REG - Mitsubishi Elect. - 3rd Quarter Results
RNS Number : 9495OMitsubishi Electric Corporation04 February 2019
FOR IMMEDIATE RELEASE
No. 3248
Investor Relations Inquiries
Media Inquiries
Investor Relations Group, Corporate Finance Division
Public Relations Division
Mitsubishi Electric Corporation
Mitsubishi Electric Corporation
Cad.Irg@rk.MitsubishiElectric.co.jp
www.MitsubishiElectric.com/news/
Mitsubishi Electric Announces Consolidated Financial Results
for the First 9 Months and Third Quarter of Fiscal 2019
TOKYO, February 4, 2019 - Mitsubishi Electric Corporation (TOKYO: 6503) announced today its consolidated financial results for the first 9 months and third quarter, ended December 31, 2018, of the current fiscal year ending March 31, 2019 (fiscal 2019).
1. Consolidated First 9 Months Results (April 1, 2018 - December 31, 2018)
Net sales:
3,264.1
billion yen
(2% increase from the same period last year)
Operating income:
201.4
billion yen
(15% decrease from the same period last year)
Income before income taxes:
221.7
billion yen
(14% decrease from the same period last year)
Net income attributable to Mitsubishi Electric Corp. stockholders:
158.8
billion yen
(14% decrease from the same period last year)
In the first 9 months of fiscal 2019, from April through December 2018, the global economy saw a buoyant expansion in the U.S. and gradual trends of recovery in Japan and Europe, while the Chinese economy experienced a slight slowdown. In addition, compared to the same period of the previous fiscal year, the yen appreciated against the U.S. dollar, especially due to the currency fluctuation at the end of December, and remained strong against the euro in and after August.
Under these circumstances, consolidated net sales for the first 9 months of fiscal 2019 increased by 2% compared to the same period of the previous fiscal year to 3,264.1 billion yen due primarily to increased sales in the Energy and Electric Systems, Industrial Automation Systems and Home Appliances segments.
Consolidated operating income decreased by 15% compared to the same period of the previous fiscal year to 201.4 billion yen, due to decreased profits in the Industrial Automation Systems, Information and Communication Systems and Electronic Devices segments.
Income before income taxes decreased by 14% compared to the same period of the previous fiscal year to 221.7 billion yen.
Net income attributable to Mitsubishi Electric Corporation stockholders decreased by 14% compared to the same period of the previous fiscal year to 158.8 billion yen.
Consolidated Financial Results by Business Segment (First 9 months, Fiscal 2019)
Energy and Electric Systems
Total sales:
885.8
billion yen
(3% increase from the same period last year which recorded 859.6 billion yen)
Operating income:
39.2
billion yen
(11.1 billion yen increase from the same period last year which recorded 28.1 billion yen)
The social infrastructure systems business saw an increase in orders from the same period of the previous fiscal year due primarily to an increase in orders of the transportation systems business inside and outside Japan. Total sales for this business also increased from the same period of the previous fiscal year, due to increased sales in the power systems business in Japan and the transportation systems business worldwide.
The building systems business remained substantially unchanged in both orders and sales from the same period of the previous fiscal year, experiencing a decrease in the new installation of elevators and escalators in Japan and China and buoyant growth in the renewal business in Japan and other factors.
As a result, total sales for this segment increased by 3% from the same period of the previous fiscal year to 885.8 billion yen. Operating income increased by 11.1 billion yen from the same period of the previous fiscal year to 39.2 billion yen, due primarily to an increase in sales.
Industrial Automation Systems
Total sales:
1,094.2
billion yen
(2% increase from the same period last year which recorded 1,070.5 billion yen)
Operating income:
114.0
billion yen
(35.3 billion yen decrease from the same period last year which recorded 149.4 billion yen)
The factory automation systems business saw decreases in both orders and sales from the same period of the previous fiscal year due primarily to a decrease in capital expenditures in the fields of organic light emitting diodes (OLED) and smartphones outside Japan, despite buoyant demand in Japan.
The automotive equipment business saw increases in both orders and sales from the same period of the previous fiscal year due primarily to increases in Japan, other markets in Asia and Europe, as well as increased sales in electric-vehicle related equipment in response to market growth worldwide.
As a result, total sales for this segment increased by 2% from the same period of the previous fiscal year to 1,094.2 billion yen. Operating income decreased by 35.3 billion yen from the same period of the previous fiscal year to 114.0 billion yen due primarily to a shift in product mix, increases in material prices and upfront investment for growth drivers.
