Fuji Electric Aktie

Good afternoon. I'm Miyoshi of the Corporate Management Planning Headquarters. Thank you for attending the third quarter results briefing for Fuji Electric.

The general overview of third quarter results is that the Energy and Industry segments continue to drive financial results as we discussed during the interim results briefing in October.

This is a summary of consolidated financial results for the first through third quarters on a year-on-year basis. Net sales, operating profit and ordinary profit all reached record highs. Net sales were up JPY 60 billion year-on-year to JPY 851.1 billion. The increase includes JPY 4.8 billion of gains on translation of overseas subsidiary earnings. The increase due to the underlying growth in demand was JPY 55.2 billion.

Operating profit was up JPY 5.6 billion year-on-year to JPY 74.0 billion. We will look at factors behind movement in operating profit on the next page.

Ordinary profit was up JPY 5.8 billion year-on-year to JPY 74.2 billion, owing to ForEx gains booked to nonoperating gains and losses. Extraordinary gains and losses were down JPY 16.7 billion year-on-year, mainly due to a JPY 16.6 billion decline in gains on the sale of investment securities recorded in the previous year. Net profit was down JPY 6.9 billion year-on-year to JPY 48.5 billion, owing to the movement in extraordinary gains and losses.

We will now look at factors behind the movement in operating profit. On a negative side was a JPY 9.3 billion increase in costs related to future growth investment, including labor costs. There was also a JPY 4 billion drag from rising raw material costs, shown under added value and others.

The higher raw material costs had a particularly pronounced effect on ED&C components in the Industry segment and the Semiconductors segment. However, higher sales and production volumes offset the increased costs and deterioration in the external environment, while differences in model mix and between projects lifted profit alongside cost reductions.

As a result, operating profit reached JPY 74 billion. Of the JPY 12.9 billion increase in sales and production volume, over JPY 8 billion related to the Energy segment and over JPY 4 billion to Industry, with both segments making a significant contribution.

This is an overview across segments. The Energy and Industry segments drove both net sales and operating profit in the third quarter. The Energy segment, in particular, generated an operating profit ratio of 12.7% for the 3 quarters, a 4-point improvement over the prior year. In the Energy segment, net sales were up JPY 27.1 billion year-on-year and operating profit was up JPY 12.8 billion.

Sales and profit were up across all subsegments. In power generation, sales and profit were up on large hydropower generation facility projects. In energy management, sales and profit were up sharply for both storage battery systems and substation equipment, driving the energy segment overall. In power supply and facility systems, demand for use in data centers remained brisk, driving sales and profit growth. In equipment construction, both sales and profit remained in an uptrend.

In the Industry segment, net sales were up JPY 32.4 billion year-on-year and operating profit was up JPY 2.6 billion year-on-year. In IT Solutions, sales and profit were both up, driven by large education projects linked to the government-run GIGA School program.

In social solutions, sales and profit were up on higher demand for railway rolling stock. In factory automation components, demand rose for measuring instruments, but low-voltage inverters remained weak. As a result, sales were up slightly, while operating profit was flat year-on-year.

In automation systems, sales were up on solid demand for plant system projects, mainly in the steel industry, but operating profit was below the prior year, owing to rising costs on large projects as noted at interim results. For ED&C components, sales rose on a moderate recovery in demand from finished machinery manufacturers, but operating profit was flat year-on-year as higher sales could not offset surging raw materials costs.

In the Semiconductor segment, sales were up JPY 6 billion year-on-year, but operating profit was down JPY 6.6 billion year-on-year. In the Automotive business, sales declined on falling demand for use in EVs. Profit also fell on a combination of higher depreciation costs caused by production capacity investment and surging raw material prices.

In the Industrial business, sales were up year-on-year, thanks to higher demand in China and favorable ForEx impact. In the Food and Beverage Distribution segment, net sales were down JPY 5.9 billion year-on-year and operating profit was down JPY 3 billion year-on-year. This owed to the dropout of special demand related to the new banknotes issued in the previous year. However, excluding this special demand, both sales and profit continued to rise in underlying terms.

