Fuji Electric Co Ltd

Good afternoon. This is Arai, in charge of Corporate Management Planning Headquarters. I would like to present the financial results for fiscal year 2023 in comparison to the previous year. In short, the P&L results exceeded our expectations. We achieved record highs in net sales, operating profit, ordinary profit, and profit attributable to owners or parent. Net sales increased 93.8 billion yen year-on-year to 1 trillion 103.2 billion yen. Excluding the effect of exchange rates, which came to 24.2 billion yen, demand actually increased by 69.6 billion yen. Operating profit was up 17.2 billion yen to 106.1 billion yen, up 19% year-on-year. with profit margin of 9.6% up 0.8% from the previous year. Net interest expense was down 0.5 billion yen due partly to reduction of cross-shareholdings. Largely in part to foreign exchange gain of 3.6 billion yen resulted in total non-operating profit up 2.8 billion yen. Ordinary profit increased 20 billion yen year-on-year to 107.8 billion yen. Extraordinary loss was down 1.7 billion yen at 6.2 billion yen. As mentioned earlier, with extraordinary profit, we recorded profit on sales of investment securities in the previous year of 9.9 billion yen, which came down to 6.9 billion yen, lower by 3.1 billion yen. Profit attributable to owners or parent was 75.4 billion yen, an increase of 14 billion yen or 23% from the previous year. Next is a waterfall chart showing breakdown of changes in operating results for fiscal year 2023. Increases in sales and production volume of 26.5 billion yen came from automotive business in semiconductor segment, power supply and facility system business, substation equipment business, factory automation business, and store distribution business. On the other hand, fixed costs increased, including labor costs by 6.4 billion yen, and capital expenses, that is, depreciation and leases paid, mainly related to semiconductor segment, increased 5 billion yen, and other expenses increased 9.1 billion yen. But with progress in businesses, such controllable expenses and outsourcing costs increased, resulting in a total of ¥20.4 billion increase in fixed costs, a negative ¥20.4 billion impact on the bottom line. Depreciation of the Japanese yen resulted in positive effect of 4.4 billion yen and 6.7 billion yen from others. Surge in raw material prices of 6.7 billion yen and differences in model mix and in profitability between projects of 1 billion yen is included, but that these were offset by increasing selling prices of 14.4 billion yen. Next, net sales and operating profit by segment for fiscal year 2023. Net sales and operating profit were higher in all segments. Operating profit ratio were above 8% in all of the segments with ratio of nearly 16% for semiconductor segment resulting in total operating profit ratio of 9.6%. Looking at the results by segment in more detail, Energy segment had net sales of 342.8 billion yen up 9.5 billion yen, operating profit up 1.6 billion yen to 30.1 billion yen. There are four businesses with two of them doing strong while the other two not doing well. Power generation business did not do well with lower net sales and operating results due to an absence of large-scale project recorded in the previous fiscal year and higher expenses in the large-scale projects resulting in decrease in both net sales and operating profit from the previous fiscal year. The other business which did not do well was ED&C components business, with poor performance in domestic as well as overseas markets for finished machinery manufacturers and for semiconductor production equipments, resulting in huge decrease in net sales and operating profit from the previous year. On the other hand, the two businesses that did well were energy management business, so substantial increase both in net sales and operating profit as a result of achieving large-scale orders for substation equipment for industrial applications in Japan and power supply equipment in the U.S., The other business that did well was power supply and facility systems business, recording higher net sales as well as operating profit, as projects from data centers and semiconductor manufacturers increased. Overseas subsidiaries saw a large increase in both net sales and operating profit, making contribution to the business. Next, industry segment was up 50.1 billion yen in net sales to 419.9 billion yen, operating profit up 7.5 billion yen to 34.3 billion yen year-on-year. There are four businesses under industry as well, with all four businesses recording increase in net sales and operating profit. In automation systems business, with increased production of factory automation components and low-pressure inverters, etc., net sales and operating profit grew. Social solutions business recorded substantially higher net sales as well as operating profit from the previous year due to increases in orders for nuclear power and radiation-related equipment. Third is equipment construction business, which also recorded higher net sales and operating profit, with large order for air conditioning equipment construction. IT solutions business saw higher net sales with large projects compared to the previous year, but operating profit remained flat due to differences among the projects. Next, for semiconductor segment, net sales came to 228 billion yen, up 