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This is Fukumoto, Director, Executive Officer, General Manager of Finance and Accounting of IHI Group. I will explain the overview of IHI Group's financial results for the second quarter of fiscal 2024 and the full year forecast for fiscal 2024.
Here are the contents of today's presentation. Please turn to Page 4. For the consolidated results for the second quarter of fiscal 2024, here is the summary. Orders received was JPY 760.2 billion. Revenue was JPY 757.4 billion, operating profit was JPY 77.2 billion. Operating margin was 10.2%, significantly higher than the same period last year. We were able to get off to a good start in the first quarter of fiscal 2024, and that trend continued into the second quarter.
Based on the robust results, we have made a certain level of recovery in the financial soundness indicators as shown on the bottom right. The impact of losses related to the additional inspection program for PW1100G-JM engines and the litigation settlement in North America recorded in the second quarter of FY 2023 are treated separately from the rest for a comparison purpose in this presentation. I will give you more details on the following pages.
Please turn to Page 5 for the highlights of the second quarter. the civil aero engines business continued to be a profit driver in the second quarter of fiscal 2024, same as the first quarter. And the company achieved record profits in each profit category, including operating profit for the first half of the year. The growth in spare parts for civil aero engines contributed significantly to orders received, revenue and operating profit. Orders received for engine parts related to the defense business also increased. Operating profit increased significantly due to the strong sales in spare parts delay in accrual of maintenance costs and favorable changes in foreign exchange and other factors. I will explain more details later.
In the vehicular turbocharger business, we recorded expenses related to the restructuring of the business as we continue to consolidate sites in Europe. As for the impact of the additional inspection program for PW1100G engines recorded in fiscal 2023, there is no change in the assumption for the total dollar-based estimate and the amount to be covered by the company. However, the estimated amount in Japanese yen terms decreased by approximately JPY 8.3 billion due to the appreciation of the yen to a level close to JPY 140 per dollar towards the end of September. We have made a good progress in signing contracts with airlines to compensate for grounded aircraft, which is a major portion in the estimate and the impact on cash is gradually accumulating.
Page 6 shows orders received revenue and other key profit and loss items. We have also included a comparison of changes in the figures with and without the special factors recorded in fiscal 2023 for your reference.
Please turn to Page 7. This page provides a waterfall chart of the factors of year-on-year change in operating profit from JPY 16 billion in the second quarter last year to JPY 77.2 billion in the second quarter this year, excluding special factors, factors of change in operating profit by segment are shown on Page 21 for your reference. Changes in the business environment resulted in an increase in operating profit by JPY 44 billion due to a major attribution from continued strong sales of spare parts for civil aero engines.
In addition, COGS reduction effect through our efforts to reinforce the cost structure, changes in the foreign exchange rates contributed to the profit growth. The JPY 4 billion in reformation of business is an impact of the site consolidation of the vehicular turbocharger business in Europe that I earlier mentioned.
Please turn to Page 8. This slide provides the factors of JPY 66 billion increase in operating profit for the Aero Engine, Space and Defense business, which was a notable change in operating profit. In addition to strong sales growth of spare parts, such as V2500 and GEnX, delay in accrual of maintenance costs resulting from longer maintenance periods also contributed significantly to the profit growth.
Please turn to Page 9 for the consolidated financial position. Inventories increased due to increased production in the civil aero engines and progress in defense system projects. As for the indicators for financial soundness, debt-to-equity ratio and ratio of equity attributable to owners of the parent improved to 1.36x and 19.3%, respectively, as we accumulated profits.
Please turn to Page 10 for a chart showing the cash flows. Cash flow from operating activities improved significantly due to strong growth in EBITDA, progress in the collection of construction payments and other factors. We will continue to accelerate our initiatives to drive working capital efficiency in order to generate JPY 75 billion in cash flow from operating activities for the full year.
Next, I would like to talk about forecast of the consolidated results for fiscal year 2024. Please turn to Page 12. No changes in orders received and revenue from the previous forecast, but in terms of operating profit, based on the results through to the second quarter, we have made an upward revision by JPY 35 billion to JPY 145 billion. This upward revision is factoring in a significant profit uptick from civil aero engines, which we expect to outweigh the challenge in conventional businesses.
Regarding cash flows, we have maintained the previous forecast for the operating cash flows, whereas we anticipate the improvement in the investing cash flows, reflecting the progress we're making in the cross shareholdings divestment. Considering the earnings provision this time around, we have also revised the year-end dividend forecast from the previous JPY 50 per share to JPY 70 per share.