In vending machines, a decline in domestic vending machine demand caused both sales and operating profit to fall year-on-year. In store distribution, demand was firm for store fixtures for use in convenience stores, but this was unable to offset the decline in the vending machines division and the dropout of prior year special demand. As a result, sales were down for the segment overall.

We will now look at net sales for the first 3 quarters for Japan and each overseas region. In Japan, sales rose on firm demand in the Energy and Industry segment. Japan sales were up JPY 45.6 billion year-on-year. Overseas sales were up JPY 14.4 billion year-on-year, including JPY 4.8 billion from ForEx. The underlying demand-driven increase in sales was around JPY 10 billion year-on-year.

In overseas markets, sales growth was driven by FA components within the Industry segment and Industrial business within the Semiconductor segment. By overseas region, sales were down JPY 1.2 billion year-on-year in the Americas, partly owing to policy developments. Performance differed between segments for other regions, but in general, growth was led by FA components and the Industrial business in the Semiconductor segment.

This slide shows orders received for the 3 quarters. Demand remains strong for plant systems in Energy and Industry. Orders overall were up JPY 149 billion year-on-year to JPY 1,008.7 billion. Plant system orders were up JPY 132.8 billion year-on-year.

Energy segment orders were up JPY 68.5 billion year-on-year, mainly on growth for power generation, energy management and power supply and facility systems. Industry segment orders remained strong, up JPY 65 billion year-on-year, mainly driven by education applications within IT Solutions.

We will next look at orders for major components. Orders for components for factory automation, ED&C components and semiconductors in the third quarter were JPY 112.6 billion. This is the highest for a single quarter since the first quarter in fiscal 2024. Orders are in a gradual recovery, albeit without a sharp improvement.

Momentum varied slightly between segments. Demand was down year-on-year in automotive, semiconductors, mainly in overseas markets. Demand was up quarter-on-quarter, both overseas and in Japan. In industrial semiconductors, year-on-year demand momentum was firm, mainly for renewable energy applications in China. In factory automation, demand was up both year-on-year and versus the second quarter, mainly in Europe. For ED&C components, demand was up year-on-year, mainly in Japan. In quarter-on-quarter terms, demand was up both in Japan and overseas.

We will now look at the balance sheet and cash flows. Total assets were up JPY 67 billion versus the end of fiscal 2024 to JPY 1,379.2 billion. Despite the decline in trade accounts receivable, inventories and contract assets were up, driven by brisk growth in plant system projects and an increase in the market value of investment securities.

Liabilities, however, stayed in line with the end of fiscal 2024 as a decline in accounts payable was offset by a JPY 22.1 billion increase in interest-bearing debt following the issue of commercial paper. Net interest-bearing debt was up JPY 15.4 billion to JPY 57.6 billion, and the net debt-to-equity ratio remains at a healthy 0.1x, actual value 0.08x. The equity ratio is up 1.8% to 54.6%.

We now turn to cash flows. Cash flows from operating activities were positive JPY 79.9 billion, the result of an increase in inventories and a decline in advances collected. Cash flows from investing activities declined to outflows of JPY 67.8 billion, owing to a decline in proceeds from the sales of investment securities versus the prior year. As a result, free cash flows were JPY 12.1 billion, in line with internal targets.

This slide shows our consolidated results forecast. While we kept our company-wide full year forecast in place, we revised our operating profit forecast by segment, reflecting progress through the third quarter and the current external environment.

Net sales, operating profit, ordinary profit and net profit remain as in the October announcement. We also reiterate our ForEx assumptions of JPY 140 per dollar and JPY 164 per euro. Within this context, we raised our operating profit forecast for the Energy segment by JPY 2 billion to reflect brisk demand. Our operating profit ratio forecast is 14.0%.

In the Industry segment, we lowered our operating profit forecast by JPY 1.5 billion, reflecting higher raw materials prices in ED&C components. Our overall operating profit ratio target is 10.8%. We have used the figure disclosed in October as our forecast minimum and aim to raise the ratio further in the remaining 2 months.

