Since its inception in 1973, Nidec has become the first company to successfully commercialize the precision motors that pushed forward the shrinking of the computer. It has completed 24 domestic and 15 international M&A deals, specializing in ‘everything that spins and moves’.
In 1998 it listed on the Tokyo Stock Exchange, then in 2001 it became the first company to join the NYSE after 9/11. Over time, Nidec has also branched out from the world of small precision motors that made its name, moving into everything from cars to home appliances and radio-controlled gliders.
Through each of these milestones, Shigenobu Nagamori has been the company’s long-running constant. The 70-year-old, ranked 13th in Forbes’ list of Japan’s 50 richest people, has been leading the firm he founded alongside three colleagues for more than 40 years, and has infused Nidec’s investor outreach with his open and somewhat outspoken style.
According to Shinichi Takagi, Nidec’s London-based IRO of the past five years, Nagamori’s rather un-Japanese approach makes life simpler for an IR team spread across three continents. ‘It does make my job easier to have an outspoken CEO because the message is always clear,’ he points out. ‘I don’t have to second-guess what management is thinking.’
Nagamori’s approach is also appreciated by investors, adds Takagi, and makes Nidec ‘unique’ among Japanese companies. ‘Japanese firms tend to stick with formalities,’ Takagi points out. They often spend only a little time on the Q&A in investor meetings, preferring to focus on the company’s own message. ‘Our CEO typically has a very short presentation – or often no presentation at all – and jumps straight into Q&A. The investors can ask what they like and spend most of the time on what they want to discuss rather than have us presenting them with our ideas.’
Such a long tenure at the top, however, also brings up questions about Nagamori’s eventual successor. ‘He’s the founder of the company and he’s been in the [CEO] position for more than 40 years now,’ says Takagi. ‘Inevitably, there will come a time when we have to make the changeover – so this is a topic that is quite popular [with investors and analysts].’
Nagamori’s style isn’t the only unusual thing about Nidec’s approach to IR. Takagi notes, for example, that it is rare for a company like Nidec to post IROs abroad. ‘There’s only a handful of Japanese companies with IR officers outside of Japan,’ he says. ‘In London there are probably six or seven – Toyota, Sony, Hitachi, the larger names. For a company of our size to have an IR representative [outside Japan] is rare.’ Rarer still is the fact that Nidec has two IROs abroad: Takagi in London and Kiyoshi Nagase in New York.
Challenging times
All this comes from the C-suite’s understanding that investor relations is vital to the firm’s strategy. But even though they might not need to prove their worth in the same way as IROs at other firms, Takagi says that since joining Nidec, he, Nagase and their six Kyoto-based colleagues have worked through a number of challenging situations. ‘In the past we were quite successful in the small precision motors area – particularly for hard disc drives,’ says Takagi. ‘With the shrinkage of the PC market, however, we faced difficulties.’
Luckily for Nidec, the firm had anticipated changes in the market and had already begun to shift its resources to other areas, such as motors for cars, home appliances and industrial use. ‘But these major transitions take time,’ notes Takagi. Investors initially reacted with mixed feelings to the transition. ‘We tried to communicate that we wanted a better balance of risk – not just relying on one particular area, which is notoriously volatile,’ Takagi continues. ‘More importantly, however, we saw opportunities in these new areas, through more efficient motors as the world seeks greener products. We thought there was room to explore and to sell our efficient motors.
‘But because the IT area was so profitable and the initial profitability in the new areas would be low, some investors were concerned we would be diluting profitability. There were short-term concerns but, if the transition went as planned, there was a belief the long-term outlook would be brighter.’
Unforeseen events
Things didn’t go quite to plan, however. ‘There was a period in 2012 where the slowdown in the PC market came earlier than we expected and the transition to new areas didn’t really take off,’ says Takagi. ‘And there were natural disasters like the floods in Thailand that affected our business.’
As part of his role, Takagi gives feedback to management via a weekly report. And, in true Nidec style, ‘these [reports] could potentially affect the decisions of the management,’ he says. ‘In 2011 we announced the five-year plan, with a target to 2015. Soon after, however, we faced all sorts of difficulties: the emergence of the tablet, some natural disasters and a strong currency. In the eyes of the investors, that plan looked increasingly optimistic or ambitious.
‘One investor told me it was getting annoying to see punchy targets that weren’t realistic. I wrote something about that in my report and by late 2012 we had reduced our sales target for 2015 from ¥2 tn ($17 bn) to ¥1.2 tn.’
While Takagi says it’s nice to have an ambitious target, ‘when it becomes unrealistic people stop listening to you. [After the revision] I think investors became more comfortable with our strategy. It also showed that we could be flexible depending on the external conditions.’
By 2013 the transition Nidec had been talking about started to materialize. In April 2014 the company reported record annual sales, and revealed that it had topped its predicted operating income by ¥15.1 bn. Its Q1 2014 results continued the trend with record-high quarterly sales, operating income that had increased 42 percent year on year – ‘marking six consecutive quarters of increased operating income since the structural reform in 2012’ – and an upward revision of financial year 2014 forecasts, as well as raised dividend projections.
The high price of success
Yet these positives also present IR challenges and investor concerns in their own right, says Takagi. In fact, Nidec’s high-performing share price has been one of his biggest IR challenges this year. ‘It’s been difficult to attract new investors and persuade them to buy at – in some people’s view – lofty levels,’ he explains. ‘We need to sell our story for the longer term and convince the investors there’s still room for more growth.’
Even during more difficult times, Takagi says Nidec has always taken an open approach with the investment community. ‘Some companies downsized their IR presence after the global financial crisis, some tend to be more low key when they are not performing so well,’ he says. ‘We try to face the investors whatever the situation is.’
This consistency is part of what makes Nidec’s IR approach so popular and is something that will no doubt be continued by Takagi’s London-based successor, expected to take over in 2015. What advice would he offer as he prepares to pass the baton? ‘Try to understand where investors are coming from, the intentions behind the questions,’ he says. ‘And stand firm on principles but be open-minded on productive suggestions.’
