Dear all participants, thank you very much for joining Nidec's conference call. I'm Yoichi Orikasa, General Manager, Kyoto Branch of Mitsubishi UFJ Morgan Stanley Securities. As we kick off the conference, I'd like to ask you to make sure all the materials are ready in front of you. If not, please download the files on Nidec's homepage at this moment. Please note, this call is being recorded, and the conference materials will be posted on the company's homepage for the coming week for investors and analysts who are not able to join today's call. Now, I'd like to introduce today's attendees from Nidec Corporation. Mr. Jun Seki, Representative Director, President, and Chief Executive Officer. Mr. Hidetoshi Yokota, Senior Vice President and Chief Financial Officer.
Hello, everyone.
First, Mr. Yokota will make a presentation. After his presentation, we will move on to a Q&A session, and Mr. Seki and Mr. Yokota will answer your questions. Mr. Yokota now presents Nidec's Q2 Fiscal Year 2021 results, future outlook, and management strategy. Mr. Yokota, please go ahead.
Thank you, Orikasa-san. Good day, everyone, and welcome to today's conference call. My name is Hidetoshi Yokota, Chief Financial Officer of Nidec. Today, Mr. Jun Seki, Representative Director, President, and CEO of Nidec, and myself will be your main speakers and answer your questions. Joining us also is Mr. Masahiro Nagayasu, General Manager of Nidec IR team. For the forward-looking statement, please see slide two of our presentation material for details. Now, I'm going to review the key figures. Please see slide three for our first half results. As summarized on slide four, the first half net sales stood at record high of JPY 910.7 billion, 21.1% higher year-on-year. The operating profit increased 30.4% year-on-year to JPY 90.2 billion.
The quarterly operating profit ratio at Appliance, Commercial, and Industrial Motors, or ACIM, has improved steadily, and its first half operating profit ratio reached 10.7%. The profit attributable to owners of the parent increased 38.6% year-on-year to JPY 67.6 billion. Based on those achievements, we have made an upward revision to the full-year fiscal year 2021 guidance. On slide five and six, you have step charts showing the net sales and operating profit year-on-year and quarter-on-quarter respectively by product groups with exchange-related effect, eliminations, and structural reform expense.
As you see on slide six, while the operating profit of Small Precision Motors, Automotive Products, and Electronic and Optical Components declined, mainly due to the reduced sales caused by the lockdown in some Southeast Asian countries, where our main production sites are located and also due to one-off expenses caused by the emergency change of production site. However, the net sales of all the segments made an increase despite semiconductor shortage and the reduced sales caused by the lockdown. Please turn to Slide eight. As I explained just now, based on the September quarter's achievement, we have made an upward revision to the net sales, operating profit before income taxes, profit attributable to owners of the parent, and EPS. Please see Slide 12. Major OEMs complete the review of the electrification plan and a rapid EV shift is accelerated globally.
As illustrated by the red circles, many of those OEMs have announced that during years between 2026 and 2040, they are going to make their new car sales 100% EVs and fuel cell vehicles, both of which are defined as zero-emission vehicles. The greatest opportunity has finally arrived for our traction motor business. Please see slide 13. OEM companies in the world can be grouped into three different types by their strategy of sourcing traction motors, and it is expected that more traction motors will be outsourced after the turning point year, fiscal year 2025. Type A customers are those who manufacture traction motors in-house, such as Japanese, American, and European traditional OEMs, and they stick to this until fiscal year 2025, when they are expected to switch to more outsourcing.
Type C customers are OEMs in emerging countries such as China and Tier 0.5 and are already outsourcing traction motors to Nidec. For these companies, outsourcing traction motors will completely become the norm after fiscal year 2025. Sitting somewhere between Type A and C are Type B companies who are not heavily dependent on outsourced motors, but less committed to manufacturing them in-house. These companies have established or are expected to establish joint ventures and alliance with motors specialists such as Nidec. We expect that regardless of the types of all the EV manufacturers will eventually be producing traction motors and other major components from independent specialized supplier after 2030. Please see slide 14.
