Mitsubishi Motors Corp

Good evening to everyone. Thank you for your participation in the FY21 result meeting while you're busy schedule. The COVID, which has continued since 2020, has been repeatedly epidemic due to mutant strains and has struck a serious blow to supply chains as well as the product sales. In addition, from the second half of FY2021, cost increases due to throwing raw material and logistic costs have become apparent. Furthermore, due to the emergence of geopolitical risk triggered by Russia's military invasion against Ukraine. The business environment surrounding us became more uncertain and changed on a daily basis in FY21. Although FY21 was a very challenging year, we were able to significantly improve our business performance by delivering the new Outlander, Expander, and other products to numerous customers, and also adapting flexibly to the various environment changes company-wide. And as shown on the slide, our earnings are on the recovery track. Cumulative sales in FY21 were 937,000 units globally, an increase of 17% year-over-year, net sales increased 40% year-over-year to 2,038.9 billion yen, while owning in part to the tailwind of foreign exchange rates, an increase of unit sales, the effect of curving discounts, and the cost reduction effect helped improve consolidated operating profit to 87.3 billion yen for the full fiscal year. BOP margin was 4.3% an improvement of about 11 points from the previous fiscal year. Ordinary profit was 101 billion yen due to an improvement in profit from equity method affiliates and the significant depreciation of the yen towards the end of the fiscal year. Net income after tax was 74 billion yen, mainly due to tax payment and the recording of an extraordinary loss related to Russian businesses. In Q4, we recorded net sales of 622.8 billion yen operating profit of 31.4 billion Ordinary profit over $39.9 billion and net income over $29.3 billion. The OP margin was 5%. Please turn to page 4. The slide you can see explains the factors behind year-over-year changes in operating profit for the full year of FY 2021. Volume mix and selling price improved by 75.5 billion yen due to increase in sales mainly in North America, ASEAN, Australia, and New Zealand, and the success of measures to improve the quality of sales in each country. Although advertising and promotional expenses increased in line with the plan with the launch of new models, we strengthened measures to curb incentives throughout the year, which resulted in an improvement of 20.3 billion yen year-over-year. Cost reductions and so on resulted in an overall improvement of 2.3 billion yen because continued low material price hikes were offset to some extent by progress in cost reduction activities as planned. And in addition, there were improvements in factory expenses associated with the normalization of operations. The effect of structural reforms improved by 23 billion yen due to the curtailment of depreciation and indirect labor costs. R&D expenses increased gradually from Q3, but the cumulative total improved by 2.1 billion yen Other factors delivered an improvement of 5.4 billion yen, mainly due to an improvement in after-service business. With regard to FX, the yen continued to depreciate, resulting in a positive effect of 53.8 billion yen year-over-year. In total, operating profit in FY21 increased substantially by 182.6 billion yen year-over-year. Would you please go to page 5? The slide you can see explains the factors behind year-over-year changes in operating profit for Q4-FI-2021. Volume mix and selling price improved by 15.3 billion yen year-over-year. Domestic sales were slightly lower than the previous year, mainly due to restraints on car supply due to the impact of semiconductor shortage and the suspension of some production lines. However, sales volume growth and improved mix and selling prices in ASEAN, North America, Australia, and New Zealand were the key drivers of the uptime. Sales expenses had a positive impact of 8.6 billion yen, mainly due to the effect of curbing discounts mainly in North America, Australia, and New Zealand. In cost reduction and others, low material price hikes and increased material cost for enhancement of products were largely offset by cost reduction activities. However, operational losses due to the suspension of some factory lines resulted in an overall deterioration of 4.2 billion yen. As mentioned earlier, R&D expenses began to increase from Q3 as preparation for launching new models from the next fiscal year onward. Q3 also followed the same trend. Structural reforms provided an improvement of 4.6 billion yen year-over-year, mainly due to an improvement in indirect labor costs and others. Regarding foreign exchange rates, the overall trend of yen depreciation continued, resulting in a positive impact of 16.5 billion yen. In total, even in the Q4 alone, profit increased significantly by 40 billion yen year-over-year, which increased down to page 6. Now I'd like to explain our global sales volume for FY21. Our total sales in all regions increased by 17% year-over-year to 937,000 units. In the ASEAN region, our core market restrictions such as lockdown were gradually eased due to the policy shift from zero COVID to with COVID by governments in each country, and the recovery in demand became apparent. from the end of 2021. The sales increased by 32% to 250,000 units from the previous year. In Australia and New Zealand, the market as a whole remained firm due to an increase in the number of households using surplus funds to purchase new cars, while various activities were restricted. We increased sales by 35% year-over-year to 97%, due to sales expansion of models where the impact of parts shortage was relatively small with steady supply, as well as strong sales of the new Outlander. In Japan, which is our home market, sales increased by 3% year-over-year to 75,000 units as a result of the focus on inventory sales and the strong launch of the new Outlander PHEV amid limited supply due to a shortage of semiconductors. In North America, their new outlander, which began full-scale sales in April last year, performed well throughout the year, resulting in a 38% increase year-over-year to 156,000 units. In addition, China, which