Mitsubishi Heavy Industries Ltd

TSE:7011

Earnings Call Transcript 2023-Q3

[Hisato Kozawa, executive]

Hello. This is Kozawa speaking. I look at [indiscernible] this presentation to make a presentation about the financial results.

So Slide #2 shows the contents of this presentation. First of all, this is the overview of the financial results.

Please refer to Slide 4. It shows the major financial indicators here. The summary is -- the highlights is on Slide 5. To give you some highlights, in terms of order intake and revenues have increased from the previous year, specifically for the order intake growth has been substantial. Continued with the second quarter, we have seen a strong sound trend. The GTCC compared to the previous year has increased by 57% to JPY 536.8 billion. So excluding the Plant & Infrastructure Systems segment. We had all segments.

Revenue declined slightly in the Plant & Infrastructure Systems segment, but for the other segments, it has increased. The order intake and the revenues is to as they are coming from the ForEx consideration has increased by JPY 240 billion, respectively, however even excluding this factor, we think that both items would increase.

In terms of profit, we had [indiscernible] continue to rise in the material and logistic costs on top of plans, the logistics cost and [indiscernible] has increased. There has been a one-off expenses coming from some businesses. So there has been a negative impact. Having said that, the revenue increase, price optimization, fixed cost reduction and the impacts of the weaker yen, although the business profit and the net market that included.

In terms of interest-bearing debt compared to the previous year, has improved greatly, the D/E ratio and the equity ratio at still on a high level of fiscal health.

Going to slide 6 and onwards, we listed more of a detail of our financial results.

Slide #7 is a chart. So this is a repetition, so I will not go into this.

To the Slide 8. This is the balance sheet and the cash flow. In terms of total assets from the end of FY 2021 has increased by JPY 361.3 billion to JPY 5,477.6 billion. The context of the increase was due to the weaker yen, the foreign currency denominated [indiscernible] has increased by -- is JPY 85 billion. The cash on hand is increased by JPY 15 billion.

Instead on the chart, inventories and trade receivables has increased substantially. But again, this is again from the impact of the ForEx translation. If you look in this, basically, the change is in range in a normal year.

With the cash flow, compared to the previous year, it declined by JPY 65.1 billion. The cash flow was JPY 213.2 billion. But the reduction of the investing cash flow is that the gains coming from the sale of real estate and marketable securities has decreased compared to the previous year.

The decrease of operating cash flow is that the payment of the corporate tax has increased compared to the previous year. Excluding these factors, operating cash flow has improved.

Please go to Slide 9, year-over-year comparison of the business profit that I want to explain. So on the bar chart on the very left, FY '21 third quarter business profit was JPY 80.8 billion. The LTD and aviation businesses has led to increased revenue, and this was JPY 31 billion. On the other hand, material cost and logistics costs have increased, and there was a disruption of the supply chain, and this is a [ product investment ] and this declined to profit by JPY 13 billion. This minus JPY 13 billion includes the improvement of JPY 28 billion through price optimization.

On the bar next to it, we have the onetime impact of Thermal Power business and other. And I have talked about this in the financial meeting in the second quarter, there has been a decrease from the previous year of high [indiscernible] in business. And this year, there is an organizational transformation costs in Europe. On top of that, in the third quarter, there has been some additional cost for the organizational transformation and some one-off expenses with the international projects. But these are the factors within here, the business for this quarter is JPY 105.2 billion.

On Slide 10, you see the summary of the order intake revenue profit by each segment. From now on, I would like to give you more details on [indiscernible] the segment situation.

On Slide 11, you see the status of the Energy Systems segment. Order intake, revenue and profit all exceeded the previous year. And as you can see, the numbers that are shown at the bottom of this graph, GTCC, Aero Engines, Nuclear Power businesses are showing a steady progress.

And recently, with regards to the full-year profit forecast, we have lowered the [ debt ] JPY 10 billion to JPY 110 billion. And this is mainly due to the complaints that related to the international provisions and also making additional provisions are considering the unstable operation of IGCC.

And on Slide 12, we show Plant & infrastructure segment. Order intake, engineering, merchant vessels have reduced compared to the previous year. And for metal machinery that was continuing with good progress are struggled in the third quarter. However on a 9-month cumulative basis, it's still exceeding the previous year level.

Sales, there is a large impact from the sales reduction of engineering compared to the previous year and down by JPY 4 billion. And for the business profit, we see a good impact from the sales increase of metal and machinery, achieving profit growth.

And for Slide 13, you see the LT&D segment status. As a segment in total, order intake and sales are progressing [indiscernible]. However, for the business profit, it went down slightly. For order intake and revenue, we see a significant increase compared to the previous year.

Logistics systems, HVAC engines, the FX rate or the taking out the FX impact or the price increase, we're seeing increase on a volume basis. In terms of a profit until the second quarter, the material, the logistic cost increase has been captured through the sales price increase, which has not caught up.

Finally, we're starting to see improvement. It's [ much ] on the material, we've got the profit for three months when you compared to the previous year. First quarter was lower by JPY 8 billion. The second quarter was JPY 1.8 billion positive. And in the third quarter, it was a positive JPY 5.7 billion. And so we're seeing a continuous improvement.

On Slide 14, you see the status per ADS. The Commercial Aviation Tier 1 business, we saw increase in shipment for freighters and business jet. And on top of that, due to the weaker yen, we saw increase in sales and profit, and we're seeing solid progress of Defense business.

And taking the progress of the third quarter into account, we have increased the full-year forecast by JPY 10 billion and raised the profit forecast of JPY 40 billion.

And between Slide 15 to 17, you see the forecast for FY '22. As I mentioned earlier, for orders revenue profit, we're not changing the quarter guidance, but we have partially revised the full year profit forecast for the segment.

And in terms of the undetermined foreign currency amount, looking at the current status, we are changing the assumption of FX rate to JPY 130 to a $1, and please read the specific numbers on the chart. And that will be all for the explanation from myself around the financials.

And I will skip some of the numbers on the appendix, and please jump to Page 23. On today, we have [indiscernible] some disclosure material, but starting from last evening, we saw a lot of reports on the media and in today's Board meeting, so we have officially decided the discontinuation of SpaceJet development. So please refer to the details on the slides in front of you.

That will be all for the explanation from my side. Thank you very much.