This slide compares our full year consolidated forecast with the prior year. If ForEx remains at current levels, net sales would overshoot by just over JPY 10 billion and operating profit by just over JPY 1 billion.

That is the end of the presentation. Thank you for listening.

Hello, everyone. Once again, I am Miyoshi, Corporate General Manager, Corporate Management Planning Headquarters. Thank you so much for joining us today, the first half results briefing of Fuji Electric in spite of your busy schedule. The first half results were higher both year-on-year as well as compared to our July upward revision. Net sales, operating profit and ordinary profit were all record highs.

As we alluded to in July, energy and industry were drivers for the financial performance, and this trend was more obvious in the first half. This page shows the summary of consolidated financial results for the first half of FY 2025 compared to the last fiscal year.

Net sales, operating profit and ordinary profit were record highs. Net sales were JPY 543.2 billion, JPY 45.8 billion higher year-on-year. If you look at the right-hand side for the breakdown of changes in net sales, you see a gain on translation of earnings of overseas subsidiaries of JPY 2 billion, which pushed up net sales.

Without it, net sales increase would have been JPY 43.8 billion, driven by demand increase. Operating profit increased by JPY 2.4 billion year-on-year to JPY 42.8 billion. I will explain the details of changes in operating profit later.

Operating profit ratio was 7.9%. There was no major change in nonoperating profit in the first half, but with the impact from the exchange rate, ordinary profit was JPY 41.7 billion, JPY 2.8 billion higher year-on-year. Extraordinary profit declined JPY 17.6 billion to minus JPY 1.2 billion because we had a gain on sales of investment securities last year, but it did not repeat this year.

Profit attributable to owners of parent was JPY 26.6 billion, down JPY 8.9 billion year-on-year. Let me explain factors behind year-on-year changes in operating profit. We had negative factors such as fixed costs, increase in raw material costs, exchange rates and so on, totaling a little bit over JPY 10 billion. These negative factors were offset by increase in sales and production volumes of JPY 10.6 billion and furthermore, added value and others such as selling price, better model mix, profitability difference among projects and cost reductions, which accumulated profits on top.

As a result, operating profit was JPY 2.4 billion higher year-on-year. With regards to increase in sales and production volumes of JPY 10.6 billion, energy drove the strong results.

Around 60% of the profit was generated by energy. Second largest contribution was industry, in particular, IT Solutions, where net sales increased a lot, therefore, contributed to the profit. Fixed cost increased by JPY 7.5 billion. Data costs, depreciation and leases paid increased, majority of which related to semiconductor business.

With regards to added value and others, impact from rising raw material costs have continued mainly from silver and copper, which totaled JPY 2.8 billion as negative factors. Business units, which were impacted mostly were semiconductors and ED&C components.

Most of the impact was on these 2 divisions. Next, I'd like to explain net sales and operating profit by segment. Net sales of Energy and Industry increased year-on-year by JPY 21.2 billion and JPY 31 billion, respectively. Operating profit of Energy increased by JPY 8.9 billion and Industry by JPY 2.9 billion year-on-year, which offset the decline of profit in semiconductors and Food and Beverage Distribution.

We achieved operating profit ratio improvement in Energy up to 11.5% in the first half. In Energy, net sales increased by JPY 21.2 billion and operating profit increased by JPY 8.9 billion year-on-year. Operating profit ratio was 11.5%. Revenue drivers were clearly energy management and power supply and facility systems in particular, contributing greatly to net sales.

Accordingly, operating profit improved significantly in those 2 subsegments. Let me go through each subsegment. With regards to power generation, we achieved increases both in net sales and operating profit as a result of the benefits of an increase in large-scale renewable energy projects.

With regards to Energy Management, we achieved increases both in net sales and operating profit driven by storage battery system for grid stability and substation equipment. Regarding power supply and facility systems, demand from data centers stayed strong, achieving increases both in net sales and operating profit.

