Mitsubishi Electric Corporation

Now we would like to start Mitsubishi Electric Corporation's consolidated financial results briefing for fiscal 2025. Thank you very much for joining today out of your very busy schedule. We appreciate your attendance. I am your moderator. Today I am Yamazaki from Corporate Communications. Financial results, Tanshin report and presentation materials are posted in the news release site as well as the financial results site of our website. We'll be using the presentation materials today, therefore please make sure you download the materials from our website. Now I'd like to explain the flow of today's briefing session. First, CFO Masuda will give an explanation of the financial results, and then that will be followed by Q&A session. The explanation part will take around 15 minutes, and questions will be taken first from the members of the media, followed by investors and analysts. We plan to end this session at around 5.15 p.m. Now I'd like to introduce our presenter today, Executive Officer CFO Kuniaki Masuda. Now I'd like to give the floor over to Mr. Masuda.

This is Masuda of Mitsubishi Electric. Thank you very much for joining our results briefing. Now, I will start explaining consolidated results for the first quarter of fiscal 2025. Please turn to page 3. I will begin with the key points of the financial results. Revenue in the first quarter of fiscal 2025 was 1 trillion 286.4 billion yen, marking the fourth consecutive year of record high revenue for the first quarter, primarily due to an increase in infrastructure segment and the impact of the weaker yen. Operating profit remained at the same level with the previous fiscal year, mainly due to the impact of a decrease in volume in the profitable factory automation systems business and the impact of the rising material and other procurement costs. As for the full-year forecast for the fiscal 2025, revenue forecast is revised upward by 90 billion yen from the previous forecast up to 5 trillion 390 billion yen, partly due to revision to the foreign exchange rate assumptions while incorporating the impact of the delay in the market recovery for the factory automation systems business. Operating profit forecast remains unchanged from the previous forecast at 400 billion yen. We will steadily implement initiatives to achieve earnings targets by continuing our efforts to improve profitability and efficiency in each business, including improvements in product prices to reflect the impact of rising procurement costs. Please turn to page 5. This page shows the group's financial results for the first quarter. Revenue was 1 trillion 286.4 billion yen, up 66.1 billion yen year-on-year due to the impact of the weaker yen. Operating profit, on the other hand, decreased by 2.3 billion yen year-on-year down to 58.6 billion yen, despite the positive impact of the weaker yen, and the operating profit ratio decreased by 0.4 points year-on-year to 4.6%. Please turn to page six. The change in revenue and operating profit from the previous fiscal year just explained are shown in a waterfall chart. The impact of the exchange rate fluctuations led to an increase in the revenue of 73 billion yen and an increase in profit of 20 billion yen. Operating profit decreased more than the decrease in actual volume, excluding the impact of the exchange rate fluctuation, mainly due to the deterioration in the product mix as a result of the decrease in revenue from the profitable factory automation systems business, as well as the worsening in material procurement costs despite the positive impact from the exchange rate and continued efforts for price improvement. We will strengthen cost control from Q2 onwards, also taking into account the delay in market recovery. Please turn to page 7. Next, I will explain the key points of the consolidated statement of profit or loss. The cost ratio was 71%, an improvement of 0.1 point year-on-year from 71.1%. As a result of improvement due to foreign exchange rates and price, which was offset by product mix and cost, SG&A increased by 25.5 billion yen year-on-year, due mainly to increased expenditures for personnel and R&D expenses, as well as 12.4 billion yen impact from the weaker yen. Please turn to page 8. I will move on to the consolidated statements of financial position. First, assets increased by 77.7 billion yen compared to the end of the previous fiscal year. Inventories increased by 55.1 billion yen. After that, the impact of the exchange rate fluctuation was 38.6 billion yen. The balance increase in individual production businesses as a result of progress of job orders While in mass production businesses, the actual balance excluding the impact of the exchange rate fluctuation decreased from the end of the previous fiscal year, mainly due to reduced inventories in air conditioning systems and home products business. On year-on-year basis, the inventory balance decreased by 24.7 billion yen and excluding an increase of 59.3 billion yen due to the impact of exchange rate fluctuation. The balance decreased by 84 billion yen and we are making steady progress in reducing inventories to an appropriate level. The total equity increased by 75.4 billion yen, of which Mitsubishi Electric Corporation stockholders' equity increased by 69.7 billion yen compared to the end of the fiscal year 2024 to 3,807.2 billion yen. And due to the ratio of Mitsubishi Electric Corporation stockholders' equity to total assets increased by 0.8 points from the end of the fiscal 2024, to 61.4% due to unrealized gain of 82.3 billion yen from currency exchange rate on the net assets of overseas subsidiaries, among other factors, as well as to the recording of 49.1 billion yen for the net profit attributable to Mitsubishi Electric Corporation stockholders, despite a decrease of 62.7 billion yen due to payment of dividends. Cash flow from operating activities increased by 92.6 billion yen year-on-year to 183.8 billion yen, mainly due to an increase in net profit attributable to Mitsubishi Electric Corporation stockholders and 61.5 billion yen decrease in expenditure for inventories and 43.3 billion yen decrease in trade receivables. Cash flow from investing activities was an outflow of 63.7 billion yen, an increase in outflow of 22.8 billion yen year-on-year, primarily due to 11.3 billion yen increase in acquisition of investment securities and others of affiliated companies, and 8.8 billion yen of increase in acquisition of property, plant, and equipment. As a result, free cash flow was an inflow of 120.1 billion yen, an increase of 69.8 billion yen year-on-year.