Information and Communication Systems
Total sales:
287.5
billion yen
(2% decrease from the same period last year which recorded 292.2 billion yen)
Operating income:
6.6
billion yen
(0.2 billion yen decrease from the same period last year which recorded 6.9 billion yen)
The telecommunications systems business saw decreases in both orders and sales from the same period of the previous fiscal year due primarily to decreased demand in communications infrastructure equipment.
The information systems and service business saw a decrease in orders from the same period of the previous fiscal year and sales remained substantially unchanged, experiencing a shift in projects for the IT infrastructure services business, etc.
The electronic systems business saw a decrease in orders from the same period of the previous fiscal year and sales remained substantially unchanged, experiencing a shift in the portfolio of large-scale projects in the space systems business, etc.
As a result, total sales for this segment decreased by 2% from the same period of the previous fiscal year to 287.5 billion yen. Operating income decreased by 0.2 billion yen from the same period of the previous fiscal year to 6.6 billion yen due primarily to a decrease in sales.
Electronic Devices
Total sales:
148.5
billion yen
(1% decrease from the same period last year which recorded 149.8 billion yen)
Operating income:
0.7
billion yen
(11.2 billion yen decrease from the same period last year which recorded 12.0 billion yen)
The electronic devices business saw a decrease in orders and sales fell by 1% from the same period of the previous fiscal year to 148.5 billion yen mainly due to decreased demand for optical communication devices.
Operating income decreased by 11.2 billion yen from the same period of the previous fiscal year to 0.7 billion yen due primarily to a decrease in sales and a shift in product mix.
Home Appliances
Total sales:
806.0
billion yen
(3% increase from the same period last year which recorded 779.1 billion yen)
Operating income:
50.7
billion yen
(0.3 billion yen increase from the same period last year which recorded 50.3 billion yen)
The home appliances business saw an increase in sales of 3% from the same period of the previous fiscal year to 806.0 billion yen due to an increase in sales of air conditioners for Japan, Europe and North America.
Operating income increased by 0.3 billion yen from the same period of the previous fiscal year to 50.7 billion yen due primarily to an increase in sales, despite rises in material prices and sales expenses.
Others
Total sales:
500.2
billion yen
(5% increase from the same period last year which recorded 477.4 billion yen)
Operating income:
16.1
billion yen
(0.9 billion yen increase from the same period last year which recorded 15.2 billion yen)
Sales increased by 5% from the same period of the previous fiscal year to 500.2 billion yen mainly due to an increase in sales at affiliated companies involved in logistics.
Operating income increased by 0.9 billion yen from the same period of the previous fiscal year to 16.1 billion yen due primarily to an increase in sales.
2. Consolidated Third-quarter Results (October 1, 2018 - December 31, 2018)
Net sales:
1,094.0
billion yen
(2% increase from the same period last year)
Operating income:
75.5
billion yen
(11% decrease from the same period last year)
Income before income taxes:
80.4
billion yen
(13% decrease from the same period last year)
Net income attributable to Mitsubishi Electric Corp. stockholders:
56.4
billion yen
(10% decrease from the same period last year)
Consolidated net sales for this quarter, from October through December 2018, was 1,094.0 billion yen, a 2% increase from the same period of the previous fiscal year, due to increased sales in the Energy and Electric Systems and Home Appliances segments.
Consolidated operating income was 75.5 billion yen, an 11% decrease from the same period of the previous fiscal year, with decreased profits mainly in the Industrial Automation Systems and Electronic Devices segments.
Income before income taxes decreased by 13% compared to the same period of the previous fiscal year to 80.4 billion yen.
Net income attributable to Mitsubishi Electric Corporation stockholders decreased by 10% compared to the same period of the previous fiscal year to 56.4 billion yen.
Consolidated Financial Results by Business Segment (Third Quarter, Fiscal 2019)
Energy and Electric Systems
Total sales:
317.2
billion yen
(5% increase from the same period last year which recorded 302.4 billion yen)
Operating income:
23.6
billion yen
(6.1 billion yen increase from the same period last year which recorded 17.5 billion yen)
The social infrastructure systems business saw an increase in orders from the same period of the previous fiscal year due primarily to increases in the transportation systems business in Japan and the power systems business outside Japan. Total sales also increased from the same period of the previous fiscal year, due to increases in the power systems and transportation systems businesses in Japan.
