Nidec (6594) Investor update summary

Investigation findings and root causes

• Extensive inappropriate accounting practices were identified across multiple business units and group locations, with a negative impact of approximately ¥139.7 billion on net assets as of Q1 FY2025.

• Root causes included excessive pressure to meet unrealistic business targets, a top-down management style, and lack of effective governance and internal controls, with ultimate authority held by Mr. Nagamori.

• Accounting and internal audit departments failed to function as effective checks, prioritizing financial closing schedules over thorough investigation, and employees provided inaccurate information to auditors.

• The culture of pressure and avoidance of loss recognition led to systemic misconduct, with over 1,000 cases identified, including misstatement of inventory values, avoidance of impairment, premature revenue recognition, and manipulation of provisions and grants.

• Internal reviews also identified customs and trade compliance errors, including underreported taxes and unlicensed exports at subsidiaries, with voluntary disclosures and estimated additional customs duties of up to USD 148.2 million.

Company response and reform measures

• The company deeply apologized for the misconduct, announced resignations and compensation reductions for key executives, and will forgo a portion of compensation until reforms are confirmed.

• A Responsibility Investigation Committee will be established to determine legal responsibility of current and former executives.

• Governance reforms include restructuring the board, increasing diversity and expertise, strengthening internal controls, and launching a renewed management structure with talent from domestic and overseas group companies.

• Measures to prevent recurrence include revising business plans, improving information sharing with outside directors, enhancing audit functions, and implementing enhanced training and process standardization.

• The company is committed to transparency, timely disclosure, and restoring trust with stakeholders and the market.

Financial and operational impact

• In addition to the ¥139.7 billion impact, a further impairment loss of up to ¥250 billion is under review, mainly related to the automotive business and goodwill.

• Additional provisions of ¥23 billion are being considered for past tariff errors, and estimated additional customs duties of up to USD 148.2 million have been disclosed.

• No immediate changes to cash flow or major CapEx projects, but spending is being prioritized and scrutinized; preliminary Q3 FY2026 figures show net sales of JPY 19,800 hundred million, a 1.7% increase year-on-year.

• The impact of ongoing investigations is not yet reflected in the consolidated financial statements; amended securities reports will be filed after investigations conclude.

• No year-end dividend will be paid for the fiscal year ending March 2026 due to the material financial impact and ongoing investigation.