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

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

Consolidated Financial Results

The economy in the first quarter, from April through June 2022, of fiscal 2023 generally continued to see recovery in the corporate and household sectors in the U.S., while there was downward pressure on the corporate and household sectors due to the impact of lockdown caused by the expansion of COVID-19 in China. In Japan and Europe, the pace of recovery slowed down due primarily to a decrease in production. There was also the impact of the rise in a part of material prices and high logistics costs as well as the prolonged components shortage.

Revenue

Revenue increased by 1.2 billion yen year-on-year to 1,067.7 billion yen owing primarily to the weaker yen, despite a decrease due mainly to the impact of Shanghai's lockdown. The Infrastructure segment saw decreases in revenue in all of its businesses: the public utility systems, the energy systems, and the defense & space systems. The Life segment saw an increase in the building systems business and a decrease in the air conditioning systems & home products business. The Industry and Mobility segment saw an increase in the automotive equipment business and a decrease in the factory automation systems business. The Business Platform segment saw increases in both of its businesses: the information systems & network service and the semiconductor & device.

Operating profit

Operating profit decreased by 48.8 billion yen year-on-year to 33.9 billion yen due mainly to decreases in the Life segment, the Industry and Mobility segment and the Infrastructure segment, despite an increase in the Business Platform segment. Operating profit ratio decreased by 4.6 points year-on-year to 3.2% due mainly to deteriorated cost ratio.

The cost ratio deteriorated by 2.5 points year-on-year despite the weaker yen, primarily as there was the impact of the rise in material prices and a deterioration in the Life segment, whose production level was lower due to the electronic components shortage. Selling, general and administrative expenses increased by 21.5 billion yen year-on-year, and the selling, general and administrative expenses to revenue ratio deteriorated by 2.0 points year-on-year. Other profit (loss) decreased by 0.3 billion yen year-on-year and the other profit (loss) to revenue ratio deteriorated by 0.1 points year-on-year.

Profit before income taxes

Profit before income taxes decreased by 42.6 billion yen year-on-year to 46.8 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 28.3 billion yen year-on-year to 33.4 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 3.1%.

Consolidated Financial Results by Business Segment

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 recovery in capital expenditures of power companies in Japan as well as 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 generation business outside Japan and the power distribution business 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 an increase in orders year-on-year due primarily to an increase in large-scale projects for the space systems business, while revenue decreased year-on-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% year-on-year to 174.2 billion yen.

Operating profit declined by 8.9 billion yen year-on-year to a loss of 3.2 billion yen due primarily to a decrease in revenue and a shift in project portfolios.

Industry and Mobility

The market for the factory automation systems business saw a global increase primarily in demand 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 increased year-on-year, while revenue decreased year-on-year due primarily to a decrease in revenue in China owing mainly to Shanghai's lockdown.

The market for the automotive equipment business saw a decrease in sales of new cars except some regions due primarily to the semiconductor shortage, although there was 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.

As a result, revenue for this segment increased by 1% year-on-year to 364.4 billion yen.

Operating profit decreased by 11.9 billion yen year-on-year to 22.7 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 saw the signs of recovery from the sluggish market stemming from COVID-19. In this environment, orders won by the business decreased year-on-year due mainly to a decrease in China, while revenue increased year-on-year due mainly to the weaker yen and an increase in Japan and Asia.

The market for the air conditioning systems & home products business saw the impact of Shanghai's lockdown and the electronic components shortage. In this environment, the revenue for the business decreased year-on-year due mainly to a decrease in residential and industrial air conditioners in Japan, China and North America.

As a result, revenue for this segment increased by 1% year-on-year to 438.3 billion yen.

Operating profit decreased by 31.0 billion yen year-on-year to 13.7 billion yen due primarily to the rise in material prices and logistics costs as well as the lower production level, 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. 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 & devices business saw a decrease in power modules used in automotive applications, although optical communication devices remained robust in line with increasing demand for communication. 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 as well as an increase in high frequency and optical devices, particularly in optical communication devices.

As a result, revenue for this segment increased by 6% year-on-year to 93.2 billion yen.

Operating profit increased by 3.5 billion yen year-on-year to 7.4 billion yen due mainly to an increase in revenue.

Others

Revenue increased by 12% year-on-year to 179.8 billion yen due primarily to increases in materials procurement and logistics.

Operating profit increased by 0.1 billion yen year-on-year to 3.9 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 11.4 billion yen compared to the end of the previous fiscal year to 5,119.4 billion yen. The change in balance of total assets was mainly attributable to increases in inventories by 136.6 billion yen and other current assets by 46.2 billion yen, despite a decrease in trade receivables by 165.0 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 semiconductors and other electronic components shortage. Trade receivables decreased due mainly to credit collection for projects from the previous fiscal year.

Total liabilities decreased by 44.4 billion yen compared to the end of the previous fiscal year to 1,966.1 billion yen due primarily to decreases in trade payables of 24.8 billion yen and other current liabilities of 27.9 billion yen. Bonds and borrowings increased by 2.6 billion yen compared to the end of the previous fiscal year to 219.8 billion yen, with the ratio of bonds and borrowings to total assets recording 4.3%, unchanged compared to the end of the previous fiscal year.

Mitsubishi Electric Corporation stockholders' equity increased by 51.3 billion yen compared to the end of the previous fiscal year to 3,027.2 billion yen due mainly to net profit attributable to Mitsubishi Electric Corporation stockholders of 33.4 billion yen and an increase in accumulated other comprehensive income of 72.2 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 59.1%, representing a 0.8 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 this quarter were 54.6 billion yen (cash in), while cash flows from investing activities were 54.4 billion yen (cash out). As a result, free cash flow was 0.2 billion yen (cash in). Cash flows from financing activities were 68.8 billion yen (cash out), and cash and cash equivalents at the end of the period decreased by 40.0 billion yen compared to the end of the previous fiscal year to 687.1 billion yen.

              Net cash provided by operating activities decreased by 67.0 billion yen year-on-year due primarily to a decrease in profit and an increase in inventories.

              Net cash used in investing activities increased by 22.5 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 24.6 billion yen year-on-year due primarily to the impact of the expenditure for repayments of bonds in the same period of the previous fiscal year.

Forecast for Fiscal 2023

The consolidated earnings forecast for fiscal 2023, ending March 31, 2023, is unchanged from the previous forecast announced on April 28, 2022 as stated below.

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 control practice. 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/

Consolidated forecast for fiscal 2023

Exchange rates in and after the second quarter of fiscal 2023 are120 yen to the U.S. dollar, which is 5 yen weaker than the previous announcement; 130 yen to the euro, which is 5 yen weaker than the company's previous announcement; and 18.0 yen to the Chinese yuan, which is unchanged from the previous announcement.

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 209 consolidated subsidiaries.

Condensed Quarterly Consolidated Financial Statements

Condensed Quarterly Consolidated Statement of Profit or Loss and
Condensed Quarterly Consolidated Statement of Comprehensive Income

(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 Q1 (Apr. 1, 2021 - Jun. 30, 2021)

(In millions of yen)

FY '23 Q1 (Apr. 1, 2022 - Jun. 30, 2022)

(In millions of yen)

Condensed Quarterly Consolidated Statement of Cash Flows

(In millions of yen)

Consolidated Segment Information

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 Q1 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

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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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