Toshiba : Reports for the 184th Fiscal Period

(This Business Report is an English summary of the original Japanese report. The Japanese original is official and this summary is for your convenience only. Toshiba does not guarantee the accuracy of this summary.)

Business Report

From April 1, 2022 to March 31, 2023

1. Business Environment and Results of the Group Operation and Results of the Group

During FY2022, the global economy picked up moderately, particularly in the U.S. and China. In Europe, however, the pick-up has been slowing down. In the domestic economy, private consumption, including the service industry, has picked up moderately as whole, and business fixed investment has picked up moderately as whole as a whole, though stagnation was observed in some area. And, exports from Japan continue to remain weak.

In FY2023, the global economy is expected to continue to recover steadily and picked up moderately. However, there are certain forecasted downside risks. There are downside risks due to monetary tightening in the U.S., downside risks due to trends in the real estate market in China, and downside risks due to monetary tightening and the energy situation in Europe. While the domestic economy is expected to pick up under the condition of the new normal. However, the downturn in the overseas economy is a risk domestically. And there are also risks such as inflation, supply-side constraints and fluctuations in the financial and capital markets.

In these conditions, Toshiba Group's net sales increased by 24.7 billion yen to 3,361.7 billion yen (US$25,087.0 million). Energy Systems & Solutions recorded higher sales by due to the difference in progress of projects to enhance safety measures in nuclear power systems, progress of construction projects in thermal and hydro power business and growth in transmission and distribution systems. Infrastructure Systems & Solutions recorded higher sales in railways and industrial systems. Building Solutions recorded higher sales in elevators overseas business and lighting, offset by lower sales in the elevators domestic business. This business was also impacted by the sale of air conditioning business during the year. Retail & Printing Solutions recorded higher sales in both the retail and printing businesses. Electronic Devices & Storage Solutions recorded higher sales in semiconductors but was offset by declines in mobile and desktop markets. This was compounded by lower sales in the HDD market and nearline HDD market adjustment. Digital Solutions recorded higher sales due to growth in system projects in both public and private sectors. The growth in the business was despite the sale of Chubu Toshiba Engineering.

Operating income was 110.5 billion yen (US$825.0 million), a decrease of 48.4 billion yen. Infrastructure Systems & Solutions, Digital Solutions and Others recorded higher operating income, but Energy Systems & Solutions, Building Solutions, Retail & Printing Solutions, Electronic Devices & Storage Solutions recorded lower operating income.

Income before income taxes and noncontrolling interests was 50.1 billion yen lower at 189.0 billion yen (US$1,410.2 million). By the sale of air conditioning business, partial

transfer of affiliates stock, and special dividend, income before income taxes and noncontrolling interests was recorded higher, but by a decrease in equity earnings from Kioxia, etc, income before income taxes and noncontrolling interests was recorded lower.

Net income attributable to shareholders of the Company decreased by 68.1 billion yen to

126.6 billion yen (US$944.6 million), mainly due to the impact of reversal of deferred tax assets of a consolidated subsidiary.

In terms of dividends for the fiscal year under review, in August 2022 the Company paid a special dividend of 160 yen per share to shareholders registered as of June 30, 2022, and in December 2022 it paid a dividend (interim) of 60 yen per share to shareholders registered as of September 30, 2022.

Performance by Segment
Net sales and operating income (loss) by segment are as follows:
			(Yen in billions)
	Net Sales	Operating Income (Loss)
		Change*		Change*
Energy Systems & Solutions	669.5	110.5	30.4	△5.2
Infrastructure Systems & Solutions	693.2	38.5	45.0	3.3
Building Solutions	448.1	△150.9	5.9	△20.4
Retail & Printing Solutions	513.1	59.9	△4.1	△15.8
Electronic Devices & Storage	797.1	△62.7	42.9	△22.8
Solutions
Digital Solutions	235.6	5	27.0	2.6
Others	232.8	16.3	△42.0	10.7
Eliminations	△227.7	8.1	5.4	△0.8
Total	3,361.7	24.7	110.5	△48.4
		(* Change from the year-earlier period)

