Fuji Electric Co Ltd

Hello, everyone. I am Junichi Arai from Corporate Management Planning Headquarters. I will now explain our financial results for the second quarter or the first half of fiscal 2024. As President Kondo mentioned, we were able to post record high numbers for sales and profits at all levels. I will go over the results by showing the comparison with the same period of the previous year. Net sales increased by 5.7 billion yen to 497.4 billion yen. This includes a slight loss in foreign exchange, and therefore we would have achieved a 6.1 billion yen growth if we exclude this impact. The operating profit increased by 5.3 billion to 40.3 billion yen, and the operating profit ratio increased by 1 percentage point to 8.1%. In terms of non-operating profit, the appreciation of the yen pushed down the foreign exchange gain by 2.5 billion yen, while some of the expenses that were incurred in the previous year were reduced in this fiscal year. Those resulted in a total year-on-year decline of 1.0 billion yen. The ordinary profit increased by 4.3 billion to 38.9 billion yen, and extraordinary profit increased by 11.5 billion to 16.3 billion yen, mainly due to the sale of cross-holding shares, which increased significantly compared to last year and amounted to double-digit billion yen. Profit attributable to owners of the parent reached 35.5 billion, an increase of 11.2 billion yen. I would like to explain the changes in operating profit versus the previous year. In terms of sales and production volume, although factory automation and ED&C components were down from the previous year, this was offset by strong performance in substation systems for plants and store distribution in the food and beverage distribution segment, leading to an increase of 2.9 billion yen. On the other hand, fixed costs, including labor costs, R&D expenses, and depreciation and leases paid, increased from the previous year, resulting in a negative impact of 6.2 billion yen. Exchange rate effect improved by 1.1 billion yen, while under others, a 2.5 billion yen increase in product selling prices and a 2.6 billion yen in negative impact of rising raw material costs almost cancelled out each other. As for the breakdown of the differences in model mix and in profitability between projects and cost reduction, The difference in model mix was positive in equipment construction, power generation, and vending machines, while cost reduction improved by 7.7 billion due to an enhanced yield mainly in semiconductors. All these factors together resulted in a total increase of 7.6 billion yen in others. Here you can see year-on-year comparison of net sales, operating profit and operating profit ratio by segment. Sales went down from the year before in industry and semiconductors, with the industry affected by low voltage inverters and semiconductors by its automotive business. Operating profit decreased in semiconductors, but increased in energy, industry, and food and beverage distribution, resulting in increases in both total sales and profits. I will now explain the results by segment. In the energy segment, sales increased by 1.4 billion to 147.6 billion yen, and operating profit increased by 1.1 billion to 9.8 billion yen. There are four sub-segments, and the ED and C components suffered negative growth in sales and profit. The key is energy management, which saw a significant increase in both sales and profit due to an increase in large-scale orders. In power generation, there was a slight increase in both sales and profit, and overseas, A large-scale geothermal project won by Indonesia made contribution. In power supply and facility systems, sales were down slightly despite a strong demand from data center operators, impacted by the absence of large-scale projects posted in the previous year at a subsidiary in Singapore, while operating profit improved slightly due to fixed cost reductions. As for industry, net sales fell 2.8 billion to 176.8 billion yen, while operating profit rose 3.2 billion to 8.4 billion yen. Automation systems saw sales decline slightly due to inventory adjustments of low-voltage inverters, but operating profit was relatively unchanged due to lower fixed costs and other cost reductions. As for social solutions, sales and profits increased significantly, a good result brought about by receiving large-scale orders for nuclear power-related equipment. In digital transformation solutions, both sales and operating profit increased due to large-scale projects won by IT Solutions, one of our subsidiaries. In equipment construction, net sales went down, due to the impact of large-scale projects recorded in the previous year, but profit remained barely in the positive territory by some single-digit billion yen.

In semiconductor segment, net sales decreased by 0.5 billion yen to 108 billion yen. Operating profit dropped by 1.7 billion yen to 15.1 billion yen. The table on the upper right shows year-on-year changes by application. Industrial semiconductors grew by 1.3 billion yen year-on-year. Automotive semiconductors were down by 1.7 billion yen due to impacts of unfavorable foreign exchange influences and declines in overseas sales volume of power semiconductors for electric vehicles. Operating results were lower than last fiscal year because of a rise in capital expenses for bolstering power semiconductor production capacity and an increase in material costs. In food and beverage distribution, net sales was 58.3 billion yen, up 5.1 billion yen year on year. Operating profit grew by 3.3 billion yen to 8.7 billion yen. Both vending machines and store distribution had excellent results. In vending machine business, even though the overseas market somewhat weakened, strong demand in domestic market and cost reduction efforts contributed to boosting profitability. Store distribution had a special demand stemming from the issuance of newly designed banknotes in Japan. That resulted in a huge jump in sales and an increase in profit. Page 10 shows overseas and domestic net sales and their year on year changes. Overseas net sales dropped by 9.2 billion yen to 142.8 billion yen. Domestic net sales increased by 14.9 billion yen to 354.6 billion yen. Factors contributing to a 9.2 billion yen decrease in overseas sales are mainly a 14 billion yen drop in Asia. In Asia, power supply and facility systems saw a decline in sales due to a lack of large projects at our Singapore company. Sales of automobile semiconductors dropped by 7.3 billion yen. Europe also saw a drop in sales mainly due to semiconductor performance. But China and Americas increased their sales. Page 11 shows orders received compared with the same period last year. We received orders totaling 571.7 