According to the company’s website news release on November 8, 2022, IHI Corporation (IHI) is listed on the Prime Market of the Tokyo Stock Exchange, Nagoya Stock Exchange, Sapporo Securities Exchange and Fukuoka Stock Exchange with the securities code number 7013.
Representative : Representative Director and President, Hiroshi Ide
For further information contact : Executive Officer, Yasuaki Fukumoto Tel: +81-3-6204-7065 URL: https://www.ihi.co.jp
Submission date of Quarterly Securities Report: November 10, 2022 (planned)
Commencement of Dividend Payments: December 9, 2022 (planned)
Preparing supplementary material on financial results: Yes
Holding financial results presentation meeting: Yes (for institutional investors, analysts and the media)
This consolidated financial report has been prepared in accordance with International Financial Reporting Standards (hereinafter, “IFRS”).
Figures are in Japanese yen rounded to the nearest millions.
QUALITATIVE INFORMATION REGARDING CONSOLIDATED RESULTS
EXPLANATION REGARDING BUSINESS RESULTS
During the six months ended September 30, 2022, in the global economy, economic conditions have been on the downside due to heightened geopolitical risks, such as the lengthening of the Russian invasion upon Ukraine, and inflation and acceleration of monetary tightening policies internationally. Meanwhile, although the Japanese economy staged a gradual recovery with the nation’s economy holding on a path toward striking a balance between social and economic activity as it progressively transitioned to a new phase of coexistence with COVID-19, the effects of the rapid yen depreciation due to the situation of the global economy is becoming apparent.
In the IHI Group’s main business, the Civil aero engines Business, although a serious labor shortage in the airline industry mainly in North America recently begins affecting the results of IHI Group, overall, sales of spare parts remained steady along with the recovery in demand for aero transportation which had been depressed by COVID-19. In the Vehicular turbochargers Business, production is recovering from restrained economic activity in China and the production adjustment by automobile companies in response to the global shortage of semiconductors. Although the current soaring prices of raw materials has affected the profitability of many of our businesses, the steady contract amount negotiation, activities to improve construction profitability and the effect of the yen depreciation have contributed to our business performance.
Under this business environment, orders received of the IHI Group during the six months increased 26.4% from the previous corresponding period to ¥642.8 billion. Revenue increased 15.1% from the previous corresponding period to ¥594.4 billion.
In terms of profit, operating profit increased ¥7.1 billion to ¥33.5 billion due to increased sales of spare parts and improved profitability in the Civil aero engines Business and increased profit resulted from increased revenue in the Nuclear energy Business, as well as the effect of significant yen depreciation, despite decreased profit due to the sales of property, plants and equipment in the corresponding period. Profit before tax increased ¥12.9 billion to ¥39.5 billion due to a favorable turnaround in foreign exchange gains (losses), despite decreased share of profit (loss) of investments accounted for using equity, profit attributable to owners of parent increased ¥5.9 billion to ¥21.1 billion.
EXPLANATION REGARDING CONSOLIDATED FINANCIAL POSITION
Assets, liabilities and equity
Total assets at the end of the second quarter were ¥1,903.4 billion, up ¥23.7 billion compared with the end of the previous fiscal year. The major items of increase were inventories, up ¥54.6 billion and contract assets, up ¥16.7 billion and investment property, up ¥7.9 billion. The major items of decrease were cash and cash equivalents, down ¥50.1 billion and trade and other receivables, down ¥6.7 billion.
Total liabilities were ¥1,465.7 billion, down ¥6.9 billion compared with the end of the previous fiscal year. The major item of decrease was trade and other payables, down ¥13.3 billion. The balance of interest-bearing liabilities, including lease liabilities, was ¥507.6 billion, up ¥2.0 billion from the end of the previous fiscal year, which included the Transition Bond issued as part of our initiatives to become carbon-neutral. Equity was ¥437.7 billion, up ¥30.6 billion compared with the end of the previous fiscal year, which included profit attributable to owners of parent of ¥21.1 billion.
As a result of the above, the ratio of equity attributable to owners of parent increased from 20.3% at the end of the previous fiscal year to 21.6%.
Cash flows
At the end of the second quarter, the outstanding balance of cash and cash equivalents was ¥95.3 billion, down ¥50.1 billion from the end of the previous fiscal year.
Net cash flows from operating activities were ¥9.9 billion excess of expenditure. This was due to increases in inventories, prepayments and tax payment, while there were decreases in trade receivables.
Net cash flows from investing activities were ¥21.6 billion excess of expenditure. This was due mainly to acquisitions of property, plant and equipment.