Page 13 shows an overview of the full year forecast in more details. FX assumptions from the third quarter and onwards remains unchanged at JPY 140 to a U.S. dollar. FX sensitivity for the remaining 6 months is JPY 1 move will have JPY 700 million impact on operating profit, excluding the PW1100G additional inspection program impact.
Please turn to Page 14. The above shows factors of change in operating profit in a waterfall chart which add up to the JPY 35 billion of upward revision and the below shows the financial results by segment. With regard to the reinforcement of cost structure at the center in the top chart, we have reflected the drop in profitability due to the delay in resolving the increased contract negotiation in the conventional businesses. On the other hand, for the civil aero engines business, we have priced in a gain of JPY 31 billion for the changes in business environment and JPY 13 billion for the favorable FX to the second quarter, respectively.
On Page 15, we show factors of change in the JPY 44 billion of operating profit for the Aero Engines, Space and Defense segment, all of which is related to the civil aero engine business, which I will touch on now. First, new engines. The total number of new engine sales for the year is expected to decline by 255 from the previous 1,398 units to 1,143 units. Decline in the number of engine units which are less profitable in early stage of the mass production also led to the gain of JPY 13 billion. Next, spare parts. Some of them have seen slowdown in growth, but V2500 and GEnx are fairly strong, resulting in an increase by JPY 5 billion.
Also, we have seen prolonged maintenance of spare parts, such as PW1100G and V2500. And these maintenance costs are now going to be delayed to the next year and onward, which translated into an increase by JPY 13 billion. From here, adding JPY 13 billion from FX gains to the second quarter, we have an upward revision of JPY 44 billion.
Please turn to Page 16. The line graph shows the growth of spare parts handling amount in the U.S. dollar. As you can see, we had a strong growth observed in the second quarter. Given the stronger-than-expected second quarter, we expect that the growth will slightly be subdued towards the end of the year, but the year-on-year expansion trend should continue. The bar graph shows revenue expectation in the later half of the year, which is reflective of some improvement with delayed maintenance costs as well as FX impact. Also, please note that we added 2 line graphs here. The line below represents the trend that we have been disclosing from before.
Please turn to Page 17. Status of lifecycle business in the conventional businesses. Lifecycle businesses have been steadily expanding since 2019, and the business scale has now become 1.5x compared to 2019. Progress ratio in the second quarter was approximately 40%, in line with our plan and was at the same level as ordinary years.
In the second quarter, IHI Group was able to maintain the strength driven by the civil aero engines. We are committed to continue working towards recovering the financial foundation that was hit in 2023, while making a steady execution of the transformation we set out in the group management policies.
The following slides are just for your reference. Please take a look at them later. This is the end of my presentation. Thank you.
I will now provide a management briefing. My presentation will cover the following contents. I will first report on the progress with group management policies 2023.
Here are the trends in operating profit, operating margin and ROIC since fiscal 2019. The yellow boxes on the far right of the slide show targets under the group management policies 2023. As you can see, we delivered solid performance recoveries from fiscal 2021 after the pandemic hit us hard in fiscal 2020. We thereafter posted steady increases.
Profitability improved on a civil aero engines business turnaround in line with global passenger demand growth, and expansions in the lifecycle businesses in the conventional businesses. We achieved our medium-term ROIC target of 8% and operating margin target of 7.5% ahead of schedule. As you can see, we are steadily enhancing our ability to generate profits while harnessing our asset efficiently.
This chart gives you a cash-related summary. In the chart, you see operating cash flow in dark blue bars and EBITDA in light blue bars. EBITDA profitability benchmark has grown steadily, while operating cash flow levels remained low. This significant difference is due to an increase in working capital. This is due to the accumulation of parts inventories in some industries as they continue to experience supply chain disruptions since the pandemic. While it will be challenging to achieve our medium-term targets of JPY 100 billion in operating cash flow and a cash conversion cycle of 100 days, we are stepping up group-wide efforts to reduce working capital as we move toward these goals.
In the remaining 18 months of our current medium-term management plan, we will accelerate the reforms, as you can see on this slide. First, we will overhaul our business portfolio. We will intensively invest cash and talent in growth and development-focused businesses. I would like to highlight that we have already transferred hundreds of employees within the group. We will also restructure businesses that are underperforming in terms of profitability and capital efficiency, which we will discuss in more detail later.
