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Toshiba Corp
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The time has come, so we would now like to start the online briefing of the fiscal year 2022 first quarter consolidated business results. Today's session will be held online until 3:50 p.m. Japan time, we will give a presentation, followed by a 20-minute Q&A session with media representatives, and the second half of the 20 minutes will be Q&A with analysts and investors. We will accept questions for the teleconferencing system. As modified to in advance, pre-registration is necessary to use the teleconferencing system.
Today's speakers are representative Executive Officer, Corporate Executive Vice President and CFO, Masayoshi Hirata; Corporate Officer, Vice President of Finance and Cash Management Division, Yasuhiro Matsunaga. I am Hara from the Corporate Communications Division.
Now Mr. Hirata will give a presentation using the power port material into the fiscal year 2022 first quarter consolidated business results.
Thank you very much for participating today. I would now like to explain about the fiscal year 2022 first quarter consolidated business results.
First, please refer to Page 3. These are the key points of the FY 2022 Q1 consolidated business results. There are 4 points. The first point is operating income or loss was significantly impacted by semiconductor shortage and solid material and logistics costs and declined year-on-year. But due to higher nonoperating income, net income increased. I will explain about the numbers later on.
The second point is free cash flow with higher cash flow from operating activities and from investing activities. Free cash flow was JPY 93.6 billion.
Third, orders received, reflecting orders for large-scale projects in the previous year. Amount of orders received and order backlog decreased year-on-year. But on an increasing trend, compared to before and in line with the plan.
The fourth point is FY 2022 full year guidance. We expect to achieve the operating income forecast announced on May 13, operating income forecast of JPY 170 billion. Impact of semiconductor shortage and soaring material and logistics cost exceeds assumptions made at the beginning of the term. But through initiatives such as sales price hike, we will make steady efforts to achieve our forecast.
Please turn to Page 6. This is the -- a view of the income statement. Net sales in fiscal year '22 Q1 was JPY 740.7 billion, a year-on-year increase of JPY 12.8 billion or 2%. This includes benefit from weaker Japanese yen of JPY 41.3 billion. Excluding this benefit, underlying net sales declined by JPY 28.5 billion or 4%.
Operating income loss was negative JPY 4.8 billion, which did benefit from weaker yen. However, because of a drop in sales and profit, mainly due to semiconductor shortage. And in terms of costs, there was impact of soaring material and logistics costs. Operating income or loss and therefore, declined year-on-year by JPY 19.3 billion. I will explain in more detail later on.
Income before income taxes was JPY 41.7 billion, a year-on-year increase of JPY 12.5 billion. Gain on sale of securities and equity earnings from Kioxia pushed up nonoperating income to JPY 46.5 billion, which contributed to the increase in income before income taxes. Consequently, net income after deducting tax expenses [indiscernible] was JPY 25.9 billion, an increase of JPY 7.9 billion from the previous year.
Page 7 is the overview of the year-on-year comparison of operating income or loss. At the far left is the FY 2021 Q1 operating income of JPY 14.5 billion. And if we add back the restructuring cost of JPY 300 million spent last fiscal year, operating income baseline operating income becomes JPY 14.8 billion. There was positive foreign exchange impact. But with secure impact from semiconductor shortage and soaring material and logistics costs, as written in the right, we incurred an operating loss of JPY 4.8 billion in the first of FY '22.
As written in the box outside the waterfall chart, semiconductor shortage is included in decrease in sales and pushed down profit by JPY 3 billion. Soaring material and logistics cost is included in cost increase, pushing profit down JPY 9.4 billion which put together led to a decline in profit of approximately JPY 12.4 billion.
Page 8 is the breakdown of nonoperating income or loss. Nonoperating income in Q1 FY '22 was JPY 46.5 billion, a year-on-year increase of JPY 31.8 billion. Income on sale of securities was a large factor with JPY 30.1 billion. This is because we continuously verified the equipments of our shareholdings and decided to sell some of them. Equity in earnings of affiliates improved by JPY 8.9 billion from the previous year, mainly due to an improvement in equity and earnings from Kioxia of JPY 7.9 billion.
Page 9 shows the free cash flow. Operating cash flow was JPY 111 billion, partly due to the collection of accounts receivable at the end of the previous fiscal year. Cash flow from investing activities was negative JPY 17.4 billion for a total positive cash flow of JPY 93.6 billion.
