Kawasaki Heavy Indu New

My name is Yoma Motel. Thank you for participation. Now I will present the financial highlights. As we disclosed at the Tokyo Stock Exchange and through our website at 11.30 today, the first quarter FY2022 continued to be strong for motorcycle and engine business, but aerospace systems business had much lower production volume for Boeing last year, and precision machinery and rubber was adversely affected by lockdown in China. For these reasons and other factors, the revenue and profit declined year over year. On the other hand, we expect recovery of Boeing business in the second half of the year and moderate improvement of precision machinery and robot as China's lockdown impact had concentrated in the first quarter. Furthermore, the company changed the rate assumption of US dollar from 120 yen to 125 yen. As a result, we revised the full-year projection upward from the prior outlook, now expecting improvement in business profit to ¥56 billion up by ¥3 billion and net profit to ¥32 billion up by ¥3 billion. This is a summary of financials. From page 3, I will explain more details. The first quarter of FY 2022 ended with the orders received of ¥412 billion, revenue of ¥350.3 billion, business profit of ¥4.5 billion, profit before tax of ¥10.6 billion, and profit attributable to owners of a parent was ¥5.4 billion. The year's weighted average exchange rate of Japanese yen was about 14 yen weaker than last year. The value of U.S. dollar-based transactions was $0.41 billion. Page 4 shows orders received, revenue, and business profit by segment. As you see in cells numbered 1, the aerospace systems declined considerably in sales and profit, driven by fewer deals for Boeing. As indicated by number 2, precision machinery and robot decreased in sales and profit, because China's demand for hydraulic machinery became very weak in the wake of lockdown and other factors. Last year, we posted 1.6 billion yen of gain on land sales in the first quarter in eliminations and corporate, which didn't happen this year. As we explained at the beginning of the year, we will spend more on R&D at the headquarters this fiscal year, and the first quarter already saw a cost increase of about 1 billion yen year over year. These factors created a big drop in profit. As a result, the quarter ended with a revenue of 350.3 billion yen, down by 5.2 billion year on year. The business profit decreased to 4.5 billion yen, down by 13.9 billion. Please look at the table for details. As you can see in the box 1, cost of sales rose in motorcycle and engine and other segments, driven by higher raw material prices. As you see in box 2, selling, general and administrative expenses went up particularly in the headquarter departments. The share of investments accounted for using equity method was negative in the same period last year because of a poor profitability at the ship and offshore structure joint venture in China under still price pressure. This year, the situation is getting a little better. The share in equity method subsidiaries produced 0.6 billion yen in profit, improvement of 1.6 billion yen year over year. As a reminder, there was gain on sales of a land in the first quarter FY 2021, but this first quarter didn't have gain on a land sale. The operating profit was 4.5 billion yen, down by 13.9 billion yen. Let's turn to income details in the operating profit. The first quarter saw a rapid depreciation of Japanese yen quarter on quarter, pushing up valuation of assets denominated in foreign currencies, creating foreign exchange gain of ¥7 billion. As a result, the first quarter delivered ¥10.6 billion profit before tax, a bigger improvement than the operating profit. The profit attributable to owners of a parent was 5.4 billion yen, down by 6 billion yen year over year. I will explain the factors contributing to change in a business profit. The Japanese yen depreciated year on year, leading to profit improvement of 9.3 billion yen. However, aerospace systems couldn't sell Boeing 787 components at all in this quarter, because we had shipped a lot of 787 components to Boeing at the end of last fiscal year. Slow operation created operational loss and added more losses through changes to a sales mix. Motorcycle and engine faced soaring costs of raw materials and logistics. Precision machinery and rubber was slow in sales of high-margin hydraulic products for China. For these reasons, the profit was forced to shrink. As a result, business profit was 4.5 billion yen, down by 13.9 billion year-on-year. Please refer to page 8 for more details by segment. Page 9 shows the change factors in assets. As noted by number 1, motorcycle, rolling stock and precision machinery and robot increased inventories. Aerospace assistance had received advances at the year end. Now in this quarter, as you see in number 2, the aerospace assistance increased advance payments to suppliers. The error engine also increased accounts receivable. Primarily for these reasons, we have a higher level of current assets. This slide shows change factors of liabilities and net assets. As is indicated by number 3, interest-bearing debt increased since the end of March, but this is a normal business cycle, and the debt level is still lower than usual years and stands at the planned level. The first quarter ended with the net DE ratio of 106.8%. In order to return to the target range of 70 to 80% by the year end, we will continue to accelerate collection of accounts receivable, control inventory assets, and improve asset efficiency. Box number 1 shows the cash flow from operating activities. There is cash outflow of ¥61.9 billion, up by ¥32.4 billion year-on-year, due to increases in advance payments to suppliers from the money received in advance at the year end. The cash outflow from investing activities was ¥24 billion, up by ¥10.4 billion, but this was due to a capital injection