Energy Systems & Solutions

Main Businesses

As of March 31, 2023

Nuclear power generation systems, Solar Photovoltaic systems, Thermal power generation systems, Transmission & Distribution systems, Hydroelectric power generation systems

Business Overview

The Energy Systems & Solutions segment saw higher sales. Power Generation Systems recorded higher sales, as Nuclear Power Systems recorded higher sales due to the difference in progress of projects to enhance safety measures, etc., and Thermal & Hydro Power Systems saw higher sales due to the difference in progress of orders received, etc. Transmission & Distribution Systems also saw higher sales as, Transmission & Distribution Systems and Solar Photovoltaic Systems recorded higher sales.

In terms of profit and loss, the segment as a whole saw a decrease in operating income. While Transmission & Distribution Systems saw an increase in operating income from the impact of higher sales, Power Generation Systems recorded lower operating income due to analysis of project costs by Toshiba Plant Systems & Services Corporation, and review of provision for Power Generation Systems product warranty, etc.

Topics

1. Development of Lightweight, Compact, High-Power Superconducting Motor Prototype for Mobility Applications

Toshiba Energy Systems & Solutions Corporation has developed a compact, lightweight, and high-power superconducting motor that is the first in the world to achieve the high-speed rotation required for large mobility applications such as aircraft.

As global environmental awareness grows, movements to reduce greenhouse gas emissions, such as CO2, are accelerating rapidly in the mobility industry, including among aircraft and automobile manufacturers. The aviation industry has set a goal of reducing emissions of CO2 to zero (net-zero carbon) by 2050. However, in addition to changing over to sustainable aviation fuel (SAF), the evolution of aviation systems as a whole is required, and the industry needs to develop lightweight and high-powered motors.

Toshiba Energy Systems & Solutions Corporation has developed a prototype for a compact, high-speed superconducting motor with a high-power output of 2 MW, bringing together its manufacturing technology for high-speed rotating machines and superconductivity technology that it has fostered over many years. The motor is less than 1/10th the weight and size of a conventional motor with the same level of power output. The motor is the first of its kind in the world, developed through the integrated strength of the Toshiba Group. It has earned strong recognition for its future possibilities, and was awarded the grand prize in the Total Solutions Category at the CEATEC AWARD 2022.

Going forward, we will work to make motors with even greater improvements, and by combining them with the products and services of the Toshiba Group, we will provide new value to the mobility industry and contribute to the realization of a carbon-neutral society.

1. Toshiba Energy Systems & Solutions Corporation Begins Sales of Japan's First Environmentally Friendly Gas Insulated Switchgear That Uses Natural Origin Gases

Toshiba Energy Systems & Solutions Corporation delivered a gas insulated switchgear that uses natural origin gases to TEPCO Power Grid, Inc., and the switchgear began operations in February 2023.

This order is a replacement for equipment at TEPCO Power Grid, Inc.'s Fuchu Substation and is Japan's first gas insulated switchgear that uses natural origin gases to be used at a power company.

Gas insulated switchgears are devices that interrupt current and prevent it from affecting other power equipment in the event of an anomaly in the transmission lines and are essential equipment in power infrastructure. As its insulating medium, rather than sulfur hexafluoride, a greenhouse gas, this equipment uses a mixture of nitrogen and oxygen, which are safe and have no global warming impact in the event of a leak. This product is the result of joint development that Toshiba Energy Systems & Solutions has been pursuing with Meidensha Corporation since 2020. Having completed the prescribed type testing, sales of the product are now underway.

Toshiba Group has been working on gas insulated switchgears since the 1960s, and has a great deal of expertise in their overall product development. Meanwhile, for more than 15 years, we have been conducting research and development of equipment that uses natural origin gases as a measure to reduce environmental impact.

In view of the ongoing adoption of environmental regulations governing the use of sulfur hexafluoride gas for electric power equipment in Europe, North America, and other regions, we will expand our lineup of electric power equipment that uses natural origin gases, starting with gas insulated switchgears, which are easy to handle and pose no environmental risk, under the AEROXIA® brand in Japan and overseas. By actively developing environmentally friendly products, the Toshiba Group will continue working to help achieve carbon neutrality.