As I explained just now, Type C customers are currently increasing their outsourced orders, while Type A customers are expected to increase their outsourcing one to two years before or after the turning point. Please see slide 15. While establishing local production and supply chain in China, we are eyeing expansion of Europe and Americas. In addition to three R&D centers in Japan, we have established one in China to speed up R&D for the Chinese market, and our production site in China is geographically diversified into North, Center, and South to build stable supply chain. Please see slide 16. We are steadily implementing in-house production of main components and equipment by bringing together all the production know-hows and technologies within Nidec group.
The pictures on this slide are showing examples of in-house manufactured parts such as die casting, precision machining, stamping, pressing, and laser modeling, as well as examples of in-house equipment such as press machine, winding machine, grinding machine, gear shaper cutters, and the motor benches. By driving comprehensive vertical integration through in-house production, we are going to achieve overwhelming cost competitiveness and R&D speed up in our E-Axle business. Please see slide 17. The cumulative number of EVs using our E-Axles reached 200,000 units, and the first half volume has doubled year-on-year. The number of EV models adopting our E-Axle has expanded to nine. Please see slide 18. As the 10th EV model adopting our E-Axle, 200-kW NI200 EX has been adopted in Zeekr 001, the first model of Geely's new premium EV plan, Zeekr.
As is illustrated on the previous slide, Geely's two EV models, Geometry A and C, have already adopted Nidec's E-Axles. However, Zeekr is their premium brand, and this is the first case where our E-Axles have been adopted in premium class EV model. With a dual motor type option of Zeekr 001, you can achieve maximum output of 400 kW, maximum torque of 768 newton-meters, 0-100 km sprint of 3.8 seconds, maximum speed of 200 km/h. The sales of Zeekr 001 in China start within 2021, while its global sale is set to start in 2022. Please see slide 19.
Despite semiconductor shortage, material cost rise, and COVID-19, automotive existing business kept double-digit operating profit ratio for five consecutive quarters after bottoming out in Q1 of fiscal year 2020. Please see slide 20. Paradigm shift from ICE vehicle to EVs is rapidly accelerating in two-wheeled and compact cars as well. In the mobility area, electric two-wheeled vehicle market is formed mainly in India, China, and ASEAN countries and is expected to enter high growth period driven by environmental measures. We are currently focusing on two major markets of India and China, and have already started mass production of motors for major customers. In the mini EV area, we are receiving inquiries from multiple numbers of potential customers, mainly in the Chinese market, and eyeing possible mass production of motors for major customers. Please see slide 21.
In Small Precision Motors segment, we are implementing a business portfolio transformation, I mean, HDD motor, market structure change and mobility and mini EV which belong to this Small Precision Motors segment are expected to be the drivers going forward, as I explained in the previous slide. Please see slide 22. In ACIM, we are executing a structural reform in overseas business and looking to enter new phase of growth. While estimating CAGR of the market at 3%-5%, we aim to grow ACIM sales at CAGR of 10%-11% by creating a new demand through solution proposal in markets such as HVAC and handling robot, where structural change is occurring. Please see slide 23.
ACI's operating profit ratio is steadily improving after bottoming out in Q4 fiscal year 2019, and we have achieved record high net sales and operating profit in quarter two. Please see slide 24. In other product groups, operating profit ratio is keeping high level with over 20% operating profit ratio in quarter two after bottoming out in quarter four fiscal year 2019. We have achieved the record high quarterly net sales and operating profit in machinery segment in quarter two. Last but not least, on behalf of the entire management team, I would like to thank our customers, partners, suppliers for their support and commitment, as well as our shareholders. At this time, we would like to open up the call for any questions. Thank you.
Thank you very much, Yokota-san. Now, we would like to turn to the Q&A session. Mr. Seki and Mr. Yokota will be pleased to answer your questions. Today's question and answer session will be conducted electronically. If you would like to ask a question, please press the star key and one on your touchtone phone. Again, please press star and one if you would like to ask a question. If you would like to cancel your request, please press star and two. We now pause for questions from the participants. Okay, our first question today is from James Pulsford of Alma Capital. James, please go ahead.
Great. Thank you very much for your time. Can I ask just a couple of things about the automotive side? In your presentation, you say that the mainstream OEMs, that's the sort of Type As, you expect the move, you know, them to be basically relying on internal production for the next sort of four or five years, but then to move to outsourcing. I know the auto companies plan quite a long way ahead. At the moment, is this just a hypothesis, or do you have concrete evidence for this, or is it too early for that?