Orders in the building systems business remained substantially unchanged, while sales for this business increased from the same period of the previous fiscal year due primarily to buoyant growth in the renewal business in Japan.
As a result, total sales for this segment increased by 5% from the same period of the previous fiscal year to 317.2 billion yen. Operating income increased by 6.1 billion yen from the same period of the previous fiscal year to 23.6 billion yen mainly due to an increase in sales.
Industrial Automation Systems
Total sales:
363.9
billion yen
(1% decrease from the same period last year which recorded 366.8 billion yen)
Operating income:
36.1
billion yen
(17.0 billion yen decrease from the same period last year which recorded 53.1 billion yen)
The factory automation systems business saw decreases in both orders and sales from the same period of the previous fiscal year due primarily to a decrease in capital expenditures in the fields of organic light emitting diodes (OLED) and smartphones outside Japan, despite buoyant demand in Japan.
The automotive equipment business saw increases in both orders and sales from the same period of the previous fiscal year due primarily to an increase in the Japanese market, as well as increased sales in electric-vehicle related equipment in response to market growth worldwide.
As a result, total sales for this segment decreased by 1% from the same period of the previous fiscal year to 363.9 billion yen. Operating income decreased by 17.0 billion yen from the same period of the previous fiscal year to 36.1 billion yen due primarily to a decrease in sales, a shift in product mix and upfront investment for growth drivers.
Information and Communication Systems
Total sales:
100.7
billion yen
(Substantially unchanged from the same period last year which recorded 101.0 billion yen)
Operating income:
4.1
billion yen
(0.4 billion yen increase from the same period last year which recorded 3.6 billion yen)
The telecommunications systems business saw an increase in orders from the same period of the previous fiscal year, while sales decreased from the same period of the previous fiscal year mainly due to a decrease in sales of communications infrastructure equipment.
The information systems and service business saw increases in both orders and sales from the same period of the previous fiscal year, mainly due to an increase in the system integrations business.
The electronic systems business saw decreases in both orders and sales from the same period of the previous fiscal year mainly due to a decrease in large-scale projects in the defense systems business.
As a result, total sales for this segment remained substantially unchanged from the same period of the previous fiscal year to 100.7 billion yen. Operating income increased by 0.4 billion yen from the same period of the previous fiscal year to 4.1 billion yen due primarily to a shift in project portfolios.
Electronic Devices
Total sales:
46.6
billion yen
(7% decrease from the same period last year which recorded 50.3 billion yen)
Operating income (loss):
(0.5
billion yen)
(5.3 billion yen decline from the same period last year which recorded 4.7 billion yen)
The electronic devices business saw a decrease in orders and sales fell by 7% from the same period of the previous fiscal year to 46.6 billion yen mainly due to decreased demand for optical communication devices and power modules used in industrial applications.
Operating income declined by 5.3 billion yen from the same period of the previous fiscal year to a loss of 0.5 billion yen due primarily to a decrease in sales and a shift in product mix.
Home Appliances
Total sales:
248.9
billion yen
(4% increase from the same period last year which recorded 239.9 billion yen)
Operating income:
17.0
billion yen
(6.1 billion yen increase from the same period last year which recorded 10.9 billion yen)
The home appliances business saw an increase in sales of 4% from the same period of the previous fiscal year to 248.9 billion yen due to an increase in sales of air conditioners for Japan, North America and Europe.
Operating income increased by 6.1 billion yen from the same period of the previous fiscal year to 17.0 billion yen due primarily to an increase in sales.
Others
Total sales:
172.4
billion yen
(3% increase from the same period last year which recorded 166.6 billion yen)
Operating income:
5.8
billion yen
(0.2 billion yen increase from the same period last year which recorded 5.5 billion yen)
Sales increased by 3% from the same period of the previous fiscal year to 172.4 billion yen mainly due to an increase in sales at affiliated companies involved in logistics.
Operating income increased by 0.2 billion yen from the same period of the previous fiscal year to 5.8 billion yen due primarily to an increase in sales.
Financial Standing
An analysis on the status of assets, liabilities and equity on a consolidated basis
Total assets as of the end of this fiscal quarter decreased from the end of the previous fiscal year by 162.5 billion yen to 4,143.0 billion yen. The change in balance of total assets is mainly attributable to increases in inventories by 129.2 billion yen, while cash and cash equivalents decreased by 155.7 billion yen, and trade receivables and contract assets decreased by 108.7 billion yen.
