NSK Ltd. (NSK)(TOKYO:6471) today announced its financial results for fiscal year ending March 2015. The company achieved strong results for both sales and profit.
1. Business Overview
(1) Qualitative Information Regarding Consolidated Business Results
The NSK Group is working to implement its mid-term management plan for the three years beginning April 2013, aiming to achieve net sales of ¥1 trillion in the year of 2016 – the 100th anniversary of the company’s foundation. In order to enhance its corporate foundation, the NSK Group has adopted a business strategy of growth with a focus on profitability, and is implementing measures to develop the management capability required to handle ¥1 trillion in sales volume.
Looking at global economic conditions for the year ended March 31, 2015, the Japanese economy showed signs of a gradual recovery due to the impact of lower crude oil prices and various policies by the Japanese government and the Bank of Japan, despite slow recovery in consumer spending following the consumption tax rise. The U.S. economy continued to recover steadily. The European economy also showed signs of an upturn, primarily in the Eurozone, despite the impact of government debt problems and geopolitical risks. In Asia, economic conditions in the ASEAN bloc remained weak overall, although the Indian economy showed signs of recovery. Meanwhile, the pace of economic growth in China also slowed.
In this economic environment, consolidated net sales for the year ended March 31, 2015 totaled ¥974,885 million, a year-on-year increase of 11.8%, and operating income totaled ¥97,327 million, a year-on-year increase of 43.0%. Ordinary income was ¥91,002 million, a year-on-year increase of 36.3%. Net income after adjusting for income taxes, minority interests, and other factors was ¥61,962 million, a year-on-year increase of 98.8%.
Business Segment Information
 Industrial Machinery Business Segment
Demand in the industrial machinery business continued to gradually recover worldwide. Looking at results by region, sales in Japan increased, primarily in the machine tool and semiconductor sectors, driven by steady demand for smartphone-related machinery. Sales in the Americas grew, primarily in the general machinery sector. In Europe, sales increased due to steady demand in the wind turbine and machine tool sectors. In China, government stimulus policies drove strong demand in the railway and wind turbine sectors. Despite market stagnation, sales of industrial machinery bearings in the ASEAN region grew, primarily in the aftermarket sector.
As a result, net sales in the industrial machinery business totaled ¥276,361 million, a year-on-year increase of 13.7%, and operating income was ¥34,362 million, a year-on-year increase of 44.9%.
 Automotive Business Segment
The global automotive market continued its gradual expansion, driven by the strong North American market, despite slower demand growth in China. Looking at results by geographic breakdown, the automotive market in Japan was slow to recover from the impact of the consumption tax rise, and sales declined as NSK shifted part of its production overseas in line with automakers’ requirements for local procurement. In the Americas, sales increased due to strong market demand in North America in addition to the effect of production transfer from Japan. In Europe, continued recovery in the automotive market led to higher sales. In China, electric power steering system (EPS) sales rose significantly due to the intake of new orders, while sales of automotive bearings – primarily to European and Japanese automakers – were also strong despite slower market growth. Meanwhile, although market conditions in other parts of Asia varied by country, sales to Japanese and Korean automakers rose.
As a result, net sales in the automotive business totaled ¥656,998 million, a year-on-year increase of 11.3%, and operating income totaled ¥65,718 million, a year-on-year increase of 33.6%.
Business Forecast for the Year Ending March 31, 2016
The global economic outlook remains uncertain due to the impact of U.S. monetary policy on emerging countries, particularly China, as well as rising geopolitical and economic risks. However, the global economy is expected to continue its gradual recovery despite areas of weakness.
Given such circumstances, NSK forecasts the following financial results for the year ending March 31, 2016.
|Year ending Mar. 31, 2016||% change from previous year|
|Consolidated Financial Highlights|
|Net sales||¥ 1,020,000||million||+4.6%|
|Industrial Machinery Business|
|Net sales||¥ 292,000||+5.7%|
|Net sales||¥ 701,000||+6.7%|
• Exchange rate forecast for the year ending March 31, 2016:
All forecasts are based on a number of assumptions regarding business environment and policies, and are subject to change with various factors. Actual financial results may differ materially and NSK accepts no liability whatsoever for any direct or consequential loss arising from any use of this report.
