Company Announcements

Mitsubishi Electric Announces Consolidated Financial Results
for the First Half and Second Quarter of Fiscal 2023

TOKYO, October 28, 2022 - Mitsubishi Electric Corporation (TOKYO: 6503) announced today its consolidated financial results for the first half and second quarter, ended September 30, 2022, of the current fiscal year ending March 31, 2023 (fiscal 2023).

1. Consolidated Half-year Results (April 1, 2022 - September 30, 2022)

The economy in the first half of fiscal 2023, from April through September 2022, generally continued to see recovery in the corporate and household sectors in the U.S. In China, there was downward pressure due to the impact of lockdown caused by the expansion of COVID-19, and the pace of subsequent recovery stayed slow. In Japan, gradual recovery continued primarily in the household sector. In Europe, the paces of recovery were even slower in the corporate and household sectors. There was also the impact of the rise in some material prices and high logistics costs, as well as the prolonged electronic components shortage.

Revenue

Revenue increased by 201.1 billion yen year-on-year to 2,339.5 billion yen owing primarily to the weaker yen, despite a decrease in revenue in the Infrastructure segment. The Life segment saw an increase in the building systems business in Asia and Japan, and the air conditioning systems & home products business also increased due mainly to a recovery in demand for air conditioners in Asia (excluding China), Europe and Japan. The Industry and Mobility segment saw an increase in the factory automation systems business due mainly to an increase in global demand for capital expenditures related to digital equipment and decarbonization, and the automotive equipment business also increased due to robust demand for electric vehicle-related equipment. The Business Platform segment saw an increase in the information systems & network service business due mainly to increases in the IT infrastructure service and the system integrations businesses. The semiconductor & devices business also increased due to robust demand for power modules and optical communication devices.

Operating profit

Operating profit decreased by 57.3 billion yen year-on-year to 80.5 billion yen due mainly to decreases in the Life segment, the Infrastructure segment and the Industry and Mobility segment, despite an increase in the Business Platform segment. Operating profit ratio decreased by 3.0 points year-on-year to 3.4% due mainly to deteriorated cost ratio.

The cost ratio deteriorated by 2.3 points year-on-year despite the improvement owing to the weaker yen, as there was the impact of the rise in some material prices, the Life segment deteriorated due to the lower production level caused by the rise in logistics costs and the electronic components shortage, and the profitability of the Infrastructure segment also deteriorated. Selling, general and administrative expenses increased by 62.0 billion yen year-on-year, and the selling, general and administrative expenses to revenue ratio deteriorated by 0.7 points year-on-year. Other profit (loss) and other profit (loss) to revenue ratio remained substantially unchanged year-on-year.

Profit before income taxes

Profit before income taxes decreased by 45.2 billion yen year-on-year to 103.1 billion yen due primarily to a decrease in operating profit. The profit before income taxes to revenue ratio was 4.4%.

Net profit attributable to Mitsubishi Electric Corporation stockholders

Net profit attributable to Mitsubishi Electric Corporation stockholders decreased by 30.0 billion yen year-on-year to 74.8 billion yen due mainly to a decrease in profit before income taxes. The net profit attributable to Mitsubishi Electric Corporation stockholders to revenue ratio was 3.2%.

Consolidated Financial Results by Business Segment (First Half, Fiscal 2023)

Infrastructure

The market for the public utility systems business saw robust investment in the public utility area outside Japan, while there was a continuing trend of railway companies in Japan revising their capital expenditure due to the impact of COVID-19. In this environment, orders won by the business increased year-on-year due primarily to an increase in the public utility area outside Japan, while revenue decreased year-on-year due mainly to a decrease in the transportation systems business in Japan.

The market for the energy systems business continued to see capital expenditures of power companies in Japan and robust demand for power supply stabilization in the expansion of renewable energy. In this environment, orders won by the business increased year-on-year due primarily to increases in the power distribution and the power generation businesses in Japan, while revenue decreased year-on-year due mainly to a decrease in the power generation business in Japan.

The defense & space systems business saw a decrease in orders year-on-year due primarily to a decrease in large-scale projects for the defense systems business, while revenue increased year-on-year due mainly to an increase in large-scale projects for the defense systems business.

