MHI REPORT 2019 FINANCIAL SECTION For the Year Ended March 31, 2019 K137-MRFS19E1-A-0, (0.55)19-11, F Printed in Japan SEGMENT INFORMATION Mitsubishi Heavy Industries, Ltd. and Consolidated Subsidiaries Fiscal years ended March 31, 2019 and 2018 REVENUE IMPAIRMENT LOSS Millions of yen Thousands of Millions of yen Thousands of U.S. dollars Billions of yen U.S. dollars 5,000 Industry Segment 2018 2019 2019 Industry Segment 2018 2019 2019 Power Systems ¥1,482,457 ¥1,525,108 $13,740,949 Power Systems ¥4,784 ¥1,263 $11,379 4,000 Industry & Infrastructure 1,890,078 1,907,871 17,189,575 Power Systems Industry & Infrastructure 1,248 658 5,928 Aircraft, Defense & Space 718,303 677,577 6,104,847 3,000 Aircraft, Defense & Space 102,304 70,618 636,255 Others 120,748 71,661 645,652 Others — 2,081 18749 2,000 Industry & Subtotal 4,211,588 4,182,218 37,681,034 Infrastructure Subtotal 108,337 74,622 672,330 1,000 Eliminations or Corporate (125,909) (103,874) (935,886) Aircraft, Defense Corporate — — — & Space Total ¥4,085,679 ¥4,078,344 $36,745,148 Total ¥108,337 ¥74,622 $672,330 0 2018 2019 Others, Eliminations or Corporate SHARE OF PROFIT OF INVESTMENTS ACCOUNTED FOR PROFIT FROM BUSINESS ACTIVITIES USING THE EQUITY METHOD Millions of yen Thousands of Millions of yen Thousands of U.S. dollars Billions of yen U.S. dollars Industry Segment 2018 2019 2019 320 Industry Segment 2018 2019 2019 Power Systems ¥87,689 ¥132,897 $1,197,378 Power Systems ¥(2,921) ¥8,187 $73,763 240 Industry & Infrastructure 41,055 Industry & Infrastructure 2,332 70,132 631,876 Power Systems 2,036 18,343 Aircraft, Defense & Space (63,558) (37,469) (337,588) 160 Aircraft, Defense & Space — — — Others 4,443 35,977 324,146 Others 148 1,668 15,028 80 Industry & Infrastructure Subtotal 69,630 201,537 1,815,812 Others, Eliminations Subtotal (440) 11,891 107,135 or Corporate 0 Eliminations or Corporate (11,453) (14,813) (133,462) Aircraft, Defense Corporate 3,110 (954) (8,595) & Space Total ¥58,176 ¥186,724 $1,682,349 Total ¥2,670 ¥10,937 $98,540 -80 2018 2019 DEPRECIATION AND AMORTIZATION REVENUE Composition of Overseas Revenue Millions of yen Thousands of Millions of yen Thousands of by Geographic Distribution U.S. dollars U.S. dollars Industry Segment 2018 2019 2019 Breakdown of Revenue by Customer Location 2018 2019 2019 Middle East Japan ¥1,832,951 ¥1,877,497 $16,915,911 3.0% Power Systems ¥53,493 ¥42,270 $380,845 Africa Others U.S.A. 618,990 627,168 5,650,671 2.2% 1.7% Industry & Infrastructure 51,909 47,835 430,984 Asia 687,373 737,650 6,646,094 Central and South America Europe 432,210 418,514 3,770,736 3.2% Aircraft, Defense & Space 57,503 27,520 247,950 Europe Central and South America 184,564 132,015 1,189,431 10.3% Others 2,517 1,916 17,262 Japan Africa 104,796 91,304 822,632 46.0% Middle East 149,153 123,721 1,114,704 Asia Subtotal 165,424 119,542 1,077,051 18.1% Others 75,639 70,473 634,949 Corporate 8,315 5,364 48,328 Total ¥4,085,679 ¥4,078,344 $36,745,148 U.S.A. 15.4% Note: ‌U.S. dollar amounts in this annual report are translated from yen, for convenience only, at the rate of Total ¥173,739 ¥124,906 $1,125,380 ¥110.99=US$1, the exchange rate prevailing at March 31, 2019. 1 MHI REPORT 2019 FINANCIAL SECTION I MITSUBISHI HEAVY INDUSTRIES GROUP MHI REPORT 2019 FINANCIAL SECTION I MITSUBISHI HEAVY INDUSTRIES GROUP 2 MANAGEMENT’S DISCUSSION AND ANALYSIS > ANALYSIS OF OPERATING RESULTS stemming from a smaller rate of decline in working capital Breakdown of Interest-Bearing Debt and its Applications > DIVIDEND POLICY paired with an increase in profit before income taxes. The breakdown of interest-bearing debt as of March 31, 2019, Consolidated revenue decreased ¥7.3 billion, or 0.2% year on Under the 2018 Medium-Term Business Plan, MHI Group has Investing activities used net cash of ¥161.8 billion, a was as follows: year, to ¥4,078.3 billion, due to lower revenue from the adopted an ROE of 11% and owners’ equity of ¥1,650.0 billion as decrease of ¥76.3 billion year on year, as proceeds from sales In billions of yen Aircraft, Defense & Space segment. This result was in spite of numerical targets for fiscal 2020. In the process of reaching of property, plant and equipment and intangible assets Due within Due after increased profit in the Power Systems and Industry & Total one year one year these targets, the Group formulated a basic policy of providing increased, and purchases of property, plant and equipment Infrastructure segments. Profit from business activities Short-term borrowings 170.1 170.1 — returns to shareholders at a dividend payout ratio of around and intangible assets decreased. increased ¥128.5 billion, or 221.0%, to ¥186.7 billion, owing to Long-term