Kawasaki Heavy Indu New

My name is Yamamoto. Thank you for participation. Now I'd like to present financial highlights. page one, as we discussed at the total stock exchange in a through our website at 1130 today the four year results for every 2022 improved significantly year on year. Due to power sports in the engine continuously performing well since the previous fiscal year and aerospace systems, having less impact from the pandemic. Compared to our outlook announced in the previous earnings briefing in February, the January-March quarter ended largely in line with the plan, hitting a record net income of 55 billion yen, exceeding 51.6 billion yen in 2014. As a result, we plan to pay the dividend of 90 yen per share, a 20 yen increase from the previous announcement. Regarding the outlook for FY2023, we project more appropriate income balance between mass production and order-based businesses, thanks to better-than-expected high performance of power sports and engine in the second half of fiscal year 2022, as well as our profit structure in aerospace system being positive for profit improvement along with passenger demand recovery. and project growth in order-based businesses such as rolling stock and energy solution and marine engineering, as we explained in the Group Vision 2030 Progress Report meeting in December last year. As a result, revenue is projected at a record high of 1.9 trillion yen, with operating profit of 78 billion yen. This is a summary of the financials. From page 3, I will explain more details. Page 3. In FY 2022, we took orders worth 2 trillion 37.4 billion yen, with revenue of 1 trillion 725.6 billion yen. operating profit of 85.2 billion yen, recurring profit of 73.2 billion yen, and profit attributable to owners of the parent of 55 billion yen. Orders received, revenue and profit attributable to the owners of the parent hit a record high. Starting from this earnings announcement, we are disclosing after-tax ROIC for your reference in order to promote our engagement with the capital market. Our view of cost of capital is on the 4% mark, and our income in FY 2022 exceeded our cost of capital. As indicated, weighted average exchange rate of the Japanese yen was about 22 yen cheaper year on year. The value of U.S. dollar-based transactions was about $2.05 billion. Page 4. This page shows orders received, revenue, and business profit by segment. As indicated by number one, revenue and profit grew significantly year on year, with aerospace systems seeing passenger demand recovery and power sports and engine enjoyed strong outdoor demand as well as a tailwind of the cheaper year. As indicated by No. 2, others in eliminations and corporate saw profit decline due to increased investment related to DX and IT infrastructure, and an impairment loss was recorded in PCR viral testing service business due to Japan's downgrading of COVID-19. As a result, we ended the year with revenue of 1,725.6 billion yen, up by 224.7 billion yen year-on-year. The business profit increased to 85.2 billion yen, up by 54.9 billion yen. Page 5. Please look at the table for details. As indicated by No. 1, raw material cost rose, but the sales cost ratio improved as a result of a steady price pass through in mass production businesses, sales volume increased, and the depreciation of the Japanese yen. As you see in number 2, selling general and administrative expenses increased mainly in the headquarters departments. This is due to increased expenses for the area mentioned DX, digital transformation, and for hydrogen and other new businesses. As indicated by number 3, we had posted a loss provisioning due to rising steel materials at the joint venture in China in the previous fiscal year. But with an improving trend and positive turnaround thanks to the renminbi's depreciation in this fiscal year, a share of investment accounted for using equity method was 3.3 billion yen, up by 17.7 billion yen. As a result, business profit was 85.2 billion yen, up by 54.9 billion yen year over year. Page 6, Income Statement. Finance costs increased year on year. This is due to a valuation loss on assets denominated in foreign currencies with the yen's appreciation for the period end rate in FY 2022 and due to the time difference between deposits and withdrawals. This does not pose as an issue. The profit attributable to owners of the parent was 55 billion yen. Page 7. I will explain the factors contributing to a change in profit. The year-on-year depreciation of the yen improved profit by 64.5 billion yen. Higher raw material prices pushed up our cost, but it was offset by price pass-through and fixed cost reduction. Furthermore, power sports and engine continue to enjoy strong sales, gaining 8.2 billion yen more in revenues. Although power sports and engine was able to pass cost increases today and maintained positive product mixed effect from the previous quarter, total business decreased slightly due to a loss posted in PCR viral testing service business. As a result, business profit stood at 85.2 billion yen, up by 54.9 billion yen year on year. Please refer to page 8 for more details by segment. Page 9, changes in assets for FY 2022. As marked by number 1, power sports and engine and aerospace systems saw sales growth, which also resulted in increased trade receivables. As marked by number 2, production increases in these two businesses and rolling stock also increased inventories. Page 10. This slide shows changes in the liabilities and net assets. As indicated by numbers 3 and 4, production increase