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Mitsubishi Electric announces consolidated financial results for the first half and second quarter of Fiscal 2015

Mitsubishi Electric Corporation (TOKYO: 6503) announced today its financial results for the first half and second quarter, ended September 30, 2014, of the current fiscal year ending March 31, 2015 (fiscal 2015). 1. Consolidated Half-year Results (April 1, 2014 – September 30, 2014) Net sales: 1,972.8 billion yen (9% increase from the same period last … Continued

Mitsubishi Electric Corporation (TOKYO: 6503) announced today its financial results for the first half and second quarter, ended September 30, 2014, of the current fiscal year ending March 31,
2015 (fiscal 2015).

1. Consolidated Half-year Results (April 1, 2014 – September 30, 2014)

Net sales: 1,972.8 billion yen (9% increase from the same period last year)
Operating income: 121.3 billion yen (52% increase from the same period last year) Income before income taxes: 145.9 billion yen (75% increase from the same period last year) Net income attributable to
Mitsubishi Electric Corp.: 97.8 billion yen (102% increase from the same period last year)

The business environment in the first half of fiscal year 2015 in Japan experienced an upward trend in the commercial sector despite a backlash due to the last-minute surge in demand experienced before the rise in consumption tax. Meanwhile, economies outside Japan as a whole saw ongoing gradual expansion, owing to buoyant economic expansion in the U.S. and other factors, despite a stagnation in Europe and certain emerging markets. In the foreign currency exchange market, the yen became weaker against the U.S. dollar towards the end of the second quarter of fiscal 2015.

Under these circumstances, consolidated net sales in the first half of fiscal 2015 increased by 9% compared to the same period of the previous fiscal year to 1,972.8 billion yen, due to increased sales in all segments. Consolidated operating income increased by 52% compared to the same period of the previous fiscal year to 121.3 billion yen, due to increased profits in Industrial Automation Systems, Information and Communication Systems and Home Appliances segments.

Consolidated Financial Results by Business Segment (First Half, Fiscal 2015)
Energy and Electric Systems
Total sales: 502.1 billion yen (5% increase from the same period last year)
Operating income: 12.5 billion yen (5.8 billion yen decrease from the same period last year)

The social infrastructure systems business saw a decrease in orders compared to the same period of the previous fiscal year due primarily to a decrease in the power generation business. Sales, meanwhile, saw an increase compared to the same period of the previous fiscal year owing to increases in the public utility systems business in Japan and the rolling-stock equipment business worldwide.

The building systems business experienced increases both in orders and sales compared to the same period of the previous fiscal year, owing to growth in the new installation of elevators and escalators both overseas, mainly in China, and in Japan, as well as the weaker yen.

As a result, total sales for this segment increased by 5% from the same period of the previous fiscal year. Operating income decreased by 5.8 billion yen from the same period of the previous fiscal year due primarily to a shift in project portfolios and other factors.

Industrial Automation Systems

Total sales: 609.3 billion yen (20% increase from the same period last year)
Operating income: 66.2 billion yen (27.3 billion yen increase from the same period last year)

The factory automation systems business saw increases in both orders and sales from the same period of the previous fiscal year due to growth in capital expenditures relating to smartphone and automotive industries as well as facility replacements by manufacturers in Japan, and due additionally to the weaker yen.

The automotive equipment business saw increases in both orders and sales from the same period of the previous fiscal year primarily due to growth in the car sales market outside Japan as well as the positive influence of the weaker yen.
As a result, total sales for this segment increased by 20% from the same period of the previous fiscal year. Operating income increased by 27.3 billion yen from the same period of the previous fiscal year due primarily to an increase in sales.

Information and Communication Systems

Total sales: 248.5 billion yen (2% increase from the same period last year)
Operating income: 5.3 billion yen (2.2 billion yen increase from the same period last year)

The telecommunications equipment business saw an increase in orders compared to the same period of the previous fiscal year. Sales, meanwhile, decreased due primarily to a decrease in demand for communications infrastructure products.

Sales in the information systems and service business remained substantially unchanged compared to sales of the same period of the previous fiscal year.

The electronic systems business saw a decrease in orders compared to the same period of the previous fiscal year due to a decrease in orders for large-scale projects in the electronics business. Sales, meanwhile, experienced an increase compared to the same period of the previous fiscal year due to progress in orders already received for projects in electronics and space systems businesses.

As a result, total sales for this segment increased by 2% compared to the same period of the previous fiscal year. Operating income increased by 2.2 billion yen from the same period of the previous fiscal year due
primarily to an increase in sales.