As a result, revenue for this segment decreased by 2% year-on-year to 402.0 billion yen.

Operating profit declined by 24.1 billion yen year-on-year to a loss of 15.3 billion yen due primarily to a decrease in revenue, a shift in project portfolios and lower profitability in the defense & space systems business.

Industry and Mobility

The market for the factory automation systems business saw robust demand worldwide primarily for capital expenditures related to digital equipment such as semiconductors and electronic components, as well as products in the decarbonization area such as lithium-ion batteries. In this environment, the business saw increases in both orders and revenue year-on-year.

The market for the automotive equipment business saw sales of new cars remaining substantially unchanged year-on-year and robust demand for electric vehicle-related equipment in line with the expansion of the electric vehicle market, despite the semiconductor shortage. In this environment, the business saw increases in both orders and revenue year-on-year due primarily to the weaker yen and increases in electric-vehicle related equipment such as motors and inverters as well as electrical components.

As a result, revenue for this segment increased by 13% year-on-year to 794.9 billion yen.

Operating profit decreased by 11.2 billion yen year-on-year to 43.9 billion yen due mainly to the rise in material prices and logistics costs, despite the weaker yen.

Life

The market for the building systems business continued to see recovery from the sluggish market stemming from COVID-19. In this environment, the business saw increases in both orders and revenue year-on-year due primarily to the weaker yen and an increase in Asia and Japan.

The market for the air conditioning systems & home products business saw recovery from the impact of Shanghai's lockdown and an improvement of the situation with regard to the electronic components shortage in and after the second quarter. In this environment, the revenue for the business increased year-on-year due mainly to the weaker yen and an increase in air conditioners in Asia (excluding China), Europe and Japan.

As a result, revenue for this segment increased by 11% year-on-year to 940.1 billion yen.

Operating profit decreased by 35.7 billion yen year-on-year to 34.0 billion yen due primarily to the rise in material prices and logistics costs as well as lower production level in the first quarter, despite the weaker yen.

Business Platform

The market for the information systems & network service business saw robust demand due mainly to the restarts of projects delayed in the COVID-19 pandemic, despite the semiconductor shortage. In this environment, the business saw an increase in both orders and revenue due mainly to increases in the IT infrastructure service and the system integrations businesses.

The market for the semiconductor & device business saw robust demand for power modules used in consumer and industrial applications as well as optical communication devices. In this environment, orders won by the business decreased year-on-year due primarily to the end of the TFT-LCD module business, while revenue increased year-on-year due primarily to the weaker yen and increases in power modules used in consumer and industrial applications, as well as high frequency and optical devices, particularly in optical communication devices.

As a result, revenue for this segment increased by 10% year-on-year to 206.8 billion yen.

Operating profit increased by 9.8 billion yen year-on-year to 19.4 billion yen due mainly to the weaker yen and an increase in revenue.

Others

Revenue increased by 14% year-on-year to 393.0 billion yen due primarily to increases in materials procurement and logistics.

Operating profit increased by 4.8 billion yen year-on-year to 14.3 billion yen due mainly to an increase in revenue.

2. Consolidated Second-quarter Results (July 1, 2022 - September 30, 2022)

Revenue

Revenue increased by 199.9 billion yen year-on-year to 1,271.8 billion yen owing primarily to the weaker yen.

The Life segment saw an increase in the building systems business due to an increase in Asia and Japan, and the air conditioning systems & home products business also increased due mainly to a recovery in air conditioners in Japan, North America and Asia. The Industry and Mobility segment saw an increase in the factory automation systems business due to an increase in global demand primarily for capital expenditures related to digital equipment and decarbonization, and the automotive equipment business increased due to an increase in sales of new cars globally year-on-year, particularly in China and India, and robust demand for electric vehicle-related equipment. The Business Platform segment saw the information systems & network service business remaining substantially unchanged year-on-year, and the semiconductor & device business increased due mainly to robust demand for power modules and optical communication devices. The Infrastructure segment saw a decrease in the energy systems business, while the public utility systems business remained substantially unchanged year-on-year and the defense & space systems business increased.

