Fuji Electric Co Ltd

I will explain consolidated financial results for the first half of the fiscal year 2022 and full year forecast. Firstly, let me explain results for the first half. As Kondo mentioned, despite negative factors such as lockdowns in China, rising resource and energy costs, partly due to the tailwind of the depreciation of the yen, fortunately, we achieved record high operating income, ordinary income, and net income in the first half. Page 4, please. Net sales were 447.1 billion yen and 49.5 billion yen. Excluding gain and translation of earnings of overseas subsidiaries, net sales increased 31.7 billion yen due to demand increase. Operating income was 26.7 billion yen up 10.4 billion yen or 64% year-on-year. Ordinary income was 28.9 billion yen up 12 billion yen. As for non-operating items, foreign exchange income increased to 1.9 billion yen. Expenses for converting the magnetic disk production lines in Malaysia to semiconductor production lines were 600 million yen. In total, non-operating income net of non-operating expenses was up 1.6 billion yen. Extraordinary income net of extraordinary loss was down 600 million yen year on year. Gain on sales of investment securities was 8.2 billion yen due to sales of a large number of shares in the first half of the last fiscal year and was 6.3 billion yen in the first half of this fiscal year down 1.9 billion yen. Expenses for withdrawal from magnetic disk business were 1.2 billion yen in the first half of the last fiscal year. Absence of this factor was positive in the first half of this fiscal year. In total, extraordinary income net of extraordinary loss was 5.7 billion yen, down 600 million yen. Net income attributable to owners of parent was 20.3 billion yen up 6.3 billion yen or 45% year on year. Page 5 shows breakdown of 10.4 billion yen year on year increase of operating income. The biggest factor was increase in sales and production volumes, in particular, in automotive semiconductor, power supply and facility systems, ED&C components, and IT solutions. In total, increase in sales and production volumes pushed up income by 15.6 billion yen. Fixed cost increased ¥6.4 billion in total. Depreciation and leases paid increased fatally due to proactive investment in semiconductor. Other expenses increased ¥3.4 billion. Controllable expenses and outsourcing expenses increased. The yen depreciated and exchange rate effect pushed up income by ¥3.4 billion. Others pushed down income by 2.1 billion yen. Negative 4.7 billion yen was from impacts of rising raw material prices. Negative 1.4 billion yen was from impacts of energy prices, especially impacts on semiconductor. 3.4 billion yen effects of higher product selling prices partially offset the negative effects, but not fully offset the rising raw material prices. 600 million yen positive effect of cost reduction in others also partially offset the negative effects. However, in total, others pushed down income by 2.1 billion yen. Page 6 shows year-on-year comparison of net sales and operating income by segment. Net sales increased in all the segments. Operating income in power electronics industry decreased 1.3 billion yen year on year partly due to decrease in automation systems. Operating income mainly increased in power electronics energy, semiconductor, and food and beverage distribution. On pages 7 and 8, I will talk about business results by segment. In power, electronics, energy, net sales were up 16.9 billion yen and operating income was up 5.4 billion yen. The number in the box indicates exchange rate defect. In this segment, there are three businesses. In energy management, net sales decreased and operating results increased slightly. In power supply and facility systems, net sales and operating results increased significantly as a result of substantially higher demand for projects from data centers and semiconductor manufacturers in Japan and overseas. In particular, a subsidiary of Switchgears and Controlgears in Singapore made a significant contribution to orders, sales, and operating results. The biggest contributor was ED&C components. Net sales and operating results increased in ED&C components. Higher demand from domestic manufacturers of finished equipment was a major income driver. In power electronics industry, net sales were up 10.4 billion yen but operating income was down 1.3 billion yen unfortunately. There are four businesses in this segment. In automation systems, there were impacts of lockdowns in China and operating results decreased due to the high prices for materials and effects on production from difficulties in procuring parts. Net sales increased slightly partly due to foreign exchange influences. in social solutions net sales decreased but operating results increased slightly scuffers orders decreased but operating results increased slightly year on year due to the benefits of cost reduction activities In equipment construction, net sales and operating results decreased. In IT solutions, net sales increased significantly and operating results increased year on year due to large-scale academic or school-related and private sector projects. Page 8, please. In semiconductor, net sales were up 12 billion yen and operating income was up 3.1 billion yen. Sales of industrial applications were up 2.7 billion yen. Sales of magnetic disks were 5.8 billion yen in the first half of the last fiscal year and the margin was also high. Fortunately, despite that, most sales and income increased. In automotive applications, sales increased substantially by 9.3 billion yen and income also increased. Despite negative factors such as the rise in depreciation and leases paid for bolstering production capacity and the increases in material and in particular energy costs, operating income increased year-on-year partially due to high operating ratio close to 100% at factories. In power generation, net sales were up 8.2 billion yen and operating income was up 600 million yen. Net sales and operating income increased due to the benefits of large-scale renewable energy projects. In food and beverage distribution, net sales were up 