Company Announcements

Mitsubishi Electric Announces Consolidated Financial Results for Fiscal 2020

TOKYO, May 11, 2020 - Mitsubishi Electric Corporation (TOKYO: 6503) announced today its consolidated financial results for fiscal 2020 (April 1, 2019- March 31, 2020).

Consolidated Financial Results

The economy in fiscal 2020 generally saw a gradual and slow recovery in Japan, the U.S. and Europe until the end of 2019 but the corporate sector slowed down. The growth of China also slowed down with the corporate sector experiencing a slowdown in exports and capital expenditures for fixed assets. The expansion of the novel coronavirus diseases (COVID-19) and its impact put great downward pressure on the global economy from the beginning of 2020.

Under these circumstances, the Mitsubishi Electric Group has been working even harder than before to promote growth strategies rooted in its advantages, while continuously implementing initiatives to strengthen its competitiveness and business structure.

Revenue

Revenue for fiscal 2020 decreased by 57.4 billion yen from the previous fiscal year to 4,462.5 billion yen due primarily to a decrease in revenue of Industrial Automation Systems segment, despite that revenue increased in Information and Communication Systems, Home Appliances, Energy and Electric Systems, and Electronic Devices segments. In Industrial Automation Systems segment, revenue for the factory automation system business decreased due mainly to stagnant demand for capital expenditures worldwide and revenue for the automotive equipment business decreased due to a slowdown in demand for new cars worldwide.

Other factors that caused the decrease in revenue include the yen appreciating against foreign currencies and the impact of COVID-19 in the fourth quarter.

Operating Profit

Operating profit decreased by 30.8 billion yen from the previous fiscal year to 259.6 billion yen due primarily to a decrease in operating profit of Industrial Automation System segment, despite that operating profit increased in Home Appliances, Information and Communication Systems, and Electronic Devices segments. Operating profit ratio decreased by 0.6% from the previous fiscal year to 5.8% due mainly to increased cost ratio.

The cost ratio increased by 1.2% due primarily to lowered operation, a shift in product mix and upfront investment for growth drivers of Industrial Automation Systems segment in addition to the yen appreciating against other currencies.

Selling, general and administrative expenses decreased by 26.2 billion yen from the previous fiscal year and selling, general and administrative expenses to revenue ratio improved by 0.3%.

Other profit (loss) increased by 13.6 billion yen from the previous fiscal year due mainly to sale of land and other profit (loss) to revenue ratio improved by 0.3%.

Profit before income taxes

Profit before income taxes decreased by 33.9 billion yen from the previous year to 281.9 billion yen due primarily to a decrease in operating profit, an increase in financial expenses caused by loss on foreign exchange, and a decrease in share of profit of investments accounted for using the equity method. Profit before income taxes to revenue ratio was 6.3%.

Net profit attributable to Mitsubishi Electric Corporation stockholders

Net profit attributable to Mitsubishi Electric Corporation stockholders decreased by 4.8 billion yen from the previous year to 221.8 billion yen due primarily to decreased profit before income taxes despite reduced income taxes as a result of the reorganization of its affiliated company outside Japan. Net profit attributable to Mitsubishi Electric Corporation stockholders to revenue ratio was 5.0%.

ROE decreased by 0.5% from the previous fiscal year to 9.2%.

Consolidated Financial Results by Business Segment

Energy and Electric Systems

The market of the social infrastructure systems business saw buoyant investment in the public utility for preventing and reducing disaster risks in Japan, also buoyant investment in train system business worldwide, and continued demand in the power systems in Japan due to the electricity system reform. In this environment, the business saw an increase in orders from the previous fiscal year due primarily to an increase in the power systems business worldwide and the public utility and transportation systems businesses in Japan. Revenue for this business remained substantially unchanged from the previous fiscal year due mainly to a decrease in thermal power generation business worldwide despite an increase in orders.

The market of the building systems business saw decreased demand for high-end, large-scale office projects in China, continued market stagnation in the Middle East, and an increase in renewals of elevators and escalators in Japan. In this environment, the business saw a decrease in orders from the previous fiscal year due primarily to market stagnation in China and the Middle East. Revenue for this business remained substantially unchanged from the previous fiscal year due mainly to an increase in new installations of elevators and escalators in Japan, mainly in the Tokyo metropolitan area despite a decrease in orders.

As a result, revenue for this segment increased by 1% from the previous fiscal year to 1,307.3 billion yen. Operating profit decreased by 0.1 billion yen from the previous fiscal year to 82.3 billion yen, due primarily to the yen appreciating against other currencies and a shift in project portfolios.