Electronic Devices

Total sales: 106.5 billion yen (18% increase from the same period last year)
Operating income: 7.7 billion yen (3.2 billion yen increase from the same period last year)

The semiconductor business saw increases in both orders and sales from the same period of the previous fiscal year due to an increase in demand mainly for power modules used in automotive, consumer, railcar applications and for optical communication devices, as well as the weaker yen.

The LCD module business saw increases in both orders and sales compared to the same period of the previous fiscal year due to an increase in demand for industrial and automotive-use products.

As a result, total sales for the segment increased by 18% compared to the same period of the previous fiscal year. Operating income increased by 3.2 billion yen compared to the same period of the previous fiscal year
due primarily to an increase in sales.

Home Appliances

Total sales: 477.1 billion yen (4% increase from the same period last year)
Operating income: 35.2 billion yen (12.0 billion yen increase from the same period last year)

The home appliances business saw an increase in sales of 4% compared to the same period of the previous fiscal year due primarily to increased sales in air conditioners in Asian, North American and European markets and in package air conditioners in Japan, as well as the weaker yen, despite impact from the backlash due to the last-minute surge in demand experienced before the rise in consumption tax.

Operating income increased by 12.0 billion yen compared to the same period of the previous fiscal year largely due to an increase in sales.

Others

Total sales: 351.2 billion yen (14% increase from the same period last year)
Operating income: 8.2 billion yen (3.1 billion yen increase from the same period last year)

Sales increased by 14% compared to the same period of the previous fiscal year mainly at affiliated companies involved in materials procurement.

Operating income increased by 3.1 billion yen from the same period of the previous fiscal year due primarily to an increase in sales.

2. Consolidated Second-quarter Results (July 1, 2014 – September 30, 2014)

Net sales: 1,062.1 billion yen (9% increase from the same period last year)

Operating income: 62.0 billion yen (36% increase from the same period last year) Income before income taxes: 78.0 billion yen (91% increase from the same period last year) Net income attributable to Mitsubishi Electric Corp.: 54.8 billion yen (140% increase from the same period last year)

Consolidated net sales for this quarter was 1,062.1 billion yen, a 9% increase from the same period of the previous fiscal year, due primarily to increased sales in all segments. Consolidated operating income was 62.0 billion yen, increasing by 36% from the same period of the previous fiscal year, with increased profits in all segments.

Consolidated Financial Results by Business Segment (Second Quarter, Fiscal 2015)

Energy and Electric Systems

Total sales: 278.9 billion yen (7% increase from the same period last year)
Operating income: 4.6 billion yen (1.1 billion yen increase from the same period last year)

The social infrastructure systems business saw a decrease in orders from the same period of the previous fiscal year due primarily to a decrease in the power generation business. Sales, meanwhile, increased from the same period of the previous fiscal year primarily due to increases in sales of the public utility systems in Japan and the rolling-stock equipment business worldwide.

The building systems business experienced increases in both orders and sales compared to the same period of the previous fiscal year, owing to growth in the new installation of elevators and escalators both overseas, mainly in China, and in Japan, as well as the weaker yen.

As a result, total sales for this segment increased by 7% from the same period of the previous fiscal year. Operating income increased by 1.1 billion yen from the same period of the previous fiscal year due primarily to an
increase in sales.

Industrial Automation Systems

Total sales: 313.9 billion yen (18% increase from the same period last year)
Operating income: 31.1 billion yen (7.2 billion yen increase from the same period last year)

The factory automation systems business saw increases in both orders and sales from the same period of the previous fiscal year due to growth in capital expenditures relating to smartphone and automotive industries as well as facility replacements by manufacturers in Japan, and due additionally to the weaker yen.

The automotive equipment business saw increases in both orders and sales from the same period of the previous fiscal year primarily due to growth in the car sales market outside Japan, as well as the positive influence of the weaker yen.
As a result, total sales for this segment increased by 18% from the same period of the previous fiscal year. Operating income increased by 7.2 billion yen from the same period of previous fiscal year due primarily to an increase in sales.

Information and Communication Systems

Total sales: 155.9 billion yen (12% increase from the same period last year)
Operating income: 7.1 billion yen (3.0 billion yen increase from the same period last year)

The telecommunications equipment business saw increases in both orders and sales compared to the same period of the previous fiscal year owing primarily to an increase in demand for communications infrastructure products.
The information systems and service business experienced a decrease in sales from the same period of the previous fiscal year mainly due to a decrease in the IT infrastructure service business.

The electronic systems business saw a decrease in orders compared to the same period of the previous fiscal year due to a decrease in orders for large-scale projects in the electronics business. Sales, meanwhile, experienced an increase compared to the same period of the previous fiscal year due to progress in orders already received for projects in the electronics and space systems businesses.

