Mitsubishi Heavy Industries, Ltd.

Good afternoon, ladies and gentlemen, and thank you very much to participate in this meeting. Please refer to the materials you have at hand.

Based on this material I'm about to give you an overview of MHI’s financial results for the first three quarters of fiscal 2018. First is a highlight, we have been working on the investment for MRJ, it is meeting our expectation in budget, but other than that fundamental business earnings are solid.

Then about orders received. Mainly due to a large order cancellation for a coal-fired thermal power plant in Power Systems, we had to bear with the cancellation, so orders received decreased.

However, the Industry & Infrastructure and Aircraft, Defense & Space orders increased. So all in all, it is almost the same as before.

So, in actuality we are able to say that the orders received are unchanged, and then the profit from business activities increased in all segments, and then looking at interest-bearing debt and free cash flow, they were both improved. So compared with the previous conditions, it’s much better.

So the financial status of MHI is quite solid. Then on the other hand as you are well aware, we have seen some deterioration of the order amount in Power, and then about the industry – Industry & Infrastructure, the situation looks good, but still there have been some concern about the delay of the orders we have been expecting to the next year, so we would speak about this later on.

But there has been decline of the expectation by about JPY 200 billion and then scheduled full year payout is going to be kept at JPY 130. Then allow me to – turning to Page 4, summary of the first to third quarter fiscal financial results.

The orders received are JPY 2,479.3 billion, which is a decline of JPY 96.4 billion, but there have been – if we just exclude the cancellations, then it is about the same as the previous years. And then the revenues increased by JPY 55 billion, the JPY 2,899 billion.

And then the profit from business activities JPY 105.3 billion, which is JPY 48 billion increase, and then profit attributable to owners of parent JPY 35.3 billion, which is an increase of JPY 34.1 billion. So, as in the case of the previous time, this is a – we had been using the Japanese GAAP, but in order to have good comparison – consistency with workstation, we have been utilizing IFRS.

So if you make a comparison using the IFRS, this is a figure that I had just mentioned, EBITDA is JPY 200.7 billion and the free cash flow was JPY 154.4 billion, both were better than the previous time. And then the next is the basis for the fundamental business.

So the profit from business activities were JPY 183.4 billion and the – then the figure is 6.9% and the 3.6%. So all in all, it is very good for EBITDA and free cash flow as it can be seen here.

And then moving on, I guess, you could take a look at each segment for orders received, Power Systems, the JPY 756.5 billion. So this is a decrease of JPY 258 billion and then about JPY 100 billion was the cancellation for the previous year, and then Industry & Infrastructure JPY 1,368 billion, which is the increase of JPY 160 billion.

In the – so machinery, steel machinery is increasing and also for the Aircraft, Defense & Space, I think it was JPY 381.5 billion, which is the increase of JPY 31 billion. So all in all, Power was decreased but industry and the Aircraft, Defense & Space has done well.

So all in all, we are able to say that it was almost in line with the previous year. Then, especially for Aircraft and Defense 777, it has been changed to 777X, so we are in the transition.

So that was a reason why there was a decline in the orders, but the Power and Industry & Infrastructure increased. So all in all, it was about increase of the – about JPY 50 billion.

And then about – for all of them, we were able to see the increase in all segments, so there have been cash flow improvement and balance sheet efficiency improvement. And, of course, we are in the process of all these, and we are now seeing the fruit of all these activities.

Next is the balance sheet. In the case of MHI, we see – we tend to see the expansion of our balance sheet on the third quarter, then the total figure was JPY 5,269 trillion which you see, an increase of JPY 21 billion that can be seen here.

This includes indemnification asset for South African project which is about JPY 52 billion. So excluding this balance sheet in our strategy is – it is shrinking.

So this seems to be a very good trend. Then looking at the liability side, the interest-bearing debt was JPY 997.3 billion.

And in many ways it indicates, we have the figure over JPY 1 trillion, but this is less than that. So to a certain trend, we are able to say that interest-bearing debt situation is not bad and then for the short-term we are funded – utilizing commercial papers and the short-term Boeing, but still this will be reversed by the end of this year.

