I am Yamamoto. Thank you for joining us today. I would like to present the financial results for the third quarter FY 2020. Please turn to page three of the presentation material. This slide shows a summary of the third quarter financial results, orders received, and net sales are as shown here. As for orders, environments in precision machinery and robot and motorcycle and engine steadily recovered. The impact by COVID-19 in aerospace systems and impact in energy system and p lant engineering by prolonged negotiations and delayed investment decisions were observed. In rolling stock, reactive downturn from the large orders in previous year affected orders. Due to all of these, orders declined year on year. Net sales declined sharply as a whole by JPY 102.9 billion year on year. Mainly, it was caused by the sales decline in aerospace systems, but the sales contraction rate has been moderating compared to the second quarter. Operating income will be elaborated in detail on page five and onward by factor. Mainly due to the spread of COVID-19, operating income decreased by 34.7 billion JPY, but COVID-related loss has been shrinking, except in aerospace systems. Recovery in precision machinery and robot and motorcycle and engine was notable, and operating income three months from October to December turned to + 18.1 billion JPY, showing steady recovery. Accordingly, recurring profit and loss improved to breakeven. In net profit, due to impairment loss of Sakaide Works in the second quarter and the partial withdrawal of deferred tax assets, loss of 13.9 billion JPY was posted. At the bottom of the page, weighted average exchange rates and net sales in foreign currencies are shown. As shown here, yen appreciated against U.S. dollar by 4 JPY to a dollar and depreciated against Euro by 1 JPY to euro year on year. Page four, orders received, net sales, and operating income by segment are as shown here. I will explain them on the page of each segment. Page five, details of change in profit and loss. Operating income decreased from JPY 30.9 billion to -JPY 3.7 billion, down JPY 34.7 billion year on year. Let me go through variance analysis. COVID-19 impact was -JPY 38.8 billion for the whole company. Breakdown is aerospace systems account for 60%, motorcycle and engine and rolling stock were 10%+ respectively, and 30% combined. These three segments account for 90% of the total impacts. As for foreign exchange rates, as mentioned, JPY appreciated against U.S. dollar in weighted average rate, and the impact was -JPY 3.9 billion. Certainly, as for change in sales, despite profit increase due to sales growth in hydraulic equipment for excavator for China and semiconductor robot in precision machinery and robot, impact by commercial aircraft-related sales decrease in aerospace systems was substantial, and -JPY 7.6 billion's impact was recorded. Firstly, as for change in product mix and other factors, impacts by worsened after-sales profit of engine, as well as loss on shorter operation in aerospace systems were substantial. Profitability in rolling stock improved year on year, and the product mix improved with robust sales of off-road vehicle and motorcycle for North America in motorcycle and engine. In total, positive impact of JPY 1.9 billion was recorded. As for SG&A expenses, mainly hydrogen-related R&D cost was reduced, and promotion and advertisement cost in motorcycle and engine was reduced as well. In total, JPY 13.7 billion of improvement was posted. Factors for decreased operating income were explained before, as for non-operating income and expenses, it was JPY 3.6 billion, up JPY 19.2 billion year on year. There are two major factors for change. Firstly, as for gain and loss on foreign exchange, JPY appreciated against USD this year, gain on payment side, JPY's depreciation against EUR and variation gain on other currencies credit were posted. The total gain and loss on foreign exchange was JPY 1.9 billion, up JPY 6.7 billion year on year. Secondly, payments for the in-service issues of commercial aircraft jet engines. After reviewing the payment of engine manufacturers, including Kawasaki Heavy Industries, considering the progress of replacement work, reversal gain on the payment posted previous year and before was recorded. With no new additional payment this year, in total, improvement of JPY 10.6 billion was posted. As for extraordinary income and losses, as explained in the second quarter results meeting, gain on sales of corporate housings and sales of shares of subsidiaries in the period were posted, while impairment loss on ship in Sakaide Works were also posted. Against the loss on business withdrawal recognized in the previous year, there was a reactive uptick. Accordingly, extraordinary income was up JPY 1.9 billion year on year to + JPY 0.8 