At the lower part of the slide, equity attributable to the shareholders of the company is JPY 1,221.7 billion. After the payment of year-end dividend for FY '21, additional net income accumulated other comprehensive income improved due to yen's depreciation, resulting in shareholders equity increase of JPY 15.1 billion. Shareholders' equity ratio is 31.8%. Net interest-bearing debt is a borrowing position of JPY 14.2 billion.
Please refer to Page 10 for the breakdown that I have just explained.
From Slide 11 is business results by segment.
Slide 12 is the overview of the breakdown by segment. Details will be explained using the following slides.
Slide 13 shows the breakdown of the Energy Systems & Solutions business. Net sales were JPY 121.8 billion, an increase of JPY 23.1 billion versus the same period last year, and operating loss was JPY 7.6 billion, a decrease of JPY 5.8 billion from the same period last year. As you can see, both Power Generation Systems and Transmission & Distribution Systems, sales increased and profit decreased, respectively, due to the differences in sales mix.
Slide 14 is the breakdown of the Infrastructure Systems & Solutions. Net sales was JPY 135.1 billion, and operating income was JPY 0.5 billion. In public infrastructure, sales and profit increased in the Defense and Electronic Systems business. Industrial Systems is in the red because of the slight delay in price hike in response to soaring material prices. However, there was an improvement in the railway business due to a reduction in losses from overseas projects and loss in the Railway business narrowed. Overall, segment sales and income increased year-on-year.
Slide 15 is Building Solutions. Net sales were almost flat at JPY 142.3 billion, and operating income was JPY 0.3 billion, a decrease of JPY 6.1 billion from the same period last year due to the shortage of semiconductors in both the elevator and escalator business and the lighting business and the impact of soaring material prices in the air conditioning business.
Slide 16 shows the breakdown of Electronic Devices & Storage Solutions. Net sales were JPY 181.5 billion, a decrease of JPY 19.4 billion from the same period last year. Operating income was JPY 7.7 billion, a decrease of JPY 2.6 billion from the same period last year. In semiconductors, both sales and profits increased due to the continued strong market conditions and an increase in sales of the new flare technology mask writer.
HDDs & Others saw a decrease in sales and profit due to a decline in demand for HDDs for PCs and a change of sales channel of Kioxia resell products. Also, the quality cost is being discussed with a specific customer. Regarding the perception of quality and for accounting purpose, conversation is ongoing and for accounting purpose, conservative estimate, JPY 4 billion for provision for product warranty is booked.
Upper part of Slide 17 is Retail & Printing Solutions. Sales were almost flat at JPY 110.6 billion. Operating income was JPY 0.2 billion, a decrease from the same period of the previous year, excluding the effect of yen depreciation.
The lower half shows Digital Solutions. Net sales were JPY 47.8 billion, and operating income was JPY 2.5 billion. Both sales and income decreased slightly from the same period from the previous year, but both are attributable to the sales and deconsolidation of Chubu Toshiba Engineering Corporation.
Slide 18 illustrates the 3-year trend of orders received and order backlog. The left graph shows the amount of orders received, which was down year-on-year. This was due to the large scale order booked in the previous year. So the order level this year has been consistent with the normal years. The right side indicates the order backlog, which was down year-on-year, this was primarily due to the progress in thermal power project. The order backlog has been steadily increasing, up about 8% over the past 3 years.
Slide 20 shows the equity earnings from Kioxia. The details are provided on the slide. So please take a look at your convenient time.
From Page 21, I'd like to go over the fiscal year '22 forecast.
Please turn to Page 22. The forecast on net sales and operating income remains unchanged from the previous guidance. On the other hand, the projection for income before income taxes is revised up by JPY 30 billion vis-a-vis the previous forecast. This is due to the sales gain on the air conditioner business being approximately JPY 20 billion higher than the previous forecast, as announced on August 1 as well as a reflection of equity in earnings of Kioxia in the first quarter. As a result, net income is expected to be JPY 200 billion.
Free cash flow will improve by JPY 20 billion from the previous forecast, reflecting the upward revision of the sales gain on the air conditioner business. And shareholders' equity will be JPY 1.28 trillion as indicated on the right, reflecting the improvement in net income. The figures reflect the special dividend of approximately JPY 70 billion, which we have started to pay out from August 8.
Slide 23 shows the full year guidance for FY '22 by segment. The column at the far right shows the changes from the previous forecast. For Energy Systems & Solutions, net sales has revised up, thanks to the progress in the construction of thermal power plants, while the operating income projection is kept unchanged due to the sales mix.
