Mitsubishi Electric : Consolidated Financial Results for Fiscal 2022

MITSUBISHI ELECTRIC CORPORATION

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No. 3516

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Mitsubishi Electric Announces Consolidated Financial Results for Fiscal 2022

TOKYO, April 28, 2022 -Mitsubishi Electric Corporation (TOKYO: 6503) announced today its consolidated financial results for fiscal 2022 (April 1, 2021 - March 31, 2022).

Consolidated Financial Results

Revenue:	4,476.7	billion yen	(7% increase compared to the previous fiscal year)
Operating profit:	252.0	billion yen	(9% increase compared to the previous fiscal year)
Profit before income taxes:	279.6	billion yen	(8% increase compared to the previous fiscal year)
Net profit attributable to
Mitsubishi Electric Corp.
stockholders:	203.4	billion yen	(5% increase compared to the previous fiscal year)

The economy in fiscal 2022 generally continued to see recovery in the corporate sector in the U.S., Europe and Japan. The household sector continued to recover in the U.S. and Europe, while in Japan there was the downward pressure stemming from the novel coronavirus diseases (COVID-19), despite recovery owing to normalization of economic activities. China continued to see recovery in export and manufacturing, while the pace of recovery in the household sector slowed down. There was also the impact of the rise in material prices and logistics costs as well as a prolonged components shortage.

In this environment, the Mitsubishi Electric Group has been working even harder than before to uplift profitability by strengthening its business portfolio strategy towards sustainable growth, while continuously implementing initiatives to strengthen its competitiveness and business structure.

Revenue

Revenue increased by 285.3 billion yen compared to the previous fiscal year to 4,476.7 billion yen due primarily to increased revenue in Industrial Automation Systems, Home Appliances and Electronic Device segments, despite decreased revenue in Energy and Electric Systems and Information and Communication Systems segments. Industrial Automation Systems segment saw an increase in the factory automation systems business due mainly to an increase in demand for capital expenditures relating to digital equipment and decarbonization worldwide. The automotive equipment business also increased due to the expansion of the electric vehicle market. Home Appliances segment increased due mainly to an increase in air conditioners particularly in Europe and North America, despite a decrease in air conditioners in Japan due primarily to a semiconductor shortage. Electronic Devices segment increased due primarily to recovery in demand for power modules.

Operating profit

Operating profit increased by 21.8 billion yen compared to the previous fiscal year to 252.0 billion yen due mainly to increased operating profit in Industrial Automation Systems and Electronic Devices segments, despite decreased operating profit in Energy and Electric Systems and Home Appliances segments. Operating profit ratio improved by 0.1 points compared to the previous fiscal year to 5.6% due mainly to increased revenue.

The cost ratio improved by 0.2 points compared to the previous fiscal year due primarily to higheroperating ratio owing to increased revenue in Industrial Automation Systems segment and the yen depreciating against other currencies, despite the rise in material prices. Selling, general and administrative expenses increased by 60.0 billion yen compared to the previous fiscal year, but selling, general and administrative expenses to revenue ratio improved by 0.2 points. Other profit (loss) decreased by 8.2 billion yen compared to the previous fiscal year due mainly to decreased profit from sales of land, and other profit (loss) to revenue ratio deteriorated by 0.3 points compared to the previous fiscal year.

Profit before income taxes

Profit before income taxes increased by 20.9 billion yen compared to the previous fiscal year to 279.6 billion yen due primarily to an increase in operating profit. Profit before income taxes to revenue ratio was 6.2%.

Net profit attributable to Mitsubishi Electric Corporation stockholders

Net profit attributable to Mitsubishi Electric Corporation stockholders increased by 10.3 billion yen compared to the previous fiscal year to 203.4 billion yen due mainly to increased profit before income taxes. Net profit attributable to Mitsubishi Electric Corporation stockholders to revenue ratio was 4.5%.

ROE deteriorated by 0.4% compared to the previous fiscal year to 7.1%.

