Fuji Electric Co Ltd

I am Junichi Arai, Corporate General Manager, Corporate Management Planning Headquarters. I will explain consolidated financial results for the first quarter of the fiscal year 2022. Fortunately, we achieved record high income in the fiscal year 2021 and made a start in this fiscal year with a plan to achieve significant year-on-year growth. Both sales and income increased year-on-year in the first quarter of the fiscal year 2022. We achieved the first quarter record high orders, net sales, operating income, and ordinary income. Net income attributable to owners of Ferent was 10 billion yen in fiscal year 2010 due to gain on sales of investment securities. And net income attributable to owners of Ferent in the first quarter of this fiscal year was 9.9 billion yen, 100 million yen below that. Page 4 shows your own year comparison. Net sales were 203.9 billion yen, up 14 billion yen. Excluding 7.1 billion yen of gain on translation of earnings of overseas subsidiaries, net sales increased 6.9 billion yen in real terms. 5 billion yen of sales of magnetic disks was included in the last fiscal year. Excluding sales of magnetic disks, net sales increased 11.9 billion yen. Operating income was 9.9 billion yen, up 4.6 billion yen. Operating margin was 4.8%. Non-operating income net of non-operating expenses was up 1.8 billion yen year on year. As for the breakdown, falling exchange gain increased 1.5 billion yen. 400 million yen was from an increase in dividends received from non-consolidated companies. Ordinary income was 12.3 billion yen of 6.4 Extraordinary income net of extraordinary loss was 4.2 billion yen, up 2 billion yen. The main item was gain on sale of investment securities. We've been setting closure holdings in a planned manner. We booked 4.6 billion yen of gain on sales of investment securities in the first quarter of the fiscal year 2022. Year-on-year increase was 2.3 billion yen. In total, the increase was 2 billion yen. Net income attributable to owners of Furin was up 5 billion yen, almost doubled to 9.9 billion yen. Page 5 shows breakdown of 4.6 billion yen increase of operating income, increase in sales and production volumes pushed up operating income by 5 billion yen, sales and income of automotive semiconductor, power supply and facility systems and ED&C components mainly increased. Increasing fixed cost pushed down operating income by 2.3 billion yen. Labor costs and depreciation in leases paid increased. As we actively made investments and expanded production capacity in power semiconductor, depreciation in leases paid increased. 1.3 billion yen was from other expenses. Controllable expenses, outsourcing expenses, and IT expenses increased. In total, increase in fixed cost pushed down operating income by 2.3 billion yen. The yen depreciated and exchange rate effect was 1.4 billion yen. 400 million yen was from others. Year-on-year impacts of rising raw material prices were negative 2.1 billion yen. Effects of higher product selling prices were positive 1.7 billion yen. In total, the negative impacts of rising raw material prices were bigger than the positive effects of higher product selling prices. Cost reduction and others offset 800 million yen. And as a result, others boosted operating income by 400 million yen. In total, operating income was up 4.6 billion yen to 9.9 billion yen. Page 6 shows net sales and operating income by segment. Net sales in power electronics industry and food and beverage distribution decreased slightly. However, net sales increased in all other segments. Except power electronics industry, operating income increased in all segments, mainly power electronics energy and semiconductor. In total, operating income was up 4.6 billion yen. From page 7, I will explain business results by segment. In power electronics energy, net sales were up 6.5 billion yen and operating income was up 2.9 billion yen year on year. There are three businesses in this segment. The key point is power supply and facility systems. Both net sales and operating results increased as a result of substantially higher demand for projects from data centers and semiconductor manufacturers. In ED&C components, net sales and operating results increased due to higher demand mainly from domestic manufacturers of finished equipment. Significant increase was achieved in Japan and increase in Asia and the U.S. However, results of China were down due to the impacts of lockdowns. In power electronics industry, the key point is automation systems, including low-voltage inverters. This business was hardest hit by the lockdowns in China. Net sales were down. Besides, high prices for materials and difficulties in procuring parts in China also impacted material procurement in Japan. As a result, net sales and operating results decreased in automation systems. In social solutions, net sales and operating results decreased year on year due to a decrease in SOX sclubbers. In IT solutions, net sales increased due to large-scale private sector projects, but operating results were almost in line with budget because of differences in profitability between projects. Page 8, please. In semiconductor, net sales were up 1.7 billion yen and operating income was up 1.5 billion yen. Industrial applications were down year on year. Excluding 5 billion yen sales of magnetic disks included in the first quarter of the fiscal year 2021, net sales and operating results increased. Net sales and operating results for automotive applications also increased due to booming demand for electrified vehicles. Expenses such as depreciation and leases paid increased for bolstering production capacity. However, by maintaining high operating ratio, production and sales volumes increased. As a result, net sales and operating results increased year on year. In power generation, net sales were up 4.9 billion yen and operating income was up 800 million yen. Sales and income increased year on year due to the benefits of overseas