Thank you, James. Seki speaking. Then, if we go back, page 14. The, you know, we cannot explain the detail of customers, but many of Type A is already looking for to move to Type A'. So at this moment, they are producing their motor by themselves, but we are receiving RFQ for like rotors only or stators only. So they purchase some components from us and then just make a final assembly as motors. That we are seeing. Other case is from these six months, we rapidly took orders for hybrid. It's not E-Axle for EVs, but it's already exceeding 2 million, only these six months. This is what happening in there, you know. They shift from hybrid to EV, and then hybrid is no longer their core product.
They are intensively, you know, gathering their resource for EVs. Naturally, hybrid going out. It's happening, occurring not only for OEM, but also Tier 1 suppliers, you know. They're shifting to more EV. That's why it's coming to Tier 2 side or us. Together with those two phenomena, I think it's not extremely clear, but it's already starting. They are moving from Type A to Type A'. You know, this is not from all of OEM, but some of OEM. With next four years, I think many OEM will move. That we are seeing.
Okay. Thank you very much. That's a very, very clear explanation. I wonder, could you also update, are there any significant new major contracts, developments or awards that things that have changed over the last three months in your E-Axle business? I think it's correct that you've updated your official forecast for E-Axle orders from 2.8 million to 3.5 million. I'm not sure. I believe that's correct. I wonder on what I remember the 2.8 million before included a, if you like, a sort of discount because it was a bit difficult to tell what was coming through. If you have changed to 3.5, on what basis is the 3.5 million made, please?
Yep. Thank you again, James. First can we go to page 17? No, it's obviously increasing very acutely. You know, this is happening not only for us, but also all EV in China. We don't have September data yet, but if we pick up China EV and plug-in hybrid, we are adding plug-in hybrid, but because for us it's same customer anyway. You know, they have a traction motor to drive vehicles. Those combined percentage is 17%. By the way, EV alone is 13.9%. So almost, you know, one out of five car, they're becoming EVs. It's happening similar in Europe. Europe data in August was 18.8%. It's a combined EV and plug-in hybrid. EV alone is 11.1%.
From this, what I want to say is, we didn't believe numbers, quantities coming from our customers. It's always like 50% off, sometimes even 70% off. Now what's happening in China is, they are changing their original requirement even more. Let's say they requested 50,000 in this second half, increasing to 100,000, which is very difficult to build because of the lack of semiconductors. Of course, we are welcoming this, you know. Their required volume is much more reliable than before because of this EV boom. Yeah.
Based on that, we changed the conversion ratio from current orders and then very high desirable RFQs. Before we introduced like a 50%, currently I'm recommending we use 75%. 75% even maybe too pessimistic based on current. We decided to change JPY 2.8 million to JPY 3.5 million. Actually, if it's same formulas, it's let's say like JPY 3.1 million. But because of these conversions, I clearly say JPY 3.5 million is very makeable target. That's a background on orders.
Thank you. The JPY 3.5 million still includes some element of discount, but smaller than before, yeah?
That's right. That's exactly right.
Okay. Wonderful. Thank you. Thank you very much. I have some more, komakai questions, but I'll go to the back of the queue. Okay? Thank you.
Thank you. Very kind.
Okay. Thank you, James. Our next question is from Ramsey [Neelam] of State Street. Ramsey, please go ahead.
Yeah. Thank you very much for taking my question. To follow up the previous question, can you give a breakdown of the 3.5 million units into like, what is the percentage of the confirmed orders and the orders with the high probability? I think before it was 50-50. I mean, if there's any change in the ratio for 3.5 million.
Just a moment. Yes. Ramsey, sorry. Microphone quality is not perfectly good. Can you repeat your question again?
Yeah. Yeah, I'm audible now. Is it better?
Yeah. It's a little better.
Yeah. We have a revised target of 3.5 million units. Can you break down what is the confirmed portion of the orders and the orders with the high probability? I think for the previous target, we have 50% of the confirmed orders and 50% as orders with high probability. Is there any change in the mix for 3.5 million units?
Yeah, actual order we got is 2 million. Besides that, we have about over 2 million very high probability RFQs and potential orders. We converted that to 150, 1.5 million. 2 million firm order, 1.5 million high possibility, that makes 3.5 million.
