Mitsubishi Electric Corporation

It is now the scheduled time. We will begin the Mitsubishi Electric Financial Briefing for fiscal 2025. I would like to introduce today's presenters. Mr. Kei Uruma, Representative Executive Officer, President, CEO. Mr. Ken Ichiro, Fujimoto Executive Officer, CFO. Now, President Uruma, please proceed.

Hello, everyone. And I was just introduced. I am Uruma of Mitsubishi Electric. And I'd like to thank you for attending our consolidated financial results briefing today. So I will first highlight the key points of the financial results, followed by our CEO, Fujimoto, who will cover the details. So I would like you to refer to page three now. And I'd like to explain the key points of the financial results, starting with the results for fiscal year 25, the group's revenue increased 263.7 billion yen. That's a 10.5% increase from the previous fiscal year to 5 trillion, 521.7 billion yen and operating profit increased. 63.3 billion yen to 391.8 billion yen. That's a 119% increase. The factory automation systems business was affected by the delayed market recovery, but due to increased sales and profitability in the infrastructure and life segments, as well as improved profitability and also the improved profitability in the semiconductor device segment, we achieved record high revenue as well as operating income and also met our initial corporate target for net profit. In the FA systems business, the scale of factory automation systems declined, the revenue declined, along with profitability. However, through drastic measures in low profit businesses and fixed cost reductions, et cetera, will be done exhaustively this year. And we hope to strengthen our business in China, and we hope to quickly return to a growth trajectory. We hope to return the business in China to a growth orbit as soon as possible. As for free cash flow, it totaled 264.1 billion yen, increase and in fiscal year 25 we enhance business competitiveness through NMA to expand the air conditioning business in Europe and a decision to establish a China business regional headquarters for FAA systems. In addition, regarding the China business regional headquarters, up to now, production and distribution were the only outlets in China, but we want to add a development function so that we can locally produce for the local market in China. And that's why we decided to establish this China regional headquarters company. As for, I'm sure you know about the transfer of shares in our group logistics company, and we will also sell off our cross-held shares in order to improve asset efficiency. Also, last week announced about the vehicle lamp system business. We announced the establishment of a JV joint venture, and we are also promoting portfolio reforms in the automotive equipment business. In 2026, we will further accelerate such moves. Also, in our 2026 full-year performance outlook, we forecast a revenue of 5 trillion 400 billion yen and operating profit of 430 billion yen, which will be an all-time high for the operating profit. Meanwhile, the impact of U.S. tariffs, and the details will be, of course, given by our CFO Fujii Emoto, however, We have factored into the earnings forecast an impact of close to 30 billion yen, but currently In areas where calculations are possible, we have calculated the impact, but because there's a lot of fluctuation, we would like to revisit our earning forecast as well as the impacts. And we would like to cope with the US tariff increases through price hikes. We have also decided today to repurchase our own shares. and will continue to invest in growth, promote its business portfolio strategy, and strengthen our management structure, while steadily returning profits to shareholders with the aim of achieving an ROE of 10% as soon as possible. Now then, I would like to call upon Kenichiro Fujimoto, our CFO, to explain the details of the financial results. This is Fujimoto. will now explain the details of the financial settlement in accordance with the handout materials so please refer to page five the group's revenue increased 263.7 billion yen year on year to 5 trillion 521.7 billion yen that's 105 percent of the previous year and revenue increased over the previous year even after excluding the exchange rate impact of 109 billion yen Operating income increased 63.3 billion yen to 391.8 billion yen, 119% of the previous year's level, and even excluding the foreign exchange impact of 30 billion yen, operating income increased year on year. The operating profit margin was 7.1%, an improvement of 0.9 percentage points from the previous year. In addition to the record revenue and operating income Uruma mentioned earlier, profit before income taxes and net profit attributable to shareholders of Melco also reached record highs. Now please turn to page six. This waterfall chart shows year-on-year changes in revenue and operating profit. The foreign exchange impact increased net revenue by 109 billion yen and profit by 30 billion yen. Aside from forex, we were impacted by a 37 billion yen cost increase in materials and distribution expenses and negative changes to the product mix, such as the decreasing ratio of the highly profitable FAA Systems business, as well as a one-time charge of 15 billion yen. However, price improvements of 48 billion improved profitability, mainly in the infrastructure and life divisions, and the sale of non-core businesses resulted in increased revenue and operating profit for the year. Now then, please turn to page 7. I will highlight some items in the consolidated statement of profit and loss that have not been mentioned so far. The cost of sales ratio improved 1.2 percentage points from 70.6% in the previous fiscal year to 69.4% as the impact of price improvements and more selective order taking began to take effect in all businesses. Selling general and administrative expenses increased by 78.5 billion yen from the previous year, mainly due to an increase in personnel development and marketing expenses. The foreign exchange impact was 20.3 billion yen. Now please turn to page eight. I will explain the consolidated statement of financial position. Assets. increased by 208.3 billion yen from the end of the previous fiscal year, mainly due to an increase in trade receivables and contract assets resulting from sales growth, mainly in the made-to-order business. Equity attributable to Melco shareholders decreased by 104.3 billion yen due to dividend payout, but we recorded 324 billion yen in net profit attributable to Melco shareholders, which increased our equity by 210.3 billion yen from the end of the previous fiscal year to a total of 3,949.6 billion yen. And the ratio of equity attributable to Melco shareholders to total assets rose 1.3 from the end of the previous fiscal year to 61.9%. Operating cash flow was an inflow of 455.9 billion yen, an increase of 40.4 billion yen from the previous year, mainly due to an increase in net income, Cash outflow from investing activities increased by 97.6 billion yen over the previous year due to a decline in sales proceeds on securities, resulting in an investment cash outflow of 191.7 billion yen. And as a result, free cash flow decreased by 57.2 billion from the previous year to a total inflow of 264.1 billion yen. Now, turning onto page 10, I will now briefly explain each of our business segments. The following waterfall chart illustrates the FY25 revenue and operating profit by segment compared to the previous year. Infrastructure, life, and business platform segments increased both revenues and profits. Semiconductor devices increased profits despite lower revenues, while the industry mobility segment reported lower revenues and profits.