Industrial Automation Systems

The market of the factory automation systems business saw continued stagnation in demand for automotive-related investments worldwide, semiconductor and machinery-related investments in Japan, and investments related to organic light emitting diodes (OLED) and smartphones outside Japan. In this environment, the business saw decreases in both orders and revenue from the previous fiscal year due primarily to the yen appreciating against other currencies and a decrease in sales of factory automation devices, processing machines and numerical controllers.

The market of the automotive equipment business saw a slowdown in demand for new cars worldwide and the impact of COVID-19 becoming actual in the fourth quarter, while the market of electric-vehicle related equipment expanded worldwide. In this environment, the business saw decreases in both orders and revenue from the previous fiscal year due mainly to a decrease in sales of electrical components and the yen appreciating against other currencies, while sales of electric-vehicle related equipment such as motors and inverters increased.

As a result, revenue for this segment decreased by 8% from the previous fiscal year to 1,349.4 billion yen. Operating profit decreased by 73.6 billion yen from the previous fiscal year to 68.9 billion yen due primarily to a decrease in revenue, a shift in product mix and upfront investment for growth drivers.

Information and Communication Systems

The market of the telecommunications systems business saw buoyant investment by telecommunications carriers to deal with increased traffic caused mainly by the expanding 5G communications networks. In this environment, the business saw increases in both orders and revenue from the previous fiscal year due primarily to increased demand for communications infrastructure equipment.

The market of the information systems and service business saw increased demand relating to the cloud utilization, the enhancement of cyber-security and the improvement of work efficiency. In this environment, the business saw increases in both orders and revenue from the previous fiscal year due mainly to an increase in the system integrations business.

The electronic systems business saw an increase in orders from the previous fiscal year due primarily to an increase in large-scale projects for the space systems business. The revenue also increased from the previous fiscal year due mainly to an increase in large-scale projects for the defense systems business.

As a result, revenue for this segment increased by 7% from the previous fiscal year to 455.5 billion yen. Operating profit increased by 14.2 billion yen from the previous fiscal year to 26.4 billion yen due primarily to an increase in revenue and a shift in project portfolios.

Electronic Devices

The market of the electronic devices saw emerging demand relating to 5G communications networks and next-generation data centers, and accelerated development and market launches of electric vehicles. In this environment, the business saw an increase in orders and revenue also increased by 4% from the previous fiscal year to 208.7 billion yen due primarily to increased demand for high frequency and optical devices, particularly for optical communication devices, and power modules used in automotive applications.

Operating profit increased by 7.2 billion yen from the previous fiscal year to 8.7 billion yen due mainly to an increase in revenue and a shift in product mix.

Home Appliances

The market of the home appliances saw a heightened awareness of environmental issues causing increased demand of ductless air conditioners in North America and heat-pump hot water and heating systems in Europe. The demand for industrial air conditioners for schools also increased in Japan. In this environment, the business saw an increase in revenue by 2% from the previous fiscal year to 1,090.2 billion yen due primarily to an increase in sales of air conditioners for Japan, North America and Europe.

Operating profit increased by 18.7 billion yen from the previous fiscal year to 78.2 billion yen due mainly to an increase in revenue and cost improvement.

Others

Revenue decreased by 3% from the previous fiscal year to 659.6 billion yen due primarily to decreases in procurements and logistics for the Mitsubishi Electric Group at affiliated companies.

Operating profit increased by 1.8 billion yen from the previous fiscal year to 26.0 billion yen due mainly to cost improvements.

Fundamental Dividend Distribution Policy and FY2020 Dividend

Fundamental dividend distribution policy

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

FY 2020 dividend

Considering the company's business performance and financial conditions in fiscal 2020, the company has decided to pay a year-end retained earnings dividend of 26 yen per share for fiscal 2020. 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, 2020.

The retained earnings dividend for fiscal 2021 is still undecided.

cf. In fiscal 2019, interim dividend was 14 yen and year-end dividend was 26 yen per share. (Annual dividend of 40 yen per share)

Financial Standing

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

The Mitsubishi Electric Group has applied IFRS 16 Lease from the first quarter of the current fiscal year, thereby, as of the date of the initial application, it has added lease assets of 93.0 billion yen mainly as property, plant and equipment, and liabilities of 95.1 billion yen as bonds, borrowings and lease liabilities. (For details, refer to the 'Changes in Accounting Policies' in 'Notes to the Consolidated Financial Statements.')

Total assets as of the end of this fiscal year increased from the end of the previous fiscal year by 53.5 billion yen to 4,409.7 billion yen. The change in balance of total assets was mainly attributable to increases in property, plant and equipment by 93.8 billion yen and cash and cash equivalents by 23.3 billion yen despite decreases in inventories by 35.2 billion yen and other financial assets by 41.4 billion yen.