For Building Solutions, net sales was revised up driven by growth in the elevator and escalator business. While operating income is revised down due to the margin compression of the air conditioner business in Q1.
For Electronic Devices & Storage Solutions, despite the increase in sales and profit of the chip business, the revised forecast reflects the sales and profit decline in HDD and other business. On a consolidated basis, we have not changed the projection of reaching the previous guidance.
Slide 24 completes the changes in operating income from FY '21 actual to the FY '22 forecast. Please refer to the third row in the table that is subtotal. The bar at far left shows the actual operating income of JPY 158.9 billion for FY '21. When adjusted for the restructuring cost of JPY 7.5 billion spent in FY '21, operating income has been roughly JPY 166.4 billion in effect. In FY '22, as negative impact, fixed cost for growth will increase by JPY 45 billion and special community cost flow at up to JPY 13 billion.
On the other hand, we expect positive contribution of JPY 15 billion from weaker yen, JPY 31.5 billion from higher sales and JPY 15.1 billion from improvement to earnings power and project the full year operating income of JPY 170 billion. As noted, inside the balloon, we expect a total negative impact of about JPY 52 billion for the year, including negative JPY 11 billion semiconductor shortage and JPY 41 billion from storing material and logistics costs. We have responded this by achieving positive JPY 32.5 billion in contribution from raising the sales price and another JPY 23.6 billion by improving the product mix.
The FY '22 guidance by major businesses is shown on Page 25 and beyond in the Appendix section. Please have a look at your convenient time.
This concludes my presentation on the results for the first quarter of fiscal '22. Thank you for your attention.
This concludes our explanation. We would now like to start the Q&A session.
From now, during the first 20 minutes, we will respond to questions from media representatives. Please allow me to explain how to ask questions. We will respond to questions from people who are preregistered with the teleconferencing system. We will first take questions on the Japanese channel, followed by the English channel. [Operator Instructions]
We will now receive questions from the Japanese channel.
Nikkei [indiscernible] Yao-san, please.
This is Nikkei [indiscernible] Yao. Can you hear me?
Yes.
I have two questions. This is not about the financial results, but privatization and other strategic alternatives are now being considered by the company. What is the progress so far? And what is the upcoming schedule? That's my first question.
Mr. Yao, thank you for your question. Concerning the point you raised, we are considering the factors and in considering this process in order to ensure transparency. And we want to get to a fair process. Therefore, when it comes to progress and other details, I would like to refrain from responding to such questions during this pin session. I'm very sorry.
Understood. And my second question is the current share price. Since April of 2021, the company's share price has been trending high. And it may be difficult for you to comment on this, but how do you perceive the current share price level of the company?
Thank you for the question. considering how we receive the current stock price level, the company is not in a position to be able to make a comment on this point. Therefore, I would like to once again refrain from responding in detail.
So next question, Nikkei business, [indiscernible].
Nikkei Business, this is [indiscernible] speaking. I have two questions. My first question is about the Energy business, especially the Transmission & Distribution. So compared to the previous first quarter, could you break it down further and elaborate.
For Q1, operating profit is a loss-making of JPY 2.7 billion and is the deterioration by JPY 4.5 billion. Is that your question?
Right. Well, especially -- well, at the moment, there is a progress of the overseas projects, and there is an increase of cost. We are seeing an increase in cost. This was already projected to some extent. And the sales is being booked earlier than expected. So we are seeing these in the first quarter. After second quarter, these deteriorating factors will go away and disappear. So are you saying that cost is being booked earlier than the sales? Is my understanding correct?
Excuse me, could you repeat the question?
So are you saying that the cost is being booked from an accounting perspective earlier than revenue sales. So is that...
So the cost being booked. But so well, I mean, the project is in progress. So the revenue, of course, we are booking earlier sales, but also some of the costs are being front-loaded. And there are some projects that are unprofitable overseas. And those loss are being booked during the first quarter.
So my second question about the hard disk. So you mentioned about the product warranty and -- so it is a large client. And what has caused what is the discrepancy from the quality that this large client has been demanding. Is this a one-off? Or for the second quarter, is this impact going to be linger about the quality issues?
Thank you for the question. Well, about this matter, the client, it is a specific client customer. And we have some differences in perception of quality. The hard disk, other customers' clients do not have the same issue, we ship the same product. And so it seems that depending on the environment that the product is in usage, perhaps there are some differences, discrepancies.
