Ebara : Nine Months Ended September 30, 2023

Ebara Corporation

Results Presentation for Nine Months Ended September 30, 2023

November 14, 2023

Event Summary

[Company Name]	Ebara Corporation
[Company ID]	6361-QCODE
[Event Language]	JPN
[Event Type]	Earnings Announcement
[Event Name]	Results Presentation for Nine Months Ended September 30, 2023
[Fiscal Period]	FY2023 Q3
[Date]	November 14, 2023
[Time]	16:00 - 17:01
	(Total: 62 minutes, Presentation: 24 minutes, Q&A: 38 minutes)
[Venue]	Webcast
[Number of Speakers]	2
	Shugo Hosoda	Executive Officer, Division Executive of
		Corporate Strategic Planning, Finance and
		Accounting Division & CFO
	Akihiro Osaki	Division Executive of Corporate Strategic
		Planning Division

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Presentation

Osaki: Thank you for your patience.

Thank you very much for taking the time today to participate in the quarterly financial results briefing session for Q3 of the fiscal year ending December 31, 2023, of Ebara Corporation.

The time has arrived, and we will now begin the briefing. At 3:00 PM today, documents related to the financial results were disclosed on the TSE platform and on the Company's website. We hope that you will join us as we look at that as well.

Here are our attendees. Shugo Hosoda, Executive Officer, Division Executive of Corporate Strategic Planning, Finance and Accounting Division & CFO.

Hosoda: My name is Hosoda. Thank you.

Osaki: I, Osaki, Division Executive of Corporate Strategic Planning Division, will be the moderator. Thank you for your cooperation.

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Mr. Hosoda will give an overview of the financial results and then take questions from the audience. The end time is scheduled for 5:00 PM. Now, Mr. Hosoda will begin the explanation.

Hosoda: I am in charge of investor relations and executive officer. I will begin with the key points in this Q3 financial results. As you can see here, orders received totaled JPY598.3 billion, revenue totaled JPY551.2 billion, and operating profit totaled JPY56.9 billion, all of which are record highs for Q3 of a fiscal year.

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I would like to mention some of the unique events in the current financial results. First, in the precision machinery segment, reflecting the global semiconductor market, which is in an adjustment phase, our precision machinery segment is not as strong as it was in the previous fiscal year, and has not shown the same strength as it has to date. On the other hand, other strong segments in our business portfolio, such as the energy segment and the building & industrial segment, are covering the weakness of the precision machinery segment.

In the precision machinery segment, if we look at quarterly orders in Q1, Q2, and Q3, and orders for each of the three months in turn, in Q3, we are beginning to see signs of a slight recovery, or even a bottoming out, in our precision machinery segment.

In China, it is generally said that market conditions are worsening, especially in the construction and real estate markets, but on the other hand, our business in the Chinese domestic industrial and public sector markets, mainly in the building and industrial segment and the energy segment, remained relatively strong.

In the semiconductor market, we are also in a position to benefit from the aggressive legacy investments of some of our Chinese customers. I believe that the Chinese business, which is surprisingly stronger than people have been saying, was a factor supporting our strong performance in Q3.

As I will introduce later as a topic, we established a new regional headquarters company in Beijing in August of this year to strengthen governance and business infrastructure in the Chinese market, which I will introduce later.

The full-year forecast for orders in the energy segment has been revised upward, considering the progress made up to Q3 and the future business environment. Revenue and operating profit remain unchanged from the figures at the beginning of the period.

I will continue with a detailed explanation of the financial results.

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See page five. Consolidated results for the first nine months of the fiscal year. As you can see on this slide, the figures for each item from orders received to quarterly profit exceeded the levels of the same period last year.

Orders received were at a very high level for Q3 of the previous year as well. This fiscal year, the result was only 0.6% higher than the previous year, but even more than that.

Revenue increased by JPY71.1 billion from the same period of the previous year, due in part to the steady digestion of the order backlog, which was also high at the beginning of the period and at the beginning of this fiscal year.

Operating profit increased by JPY14.2 billion YoY, and the operating profit margin was in the double-digit 10% range as of Q3, so I would say that the results were relatively strong.

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See next page, page six. This is a summary of financial results by segment. With regard to the comparison with the same period of the previous year, orders decreased in both the precision machinery segment, which was affected by the weak semiconductor market, and the environmental solutions segment, which had relatively fewer large projects this fiscal year compared to the previous fiscal year. Orders decreased in both segments.

On the other hand, orders in the energy segment grew strongly, up 85% YoY, along with the building service & industrial and infrastructure segments.

Despite favorable and unfavorable conditions among segments, the overall consolidated order situation thus remains at a high level.

Revenue increased in the other four segments, excluding the environmental solutions segment, resulting in an overall increase of JPY71.1 billion in revenue.

As for operating profit, except for the infrastructure segment, which was almost the same level as the same period last year, all other segments grew, resulting in an overall significant increase in operating profit of JPY14.2 billion compared to the same period last year.

On the next page, we will provide an explanation of the factors that contribute to the increase or decrease in operating profit.

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Page seven. Operating profit increased JPY14.2 billion from JPY42.6 billion to JPY56.9 billion.

The increase in fixed costs is quite large, but this fiscal year we saw a rise in personnel costs, including those related to performance-linked bonuses. On the other hand, the increase in sales and profits from higher revenues outweighed this increase, resulting in an overall increase in sales and profits.

The overall improvement in profitability was only JPY2.2 billion, due to the project mix by the precision machinery segment and the impact of less profitable projects such as evaluation equipment for the next generation by the same segment, while there was an improvement in profitability in the building & industrial and environmental segments.

Another item of special note, plus JPY2.3 billion in other items, is the liquidation cost of a group company in the Corporate Division, a company called Ebara Agency, which was recorded in the previous fiscal year. We recorded liquidation expenses for that company in the previous fiscal year, but please understand that we do not have that in this fiscal year, and that we are transitioning to a new five-segment segment structure this fiscal year, and that technical figures such as adjustments related to the transition to the new segments are included in the other category.

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Continued on page eight. This is the composition of revenue by region. In the current fiscal year, both domestic and overseas, sales in each region increased compared to the same period of the previous year.

The percentage of overseas revenue is approximately 65%, which is relatively high compared to past levels.

By region, in China, revenue increased over the previous year due to firm investment in the industrial market, public market, petroleum, chemicals, electric power, and the legacy semiconductor field, which are the markets that our businesses are facing.

In North America and the Middle East, the energy segment is performing well, along with product and service support. In addition, in the building service and industrial segment, the consolidation of Hayward Gordon, which was completed last fiscal year, is contributing in an inorganic manner.

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Please also refer to page 26 for time-series trends by geographic segment.

We will now move on to a detailed description of the business results by segment.

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