500 million yen, and operating income was up 2.4 billion yen. In vending machines, net sales and operating results increased. Operating results were negative in the first half of the last fiscal year, but improved significantly in the first half of this fiscal year. Operating margin was slightly higher than 8%. In store distribution, net sales decreased 8%, but operating results were almost flat. Due to the benefits of cost reduction activities, operating results were not negative. Page 9 shows year-on-year comparison of net sales by Japan and overseas area. Net sales were up 49.5 billion yen in total, overseas sales were up 20.7 billion yen, and sales in Japan were up 28.8 billion yen. Increasing overseas sales included 17.7 billion yen of exchange rate effect. By area, sales in Asia and others were up 12.7 billion yen, including negative 5.8 billion yen from magnetic disks. Sales mainly of power supply and facility systems, ED&C components, and automation systems increased. In China, sales of automation systems and food and beverage distribution decreased due to strong impacts of lockdowns. In total, sales in China decreased 600 million yen. In Europe and Americas, sales increased slightly more than 4 billion yen respectively year-on-year. Components such as factory automation and semiconductor increased. Page 10 indicates year-on-year comparison of amount of orders received by product. Amount of orders was 565.5 billion yen, up 80.6 billion yen year-on-year. In particular, amount of orders for plan and system projects increased. Amount of orders for power supply and facility systems, energy management, and equipment construction mainly increased substantially. Orders for components were 225.1 billion yen of 22 billion yen. Orders for semiconductor and ED&C components increased significantly by 13% respectively. Bar graphs indicate quarterly trend of major components orders received from the first quarter of the fiscal year 2021 to the second quarter of the fiscal year 2022. In a first quarter and a second quarter, major components orders received increased more than 10 billion yen year-on-year. Page 11 shows year-on-year comparison of amount of sales by product. Sales for 447.1 billion yen up 49.5 billion yen. Sales of plant systems increased, including sales of projects in power supply and facility systems, power generation, and IT solutions. Component sales were 197.7 billion yen, up 23.2 billion yen. In particular, sales of semiconductor increased 23% and sales of ED&C components increased 17%. Sales and operating results of factory automation decreased due to impacts from China, difficulty in procurement of parts, and rise in material costs. However, sales of factory automation increased 20% from the first quarter to the second quarter. That means orders are leading to sales. Major components, cells, increased in the first and second quarter, respectively, by approximately 10 billion yen year-on-year. Page 12 shows results for the first half in comparison with forecast announced on July 28. Net sales were 23.1 billion yen higher than forecast. Excluding gain on translation of earnings of overseas subsidiaries, net sales increased 10.5 billion yen due to demand increase. Operating income was 4.7 billion yen higher than forecast. 3.2 billion yen was from increase in sales and production volumes, mainly of ED&C components and industrial semiconductor. Decreasing fixed costs, including labor costs and depreciation and leases paid, pushed up income by 1.8 billion yen. Exchange rate defect was positive 2 billion yen. Unfortunately, others were negative although we raised prices to offset rising raw material and energy costs. Operating income was 4.7 billion yen higher than forecast in total. Ordinary income was 6.9 billion yen higher and net income attributable to owners of parent was 4.8 billion yen higher. By segment, in power electronics energy, net sales were 6.6 billion yen higher and operating income was 2.4 billion yen higher. Sales and income were higher mainly due to demand increase of ED&C components. In power electronics industry, net sales were 6.2 billion yen higher and operating income was 600 million yen lower. Sales were higher due to increased automation systems business sales and beneficial foreign exchange influences, but income was lower because of higher raw material prices. In semiconductor, net sales were almost in line with forecast when excluding foreign exchange influences. Sales and income were higher in industrial semiconductor. Sales and income were slightly lower in automotive semiconductor. In power generation, net sales were 2.8 billion yen higher and income was 500 million yen lower. Income was lower because of differences in profitability between projects. In food and beverage distribution, situation of vending machines was very challenging in China. However, sales and income were higher due to increased demand for vending machines in Japan and for store distribution equipment, reduced fixed cost, and increased production. In total, net sales were 23.1 billion yen higher and operating income was 4.7 billion yen higher than forecast. Let me move on to consolidated balance sheet. Comparison is made between March 31, 2022 and September 30, 2022. Collection progressed for nodes and account receivables, trade receivables, mainly and plant-related sales accumulated up to March. As a result, nodes and account receivables, trade receivables decreased 50.1 billion yen. Inventories increased 30.6 billion yen due to increase in components and plant-related inventories. Nodes and account payables, trade payables increased 3.5 billion yen. Tangible fixed assets increased 12.5 billion yen mainly due to semiconductor. Investments and other assets decreased 18.1 billion yen mainly due to sales of cross-share holdings. Consequently, total assets stood at 1,125,7 billion yen of 8.6 billion yen. Interest-varying debts decreased 11.2 billion yen. Cash-on-time deposit increased 18.5 billion yen. As a result, net interest-varying debt was 86.2 billion yen, down 30.8 billion yen. Net DE ratio was 0.2 times, equity ratio was 43.5%, up 1.1% from