Inventories decreased due mainly to the slowdown of the Industrial Automation Systems segment, reduced stock of the Home Appliances segment caused by the consumption tax hike and increased demand for industrial air conditioners for schools, and the yen appreciating against other currencies. Inventory turnover improved by 0.23 from the end of the previous year to 6.43.

Total liabilities increased from the end of the previous fiscal year by 25.8 billion yen to 1,870.9 billion yen. The outstanding balances of bonds, borrowings and lease liabilities increased by 78.5 billion yen, while trade payables decreased by 32.3 billion yen, and net defined benefit liabilities also decreased by 12.8 billion yen. Meanwhile, bonds and borrowings decreased by 8.9 billion yen from the end of the previous fiscal year to 267.0 billion yen, with the ratio of bonds and borrowings to total assets recording 6.1%.

Mitsubishi Electric Corporation stockholders' equity increased by 29.7 billion yen compared to the end of the previous fiscal year to 2,429.7 billion yen. The stockholders' equity ratio was recorded at 55.1%, representing no changes from the end of the previous fiscal year. These changes referred to above primarily result from an increase from recording a net profit attributable to Mitsubishi Electric Corporation stockholders of 221.8 billion yen despite a decrease due to dividend payment of 85.8 billion yen and a loss in accumulated other comprehensive income of 81.6 billion yen caused by the yen appreciating against other currencies and a decline in stock prices.

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

Cash flows from operating activities was 395.8 billion yen (cash in) while cash flows from investing activities was 203.9 billion yen (cash out). As a result, free cash flow for fiscal 2020 increased by 162.6 billion yen compared to the previous fiscal year to 191.8 billion yen (cash in). Meanwhile, cash flows from financing activities was 156.4 billion yen (cash out), and cash and cash equivalents at end of period increased by 23.3 billion yen from the previous fiscal year to 537.5 billion yen.

              Net cash provided by operating activities increased by 156.0 billion yen from the previous fiscal year due primarily to a decrease in payment for inventories and an increase in depreciation caused by the application of IFRS 16 Lease.

              Net cash used in investing activities increased by 6.6 billion yen from the previous fiscal year due primarily to an increase in proceeds from sale of property, plant and equipment despite an increase in purchase of investment securities and property, plant and equipment.

              Net cash used in financing activities decreased by 44.3 billion yen from the previous fiscal year due mainly to increased repayment of lease liabilities caused by the application of IFRS 16 Lease.

Current Forecast for Fiscal 2021

The global economy is expected to experience a significantly negative effect of COVID-19 as its impact becomes more serious. Economic growth rate of fiscal 2021 is expected to be remarkably lower than the previous fiscal year without full economic recovery despite the economic measures taken in various countries and regions. The business environment is expected to be even more severe if COVID-19 has a long-term impact.

Under these circumstances, the Mitsubishi Electric Group aims to uplift the profitability of its main businesses by promoting its global operations. The Group also aims to further strengthen its business foundation by accelerating business model transformations with active exploration of open innovations, reinforcing its solution businesses for increasingly diverse social issues, and reviewing its business portfolios for higher profitability and more effective use of business resources.

The current financial performance forecast for fiscal 2021 follows below.

The current forecast reflects the sluggish markets in various countries and regions and following recovery process, and is based on the assumption that COVID-19 continues to have an impact on revenue and operating profit until the second quarter. The amount of the impact is expected to be a decrease in revenue by 440.0 billion yen and a loss of operating profit by 135.0 billion yen. The current forecast may be modified depending on the global and local situation of the containment of COVID-19.

Current consolidated forecast for fiscal 2021

Exchange rates for this forecast is 105 yen to the U.S. dollar, 115 yen to the euro and 15.0 yen to the Chinese yuan.

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.

Consolidated Financial Results Summary

 (In billions of yen except where noted)

Notes:

1) Consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS).

2) The company has 203 consolidated subsidiaries.

Consolidated Financial Statements

Consolidated Statement of Profit or Loss and Consolidated Statement of Comprehensive Income (Fiscal 2020)

(Consolidated Statement of Profit or Loss)

 (In millions of yen)

(Consolidated Statement of Comprehensive Income)

 (In millions of yen)

Consolidated Statement of Financial Position

                                                                  (In millions of yen)

Consolidated Statement of Changes in Equity

FY '19 (Apr. 1, 2018 - Mar. 31, 2019)

(In millions of yen)

FY '20 (Apr. 1, 2019 - Mar. 31, 2020)

(In millions of yen)

Consolidated Statement of Cash Flows

(In millions of yen)

Consolidated Segment Information (Fiscal 2020)

1. Revenue and Operating Profit by Business Segment

(In millions of yen)

*Notes: 1) Inter-segment revenue are included in the above chart.