mainly in aerospace systems resulted in increased trade payables. Other liabilities also increased due to receivables liquidation. Net DE ratio was 77%, achieving our benchmark level. We will continue to enhance asset efficiency by promoting the collection of accounts receivables and by controlling inventories. Page 11, box number 1 shows the cash flow from operating activities. Despite the high level of profit before tax, with increased working capital, such as an increase in trade receivables and inventories due to recovering aerospace systems and strong performance in power sports and engine, and increased advance payment to suppliers on the back of advance money received at the end of the previous fiscal year, the cash flow from operating activities deteriorated by 133.2 billion yen year on year, but ended with positive 23.6 billion yen. The cash flow from investing activities decreased by 19 billion yen to negative 77.4 billion yen, This was mainly due to capital increase to our equity method affiliate, Medicaroid. The total free cash flow was negative 53.8 billion yen, down by 152.3 billion yen year on year. Page 12 shows historical cash flows over the past 10 years for your reference. Page 13. In fiscal year 2023, we project significant revenue and profit increases in aerospace systems, steady overall sales in power sports and engine continuing from very strong FY 2022, and revenue increase in other businesses. Revenue is projected to reach a new high of 1.9 trillion yen, up by 177.4 billion yen. Business profit is projected to decline because we factored in sales promotional expenses to increase due to a recovery in the inventory level to the normal year level, particularly in the North American market and a sign of a slowdown in the retail market. On the other hand, Order-based businesses have been improving in line with our expectation, and profit is net positive save for FX impact at 78 billion yen, as indicated in the Group Vision 2030 Progress Report meeting in December last year. Profit before tax will be 70 billion yen, with profit attributable to owners of the parent of 47 billion yen. These are minimum levels for us, and we will strive to improve these. After-tax ROIC is planned at 4.9% for FY2023, down by 1 percentage point year-on-year. We will aim to improve our capital efficiency and to enhance our corporate value through wider ROIC spread, which is the difference with cost of capital. Our currency assumption for this projection is 130 yen to the dollar, about 4 yen stronger compared to the actual exchange rate in the previous fiscal year. U.S. dollar-based transaction is planned at $2.52 billion, up by about $0.5 billion year-on-year, due mainly to increased sales of aerospace systems. Page 14. Segment breakdown is shown in the table. I will go into more details on segment specific slides. Page 15. Although orders for component parts for commercial aero engines increased, overall orders received decreased year on year due to alleged orders for the Ministry of Defense received in the previous fiscal year. Both revenue and business profit grew significantly year on year, driven by passenger demand increase and longer flight hours in the air engine business, and increased sales for Boeing. Our forecast for FY2023 is both orders received and revenue to increase for the Ministry of Defence and Boeing, as well as for components parts for commercial air engines. Business profit is also expected to increase due to a revenue increase. Page 16. This slide is for your reference, showing orders received in revenue by aerospace and air engine, number of components parts sold to Boeing, and jet engine components sold. Page 17 shows the quarterly revenue and the business profit over time. You can see the historical trend. This is also for your reference. Page 18. This page describes our view of business environment and order trend, as well as specific efforts and initiatives to achieve the earnings targets. There is no significant change from our previous announcement, but we made an addition of redevelopment of supply chain and the larger production system to prepare for demand recovery in order to secure stable earning space in our core businesses. Page 19, orders received for FY2022 increased significantly by 241.7 billion yen year on year due to major orders for new subway cars for New York City Transit. Revenue grew slightly with an increase in the U.S., and the business profit stood at 1.3 billion yen, continuously positive from the previous fiscal year, although we recorded a loss due to the delayed Long Island Rail M9 project in the U.S. For FY2023, with the commencement of R211 project deliveries for New York City Transit, Revenue is forecast to increase by 44% year-on-year to 190 billion yen. And business profit is also to increase along with the revenue increase and will progress for profitability improvement. Page 20. This page shows orders received in revenue in domestic and Asia and in North America. For your information, appendix shows sales from high margin after sales service and progress of the M9 project for Long Island Railroad in the U.S. Page 21. This page shows the quarterly trend of revenue and business profit for your information. Page 22. Rolling stock market overview has not really changed since the last announcement. Specific efforts were updated with delivery schedules of overseas projects. The status of the R211 project is also updated for your reference. Page 23. FY2022 results are shown in this slide. Orders received made a big jump year