Page 10, from here I will explain revenue operating profit by business segment. The infrastructure and semiconductor device business segments both saw an increase in revenue and profit year-on-year, while the life business segment saw an increase in revenue and a decrease in profit, and the industry and mobility business segment saw a decrease in both revenue and profit. From next page, I will explain details of each segment. Please turn to page 19 for more details. Page 11, please. First, the infrastructure segment. In the public utility systems business, the overseas UPS business and the transportation business performed well, and orders, revenue and operating profit all increased compared to the same period last year. In the energy systems business, demand for power stabilization solutions due to expansion of capital investment by domestic power companies and the expansion of renewable energy both domestically and overseas remained strong and orders, revenue and operating profit all increased year on year. In the defense and space systems business, both revenue and operating profit increased year on year. Orders received decreased year on year due to the impact of a large defense system project in the same period of last year, but the market is strong and we expect to see a steady increase in orders in the future. Page 12. Industry and mobility segment. In the FE systems business, demand for lithium-ion batteries and other decarbonization-related fuels continues to stagnate, but demand for smartphones and machine tools in China is increasing, and orders received exceeded the same period of last year. However, there has not yet been a strong recovery, and both revenue and operating profits declined year on year. In the automotive equipment business, the number of new cars was strong at the same level year on year in almost all regions except Japan, and the effect of price improvement was particularly large compared to the same period of last year, with both revenue and operating profit increased year on year. Page 13, Life Segment. In the building systems business, demand recovery continued in various regions, both domestically and overseas, and orders, revenue, and operating profit also increased year on year. In the air conditioning systems and home products business, Demand for home air conditioners in particular continued to be sluggish in Europe, while demand was strong in Japan and other regions, mainly in Asia except China, and revenue exceeded the same period last year. Also, revenue increased, operating profit decreased year on year due to sluggish demand in Western countries, especially in Europe, and the impact of rising material prices. Please see page 14. In the business platform segment, demand for system updates and DX introduction related items remained strong, and orders, revenue and operating profit all exceeded the same period last year. In the semiconductor and device segment, orders received in the same period of previous year were high, including orders for specific projects, so orders received this year were lower than the previous year, however, Revenue and operating profit were higher year-on-year, supported by strong demand. Page 15. This page shows revenue by location of customers. Revenue in overseas markets increased by 45.2 billion yen year-on-year to 107% level, or 730.1 billion yen, despite decreasing demand in some regions and fields, a major driver was the weaker yen. Revenue in Japan increased to 104% year-on-year, but overseas revenue grew even more than that, so overseas revenue accounted for 56.8% of consolidated revenue, a record high for the third consecutive year for the first quarter. Page 17. This is a forecast for fiscal 25. We have revised our revenue forecast to 5 trillion 390 billion yen, an upward revision of 90 billion yen from the previous forecast, and our operating profit is expected to be 400 billion yen as previously announced. In light of the yen's depreciation, which was greater than expected, we have revised our exchange rate assumptions, which will boost both revenue and operating profit, while revising our market outlook for FA systems. In the FA systems business, where we had expected demand to recover from the third quarter, We have revised the timing of the overall recovery in demand to the fourth quarter about three months later than our previous forecast in light of the current situation although demand has recovered in some areas. The revenue and operating profit forecast by segment are disclosed in the supplementary information on page 20. Basically, compared to the previous forecast, we have revised our forecast to show a decrease in revenue and profit in the FASystems business and an increase in revenue and profit in many other sub-segments. That's all from me.