Thank you. That's great. Moving on to the Vietnam lockdown. There's a huge impact on sales. I mean, can you give a color on what is the impact from lockdown, and also what is the impact from the semiconductor shortage on the automotive sector, especially for Nidec in Q2?
Okay. First, let me answer your automotive area questions, then Yokota-san will explain to you the Vietnam situations. First, for automotives, let me tell you just average, okay? We are not living with average. We are much better than average. Automotive average in this fiscal year 2022 is around 82% compared with 2019. We don't compare with 2020 because it's extremely low. We originally expected same, almost same level as 2019. It's about 18% off. We knew this and up to June, and then we expected it will be better in July, August, towards Q3. As you know, Malaysia, Vietnam, and Thailand went to lockdowns because of COVID-19 pandemic.
The automotive sector has a huge supply of semiconductors for harnesses from Malaysia. It's completely 100% locked down. It continued about around half a month. The automotive world completely lost semiconductors for harnesses. That makes current volume down significantly. We are seeing about 25% volume down compared with 2019 for, like, September, October periods. It's still continuing. But sometimes, definitely it's coming back. We stopped seeing optimism for this year. We are intentionally forecasting volumes very pessimistic, and then we are still squeezing our cost side. That's what we are saying. No, everyone says, you know, Q4, it will come back, start to come back.
It may take a longer time than we expected before. So that's semiconductor impact to automotive side. We are not, like, 25% off from 2019. We are only slightly off, so we are far better. Because first, we are increasing market share from 2019 to 2020 to 2021. Second, you know, for in automotive area, it's clearly see losers and winners. We have more customers for winner side. Those two element makes our volume better than average. That's automotive area. Yokota-san, for Vietnam?
Yeah. For the impact of Vietnam lockdown, we have disclosed the numbers in our financial report. It was estimated like JPY 11 billion in operating profit. The segment split is like JPY 8.5 billion for Small Precision Motors, and JPY 2.5 billion for Automotive. Out of this total JPY 11 billion, roughly 40%-50% is volume lost, let's say marginal profit lost. The rest remaining cost is all the sourcing change or employee support expense or hotel gas rental, et cetera, et cetera, to maintain our workforce within the factory. All in all, our operating profit impact was JPY 11 billion. Of course, means we made a lot of counteraction to mitigate or offset this loss in the first half. In the third quarter onward, some of the costs is just one time in second quarter. The volume lost, we may try to recover as much as we can. That's what we can say now.
That's great, Color. To follow up on the same question, can you give some color on what is the capacity utilization or the current status of the production facilities in Southeast Asia?
Can you share what capacity of which factory or segment production especially?
Yeah. In the areas which are impacted due to lockdowns in Q2.
Okay. Maybe I can only tell what kind of product we produce in Vietnam, for example. Is that okay for you?
No, no. Sorry, Yokota-san. Ramsey is asking capacity utilizations. Ramsey, in Vietnam w e have many, many products. Some are precision motors, some are electronics, and some are, like, valves for transmissions. Because Vietnam has a big cost advantage, including the tax incentives, we are fully utilizing those, almost 100%, even 110%. Because of just after the release of this pandemic, actual usage average 80%-85%. It's not completely recovered at 100%. Meanwhile, Thailand, it's mainly hard disk drive plants. It's completely recovered at 100%. Then Malaysia, very similar to Vietnam. It's, let's say 80%-85%. That's the recovery situations.
Yeah.
Did that answer your question?
One last question.
Yeah.
Yeah, yeah, the same question I asked. Thank you. Yeah, and one last question, if I may ask. So, I remember from Q2 call, we don't see much impact on ACIM segment from semi shortage. So is that status remain same in Q3 and going forward, or are we seeing any kind of supply chain constraint on ACIM segment?
Answer is yes. You know, Ramsey, because that segment is growing, we prioritize the sales. Even supplier requesting increased price, we mostly adapt it, then we increase our sales. Our cost becoming high. Actually, without those price ups, parts price up, probably our profit would be much better, you know, we're facing. We are facing very high logistic cost, either sea or air freight. It's continuing from Q2 to Q3. It's not increasing, but it's a very high level, maintaining high levels. Good news is one of the highest increased part was magnetic steel. We need those for our motors. There was peak in Q2. In October, we are seeing slightly coming down. It's not significantly. First, we already confirmed we don't have a shortage, significant shortage. But we are suffering. We have been suffering by price increase of those. Then it will be soft. Okay?