on year, driven by increased orders for submarine, LPG-LAG carriers, and power generation facilities. Revenue is up thanks to an increase in energy business and construction work for submarines for the Ministry of Defence. Business profit was short of the forecast announced in February due to lower profitability in some projects, but stood at positive ¥3.9 billion, a ¥14.7 billion improvement from equity gains in affiliates year on year. Regarding FY2023 outlook, order is forecast to decrease because of the year-on-year effect. Revenue is to increase thanks to energy business increase, and the business profit is forecast at 9 billion yen, up by 5.1 billion yen on the back of revenue increase. Page 24. This page shows orders received in revenue of energy plants and marine machinery business and ship and offshore structure business for your reference. Page 25. This page shows quarterly trend of revenue and business profit for your reference. Page 26. This page shows the market overview of this segment. As indicated under specific efforts for this fiscal year, we received orders for seven LPG-LAG carriers in FY 2022. These are products contributing to realize low-carbon and decarbonized society. Since August 2021, we have been taking 12 back-to-back orders for carriers, securing an ample amount of work for us to start constructing large liquefied hydrogen carriers in the mid-2020s. We will continue to establish our leading company position towards realizing liquefied hydrogen supply chain. We are also focusing on developing and launching products during the transition to realizing hydrogen society, and this slide shows some representative cases for your reference. Page 27. FY 2022 results are shown in this slide. Revenue was flattish year on year, driven by various robot sales despite a drop in hydraulic components due to a temporary contraction of the construction machinery market in China. Business profit declined considerably by 5.1 billion yen year-on-year to 8.7 billion yen on the back of sales decrease due to the earlier mentioned contraction of the Chinese construction machinery market as well as higher cost of electrical components and raw materials and the China's lockdown. We believe, however, that demand will recover And in our FY2023 forecast, revenue is expected to increase by an increase in construction machinery market in developed countries. And we also expect business profit to increase, driven by revenue increase and improved equity gains in affiliates. Page 28. This page shows orders received in revenue of production machinery and robot as well as revenue of hydraulic components to China and revenue of robots by segment for your reference. Page 29. This page shows quarterly trend of revenue and business profit for your reference. Page 30. This page shows market overview. Regarding specific efforts, we started to take orders for energy-saving hydraulic hydrogen compressors for hydrogen stations. These are new hydrogen-related products towards realizing decarbonized society. These products achieved a substantial energy conservation vis-à-vis existing products by integrating our motor hydraulic pump unit, EcoServo, in addition to hydrogen gas compression control technology. For open innovation promotion, we opened UCAM Lab in Future Lab, Haneda, located adjacent to the Haneda Airport. This is an open innovation facility for startups, academia, and research institutions. Our partners can use our service robots at this facility and develop and demonstrate application software freely. In order to solve a social issue of a labor shortage, we will further accelerate the adaptation of a robot in society with our partners. Page 31. This slide shows the FY 2022 results. Revenue grew strongly year-on-year due to an increase in motorcycles for North America and Southeast Asia, an increase in four-wheelers for North America and general-purpose gasoline engines, in addition to the impact from the yen's depreciation and price path through. Business profit was 71.5 billion yen, hitting another record continuously from the previous fiscal year as a result of a price pass-through in spite of higher raw material prices, logistics and fixed costs. 2023 forecast, revenue is expected to decrease slightly to 580 billion yen. This is on the back of continued recovery in motorcycles for emerging countries, despite the decline in motorcycles for developed countries and the stronger yen in our currency assumption. Business profit is expected to decrease by ¥24.5 billion to ¥47 billion. Because we view sales promotion costs to increase in order to cope with intensive competition led by inventory recovery in the motorcycles market for developed countries. In the North American four-wheeler market, where market expansion is expected, we will have larger production capacity with our new plant in Mexico, which is under construction now, enabling us to launch a wider array of models. We project revenue to start growing again after FY2024. Page 32. This page shows revenue by sub-segment, namely motorcycles for developed countries, motorcycles for emerging markets, utility vehicles, ATVs and PWCs, and general-purpose gasoline engines. In addition to wholesale of motorcycles by country, we included a wholesale plan for FI2023 by category, namely developed countries' motorcycles, emerging countries' motorcycles, for wheelers and PWCs. Page 33. This page shows quarterly trend of revenue and business profit for your reference. Page 34. This page describes market overview of power sports and engine for