So together with the client at the moment, we're trying to identify the cause. In second quarter, we will be completing to identify the root cause and then it will be solved and addressed.
So is this for a large size server? Is that the case?
Yes, it is for a data center.
So if you say a data center, the usage environment. So I don't believe that it will largely differ anywhere in the world, the usage environment?
Well, yes, generally, I think your understanding is correct. That is our understanding as well. At a specific part whether or not the quality is really defective or not, that is also part of the investigation together with the customer.
Next, from Nikkan [indiscernible] Simpson.
This is Nishikori from Nikkan Kogyo Shimbun. For the Energy Systems Solutions business, for the Power Generation business...
Sorry, your voice is a little bit patchy. I was not able to get your question.
Can you hear me now?
Yes. Now it's clear. So for the... which system did you say? The Power Generation System, is that what you're asking about?
Mr. [indiscernible], can you hear us. Mr. Nishikori, I think he cut off. So please, can you press the teleconference system again, we will come back to you later.
So let me move on to the next question. Mr. [indiscernible].
This is [indiscernible] from Nike. Can you hear me?
Yes.
I have two questions. First, regarding the material prices, the soaring material cost and logistics cost. The prices higher than expected. Are you trying to negotiate with the customers to hire a selling price, but you have not been able to reach an agreement with the customers. So vis-a-vis your expectation, what is the situation with the soaring cost? And I'm sorry, if I can add into the selling price.
In Q1, looking at the profit and loss. If you can turn to Page 7, please. I think you're asking about this slide. And in the middle, we have negative JPY 12.8 billion in the middle. And in the box, we show you the details. In the soaring material and logistics costs, that have been happening for a longer time than expected. But to respond to that, we have been going to our customers to raise the prices. So from the end last year, we have taken those actions. However, we do need to negotiate this matter with the clients.
So we have not been able to realize the hike in the sale price to fully offset the soaring material cost. So for soaring material costs, the negative impact was JPY 9.4 billion, but we are only able to cover that by 50% through sales pricing hike.
So does that mean that the cost is rising longer than expected?
Yes, we expect this level to continue throughout the course of this year. And we are now taking measures to raise selling price. In the next 9 months, we hoping to realize the sales price hike, how to offset the negative impact.
And specifically, what kind of materials do you see the cost rising?
There multiple materials like steel, copper and general commodities and also with the component makers in order for them to make the components, they are seeing an increase in their material cost that is reflected in increasing the cost for us.
My second question is regarding device storage. In the business environment, can you give us a more specific trend? Is the outlook for the chip industry and also the electronic components market, for your Devices & Storage business, what is the recent business trend? As the customers trying to accelerate the buildup of the inventory, do you see any change in the demand trend? And -- or do you see any slowdown? Can you explain by different applications, consumer electronics, auto and industrial applications?
Yes. Thank you for the question. In principle, our products are discrete or power semiconductors are what we provide. So now the U.S. chipmakers are seeing some slowdown in their business. So from that level, we have not been impacted much for business. For the consumer electronics checks, we do see some signs of slowdown. But for automotive applications for industrial applications, the market is still quite brisk.
Also for industrials, does that mean that you're not seeing any material change in the demand from clients?
That is right.
[indiscernible] we're sorry if I can't ask your question before.
This is Nishikori from Nika [indiscernible]. Can you hear me?
We can hear you, but there's some noise around you really.
Is it all right now?
Yes, it's all right now.
I'm sorry, I could not ask my question before. By segment, from April to June, Energy Systems & Solutions, Power Generation System business is in operating loss. I want to know the breakdown. That's my first question.
Thank you for the question. Once again, as I mentioned for Transmission & Distribution system, there has been some replacement demand with low profitability. And for Power Generation as well, there are overseas projects with very quick progress and in Q1, there's been some projects with a low profitability. And the sales is being generated from these low-profit projects that is leading to us. And in Q1, we scrutinized our quotation and we -- please understand that something that this will not happen in the second half onwards.
Understood. And my second question is -- sorry this is not directly related to the financial results, but in the winter, towards the winter, the government is considering to resume operation of nuclear power plant and so forth to meet power shortage, and there is soaring electricity price. How does Toshiba perceive this? And do you have any requests?
Well, probably, generally speaking, in the winter, if the current situation continues, there's likely to be have a power shortage, electricity shortage. That is what the company thinks and that is what I personally think as well.
