Mitsubishi Electric Corporation

It's time to start the Mitsubishi Electric FI26 second quarter financial results briefing. Let me introduce the speaker, our Executive Managing Director, Officer, CFO, Kenichiro Fujimoto. So, Fujimoto-san, please proceed. Thank you. I'm Fujimoto from Mitsubishi Electric. Thank you for joining our earnings results briefing today. So let me explain the consolidated financial results for our second quarter of FY26 year ending March 31, 2026. Please move to page 3. These are the highlights. Despite the impact of a stronger yen, particularly against the U.S. dollars during the first half of FY26, revenue increased to 2 trillion 732.5 billion and operating profit reaching 224.3 billion, both record high, thanks to sales growth mainly in the infrastructure and the ongoing effort of profitability and efficiency improvements. The FY26 full-year outlook projects revenue of 5.67 trillion 270 billion, higher than the previous forecast, reflecting the sales growth in the infrastructure and the revised assumption of a weaker yen. and operating profit is projected at $430 billion, no change from the previous announcements incorporating increased retirement costs under the Next Stage Support Program while reflecting increased sales, the FX impact, and the realization of a price path through for U.S. tariff. Excluding the retirement allowance income, it is ¥40 billion increase from the previous announcement. The interim dividend has been increased by ¥5 from the previous yen, setting a record high of ¥25 per share. The year-end dividend is planned to be ¥30, resulting in an annual dividend of ¥55. We will continue to return profits from our business growth to our shareholders. Please move to page 5. This is our group's first half performance. As mentioned before, revenue reached $2,732.5 billion, an increase of $88.9 billion year-over-year, exceeding the first half of FY25 and set a new record high. Operating income increased by $47.6 billion year-over-year, $224.3 billion higher than the first half of FY25, setting a record high. The operating profit margin improved by 1.5% each point to 8.2%. profit after this also operating income is so setting a record high better than fi 18. page 6 in the second quarter q2 of fi 26 both revenue and income after tax rates record high for q2 operating income decreased due to a factor that boosted operating income in q2 of the previous year and decrease in unrealized gains on inventories related to the intra group transaction against the sharp appreciation of yen please go to page seven so the waterfall chart shows the air on air change in the revenue and operating profit for the first half The stronger yen resulted in 31 billion decrease in revenue and 15 billion decrease in operating profit. Excluding the impact of FX, revenue and operating profit increased due to growth in scale in the infrastructure and FAS systems, price improvements in the industry and mobility and air conditioning systems, home products, and gains on the transfer of subsidiary shares. Please go to page eight. I now focus on items not previously explained in consolidated statement. The cost of sales was 68.3%, improvement of 1.0 point from the 69.3% in the same period of the previous year. Although each business was impacted by stronger yen, Efforts to improve pricing, profitability, and efficiency are yielding results. HC&A expenses increased by $27.1 billion year-on-year. This was due to increased personnel and R&D costs due to accelerating AI adoption and 3D business growth. Regarding non-operating side, the Q2 of last year, so a sharp yen appreciation leading to FX losses. This fiscal year, the yen remained weak, particularly against the euros, resulting in 25.1 billion improvements in expense compared to the last year. Please refer to page 10. This is a consolidated financial position. First, assets increased by 69 billion compared to the end of the last year. Inventories increased by 23.5 billion due to the weaker yen against the euro and Thai bahts. In the major order business, inventories increased due to the project progress, but in the mass production business, inventory optimization led a decrease compared to the end of the last year. Capital increased by $104.5 billion compared to the end of the last year, of which Equity attributable to the owners of the parent increased by $98.2 billion to $4,047.9 billion, reflecting the net income of $189.3 billion for the first half. While we had dividends paid to shareholders in shared buyback, the ratio to total asset increased by 0.9 percentage point to 62.8%. Please refer to page 11. Cash flow from operating activities increased by $73.2 billion to $344.7 billion due to higher net income for the first half. Cash flow from investment decreased by 71.7 billion primarily due to higher proceeds from the sales of the securities and subsidiary shares. As a result, free cash flow increased by 145 billion to 297.9 billion yen.