your reference. Page 35. Regarding shareholder return, we plan to increase the fiscal 2022 year-end dividend by 20 yen to 60 yen, resulting in an annual dividend increase of 40 yen from the initial forecast to 90 yen per share. Full year dividend for FY2023 is planned at 80 yen per share at present. Page 36. Let me report three project topics today. I'd like to first explain the outlook for our civil aerospace and air engine business related to the aviation market, which is strongly recovering from the pandemic. Aerospace systems were a core contributor to our total profit, with operating profit exceeding ¥40 billion in 2019 before COVID, but the pandemic changed its business environment dramatically and a loss of more than ¥30 billion was posted in FY 2020. However, in FY 2022, we posted a profit of 17.8 billion yen with a recovery in air traffic demand, turning profitable again for the first time in three years. In addition, as indicated in the slide, strong orders for Boeing 787s indicate production to increase going forward. We will aim for growing aerospace systems further from this fiscal year. Page 37. In this slide, I will present our review of PCR viral testing service business and its future prospects. We started to develop automatic PCR testing using industrial robots in the spring of 2020 to prevent infection risk of healthcare professionals who are fighting against COVID-19 and to contribute to an early recovery of the economic activities. We have been offering full-scale services one year later in the spring of 2021. We have contributed to prevent the expansion of infections by testing 850,000 samples over a two-year period. Now that COVID infection is downgraded to Class 5 from Class 2 status and with sharply declined demand for testing, we posted a valuation loss of asset holdings in the fourth quarter of FY2022. However, this business accepted a large number of people from aerospace systems where business sharply deteriorated under the pandemic and workforce became redundant. And this business contributed to fixed cost recovery for the company as a whole. And through this business, we believe we were able to gain knowledge and expertise by acquiring the mindset of marketing services and many talented people, and by establishing good relationships with government ministries, municipalities, and hospitals. We will leverage our knowledge and expertise and engage in developing new businesses in healthcare segment, such as genome analysis, drug discovery support, and other medical examination business, and supporting in-hospital operational efficiency improvement. Page 38. This is the last introduction of project topics. Let me introduce our hydrogen business, which is positioned as core next-generation business for our company. At present, we have been working with our partner companies in the liquefied hydrogen supply chain commercialization project as a part of NEEDL's Green Innovation Fund project with a target of procurement of 225,000 tons of liquefied hydrogen from overseas and commercialization in 2030. In March this year, sites for shipping and receiving liquefied clean hydrogen were selected at Port of Hastings, Victoria, Australia, and Kawasaki City, Kanagawa, Japan, respectively. This selection will commence the construction work of the shipping and receiving bases. As explained, the respective development is progressing steadily towards realizing hydrogen society. We will continuously aim to establish clean liquefied hydrogen transportation technology to partner with users in the local governments conducting hydrogen power generation demonstration and to contribute to build a commercial scale global liquefied hydrogen supply chain towards realizing carbon neutrality by 2050. Page 39. Since this is an year-end resource briefing, I would like to introduce our ESG-related topics. In the first slide, let me explain our initiative for reducing CO2 emissions. We have set targets for Scopes 1 and 2 in the past to achieve net CO2 emissions internally using in-house hydrogen power generation by 2030. Last year, We announced that we would target net-zero group-wide CO2 emissions through 80% emissions reduction by 2040 under Scope 3, Category 1, and by shifting all solutions CO2-free by 2050 under Category 11. As introduced in the bottom left of the slide, we were selected as the best practice for TCFD Guidance 3.0 case examples published by the TCFD Consortium. We were highly regarded as illustrating the initiatives in an easy to understand way by major category. Please check it out with the QR code in the slide. Page 40. Next, I would like to present that we were selected as an A-list company, the highest rating by CDP, one of the world's leading ESG evaluation agencies, evaluating climate change response strategies and CO2 emissions reduction initiatives. We believe that our active initiatives for transparency in information disclosure and performance were recognized in the climate change survey, and we are the first A-list company in the heavy industry sector. We will continuously contribute to early realization of a decarbonized society by offering solutions for achieving carbon neutrality. Please also refer other major ESG topics for FY 2022 in this slide, such as the selection of our integrated report issued last year as the most improved one by GPIF, Government Pension Investment Fund of Japan. Page 41, from this slide onward, contain information regarding capital expenditure, depreciation, R&D expenses, the headcount at the year end, and so forth. This concludes