Next, we will restructure our balance sheet. As I mentioned earlier, we are facing major balance sheet issues that require major reforms. We will swiftly restore our financial soundness while focusing more on capital costs and returns. Finally, we will undertake DE&I initiatives that are the cornerstone of everything we do. Employee mindsets will shape the speed of our reforms. While we encourage employees to change their mindsets, we will create an environment where all employees can leverage their strengths to swipe and to accelerate change. We will accordingly focus on solidifying growth foundations toward and beyond our next medium-term management plan.
I will now discuss specific approaches to overhauling our business portfolio and restructuring our balance sheet. The diagram on the left illustrates our vision presented in May this year. Our civil aero engines, defense and space business and fuel ammonia value chain business form the twin pillars of corporate value creation. There is no change to that.
On the right, the pie charts show our fiscal 2023 results and our current state. As you can see, our growth businesses have been highly profitable, utilizing capital efficiently and generating just under 60% of our operating profit. On the other hand, our conventional businesses represent nearly 70% of revenue and just below 50% of invested capital, yet they are less profitable and efficient. That is a major challenge we need to address. Overhauling our conventional business portfolio is vital to realize our vision.
Now let me present the 3 criteria for assessing our business portfolio. The first criterion is strategic alignment or whether there are synergies with our civil aero engines and fuel ammonia value chain businesses and whether our businesses can establish high entry barriers by leveraging our technological prowess. The second criterion is growth potential or whether the markets and/or our businesses offer growth potential. The third criterion is business stability and efficiency.
As you would expect, the civil aero engines business has high growth and profitability potential but is also cyclical and inherently volatile. Given these growth business characteristics, we need businesses that can absorb such volatility to stably and sustainably enhance our overall corporate value.
As I mentioned earlier, our conventional businesses are essential to build a stable and sustainable business portfolio. Their primary role is to support growth and development-focused businesses and stabilize our group-wide portfolio. First, by improving profitability through expanding life cycle businesses and thoroughly maximizing cash flows, we seek to generate resources to invest in growth and development-focused businesses. We will then adopt growth strategies once we identify businesses among them that have medium- to long-term growth potential.
Unfortunately, however, some of our existing conventional businesses are not fulfilling their primary role. We will overhaul those businesses to eliminate downside risks and enhance profitability, as you can see in the second section. We will determine the direction of restructuring by the end of fiscal 2024 and accelerate implementing actions from fiscal 2025. We will also consider transferring businesses if they can achieve greater sustainable growth outside the IHI Group, we included 2 typical examples at the bottom of the slide.
I will now discuss balance sheet restructuring. Key challenges are a high working capital level, a high debt-to-equity ratio and a low equity ratio. To build a healthier financial position, we will start by thoroughly reducing working capital. We will then improve capital efficiency by selling investment properties and policy shareholdings.
With respect to the restructuring businesses I mentioned in the previous slide, we will optimize invested capital to streamline the balance sheet. Through these initiatives, we aim to swiftly restore the debt-to-equity ratio to around 1.1 and boost the equity ratio to at least 20%. And going forward, we will focus our efforts on our balance sheet, engaging in practices that prioritize capital costs and returns.
This slide presents a summary of our reform efforts. The top section outlines business portfolio reforms. Please refer to the first 2 items on the table. Starting with the vehicular turbocharger business, in the last fiscal year, we restructured our German subsidiary, including fixed asset impairment due to profitability challenges. We recently announced the closure of this unit.
Next is business transfer. As we announced the other day, we will transfer the general purpose boiler business to Takuma. The materials handling system business will be transferred to Tadano, which we announced earlier today. With the new partners, these businesses will strive to achieve sustainable growth.
As part of ongoing efforts to streamline our balance sheet, we plan to sell investment properties for the second consecutive year. We will continue to move forward with these reforms at a rapid pace and keep informed of our progress.
On this slide, I would like to reiterate our vision for generating medium- to long-term value. As mentioned at the beginning of my presentation, we will accelerate reforms over the remaining 18 months of our current medium-term management plan. By fostering a reform-oriented culture, we seek to build an organization that can constantly undertake operating reforms beyond the current medium-term management plan and boost corporate value over the medium to long term.