Please turn to page 12. From here, I will explain revenue and operating profit by segment. While infrastructure posted year-on-year increase in both revenue and profit, industry and mobility as well as semiconductor device posted decrease in revenue and increase in profit and life and digital innovation recorded increase in revenue and decrease in profit. We will provide a detailed explanation of each segment from the next page onward and the table showing results by each sub-segment is available on page 21 in the supplementary materials. Please turn to page 13. First, infrastructure segment. In public utility systems, transportation systems, public utility systems, businesses in Japan, as well as at the UPS business for overseas markets, performed well and revenue increased year on year. Operating profit also increased year on year, mainly due to increased revenue, a shift in project portfolio, and the recognition of one-time gains. In energy systems, both revenue and operating profit increased year-on-year mainly due to the expansion of the power transmission and distribution businesses in Japan and overseas. In defense and space systems, both revenue and operating profit increased year-on-year due to increased demand for the defense systems. We will continue to focus on the steady execution of construction projects and secure revenue and earnings steadily in the second half of the year. Please turn to page 14 for industry and mobility. In factory automation systems, both orders and revenue increased year-on-year as demand related to smartphones and industrial machinery in China and capital expenditures mainly for AI-related semiconductors in Japan, China, and Taiwan continued to grow in the second quarter. Operating profit also increased year-on-year due to increased revenue and the improvements in product prices. In automotive equipment, revenue decreased year-on-year primarily due to the impact of lower sales volume by Japanese car manufacturers in China and the decrease in car multimedia for North America. But operating profit increased year-on-year due to improvements in product prices and reduced expenses. Please turn to page 15 for life segment. In building systems, those orders and revenue increased year on year, mainly due to an increase in the domestic renewal businesses and operating profit also increased year on year. In air conditioning systems and home products, revenue increased year on year due to robust demand for air conditioning systems in North America and Japan, along with signs of recovery in demand in Europe, despite the impact of the strong yen. Operating profit decreased year on year, despite higher revenue, mainly due to the impact of foreign exchange rates and the upfront investment into development, among others. Please refer to page 16. In digital innovation, both orders and revenue increased year-on-year due to a robust demand for system upgrades and digital transformation related to efforts. But operating profit decreased year-on-year mainly due to expenses related to the integration of affiliated companies. In semiconductor and device, demand for optical communication devices for data centers remained strong despite the stagnation in demand for power modules. Orders decreased year-on-year due to decrease in orders for power modules. Revenue decreased year-on-year due to decreases in power modules used for industrial and automotive applications despite an increase in optical communication devices. Operating profit, however, increased year-on-year due to an improved profitability resulting from an increase in sales of optical communication devices and the effective cost control. Please refer to page 17. This page shows revenue by location of customers. Overseas revenue increased by 27.6 billion yen, or 102% of the same period of the previous year, to 1,447.2 billion yen due to increased demand in infrastructure and life in North America, as well as increased demand in factory automation systems in China and Asia, despite decreases in automotive equipment in China and North America. On the other hand, revenue in Japan increased by 61.2 billion yen, or 105% of the same period of the previous year. As a result, the ratio of overseas revenue to consolidated revenue was 53%, down 0.7 percentage points year-on-year. Please refer to page 19 for the full-year forecast for the fiscal year 2026. Revenue is expected to increase by 270 billion yen from the previous forecast up to 5,670,000,000 yen due to increasing demand for infrastructure and factory automation systems in China and Asia, as well as increasing demand for air conditioning systems centered on North America and Europe, along with the revision of the foreign exchange rate assumption to a weaker yen. Operating profit is expected to be 430 billion yen unchanged from the previous forecast as increasing profit in each business segment is factored in while incorporating 40 billion yen of retirement costs as a corporate expense associated with the next stage support program. Revisions were made from the previous forecast by segment, with increase in revenue and profit forecasted for each sub-segment in infrastructure due to increase in volume, and increase in revenue and profit for each sub-segment in industry and mobility driven by higher volume in factory automation systems, as well as weaker yen, and increase in profit in semiconductor and device due to weaker yen among other factors. The forecast for revenue and operating profit by segment is on page 23 in supplementary materials.