Consolidated Financial Results by Business Segment

Energy and Electric Systems

Revenue:

1,238.1 billion yen

(3% decrease compared to the previous fiscal year, which recorded 1,270.2 billion yen)

Operating profit:

62.1 billion yen

(46.7 billion yen decrease compared to the previous fiscal year, which recorded 108.9 billion yen)

The market for the social infrastructure systems business saw buoyant investment in the public utility business in Japan, while demand relating to power systems decreased in Japan and there was the reconsideration of the capital expenditure plans by railway companies in Japan due to the impact of COVID-19. In this environment, orders won by the business remained substantially unchanged compared to the previous fiscal year due primarily to an increase in the public utility systems business in Japan despite a decrease in the power systems and the transportation systems businesses in Japan. Revenue decreased compared to the previous fiscal year due mainly to decreases in the power systems and the transportation systems businesses in Japan.

The market for the building systems business saw recovery from stagnation stemming from COVID-19 primarily in China, while recovery is delayed in some parts of Asia. In this environment, the business saw increases in both orders and revenue compared to the previous fiscal year due mainly to an increase primarily in China.

As a result, revenue for this segment decreased by 3% compared to the previous fiscal year to 1,238.1 billion yen.

Operating profit decreased by 46.7 billion yen compared to the previous fiscal year to 62.1 billion yen due mainly to decreased revenue and a shift in project portfolios.

Industrial Automation Systems

Revenue: 1,460.3 billion yen (17% increase compared to the previous fiscal year, which recorded 1,248.5 billion yen)

Operating profit: 96.8 billion yen (56.2 billion yen increase compared to the previous fiscal year, which recorded 40.5 billion yen)

The market for the factory automation systems business saw a global increase in demand for capital expenditures relating to digital equipment such as semiconductors, electronic components and smartphones, and products in the decarbonization area such as lithium-ion batteries. In this environment, the business saw increases in both orders and revenue compared to the previous fiscal year.

The market for the automotive equipment business saw an increase in electric vehicle-related equipment due to the expansion of electric vehicle market, while sales of new cars decreased in Japan, China Europe and the U.S. due primarily to a semiconductor shortage compared to the previous fiscal year. In this environment, the business saw increases in both orders and revenue compared to the previous fiscal year due mainly to increases in electric vehicle-related equipment such as motors and inverters, as well as electricalcomponents.

As a result, revenue for this segment increased by 17% compared to the previous fiscal year to 1,460.3 billion yen.

Operating profit for this segment increased by 56.2 billion yen compared to the previous fiscal year to 96.8 billion yen, as operating profit for the factory automation systems business increased due mainly to increased revenue and the yen depreciating against other currencies, while operating profit for the automotive equipment business decreased due primarily to the rise in material prices and logistics costs.

Information and Communication Systems

Revenue: 354.1 billion yen (7% decrease compared to the previous fiscal year, which recorded 380.1 billion yen)

Operating profit: 14.7 billion yen (1.7 billion yen decrease compared to the previous fiscal year, which recorded 16.4 billion yen)

The market for the information systems and service business saw a decrease in large-scale projects for the IT infrastructure service business, while delayed system development projects restarted, particularly in the manufacturing industry. In this environment, the business saw an increase in orders but a decrease in revenue compared to the previous fiscal year.

The electronic systems business saw an increase in orders compared to the previous fiscal year due primarily to an increase in large-scale projects for the defense systems business, while revenue decreased compared to the previous fiscal year due mainly to a decrease in large-scale projects for the defense systems business.

As a result, revenue for this segment decreased by 7% compared to the previous fiscal year to 354.1 billion yen.

Operating profit decreased by 1.7 billion yen compared to the previous fiscal year to 14.7 billion yen due mainly to decreased revenue.