large-scale renewable energy projects. As for food and beverage distribution, in vending machines, net sales and operating results increased because of growth in demand in Japan. We raised selling prices slightly, which also contributed to the increase. Results in China decreased year on year, due to the impacts of the lockdowns. In store distribution, net sales and operating results decreased due to the absence of large-scale orders for automatic change dispensers recorded in the previous equivalent period. Page 9 shows year-on-year comparison of net sales by Japan and overseas area. Net sales were 203.9 billion yen, up 14 billion yen year-on-year. Net sales in Japan were up 10.4 billion yen and overseas sales were up 3.6 billion yen. As for the breakdown of 3.6 billion yen increase in overseas sales, sales in Asia and others were up 2.4 billion yen. As exchange rate defect was 2.4 billion yen, sales were almost flat year-on-year in real terms. If we take magnetic disks into account, sales in Asia increased 5 billion yen. Sales in China were down 2.5 billion yen. Excluding exchange rate defect, sales were down 5.9 billion yen in real terms. ED&C components and automation systems were significantly impacted by the lockdowns. Sales in Europe and Americas were up 2 billion yen and 1.7 billion yen respectively. Page 10 indicates year-on-year comparison of amount of orders received by product for the first quarter. Amount of orders was 283.7 billion yen, up 45.3 billion yen year-on-year. This was record high first quarter orders. Up until last year, I explained, orders mainly for components increased. Orders for components were 111.9 billion yen, up 11.8 billion yen year on year in the first quarter. Orders for plant and system projects also increased significantly by 33.5 billion yen. Orders for power supply and facility systems increased significantly. Orders also for energy management, equipment construction, and IT solutions increased year on year. We started to show quarterly trend of major components orders received in the last fiscal year. Orders for semiconductor increased 11% year-on-year in the first quarter. Orders for ED&C components increased 25%. Orders for components increased approximately 12 billion yen year-on-year in the first quarter. Page 11 shows amount of sales by product. Sales were up 14 billion yen. Sales of planned projects increased 6.3 billion yen. Component sales increased 7.7 billion yen to 93.3 billion yen. As for forecast for the first half and full year, we decided to keep unchanged forecast announced on April 27th. Forecast for the first half are 424 billion yen in net sales, 22 billion yen in operating income, and 15.5 billion yen in net income attributable to owners of parent. Forecast for full year are 960 billion yen in net sales, 82 billion yen in operating income, and 59 billion yen in net income attributable to owners of parent. There is no change to the forecast. For the full year, sales and income are forecast to increase in all the segments. On page 15, you see consolidated balance sheet. Comparison is made between the end of March and the end of June. Collection progressed significantly for nodes and account receivables, trade receivables, mainly of plant-related cells, accumulated up to the end of March. As a result, nodes and account receivables, trade receivables, decreased 52.2 billion yen. inventories increased 22.6 billion yen, mainly due to accumulated plant-related inventories. In total long-term assets, investments in other assets decreased 12.2 billion yen. Out of that, 4 billion yen was due to sale of Krosia Holdings. Slightly more than 10 billion yen was due to loss on valuation of investment securities compared to the end of March. Consequently, total assets stood at 1 trillion 100.2 billion yen. down 16.9 billion yen. Interest-valuing debts decreased 8.8 billion yen. Cash and time deposit increased 11.4 billion yen. As a result, net interest-valuing debt was 96.9 billion yen, down 20.1 billion yen. Net DE ratio was 0.2 times. Equity ratio was 43.5%. Page 17 shows quarter-on-quarter and year-on-year comparison of amount of orders received for ED&C components, low-voltage inverters, semiconductor, and vending machines for the first quarter for reference. This time, we kept unchanged forecast for the first half and full year. As for market conditions, the Ukraine crisis, slowdown of economy in China and monetary tightening in Europe and the U.S. are leading to inflationary trend and possibility of recession. IMF announced economic outlook yesterday. IMF revised down global economic growth by 0.4 percentage points to 3.2%. Economic growth rate of Japan was revised down by 1.2 percentage points to 2% from January outlook of 3.2%. As for exchange rates, the yen depreciated due to difference in interest rates between Japan and the U.S., However, as markets became conscious of peaking interest rates, the yen recovered slightly. We recognize uncertainties over the future. When we announce results for the first half, we want to revise full-year forecast, including exchange rate, in light of market conditions, customer trends, procurement of parts, rising prices, and other risks. We haven't changed disclosed forecast since April. Every time, we explain upside factors based on certain conditions. If exchange rates remain at the same level, net sales will be slightly more than 20 billion yen higher and operating income will be slightly more than 3 billion yen higher than full-year forecast. I currently suppose expenses will be down billions of yen, although it depends on the COVID situation. By business, ED&C components will continue to be strong in the first and the second half. I think we can expect upside mainly in power, electronics, energy, and semiconductor mainly in industrial applications. Personally, I strongly feel we will be able to revise upward the disclosed forecast not only for the first half but also for full year. That concludes my presentation.