As a result, total sales for this segment increased by 12% compared to the same period of the previous fiscal year. Operating income increased by 3.0 billion yen from the same period of the previous fiscal year due primarily to an increase in sales.

Electronic Devices

Total sales: 55.2 billion yen (15% increase from the same period last year)
Operating income: 3.9 billion yen (0.5 billion yen increase from the same period last year)

The semiconductor business saw increases in both orders and sales from the same period of the previous fiscal year due to an increase in demand mainly for power modules used in automotive, consumer, railcar applications and for optical communication devices, as well as the weaker yen.

The LCD module business saw little change in orders, while sales increased compared to the same

period of the previous fiscal year due to an increase in demand for industrial and automotive-use products.

As a result, total sales for the segment increased by 15% compared to the same period of the previous fiscal year. Operating income increased by 0.5 billion yen compared to the same period of the previous fiscal year due primarily to an increase in sales.

Home Appliances

Total sales: 242.3 billion yen (Unchanged from the same period last year)
Operating income: 13.9 billion yen (3.0 billion yen increase from the same period last year)

The home appliances business saw little change in sales compared to the same period of the previous fiscal year. This was a result of increased sales in air conditioners in Asian and North American markets, and package air conditioners in Japan, as well as the weaker yen, while there was an impact from the backlash due to the last-minute surge in demand experienced before the rise in consumption tax.

Operating income increased by 3.0 billion yen compared to the same period of the previous fiscal year due to a shift in product mix and other factors.

Others

Total sales: 183.1 billion yen (10% increase from the same period last year)
Operating income: 6.5 billion yen (2.2 billion yen increase from the same period last year)

Sales increased by 10% compared to the same period of the previous fiscal year, mainly at affiliated companies involved in materials procurement.
Operating income increased by 2.2 billion yen compared to the same period of the previous fiscal year due primarily to an increase in sales.

Financial Standing

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

The Company’s total assets as of the end of this fiscal quarter increased from the end of the previous fiscal year by 146.3 billion yen to 3,759.3 billion yen. The change in the balance of total assets is mainly attributable to increases in the balances of cash and cash equivalents of 123.7 billion yen, and of work-in-process to be recorded in commensurate with progress in job orders under pertinent contracts by 106.7 billion yen, while trade receivables showed a decrease of 103.7 billion yen resulting from various factors including credit collection.

Total liabilities increased from the end of the previous fiscal year by 7.6 billion yen to 2,020.2 billion yen. The outstanding balances of debts and corporate bonds increased by 7.5 billion yen from the end of the previous fiscal year to 381.0 billion yen. The ratio of interest bearing debt to total assets, however, declined to 10.1%, which was a 0.2 point decrease compared to the end of the previous fiscal year. The outstanding balance of trade payable decreased by 27.0 billion yen, and retirement and severance benefits decreased by 37.3 billion yen, mainly owing to an increase in pension assets resulting from a rise in stock prices, while other current liabilities increased by
58.5 billion yen.

Mitsubishi Electric Corporation shareholders’ equity increased by 138.5 billion yen compared to the end of the previous fiscal year to 1,662.8 billion yen. Shareholders’ equity ratio, representing a 2.0 point increase compared to the end of the previous fiscal year, was recorded as 44.2%. The changes referred to above are primarily resulting from a recorded net income attributable to Mitsubishi Electric Corporation of 97.8 billion yen, together with an increase in accumulated other comprehensive income by 58.9 billion yen backed by such factors as rising stock prices and the weaker yen, despite a dividend payment of 23.6 billion yen.

Cash flows from operating activities decreased by 67.1 billion yen compared to the same period of the previous fiscal year to 225.2 billion yen (cash in). Cash flows from investing activities increased by 22.2 billion yen compared to the same period of the previous fiscal year to 88.2 billion yen (cash out) resulting primarily from an increase in capital expenditure. Consequently, free cash flow totaled 137.0 billion yen (cash in). Cash flows from financing activities were 21.5 billion yen (cash out) mainly due to dividend payments.

Forecast for Fiscal 2015 (year ending March 31, 2015)

The consolidated earnings forecast for fiscal 2015, ending March 31, 2015, has been revised from the previous forecast announced on July 30, 2014. Operating income and other figures are expected to exceed the previous forecast owing mainly to increases in the Industrial Automation Systems segment, which experienced buoyant demand in capital expenditures for smartphone and automotive related investments, as well as the Home Appliances segment, which showed growth in air conditioners for markets inside and outside Japan.

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