Mitsubishi Heavy Industries, Ltd.

Thank you very much for attending this meeting. On my side, I would like to explain about the second quarter results and the full year outlook and an update on this management policy that we have on May 28th. The order intake for the fiscal year 2025 Q2 increased year over year to 3.3 trillion yen. Order backlog was 11.5 trillion yen. This was because... North America market, the largest market in the world. Another reason was this result is that we were able to receive orders for a lot, very large company. Growth businesses such as energy systems and defense, the state growth in the plants and infrastructure business reaching 2.1 trillion. increased slightly year-over-year to 170 billion yen. Outlook for the fiscal year, 25 order intake is 6.1 trillion yen. We think we'll be able to recover the impact coming from Mitsubishi Logistics Index, which we made an announcement on September 30th. The major reason behind this is that we anticipate that the energy business is going to increase by 1 trillion yen compared to the initial guidance. The outlook for business profit is unchanged at 390 billion yen. Current business environment is unchanged. We think that robust order intake will continue mainly in growth businesses. As for business profit, our basic business capability is improving in core businesses such as CCCC and defense. This is the outcome of productivity improvement initiatives that we are conducting. Moving forward, To link this robust order intake to profit, more than ever, we will deploy resources in a focused manner such as addressing risk and accelerate initiatives for group-wide optimization. Next, I will explain about a new management policy that we announced this May. Our management objective is to realize a virtuous cycle of high profitability and growth investments. To achieve this objective, we are committed to engaging group-wide optimization and scope expansion with unprecedented speed. I will update about these initiatives. First, about focused resource deployment, which is one aspect of group-wide optimization. Focused deployment of resources mean that when facing critical situations that is related to our mid to long-term strategy, or if it's necessary to respond quickly to risk, we will deploy internal experts in a focused manner and respond speedily. For example, in GTCC, to securely answer strong demand, we are going forward to increase production volume by 30%. We are not only talking about CapEx or human resource recruitment, This is an initiative that we are engaged concurrently to improve productivity such as shortening lead time. We are putting priority in deploying internal experts to realize this objective.

As for defense business, on August 1st, the Australian government announced that it has selected our company's vessel for its next-generation general-purpose free-date program. To finalize the contract, various efforts are required, including coordination with the Japanese government and the companies involved in escort ship construction, as well as international contract negotiations with the Australian government. Accordingly, we are allocating internal resources to support this project. Regarding domain expansion, since the specific initiatives involve sensitive information closely tied to the mid- to long-term growth strategies of each business unit, we will refrain from providing detailed explanations today. We will share more when the timing is appropriate for public disclosure. As for comprehensive portfolio management for the entire company, each business unit formulates and executes its own mid to long-term growth scenario. At the same time, decisions on where to prioritize resource allocation are made based on management judgments. As announced on September 30th, we review our capital relationship with Mitsubishi Logis next. This decision reflects the approach to portfolio management. Based on the last month's Japan-US summit meeting, I'd like to briefly touch on our business opportunities in the US. Our company has long been active in the U.S. market, operating multiple manufacturing and service facilities, including those for GTCC systems and steelmaking machinery. Our sales to the U.S. last year totaled 1.1 trillion yen, underscoring the importance of the U.S. market to our business. We will continue to prepare thoroughly as a manufacturer to respond to business opportunities in the States. We aim to compute by supplying equipment and providing services, primarily energy, to meet the expectations of our U.S. customers. To achieve our targets for FI 2025 and the 2024 Mid-Term Business Plan, we will steadily advance the initiatives currently underway. As the pace of change in the business environment is expected to accelerate further, We shall strengthen our ability to respond swiftly to imagined resonance of change. We shall further accelerate our efforts in innovative total optimization to ensure robust and sustainable growth for our corporate group. That's all from myself. Thank you very much for your kind attention. Now, please let us allow me to move to CFO Hiroshi Nishio's presentation on the financial results. Please go ahead.

