Moody’s downgrades Nidec to Baa1 amid accounting concerns

Investing.com -- Moody’s Ratings has downgraded Nidec Corporation’s issuer and senior unsecured ratings to Baa1 from A3, with the ratings remaining under review for further downgrade.

The credit rating agency cited "heightened uncertainty over the quality and reliability of Nidec’s financial disclosure" following the company’s withdrawal of full-year guidance and the Tokyo Stock Exchange’s decision to designate Nidec’s stock as a "Security on Special Alert."

Roman Schorr, Moody’s Vice President and Senior Analyst, stated that "the review for downgrade incorporates the risk of further rating pressure in the event of material new developments amid the ongoing third-party investigation into potential accounting irregularities and internal control deficiencies."

Nidec has established a third-party committee to investigate concerns over potentially inappropriate accounting practices. The company has also suspended its dividend payments, adding to investor uncertainty.

Moody’s noted that Nidec’s auditor has withheld its opinion for the company’s annual report for the fiscal year ended March 2025. This raises the possibility that past financial statements may have overstated earnings and understated risks.

Despite these concerns, Moody’s acknowledged Nidec’s strengths, including its diversified product portfolio, technological capabilities in electric motors, and significant market presence. The company benefits from increasing demand for energy-efficient motors driven by tightening environmental regulations.

The review will examine the nature of potential accounting irregularities, their impact on historic financial results, and the company’s risk management practices. It will also assess Nidec’s commitment to maintaining adequate liquidity.

Moody’s indicated that a further downgrade could occur if the investigation uncovers additional significant accounting deficiencies or if the company fails to address reputational and regulatory risks. Credit metrics that would trigger downward pressure include an EBITA margin below 8% or debt/EBITDA above 3.25x on a sustained basis.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.