timing and also what kind of system they want. They want clearly the new system or something like a standard one. That's going to depending on the total R&D cost in the future. Okay?

[Brad Snyder, analyst]

Right. Great. Maybe just 1 last topic for me. I just -- I wanted to ask about the CapEx because I think you'd said about, for the fiscal year, JPY 140 billion, roughly, on the CapEx. So if I just looked at Q1, it seems a bit light on a run rate for that. So is that just a timing difference or do you have an updated CapEx target? Or if so, why would it be lower?

[Akira Sato, executive]

Yes. Main reason why the CapEx amount has been decreased is mainly the price of equity, that lower price. I mean, because of the segment market, the whole price of like motor or machine has been decreased significantly. Of course, demand is very decreasing and that's why we are now getting the lower price from the machine manufacturer. That's a kind of big reason why. And also, the time difference is another reason. But we will be able to spend the JPY 140 billion in fiscal year 2020 in order to increase our production capacity for traction motor and the other product, which is kind of a growth driver for the future.

[Masahiro Nagayasu, executive]

Is that fine?

[Brad Snyder, analyst]

Yes. And I guess maybe just since you have such a large order book, if the machinery prices are very attractive right now, is it -- I guess is there a reason why you wouldn't buy more than you need today if you know you might need it?

[Masahiro Nagayasu, executive]

Okay. Just to try to clarify R&D, right? So we say those new orders, most of the R&D cost is a so-called the certification or qualification fee. In order to be qualified for the new car, we have to spend a lot of so-called derivative testing and others, then we are collecting all the data, right? Then for the first one, which we mentioned last year, we started already 2019 about that process. Then at that time, we use a lot of so-called outsourcing service to do that, so the cost was so huge. Then we decided to do it in-house. So in order to do in-house, we have to buy the machine then using the machine that we are doing the testing. Thereby, as Mr. Sato mentioned, the cost of the machine is very important.

But overall, we have been doing more and more new customer. We just really started this business April 2019, almost year and 3 months, right? But now we do have more customers, we are more accustomed that we know how to save the money to get those, to buy the machine very cheap and we will be doing testing by ourselves. That's only the cheapest way to do that qualification. So thereby, we do have some idea that how we're going to be spending R&D in the future. That is not something that we mentioned 1 year ago about how much we spent at that time. Do you understand what I'm saying?

[Brad Snyder, analyst]

Yes, that's very helpful.

[Masahiro Nagayasu, executive]

Okay. That's the point, okay?

[Brad Snyder, analyst]

Yes. I guess is there -- I guess, do you have a time frame or how should we think about when you might do another stock buyback?

[Masahiro Nagayasu, executive]

Stock buyback.

[Brad Snyder, analyst]

And are there certain financial criteria that you're looking to hit before you would start to do that? If you can share anything around that topic. That's all for me.

[Akira Sato, executive]

As you may know, our -- the purpose of a share buyback is to protect our current shareholders from the kind of the very volatile movement of our stock price. So maybe that is why the -- our stock is up, in line with the market trend. So in that case, we will not buy our shares back. But if something happened in the market or in our share price, maybe we are not yet ready to the share or buy our shares back from the market. That's our position.

[Operator]

Our next question comes from Mr. James Pulsford from Alma Capital.

[James A. Pulsford, analyst]

Can I ask about your other precision motors, where the sales in this quarter, they're down only a little bit year-on-year and they've rebounded very sharply quarter-on-quarter. You're back in the black here but operating margins are still relatively low but obviously, a lot better than Q4. Could you comment on the recovery in sales you've seen here and prospects for the next quarter we've got coming up and whether you...

[Masahiro Nagayasu, executive]

Which motor?

[James A. Pulsford, analyst]

Other precision motor. So if you look at your...

[Masahiro Nagayasu, executive]

Oh, other precision.

[James A. Pulsford, analyst]

Other precision motor and you strip out HDD, then you're left with -- yes.