Total liabilities decreased from the end of the previous fiscal year by 184.5 billion yen to 1,723.8 billion yen. The outstanding balances of debt decreased by 19.2 billion yen from the end of the previous fiscal year to 292.6 billion yen, resulting in a decline in the ratio of interest bearing debt to total assets to 7.1%, representing a 0.1 point decrease compared to the end of the previous fiscal year. Meanwhile, trade payables decreased by 56.3 billion yen, and other current liabilities decreased by 112.3 billion yen.
Mitsubishi Electric Corporation stockholders' equity increased by 16.3 billion yen compared to the end of the previous fiscal year to 2,310.5 billion yen. The stockholders' equity ratio was recorded at 55.8%, representing a 2.5 point increase compared to the end of the previous fiscal year. These changes referred to above primarily result from recording a net income attributable to Mitsubishi Electric Corporation stockholders of 158.8 billion yen, despite a decrease due to dividend payment of 85.8 billion yen and a decrease in other comprehensive income of 55.8 billion yen reflecting a fall in stock prices and the stronger yen.
An analysis on the status of cash flow on a consolidated basis
Cash flows from operating activities decreased by 24.2 billion yen compared to the same period of the previous fiscal year to 110.1 billion yen (cash in), mainly due to an increase in inventories. Cash flows from investing activities increased by 29.5 billion yen compared to the same period of the previous fiscal year to 151.5 billion yen (cash out), due primarily to a decrease in proceeds from sale of short-term investments and investment securities. As a result, free cash flow was 41.3 billion yen (cash out). Cash flows from financing activities were 111.8 billion yen (cash out) mainly due to dividend payments.
Forecast for Fiscal 2019 (year ending March 31, 2019)
Considering the financial results for the third quarter of fiscal 2019, lower demand in the Industrial Automation Systems and Electronic Devices segments in the Chinese market and other factors, Mitsubishi Electric's business performance for fiscal 2019 is expected to fall below the company's previous forecast. As a result, the company's consolidated earnings forecast for fiscal 2019, ending March 31, 2019, has been revised from the announcement on October 29, 2018 as stated below.
Consolidated Earnings Forecast for Fiscal 2019
Consolidated
Previous forecast (announced Oct. 29)
Current forecast
Net sales:
4,510.0 billion yen
4,500.0 billion yen
(1% increase from fiscal 2018)
Operating income:
305.0 billion yen
285.0 billion yen
(13% decrease from fiscal 2018)
Income before income taxes:
335.0 billion yen
310.0 billion yen
(12% decrease from fiscal 2018)
Net income attributable to
Mitsubishi Electric Corp. stockholders:
240.0 billion yen
225.0 billion yen
(12% decrease from fiscal 2018)
Exchange rates in the fourth quarter of fiscal 2019 is unchanged from the previous announcement, which are 105 yen to the U.S. dollar, 125 yen to the euro and 16.0 yen to the Chinese yuan.
Note: The results forecast above is based on assumptions deemed reasonable by the company at the present time, and actual results may differ significantly from forecasts. Please refer to the cautionary statement at the end.
Consolidated Financial Results Summary
1. Consolidated First 9 Months Results
(In billions of yen except where noted)
FY '18 9 months (A)
(Apr. 1, 2017 - Dec. 31, 2017)FY '19 9 months (B)
(Apr. 1, 2018 - Dec. 31, 2018)
B - A
B/A (%)
Net sales
3,186.7
3,264.1
77.3
102
Operating income
237.9
201.4
(36.5)
85
Income before income taxes
259.1
221.7
(37.4)
86
Net income attributable to Mitsubishi Electric Corp. stockholders
184.0
158.8
(25.2)
86
Basic net income per share attributable to Mitsubishi Electric Corp. stockholders
85.78 yen
74.03 yen
(11.75 yen)
86
2. Consolidated Third-quarter Results
(In billions of yen except where noted)
FY '18 Q3 (A)
(Oct. 1, 2017 -
Dec. 31, 2017)FY '19 Q3 (B)
(Oct. 1, 2018 - Dec. 31, 2018)
B - A
B/A
(%)
Net sales
1,074.9
1,094.0
19.0
102
Operating income
85.1
75.5
(9.6)
89
Income before income taxes
93.0
80.4
(12.5)
87
Net income attributable to Mitsubishi Electric Corp. stockholders
63.0
56.4
(6.6)
90
Basic net income per share attributable to Mitsubishi Electric Corp. stockholders
29.41 yen
26.34 yen
(3.07 yen)
90
Notes:
1) Consolidated financial statements are made in accordance with International Financial Reporting Standards (IFRS).