And you're asking for a request to the government, we would like to ask the government to take various measures to prevent such a situation and use would like to cooperate as much as possible. We ask the government to take appropriate measures.
I'm sorry, it may be an answer a simple answer, but how can Toshiba possibly cooperate. On an emergency basis, some nuclear power plants that quantitating operation can resume apportion and these are some of the suggestions that we can possibly make.
So now we would like to take questions from the English channel. [Operator Instructions]
It seems there are no questions, so we would like to take questions from the Japanese channel. Please wait as we will be switching the lines.
NHK [indiscernible], please.
This is Shima from NHK. Can you hear me okay?
Yes, we do.
I have 2 questions. First is about the operating loss forecast. And for the logistics and material cost increase, you mentioned JPY 41 billion and also increase in sales, sales price, JPY 32.5 billion. So for the full year, the sales price increase, still, there is some costs that cannot be absorbed from price hike. So if that is the case, if there is a price hike, would that lead to the loss of opportunities of receiving orders?
Thank you very much for the question. For the full year, the forecast. I think, Slide 24 is where you are looking at. Your question is related to Slide 24. As you mentioned, for the full year, soaring material and logistics cost, JPY 41 billion total is the estimate, the forecast and sales price hike is a positive 32.5%. So we cannot absorb the entire soaring cost.
First, in Q1, only about half of price hike is realized and also that the infrastructure-related projects, especially for already ago, we have already fixed the contract amount. So for future projects that we are going to sign and we can provide a quotation based on the current terms.
And also, even with the past contracts, projects, there is some clients that we have in escalation clause. So we are negotiating with our clients, but still not the whole amount, the total amount can be transferred through the sales price up during this fiscal year, it may be difficult.
So may I ask that in that case, for soaring material and logistics costs, if -- I mean -- if it is reflected to the sales price, would that lead to loss of business opportunities? Are you afraid?
What did you say, could you repeat your question?
Well, because inflation, the material cost is soaring, if you try to transfer the price and increase the sales price, would you be worried that you will be losing the opportunity -- business opportunity, sales opportunity?
Well, from a customer's perspective, if the price goes up, and if they are offered a higher price, that is not at all favorable. The clients, the customers also do have a good understanding of the current situation. So with negotiation and discussions. We are doing our best not to lose the business opportunity.
My second question about the special committee related cost expected, it has increased from JPY 10 billion to JPY 13 billion. And -- so if this process lingers too long, the amount, the cost may keep a ballooning and increasing. So from an accounting financial perspective, how -- until when will this process continue? Or by when do you want to finish and complete the process?
Well, if the process is extended, instead of saying that it is extended as a company, the management, of course, and also the special committee, of course, they are deliberately going through the review process. And together with consultant firms, securities companies and also with their help and advice some workload increased. So that is other reason for the cost increase. It's not that the process is being extended.
And from a financial perspective, the view, of course, it is better with a lower cost, of course, but still we need to review all the alternatives, strategic alternatives. And as we are in that stage, I think it is reasonable to see some increase of cost.
Well, do you think that during this fiscal year that you want to complete the process, so there's no more increased cost?
Well, it's not that we want to limit the period, so in order to control the cost.
So there are 3 people in line as from [indiscernible]. We will be receiving the questions from those gentlemen, and then we will move on to the question-and-answer session for the investors and analysts. [Operator Instructions]
[indiscernible], please.
This is [indiscernible] from [indiscernible]. Can you hear me?
Yes, we can.
I have two questions. answer earlier. This is a follow-up question from the NHK person. At the special committee, there is an affiliated cost of JPY 13 billion, which is an increase of JPY 3 billion. So what led to this cost increase? What change at this cost increase of JPY 3 billion for special committee.
As I alluded to earlier a little bit, for the products of consideration and also, we want to dig deeper in the consideration process. So that's what led to an increase in cost.
When you say dig deeper, what is the reason for going deeper in the analysis and the consideration?
As initially, we are budgeting JPY 10 billion. And at that point, regarding what we are going to do and how deep we are going to do that. It was just the beginning of the process. So we have not accurately calculated the details of the number. But as we have made some progress, we have found out that we need the extra half from the consulting firms and so forth. So those are some of the findings that led to an increase in cost.
I see. And another question is you announced in July narrowing down the candidate and there is an offer for going private and there is also offer to maintain a listing. And I think both of those candidates remains to the second round. But those 2 are totally different directions. So when you consider the different option, how do you compare the one versus the other?