for one of equity method subsidiaries. Excluding this impact, there is no real change from the previous year. The total free cash flow was negative 86 billion yen, worsening by 42.8 billion yen year-on-year. Page 12 shows historical cash flows over the past 10 years. Turning to earnings forecast for FY 2022. We have changed the rate assumption from 120 yen against the dollar to 125 yen, reflecting the latest market rate. Weaker yen means higher costs of raw materials and other goods, as well as labor. That said, we now project that the overall revenue will reach 1 trillion 690 billion yen, up by 10 billion yen, and business profit will be 56 billion, up by 3 billion, profit before tax will be 52 billion, up by 6 billion, the net profit will be 32 billion yen, up by 3 billion. All financials are higher than the old forecast. The first quarter made a small progress against the business profit target of the year. But the aerospace systems had bottomed out in the first quarter, and we believe that earnings will make fast improvement once we start production for Boeing. We also expect that China's lockdown impact on precision machinery and robots will ease in and after the second quarter. In addition, timing of order-based business profit-making concentrates in the second half of the year as normal years, and as we use foreign exchange hedge to take advantage of weaker yen, we are well positioned to achieve the earnings target. Next, I will explain a forecast by segment. Forecast by segment is shown in the table. I will go into more details on segment-specific slides. Aerospace systems and motorcycle engine revised forecast upward, reflecting the weaker Japanese yen, while precision machinery and robot revised forecast downward due to slowdown in the Chinese construction machinery market. Eliminations in corporate attributable to headquarters made only a smaller progress in the first quarter, but the forecast remains the same as before. Aerospace Systems' financial results are shown on this slide. Orders received increased due to an increase in component parts for Ministry of Defense and Engines, but revenue and business profit both declined, mainly due to slow business with Boeing. The Boeing business, however, bottomed out in the first quarter and is expected to recover in the coming quarters as we resume production and shipping. The revised full-year forecast of a business profit is 3.5 billion yen more than the previous projection, supported by foreign exchange rate assumption change. Page 16 shows orders received and the revenue of aerospace and air engines separately. You will also find the number of aircraft component parts sold to Boeing and jet engine parts sold. Page 17 shows the quarterly revenue and profit. Please note that FY 2021 data were adjusted in conformity to IFARS. Page 18 describes our market overview regarding business environment and order trend, as well as specific efforts to achieve the targets. There is no meaningful change since last conference. We anticipate that it would take considerable time before the market environment returns to pre-pandemic status. The company continues to save production costs and tackle fixed cost structure rigorously to cope with changes in business environments. Rolling stock. As you find on this slide, there was no big movement in the first quarter. FMOI 2022 forecast remains the same as before. Page 20 shows orders received and revenue in domestic and Asia, vis-a-vis in North America. For your information, the appendix shows sales from high margin after sales service and progress of M9 project for Long Island Railroad in the United States. This page shows the quarterly trend of revenue and profit for your information. Like the Aerospace Assistance, market overview of the rolling stock segment has not changed since last time. This slide shows the results of the first quarter FY 2022. Orders received make a big jump, propelled by orders for LPG carriers and construction and operation of Japan's municipal waste incineration plants, plus other projects. But revenue declined slightly because this year is when busy seasons of municipal waste incineration plant sales. Profit improved at a Chinese shipbuilding joint venture, but the revenue decline was so steep due to sluggish waste incineration of business that the overall profit slipped slightly. The revised F1 2022 project's orders received will grow faster than the prior outlook by 20 billion yen, supported by order growth from Japanese municipal waste incineration plants. Revenue and business profit remain the same level as before. This page shows orders received and revenue of energy, plant and marine machinery, shipping offshore structure, as well as share of profit or loss of investments accounted for using equity method. Page 25 shows quarterly trend of revenue and profit. Page 26 shows the market overview and order trend in this segment. The top priority is to provide products and services to achieve a low-carbon and decarbonized society. Kawasaki delivered a high-capacity battery propulsion system for the world's first pure battery electric propulsion tanker. The main business of this segment is energy and environment solutions, but we will aggressively pursue carbon-neutral opportunities for ship applications as well. We are also focused on establishing a leading position in the decarbonization field in the mid to long term. Kawasaki is developing future-proof technology for a hydrogen energy society. For your information, I included a few good examples. Page 27 shows the results of first quarter FY2022. The orders received grew year over year, although orders for China's hydraulic components declined fast, while supported by robust robots for semiconductor manufacturing equipment and a depreciation of Japanese yen. On the other hand, revenue and business profit declined significantly year over year as they were