Yeah. Thank you. I join back with you.
Okay.
Okay. Thank you, Ramsey. Our next question is the second round questionnaire from Alma James . James, please go ahead.
Wonderful. Thank you very much. Can I just ask a brief one first of all on machinery and then follow up on precision? In the machinery area, you had record levels for Q2 of individual quarter of sales and also profitability was dramatically higher. I wonder, was there any one-off element to that, or does it simply reflect very strong demand and the sort of cost, the sort of scale benefit as sales ramped up? Can you comment on that, please?
Yeah. Basically, the machinery segment, our inspection machine or stamping machine, all of the business in very good shape, thanks to all the demand in the global, especially China. That is one of the biggest driver that we could enjoy the sales and the profitability. Some profit one-timer is included in operating profit actually. That is boosting the operating profit ratio a little bit higher.
Can you tell me roughly how much was that?
Roughly 2024 o f Japanese yen. Yeah.
Yeah. Yeah. Thank you. Thank you. Thank you very much.
James, this is Seki speaking. You know, not single reason, but majority of this good sales is based on high demand of semiconductors. Semiconductor-related stamping machine, semiconductor-related measuring machine, those going very well. Same time, as I explained, we are suffered by semiconductors, lack of semiconductors. It's plus and minus together.
Okay. Good. No, thank you very much. Could I just ask on the precision area at the interim? You mentioned I understand there are a lot of, you know, the sort of one-off impacts and sort of shutdowns. If we look at precision profitability, how does profits break down between the spindle side and the HDD motor and the rest of the business, please? And sort of say what were half one margins for the spindle side alone, please?
So, o kay. You'd like to know what the Q2, the September quarter results. In terms of the profitability of the small precision motor, right?
Yes. Also then we can see the profitability of the other motors there as well, please. Yes, thank you.
Yeah. We say roughly a OP margin for spindle hard disk drive was 31.0% for this September quarter. The non-HDD ones are at this moment, you know.
The 31% must exclude the lockdown impact. Is that correct?
Okay. The key point is we do not have so much of the impact because those lockdowns are centering around Vietnam, Ho Chi Minh City. That's not the place that we are making the motor for hard disk drive. Factory in Vietnam is non-HDD motors. Okay? Yeah. Thereby roughly we say 3.2%. Just a minute.
James, while Nagai-san is looking for numbers, let me explain one thing. You know, for spindle, sorry, precision motor side, we have a manufacturing base in Thailand and Vietnam. The HDD side is located in Thailand. The pandemic level between those two countries was the same, but the treatment by the government is completely different. In Thailand, they allow us to continue to operate our plant as long as we provide appropriate care to avoid pandemic clusters. Meanwhile, Vietnam was crazy. If we have only one new patient out of 5,000 employees, they request us to shut down. Of course, we made many complaints, official complaints, even to the president by Nagamori-san's way. Now it's softened, much better, but that's why we don't have damage for hard disk drive side, even it's in Southeast Asia.
Okay. Already we disclosed how much is the motor for HDD, how much is the non HDD out of small precision motor. We say the HDD motor OP margin is roughly 31%, and the non HDD is only 3.4%.
Yeah. Thank you. Thank you very much.
That's gonna include some of the description that we made for a, you know, JPY 8.5 billion negative impact that we analyzed from the COVID-19 in Vietnam. Okay?
That's good. Sorry, the figures you quoted before of JPY 11 billion for the whole company and JPY 8.5 billion, is that for the first half or the second quarter alone?
you know, we did not have so much of the impact in the June quarter. Clearly we had the impact from this COVID-19 in the September quarter, July, August, and September, and still in October.
Yeah. Let's say starting from first week or second week of July to mid of September.
That was peak. Now still continuing.
In recovery mode.
Much better.
No, thank you very much indeed. Is this okay, so in which case the sales also for the non-HDD were also rather negatively impacted by these production cuts you have. Is it possible to give a sales split for the first half. I think you have for the first half JPY 155.7 billion of other motors. Could you give me a sales split for that, please? So it includes, you know, CCI and vibration haptic and other things, I think.
We usually divide those, you know, Small Precision Motor into maybe three segments. In our, you know, so-called model, right? At this moment, we can say hard disk drive already we announced the number of the top line, right? Which is something like JPY 26.4 billion. No.