billion. Page seven, aerospace systems. FY 2020 third quarter orders, sales, and profit year on year are as shown here. This segment was most affected by the COVID-19. As for the aircraft, sales units of Boeing 787 and 777 decreased sharply due to shipment suspension caused by the plant operational suspension of Boeing and reduced production. The Ministry of Defense sales will be more concentrated to the fourth quarter compared to the previous year. Consequently, both sales and profit decreased substantially. As for engines, sales were down almost 50% year on year, and after-sales also decreased, and sales fell sharply. However, in three months from October to December, flight hours recovered, and in the total of this segment, it turned to a profit of +JPY 4.6 billion. In three quarters, cumulative operating income was -JPY 19.2 billion. Full year forecast for FY 2020. Due to the additional cutback of Boeing production, profit of aircraft will be lower than the previously announced forecast. After-sales of engine has been improving, and the full-year forecast remains unchanged from the previous one. In FY 2021, partly due to expected improvement of after-sales of engine, segment profit is expected to recover gradually. Page eight, energy system and plant engineering. FY 2020 third quarter orders, sales, and profit year on year, as shown here. Domestic sales increased, more than offset the impact of the COVID-19. In the previous year, large sales with construction work completion at the chemical plant for Tokheim in Houston were posted. Due to the backlash, total sales went down slightly year on year. As for profit, due to sales decrease and operation loss by the impact of COVID-19, profit was down by JPY 4.6 billion from the previous year, when we had profitable project. Full year forecast for FY 2020. As for orders, due to expected delay of investment, the decision of clients, and reduced project affected by COVID-19. Following the second quarter, we revised down the forecast in this quarter. Sales are flat year on year, but forecast of the profit was revised up this time due to improvement of profitability for some projects. Precision machinery and robot. FY 2020 third quarter orders, sales, and profit year on year are as shown here. FY 2020 forecast. In China market, sales of hydraulic components for construction machinery are stronger than expected, and sales are turning to recover from the third quarter in other markets. We revised up the forecast of orders, sales, and profit. Page 10, ship and offshore structure. FY 2020 third quarter orders and sales year on year are as shown here. FY 2020 forecast. Orders and sales forecast remain unchanged. Profit was revised down JPY 3.5 billion to - JPY 3.5 billion, along with a foreign exchange assumption. For the management stability in the next year and onward, we will strive farther to win orders of commercial ships, in particular, LPG carriers. Page 11, rolling stock. FY 2020 third quarter orders and sales year on year are as shown here. As for profit in the third quarter, we posted additional allowances for project whose process was reviewed in North America due to COVID-19. Profit increased with sales increase in rolling stock in Japan, and profit rebounded after the loss-making project in North America in the previous year. As a whole, profit improved by JPY 1.8 billion. FY 2020 forecast. As mentioned, reviewing the process in North American project, we revised down the forecast of sales and profit this time. This time, we will examine the cost deterioration of the entire project in North America, including that of the next year, caused by the reduced operation due to COVID-19, and the result will be reflected in this fiscal year. In FY 2021 and onward, business will be firm, including that of North America. Page 12, motorcycle and engine. FY 2020 third quarter sales year on year are as shown here. Up to the first half, COVID-19 impact has been substantial. For North America, sales are higher than the previous year, mainly in off-road model. In Europe, sales are recovering to the previous year's level, and they more than offset the decline in emerging countries. As for profit, in three months from October to December, operating income was + JPY 6.9 billion, and the COVID-19 negative impact is clearly over, except the emerging countries. FY 2020 forecast. Especially due to the strong retail sales in North America, this time we revised up the forecast of both sales and profit. Strong retail sales in North America are expected to continue, but in the fourth quarter, sales promotion costs will increase with the expansion of sales promotional activities. Fixed costs, including R&D expenses, will be concentrated in the fourth quarter. Therefore, even with a quarter-on-quarter sales growth, profit