seriously impacted by a slump in China's hydraulic market. As to forecast, we revised orders received revenue and business profit all downward in spite of weaker yen and robot growth considering the impact of a slump in hydraulics in China. Page 28 shows orders received and revenue of precision machinery and robots, as well as share of profit and loss of investments accounted for using equity method. Appendix shows sales of hydraulic components to China and sales of robots by segment. Page 29 shows the quarterly trend of revenue and profit. Page 30 shows market overview and specific efforts in this segment. One thing that is different from the last time is China's demand slump triggered by lockdown. Specific efforts remain the same as before. This slide shows the results of the first quarter FY2022. Revenue grew year on year due to an increase in motorcycles for North America and Southeast Asia and weaker yen, despite a decrease in off-road four-wheelers for North America and motorcycles for Europe due to product supply shortage. Business profit decreased slightly due to higher costs of raw materials, logistics, and fixed costs. In the revised FY2020 forecast, we ramped up revenue projection through stable production, supported by a strong market and low inventory levels. The business profit was revised to a record high of 45 billion yen, up 2 billion yen from the previous outlook. driven by higher profitability and driven by weaker end and by passing on a higher cost of raw materials and logistics to product prices. Page 32 shows revenue and business profit by sub-segment, namely motorcycles for developed countries, motorcycles for emerging markets, utility vehicles, ATVs, and PwC and general-purpose gasoline engines. Appendix shows whole sales of motorcycles by country. Base 33 shows the quarterly trend of a revenue and a profit. Base 34, market overview for motorcycle and engine. There is no change from the last time. Page 35, shareholder return. Propelled by weaker yen and other factors, the net profit attributable to owners of parent is expected to reach 32 billion yen, up by 3 billion from the previous forecast. But the market environment is changing extremely fast, and we maintain the full-year dividend at 50 yen per share for now. However, we plan to distribute ¥30 as interim dividend, and the company will decide the year-end dividend later, watching the company's performance going forward. I would like to report four project topics today. The first topic is from motorcycle and engine business, a driver of KHI Group Earnings. This is TRX-KRX4-1000, a four-seater sports off-road four-wheel car launched this year. North America sees growing demand for off-road four-wheelers for outdoor recreation. Adding to the popular two-seater sports model, now we offer a four-seater model to share fun with family and friends. We expect the sales of four-wheelers and peddler seats will go up about 40% year-on-year. We will continue to launch many more attractive models in a timely fashion to ensure motorcycle and engine continues to drive the earnings of their group. The next topic also comes from a motorcycle and engine. This is an initiative to facilitate carbon neutrality. As you know, we are committed to building a supply chain of CO2-free liquefied hydrogen. Decarbonization is regarded as a big challenge for motorcycles. To address this challenge, we started selling the group's first electric bikes for kids, the so-called First Kawasaki Electric Bikes Group. targets the age group of 3 to 8, which was missing in our lineup coverage before. With first Kawasaki, along with on-road and off-road motorcycles, four-wheelers and electric bikes, no slits, Kawasaki provides fun to lifestyles of all generations from kids to seniors. Two more electric motorcycle launches are planned this fiscal year, with more models coming one after another. Please keep excited about our initiatives toward carbon neutrality. Page 38 shows our service of robots in a demonstration phase. This robot restaurant is located in the Future Lab Haneda next to Haneda Airport. It has received broad mass media coverage and reservations are pouring day after day. Children get very excited when meals are served by robots. We are proud that people can really feel that a happier life with robots is coming very close to us. The photo in the right upper hand shows Tokyo Governor Ms. Koike interacting with a delivery robot of Kawasaki during the demonstration. The test delivery on the public road was successful. Delivery is a social problem today due to a labor shortage and is called the last one mile in logistics. Kawasaki is proud to contribute to solving this problem by expanding the service robot business. The last but not least project is hydrogen. It is expected to become the core business for Kawasaki. At the last conference, we reported that the world's first liquefied hydrogen carrier, Suiso Frontier, had sailed between Japan and Australia, with liquefied hydrogen loaded before the departure. Following the successful technical demonstration, we obtained approval for basic design of a large liquefied hydrogen carrier for commercialization for the first time in the world. The commercial liquefied hydrogen carrier is capable of loading 128 times more liquefied hydrogen on board than Suiso Frontier. We expect that one carrier vessel will become operational around 2025 for demonstration aiming commercialization. More carriers will be launched in the future as the use of hydrogen becomes more widespread. Kawasaki Group will generate more profit from hydrogen business in proportion to the number of new constructions of carriers. We are making a steady progress toward that goal. From this slide onward, contain information regarding a capital expenditure, depreciation, research in the development spend, the headcount at the year end, and so forth. Thank you very much for listening.