[Masahiro Nagayasu, executive]

You mean, the other precision, small precision? Okay.

[James A. Pulsford, analyst]

Absolutely. In your materials, you comment just on the very small fan motors. But for that area overall, could you talk about what happened to the different types of motor in this quarter and the recovery you saw and the prospects for profits in this profitability to perhaps maybe whether that can improve going forward or not?

[Masahiro Nagayasu, executive]

Okay. So number one, in the past, we do have a DC motor fan and the others. Now we are somewhat remodeling the total, that we now say hard disk drive and the haptic vibration and the other. The other includes the DC motor, fan motor and all the other new products, such as the vapor chamber or thermal solution management, okay?

[James A. Pulsford, analyst]

Yes.

[Masahiro Nagayasu, executive]

So if you're just looking at this business, again, the movement or our performance on the top line and bottom line in the March quarter and this June quarter is clearly affected by the COVID-19. So this business is centered in China, so that is a very reason that we could have a little bit better number on this segment when the China is recovering from the COVID-19 impact, mainly from March to the April, May, June. Around that time, you understand that Chinese economy is coming back from the COVID-19 impact. Then the riding -- we are riding on that end. So if you're looking at that, one of the key products that we mentioned in the Slide #17, FDB fan, UltraFlo FDB fan, okay?

[James A. Pulsford, analyst]

Yes.

[Masahiro Nagayasu, executive]

So those are used by notebook PC and tablets, mainly the notebook PC. And as we said, the COVID-19 is making a huge demand for notebooks, then our fans are used there. Then clearly, we had made the historic high shipment volume, over 5 million a quarter for this June quarter. So this is one example, okay?

But this business is not just like hard disk drive, one application. There are so many different applications. And overall, as we said, another very big pillar of this business is the fan motor for 5G stations. So as you understand, a 5G station is more number compared to the 4G because the coverage is much very smaller than the 4G. So the total number of base stations in the future for 5G communication, they are a huge number, then each may one require a fan motor to cooling down the system.

Then we are seeing that going to start maybe from this June quarter. We should have started maybe in March quarter. But March quarter, COVID-19 impacted the supply chain in China, so it's going to be maybe putting into this June quarter than we saw a surging demand for a 5G station fan motor demand. That's another point which we can mention the other small precision motor.

Then the other one which we've mentioned before is the thermal solution. 5G smartphone is coming, and 5G smartphone requires a new solution for a heat distribution, thermal solution, where we say we are providing a vapor chamber, heat pipe, heat sink and other so-called heat-resilient technology. Then that business is growing, okay?

Then the final one is haptic. Haptic was a huge hype in 2015 but now it's coming down, okay? So it's for a North American smartphone maker, then we have been shipping to a so-called haptic vibration motor from 2015 to today, right? Then the total volume is clearly depending on that customer's total volume. But we are maybe keeping a decent share, maybe roughly, we say, 1/3 of that customer. Because there are 3 suppliers in this business, then we are keeping 1/3 share from 2015 and after 2025 year. We've been competing against the Chinese competitor but still we are keeping that share. That's the current situation.

So those are some of the last examples of what kind of business are there. So the other small precision motor other than hard disk drive. Is that fine?

[James A. Pulsford, analyst]

That's good. Can I just ask one -- just, you mentioned you basically chopped it up into hard disk, haptic and others. Just so that I can understand what's happening in others, for -- could you just tell me what -- for the last quarter, what were the sales and profit margin just for the haptic business, please?

[Masahiro Nagayasu, executive]

For the full year last year, okay, full year last year, we say a total haptic sales was something like JPY 37.7 billion but that was somewhat a breakeven, okay? This year, maybe we are guiding something similar, like the JPY 37 billion for the full year top line sales, but we are looking at something like 3% -- 3% to 4% OP margin for this year, okay?