2) The company has 207 consolidated subsidiaries.
Condensed Quarterly Consolidated Financial Statements
Condensed Quarterly Consolidated Statements of Profit or Loss and Condensed Quarterly Consolidated Statements of Comprehensive Income (First 9 Months, Fiscal 2019)
(Condensed Quarterly Consolidated Statements of Profit or Loss)
(In millions of yen)
FY '18 9 months
(Apr. 1, 2017 -
Dec. 31, 2017)
FY '19 9 months
(Apr. 1, 2018 -
Dec. 31, 2018)
(A)
% of total
(B)
% of total
B - A
B/A
(%)
Net sales
3,186,755
100.0
3,264,125
100.0
77,370
102
Cost of sales
2,207,353
69.3
2,300,249
70.5
92,896
104
Selling, general and
administrative expenses
742,195
23.2
763,053
23.3
20,858
103
Other profit (loss)
739
0.0
617
0.0
(122)
83
Operating income
237,946
7.5
201,440
6.2
(36,506)
85
Financial income
7,546
0.2
8,460
0.2
914
112
Financial expenses
2,044
0.1
3,347
0.1
1,303
164
Share of profit of investments accounted for using the
equity method15,726
0.5
15,193
0.5
(533)
97
Income before income taxes
259,174
8.1
221,746
6.8
(37,428)
86
Income tax expenses
66,565
2.1
54,354
1.7
(12,211)
82
Net income
192,609
6.0
167,392
5.1
(25,217)
87
Net income attributable to:
Mitsubishi Electric Corp.
stockholders184,070
5.8
158,819
4.9
(25,251)
86
Non-controlling interests
8,539
0.2
8,573
0.2
34
100
(Condensed Quarterly Consolidated Statements of Comprehensive Income)
(In millions of yen)
FY '18
9 months (A)
(Apr. 1, 2017 -
Dec. 31, 2017)FY '19
9 months (B)
(Apr. 1, 2018 - Dec. 31, 2018)
B - A
Net income
192,609
167,392
(25,217)
(Other comprehensive income (loss),
net of tax)
Items that will not be reclassified to
net income
Financial assets measured at fair value
through other comprehensive income23,345
(44,418)
(67,763)
Share of other comprehensive income of investments accounted for using the equity method
829
(464)
(1,293)
Subtotal
24,174
(44,882)
(69,056)
Items that may be reclassified to net income
Exchange differences on translating foreign operations
45,981
(13,215)
(59,196)
Net changes in the fair value of cash flow hedges
3
(36)
(39)
Share of other comprehensive income of investments accounted for using the equity method
1,080
(1,651)
(2,731)
Subtotal
47,064
(14,902)
(61,966)
Total other comprehensive income (loss)
71,238
(59,784)
(131,022)
Comprehensive income
263,847
107,608
(156,239)
Comprehensive income attributable to:
Mitsubishi Electric Corp. stockholders
251,574
100,261
(151,313)
Non-controlling interests
12,273
7,347
(4,926)
Condensed Quarterly Consolidated Statements of Profit or Loss and Condensed Quarterly Consolidated Statements of Comprehensive Income (Third Quarter, Fiscal 2019)
(Condensed Quarterly Consolidated Statements of Profit or Loss)
(In millions of yen)
FY '18 Q3
(Oct. 1, 2017 -
Dec. 31, 2017)
FY '19 Q3
(Oct. 1, 2018 -
Dec. 31, 2018)
(A)
% of total
(B)
% of total
B - A
B/A
(%)
Net sales
1,074,988
100.0
1,094,019
100.0
19,031
102
Cost of sales
744,794
69.3
770,080
70.4
25,286
103
Selling, general and
administrative expenses
246,182
22.8
248,688
22.7
2,506
101
Other profit (loss)
1,109
0.0
249
0.0
(860)
22
Operating income
85,121
7.9
75,500
6.9
(9,621)
89
Financial income
2,747
0.3
2,778
0.3
31
101
Financial expenses
605
0.1
3,009
0.3
2,404
497
Share of profit of investments accounted for using the
equity method5,739
0.6
5,186
0.5
(553)
90
Income before income taxes
93,002
8.7
80,455
7.4
(12,547)
87
Income tax expenses
27,179
2.6
21,095
2.0
(6,084)
78
Net income
65,823
6.1
59,360
5.4
(6,463)
90
Net income attributable to:
Mitsubishi Electric Corp.