(2) Qualitative Information Regarding Consolidated Financial Position
Assets and Liabilities
Total assets were ¥1,129,164 million, an increase of ¥128,232 million compared to total assets as of March 31, 2014. The main reasons for this increase were increases of ¥7,770 million in cash and deposits, ¥23,826 million in notes and accounts receivable, ¥5,960 million in short-term investment securities, ¥30,726 million in property, plant and equipment, ¥14,740 million in investment securities, and ¥29,621 million in net defined benefit assets.
Total liabilities were ¥647,304 million, an increase of ¥28,527 million compared to total liabilities as of March 31, 2014. The main reasons for this increase were increases of ¥23,371 million in current portion of long-term loans payable, ¥40,000 million in corporate bonds, and ¥12,422 million in deferred tax liabilities, which offset decreases of ¥15,000 million in current portion of corporate bonds and ¥35,374 million in long-term loans.
Net assets totaled ¥481,859 million, an increase of ¥99,704 million compared to net assets as of March 31, 2014. The main reasons for this increase were ¥61,962 million in net income, ¥21,659 million in translation adjustments, and ¥19,542 million from remeasurements of defined benefit plans.
Total cash and cash equivalents at the end of the period were ¥184,374 million, a year-on-year increase of ¥15,434 million.
 Net cash flow provided by operating activities
Net cash flow provided by operating activities totaled ¥67,709 million, a decrease of ¥2,633 million, compared to the same period of the previous year. This includes ¥87,976 million in income before tax expenses and minority interests, and ¥38,453 million provided by depreciation and amortization, which offset an increase of ¥16,119 million in notes and accounts receivable, ¥18,878 million in Antimonopoly Act related loss paid, and ¥30,687 million in income taxes paid.
 Net cash flow used in investing activities
Net cash flow used in investing activities totaled ¥46,335 million, an increase of ¥3,932 million compared to the same period of the previous year. This includes ¥43,891 million for purchase of property, plant and equipment.
 Net cash flow used in financing activities
Net cash flow used in financing activities totaled ¥8,304 million, an increase of ¥5,100 million compared to the same period of the previous year. This includes a net increase of ¥40,000 million in proceeds from issuance of corporate bonds, which was offset by decreases of ¥25,123 million due to repayment of long-term loans, ¥15,000 million due to repayment of corporate bonds, and ¥11,353 million in dividends paid.
|As of Mar. 31, 2012||As of Mar. 31, 2013||As of Mar. 31, 2014||As of Mar. 31, 2015|
|Shareholders’ equity to total assets (%)||33.2||36.2||35.9||40.4|
|Shareholders’ equity to total assets at market value (%)||40.7||43.7||57.3||84.3|
|Cash flow to interest ratio (Years)||5.2||5.7||4.5||4.8|
|Interest coverage ratio (Times)||11.8||11.4||14.4||13.2|
|• Shareholders’ equity to total assets: Shareholders’ equity/Total assets|
|• Shareholders’ equity to total assets at market value: Market capitalization/Total assets|
|• Cash flow to interest ratio: Interest bearing debts/Net cash provided by operating activities|
|• Interest coverage ratio: Net cash provided by operating activities/Interest paid|
|(Notes)||1.||All indices have been calculated based on consolidated data.|
|2.||Market capitalization has been calculated as:|
|“Closing share price at end of the year” x “Common shares outstanding at end of the year”|
|3.||Net cash provided by operating activities refers to the net cash provided by operating activities on the consolidated statements of cash flows. Interest-bearing debts refer to the total amount of liabilities paying interests on the balance sheet.|
(3) Basic Policy on Appropriation of Retained Earnings and Dividends
NSK places great importance on shareholder returns. We will maintain our basic policy of issuing a consistent dividend, and ensure that our dividends better reflect our consolidated payout ratio and business results.
Considering this dividend policy, the year-end dividend for the fiscal year ended March 31, 2015 will be ¥16.00 per share. Including the dividend of ¥12.00 per share for the first half of the year, paid on December 2, 2014, the full year dividend will be ¥28.00 per share, a year-on-year increase of ¥12.00.
Dividends for the year ending March 31, 2016 are planned to be ¥34.00 per share (¥17.00 per share for the first half of the year).
Safe harbor statement
This document is an English convenience translation of a document that was originally prepared in the Japanese language and is provided for convenience purposes only. NSK makes no representation or warranty that this document is a complete or accurate translation of the original Japanese text, and is not intended to be relied upon. In the event that there is a discrepancy between the Japanese and English versions, the Japanese version shall prevail. This document is not intended and should not be construed as an inducement to purchase or sell stock in NSK.