Operating profit

Operating profit decreased by 8.5 billion yen year-on-year to 46.5 billion yen due mainly to decreases in the Infrastructure segment and the Life segment, despite increases in the Business Platform segment and Industry and Mobility segment. Operating profit ratio decreased by 1.4 points year-on-year to 3.7% due mainly to deteriorated cost ratio.

The cost ratio deteriorated by 2.0 points year-on-year despite the improvement owing to the weaker yen, as there was the impact of the rise in some material prices, the profitability of the Infrastructure segment deteriorated, and the Life segment also deteriorated due to the rise in logistics costs. Selling, general and administrative expenses increased by 40.4 billion yen year-on-year, but the selling, general and administrative expenses to revenue ratio improved by 0.5 points year-on-year. Other profit (loss) increased by 0.4 billion yen and other profit (loss) to revenue ratio improved by 0.1 points year-on-year.

Profit before income taxes

Profit before income taxes decreased by 2.6 billion yen year-on-year to 56.2 billion yen due primarily to a decrease in operating profit. The profit before income taxes to revenue ratio was 4.4%.

Net profit attributable to Mitsubishi Electric Corporation stockholders

Net profit attributable to Mitsubishi Electric Corporation stockholders decreased by 1.6 billion yen year-on-year to 41.3 billion yen due mainly to a decrease in profit before income taxes. The net profit attributable to Mitsubishi Electric Corporation stockholders to revenue ratio was 3.2%.

Consolidated Financial Results by Business Segment (Second Quarter, Fiscal 2023)

Infrastructure

The market for the public utility systems business saw robust investment in the public utility area outside Japan, while there was a continuing trend of railway companies in Japan revising their capital expenditure due to the impact of COVID-19. In this environment, orders won by the business increased year-on-year due primarily to an increase in the public utility area outside Japan, while revenue remained substantially unchanged year-on-year.

The market for the energy systems business continued to see capital expenditures of power companies in Japan and robust demand for power supply stabilization in the expansion of renewable energy. In this environment, orders won by the business increased year-on-year due primarily to increases in the power distribution and the power generation businesses in Japan, while revenue decreased year-on-year due mainly to a decrease in the power generation business in Japan.

The defense & space systems business saw a decrease in orders year-on-year due primarily to a decrease in large-scale projects for the space systems business, while revenue increased year-on-year due mainly to an increase in large-scale projects for the defense systems business.

As a result, revenue for this segment increased by 2% year-on-year to 227.7 billion yen.

Operating profit declined by 15.1 billion yen year-on-year to a loss of 12.1 billion yen due primarily to a shift in project portfolios and lower profitability in the defense & space systems business.

Industry and Mobility

The market for the factory automation systems business continued to see robust demand worldwide primarily for capital expenditures related to digital equipment such as semiconductors and electronic components, as well as products in the decarbonization area such as lithium-ion batteries. In this environment, orders won by the business decreased year-on-year due primarily to a decrease in demand related to smartphones in China, while revenue increased year-on-year.

The market for the automotive equipment business saw an increase in sales of new cars globally year-on-year, particularly in China and India, despite the semiconductor shortage. There was also robust demand for electric vehicle-related equipment in line with the expansion of the electric vehicle market. In this environment, the business saw increases in both orders and revenue year-on-year due primarily to the weaker yen and increases in electric-vehicle related equipment such as motors and inverters as well as electrical components.

As a result, revenue for this segment increased by 26% year-on-year to 430.4 billion yen.

Operating profit increased by 0.7 billion yen year-on-year to 21.2 billion yen due mainly to an increase in revenue, despite the rise in material prices and logistics costs.

Life

The market for the building systems business continued to see recovery from the sluggish market stemming from COVID-19. In this environment, the business saw increases in both orders and revenue year-on-year due primarily to the weaker yen and an increase in Asia and Japan.

The market for the air conditioning systems & home products business saw recovery from the impact of Shanghai's lockdown and an improvement of the situation with regard to the electronic components shortage. In this environment, the revenue for the business increased year-on-year due mainly to the weaker yen and increase in air conditioners in Japan, North America and Asia.

As a result, revenue for this segment increased by 22% year-on-year to 501.7 billion yen.

Operating profit decreased by 4.6 billion yen year-on-year to 20.3 billion yen due primarily to the rise in material prices and logistics costs, despite the weaker yen.