stockholders63,098
5.9
56,491
5.2
(6,607)
90
Non-controlling interests
2,725
0.2
2,869
0.2
144
105
(Condensed Quarterly Consolidated Statements of Comprehensive Income)
(In millions of yen)
FY '18 Q3 (A)
(Oct. 1, 2017 -
Dec. 31, 2017)
FY '19 Q3 (B)
(Oct. 1, 2018 -
Dec. 31, 2018)
B - A
Net income
65,823
59,360
(6,463)
(Other comprehensive income (loss),
net of tax)
Items that will not be reclassified to
net income
Financial assets measured at fair value
through other comprehensive income13,624
(35,989)
(49,613)
Share of other comprehensive income of investments accounted for using the equity method
232
(702)
(934)
Subtotal
13,856
(36,691)
(50,547)
Items that may be reclassified to net income
Exchange differences on translating foreign operations
14,422
(22,601)
(37,023)
Net changes in the fair value of cash flow hedges
(2)
(128)
(126)
Share of other comprehensive income of investments accounted for using the equity method
1,265
112
(1,153)
Subtotal
15,685
(22,617)
(38,302)
Total other comprehensive income (loss)
29,541
(59,308)
(88,849)
Comprehensive income
95,364
52
(95,312)
Comprehensive income attributable to:
Mitsubishi Electric Corp. stockholders
90,879
(673)
(91,552)
Non-controlling interests
4,485
725
(3,760)
Condensed Quarterly Consolidated Statements of Financial Position
(In millions of yen)
FY '18 (A)
(ended Mar. 31, 2018)
FY ' 19
9 months (B)
(ended Dec. 31, 2018)
B - A
(Assets)
Current assets
2,582,735
2,455,870
(126,865)
Cash and cash equivalents
599,199
443,485
(155,714)
Trade receivables and Contract Assets
1,191,529
1,082,734
(108,795)
Inventories
646,262
775,475
129,213
Other current assets
145,745
154,176
8,431
Non-current assets
1,722,845
1,687,175
(35,670)
Investments accounted for using the equity method
194,308
194,199
(109)
Other financial assets
363,171
301,608
(61,563)
Net property, plant and equipment
724,257
747,654
23,397
Other non-current assets
441,109
443,714
2,605
Total assets
4,305,580
4,143,045
(162,535)
(Liabilities)
Current liabilities
1,488,249
1,340,965
(147,284)
Bonds and borrowings
122,895
144,338
21,443
Trade payables
579,566
523,228
(56,338)
Other current liabilities
785,788
673,399
(112,389)
Non-current liabilities
420,112
382,863
(37,249)
Bonds and borrowings
189,055
148,342
(40,713)
Net defined benefit liabilities
171,520
178,020
6,500
Other non-current liabilities
59,537
56,501
(3,036)
Total liabilities
1,908,361
1,723,828
(184,533)
(Equity)
Mitsubishi Electric Corp. stockholders' equity
2,294,174
2,310,562
16,388
Common stock
175,820
175,820
-
Capital surplus
199,442
202,494
3,052
Retained earnings
1,811,348
1,881,564
70,216
Accumulated other comprehensive income (loss)
109,492
53,666
(55,826)
Treasury stock at cost
(1,928)
(2,982)
(1,054)
Non-controlling interests
103,045
108,655
5,610
Total equity
2,397,219
2,419,217
21,998
Total liabilities and equity
4,305,580
4,143,045
(162,535)
Balance of Debt
311,950
292,680
(19,270)
Accumulated other comprehensive income (loss):
Exchange differences on translating foreign operations
17,549
3,915
(13,634)
Remeasurements of defined benefit pension plans
-
-
-
Financial assets measured at fair value through other comprehensive income
91,952
49,811
(42,141)
Net changes in the fair value of cash flow hedges
(9)
(60)
(51)
Condensed Quarterly Consolidated Statements of Changes in Equity
(In millions of yen)
Mitsubishi Electric Corp. stockholders' equity
Non-controlling interests
Total equity
Common stock
Capital surplus
Retained earnings
Accumulated other comprehensive income (loss)
Treasury stock at cost
Total
Balance at April 1, 2017
175,820
198,745
1,593,660
101,166
(1,228)
2,068,163
98,800
2,166,963
Comprehensive income
Net income
184,070
184,070
8,539
192,609
Other comprehensive income (loss)
67,504
67,504
3,734
71,238
Comprehensive income
-
-
184,070
67,504
-
251,574
12,273
263,847
Transfer to retained earnings
7,941
(7,941)
-
-
Dividends paid
(68,696)
(68,696)
(5,791)
(74,487)
Purchase of treasury stock
(699)
(699)
(699)
Reissuance of treasury stock
0
0
0
0
Transactions with non-controlling interests, etc.