Electronic Devices

Revenue: 241.4 billion yen (18% increase compared to the previous fiscal year, which recorded 205.2 billion yen)

Operating profit: 16.8 billion yen (10.5 billion yen increase compared to the previous fiscal year, which recorded 6.2 billion yen)

The market for the electronic devices business saw recovery in demand for power modules used in consumer, industrial and automotive applications. In this environment, the business saw an increase in orders compared to the previous fiscal year and revenue also increased by 18% compared to the previous fiscal year to 241.4 billion yen due primarily to an increase in power modules used in consumer, industrial and automotive applications.

Operating profit increased by 10.5 billion yen compared to the previous fiscal year to 16.8 billion yen due mainly to increased revenue.

Home Appliances

Revenue: 1,144.7 billion yen (10% increase compared to the previous fiscal year, which recorded 1,038.3 billion yen)

Operating profit: 70.9 billion yen (4.8 billion yen decrease compared to the previous fiscal year, which recorded 75.7 billion yen)

The market for the home appliances business saw an increase in demand for residential air conditioners primarily in Europe and North America as working from home becomes common, despite the impact of a semiconductor shortage. Demand for industrial air conditioners also recovered gradually as capital expenditures started to recover from the impact of COVID-19. In this environment, the business saw an increase in revenue by 10% compared to the previous fiscal year to 1,144.7 billion yen due mainly to an increase in air conditioners primarily in Europe and North America as well as the yen depreciating against other currencies, despite a decrease in air conditioners in Japan due primarily to a semiconductor shortage.

Operating profit decreased by 4.8 billion yen compared to the previous fiscal year to 70.9 billion yen due mainly to the rise in material prices and logistics costs despite increased revenue and the yen depreciating against other currencies.

Others Revenue:

Operating profit:

676.2 billion yen 21.9 billion yen

(12% increase compared to the previous fiscal year, which recorded 603.0 billion yen)

(8.3 billion yen increase compared to the previous fiscal year, which recorded 13.6 billion yen)

Revenue increased by 12% compared to the previous fiscal year to 676.2 billion yen due primarily to increases in materials procurement and logistics.

Operating profit increased by 8.3 billion yen compared to the previous fiscal year to 21.9 billion yen due mainly to increased revenue.

Fundamental Dividend Distribution Policy and Fiscal 2022 Dividend

Fundamental dividend distribution policy

Mitsubishi Electric's fundamental policy is to comprehensively promote improvement in shareholders' profits from the viewpoints of appropriate profit distribution commensurate with earnings performance of the respective fiscal year, as well as strengthening our financial standing through Mitsubishi Electric's internal reserves, with the ultimate goal of enhancing corporate value.

Fiscal 2022 dividend

Considering the business performance and financial conditions in fiscal 2022, Mitsubishi Electric has decided to pay a year-end retained earnings dividend of 26 yen per share for fiscal 2022. Upon adding the interim dividend of 14 yen per share, the total annual dividend will be 40 yen per share. Payment is planned to begin on June 2, 2022.

The retained earnings dividend for fiscal 2023 is still undecided.

cf. In fiscal 2021, the interim dividend was 10 yen and the year-end dividend was 26 yen per share. (For an annual dividend of 36 yen per share)

Financial Standing

An analysis on the status of assets, liabilities and equity on a consolidated basis

Total assets as of the end of fiscal 2022 increased compared to the end of the previous fiscal year by 310.0 billion yen to 5,107.9 billion yen. The change in balance of total assets was mainly attributable to increases in inventories by 215.8 billion yen and other non-current assets by 85.1 billion yen.

Inventories increased due primarily to recovery in demand for Industrial Automation Systems and Home Appliances segments as well as the impact of semiconductor and electronic components shortages. Other non-current assets increased due mainly to an increase in net defined benefit assets mainly reflecting a rise in stock prices.

Total liabilities increased compared to the end of the previous fiscal year by 83.2 billion yen to 2,010.5 billion yen due primarily to increases in trade payables by 59.8 billion yen and other current liabilities by 60.9 billion yen. Bonds and borrowings decreased compared to the end of the previous fiscal year by 31.7 billion yen to 217.1 billion yen, with the ratio of bonds and borrowings to total assets recording 4.3%, representing a 0.9 point decrease compared to the end of the previous fiscal year.