1. Toshiba Energy Systems & Solutions Corporation Wins Contract for IoT Services Using EtaPRO™ for an Indonesian Geothermal Power Plant

Toshiba Energy Systems & Solutions Corporation, through its Indonesian subsidiary Toshiba Asia Pacific Indonesia, has won a contract for an Indonesia's state-owned geothermal power company, PT Geo Dipa Energi, for an IoT service for the power generation facilities at its Patuha geothermal power plant. This service uses IoT and AI technologies, including predictive failure diagnosis and performance monitoring at the plant.

The system provided through this service employs EtaPRO™, a monitoring software for plant operators acquired by the Company in FY2020, and represents the world's first commercial application of EtaPRO™ at a geothermal plant.

The service uses AI to analyze real-time power plant operation data obtained from various sensors and detect signs of anomalies that may cause problems during normal operation. In doing so, it reduces the number and duration of power plant shutdowns. A demonstration project showed that it was able to reduce the rate at which problems occurred by over 20%. Compared to thermal power plants, the detection of anomalies in geothermal power plants is difficult, given the unstable condition of the steam flowing into the turbine, but this service allows the detection of anomalies even under those conditions.

By deploying this service worldwide, Toshiba Energy Systems & Solutions Corporation aims to reduce the customer's cost of power generation by helping improve power plants' utilization rates, thereby promoting the spread of geothermal power generation and helping to achieve carbon neutrality.

Infrastructure Systems & Solutions

Main Businesses

As of March 31, 2023

Water supply and sewage systems, Power distribution systems, Road systems, Communication & broadcast systems, Telecommunication systems, Security & automation systems, Railway systems, Motor & drive systems

Business Overview

The Infrastructure Systems & Solutions segment higher sales overall. Public Infrastructure recorded lower sales due to decreased volume in the social systems business, but Railways and Industrial Systems reported higher sales mainly due to increased volume by recovery from market downturn caused by COVID-19 and exchange rate changes, etc. in the industrial systems.

In terms of profit and loss, the segment as a whole saw higher operating income. While Public Infrastructure saw lower operating income due to lower sales in social systems business, Railways and Industrial Systems saw an increase, reflecting higher sales in the industrial systems and by impact of the absence of the previous year's restructuring, etc.

Topics

1. Toshiba Infrastructure Systems & Solutions Corporation Wins Order for Multi- Parameter Phased Array Weather Radar

Toshiba Infrastructure Systems & Solutions Corporation won order for two sets of multi- parameter phased array weather radar from the National Institute of Information and Communications Technology Radio Research Institute.

This equipment adds multi-parameter capabilities of estimating rain volume through radar waves emitted simultaneously both vertically and horizontally to the phased-array weather radar installed in Kobe, Hyogo Prefecture and Suita, Osaka. Through these added capabilities, the two sets of weather radar are able to perform high-speed,three-dimensional measurements of rain clouds in 30 to 60 seconds and to measure rainfall with extreme precision.

In recent years, serious disasters caused by localized torrential rain and tornadoes have become a social issue. However, with these added capabilities, the accuracy of rainfall measurement has increased, and we are able to accurately and quickly detect the signs of torrential rain and estimate rain volume. In addition, by realizing network observation for the first time as a multi-parameter phased array weather radar, the observation range will be expanded, and even if rainfall observation accuracy deteriorates during heavy rainfall events, the other radar will cover it and ensure accuracy. Therefore, it is also expected to accelerate research and demonstration for use in flood prevention activities and evacuation orders for residents in the Kansai region.

Going forward, we plan to install additional multi-parameter phased array weather radar in new regions and contribute to reducing the damage caused by torrential rains.

(2) Local 5G Research and Business Co-Creation Initiatives

Differently from "public 5G" by which carriers provide nationwide communication services, in addition to the features of 5G wireless including high-speed,high-capacity,low-latency, and multi-connections, "local 5G" is built and operated independently by vendors for designated areas and uses. As such, it has expected benefits in a wide range of fields, but also has issues such as obstructions causing lost signals and signals leaking outside of coverage areas.