Fuji Electric Co Ltd

Hello everyone, my name is Arai, in charge of the Corporate Management Planning Headquarters. I'll be explaining our financial results for the third quarter of fiscal year 2023. Please refer to page 4 of the material. I will explain the profit and loss and sales compared to the previous fiscal year. Thanks to your support, we were able to achieve record high consolidated net sales, operating profit, ordinary profit, and net profit for the third quarter of this fiscal year. Net sales increased by 68.9 billion yen to 759.7 billion yen. Even when we exclude exchange rate impact, net sales would have increased by 57 billion yen solely by the actual demand. Operating profit increased by 15.2 billion yen to 57.7 billion yen, and operating profit ratio increased by 1.4% to 7.6%. Non-operating profit and loss which include foreign exchange gains of 1.3 billion yen and some negative items, increased by 0.2 billion yen in total over the previous year. Ordinary profit increased by 15.4 billion yen to 56.6 billion yen, and extraordinary profit went down by 2.3 billion yen compared to the previous year. which means that the gain on sale of the investment securities was less than the previous year, but the absolute amount of extraordinary profit was positive 6 billion yen. Net profit increased by 8.3 billion yen to 37.3 billion yen. The breakdown of the 15.2 billion yen increase in operating profit is shown in the staircase graph on page 5. The largest factor was the increase in sales and production volumes, which increased by 21 billion yen. Unfortunately, ED and C components saw a decline, but there was a large increase in semiconductors automotive, as well as a large increase in the power supply and facility systems, factory automation, and the store distribution. With regards to the fixed costs, labor cost increased by 4 billion yen, half overseas and half in Japan. Depreciation and leases paid increased by 4.2 billion yen, mainly for semiconductors, and other expenses went up by 5.9 billion yen. which include increases in controllable expenses and outsourcing costs on the back of the business expansion, which resulted in a 14.3 billion yen negative impact on the profit. The exchange rate fluctuation impact was positive 2 billion yen, and the impact from others was positive 6.6 billion yen. There were negative factors of about 6 billion yen due to rising raw material prices and higher energy prices, which were offset by higher product selling prices. There were differences in the model mix and in profitability among the projects. Profitability of power generation projects this year went up compared to those in the previous year. All of these added up to positive 6.6 billion yen in others. In total of these factors, operating profit went up by 15.2 billion yen year-on-year. From base 6 onwards, we show a year-on-year comparison of net sales and operating profit by segment. The operating profit in the energy segment went down due to the decline in the ED and C components, but other segments such as industry, semiconductor, and food and beverage distribution posted increases in sales and profit. In the energy segment showed an increase in net sales and unfortunately a slight decrease in operating profit. I will explain in more detail about each segment from page 7. In the energy segment, sales increased by 3.6 billion yen, while operating profit decreased by 0.8 billion yen. There are four sub-segments. In the power generation business, net sales declined and operating profit went down slightly as a result of the absence of large-scale renewable energy projects recorded in the previous equivalent period. Energy management showed increases both in sales and profit driven by large orders for substation equipment and power supply equipment. power supply and facility systems showed a significant increase in both sales and profit, driven by increases in projects from data centers and semiconductor manufacturers, especially overseas. In the ED and C components business, sales and profit decreased as a result of decline in demand from finished machinery manufacturers and for semiconductor production equipment. In the industry segment, net sales increased by 36.9 billion yen and operating profit increased by 7.3 billion yen. There are four sub-segments here as well. In the automation system, especially in the factory automation business, both sales and profit increased, mainly due to increased production of factory automation components. In the social solution business, net sales and operating profit went up largely as a result of increases in orders for nuclear power and radiation-related equipment. In the equipment construction business, net sales went up a lot and profit went up by a single digit. In the IT solutions business, net sales increased, but profit remained almost unchanged. Sales increased due to winning large projects in the academic sector and large projects in the public sector. Moving on to page 8. In the semiconductor segment, net sales increased by 19.6 billion yen. Operating profit increased by 4 billion yen. In the industrial business, net sales were down and profit was down slightly. On the other hand, in the automotive business, both sales and profit increased significantly. Although there was an increase in capital expenditure for production capacity and the impact of a sharp rise in raw material prices, the automotive business achieved a large increase in both sales and profit, reflecting cost reductions and higher sales prices. In the food and beverage distribution, net sales increased by 11.1 billion yen and operating profit by 4 billion yen. And both sales and profit increased in vending machines and store