Fuji Electric Co Ltd

Hello everyone, my name is Arai, in charge of Corporate Planning. I'd like to present the consolidated financial results for the fiscal year 2022 compared to the previous year. Please turn to page 4. Thanks to your support, net sales, operating income, ordinary income, and net income attributable to owners or parent all exceeded the previous year's levels, and we were able to finish the fiscal year with new record highs. As explained by Chairman Kitazawa, I am very pleased that we were able to achieve our medium-term management plan goal one year ahead of schedule. First of all, net sales increased by 99.2 billion yen from the previous year to 1 trillion 9.4 billion yen. Excluding gain on translation of earnings of overseas subsidiaries, it was up 11.8 billion yen. Sales have increased by 87.4 billion yen. The figure includes a negative impact of approximately 13 billion yen due to the lockdown in China, which caused some difficulty. Operating income increased by ¥14 billion to ¥88.9 billion, and operating margin was up 0.6% to 8.8% year-on-year. Non-operating loss was at ¥5.5 billion, including ¥2.4 billion in foreign exchange gains and losses, which is related to receivables and payables in foreign currencies. The other items include the cost of converting the business of our affiliated company in Malaysia from media to semiconductors, etc., which was 5.5 billion yen, resulting in an absolute loss of 1.1 billion yen. Ordinary income increased by 8.5 billion yen to 87.8 billion yen, and extraordinary loss was 1.3 billion yen for an absolute figure of 7.9 billion yen. The extraordinary income loss includes mainly loss on liquidation of affiliated companies, including loss on liquidation of an Indonesian company, which was minus 1.1 billion yen compared to the previous year. The net income attributable to owners or parents for the year increased by 2.7 billion yen to 61.3 billion yen, exceeding the 60 billion yen mark. Waterfall chart with a breakdown of changes in operating results is shown on page 5. The total increase came to 14 billion yen. Large part of this increase is due to an increase in sales and production volume, which came to 35.5 billion yen. The increase in the sales and production volume in semiconductor, automotive, power supply and facility systems, vending machines, factory automation systems, and ED&C components were the major positive factors. On the other hand, fixed costs increase due to an increase in personnel expenses and capital expenses related to capital investment, mainly in semiconductors, with other expenses increasing by ¥12.3 billion. This includes controllable expenses and subcontracting expenses, Compared to the previous year, a special factors which include about 4 billion yen of negative factor which is allowance for doubtful accounts in China. Because of depreciation of the Japanese yen, there was an exchange rate effect of 5.6 billion yen. Others came to minus 5.1 billion yen. The negative factors include a rise in raw material costs of 9.5 billion yen and a rise in energy prices of 3.8 billion yen, which came to more than 13 billion yen. We tried very hard by raising the selling prices by 8 billion yen, but it was short of offsetting the increase, resulting in minus 5 billion yen. The total operating income increased by 14 billion yen from the previous year. Page 6 shows net sales and operating income by segments for fiscal year 2022. Thanks to the efforts of all segments, all segments achieved increase in both net sales and operating income. In terms of net sales, the power, electronics, energy, industry, and semiconductors led the increase in sales. In terms of profit and loss, power, electronics, energy and semiconductors made a large contribution to profit and loss. I will provide details of each of the segments starting on page 7. In the power, electronics, energy, sales increased by 33.1 billion yen to 264.1 billion yen. and operating income increased by 5.7 billion yen to 26.9 billion yen year-on-year. There are three areas covered here. The energy management decreased in both sales and income due to a large order received in the previous year. Sales and profits increased substantially in the power supply and facility systems and ED&C components. Power supply and facility systems had a significant increase in sales to domestic and overseas data centres and semiconductor manufacturers. In particular, sales of electric panels increased significantly at our subsidiary in Singapore, contributing to both sales and profit. As for ED&C components, both sales and profit increased significantly due to increased demand from set manufacturers, mainly machine tools and semiconductor production equipment, mainly here in Japan. In the power electronics industry, sales increased by 29.3 billion yen to 353.4 billion yen. and operating income increased by ¥1.1 billion to ¥24.9 billion. There are four areas covered in this segment. Social solutions, where both sales and income declined due to decrease in ship, socks scrubber, and railcar-related orders from the previous year. The remaining three areas saw increases in both sales and income. Automation systems were still very much affected by the lockdown in China. Demand increased in Japan and overseas, excluding China. Both sales and income increased due in part to the impact of foreign exchange rates. Equipment construction also saw an increase in both sales and income, albeit slightly. Biggest contributor being higher demand for electrical equipment construction. Both sales and income increased in IT solutions, especially in sales to larger scale academic and private sector projects. Next, semiconductors on page 8. Sales increased by 27.4 billion yen to 206.2 billion yen, and operating income increased by 5.1 billion yen to 32.2 billion yen. resulting in an operating income margin exceeding 15%. As stated in the overview section, sales in the industrial increased by 0.3 billion yen, but since there was a media sales increase of 6 billion yen in the previous year, the total sales increase in the industrial came to just under 7 billion yen. In automotive, sales increased significantly by ¥27.1 billion, exceeding the ¥100 billion mark. Demand for EVs has been extremely strong, and we expect orders to continue to be very strong in the future as well. Thanks to the large number of orders we are receiving, we will continue to strengthen our production facilities. Despite an increase in the ratio of capital to production and in the rising cost of materials and power, all of our facilities are operating at almost 100% of its capacity, and we have been able to increase our profit in tandem with increased sales. In power generation, we were able to win a large order for a renewable energy project, a geothermal project in New Zealand, resulting