Well, the direction may be different in how we operate may be different depending on options. But from our view, we only have a single view, maximizing our corporate value. What is the best way to maximize the corporate value? And to all the stakeholders, what is the best way to benefit the interest of stakeholders. So that is the view that we are having to consider the options.
So when you compute the different ideas and options, how do you compare because if it's 2 options for which both are moving into direction of going private. But if you are comparing the idea of one going private and the other, maintaining the listing, how do you compare those two?
Well, calculating the valuation agnostic of which pathway is taken, the valuation can be done. So we believe that we can do a comparison between the 2 different options.
Murakami-san from [indiscernible], please.
This is Murakami from [indiscernible]. Can you hear me?
Yes.
You are currently considering strategic alternatives. I have a question about this. And the privatization versus maintaining listing status. Concerning these 2 options, what are the pros and cons of them, do you think?
Thank you very much for your question. We appreciate your question very much, but we are right in the midst of working on this process. And I don't think it's appropriate for me to explain on a personal note, the pros and cons. If I do that, I will end up [ totally ] distorting the process. So I'm very sorry, but I have to refrain from responding to this question.
The next question will be the last question from the media [indiscernible].
This is Toyokeze Okada. Can you hear me?
Yes.
I have a question. One question, at the AGM June, it is related to the result. So there was about a support ratio for 60% or 70%, what is the reason that there was a large number of oppositions. And based on the analysis, how does the company view the dialogue with the shareholders?
And also, is that being something that is being discussed. And if there's a lot of opposition against votes, if you do an analysis, in the governance code, in the principal, it is stipulated. And also as it relates to the IR activities, I think that there should be analysis done. So that is the reason that I ask the question.
Thank you. As you mentioned, yes, we have done an analysis, are doing analysis. And based on the results. Well, there are diverse ideas, opinions by shareholders, and we would like to look into them each separately and engage with the dialogue.
So at this point, is there anything that you have identified that could have been the cause for the high opposition rate? Is there anything that you can share?
Well, still the analysis is ongoing. So once we have the result at a separate opportunity, we would like to report and share.
So now we would like to close the questions from the media. Now we'd like to move on to the Q&A session from the analysts and investors. First of all, we'll take questions from the Japanese channel. And then after that, we will switch to the English channel. So we will get the question first from the Japanese channel. [Operator Instructions]
So from Citigroup, [indiscernible].
This is Ezawa from Citigroup. Can you hear me?
Yes, we can.
Also on Slide 24, you show the waterfall chart on the operating profit. So I have two questions on this slide. The first question is the item of higher sales from Q2 to Q4 in the plan, you're seeing JPY 36.1 billion coming from the increase/decrease in sales. But if you think about the impact of the chip shortage and if you look that impact in Q1, without the FX impact, the revenue declined. But from Q2 to Q4, looking at the sales plan on a year-on-year basis, I think the it going to be a revenue decline of JPY 50 billion. However, despite that, you're saying that there's going to be positive JPY 36.1 billion on OP from higher revenue. So if we think about the shortage impact, in effect, this will be plus JPY 44 billion. So where you get this positive JPY 44 billion from?
And also on the same page, I'd like to ask my second question. Looking at the mix, in Q1, it was negative from Q2 to Q4, it's going to have a positive impact of JPY 31.8 billion on the profit. Where did you get this number? Can you elaborate, please?
Sorry. Well, it's a little bit difficult to hear your second question. Can you repeat that again?
Yes, you see a difference in the sales mix and other factors. In Q1, it was negative JPY 8.2 billion from Q2 to Q4, you're expecting a positive impact of JPY 31.8 billion. Where did you get this number from?
Yes. Mr. Matsunaga response, the first question. And on the second question, let me try to answer that for one. I don't know if you remember or not, but last year, in FY '21, for environmental measures, we spent roughly JPY 10 billion, which was reflected as lower cost this will be absent this year. So we will have an increase of JPY 10 billion. That's reflected in the sales mix. And also last year, for the TNP business, we had a large project which was not progressing well. So last year, we booked a loss of approximately JPY 10 billion. So that project has been completed. So we will no longer have such loss this fiscal year. So those are the major items for this positive number in the sales mix.