I would like to give you some points utilizing our presentation material. Please look at page three. So in terms of the numbers that we're going to use in this presentation, I would like to give you some points. On September 30th, we announced about a plan to transform WTO Logistics. We're going to call it ML afterwards. With this, basically, only intake, revenue, business, profit, excludes the numbers of ML. The detailed recategorization of the numbers are in page 29. Please refer to that slide as well. In terms of the balance sheet, with the total numbers, it includes ML, but there is an additional line for both assets and liabilities categorized as assets or liabilities held for sale. Please take notice of this matter. Then I will talk about the numbers. Please turn to page six. These are the major financial results. The order intake revenue business profit, Ito has mentioned already at the beginning. With the net income, it is 114.9 billion yen. Year over year, it increased by 7%. So this is the highest number for the second quarter results. On the top, we cash flow 151 billion yen. This is in the black. Interest-bearing debt, it is 607.7 billion yen. Although it is not shown on this page, in terms of order backlog, it is 11.5 trillion yen. It has increased by 1.2 trillion yen from the last year end. Turn to page 10. This is about the balance sheet. Total assets are over 7 trillion yen. One point I want to make is that on the lower side, on the liability side of the second line, there is a line called contract liabilities. This is advance payment. This increased by 260 billion yen substantially. from the year end last year. This is due to the increased order intake of GTCC. This is the reason why the previous flow is 151 billion on the positive in the second quarter. I'm going to page 11. This is the profit base comparing business profit from the previous year. So starting at 188.4 billion yen last fiscal year, same quarter deducting a million portion, and then going to 168 billion yen. So this will be the start of the Apple-to-Apple comparison, I guess, last year to this fiscal year. So first of all, there's a 76 billion improvement coming from changes in revenue margin improvements, showing that... Various initiatives and improvements have steadily taken results in all segments. On the other hand, if you go to the right, this is a change in one-time expenses. It's minus 30 billion yen. So in the steam power business, about 30 billion provisions were booked for the one-off expenses. Out of the 30 billion, 20 billion is for the South African project. I would like to verbally explain the background about this South African project. This is a project that we have inherited when the thermal business was integrated with Hitachi. Construction has continued for more than 10 years, and operations have started by phases over the years. In September 2025, the last unit, number 12 unit, has started operation. We are still consulting with the customer in terms of how to share the cost that has been incurred due to the construction place at the customer's side. So this provision was made for this second quarter for accounting purposes.

So this was an unfortunate, but the one cost of 30 billion yen. was provided for. So moving on to page 19. For all the segmentation, please refer as per your convenience. So talking about the earnings forecast starting from slide 19. This is the yearly forecast for the year 2025. The order intake is going to be revised upwards to $6.1 trillion. Revenue remains at $4.8 trillion, and profit from business activities is unchanged at $390 billion. The free cash flow remains at zero. The assumption of the exchange rate is $145.2 billion, and exchange rate sensitivity is $1.6 billion. For the annual forecast, we have been providing the segment information starting from 21 for the energy systems segment. The order intake for the energy system segment has been revised upwards because of the stronger performance in GTCC from 2.2 trillion to 3.2 trillion yen, the business profit. remains unchanged at 240 billion. However, last time we have provided for at the 20 billion in risk buffer for one-time expenses that was included. But this time in Q2, that one-off expense has already been recognized in 30 billion so that no buffer is incorporated for in a second house. And down below is a planned infrastructure. The project execution is going quite distinctly so that the business profit has been revised upward from 60 billion to 70 billion yen. And moving to the slide 22, logistics, thermal, and driver systems. To a slowdown in sales of turbochargers and HVAC units, order intake, revenue, and the business profit have all been revised downward. And down below is for the aircraft defense and the space just remained unchanged in the early total. That's all that I mentioned. And just for your information, on slide 23, and here we show the defense business size. And this is the track record from 2018. The order intake for the year 2025 seems to be down compared to the year before, and there are a lot of questions coming regarding that, so that we are explaining the reason why. In year 23, 24, the level has been quite high. So compared to those two fiscal terms, the current fiscal year is 1.2 trillion, which is down. However, compared to the normal level, it's still quite high level. And for your reference as well, on page 26 is the energy segment on the right below. The after-sales service revenue ratio is shown. And also on page 28 is the business portfolio optimization history, just for your reference. So now that's all from myself. Thank you very much.