in increased sales and profit. Net sales increased by 8.8 billion yen to 87.3 billion yen. Operating income was up 0.4 billion yen to 3.6 billion yen. In food and beverage distribution, net sales increased by ¥4.5 billion to ¥95.3 billion. Operating income was ¥4.4 billion, an increase of ¥1.3 billion. The increase in sales and income from vending machines was after taking into account the allowance for doubtful accounts of more than ¥2 billion for a Chinese subsidiary's customer. Demand from domestic customers was strong, and we were able to turn profitable thanks to cost reductions and other measures. In store distribution, sales were down, but we were able to slightly increase profits through cost reductions and other measures. The profit margin would have been more than 7% and not 4.5% if it were not for the special factor in China, which amounted to more than 2 billion yen. Page 9 shows the net sales for Japan and overseas area. The total sales increased by 99.2 billion yen, 37.7 billion yen overseas, and 61.6 billion yen domestically, which means that the ratio to overseas sales is 29%. By region, sales in Asia increased by 28.4 billion yen, Europe by about 13.1 billion yen, and the Americas by 7.3 billion yen. The increase was due in part to the impact of foreign exchange rates, but it was also an increase compared to the previous year. In China, all business segments including ED&C components, automation systems, semiconductor and food and beverage distribution were negative, resulting in a total decrease of 11.2 billion yen from the previous year. On page 10 is a breakdown of changes in amount of orders received by segments for fiscal year 2022 versus the previous year. Compared to the previous year, orders received increased by 98.6 billion yen to 1 trillion 106.5 billion yen. Orders grew largely for power, electronics, energy, 57.4 billion yen, power electronics industry, 23.6 billion yen, and semiconductors, 16.8 billion yen. Especially orders for power electronics energy management and power supply and facility systems and semiconductor automotive increased by triple digit billion yen. Page 11 shows a comparison of amount of orders received and sales by major components. Orders increased slightly in major components up 2.3 billion yen, with semiconductor automotive up 33%, semiconductor industrial down 4%, factory automation down 8%. Net sales increased by 45.9 billion yen, due in part to a significant increase in orders. Sales increased in all components, 37% in semiconductor automotive, 7% in semiconductor industrial, 2% in factory automation, and 11% in ED&C components. The right half of the slide shows a quarterly comparison of amount of orders and net sales from FY 2021 to FY 2022. Up until the second quarter of fiscal year 2022, orders exceeded the sales. However, sales have been exceeding orders since the third quarter. Sales have been trending strongly quarter on quarter.

On page 13, there is a comparison with the forecast on January 26, which is the same as the figures announced in October. Net sales were higher by 24.4 billion yen and operating income higher by 1.9 billion yen, but due to a negative factor of about 2 billion yen from exchange rates in the non-operating line, ordinary income was slightly lower by 0.2 billion yen. However, net sales attributable to owners or parent came in higher by 1.8 billion yen. As a result, net sales, operating income, and net income exceeded the forecast. Below is a comparison with a plan for each segment of the business divisions. Power energy industry, which is mainly low-voltage inverters, saw a decrease in production due to difficulties in procuring materials in Japan. Also, sales in China decreased, resulting in lower sales and income. In the power generation, net sales were higher by 5.3 billion yen, but due to cost increases, income was lower by 0.5 billion yen. Net sales and income in power electronics energy, semiconductors, and food and beverage distribution increased in comparison to the plan. Page 15 shows the balance sheet. This is a comparison of the balance sheet as of March 31st of this year with that of March 31st of last year. Inventories increased by 28.4 billion yen due to increased net sales and increased production. Tangible fixed assets increased, mainly semiconductors, by over 50 billion yen. On the other hand, in investments and other assets within total long-term assets, we have been systematically selling policy stock holdings, resulting in a reduction of approximately 18 billion yen. In total, total assets increased by 64.4 billion yen to 1.1816 trillion yen. Cash and time deposits are down by 8.3 billion yen. and interest-bearing debt was also reduced by 25.1 billion yen. As shown in the lower left-hand side, net interest-bearing debt is down by 17.9 billion yen to 99.1 billion yen, less than 100 billion yen. Net DE ratio was 0.2 times, and equity ratio was 43.8%. On page 16, we show cash flows. Cash flows from operating activities increased by 39.4 billion yen year-on-year to 116.2 billion yen. Cash flows from investing activities increased by 27.1 billion yen compared to the previous year. This is due to the increase in investment in semiconductors, which resulted in a negative cash flows of 49.5 billion yen from investing activities. Free cash flow increased by 12.2 billion yen to 66.7 billion yen. Cash flows from financing activities were increased year-on-year by 34.3 billion yen to negative 77.2 billion yen due to increase in dividends and proactive repayment of long-term borrowings. As a result, the balance of cash and cash equivalents at the end of the fiscal year was 84.2 billion yen. Page 18 shows dividends. We decided to pay half-year dividend of 55 yen and the end-of-year dividend of 60 yen, which makes annual dividend 115 yen per share in FY 2022. It is higher by ¥15 compared to the previous year, and this marks continuous increase in dividends from ¥20 per share per year in 2011 up to FY2022 except for 2019 when there was no change from the previous year. We were able to increase dividends by ¥15 each year in 2021 and 2022. We'd like to increase dividend by the similar pace next year as well. On page 20, as reference data, there is a Q on Q comparison of the fourth quarter versus the third quarter of ED and C components, low voltage inverters, semiconductors, and vending machines. and at the same time, a year-on-year comparison of the fourth quarter versus the previous year, as well as full-year year-on-year comparison. As I mentioned earlier, we recorded over ¥4 billion in loss costs in FY 2022 on the operating PO basis. Even though COVID played some role in this, we have launched a new project to prevent these losses from occurring, and we will work to reduce them and improve the profit margin. This completes my explanation.