borrowings 289.9 45.4 244.5 30%, while giving consideration to the balance between busi- Net cash used in financing activities was ¥255.5 billion, an a gain on sale of property, plant and equipment, as well as Bonds 205.0 65.0 140.0 ness growth and financial stability. increase of ¥143.2 billion compared with the previous consoli- increased profit across all segments. Profit before income We will continue to uphold our basic policy on providing dated fiscal year. This result was due largely to the repayment Total 665.1 280.5 384.5 taxes increased ¥143.3 billion, or 365.5%, from the previous returns to shareholders. of short-term borrowings. consolidated fiscal year, to ¥182.6 billion. Consequently, profit MHI Group is involved in various projects with compara- As decided in MHI’s Articles of Incorporation, the Group attributable to owners of the parent increased ¥108.6 billion tively long construction periods. It also owns numerous pays dividends from retained earnings to shareholders twice a Primary Funding Requirements from the previous consolidated fiscal year, to ¥101.3 billion. manufacturing facilities that employ large-scale machinery. year. These payments consist of an interim dividend with a MHI Group primarily requires funds in operating activities for Consequently, MHI Group must secure a stable level of working record date of September 30 and a year-end dividend with a working capital for manufacturing activities (materials, out- > ANALYSIS OF FINANCIAL POSITION capital and funds for capital investments. In recent years, record date of March 31. Decisions on interim dividend pay- sourcing, and personnel costs), business development these types of necessary funds for capital investment have ments are made by the Board of Directors, and decisions on Total assets as of March 31, 2019, were ¥5,142.7 billion, down expenses and other selling expenses related to winning new been increasing due to the expansion of MHI Group’s business year-end dividend payments are made at the General Meeting ¥106.0 billion from their level one year earlier, mainly due to a orders, and R&D expenses that enhance the competitiveness scale. Meanwhile, the Group has continued to work to stream- of Shareholders. decrease in contract assets. of its products, strengthen manufacturing capabilities and line its assets and has repaid borrowings that have come due. In accordance with the above policy and after taking into Total liabilities were ¥3,393.9 billion, down ¥160.9 billion enable the launch of new businesses. In investing activities, As a result, the total interest-bearing debt of MHI Group at the overall consideration such factors as the Group’s operating from the previous fiscal year-end. The decrease was attribut- funds are required for capital investments to grow busi- end of fiscal 2018 was ¥665.1 billion, consisting of ¥280.5 bil- performance during the fiscal year and financial conditions, able to such factors as a decline in bonds, borrowings, and nesses, raise productivity, and enable the launch of new lion due within one year and ¥384.5 billion due after one year. the total dividend payment for fiscal 2018 was ¥130 per share, other financial liabilities. businesses as well as for the purchase of investment securi- The interest-bearing debt mentioned above is utilized as comprising the interim dividend of ¥65 per share, paid in Total equity came to ¥1,748.8 billion, up ¥54.9 billion from ties related to the execution of business strategies. working capital and for capital investments required for busi- December 2018, and the year-end dividend of ¥65 per share. the end of the previous fiscal year, due to the posting of In growth areas, MHI Group is planning to purchase invest- ness activities, and MHI Group plans to use these funds mainly Internal reserves will be utilized to further strengthen the ¥101.3billion in profit attributable to owners of the parent ment securities and execute necessary capital investments in key growth fields that are expected to require funds, includ- Group’s corporate structure and enhance the Group’s business and R&D investment. As a whole, the Group plans to stream- ing thermal power systems and commercial aircraft. development going forward > SOURCE OF FUNDS AND LIQUIDITY line its assets and selectively concentrate on core investment Cash Flow Analysis schemes, while anticipating funding requirements in future Financial Policy Net cash provided by operating activities amounted to ¥404.9 growth fields and closely monitoring the latest market envi- MHI Group funds its working capital and capital investments billion, ¥0.8 billion (0.2%) less than the preceding fiscal year, ronments and order trends.