That's for the Q2, yeah?
Yeah. You need a Q1 plus Q2 or Q2 number? Whatever.
If you have the first half numbers, that would be good.
The first half number is 40. Yeah, JPY 49.4 billion on the.
Yeah.
HDD. The OP margin is 33.07%. We have a second portion is the DC motor fan and the other, okay, which gonna include CCI, because we are not separating CCI there. 139.1 billion for the first half. 5.0% OP margin. The last portion in the Small Precision Motors is a vibration and haptic, JPY 16.5 billion top line and 6.1% OP margin. Those are the three segments under small precision, hard disk drive, DC motors and the other, and the haptic vibration. Those are the number. Okay?
Okay. No, thank you very much. Lastly, sorry, if it's okay, on the HDD side, can you, I don't know how much detail you're happy to give, but in terms of sort of volumes, your own volumes and ASP and overall and if possible for the various sort of elements within that, however much you're happy to disclose would be great, please.
As we've been clearly disclosing the shipment volume by form factor and the ASP, okay? For this September quarter, we shipped 34.0 million total HDD spindle motors, where the 2.5-inch high-end is 1.1 million, and the nearline 9.2 million. The 3.5-inch is 12.3 million, and 2.5-inch is 11.4 million. Regarding the ASP, the total ASP is $7.06, okay? As you can see from our Kessan that because COVID-19 hit our customer in time, as Mr. Seki explained, thereby we see the shipment is a little bit higher than the production for this quarter. Okay. Thereby, we are keeping something like a 55% share for this quarter. This is the last quarter our inventory adjustment by our former competitor, Minebea, might be affecting our business. This would be the last quarter for that. Okay.
The last quarter. The figures you gave me are shipment figures, yeah?
No. The number which we talked about is the shipment of our motors. Okay?
Yes, your shipment figures. Yeah, absolutely.
Right.
That's great.
We are adjusting time, so our production number and shipment number is almost in line. Especially in the case of hard disk drive spindle motor. Okay.
That's it. Thank you. I'm sorry, very last question, I apologize. For the first half of the year, your any restructuring costs you made were quite small I think. Yeah. Is it about JPY 1.5 billion? Just looking at your flow chart, it showed an improvement of JPY 5.4 billion year-on-year. Is that correct?
The spending on quarter two is about JPY 6.5 billion.
JPY 6.5 billion, yeah.
You want to configure first half versus second half?
No, that's absolutely fine.
Yeah, okay.
If you give me the Q2 figure, that's enough.
Yeah.
In terms of the second half and for the full year, you're making some changes to production, particularly in the small precision side. What figure do you expect for the full year? Do you have a target for that, please?
Yeah. Normally, we constantly make a restructuring effort by maintaining like, what, JPY 2 billion constantly. Recently, spending is a little bit low because of all the supply chain confusion and everything gets a bit stabilized. We will examine how much exactly we want to make a restructuring. Roughly, I would say, JPY 2 billion average we spend per quarter.
Per quarter. Okay. It just happens to be lower in the first half of the year. Okay.
Exactly.
Thank you very much.
Yeah.
Yeah. Thank you. Thank you very much for answering all my questions.
James, just addition from Seki. You know, we had about EUR 10 million restructuring in Europe for Appliance, Commercial and Industrial. Because sales is growing too much, I intentionally stopped because we need people. Those are also mixed. Meanwhile, I don't expect this pace is slowing down in H2. We may postpone to next year. We have some area we have to restructure, but because good sales from Appliance, Commercial and Industrial side, we didn't spend.
Okay. Thank you. That's very clear. Thank you very much.
Yes.
Thank you very much, James. Our next question is from Hamish Chamberlayne of Janus Henderson. Hamish, please go ahead.
Thank you. Good evening, everyone. Thank you for taking my questions. My first question is to do with the recent acquisition of Mitsubishi Heavy Industries Machine Tool, and I was wondering if you could just perhaps go into a little bit more detail in the background to this acquisition, its strategic fit and the financial impact.