was in the transitional period over the model cycle, sales fell 23% year-over-year to 81,000 units. Sales in Europe, which is in the midst of business restructuring, decreased by 9%. and the sales in other regions where recovery is observed, particularly in the pickup segment was 40% to 147,000 units. And then I will explain FY22. Alex, please go to the next slide. As I explained earlier in FY21, we were able to achieve significant improvements in profitability, but there are many areas that were helped by the tailwind of foreign exchange and the curtailment effect of incentives caused by tight supply and demand. Historically, as a result of trying to cover a wide range of regions and segments with limited development resources, there have been challenges such as a lack of regular product enhancement or prolonged product line. In the face of the aging of the models, we think that in order to maintain the factory's operating rate, there has been a tendency to secure sales volume by using a price appeal. Going forward, we will keep introducing attractive products that incorporate the value of uniqueness to Mitsubishi Motors and carefully manage the life cycle. Have customers fully understand our product value and sell them at prices commensurate with the value. We expect a challenging and unstable business environment to continue in FY 2022. However, by constantly identifying issues and solving them one by one, we'd like to achieve our targets of net sales of 2.29 trillion yen, operating profit of 90 billion yen, ordinary profit of 93 billion, and net income of 75 billion. growth in both sales and earnings, excluding ordinary income, which was significantly affected by the exchange rate in FY 2021, as shown in the slide. And we intend to link these to our next mid-term management plan. The dividend per share forecast is not determined at this point of time because the business environment is unstable and changing significantly, and it is difficult to calculate the dividend based on reasonable grounds we will announce it as soon as the rational calculation becomes possible. The factors behind the changes in the operating profit forecast for FY 2022 compared to the previous fiscal year shown in page 9 regarding the impact of volume and mix and selling price, although the impact of the shortage of car supply remains, sales will be increased in ASEAN regions, our core market. which has begun moving toward full-scale normalization of economic activities. And with the effect of new models launched last year and the improvement in the quality of sales, we anticipate a total positive impact of $59.6 billion with regard to selling expenses as demand recovers after restrictions are eased. We would like to select areas and models in which we should invest our resources intensively and assume a negative factor of 8.8 billion yen from the previous fiscal year. In cost reduction, we will partially absorb the raw material price height and soaring material costs, including semiconductors. through procurement cost reduction activities. However, due to soaring transportation costs and worsening factory-related expenses, we expect a total deterioration of ¥72.4 billion, and the expenses are on the increasing trend towards the introduction of new models scheduled for this fiscal year onward, and we anticipate a deterioration of ¥11.3 billion. In addition, we assume an increase in personal expenses and general expenses due to worldwide inflation and expect the duration of 25.1 billion yen. The impact of FX rate is expected to be an increase of 60.7 billion based on the current rate. Next place, supply chain turmoil, including the shortage of semiconductors, is expected to continue for the time being. And there are also logistical crises caused by geopolitical risk. However, in addition to the sales of new models, such as new EV K cars, we will carefully sell attractive lineups that embody the Mitsubishi model's uniqueness, such as the new generation models, Eclipse Cross, P-HAB, Outlander, Outlander P-HAB, and Expander we have launched since last year. And our sales target for FY22 will be 938,000 units globally. Next page, please.

In our core market, ASEAN will launch a series of new models, starting with new Triton after this fiscal year. And FY22 will accelerate preparations to launch new models. First of all, in Thailand, we'll introduce a BMC model of expander. The vastly revamped the exterior, interior, and powertrain to enhance the product, which we could call almost our full model change. Its rollout in Indonesia made a good start, and we began sales measures aimed at a successful product launch in Thailand. Such measures will solidify our sales capabilities after Trident's launch. In Indonesia, We'll introduce models that comply with Euro 4 regulations, which took effect in April 2022. Also, we'll further improve customer satisfaction by strengthening DX and CX, which we've been actively working on since FY21, and aim to expand the fan base through branding initiatives. Furthermore, we'll systematically expand our sales network nationwide to maximize new model seals in the future. In the Philippines, the long-lasting ease of restriction has remained, which is anticipated to drive economic normalization in full scale. We'll focus on the seals in exhibitions and malls as our competitive advantage while striving to improve seals through digital tools and to continue our seals network expansion. In Vietnam, we'll steadily capture demand and recovery from COVID and build a brand and a growing market. We'll expand our sales network while improving data marketing, training sales reps, and an attempt to capture new and loyal customers. In Malaysia, despite anticipated tighter regulations due to another wave of COVID, We'll focus on the mainstay products such as Trident and Expander with expected strong demand, strengthen our sales network, and leverage digital marketing to accommodate new norms. Please turn to page 12. Next is about our sales strategies in each region. Firstly, it's important to maintain stable profit in developed countries such as Europe, North America, and China. where we strive to improve sales quality while complying swiftly and flexibly with the ever-changing environment with