will be down. Page 13, summary of balance sheet. Compared to the end of the previous fiscal year, total assets are up by JPY 83.8 billion. Because of robust sales in motorcycle and engine business, collection of account receivable progressed. On the other hand, by securing cash on hand, cash and deposit increased, and inventories increased in aerospace systems, and they resulted in asset growth. On liabilities, along with the total assets growth, interest-bearing debt increased and total liabilities increased by JPY 98.7 billion. As a result, net debt ratio slightly worsened to 141.6% quarter-on-quarter. We'll continue to work hard to improve to achieve the level which is being shown as a guideline. Page 14, summary of cash flow. Operating cash flow improved JPY 148.6 billion year on year due to backlash in the previous year from the credit securitization in two years ago in aerospace systems segment, progress in account receivable collection backed by the strong retail sales in motorcycle and engine segment in this year, and decreased inventories. Investing cash flow improved JPY 23.8 billion due to gain on sales of corporate housings and sales of shares of subsidiaries. As a result, free cash flow improved by JPY 172.4 billion year on year. In the fourth quarter and onward, we'll continue to improve financial position through initiatives to improve profitability, capital efficiency and cash flow so that free cash flow positive will be achieved quickly. Page 15, consolidated forecast for this year. As for orders in energy system and plant engineering were revised down, affected by COVID-19. Recovery in motorcycle and engine and precision machinery and robot are stronger than expected, and growth in defense demand and after sales of engine in aerospace systems are expected. Total orders forecast was revised up JPY 20 billion from the previously announced one. As for sales and profit, loss in overseas project in rolling stock is reflected, but as increased sales and profit in motorcycle and engine and precision machinery and robot are expected, as well as profitability improvement in energy system and plant engineering. Operating income is revised up by JPY 10 billion from the previous forecast to -JPY 10 billion. Recurring profit is also revised up by JPY 10 billion to -JPY 15 billion. As for net income attributable to owners of parent, considering the possible additional expenses, as of today, it was revised up JPY 2 billion from the previous forecast to -JPY 25 billion. As presented in the Group vision 2030, shown on November 2nd, we continue to make active investment in new businesses, including airport PCR testing services, medical robot, and Near-Future Mobility, which are expected as new growth domains, and aim to achieve profitability steadily in the next fiscal year. Page 16 shows actual results in FY 2019 and forecast for FY 2020 by segment in a table for reference. Page 17 shows before-tax ROIC by segment in a table for reference. Page 18 and 19, R&D, CapEx, number of employees, and historical data are shown. Page 20 and onward shows market overview of each segment for reference. Page 22, the final page, shows, as explained in November 2nd about the Group vision 2030, the progress of the growth areas that we focus on today. Mainly, there are three points. First one is the current status of the robot-based PCR testing services. We have received many inquiries. It was officially decided that the first test will be conducted in Fujita Health University in Aichi. Today from 1:00 P.M., media presentation was organized. For details, please refer to the press release on our website. Testing systems are already installed in Fujita Health University, and from mid-February, collaborating with the university, testing service will be launched. Another project is in preparation for Nippon Foundation. For the project, it was announced that targeting nursing care facility staff in Tokyo, 14,000 PCR tests a day will be launched from April. Second one is about robotic-assisted surgery system, hinotori. Product presentation was on November 18th, and the product rollout was from December. Clinical use already started in Kobe University. In December, first clinical surgical operation was successfully carried out. By the end of January, the fifth clinical surgery was operated, and the progress has been solid. Third one is hydrogen-related project. A verification test of liquefied hydrogen carrier is ongoing, and the liquefied hydrogen receiving terminal completed. Both are the first ones in the world, and the basic design for the world's largest liquefied hydrogen storage tank is completed. This concludes the presentation on the financial results for the third quarter FY 2020. Thank you for your attention.
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