Business Platform

The market for the information systems & network service business saw the impact of the semiconductor shortage, while there was robust demand due mainly to the restarts of projects delayed in the COVID-19 pandemic. In this environment, orders won by the business decreased year-on-year due mainly to a decrease in the system integrations businesses, while revenue remained substantially unchanged year-on-year.

The market for the semiconductor & device business saw robust demand in power modules used in consumer and industrial applications as well as optical communication devices. In this environment, orders won by the business decreased year-on-year due primarily to a decrease in power modules, while revenue increased year-on-year due primarily to the weaker yen and increases in power modules used in consumer and industrial applications as well as high frequency and optical devices, particularly in optical communication devices.

As a result, revenue for this segment increased by 15% year-on-year to 113.6 billion yen.

Operating profit increased by 6.3 billion yen year-on-year to 12.0 billion yen due mainly to the weaker yen and an increase in revenue.

Others

Revenue increased by 15% year-on-year to 213.1 billion yen due primarily to increases in materials procurement and logistics.

Operating profit increased by 4.7 billion yen year-on-year to 10.3 billion yen due mainly to an increase in revenue.

Financial Standing

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

Total assets as of the end of this fiscal quarter increased by 96.6 billion yen compared to the end of the previous fiscal year to 5,204.6 billion yen. The change in balance of total assets was mainly attributable to increases in inventories by 178.3 billion yen and contract assets by 35.3 billion yen, despite a decrease in trade receivables by 104.0 billion yen.

              Inventories increased due primarily to the weaker yen, recovery in demand for the Industry and Mobility segment and the Life segment, as well as the semiconductor and other electronic components shortage. Trade receivables decreased due mainly to credit collection for projects from the previous fiscal year.

Total liabilities decreased by 17.0 billion yen compared to the end of the previous fiscal year to 1,993.5 billion yen due primarily to a decrease in other current liabilities of 30.6 billion yen, despite an increase in trade payables of 9.8 billion yen. Bonds and borrowings increased by 0.9 billion yen compared to the end of the previous fiscal year to 218.0 billion yen, with the ratio of bonds and borrowings to total assets recording 4.2%, representing a 0.1 point decrease compared to the end of the previous fiscal year.

Mitsubishi Electric Corporation stockholders' equity increased by 109.3 billion yen compared to the end of the previous fiscal year to 3,085.2 billion yen due mainly to net profit attributable to Mitsubishi Electric Corporation stockholders of 74.8 billion yen and an increase in accumulated other comprehensive income of 89.7 billion yen, mainly reflecting the weaker yen, despite a decrease due primarily to a dividend payment of 54.9 billion yen. The stockholders' equity ratio was 59.3%, representing a 1.0 point increase compared to the end of the previous fiscal year.

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

Cash flows from operating activities for the first half of fiscal 2023 were 50.7 billion yen (cash in), while cash flows from investing activities were 89.8 billion yen (cash out). As a result, free cash flow was 39.0 billion yen (cash out). Cash flows from financing activities were 91.0 billion yen (cash out), and cash and cash equivalents at the end of the period decreased by 95.5 billion yen compared to the end of the previous fiscal year to 631.5 billion yen.

              Net cash provided by operating activities decreased by 114.1 billion yen year-on-year due primarily to a decrease in profit, the impact of credit collection and an increase in inventories.

              Net cash used in investing activities increased by 10.4 billion yen year-on-year due mainly to an increase in purchase of investment securities primarily for the acquisition of subsidiaries, as well as the purchase of property, plant and equipment.

              Net cash used in financing activities decreased by 41.4 billion yen year-on-year due primarily to an increase in raising short-term borrowings and a decrease in purchase of treasury stock.

Forecast for Fiscal 2023

The consolidated earnings forecast for fiscal 2023, ending March 31, 2023, has been revised from the announcement on July 28, 2022, as stated below. Revenue is expected to exceed the previous announcement due to foreign exchange rates reconsidered in line with the weaker yen and passing rising components procurement costs onto prices. Forecasts for profits remain unchanged from the previous announcement due primarily to the rise in material prices and logistics costs, semiconductor and electronic components shortages and lower profitability in the Infrastructure segment.