21.8 billion yen, with operating profit up 4 billion yen to 36.2 billion yen. There was a month or two in the fourth quarter in which component procurement did not happen due to the factors related to the component procurement manufacturers, resulting in declines in production and sales. Also, with bolstering of power semiconductor production capacity and increasing capital costs as well as raw material costs, we were able to record profit with increased net sales and cost reduction measures. The table on the slide shows net sales for industrial and automotive with industrial sales slightly lower at 102.4 billion yen, while automotive saw a large increase of 25.4 billion yen to 125.6 billion yen. Automotive business was instrumental in increasing the profit. For food and beverage distribution segment, net sales were up 12 billion yen to 107.3 billion yen, with operating profit of 8.8 billion yen up 4.5 billion yen year-on-year. Vending machine business saw increase in net sales and operating profit due to growth in demand in Japan and benefits of cost reduction activities. In fiscal year 2022 and 2023, special factors of more than minus 2 billion yen related to customer in China were included. But if we exclude this factor, the profitability of vending machines business will be in double digits. Store distribution business grew year-near due to higher large-scale orders for counter fixtures combined with growth in demand for convenience store equipment renovations. Next is year-near comparison of net sales for Japan and overseas area. Net sales for overseas were up 40.4 billion yen to 332.4 billion yen. For Japan, it was up 53.4 billion yen to 770.8 billion yen, 40.4 billion yen increase overseas, came mainly from Asia. Other regions also saw growth, except for China, where if we exclude foreign exchange impact, it will be almost flat year-on-year, reflecting the bad market conditions there. Asia and others were up 18.2 billion yen, Europe up 6.1 billion yen, and Americas up 9.1 billion yen. Next is a breakdown of changes in amounts of orders received by segment. Orders received in fiscal year 2023 totaled 1,109.8 billion yen, up 3.3 billion yen year-near. Industrial components was down 31.6 billion yen at 399.1 billion yen, while planned systems saw rise in the amounts of orders. Automotive business in semiconductor segment was up 24% year-on-year, while industrial business was down 9%, factory automation business was down 18%, ED&C components business down 22% from fiscal year 2022. The quarterly trends from fiscal year 2022 to fiscal year 2023 is shown on the right. Quarter-on-quarter growth is shown on the far right, with industrial business semiconductor segment up 27%. Factory automation business and ED&C component business also up from the previous quarter, but semiconductor segment automotive business was down 14% due to the supply suspension by a number of component manufacturers impacting orders, net sales, and operating profit. Next is a comparison of fiscal year 2023 results against the forecast announced January 31, 2024. Net sales exceeded the plan by 33.2 billion yen, operating profit by 6.1 billion yen, operating profit ratio by 0.3%, ordinary profit by 8.8 billion yen, profit attributable to owners or parent by 7.4 billion yen. All in all, landing substantially higher than the plan. By segments, all segments saw net sales and operating profit exceed the plan. In energy segment by 11.8 billion yen and 3.8 billion yen. Industry segment by 9.9 billion yen and 1.4 billion yen. Semiconductor segment by 4 billion yen and 0.5 billion yen. Food and beverage distribution segment by 3.3 billion yen and 1.1 billion yen respectively. Learning stronger than the plan. Next is a year-on-year comparison of the balance sheet at the end of fiscal year 2022 and fiscal year 2023. Expansion of the business and net sales led to increase in notes and account receivables trade and contract assets and inventories. Fixed assets mainly in semiconductor segment increased. Total assets came to 1 trillion 271.2 billion yen, up 89.6 billion yen in a year. Cash and deposits were down 18.5 billion yen to reduce net interest-bearing debt by 1.7 billion yen to 97.4 billion yen, resulting in net DE ratio of less than 0.2 times, ROE was 13.5%, ROIC 11.5%, and equity ratio was higher than the previous year at 47.4%, enhancing our financial strengths. Next is the year-on-year comparison of the consolidated cash flows. Cash flow from operating activities was ¥84.9 billion for fiscal year 2023, down ¥31.3 billion year-on-year. Internal reserves increased ¥20 billion, but accounts tradable in FY 2023 increased substantially, with asset decrease in approximately 50 billion yen compared to the end of the previous fiscal year. Cash flows from investing activities were 62.4 billion yen down 12.9 billion yen due to investment mainly in semiconductor segment and decrease in the sale of cross-shareholdings. Free cash flow was 22.4 billion yen Lastly, on dividend of surplus. Year-end dividend per share is 75 yen, an increase of 15 yen year-in-year. The annual dividend comes to 135 yen, up 20 yen from the previous year. A basic policy is to maintain stable and continuous dividend. We will continue to increase profitability so that we can provide rising dividend in FY 2024 and beyond. Thank you very much for your attention