With regards to Equipment Construction, good momentum is continuing, and we achieved higher net sales and operating profit. Net sales in Industry increased by JPY 31 billion to JPY 206.3 billion. Operating profit increased by JPY 2.9 billion to JPY 11 billion. Operating profit ratio was 5.3%. Of the increase of net sales by JPY 31 billion, around 2/3 was contributed by IT Solutions.

Other businesses, factory automation components, automation, Social Solutions, ED& C components saw net sales increase of JPY 2 billion to JPY 3 billion, respectively, year-on-year. With regards to Automation Systems, net sales increased, but unfortunately, profit decreased due to higher expenses associated with large-scale projects as we explained in the first quarter.

In the semiconductors, net sales increased by JPY 0.7 billion year-on-year to JPY 108.7 billion. Operating profit declined by JPY 6.1 billion to JPY 9 billion. Operating profit ratio was 8.3%, significant decline in profit. At the bottom on the right, we saw the breakdown between Industrial and Automotive. In Industrial, net sales increased by JPY 5.3 billion year-on-year.

As we explained in Q1, it is driven by strong demand from renewable energy, mainly in China. On the other hand, in Automotive, net sales declined by JPY 4.6 billion due to decline in demand from power semiconductors, both in Japan and overseas. Compared to the magnitude of net sales decline, operating profit fell more because of higher raw material prices and the increase in depreciation and leases paid, which could not be fully offset by increase in sales and production volume.

In Food and Beverage Distribution segment, net sales declined by JPY 5.9 billion year-on-year to JPY 52.4 billion. Operating profit declined by JPY 2.9 billion year-on-year to JPY 5.8 billion. Operating profit ratio was 11.1%. In the last year, we had special demand from automatic change dispensers that stemmed from the issuance of newly designed paper currency in Japan. Due to the reactionary decline from that, both net sales and profit declined.

For your information, if we exclude the impact from the last year's special demand from new paper bill change dispensers, net sales were flat year-on-year and operating profit was up year-on-year.

Let me give you more color by each subsegment. In vending machines, we struggled because weak domestic demand we saw in Q1 continued. On the other hand, in store distribution, increase in convenience store renovations and demand for store fixtures trended strongly. Therefore, excluding the impact on last year's special demand, both net sales and operating profit would have been higher year-on-year.

Next, I will discuss change in net sales by Japan and overseas area in comparison to the previous fiscal year. Of the JPY 543.2 billion net sales, JPY 389.8 billion was for Japan, up JPY 35.2 billion year-on-year and JPY 153.4 billion for overseas area, including the FX impact of JPY 2 billion, up by JPY 10.6 billion year-on-year.

By segment, Energy was up by approximately JPY 2 billion, Industry by JPY 6 billion. Semiconductors was up by approximately JPY 3 billion, but semiconductor automotive is continuing to struggle. Overall, the strong domestic demand drove sales higher. Looking at the situation by region, excluding FX impact, Asia, China and India recorded higher sales of products, even excluding FX impact, while Europe and Americas remained flat year-on-year.

Next is orders for the first half. Orders for the first half had increased JPY 113.2 billion year-on-year from JPY 571.7 billion in fiscal year 2024 to JPY 684.9 billion.

Power Plant Systems business was a major driver with an increase of more than JPY 100 billion compared to the previous year. The breakdown of the increase is shown on the right-hand side with JPY 45.2 billion increase coming from the Energy segment and JPY 58.8 billion from the Industry segment.

Power Generation business and Energy Management business led the orders higher in the Energy segment. Power Supply and Facility Systems businesses were up year-on-year as well.

As for Power Generation business, we received an order for thermal and geothermal power plant system, which led to higher demand. Energy Management business saw higher demand for applications related to renewable energy stabilization and substation system.

Power Supply and Facility Systems captured growth in data center-related demand, while equipment construction business saw growth in demand for electrical and air conditioning equipment construction. In the Industry segment, as explained earlier, when I talked about the different segments, IT Solutions business made up most of the order increase with demand growing from the academic sector for the second giga program and orders for Transportation Systems in Social Solutions business making its contribution. This is the status of orders for major components shown on a year-on-year as well as quarter-on-quarter basis. Year-on-year, orders were up JPY 3.4 billion, but with FX impact of JPY 6.3 billion in actual terms, it will be negative compared to the previous year, but we are seeing a gradual recovery trend.