I'd like to share with you some main financial measure. So we had the bookings for the M&A related items given any of these terms.

So there had been some disposal, so the equity ratio is 26.2%, which is less than 30%, but still it is – sound astounding. And then interest-bearing debt and debt equity ratio compared with the end of the year, it is – it looks like it is declining, but still compared with the comparable period last year its better.

So we’d like to continue and we are confident of reducing the interest-bearing debt this year. Free cash flow, as can be seen in the figure, compared with the previous term there have been an increase of about JPY 150 billion.

In the second quarter, the free cash flow target was increased from JPY 50 billon to JPY 100 billion. And then we are quite sure that we'll be able to achieve this goal moving on.

Now let me move on to the break down by segment. I'm now on Page 9, and so if you can note the orders received are shown in the figures here for Power segment this has decreased, Industry & Infrastructure has increased.

Now for the orders backlog, they are exceeding, we received and so they have been on a decline trend and Power obviously has created an impact. Now what is happening to offshore wind power?

Many questions have been raised by many members. And so with our JV, we do have a 50% share in our JV, and so they are in – we did not include in the past, but for this quarter and onwards, we will show as reference the numbers for offshore wind power.

So order backlog is JPY 900 billion as we stand. And so for coal thermal is on the decline, however, renewable energy if we combine this then the orders backlog is pretty much on par.

Let me now move on to the revenue by segment. And again, at Power Systems, Nuclear Power, GTCC and Aero Engines have increased respectively.

Now for Nuclear Power, there was a minimal recording last year, but now we have returned back to normal. And the Aero Engines is a highlight, and so we are now – we tripling our efforts.

And so in terms of revenue as well as profit, they are expanding. Now moving on to Industry & Infrastructure segment.

For middles there had been a drop, but it is now on an improving trend. And we have combined our four companies and as a result, we are now competing for third and fourth place in the global markets, and we are enjoying synergy effects as a result and so we are seeing all in all increase.

Now moving on to chemical plants and transportation systems, there are some differences in the products, however, they all in all have decreased. Now moving on to Aircraft, Defense & Space.

Our commercial aircraft, as I explained earlier, for Boeing there has been a drop. But all in all, in terms of ratio unlike the orders received, we are pretty much on par with last year same quarter and so we are progressing as scheduled.

Now moving on to the profit from business activities by segment, Power as you can note here, we have increased and for gas turbine. After service has been a strong driver for us, and it has expanded its profit for Industry & Infrastructure, material handling equipment as well as we have also seen some increase in sales as well.

As for Aircraft, Defense & Space, commercial aircraft the 777 moving on to the 777X, there has been some drop as a result of this upgrade, and so – although, slightly, some of our profit has deteriorated. Now MRJ related activities, so as you see, the losses from JPY 88.9 billion to JPY 78.1 billion.

So all in all, augmented together we are seeing an increase. So based on the circumstances, if I can now move on to Page 13, and explain to you on the summary of forecasting, we have made some slight amendments in our forecast for the full year for orders received.

We announced as of the last financial announcement JPY 4,100 billion, but again in the Power segment, we had canceled some projects and some major projects have now been extended and postponed until next year. So considering these current trends, we are seeing a drop of approximately JPY 20 billion in Power segment.

Now for Industry & Infrastructure segment, we are expanding orders steadily at that plant that was scheduled for this year is now extending and postponed to next fiscal year. The probability of this happening is now quite high.

So we are now decreasing this by JPY 100 billion. So all in all, JPY 300 billion decrease has been adapted since the initial forecast.

Now in terms of revenue and profit and other numbers if you note here, we have not changed the full year forecast for FY 2018. Now if we further break this down by segment the full year forecast, again, as you can reference on Page 15, Power industry, JPY 200 billion and JPY 100 billion, respectively, it dropped so from JPY 1.5 trillion to JPY 1.3 trillion for Power and for Industry & Infrastructure as well we have decreased the numbers.

And for other segments, we have not changed the segment full year forecast. I would now like to conclude my presentation.

Thank you.