            2) Income from sale of land within other profit (loss) presented in the 'Consolidated Statement of Profit or Loss' is allocated to each segment.

2. Revenue by Location of Customers

(In millions of yen)

Notes to the Consolidated Financial Statements

(Matters regarding the scope of consolidation and application of the equity method: changes against the previous fiscal year end)

Number of subsidiaries: 203 (Added: 8; Excluded: 11)

Number of equity method associates: 39 (Added: 2; Excluded: 0)

(Per share information)

(Notes regarding the going concern assumption)

Not applicable

(Changes in Accounting Policies)

The Mitsubishi Electric Group has applied IFRS 16 Lease (hereafter "IFRS16") from the first quarter of the current fiscal year.

The Mitsubishi Electric Group had previously not capitalized leases classified as operating lease under IAS 17, but, by applying IFRS 16, introduced the single accounting model to capitalize lessee's lease in principle. For all leases other than leases that have a lease term of 12 months or less and leases for which the underlying asset is of low value, right-of-use assets that represent a right to use an underlying asset and lease liabilities that represent the obligation for lease payment were recognized as of the commencement date.

In the consolidated statement of financial position, the Mitsubishi Electric Group has presented right-of-use assets as property, plant and equipment, and lease liabilities as bonds, borrowings and lease liabilities.

The Mitsubishi Electric Group has applied IFRS16 retroactively following transitional measures, and has recognized the cumulative effect as an adjustment to the beginning balance of retained earnings in the current fiscal year.

By applying IFRS 16, right-of-use assets and lease liabilities were newly increased by 93,066 million yen and 95,193 million yen respectively as of the date of the initial application (April 1, 2019). Accordingly, retained earnings were decreased by 1,521 million yen.

(Significant subsequent events)

Not applicable

Condensed Quarterly Consolidated Financial Statements

Condensed Quarterly Consolidated Statement of Profit or Loss and Condensed Quarterly Consolidated Statement of Comprehensive Income (Fourth Quarter, Fiscal 2020)

(Condensed Quarterly Consolidated Statement of Profit or Loss)

 (In millions of yen)

(Condensed Quarterly Consolidated Statement of Comprehensive Income)

 (In millions of yen)

Cautionary Statement

While the statements herein including the forecast of the Mitsubishi Electric Group are based on assumptions the Group considers to be reasonable under the circumstances on the date of announcement, actual results may differ significantly from forecasts.

Such factors materially affecting the expectations expressed herein shall include but are not limited to the following:

(1)  Any change in worldwide economic and social conditions, as well as laws, regulations, taxation and other legislation

(2)  Changes in foreign currency exchange rates, especially JPY/US dollar rates

(3)  Changes in stock markets, especially in Japan

(4)  Changes in balance of supply and demand of products that may affect prices and volume, as well as material procurement conditions

(5)  Changes in the ability to fund raising, especially in Japan

(6)  Uncertainties relating to patents, licenses and other intellectual property, including disputes involving patent infringement

(7)  New environmental regulations or the arising of environmental issues

(8)  Defects in products or services

(9)  Litigation and legal proceedings brought and contemplated against the Company or its subsidiaries and affiliates that may adversely affect operations or finances

(10)        Technological change, the development of products using new technology, manufacturing and time-to-market

(11)        Business restructuring

(12)        Incidents related to information security

(13)        Large-scale disasters including earthquakes, typhoons, tsunami, fires and others

(14)        Social or political upheaval caused by terrorism, war, pandemics, or other factors

(15)        Important matters related to the executive officers, major shareholders and affiliated companies of Mitsubishi Electric Corporation

http://www.rns-pdf.londonstockexchange.com/rns/4852M_1-2020-5-11.pdf

###

About Mitsubishi Electric Corporation

With nearly 100 years of experience in providing reliable, high-quality products, Mitsubishi Electric Corporation (TOKYO: 6503) is a recognized world leader in the manufacture, marketing and sales of electrical and electronic equipment used in information processing and communications, space development and satellite communications, consumer electronics, industrial technology, energy, transportation and building equipment. Mitsubishi Electric enriches society with technology in the spirit of its corporate statement, "Changes for the Better," and environmental statement, "Eco Changes." The company recorded a revenue of 4,462.5 billion yen (U.S.$ 40.9 billion*) in the fiscal year ended March 31, 2020. For more information, please visit www.MitsubishiElectric.com

*U.S. dollar amounts are translated from yen at the rate of \109=U.S.$1, the approximate rate on the Tokyo Foreign Exchange Market on March 31, 2020