distribution. In particular, the store distribution business was able to achieve a significant increase in both sales and profit due to an increase in projects for convenience store renovations and counter fixtures. Page 9 shows net sales broken down by Japan and overseas. Overseas sales increased by 25.1 billion yen, which includes an increase from foreign exchange. Domestic sales increased by 43.8 billion yen. In total, net sales increased by 68.9 billion yen over the previous year. As for the 25.1 billion yen increase overseas, by region, sales increased in all regions, mainly in Asia. But if we exclude impact from foreign exchange, actual sales in China went down due to market conditions. Looking at by business division, ED and C components saw a weak trend of sales in Asia, China, and the Americas. Page 10 shows a year-on-year comparison of orders received by major components. The overall orders received decreased by 9.2 billion yen to 821.8 billion yen, with an increase in orders for plant-related products. While orders for power supply and facility systems went down due to the large advance orders received in the previous year, Those for power generation, social solutions, and energy management increased year on year. On the other hand, orders for major components decreased by 25 billion yen to 296.6 billion yen. However, orders for automotive semiconductors increased significantly by 35%. Orders for factory automation and ED&C components went down by double digits year-on-year due to orders received in advance last year and partly due to market conditions. The right side of the chart shows Q3 versus Q2. As expected, the semiconductor automotive business was up 13% in Q3 compared to Q2. Page 11 shows sales by major components. Overall sales increased by 68.9 billion yen. But in components, sales increased by 20.1 billion yen to 318.5 billion yen. Sales of semiconductor automotive increased by 36%, and factory automation sales increased by 12% due to the orders received in the previous year and the ample amount of backlog. Sales in ED and C components went down. If you look at sales in Q3 versus Q2, semiconductor automotive were up 4%. Sales in factory automation were flat queue on queue. Page 13 shows the balance sheet. This is a comparison between the end of the last fiscal year, March 31st and December 31st. Since the impact of COVID-19 has decreased, cash and deposits have been reduced by 32.2 billion yen to 52.5 billion yen in order to bring them closer to the normal level. Notes and account receivables slash trade, contract assets, mainly planned related receivables that had accumulated by March were down 24.9 billion yen due to progress in collection. On the other hand, towards the end of March, inventories, mainly plant-related assets, increased by 40 billion yen. Property, plant and equipment, mainly in power semiconductors, increased by 9.9 billion yen, and the total assets increased by 12.9 billion yen to 1,194.5 billion yen. In net assets on the right side, retained earnings increased by 20.1 billion yen to 385 billion yen. On the lower left, net interest bearing debt increased by 24.1 billion yen to 123.2 billion yen. The net debt to equity ratio was 0.2 times. and the equity ratio was approximately 46%. As you can see on page 15, we have revised our full-year forecast upward based on the financial results for the first three quarters. Net sales were revised up by 10 billion yen to 1,070 billion yen. Opening profit increased by 4 billion yen to 100 billion yen. Operating profit ratio increased by 0.2% to 9.3%. Ordinary profit increased by 4.5 billion yen to 99 billion yen. And net profit increased by 3.5 billion yen to 68 billion yen, resulting in a net profit ratio of 6.4%. Below that shows forecasts by segment. Sales and operating profit forecast in the energy segment are down due in part to the negative impact of the ED and C components business. Other segments such as industry, semiconductor, and food and beverage distribution are up in both sales and profit forecast, with sales up 10 billion yen and operating profit up 4 billion yen. As we always say, we forecast expenses slightly conservatively, so we think there is room for a reduction of about 1 billion yen. The exchange rate, as you can see in the upper right-hand corner, has not been changed from October and is still 140 yen to the U.S. dollar, 150 yen to euro, and 19.5 yen to renminbi. If foreign exchange rates remain at the current level, we believe this will lead to an increase in profits by more than 1 billion yen. When I mentioned about operating profit target last time, I said that we were aiming for a step up to reach a large milestone. But this time, I'd like to clearly say that we have set a goal of 100 billion yen. The operating profit ratio forecast now stands at 9.3%, and we are currently in the process of putting together a medium-term management plan that will start in FY 2024. I feel that with this forecast, we have set the stage for aiming at a double-digit operating profit ratio. As supplemental materials on page 17, we have included, for your reference, the Q3 versus Q2, Q3 versus the previous year, and 9 months in total versus previous year for orders received for ED and AC components, low-voltage inverters, semiconductor, and vending machines. Page 18 is a comparison of net sales and profit between the results last year and the new forecast. Net sales in the current forecast are higher by 60.6 billion yen and operating profit higher by 11.1 billion yen. Original profit higher by 11.2 billion yen. and net profit higher by 6.7 billion yen compared to the results last year. The breakdown by segment is as shown below. This completes my explanation.