the end of the last fiscal year. Page 16 shows year-on-year comparison of consolidated cash flow for the first half in comparison with the fiscal year 2021. Net cash provided by operating activities was 59.9 billion yen. 40 billion yen was from internal reserve and 20 billion yen was from higher efficiency in working capital. Net cash used in investing activities was 10.7 billion yen mainly due to increased investment in semiconductor. Free cash flow was 49.2 billion yen. In terms of year-on-year comparison, net cash provided by operating activities increased 20.1 billion yen. 20 billion yen increase was from internal reserve and account payables. Net cash used in investing activities was 10.7 billion yen due to increased investment in semiconductor. Free cash flow increased 9.2 billion yen year-on-year. In the first half of the fiscal year 2022, we repaid long-term borrowings of 35.7 billion yen. Even after that, we kept cash-in-cash equivalent of 110 billion yen level. Page 18 shows full-year forecast for the fiscal year 2022. Net sales forecast was revised up by 25 billion yen to 985 billion yen operating income up 5 billion yen to 87 billion yen. Ordinary income, up 5 billion yen to 88 billion yen. Net income attributable to owners or parent, up 500 million yen to 59.5 billion yen. Net income attributable to owners of parent will be much lower than ordinary income. It is due to extraordinary losses such as restoration expenses and loss on operation associated with flood damage at the subsidiary in Asia and increase in non-controlling interest. Let me look at net sales and operating income by segment. In power electronics energy, net sales forecast was revised up by 16 billion yen and operating income forecast was revised up by 4.5 billion yen. As was the case with the first half, contribution from ED&C components and power supply and facility systems will be significant. In power electronics industry, net sales forecast was revised up by 6 billion yen and operating income forecast was revised down by 1.2 billion yen. Net sales forecast was revised up due to automation systems and IT solutions. However, operating income forecast was revised down due to rise in fixed cost and raw material prices. In semiconductor, net sales forecast was revised up by 4 billion yen and operating income up by 800 million yen. Sales and income were revised up due to exchange rate. We also incorporated impacts and rising energy cost. We plan to achieve sales and operating results in line with the previous forecast in real terms. Industrial semiconductor exceeded the previous forecast, and automotive semiconductor was slightly below the previous forecast, partly due to situation of customers. In power generation, forecasts were kept unchanged, both for net sales and operating income. In food and beverage distribution, net sales forecast was revised up by 1 billion yen and operating income forecast was revised down by 900 million yen. But debt risk of a vending machine customer in China enhanced. Billions of yen of expected but debt loss were incorporated in the forecast. In total, net sales forecast was revised up by 25 billion yen and operating income forecast was revised up by 5 billion yen. But graphs of dividend of surplus are shown on page 20. Fortunately, upward trend of dividend continued up until the fiscal year 2021. Interim dividend for the fiscal year 2022 will be 55 yen per share of 10 yen year-on-year. If possible, we want to increase year-end dividend by 10 yen or more by achieving results and being conscious a payout ratio of 30%. Page 22 and after shows materials for reference. 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 second quarter are indicated. Year-on-year comparison for the first half is also shown. Page 23 shows results for the fiscal year 2021 and revised forecast for the fiscal year 2022. Net sales will increase 74.8 billion yen. Operating income will increase 12.2 billion yen. Ordinary income will increase 8.7 billion yen. Net income attributable to owners or parent will increase 800 million yen. Expenses for converting production lines in Malaysia into semiconductor production lines of 2 billion and some hundreds of million yen are included in non-operating expenses. As for extraordinary items, gain on sales of investment securities in the last fiscal year was bigger than in this fiscal year. Our subsidiary in Asia suffered from flood damage, and controlling interest increased. Due to those factors, net income attributable to owners of parent will increase 800 million yen. Net sales and operating income for power electronics energy, power electronics industry semiconductor power generation and food and beverage distribution are also shown. Net sales and operating income are expected to increase in all the segments year on year. As for risk factors throughout the year, we don't know what will happen in China. There may be lockdowns. There are other geopolitical risks. Resource and energy costs may increase further. Demand may decrease due to customer trends. There are such downward risks. Upside factors include exchange rate. Exchange rate has been fluctuating dramatically. Based on the average of the past one month, we assume net sales were pushed up by slightly less than 16 billion yen and operating income by slightly less than 2 billion yen. As for expenses, we factored in but dead risks in China. We assumed energy cost would increase in a second half. In this plan, I think there is room to reduce cost by approximately 1 billion yen. By segment, I personally expect there is upside potential of power supply and facility systems and ED&C components in power electronics energy. As Kondo mentioned earlier, under the medium-term management plan, we aim to achieve 1 trillion yen in net sales and operating margin of 8% or higher in the next fiscal year, the fiscal year 2023. We already achieved margin target in the last fiscal year. We intend to make efforts so that we will be able to achieve net sales target of 1 trillion yen in this fiscal year, one year ahead of the plan. I would appreciate your support. That concludes my presentation.