Fuji Electric Co Ltd

I am Junichi Arai, Corporate General Manager, Corporate Management Planning Headquarters. First of all, I will explain consolidated financial results for the first quarter for the fiscal year 2023 in year-on-year comparison. Page 4, please. There was slight impact of exchange rate. In real terms, both sales and profit increased significantly in the first quarter. We achieved new record highs for the first quarter for net sales, operating profit, ordinary profit, and profit attributable to owners of parent. Net sales were 234.1 billion yen, up 30.2 billion yen. Excluding gain on translation of earnings of overseas subsidiaries, net sales increased 27.9 billion yen due to demand increase. Operating profit was 14.7 billion yen, up 4.8 billion yen. Operating margin was 6.3%, up 1.4 percentage points. As for non-operating items, foreign exchange gain was zero. Also, due to timing difference of dividend income in the previous fiscal year and expenses to convert magnetic disk production lines to semiconductor production lines in Malaysia included in others, non-operating profit net of non-operating expenses was down 2 billion yen year on year. Extraordinary profit was 15.1 billion yen of 2.8 billion yen. Extraordinary profit net of extraordinary loss was 4.6 billion yen of 400 million yen mainly due to gain on sales of investment securities and gain on sales of non-current assets. Profit attributable to owners of parent was up 2.4 billion yen to 12.3 billion yen. On page 5, breakdown of changes in operating profit is shown in a waterfall chart. Increase in sales and production volumes pushed up operating profit by 9.2 billion yen. Sales and production volumes increased in power supply and facility systems, automotive, semiconductor, factory automation, and store distribution. Unfortunately, sales and production volumes of ED&C components decreased year on year. As business expanded, fixed costs increased, such as labor costs, R&D, depreciation and leases paid, and other expenses, including outsourcing and controllable expenses, in particular, travel expenses. Increasing fixed costs pushed down operating profit by 6 billion yen. Exchange rate fluctuation pushed our profit by 300 million yen. Others include 1.8 billion yen negative impacts of rising raw material prices and 400 million yen negative impacts of energy prices. Those negative impacts were offset by 3.5 billion yen positive effects of higher product selling prices. Others in total pushed up profit by 1.4 billion yen. As a result, operating profit increased 4.8 billion yen in total. Page 6 shows net sales and operating results by segment. Both net sales and operating results increased in all segments. In particular, operating profit in power electronics industry and food and beverage distribution increased by more than a billion yen. Operating margin was 14.0% in semiconductor and probably a record high of 11.4% in food and beverage distribution. On pages 7 and 8, I will give you more detailed explanation of business results by segment. In power electronics energy, net sales were 58 billion yen, up 6.8 billion yen. Operating profit was 4.4 billion yen, up 500 million yen. In energy management, net sales and operating results increased. Due to the recording of large-scale orders for substation equipment for industrial applications and power supply equipment, net sales increased, and operating results increased slightly. In power supply and facility systems, net sales and operating results increased significantly. The subsidiary in Singapore, producing switch gears and control gears, grew substantially. Normally, margin of switch gears and control gears is 5 or 6%. However, margin of this company is more than 10% every year and was above 15% in the first quarter in this fiscal year. In ED&C components, we originally expected decrease in net sales and operating results due to very challenging market condition. In line with the forecast, net sales and operating results decreased year on year. However, even under such circumstances, margin was double desert. I think actions we took so far are functioning despite decrease in net sales. In power electronics industry, net sales were 76.2 billion yen, up 11.1 billion yen. Operating results were negative 300 million yen, an improvement of 1.5 billion yen. In automation systems, both net sales and operating results increased. Up until last year, we faced with difficulties in procuring parts for low voltage inverters in particular. However, as the difficulties were alleviated, we were able to increase production and fill significant order backlog. As a result, both sales and profit increased. In social solutions, net sales and operating results increased due to increases in orders for radiation-related equipment. In equipment construction, net sales increased and operating results increased slightly as a result of the recording of large-scale orders for air conditioning equipment construction. In IT solutions, net sales and operating results increased due to higher demand for large-scale public and academic sector projects. Page 8, please. In semiconductor, net sales were 51.1 billion yen up 4.9 billion yen. Operating profit was 7.1 billion yen almost flat. For industrial applications, due to decrease in consumer products, net sales decreased and operating results decreased slightly. Automotive semiconductors grew significantly due to growth in demand for electrified vehicles. Net sales increased and operating results increased slightly. The growth in sales and increase in selling prices led to operating results being relatively unchanged despite the rise in depreciation in leases paid for bolstering power semiconductor production capacity and the increases in material cost. In power generation, net sales were 18.4 billion yen up 1.6 billion yen. Operating profit was 900 million yen up 800 million yen. Net sales and operating profit increased due to the benefits of lower-scale hydroelectric power projects. Food and beverage distribution is a major point for the first quarter. Net sales and operating results increased significantly both in vending machines and store distribution. Margin was higher than 11% in both businesses. In vending machines, overseas results mainly in China were slightly below budget. However, operating results increased significantly because of growth in demand from beverage manufacturers in Japan and the benefits of cost reduction activities. Also in store distribution, net sales and operating results increased. The performance for the first quarter was quite strong due to growth in demand for convenience store equipment renovations and higher orders for counter fixtures. The graph on page 9 shows net sales by Japan and overseas area. Net sales increased 30.2 billion yen year-on-year, 8.4 billion yen overseas, and 21.8 billion yen in Japan. Ratio of overseas sales was slightly higher than 30%. Overseas sales were 71.2 billion yen, up 8.4 billion yen. Sales in Asia and others were 36.2 billion yen, up 6.3 billion