Exchange rates in and after the third quarter of fiscal 2023 are 135 yen to the U.S. dollar, which is 15 yen weaker than the previous announcement; 135 yen to the euro, which is 5 yen weaker than the previous announcement; and 19.0 yen to the Chinese yuan, which is 1 yen weaker than the previous announcement.

Consolidated Financial Results Summary

1. Consolidated Half-year Results

 (In billions of yen except where noted)

2. Consolidated Second-quarter Results

                                                                                         (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 210 consolidated subsidiaries.

Condensed Quarterly Consolidated Financial Statements

Condensed Quarterly Consolidated Statement of Profit or Loss and Condensed Quarterly Consolidated Statement of Comprehensive Income (First Half, Fiscal 2023)

(Condensed Quarterly Consolidated Statement of Profit or Loss)

 (In millions of yen)

(Condensed Quarterly Consolidated Statement of Comprehensive Income)

(In millions of yen)

Condensed Quarterly Consolidated Statement of Profit or Loss and Condensed Quarterly Consolidated Statement of Comprehensive Income (Second Quarter, Fiscal 2023)

(Condensed Quarterly Consolidated Statement of Profit or Loss)

(In millions of yen)

(Condensed Quarterly Consolidated Statement of Comprehensive Income)

(In millions of yen)

Condensed Quarterly Consolidated Statement of Financial Position

 (In millions of yen)

Condensed Quarterly Consolidated Statement of Changes in Equity

FY '22 1st Half (Apr. 1, 2021 - Sept. 30, 2021)

(In millions of yen)

FY '23 1st Half (Apr. 1, 2022 - Sept. 30, 2022)

(In millions of yen)

Condensed Quarterly Consolidated Statement of Cash Flows

 (In millions of yen)

Consolidated Segment Information (First Half, Fiscal 2023)

1. Revenue and Operating Profit by Business Segment

(In millions of yen)

Notes:

1)     Business segments have been changed due to the adoption of the new management structure on April 1, 2022.

　Results for FY '22 1^st half were restated in line with the new segmentation.

2)     Inter-segment revenues are included in the above chart.

2. Revenue by Location of Customers

(In millions of yen)

Consolidated Segment Information (Second Quarter, Fiscal 2023)

1. Revenue and Operating Profit by Business Segment

(In millions of yen)

Notes:

1)     Business segments have been changed due to the adoption of the new management structure on April 1, 2022.

Results for FY '22 Q2 were restated in line with the new segmentation.

2)     Inter-segment revenues are included in the above chart.

2. Revenue by Location of Customers

(In millions of yen)

Notes to the Condensed Consolidated Financial Statements

(Notes regarding the going concern assumption)

Not applicable

Cautionary Statement

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

The main factors materially affecting the expectations expressed herein include but are not limited to the following:

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

(2)  Changes in foreign currency exchange rates

(3)  Changes in stock markets

(4)  Changes in the fund-raising environment

(5)  Changes in the supply and demand of products, as well as the material procurement environment

(6)  Establishment of important patents, status of significant licenses and disputes related to key patents

(7)  Litigation and other legal proceedings

(8)  Issues related to quality and defects in products or services

(9)  Laws, regulations and issues related to the global environment, especially responses to climate change

(10)        Laws, regulations and issues related to human rights

(11)        Radical technological innovation, as well as the development, manufacturing and time-to-market of products using new technology

(12)        Business restructuring

(13)        Information security incidents

(14)        Large-scale disasters, including earthquakes, tsunamis, typhoons, volcanic eruptions and fires

(15)        Social, economic and political upheaval due to heightened geopolitical risks, war, conflict, terrorism or other factors

(16)        Social, economic and political upheaval due to pandemics or other factors

(17)        Important matters related to Mitsubishi Electric Corporation's directors and executive officers, major shareholders, affiliated companies and other stakeholders

###

About Mitsubishi Electric Corporation

With more than 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 "Changes for the Better." The company recorded a revenue of 4,476.7 billion yen (U.S.$ 36.7 billion*) in the fiscal year ended March 31, 2022. For more information, please visit www.MitsubishiElectric.com

*U.S. dollar amounts are translated from yen at the rate of \122=U.S.$1, the approximate rate on the Tokyo Foreign Exchange Market on March 31, 2022

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