Mitsubishi Electric Corporation stockholders' equity increased by 221.6 billion yen compared to the end of the previous fiscal year to 2,975.9 billion yen. The stockholders' equity ratio was recorded at 58.3%, representing a 0.9 point increase compared to the end of the previous fiscal year. These changes mainly result from increases due to recording a net profit attributable to Mitsubishi Electric Corporation stockholders of 203.4 billion yen and accumulated other comprehensive income by 72.7 billion yen mainly reflecting the yen depreciating against other currencies, despite a decrease due to a dividend payment of 85.7 billion yen.

An analysis on the status of cash flow on a consolidated basis

Cash flows from operating activities for fiscal 2022 were 282.3 billion yen (cash in), while cash flows from investing activities were 114.8 billion yen (cash out). As a result, free cash flow was 167.5 billion yen (cash in). Cash flows from financing activities were 241.3 billion yen (cash out), and cash and cash equivalents atend of period decreased compared to the end of the previous fiscal year by 40.2 billion yen to 727.1 billion yen.

Net cash provided by operating activities decreased by 259.7 billion yen compared to the previous fiscal year due primarily to an increase in inventories despite increased profit.

Net cash used in investing activities decreased by 61.6 billion yen compared to the previous fiscal year due mainly to an increase in proceeds from sale of investment securities and a decrease in purchase of property, plant and equipment in fiscal 2022 as a result of restricted capital expenditures in the previous fiscal year.

Net cash used in financing activities increased by 83.9 billion yen compared to the previous fiscal year due primarily to an increase in the purchase of treasury stock and a decrease in proceeds of short-term borrowings.

Forecast for Fiscal 2023

The global economy in fiscal 2023 is expected to continue recovering but growth is anticipated to slow down due to the expansion of COVID-19 variants and supply constraints causing rising inflation in various countries and regions, as well as a slowdown in the U.S. and China. There is also an increase in uncertainty about recent geopolitical risks and the rise in material prices, which might exert more downward pressure on the global economy.

Under these circumstances, the Mitsubishi Electric Group aims to raise profitability by strengthening its business portfolio strategy and promoting global operations particularly of its Key Growth Businesses, while creating new business and expanding solution business by exploring open innovations to respond to the changing social structure and customer values. The Group also aims to build a stable revenue base that tolerates change in order to minimize the impact of the rise in material prices and logistics costs as well as components shortages.

Based on a certain premise, Mitsubishi Electric has taken into consideration the impact of improper testing, including costs for additional inspections and strengthening the quality control system. Depending on the progress of future discussions with customers and investigations, the Group may incur losses exceeding this premise or relating to the discovery of any other improper quality-related conduct. If any potential impact comes to light, it will be disclosed promptly. For more information regarding improper testing, please see "Relevant documents" of "Restoring trust: Our roadmap for reform."https://reform.MitsubishiElectric.com/relevant-documents/

The current financial performance forecast for fiscal 2023 follows below.

Current consolidated forecast for fiscal 2023

Revenue:	4,770.0	billion yen	(7% increase compared to fiscal 2022)
Operating profit:	270.0	billion yen	(7% increase compared to fiscal 2022)
Profit before income taxes:	295.0	billion yen	(5% increase compared to fiscal 2022)
Net profit attributable to
Mitsubishi Electric Corp.
stockholders:	215.0	billion yen	(6% increase compared to fiscal 2022)

Exchange rates for this forecast are 115 yen to the U.S. dollar, 125 yen to the euro and 18 yen to the Chinese yuan.

Note: The results forecast above is based on assumptions deemed reasonable by Mitsubishi Electric at the present time, and actual results may differ significantly from forecasts. Please refer to the cautionary statement at the end.

Policy Regarding Financial Reporting Standards

Mitsubishi Electric has voluntarily adopted International Financial Reporting Standards (IFRS) for its consolidated financial statements from the first quarter of the fiscal year ended March 31, 2019, in order to enhance international comparability of its financial information in the capital markets.