Okay, thank you, Hamish. This is Seki speaking. First, background why we acquired this company. If we go to vertical integration page for the E-Axles, page 16. Here, we have our vertical integration part side, which is upper side, the die cast and gears and plastics and usually some Tier 1 or Tier 2 motor company outsource of those. But we don't hesitate to invest, and even our investment become higher. We are prioritizing cost lower. Lower side is our vertical integration example for equipment side. Pressing machines and then wiring machine of copper wires and then some of testing equipment for motor itself.
From second from right, that is gear machining machines. You know, historically, automotive world had lots of gear, particularly manual transmissions. Manual transmission wasn't sensitive for noise because usually, you know, people accelerate always, so noise was very usual. In case of EV itself is very quiet and on top, you know. Usually manual transmission gear only match with one side. For EV side, we have a clockwise revolution, anti-clockwise revolutions, so matching phase need to be very careful for both sides. Those are background why we need high technology for gear while gear was used continuously from transmission errors. We looked for necessary technology to control this noise, vibration and harshness.
Mitsubishi Heavy Industries had a very high potential. Just concern was the equipment is too high. The equipment is too high because their sales is extremely low with very high fixed costs. That is a favorite of Nagamori-san. He's always going to those very poorly operated companies and purchases with very low price and restructures very quickly. Actually, we completely merged this company beginning of August, and in September, he made this company positive profit, so like magic. Yeah.
He's expecting this company to go to 10% in last month of this fiscal year, which is March 2022. You know, usually we don't believe it, but if he say he'd do, he does, probably he does anyway. That's we are seeing. Then, you know, we are showing many of equipment in here, but this is not last. We have some missing puzzle. We have to fill one by one. We will continue. Only hesitation we are considering is like semiconductor areas, because usually that technology going very fast. Even we prepared, maybe invested equipment may just waste. For that area we will be very careful. But other area, we positively continue this investment and merge and acquisitions. Is that answering your questions?
Yes. Just to follow on from that. Just to understand, this is not going to be a completely internal acquisition in the sense that the sales are to internal as part of your, you know, to other Nidec operating units within the axle business. There are some external sales and end markets here. Is that right? What are they?
Yes, yes. You know, they didn't have any industry path, so their original test will be pretty outside Nidec. That is the main thing, the amount of sales to Nidec internally. Of course we expect them to expand very rapidly. Actually, they are expanding very rapidly with very strong lead by Nagamori-san.
This is Yokota speaking. The current turnover update from us is between JPY 2 billion-JPY 3 billion. As Mr. Seki mentioned, with the consolidation, the contribution in our financial statement second quarter, the only single boost up is about JPY 4.7 million. Profit is on neutral as Mr. Seki mentioned. Of course, our mission will accelerate the free market and turn around of this company. In the, you know, in the past, this company is a cash-bleeding, and we have a lot to do fix the problem. We not too optimistic, but we are pushing so hard to make this company profitable starting this fiscal. Currently, EIB contribution on the turnover, you can multiply JPY 2 million-JPY 3 million p er month, February month is like, I don't know, JPY 200 billion or JPY 30 billion. That is the target estimation.
Okay. Just to be completely clear, the real value of this acquisition is with the technology thanks to the actual business.
Yeah. Of course, both. You know.
Okay.
Because I have a major responsibility to see for a close to the actual, you know free project to contribute to the actual business, actually controlling the NVH. As CEO of Nidec, I want them grow very fast, and I want them to bring more money.
Just talking about acquisitions and, yeah, it's been quite a period since over the last couple of years, and there were quite a number of acquisitions in 2019. Just wondering if I could get an update on how the integration has gone and the contribution has gone from both the Omron automotive electronics business and the other sort of large acquisition you did in 2019, the Whirlpool Brazilian business.
Embraco.
Compressor business.
Embraco, right? Embraco.
Yeah, Embraco. Yes, exactly. Embraco, yeah. Omron and Embraco, yeah.
Thank you. Embraco was acquired Q1 in 2019, and then Nidec Mobility, we call the company Mobility, acquired from Omron. It was done Q3 of 2019. Both were around 2%-3% OP margins when we acquired. Now both company has completely double-digit. They, you know, PMI won't be finished until they become a 15%. That is, you know, Nidec criteria. For double-digit OPs, they easily reached that level. Now they are moving from double-digit 10% level to 15% level.