focus on global models such as Outlander and Eclipse Cross. Next is Japan, our home market where we strengthen our brand and profitability. Driven by the enhanced lineup of EVs, including soon to be on sale Mini EVs and Mini Cav Mev, which will resume production in sales. We'll refine our brands with a unique lineup full of uniqueness of Mitsubishi motors, increase presence, and improve profitability. Oceania is also an important market where we have achieved high profitability, but there is still room for improvement. with an attractive lineup of global models, such as Outlander and Outlander PHAF, as well as SCN models, including Trident, will increase our market share thanks to profitability. Lastly, Latin America, Middle East, Africa. We're informed that competitors are making excellent profit leveraging SCN dedicated products. In that sense, We can strengthen sales with higher profitability by taking advantage of our SEM products in those regions. Going forward, pursuing growth in SEM and maintaining or even increasing profits in each regions are essential from strategic perspective in the long term. We'll communicate closely with each region and continue sales activity as adapted to the respective local environment. Next, we'll introduce our important measures for FY22. Mr. Cotto, the floor is yours, page 14, please. In FY20, we charted and announced our midterm plan, Small But Beautiful. And we have implemented structural reforms and focused on reinforcing environmental technologies and providing a sense of safety through four-wheel drive technologies, as well as off-road performance. Despite heaps of adversity, the performance improved significantly due to results reached in the first year of the structural reforms and boost field quality. We achieved a profit target a year ahead of schedule. FY22 will be the final year of the MedTerm Plan. and we're committed to accomplish what we plan by addressing the identified issues and improving profitability, which will lead us to the next phase of regional and product strategies. Please turn to page 15. We have set phase one from FY20 to FY22. and been working to strengthen our lineup of eco-friendly cars by leveraging technologies of ourselves in alliance. Up until FY21, we focused on PHEVs in particular and launched Eclipse Cross PHEV and Outlander PHEV in sequence. The trend towards decarbonization and electrification will accelerate, but as a pioneer of EVs, We'll seize the moment to contribute to the environment. In FY22, we'll introduce three BEBs. New Airtrek, which was launched in China in March, soon to be launched to Kcar EV, which was jointly developed with Nissan, and Mini Cav Neve, of which launch is slated to this autumn. With these new additions, will offer to our customers a wider variety of electric vehicles options. Now please turn to page 16. From this fiscal year onward, we'll enter a cycle of reinforcing SAM products. The upcoming Trident is our core model aimed at the spearheading efforts in SAM new car market. we're taking every necessary step to be fully ready for production. This fiscal year is important to gain the upper hand in new car sales, and we strive to execute measures to make that happen. Please turn to page 17. We also think it's important to set initiatives, including a product launch and a promotion and campaign, in order to encourage customers to embrace Mitsubishi Motors' uniqueness. The response to the new art founder, PHAB, which began selling domestically on December 16th last year, far exceeded our expectations and won the first place in national domestic plug-in hybrid EV seals in 2021. In addition, the model received a high evaluation in design and equipment, highlighted by winning awards, including Technology Car of the Year from Japan Car of the Year, IF Design Award 2022, and the Five Star Award, which is the top award in the automotive assessment in JNCAP. New Outlander, first rolled out in the U.S., followed by its PHEP model launched in Japan, will be rolled out globally to enhance our brand value for a wider audience. As previously mentioned, we believe expand in our lineup for easiest contributes to raising consumer awareness and eco friendly aspect of Mitsubishi motors uniqueness. The many kept me will be relaunched this autumn after we have proceeded with trials and demonstrations with many companies. And we keep receiving new inquiries for trials and proposal of potential collaboration, showing a great deal of a public interest. We've taken challenges to provide new value to customers throughout the value chain. As we announced its revival last year, Raleigh Art is our heritage brand that has trained its driving performance in technologies in the touch fields of the World Raleigh Championship and the Paris-Dakar Raleigh. While respecting its heritage, we'll evolve the brand further to lead Mitsubishi Motor's uniqueness and a monozukuri spirit with the best-in-class technologies. We'll refine the brand even more by participating in the Asia Cross Country Rally by Team Mitsubishi Ralliard and selling exclusive accessories and special edition models. Please turn to page 18. Lastly, the fiscal year is the key year to conclude the current emit term plan. but it probably has to face even greater uncertainty than previous year. The pandemic seems to be gradually subsiding as people manage to cope with it. But part shortage, soaring material costs, and disrupted logistics networks are still likely to take some time to resolve. Moreover, there is no sign of reconciliation between Russia and Ukraine anytime soon, and the outlook for Chinese lockdown is uncertain. But we anticipate that ongoing turmoil would come to end, all disturbing the world, and that would eventually drive changes further. Under certain circumstances, we'll formulate the next midterm plan. We're determined to identify a direction that we should pursue in response to carbon neutrality, including electrification and digitization, as well as a shift in business models by grasping changes in the world. And such an environment will further ensure the upward trend towards a recovery in earnings and further strengthens the management and foundation to meet the expectation of all stakeholders. Thank you for your attention.