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Introduction & Market Context
Nidec Corporation (TSE:6594) revealed the full extent of its financial challenges in its fiscal first-half 2025 presentation on November 14, as the Japanese motor manufacturer grapples with a major accounting scandal and significant losses in its automotive segment. The company, which has been designated as a "security on special alert" by the Tokyo Stock Exchange since October 30, is now implementing comprehensive corporate reforms to address improper accounting practices identified by a third-party investigation.
The presentation paints a picture of a company in crisis mode, with management suspending dividend payments and outlining a series of corrective measures aimed at rebuilding trust with investors, regulators, and business partners. Nidec’s immediate focus has shifted from growth to compliance and governance reform, with a clear timeline for regulatory remediation extending into late 2026.
Quarterly Performance Highlights
Nidec reported net sales of 1,302.3 billion yen for the first half of fiscal year 2025, representing a modest 0.7% increase year-over-year. However, this slight sales growth was dramatically overshadowed by an 82.5% collapse in operating profit, which plummeted to 21.1 billion yen from 120.5 billion yen in the same period last year. The operating profit margin contracted severely from 9.3% to just 1.6%.
As shown in the following financial summary:
The company attributed the sales increase to growth in its Automotive and Appliance, Commercial and Industrial products businesses, which managed to offset struggles in the Machinery segment. However, the operating profit decline stemmed primarily from significant negative impacts in the Automotive products business, including provisions for contract losses with customers, impairment losses, and settlement costs for claims.
A more detailed breakdown of the year-on-year changes reveals the severity of the situation:
The financial impact of these issues is substantial, with Nidec recording 87.7 billion yen in combined losses from provisions for contract losses (36.5 billion yen), impairment losses (31.7 billion yen), and claims for reimbursement (19.5 billion yen). These extraordinary items essentially wiped out what would have otherwise been a profitable half-year.
Despite these challenges, Nidec maintained positive cash generation, with net cash provided by operating activities of 112.3 billion yen and free cash flow of 45.2 billion yen for the first half of the fiscal year, as illustrated in the following chart:
Detailed Financial Analysis
The quarterly comparison provides additional insight into the timing and impact of Nidec’s financial challenges. For the three months ended September 30, 2025, the company reported a 1.6% year-over-year decline in net sales to 638.0 billion yen. More alarmingly, the quarter saw an operating loss of 26.4 billion yen, compared to a profit of 60.1 billion yen in the same quarter last year.
The discrepancy between preliminary and final second-quarter results is particularly notable, with the preliminary report showing an operating profit of 61.5 billion yen versus the final reported operating loss of 26.4 billion yen. This significant revision underscores the accounting issues that have triggered regulatory scrutiny.
Looking at segment performance, the product group overview reveals mixed results across Nidec’s business units:
While Small Precision Motors and Appliance, Commercial and Industrial Products segments showed relative stability, the Automotive Products segment displayed the most dramatic volatility, with operating profit before impairment dropping sharply in recent quarters. This aligns with the company’s disclosure of significant contract losses and quality issues in this segment.
Strategic Initiatives
In response to these challenges, Nidec has implemented a series of corrective measures and established a dedicated Corporate Reform Committee to address the underlying issues. The company has outlined a comprehensive approach to rebuilding its governance structure and corporate culture.
Central to these efforts is the newly established Nidec Corporate Reform Committee, which aims to rebuild the company with the highest ethical standards. The committee structure includes specialized subcommittees focused on accounting/finance, governance, human resources, compliance, IT, audit/internal management systems, and restructuring.
The reform initiatives extend beyond structural changes to include a transformation of corporate culture, human resources system reform, and the implementation of procedures and mechanisms to prevent arbitrary decision-making. These measures reflect a recognition that the accounting irregularities stemmed from deeper organizational issues that require comprehensive remediation.
Forward-Looking Statements
Nidec has established a clear timeline for its regulatory remediation efforts, with key milestones extending through October 2026. The company plans to submit a formal Improvement Plan for its Internal Management System by late January 2026, following the completion of the Third-Party Committee’s investigation.
The roadmap includes continued cooperation with the Third-Party Committee’s investigation, implementation of recurrence prevention measures, and ultimately the submission of a Written Confirmation of Internal Management to the Tokyo Stock Exchange. If successful, this process could lead to the de-designation of Nidec’s stock as a Security on Special Alert by October 2026.
In the interim, Nidec has taken the significant step of suspending dividend payments, with no interim dividend declared for the first half of fiscal 2025, compared to 40.00 yen per share in the previous year. This conservative financial approach reflects the company’s prioritization of addressing compliance issues and rebuilding its internal controls before resuming shareholder returns.
As outlined in the key milestones timeline, Nidec has also established a commitment line agreement to ensure financial stability during this challenging period:
While the presentation focuses primarily on governance reforms and financial results, the accompanying earnings call provided additional context, with CEO Mitsuya Kishida emphasizing the need for cultural change, stating: "We will eliminate all the bad habits from the past, and we will be reborn as a new Nidec." The company has also paused M&A activities to focus on resolving its internal challenges.
For investors, Nidec’s presentation reveals a company at a critical juncture, facing both significant financial headwinds and fundamental governance challenges. The success of its ambitious reform agenda will be crucial in determining whether the motor manufacturer can restore market confidence and return to sustainable profitability in the coming years.
Full presentation:
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