Ihi Corp Unsp/Adr

I am Oshima in charge of the group finance and accounting at the IHI Corporation. First, I would like to express my deepest condolences to those who lost their lives in the 2026 Kumamoto earthquake and my heartfelt sympathy to all those affected. We sincerely pray for the earliest possible recovery of the affected areas and for everyone's safety and well-being. Corp Unsp The highlights of the first quarter results, orders increased in civil aero engines, a growth business, but declined overall due mainly to the absence of large energy projects booked in the previous year. For energy business, we intentionally suppress the order taking by overseas subsidiaries whose performance deteriorated in the last fiscal year. Revenue and operating profit increased driven by growth in civil aero engines and nuclear energy expansion of LCB in domestic carbon solutions and improved profitability in vehicular turbochargers. Even excluding the gain on sales of property completed in the first quarter, profit reached a record high. Next, our forecasts for fiscal year 2026. Reflecting the first quarter results in civil aero engines and property sales, we have raised our forecasts for orders, revenue, operating profit, and profit attributable to owners of parent. As a result, we expect to achieve record high profits for the full fiscal year as well. We believe we have made a very strong start toward delivering the medium to long-term growth strategy announced in May. Page 5. This slide provides an overview of the first quarter results. For reference, we also show operating profit excluding gains on property sales. As mentioned earlier, Operating profit reached a record high, even excluding gains on property sales. Also, if you look at the operating profit margin, it improved from 6.2% last fiscal year to 8.8% this fiscal year, an improvement of 2.6 percentage points. The profitability is steadily improving. Next, the factors behind the change in revenue. Revenue increased by 36.7 billion yen year-on-year despite a decline from business divestments completed last year. Excluding this impact, revenue grew by 48 billion yen. Corp Unsp supported by strong demand for marine engines overseas and emergency generators for data centers. Growth businesses led the revenue increase, while stable revenue businesses also grew steadily, resulting in a substantial overall increase in revenue. Next, the factors behind the change in operating profit. The 40 billion yen in gains on property sales recorded in the first quarter are shown separately in the waterfall chart, so that the profits from business operations can be understood. The leftmost bar shows the prior year period followed by the factors behind the change. Operating profit increased, led by growth businesses such as civil aero engines and nuclear energy. LCB expansion in stable revenue businesses and improved profitability mainly through better pricing in vehicular turbochargers also contributed. This slide shows the factors behind The change in operating profit in the aero engine, space and defense segment. Overall profits increased supported by foreign exchange effects and robust growth in the civil aero engine aftermarket. Please see the waterfall chart below. The leftmost bar shows profit for the prior year period. The next item is the foreign exchange impact The weaker yen boosted the profit while translation of foreign currency liabilities related to PW1100G reduced the profit. The net impact was plus ¥2.9 billion. The next item to the right shows the negative impact from higher sales of installed engines. Installed engine shipments are progressing steadily in line with our initial outlook. While this weighs on profit in the short term, it will generate aftermarket revenue over the medium to long term, so we view this very positively. The next item shows the positive impact from the aftermarket. Steady growth in the V2500 and the PW1100G aftermarket businesses pushed up the profit by 4.3 billion yen. The increase in SG&A expenses shown to the right reduced profit, reflecting higher R&D and personnel costs. These are necessary upfront investments to build the foundation for medium to long-term growth.

This is a reference slide showing only the revenue for our Civil Air engine business. The figures are presented on a Japanese yen basis. On the left, you can see our year-on-year comparison of first quarter revenue. On the right, you can see the revenue trend since FY 2022. As you can see, backed by strong demand for civil air engines, year-on-year growth was achieved across all of the spare parts, install engine, and maintenance businesses in the first quarter. Overall, we delivered 27% year-on-year revenue growth this first quarter. This is another reference slide. The slide breaks out spare parts revenue from the previous slide. As with the previous slide, on the left, you can see a year-on-year comparison of first quarter revenue, and on the right, the revenue trend since FY 2022. Unlike the previous slide, please note that these figures are presented on a US dollar basis. Please look at the graph on the left. Even on the US dollar races, which excludes the impact of FX rate, a 15% year-on-year revenue growth was achieved. Supported by strong demand, our primary profit driver, aftermarket business, particularly the spare parts business, continued to expand significantly. Also, as noted in the heading on the right-hand graph, we have not seen any material impact from the situation in the Middle East at this point, so our outlook for solid growth this fiscal year remains unchanged. Next, turning to our balance sheet. Compared with the end of March, our equity ratio improved significantly, mainly due to earnings accumulation. Total assets increased, primarily due to the production ramp up in civil error engines. However, asset turnover remained almost unchanged, indicating that the increase was largely attributable to higher revenue. We've also been working to keep inventories under control. Given the nature of our businesses, such as defense business and bridges and water case business, inspections and acceptance tend to be concentrated in the fourth quarter, and inventories tend to build up towards the fiscal year end. but we will focus on improving working capital, particularly inventories toward the fiscal year end. Next, let me move on to our cash flows. Operating cash flow declined significantly from the prior year due to the rebound of advance payments recorded in the prior year and, as mentioned, increased working capital supporting revenue growth. Meantime, Investing cash flow improved due to property sales completed during the first quarter. As a result, overall free cash flow improved. This fiscal year as well, the entire IHI group will work together with a strong focus on generating operating cash flow. Next, I will explain the revision to our FY2026 earnings forecast As mentioned earlier at the beginning, we are revising our forecast upward as shown on this slide. Our assumed exchange rate for the full year forecast remains unchanged at 145 yen to the US dollar. Please refer to the FX sensitivity shown in the footnote. This time, our upward revision mainly reflects the actual exchange rates recorded in the first quarter. However, given recent exchange rate movements and the continued strong performance of our growth businesses, we believe there is potential for further upside in our full-year results. This slide shows the breakdown of the upward revision by segment. Please refer to the column labeled Change. For the air engine space and defense segment, we are revising upward our forecast for orders, revenue, and operating profit. For the others segment, we are also revising operating profit upward by 3 billion yen, reflecting higher than expected gains from property sales. We are leaving the 20 billion yen risk buffer included in adjustments unchanged at this time. We intend to use this buffer to cover the structural reform costs associated with our overseas energy subsidiaries, but we will assess the necessity or extent of utilizing this buffer in line with the progress of structural reform going forward. This concludes my presentation of the earnings results and forecast. Finally, allow me to briefly comment on the appendix on page 17. When we announced our total planned investments over the next three years in May, We received many questions following that regarding the funding sources for those investments, so I'd like to provide some additional explanation. The total investments for the next three years include 160 billion yen in R&D expenses, which are included within operating cash flow. As shown on the right, we expect to fund these investments through adjusted operating cash flow excluding R&D expenses and proceeds from property sales and others. We are not making investments simply for the sake of investing, but carefully assessing the effectiveness of each investment that is the returns it is expected to generate and making the investments truly necessary to achieve profit growth over the medium to long term. That concludes my presentation. Thank you very much.