Nidec, a Japanese electric motor maker, unexpectedly reported an operating loss of 6.17 billion yen in the fourth quarter of the year. This loss was primarily due to the costs associated with restructuring efforts aimed at addressing intense price competition in China’s electric vehicle market. The company had previously anticipated a profit of 21.48 billion yen in the same period, according to analysts. Nidec has been focusing on expanding its presence in the global battery-powered vehicle market by developing an e-axle traction motor that combines an electric vehicle’s gear, motor, and power-control electronics. However, uncertainty in demand and heightened price competition in China led the company to revise its operating profit estimate for the fiscal year ending in March 2024 to 180 billion yen, down nearly a fifth from the initial forecast.
Despite the unexpected fourth-quarter loss, Nidec’s operating profit for the year ended March 2024 increased by 63.1% to 163.1 billion yen, although this fell short of the January estimate. Looking ahead to the fiscal year ending in March 2025, the company projects a 41% growth in operating profit to 230 billion yen. This forecast, while significant, is below the average estimate of a 242.93 billion yen profit by 18 analysts. Nidec remains cautiously optimistic about the potential for recovery in demand for IT-related equipment and sees new business opportunities arising from the increase in demand for data centers and generative AI applications. Despite these positive developments, analysts like Kazuyoshi Saito from Iwai Cosmo Securities believe that Nidec’s profit growth forecast may not lead to a surge in the company’s share price, citing a slowdown in demand for electric vehicles as a factor.
The announcement of Nidec’s unexpected operating loss caused its shares to close down 0.25% ahead of the disclosure, underperforming the benchmark Nikkei average, which saw a 0.3% gain. Despite this decline, Nidec’s stock has seen an overall increase of about 18% so far in the year. Investors and analysts are closely monitoring the company’s performance in light of the challenges posed by the competitive electric vehicle market and the impact of restructuring efforts on profitability. Nidec’s focus on innovation and expanding its product offerings, such as water-cooling modules for data centers, indicates its commitment to adapting to evolving market trends and capitalizing on emerging business opportunities. However, the company’s ability to navigate price competition and fluctuations in demand will play a crucial role in determining its future financial performance and stock price movements.
