Mitsubishi Heavy Industries, Ltd.

Hello, everyone. I am Nishio. I am the CFO. Thank you so much for participating today. So today I will speak about our Q1 FI 2025 financial results and the FI 2025 earnings forecast, followed by some supplemental information about U.S. tariffs. The materials have been released in advance of today's briefing, so I will omit an explanation of each slide while focusing on the main points and supplemental information. First, look at slide four. I'd like to provide an overview of our financial results. Please refer to the slide which outlines our financial results in terms of our main KPIs. Order intake was ¥1,768.6 billion, with orders increasing in energy systems and plants and infrastructure systems. Overall volume decreased slightly due to a decline in defense and space, which booked several large orders in Q1 FY2024, but continued to maintain a high level. Although not shown on slide 4, order backlog was 10,772,900,000 yen, an increase of about 500 billion yen from the end of FY2024. Revenue increased by 7% to 1,193.6 billion yen. This was a record high for our first quarter. Business profit reached the 100 billion yen mark. This was a 25% increase year over year, and also a record high for a first quarter. Net income increased by 10% year-over-year to 68.2 billion yen. Although this is small compared to the growth in business income, we recorded a foreign exchange gain of approximately 20 billion yen in Q1 FY2024, when the yen depreciated significantly. The low growth rate was due to this. Net income also reached a record high. Next, let us go to slide 7. Please refer to free cash flow shown at the bottom of slide 7. Free cash flow was ¥64.3 billion, of which operating cash flow was ¥89.6 billion. This was mainly due to an increase in advances received on the back of strong order intake, particularly in GPCC gas turbine combined cycle. Slide 8. This shows the balance sheet. Total assets were ¥6,752 billion, an increase of ¥93.1 billion from the end of FY2024. Inventories and other current assets, including advances, increased due to business expansion in GTCC, Defense, and other businesses. Conversely, working capital decreased slightly in Q1, due to the large amount of advances received or contract liabilities booked on the liability side. As a result, the balance of interest-bearing debt was 650.3 billion yen, the same level at the end of FY2024. Net interest-bearing debt, which excludes cash and cash equivalents on the asset side, decreased to negative 21.4 billion yen. Slide 9. Slide 9 shows a waterfall chart outlining year-over-year changes in business profit. When you look at revenue gains and margin improvements, there's an improvement of 33 billion yen. Energy and infrastructure systems and aircraft defense and space each improved close to 10 billion yen compared to the previous fiscal period. And there's also a currency impact, foreign exchange impact of minus 6 billion yen. The average exchange rate for revenue recognition was 153 yen to the dollar in Q1 FY2024 and 146 yen in Q1 FY2025, so this is due to it. And no one-time expenses were recorded in either period, so it's not on the step chart. And on the next slide, we chose the break. And we will show the breakdown of operating segment in the following pages. Slide 10 shows the breakdown of order intake, revenue, and business profit per segment. And I will go to slide 11, which shows energy segment. Order intake, revenue, and business profit increased year over year. Rate of profit versus the full year forecast was also steady. GTCC book strong order intake in North America. Revenue and business profits also increased in steam power and nuclear power orders were strong and both revenue and business profit were stable.

But despite 12 business plants and infrastructure systems, order intake, revenue, and business profit all increased year over year and the rate of the progress against annual forecast is steady. In engineering, orders were brisk mainly due to the replacement of old transportation facilities. In metals machinery, sales and profit both increased despite a decrease in orders. In machinery systems, orders, sales, and profit also increased. Going to slide 13. In logistics and thermal and drive systems, order intake, revenue, and profit all decreased year over year. In engines, both orders and sales were strong, mainly in Asia. and business profit increased. Going to slide 14, in aircraft, defense, and space, as I mentioned at the beginning, order intake in defense decreased due to several large products booked in Q1-F5-2034, but a high-level exceeding revenue was maintained. Both revenue and business profit increased due to the steady progress in project execution. Commercial aviation revenue and business profit also increased due to an increase in the number of Boeing 787 unit deliveries, despite the impact of the stronger EM. As I described previously, our results in the first quarter overall marked a strong start to FY2025, and I believe that we are generally on track to achieve our 2024 medium-term business plan targets. Our intake was stronger than expected. Regarding the impact of U.S. tariffs, which I will explain later, direct impact from tariffs on Q1 P&L was immaterial. in the tune of several hundred millions of yen. Please go to SOI 16. Next, I will speak about our FY 2025 earnings forecast. The figures shown here are unchanged from our announcement in May. The exchange rate assumption remains at 145 yen to the dollar. Exposure to foreign exchange rates in terms of business profit is $2.3 billion. So, going to the regular buy segment, this is also unchanged from the announcement in May. The $240 billion business profit target in energy systems includes a $20 billion gain risk buffer for one-time expenses. So, actually, I would like to touch upon tariffs. Please go back to slide 15. So, as shown on page 15, indicating the underlying text on page 15, we are working on cost pass-throughs, and the number of transactions subject to tariffs is not large in the first place. Therefore, in this context, please allow me to briefly introduce MTI Group's business activities in the U.S. Please refer to page 22 at the end of the presentation materials. First of all, in terms of volume, revenue in the U.S. was 1.1 trillion yen in FY2024. This includes direct export transactions from Japan to U.S. customers, as well as transactions within the United States. Major direct export transactions are in commercial aviation aerial structures and for Boeing, V-1 business, and aerial engines. And the customers paid the tariffs in these cases. Other transactions are within the United States. As shown on this map, MNHI Group has local manufacturing service bases for DTCC, forklifts, aircraft, compressors, next-generation transportation systems, metals machinery, corrugated machinery, and other products. The volume of transactions for which we are responsible for tariffs is not large. That said, some components, such as for GTCC and forklifts, are imported from our Japanese bases by our U.S. group companies, and the duties for these products are borne for a time by our group. However, we believe that P&L impact can be controlled to a considerable extent by passing on these costs to our customers. So with this, I would like to conclude my presentation.