Net cash flows from financing activities were ¥19.3 billion excess of expenditure. This was due to dividend payments and repayments of borrowings, while there were proceeds from issuance of bonds.
EXPLANATION REGARDING FUTURE PREDICTION INFORMATION SUCH AS CONSOLIDATED FORECASTS OF RESULTS
Whereas the balance between social and economic activity is poised to strengthen through a progressive transition to a new phase of coexistence with COVID-19, concerns of an economic downturn in Europe, the U.S. and elsewhere worldwide have been mounting amid uncertainties ahead, such that include the lengthening of the Russian invasion upon Ukraine, political conflicts between U.S. and China, along with inflation and acceleration of monetary tightening internationally. Also, in the medium and long term, the trend to focus on environment, circular economies, sustainability such as respect for human rights is expected to develop, the responses of governments and companies will attract attention.
To respond to the speed of change in these environments, the IHI Group is promoting “Project Change” aimed returning to growth trajectory by further strengthening earnings foundations and expanding the lifecycle businesses, and creating growth businesses that contribute to the realization of a sustainable society. As an effort for creating growth businesses, IHI has developed gas turbine capable of burning 100% liquid ammonia and succeeded in ammonia co-firing of boilers used for thermal power generation in Malaysia and Indonesia.
While accelerating these efforts, the IHI Group is going ahead to build stronger earnings foundations by preparing multiple scenarios for responding to risks and flexibly implementing appropriate measures in response to changes in the environment.
The IHI Group’s consolidated forecasts of results for the full fiscal year ending March 31, 2023 remain unchanged from previous forecasts announced on August 9, 2022, in terms of both revenue and profit, despite improved profitability in the Civil aero engines Business and the yen depreciation, due to the revision of spare parts sales forecast caused by labor shortage in the airline industry and recording of restructuring expenses in the Marine large bore engines Business.
Note that foreign exchange rate of ¥130/US$1 has been assumed in the above forecasts in and after the third quarter ending December 31, 2022.
Concerning dividends, the Board of Directors resolved today to pay an interim dividend (40 yen per share) as previously announced in the dividend forecast. There is also no change in the forecast for the year-end dividend.
CHANGES IN ACCOUNTING POLICIES
Significant accounting policies applied by the IHI Group in the condensed quarterly consolidated financial statements are the same as those in the consolidated financial statements for the previous fiscal year. Income taxes for the condensed quarterly consolidated financial statements are calculated based on the estimated annual effective tax rate.
CHANGES IN ACCOUNTING ESTIMATES
For estimates of a part of consideration payable to a customer incurred related to the civil aero engine programs in which IHI participates, primarily due to the progress in performance improvement of the aero engines and the decrease in actual payments, IHI changed to the method based on the burden after performance improvement from the second quarter ended September 30, 2022.
As a result, revenue, operating profit, and profit before tax each increased by ¥5,529 million for the six months ended September 30, 2022.
SEGMENT INFORMATION
Overview of reportable segment
The business segments are constituent units of the IHI Group for which separate financial information is available. The Board of Directors periodically examines these segments for the purpose of deciding the allocation of management resources and evaluating operating performance.
The IHI Group organizes SBUs by products and services and allocates Business Areas to control these SBUs. Each Business Area manages and supervises the SBUs’ execution of business strategies, allocates management resources necessary for execution of the SBUs’ business strategies. SBUs shall be the units possessing complete business process including sales, developments, designs, productions, constructions, services, etc. based on the visions and strategies drawn up by Business Areas. Each SBU is an organization executing business and responsible for ensuring a profit in the SBU.
Based on the above, the IHI Group consists of segments by these Business Areas and sets the Business Areas of “Resources, Energy and Environment,” “Social Infrastructure and Offshore Facilities,” “Industrial Systems and General-Purpose Machinery,” and “Aero Engine, Space and Defense” as its reportable segment. There are no aggregated business segments when deciding the reportable segment.
Matters about changes of reportable segment, etc.
Changes in accounting estimates
IHI changed the method regarding the estimation of a part of consideration payable to a customer incurred related to the civil aero engine programs in which IHI participates form the second quarter ended September 30, 2022 as described in above “Changes in accounting estimates”. Therefore, IHI has similarly changed the measuring method of revenue in the Aero Engine, Space and Defense.
For further details, please refer to “(5) NOTES TO THE CONDENSED QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS (CHANGES IN ACCOUNTING ESTIMATES)”.
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Published on November 18, 2022 4:34 PM (GMT+8)Last Updated on November 18, 2022 4:34 PM (GMT+8)