billion yen, up 23.7 billion yen year on year. Plant systems contributed 17.2 billion yen. Energy management contributed significantly due to a good showing in substation business. Power supply and facility systems was as much as 8 billion yen higher than the previous year. Main components orders totaled 198.2 billion yen, up 6.5 billion yen year-on-year. By percentage, orders for industrial and automobile semiconductors, as well as ED and C components grew year-on-year. But orders for components for factory automations were down by 4%. Bar charts on the right shows quarterly changes in order. Orders in the second quarter decreased by 1.7 billion yen from the first quarter. Orders for automobile semiconductors and ED&C components were higher, while those for industrial semiconductors and factory automation were slightly lower than in the first quarter. In the first half of fiscal 2024, we outperformed the forecast released on July 25th by 3.4 billion yen in net sales, by 4.8 billion yen in operating profit, by 0.9 percentage points in operating profit ratio. 5.9 billion yen in ordinary profit by 6 billion yen in profit attributable to owners or parent. By segment, energy sales were lower than forecast due to lowered ED and C sales, but operating profit was 1.1 billion yen more than forecast. In industry, plant systems more than made up for poor showing of low voltage inverters and saw increases in both sales and profit. Net sales in semiconductors was 5 billion yen lower than forecast, but operating profit was 0.2 billion yen higher thanks to cost reduction efforts. Food and beverage distribution saw much higher net sales and operating profit than forecast. Page 15 shows our balance sheet as of the end of September against that as of the end of March. Inventories increased by 18.9 billion yen. Tangible assets, mainly semiconductors, grew by 20 billion yen. Notes and accountable receivables dropped by 77.9 billion yen thanks to rigorous collections since March. Total assets decreased by 38.7 billion yen to 1.2325 trillion yen. The equity ratio improved by 3 percentage points to 50.4%, mainly thanks to ¥24.8 billion increase in retained earnings. Interest-bearing debts fell by ¥48.5 billion. Net interest-bearing debt fell by ¥47.7 billion to a record low of ¥49.7 billion. Net DE ratio now stood at 0.1 times. Cash flow was positive 87.5 billion yen in the first half of 2024 due to 63 billion yen in retained earnings from operating activities. Collections of account receivables and advances received each increased by more than 10 billion yen from the same period last year. On the other hand, cash flow from investing activities was 25.8 billion yen negative. This is because over 40 billion yen in capital investment offset an inflow of about 18 billion yen from stock sales. As a result, free cash flow was 61.8 billion yen positive. Compared with the same period last year, Operating cash flow increased by 52.7 billion yen. Investing activities decreased by 4.2 billion yen and free cash flow increased by 48.5 billion yen. Page 18 shows a full-year forecast compared against the forecast released on July 25th this year. Net sales forecast is unchanged at 1.114 trillion yen. Assumed exchange rates are also unchanged from those set at the beginning of the year. They are conservative considering the current rates. 140 yen to the US dollar, 150 yen to the euro, and 19.5 yen to the yuan. We increased operating profit forecast by 2.5 billion yen to 111.5 billion yen. Operating profit ratio was raised by 0.2 points to 10% with an eye of achieving a double-digit figure. We raised our ordinary profit forecast by 2 billion yen to 111.5 billion yen. Forecast for profit attributed to owners or parent has also increased by 5.5 billion yen to 86 billion yen. Its profit ratio is now forecast to be 7.7%, up 0.5 points. By segment, energy is expected to post a sales decline of 3 billion yen due to delays in the recovery in demand, for ED and C components, but profit forecast of 31 billion yen is unchanged. In industry, net sales forecast has been revised downward due to a delayed recovery in demand for factory automation and low-voltage inverters, but profit forecast has been revived upward due to unexpected demand increase for plant systems. In semiconductors, both sales and profit have been revised downward due to lower demand for industrial semiconductors from China and lower overseas demand for automotive semiconductors. In food and beverage distribution, both sales and operating profit are expected to be higher than the forecast due to strong store distribution and vending machines businesses. We will continue to aim to achieve all-time high sales and operating profit for the year. Page 19 shows full-year forecast compared to the previous year. Net sales are expected to increase by 10.8 billion yen, operating profit up 5.4 billion yen, the operating profit ratio up 0.4 points, ordinary profit up 3.7 billion yen, profit attributable to owners or parent up 10.6 billion yen, and its ratio also up by 0.9 points. Sales and profit forecasts are higher than the previous year. Net profit is expected to increase as a result of increased sales of cross-holding shares. By segment, sales and profit are expected to be higher for energy business. In industry, net sales is expected to fall year on year due to a decrease in FAA, and the impact of large construction projects, but profit is expected to be 4.2 billion yen higher. In semiconductors, net sales is expected to be 8 billion yen higher, but the profit is likely 2.2 billion yen lower due to higher costs of capital and material costs. In food and beverage distribution, sales and profits are expected to exceed that of the previous year. The interim dividend is set at 75 yen per share, an increase of 15 yen compared to the previous year. If things go as planned, we should be able to pay out a higher year-end dividend than planned. For your reference, we will show you orders received in the second quarter for ED&C components, low voltage inverters, semiconductors, and venting machines in comparison with the first quarter and the same period last year. Parts of our current plan are a little conservative, so we'll keep our profit targets high as we proceed. Given our conservative cost assumptions, it may be possible to improve profit in the order of by a billion yen. Our assumptions for forex are also conservative. It is therefore conceivable that the sales turn out to be more than 10 billion yen higher and profit that is around 2 billion yen higher. In any case, we will continue to take necessary measures to achieve all-time high net sales and profit. We'd appreciate your continued support. This concludes my presentation. Thank you.