Please refer to page 11. This is the infrastructure segment. Both the segment and all sub-segments achieved year-on-year growth. The public utility system business grew steadily with strong UPS demand for overseas data centers and solid transportation and public sector projects, leading to higher orders, revenue, and profit. Energy systems also saw strong demand-supported power demand increase, along with data center expansion. Despite one-time cost, increase in power distribution business and improved order margins lifted both revenue and profit year-on-year basis. Orders for defense and space systems rose sharply due to defense capability preparation plans, driving gains in year-on-year basis revenue and operating profit. Improved contract terms in defense increased orders and stabilization of high-difficulty space projects boosted operating margins significantly. Steady growth in both revenue and profit is expected to continue. Please refer to page 12. Industry and mobility segment. The FH system business faced continued challenges due to delay of investment in the lithium-ion battery sector. Orders are recovering by capturing market demands in smartphones, AI, and machine tools. but a demand for high margin models has yet to rebound. Sales mix changes and one-time costs led to lower year-on-year revenue and profit. We are now accelerating efforts to meet our financial targets by optimizing fixed cost and strengthening business in China. Automotive equipment sales fell due to lower China demand, but operating profit rose year on year thanks to pricing and cost improvements. Please refer to page 13 life segment. In the building system business, growth in renovation projects in Japan and Asia, excluding China, led to year-on-year higher orders, revenue, and profit. In air conditioning and home appliances business, European demand was sluggish, but North America, Asia, and Japan remained strong. Despite one-time cost, price improvements drove gains in both revenue and profit. Please move over to page 14. The business platform segment maintained steady demand, achieving higher orders, revenue, and profit on a year-on-year basis. In semiconductor and device segment, power semiconductor demand stagnated in industry and automotive domains, but telecommunications optical device demand remained firm. While year-on-year revenue stayed flat, but operating profit increased due to a better sales mix. Please refer to page 15. Now sales by customer location. In the year ending March 2025, overseas sales grew 4%, led by air conditioning and power systems. And domestic sales grew 6%, driven by defense and space systems, the overseas sales ratio remained steady at 51%. Please refer to page 17. Now this is the outlook for the year ending March 2026. The forecast revenue of 5.4 trillion yen operating profit of 430 billion yen and 8% operating margin. Also, stronger yen will lower our revenue. We expect record high operating profit, pre-tax profit, and net profit attributable to the owners of the parent company. And as for the estimate rate for the exchange rate is 140 yen to a dollar, 155 yen to a euro, and 19.5 yen to yuan. As for US tariff impact, which is shown on the right bottom table, What company sells to United States is about 600 billion yen, of which 80% is sourced outside of the United States, making them subject to tariffs. So we have forecasted in the full year impact of 30 billion yen from the 10% baseline tariff and additional tariffs on steel and aluminiums based on the current policy. we are aiming to transfer full impact to our costs but have included the estimation of 30 billion yen as a loss considering uncertainty risks of sales declines and additional tax measures We will closely monitor tariffs and speed up relevant local productions. Please refer to page 18. Next, this is the changes in the year ending March 2026 forecast versus the previous year. The strong yen will reduce revenue by 190 billion yen and operating profit by 47 billion yen. Excluding exchange rate effect, we forecast a 68.3 billion yen revenue increase and 85.2 billion yen profit increase. We expect infrastructure and life segment to expand from last fiscal year. We forecast 430 billion yen operating profit with business sales expansion and profitability improvement cost structure review for dean business structure and elimination of one-time cost we forecast 430 billion yen operating profit so while industry and mobility segments revenue will decline over the previous fiscal year business growth profitability improvements and cost reduction in infrastructure and life segment would improve the profitability and our entire group expects to increase profit while decreasing revenue. So this concludes our presentation.