Factory automation and ED&C components businesses saw a rebound from the lump sum and advanced orders received from a specific customer, resulting in lower orders quarter-on-quarter, but demand remains flat year-on-year. We will continue to closely monitor the component market responding appropriately through initiatives, including production control.

Next is on consolidated financial results for the first half of FY 2025 in comparison to the forecast announced on July 31 of this year. Net sales were JPY 543.2 billion, up JPY 9.2 billion or excluding the FX impact of JPY 6 billion, up JPY 3.2 billion. Operating profit was up JPY 2.3 billion or excluding FX impact, resulting in net increase of JPY 1.6 billion.

By segment, notable contribution to net sales were made by the Industry segment. As for the operating profit, significant improvement was seen in the Energy segment. Notable contributions were made by the Power Generation business, Energy Management business and Equipment Construction business. Many of you may be interested in Power Supply and Facility Systems business, which saw project delays, resulting in a slight underachievement compared to the forecast announced in July.

Next, consolidated balance sheet and cash flow status. Total assets decreased by JPY 7.3 billion from end of March to JPY 1,304.9 billion, with inventory assets increasing due to strong performance of plant and Systems business. While notes and accountable receivables trade, contract assets decreased. Retained earnings increased by JPY 14.1 billion. And accordingly, equity ratio rose 2.2% to 54.9%. With commercial paper financing partially offset by a decrease in lease obligations, interest-bearing debt increased by JPY 16.3 billion. Net interest-bearing debt increased by JPY 23.9 billion to JPY 66.1 billion and net DE ratio is 0.1x.

This is a consolidated cash flow statement. Cash flows from operating activities deteriorated by JPY 51.6 billion to JPY 35.9 billion, primarily due to a decrease in advanced payments received and an increase in inventories. Cash flows from investing activities deteriorated by JPY 18.8 billion to a negative JPY 44.6 billion, impacted by the absence of proceeds from the sales of investment securities recorded in the previous year.

As for free cash flow, it was an outflow of JPY 8.7 billion. We have revised our earnings forecast upward based on the first half results. Compared to the full year forecast announced in July, this represents an upward revision of JPY 30 billion in net sales, JPY 4 billion in operating profit, JPY 5.5 billion in ordinary profit and JPY 3.5 billion in profit attributable to owners of parent.

We will aim for an operating profit ratio of 10.8% and ratio of profit attributable to owners of parent to net sales of 7.5%. The exchange rate assumption for the euro has been revised from the previous JPY 154 to JPY 164, reflecting current market rates. By segment, both the Energy and Industry segments are expected to exceed expectations, while the Components business, including SA components, is projected to continue facing challenges in the second half, similar to the first half.

Comparing the full year forecast to the previous year, net sales are projected to increase by JPY 61.6 billion, operating profit by JPY 10.9 billion, and the operating profit ratio is targeted at 10.8%, aiming higher than the previous year's 10.5%.

Ordinary profit is projected to increase by JPY 9.2 billion, but profit attributable to owners of parent is expected to decrease by JPY 3.2 billion compared to the previous year. This is because last year's results included gains from the sales of investment securities, which are not currently factored into this year's projections. In the segment breakdown compared to the previous year, the Energy segment is expected to raise its operating profit ratio to 13.5%.

Food and Beverage Distribution segment aim for a 12% operating profit ratio despite the absence of the special demand seen last year due to the change in banknotes. The Industry segment is expected to remain at 9.7%, while the Semiconductor segment continues to face challenges with an operating profit ratio of 10.4% projected. Lastly, I will explain the dividend of surplus. The interim dividend has been set at JPY 91 per share, an increase of JPY 16 from the previous year.

As stated in the medium-term management plan, in pursuit of payout ratio of 30%, which we aim to achieve this fiscal year, calculation was made based on the full year profit attributable to owners of parent. That concludes my explanation. Thank you very much for your attention.