Nidec (6594) Investor update summary

Investigation findings and root causes

• Extensive inappropriate accounting practices were identified across multiple business units, negatively impacting net assets by approximately JPY 139.7 billion as of Q1 FY2025.

• Practices included avoidance of impairment losses, misclassification of expenses, premature revenue recognition, and manipulation of provisions and grants.

• Excessive pressure to meet unrealistic profit targets, set top-down by Mr. Nagamori, was a core driver of misconduct.

• Failures in internal controls, audit functions, and oversight allowed misconduct to persist, with misleading information provided to auditors.

• Over 1,000 cases of misconduct were identified, spanning at least five fiscal years and involving various management levels.

Management response and personnel actions

• Multiple senior executives, including the chairman, CFO, and several vice presidents, resigned or had duties suspended.

• Compensation reductions were implemented for board members and executives, with some forgoing 100% of compensation until reforms are confirmed.

• A Responsibility Investigation Committee will determine legal responsibility of current and former directors, including possible civil and criminal actions.

• Broad personnel changes and a renewed management structure are being implemented to restore trust and enhance governance diversity.

• The company is reviewing and implementing improvement measures, focusing on governance reform and enhanced oversight by outside directors.

Financial and operational impact

• The total negative impact from accounting misconduct is estimated at JPY 139.7 billion, with an additional potential impairment loss of up to JPY 250 billion under review, mainly in the automotive business.

• A further JPY 23 billion may be required for additional tariff payments due to past misfilings, and up to USD 148.2 million in customs duties from compliance errors.

• No immediate impact on cash flow was reported, and business operations, including production and order status, remain stable.

• Preliminary Q3 FY2026 figures show net sales of JPY 19,800 hundred million, a 1.7% year-on-year increase, with cash and cash equivalents at JPY 8,900 hundred million.

• No year-end dividend for FY ending March 2026 due to the material impact on prior years' results and ongoing investigation.