yen. Sales in energy management, power supply and facility systems, automation systems, and semiconductor increased. Sales in Europe were 8.8 billion yen, up 2.5 billion yen mainly due to semiconductor. Sales in America were 6.3 billion yen, up 1.2 billion yen. mainly due to energy management and power supply and facility systems. Sales in China were 20 billion yen down 1.5 billion yen mainly in ED&C components and semiconductor due to bad market conditions. Page then shows major components orders received. In total, first quarter orders were 272.1 billion yen down 11.5 billion yen year-on-year. Orders for major components were 101.3 billion yen, down 10.6 billion yen. Orders for automotive semiconductor were up 30% year-on-year. However, orders decreased 33% for ED&C components, 14% for industrial semiconductor, and 6% for factory automation. Total orders were about 14 billion yen higher than planned for the first quarter. Orders for major components were slightly less than 8 billion yen higher than planned. In particular, orders for factory automation exceeded plan by 4 billion and several hundred million yen. Industrial semiconductor exceeded plan by 2 billion and several hundred million yen. In ED&C components, although orders were down year on year, plan was exceeded by several hundred million yen. We forecast ED&C components will come to a temporary standstill in the second quarter onwards. However, we expect automotive semiconductor will grow significantly. On pages 12 and 13, revised forecasts for the first half and full year in comparison with forecasts on April 27 are shown. We revised full-year forecasts mainly to reflect changes in foreign exchange rate assumptions. Page 12 shows revised forecasts for the first half in comparison with April forecasts. We devised our forecast for net sales by 8 billion yen to 474 billion yen, operating profit by 1.8 billion yen to 30 billion yen, ordinary profit by 2 billion yen to 27.5 billion yen, and profit attributable to owners or parent by 2 billion yen, to 19.5 billion yen. We revised assumed exchange rate by reflecting the actual exchange rate. By segment, for power electronics energy, April forecast for net sales and operating profit were kept unchanged. For power electronics industry, both sales and profit were revised up. For semiconductor, sales were kept unchanged and profit was revised up by 500 million yen. For power generation, Sales were revised up but profit was revised down by 800 million yen due to differences in profitability between projects. For food and beverage distribution, sales were revised up significantly by 4 billion yen and profit was revised up by 1.2 billion yen. Pay13 shows full-year forecast in comparison with April forecast. Also for the full year, as I mentioned earlier, we changed foreign exchange rate assumptions for the US dollar and the euro from the second quarter. We revised our forecast for net sales by 10 billion yen to 1 trillion 60 billion yen, Operating profit by 2 billion yen to 96 billion yen Operating margin by 3.1 percentage points to 9.1% Ordinary profit by 2.5 billion yen to 94.5 billion yen and profit attributable to owners of parent by 2 billion yen to 64.5 billion yen. We revised our forecast both for the first half and full year. We devised up sales and profit forecasts for power electronics energy, power electronics industry, and semiconductor, and kept forecasts unchanged for power generation, food, and beverage distribution and others. For the second half, we haven't closely examined forecast. By carefully assessing exchange rate trends, market trends, and situation in China, we would like to announce revised forecast in October. Next, consolidated balance sheet. This slide shows comparison between March 31, 2023 and June 30, 2023. notes and account receivable trade contract assets decreased 47.7 billion yen as collection progressed inventories increased 23 billion yen due to increase in components and planned related inventories property planned and equipment increased 4.6 billion yen mainly for semiconductor Investment and other assets decreased 2.9 billion yen partly due to planned reduction in cross-shareholding. Total assets stood at 1,132.6 billion yen down 49 billion yen. We reduced cash and deposit by 36 billion yen and also reduced interest-varying debts by slightly more than 30 billion yen. Net interest value in debt was 105 billion yen. Net DE ratio was 0.2 times. Equity ratio was 46.7%, up 3.0%. Page 17 and following pages are for reference. Phase 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. In the first quarter, automotive semiconductor orders increased year-on-year, and vending machines increased quarter-on-quarter and year-on-year. However, orders for others all decreased. Page 18 shows consolidated forecasts for 6 months in year-on-year comparison. Net sales and operating profit will increase. Ordinary profit will decrease year-on-year partly due to decrease in foreign exchange gains in non-operating items. By segment, in power electronics energy, operating profit will decrease due to ED&C components. In power electronics industry, sales and profit will increase. Also in semiconductor, sales and profit will increase. In power generation, sales will decrease due to large-scale projects in the previous year. In food and beverage distribution, sales and profit will increase. Page 19, the last page, indicates full-year forecast in year-on-year comparison. Net sales operating profit, ordinary profit, and profits attributable to owners or parent will increase. Negative impact of exchange rate of 4.5 billion yen is included in net sales and 3.1 billion yen in operating profit. By segment, net sales in power generation will decrease. Net sales in all other segments will increase. Operating profit will increase in all segments, including power generation. Net sales will be 1 trillion 60 billion yen, up 50.6 billion yen year on year. Operating profit will be 96 billion yen, up 7.1 billion yen. As for downside factors, demand is lower than planned for ED&C components. Upside factors include food-related businesses that I mentioned earlier. In power electronics industry, order backlog in factory automation is also an upside factor. Progress is made in procurement of parts from last year. I personally think there is upside potential in power electronics industry, mainly in factory automation. Regarding exchange rate, although we devised assumptions, if exchange rate remains at the current rate, I think there is upside potential of 1 billion and several hundred million yen in the first half and 4 billion and several hundred million yen in the full year. although the future exchange rate is uncertain. I suppose expenses will decrease about 2 billion yen, which will be positive for profit. As I am Corporate General Manager, Corporate Management Planning Headquarters, I want to monitor the progress carefully with a feeling of hope that we will exceed the revised forecast in the second quarter onwards. That concludes my presentation.