Mitsubishi Heavy Industries Ltd

TSE:7011

Earnings Call Transcript 2024-Q1

[Hisato Kozawa, executive]

Good afternoon, everyone. Nice to meet you today. Let me start my presentation. The table of contents is shown on Slide 2.

Let me offer you key takeaways. Please refer to Page 4. This page shows the major KPI results.

Highlights are shown on Slide 5. For the first quarter, we progressed as per the plan in general. Order intake, revenue, profit, all of them exceeded the previous year's level, especially order intake grew significantly. Progress against the full year forecast is approximately 35%, which is quite high. This is due to the fact that we've received a large defense-related order at the beginning of the year.

For Defense business, order is normally skewed towards the end of the year. However, this year was exceptional. Business profit, net income both of them have grown quite significantly from the same period last year, mainly thanks to the price optimization efforts since last year revenue growth and weaker yen. And this will be detailed out later on in Slide 9. Free cash flow is almost the same level as the last year.

Slide 6 and onwards gives you the details of the financial results. Slide 7 is rather repetitive, so let me skip.

Slide 8 shows balance sheet and cash flow. Total asset is JPY 5,655.9 billion, up by JPY 181.1 billion from the end of 2022. This increase has been driven by the impact of foreign-denominated asset translation due to weaker yen. The impact was approximately JPY 150 billion. Inventories also slightly increased, but this is within the normal range. As for the cash flow, investing cash flow improved year-on-year and became positive, this is due to the sale of real estate securities.

Slide 9 explains profit bridge from the same period last year. The bar graph on your left shows the business profit of Q1 2022, which was JPY 14.9 billion. Forklift and HVAC, last year, the same period, had a negative impact from the cost increase. But this year, magnitude of cost increase since last year has been suppressed. We had a cost optimization, which is the impact of the price increase. It exceeded the cost increase impact and profit went up by JPY 14 billion.

Decreases in onetime expenses in the Thermal Power business piece, we see no longer have loss associated with European business structure reform unlike last year. And we have other factors, and our business profit was JPY 51.9 billion.

Slide 10 shows a summary of orders, revenue and profit from business activities by segment. Now let me explain the results of each segment.

Slide 11 shows the results of the Energy segment. Orders, revenues and business profits also a positive against the full year's forecast. Especially orders intake for GTCC continue to be strong from the previous year. Although order intake and sales of steam powers are down year-on-year, this was expected under the current environment and the fact that we were able to make up that difference in other business is a good sign. Steam Power increased its profit mainly because in [ nonrestructuring ] costs of our European site from the previous fiscal year.

Slide 12 shows the Plants & Infrastructure segment. This segment also had a good start in terms of order intake, sales, revenues and profits compared to the full year forecast. Orders are down during the year, but this was mainly due to the Metals Machinery business, as I indicated in the table. Of course, this JPY 108.2 billion in the current quarter is also a high enough level, and the market continues to be strong.

Slide 13 shows the status of logistics, thermal and drive systems. Orders, revenues and business profits are all roughly 25% to our full year forecast, so mostly in line with our plan. Price optimization efforts since the latter half of the last year is contributing fully, which is a positive sign. On the other hand, although the availability of electronic components is improving, it's still unstable and we are closely monitoring the situation.

Slide 14 shows aerospace, defense and space. As I mentioned earlier, large orders received from the defense sector contributed to the segment's total orders of JPY 687.1 billion. As shown in this graph, orders received in the first quarter alone were equivalent to those of the entire last year.

In the commercial aircraft Tier 1 business, both sales and income profit increased year-on-year due to the increase in the number of 787 shipped from the Boeing and the benefits of the weaker yen.

Slide 15 to 17 shows our earnings forecast for FY 2023. Since there is no change from what we announced in May, I will omit the description of the content.

That's all for my presentation. Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]