And also at the respective business, especially for the distribution retail business, we are trying to shift to a high-margin business like a service business. So those measures are underway. And by realizing that initiative, all in all, we are expecting a positive impact of about JPY 30 billion coming from the sales mix improvement.
And let me answer your first question. regarding the OP impact from higher sales, Q1 was negative JPY 4.6 billion. But in the remaining 9 months, it did positive impact. Recently, we have made an announcement in Toshiba [ Carrier ], TCC has been divested. And with that sales can -- sorry, we said sales, it's deconsolidated. And as a result of that, the revenue has been coming down, which is quite significant.
However, with the other businesses, we're seeing an increase in revenue and profit. So that's where we get this number from. And the big revenue and profit growth is coming from the Energy Systems and also Device Solutions business. So in those businesses, they are driving the sales and profit growth.
Next, UBS Securities, Yasui.
This is Yasui from UBS Securities. This may be similar to other questions, but Energy Systems [indiscernible] JPY 7.6 billion loss. During the past 6 years, net sales was JPY 120 billion and a loss of JPY 7.6 billion seems quite tough. And there might be various factors behind this. But this year, you have very high forecast of JPY 44 billion. And is it correct in understanding that the Q1 performance is in line with your plan or not? JPY 44 billion is our annual forecast. And do you be able to achieve this annual forecast? That's my first question.
And secondly, semiconductor business, excluding new flat technology, how did it perform?
And my third question is about your balance sheet. More than JPY 1 trillion of current liabilities. And last year and the year before, it was about JPY 700 billion to JPY 800 billion. Why is there a significant increase in current liabilities?
First, Energy Systems & Solutions business. On a full year basis, you are correct. [indiscernible] touched upon this before. I mentioned that overseas, there were some projects with low profitability, and they are progressing. And in Q1, there was a loss incurred from these the profitability of these projects and the remaining 9 months of this fiscal year, we should be able to enjoy more stable profitability as well as itself. So JPY 44 billion annual guidance, we think we will be able to achieve.
And if Q1 -- was your Q1 performance in line with your forecast?
Could you please repeat that question?
Q1, Energy Systems & Solutions performance. Was it in line with your in-house forecast?
On an annual basis, our performance is in line.
Understood.
And what was your second question?
About the Electronic Devices & Storage Solutions business, you talked about new technology, but excluding new flare technology, what is the market environment as well as performance trends.
There's increase in net sales and profit, mainly because of new NuFlare technology. But concerning our semiconductor business, it's trending at a very high level, very steadily. And the power semiconductors as well as the semiconductors for both semiconductor businesses, they are trending as we expected.
On a Q-on-Q basis, net sales and profit are at the same level? Is that the great understanding?
Yes. Sales and the profit is slightly higher actually. I may have explained about this before, but we have a factory in Kaga, and we are operating at full capacity. We do not have so much levy, and we are making efforts to be able to produce more lots. And there are many orders coming in. However, we are operating at full capacity, and we are continuing to make capital investments.
So if we can increase production capacity, we can make sure to increase net sales and profit further. And profit as well is trending well, increasing on a Q-on-Q, quarter-on-quarter basis. Is that the question? Yes.
And about the balance sheet, Matsunaga-san will response.
I want to confirm your question.
When you say balance sheet, are you referring to Page 26, others?
I was take a look at attention, the attention/report current liabilities to the portion. Other current liabilities JPY 1.019 trillion.
You were referring to the attention/report?
We have not been able to pinpoint what's written in the attention/report, but there is advance payment and some unpaid bonus that's pushing up other current liabilities. It's concerning particular business, it will be advanced payments in some of our businesses. There may be some increase.
Next, SMBC Nikko, Yoshizumi-san.
SMBC, Yoshizumi speaking. Can you hear me?
Yes, I do.
I have two questions. First point, about the sales price hike. On Slide 24, between Q2, Q4, [ 72.2 ] increase [ 27.7 ], [ 28 ] and that is between Q2 and Q4. So what would be the feedback response? What is the feasibility on part of the client customers?
My second question is more of an overall question. So this time, shortages of first components and soaring cost, excluding that, it seems that all of the business segments, the business environment is quite tough. And it seems that all of the segments have gone through a decline decreased revenue. So what is the background reasoning? Is it that Toshiba is losing market position? As a CFO, is there any areas of concern, for example, downside? And any concerns weakening business areas?