I will now discuss specific initiatives for growth and development-focused businesses. First, I will outline growth strategies for our Aero Engine, Space and Defense business area. First, I will present the results of the last 5 years and outlook for our civil aero engines, defense and space businesses. We have significantly increased revenue and operating margin, far exceeding the pre-pandemic levels. In view of favorable market growth prospects, we look forward to even better outcomes. We will continue to capitalize on growth opportunities, expanding revenue to JPY 800 billion by fiscal 2030 and JPY 1 trillion by fiscal 2040.
Next, we show where our civil aero engine business stands. The graph on the left shows cumulative engine shipments. The number of engines installed on aircraft will steadily increase. The graph on the right shows our targets for fiscal 2030. For the civil aero engines business as a whole, we are aiming to increase revenue to the level of JPY 450 billion and achieved an operating margin of 20%.
To give you the breakdown of the revenue, dark blue bar indicates engines and light blue bar indicates aftermarket, which includes spare parts, maintenance and parts repairs. As the total number of engines in operation continues to grow, the revenue of the aftermarket business will expand more than the engine business. In terms of profitability, the aftermarket business is higher than the engine business, so we can expect profit growth to outpace revenue growth.
Next, I would like to touch on another pillar, which is defense business. We expect the revenue to reach around JPY 250 billion by FY 2030, centering around defense rocket motors and aircraft engines with an operating profit margin target of 10%. Compared to the civil aero engine business, the defense business is relatively more stable and requires less amount of investment that we need to work on. Therefore, by expanding the defense business, we expect that it will help absorb the volatility of civil aero engine business.
Also, going forward, we will focus on the transfer of this equipment in collaboration with the government of Japan. The engine parts export to the U.S. original equipment manufacturers, as shown on the top of the side, complement Japanese and U.S. production capabilities and help strengthening national alliances. We are also looking to expand the range of engines that we can cover going forward.
With regard to the F-35 engine maintenance business, on the left-hand side at the bottom, we are going to strengthen the production and maintenance infrastructure in collaboration with other friendly nations that operate the F-35. Upper right of the page highlights international joint development for next-generation fighter jet, GCAP. We are representing Japan as an engine manufacturer making contributions to the program.
Beyond these efforts, we are looking to harness our extensive experience to engage in projects that contribute to Japan security and reinforce the global expansion of our defense business.
Finally, space business. We positioned the space business as a long-term growth driver. And this slide illustrates an image of how we view the business can develop. Building on our rocket and other foundational technologies, we are first contributing to the government-led space development initiatives. The basic plan on space policy, which was announced in 2023, emphasizes collaboration between the public and private sectors to address space security and global challenges, creating new industries.
Alongside of that plan, we will aim to leverage our production and technological infrastructure that we have built out through government projects, collaborate with other companies and try to grow the business in the mid to long term.
Moving now to our efforts on development-focused businesses. This page shows the key milestone of our fuel ammonia value chain business. Since around 2020, we have undertaken a range of fuel ammonia R&D activities. With production and utilization R&D nearing the completion, we are now pushing ahead with demonstration tests to prepare for social implementation starting from FY 2028.
In production space, we are looking to commercially supply and receive green ammonia from India and Australia, which are ideal renewable energy locations from fiscal year 2028. With storage and transportation, we are developing large ammonia storage tanks with a view towards social implementation in FY 2026. We also expect to complete development work towards repurposing LNG storage tanks by the 2026.
In terms of utilization, which is at the center of what we're doing, we are making steady progress with demonstration tests for fuel ammonia usage in the thermal power plants and gas turbines. We're looking to fully scale the social implementation of ammonia fuel value chains in 2028.
Here, I would also like to touch on highlights from the recent initiatives. For instance, we will initiate green ammonia supply with ACME in India in 2028. We are also exploring investments in green ammonia production and sales in Australia. We plan to commercialize ammonia storage tanks in 2026. Additionally, Japanese government commissioned us to take part in a feasibility study for large ammonia receiving terminals project. We are fully engaged with the program and expect the effort to be completed by 2030.
With utilization in relation to the thermal power plants, we successfully completed the world's first 20% ammonia fuel conversion demonstration test, as we mentioned in May. We're planning to undertake 50% fuel conversion demonstration test in 2028, and demonstration tests in other areas are also going well, including the ones for small gas turbines and tugboats.
Here, we show initiatives with our global partners. Highlighted in blue are where we have made progress from the previous briefing in May this year.
Looking beyond the group management policies 2023, as I said earlier, we're going to clarify the path for transformation in the next 1.5 years, which will serve as a foundation for the next medium-term plan.
This is the end of my presentation. Thank you.