my explanation. I am President Hashimoto. I will explain the relationship between the content of FI 2022 earnings results and the growth scenario presented in the Group Vision 2030. First of all, although we achieved the highest net income in this fiscal year, we have finally reached the low end of our business profit target range of 5% to 8%. We will first work to achieve 8% business profit and then 10% or more business profit. On the other hand, in terms of the three-step growth scenario outlined in the Group Vision 2030, that is, first, mass production business will drive earnings, followed by a recovery in the aviation business and other order-based businesses, and finally, significant growth in new businesses such as hydrogen, We are at the stage where the first step, mass production, is driving earnings, and the second step, order-based businesses are returning. The record net high income shows that we are on track with our growth scenario. Looking back, the aerospace business, which had led the group's earnings before 2019, experienced a sharp decline in demand from 2020 due to the pandemic, and company-wide reforms were urgently needed to ensure future business growth. Under such circumstances, as one of the policies of the Global Vision 2030 announced in October 2020, we have decided to establish the rolling stock business and the power sports and engine business as a new company from October 2021. ensuring a steady decision-making structure, as well as to establish the mass production business as a driver of earnings and cash generation, along with the precision machinery and robot business. As a result, the power sports and engine business of Kawasaki Motors has developed a structure that enabled it to provide products in a timely manner to meet the strong demand in the North American market. And at the same time, it has improved its profitability by making prompt decisions in situations of rising logistic costs, semiconductor shortages, and price-pass growth, and over the past two years, the business has grown to generate more than 100 billion yen in cumulative business profit. In the precision machinery and robot business, we have also been able to secure stable earnings by capturing the steady needs for construction machinery and automation, and have made a significant contribution to improving profitability in the mass production business. On the other hand, in the rolling stock business of Kawasaki Rail Car Manufacturing, we have identified risks in the North American business, which had been posting consecutive losses. And the entire group has been working on countermeasures to address these risks. As a result of our selective order intake and taking orders at appropriate prices, We have secured profit for two consecutive years since FY 2021 and are on track to increase profits going forward. In the energy solution and marine engineering business, in addition to focusing on hydrogen as a future business, we have been strengthening our measures to minimize the risk of loss by carefully examining project risks in advance. our group's overall earnings ability has improved through these efforts. As you are aware, demand for aviation is rapidly recovering with the containment of the pandemic, and in FY2023, the profitability of the order-based business will improve as the aerospace systems business fully recovers. As explained in the announcement of the Group Vision 2030, we will shift to a stable management structure that can both earn profits from the second step of order-based business along with the profit-making first step of mass production business. I will also briefly explain the progress of three focus fields set forth in the Group Vision 2030. Regarding safe and secure remote society, the medical robotics business is steadily expanding with robotic-assisted surgery system, Hinotori, of Medicoroid, a joint venture with Sysmax, and the PCR testing service business using robots, which was started as a pandemic countermeasure, will be developed into a medical healthcare business, which includes medical testing for genome analysis and drug discovery support, Even after COVID-19's downgrading to Category 5 by leveraging the knowledge acquired in the medical healthcare area, In addition, many new initiatives are well underway, including a new platform business through remote robotics in collaboration with the Sony Group, and the development of an indoor location-based service business by iPint-K. As for near-future mobility, the demonstration of the unmanned helicopter K-Racer, its use for dual use and delivery robots for use on public roads and in hospitals are progressing smoothly. In the hydrogen business, as an energy and environmental solution, we are collaborating with many governments and companies in Japan and around the world, based on our world-leading required hydrogen technology, which has gained recognition to become a byword for Kawasaki Heavy Industries. We expect these new businesses to grow significantly and contribute to profits from FY 2025 onwards as the third step in our earnings. Finally, we have not changed our cautious outlook for FY2023 with respect to variable factors, and although we currently plan to pay a dividend of 80 yen per share, we are aiming for further improvement in profits and increase in dividends. And as I explained earlier, we expect the upward trend we have depicted in our growth scenario to become more certain from FY2024 onward, We look forward to your continued support and encouragement. Thank you for your attention.