Well, we whether we are losing customers or not, no, that is not the sense. Well, some of the customers, well, because of COVID and ore because of the uncertainties, and they may spend and hold placing orders. Yes, that is very partially, but may be happening. And I think this applies to Toshiba tech. Energy, Infrastructure, semiconductor-related that is not at all the case that we are seeing some weakening no. And the first question was? Excuse me, could you repeat your first question, is about the sales increase?
So Q1, how were you successful in increasing the sales price? And between Q2, Q4 against the plan, what is your -- how confidence? What is the progress? So could you explain the progress, how confident you are?
For Q1, for the JPY 55 billion, well, that was mostly the mass-produced motors and also semiconductors as well and hard disk related. So those were the areas that the price hike was accepted. But still, at this point, at Q1, the sales increase, we do not believe this has been thoroughly been realized. So mass produced products in the remaining 9 months, we will have our customers understand.
Well, for the orders that we received already the price reset has taken place. So the price hike will be realized in the remaining 9 months. Infrastructure related also for very long spread projects. As I mentioned earlier, there is an escalation clause that is included in the contract. So based on this clause, the price hike could be realized. So we are in negotiation with our customers.
Also, we have two more people who have raised their hands at ask questions. So we would like to take the next one as last question. Okawa-san from Daiwa Securities, please.
This is Okawa from Daiwa. I have three questions. My first one is on the Energy Systems & Solutions business. Compared to 3 years ago, I think you have a better management in the project to make sure to avoid loss-making contract. But you say that you have some low-margin business. This the ones which you have received the order many years ago? Or is this something more recent? Can you elaborate on how you're managing the margin on the projects for Energy Systems & Solutions?
Yes, approximately 3 years ago and since then, we have been very selective in the order taking so that we can have a rigorous management on the margin. And at this point, unfortunately, in Q1 this fiscal year, we had some projects for which we have received the order before that timing.
So there are some projects where the construction has been progressing, and we do have some remaining low-margin projects. And with the increase in the material costs the margin was under pressure further for these projects.
My second question is for HDD business, for the data center business, what is the outlook? And can you give us the outlook from the view of the year situation and also the client situation?
And looking at our HDD business or data center, at this point, I think there has been some slowdown from the [ pity ] momentum, and I think that is the general situation for the whole market. But over the long term, we expect the market to continue to roll. And at the same time, looking at different customers, I'd like to refrain from making comments on specific clients.
But generally speaking, the big data center players are using your products. On that note, looking at the mid- to long-term trend, we believe we will be able to grow the volume. So that is the assumption in our plan.
My third question is, I think you are considering different strategic options. And you said that earlier, you will not be able to offer the details to secure the fairness of the process. Do you have any indications on the schedule or timing of making the announcement for that process?
I understand the intention of your question. But having said that, in terms of the upcoming schedule, I would like to refrain from making any specific answers. Apologies for that.
There were no participants on the English channel. So I would like to entertain the next and last question from the Japanese channel. Damian Thong, Macquarie Securities.
Order backlog, 3% year-on-year. And this fiscal year's forecast, could you please explain Infrastructure and Energy Systems & Solutions business almost no change you commented before. And for example, you talked before about the possibility of resuming operation of nuclear plants in Japan. And Transmission & Distribution System, there are various business factors and so forth. And under such circumstances, how you forecast the order backlog going forward.
Thank you for your question. A major factor is energy-related business as well as the Infrastructure Systems & Solutions for Energy Systems & Solutions business, Specifically, in the case of Toshiba, we are trying to assume what applies to Toshiba, but there are some items in the pipeline and there are some pipeline projects for which we have not been able to receive formal orders yet. But we do expect orders for Energy & Systems Solutions projects to increase steadily, and we are trying to get prepared for that. I would like to refrain from comment in detail about the future prospect for nuclear power plants.
I have one follow-up question is it. Q1, you had a low profitability projects overseas incoming losses. And the [ thermal ] power plant projects and other overseas legacy projects. What percentage do these kinds of legacy projects account of total business? Thermal power plant, legacy thermal power plant business and other low profitability overseas projects, potential, what percentage do they account for? And how much order backlog to have remaining?
At this point in time, we are trying -- we are not specifically identifying unprofitable projects. If that is the case, we have to have a provision. For the Energy Systems & Solutions, group company, including affiliates, we are conducting a detailed review of projects at the moment. we are not expecting any significant loss from any of our projects at the moment.
Thank you very much. Since the scheduled closing time has come, we would now like to end today's briefing. Thank you very much for participating today.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]