The only concern is, as I explained, on the appliance, industrial, and commercial side, you know, for the Embraco side, they have a very high market share for refrigerator compressors for both personal use and commercial use. They are the ones heavily impacted by price up of magnetic steel. As I said, you know, it peaked in September, now slightly better, but still exists. If without those, probably they already reached the 12.5% or 12% levels. Now they are doing their best to mitigate this impact. They are around the 10.5%. That is where they are. Omron side, of course, they reached the double digit by Q4 last year. Because of current automotive area volume down and then many price increase from materials, they are around 10%. You know, without those handicap, probably their capabilities are about around 11% and 12%. Those, they are where they are.
Okay. Thank you. Just in terms of the sales performance, you said the Omron one has been impacted by the automotive industry downturn, but are there any other comments you can give for both Embraco and Omron in terms of you know, organic sales performance or sort of R&D and new market performance?
Can we go to page 23? That is sales on the left, profit on the right. Main contributor of this sales increase coming from Embraco. Their sales in China, Europe and Brazil, particularly Brazil, very strong. They are really leading this growth. I don't have an exact number in my hand.
Okay. Sorry. Yeah.
In the mobility side. You know, maybe because it's similar to overall behavior, we can use sector pictures. If we go nineteenth. You know, please look at blue bar. Sorry, we should see green bar, organic side. Q2 sales was almost same as Q2, 2020, slightly better. But industry is much lower than this, so I think they are doing good jobs, but you know, still impacted by this lack of semiconductor volumes. Is that answering your question? I'm not sure.
No, but I think that's very good. Just in terms of the employee turnover in those acquisitions, any sort of you know sort of perspectives there in terms of the 'cause I remember Omron you saying that they had some very talented engineers and they would be a good cultural fit with Nidec. Just how has that gone?
Yes. You know, they are kind of benchmark, very fast fit as Nagamori-ism, we call, Nidec way, very fast fit. I'm not hearing huge turnovers. Usually, average turnover in Nidec is 2% annually. Probably they're better than those. Then for Emerson side, Embraco side, same. We have many companies in Mexico and Brazil. Turnover from GA, we say, general appliance, is always benchmark, much better than any other company around them. Even internally as appliance, commercial, and industrial, ACIM, you know, many other. Our team is worse than them, so we're not worrying about any turnover from both of them.
Thank you very much.
Thank you very much, Hamish. We have exhausted planned conference time, but there seems to be one more question and so this will be our last question for tonight. Mr. [Yasuki] Tanaka of [Emergency Securities]. Mr. Tanaka, please go ahead.
Hello. Thank you very much for presentation. One question from my side. On page seven, we have CapEx plan revised down JPY 10 billion. Could you just let me know about a bit more detail of the background and the what sector will be affected about this revision? Thank you very much.
Yeah. Thank you for the question. Actually, this revision is based on the natural cost down effort for our investment in the first half, and also based on some of the timing issue of the planned investment. We adjusted. This is not based on the particular reason of any project cancellation or any fluctuation in the capital expenditure amount. This JPY 10 billion reduction is some timing issue and also reflection of our CapEx control in the first half.
Okay. That's very clear. Thank you very much.
Thank you.
Thank you, everyone. You know, just before closing, you know, I expected some question, but it didn't come. You know, this time we updated both sales and profit, and particularly for our sales side, original our announcement was JPY 1.7 trillion. Now we updated to JPY 1.8 trillion. Usually our second half sales is better than first half sales, and the first half sales is already exceeding half of those. We're expecting better than JPY 1.8 trillion base. 2022, as I said last time, as a beginning of Vision 2025, we have to achieve JPY 2 trillion, which is two years late from original Vision 2020. That will definitely come. We are very confident. That's first point.
Second point, as we demonstrated on many pages, I think, steadily of business for traction motor getting firmer and firmer. We just demonstrated JPY 3.5 million as our new target. Besides those, I think everybody understood our strengths of cost by vertical integration and actual sales results in China. Those two points I wanted to emphasize again before we close. Orikasa-san, those.
Thank you. Mr. Tanaka, thank you for your question. Mr. Seki, thank you very much for your supplemental explanations. Now we'd like to conclude the conference call today. I'd like to appreciate your active participation. Should you have any further questions, please do not hesitate to contact Nidec Corporation or your sales representative at Mitsubishi UFJ Morgan Stanley Securities. Again, thank you very much, and you may now disconnect.
Bye-bye.
Thank you.
Bye.