[James A. Pulsford, analyst]

Yes. And what happened in Q1...

[Masahiro Nagayasu, executive]

So unfortunately at this moment, this customer is very severe customer, very difficult to make money for the past and even today.

[James A. Pulsford, analyst]

Yes. And could you tell me what -- just so I can strip it out, what were the sales and margin just in Q1, please?

[Masahiro Nagayasu, executive]

Q1? This quarter?

[James A. Pulsford, analyst]

Yes, this quarter.

[Masahiro Nagayasu, executive]

This quarter is JPY 10 billion. Yes, JPY 10.2 billion and breakeven.

[James A. Pulsford, analyst]

JPY 10 billion for the quarter, yes?

[Masahiro Nagayasu, executive]

Yes.

[James A. Pulsford, analyst]

And breakeven, okay. Wonderful. That's very kind.

[Operator]

[Operator Instructions] So the next question will be go to Mr. [ Cho Yoksan ] from MUFG Security America.

[Unknown Analyst]

Sato-san and Nagayasu-san, first of all, congratulations on hitting such a strong figure, which is way stronger than our figure with our Uchino analyst. And as she goes, actually, the difference between your first OP -- first quarter OP, JPY 28 billion versus JPY 16 billion. Is that half coming from the cost cuts and the rest of the half coming from the top line increase?

And I have a question on more like a qualitative asset. And I want to know if that your new management has introduced any new strategies for -- to achieve such a strong figure? Then also second question, how the new leadership led by Seki-san possibly impacted for such a strong OP result this time?

[Masahiro Nagayasu, executive]

Okay. Can I understand, your question is, how much of that JPY 28 billion OP, which we reported for the June quarter, how much is coming from a new endeavor like the WPR4, which is mainly, you mentioned, the cost cut, right? That's number one question.

[Unknown Analyst]

Yes.

[Masahiro Nagayasu, executive]

The second question is how that's going to be related to our management structure, which is 2 top system, Mr. Nagamori and Mr. Seki. Is that fine or your question is different?

[Unknown Analyst]

That's right. Yes, that's correct.

[Masahiro Nagayasu, executive]

Okay.

[Akira Sato, executive]

I'll respond to the kind of second question first. Probably, Seki-san, the leadership, is the -- how quickly we can decide -- make a decision in any area, especially the capital expenditure to increase the production capacity for auto or those kind of things is currently very difficult decision-making. But Seki-san and Nagamori-san discuss every week on what is the right direction. So -- and the decision-making speed has been increased a lot with the new management. So Seki-san leadership is kind of a -- to speed up our operations. That's an answer to your second question. And the first question is, as I mentioned, maybe JPY 10 billion of the cost restructuring, it's a contribution from the WPR4 program.

[Masahiro Nagayasu, executive]

Yes. We never say that half is coming from the cost cut. But we -- as Mr. Sato mentioned, clearly, we mentioned roughly JPY 10 billion, then we just try to worrying how much of that JPY 10 billion is coming from the so-called the procurement side or labor cut -- labor cost cut and how much is the fixed cost. Already, we mentioned -- or we answered that in the previous question, right?

[Unknown Analyst]

Okay, yes.

[Operator]

There are no further questions today. [Operator Instructions] Mr. Orikasa, there are no further questions today. So at this time, I would like to refer the conference back over to you for any additional or closing remarks.

[Yoichi Orikasa, analyst]

Okay. Okay. We would like to conclude the conference call. Thank you very much for your participation today. Should you have additional questions later, please do not hesitate to contact either Nidec Corporation or your sales representative at Mitsubishi UFJ Morgan Stanley Securities. Thank you very much.

[Operator]

Thank you. That concludes today's conference. Thank you for all your participants and you may disconnect now. Thank you.

[Akira Sato, executive]

Thank you.

[Masahiro Nagayasu, executive]

Thank you.

[Yoichi Orikasa, analyst]

Thank you.