13
13
(311)
(298)
Balance at Dec. 31, 2017
175,820
198,758
1,716,975
160,729
(1,927)
2,250,355
104,971
2,355,326
Mitsubishi Electric Corp. stockholders' equity
Non-controlling interests
Total equity
Common stock
Capital surplus
Retained earnings
Accumulated other comprehensive income (loss)
Treasury stock at cost
Total
Balance at April 1, 2018
175,820
199,442
1,811,348
109,492
(1,928)
2,294,174
103,045
2,397,219
Comprehensive income
Net income
158,819
158,819
8,573
167,392
Other comprehensive income (loss)
(58,558)
(58,558)
(1,226)
(59,784)
Comprehensive income
-
-
158,819
(58,558)
-
100,261
7,347
107,608
Transfer to retained earnings
(2,732)
2,732
-
-
Dividends paid
(85,871)
(85,871)
(5,443)
(91,314)
Purchase of treasury stock
(1,054)
(1,054)
(1,054)
Reissuance of treasury stock
0
0
0
0
Transactions with non-controlling interests, etc.
3,052
3,052
3,706
6,758
Balance at Dec. 31, 2018
175,820
202,494
1,881,564
53,666
(2,982)
2,310,562
108,655
2,419,217
Condensed Quarterly Consolidated Statements of Cash Flows
(In millions of yen)
FY '18 9 months
(Apr. 1, 2017 - Dec. 31, 2017)
(A)
FY '19 9 months
(Apr. 1, 2018 - Dec. 31, 2018)
(B)
B - A
I
Cash flows from operating activities
1
Net income
192,609
167,392
(25,217)
2
Adjustments to reconcile net income to net cash provided by operating activities
(1) Depreciation, amortization and other
127,685
126,739
(946)
(2) Decrease in trade receivables and contract assets
111,009
111,438
429
(3) Decrease (increase) in inventories
(114,945)
(128,291)
(13,346)
(4) Increase (decrease) in trade payables
(100,923)
(57,421)
43,502
(5) Other, net
(80,986)
(109,690)
(28,704)
Cash flows from operating activities
134,449
110,167
(24,282)
II
Cash flows from investing activities
1
Purchase of property, plant and equipment
(135,221)
(138,513)
(3,292)
2
Proceeds from sale of property, plant and equipment
2,204
3,689
1,485
3
Purchase of short-term investments and investment securities (net of cash acquired)
(6,701)
(10,315)
(3,614)
4
Proceeds from sale of short-term investments and investment securities (net of cash disposed)
29,729
4,747
(24,982)
5
Other, net
(11,956)
(11,139)
817
Cash flows from investing activities
(121,945)
(151,531)
(29,586)
I + II
Free cash flow
12,504
(41,364)
(53,868)
III
Cash flows from financing activities
1
Proceeds from long-term debt and repayment of long-term debt
(36,530)
(25,401)
11,129
2
Increase (decrease) in bank loans, net
(24,471)
(950)
23,521
3
Dividends paid
(68,696)
(85,871)
(17,175)
4
Purchase of treasury stock
(699)
(1,054)
(355)
5
Reissuance of treasury stock
0
0
0
6
Other, net
(7,419)
1,412
8,831
Cash flows from financing activities
(137,815)
(111,864)
25,951
IV
Effect of exchange rate changes on cash and cash equivalents
14,512
(2,486)
(16,998)
V
Net increase (decrease) in cash and cash equivalents
(110,799)
(155,714)
(44,915)
VI
Cash and cash equivalents at beginning of period
662,469
599,199
(63,270)
VII
Cash and cash equivalents at end of period
551,670
443,485
(108,185)
Consolidated Segment Information (First 9 Months, Fiscal 2019)
1. Sales and Operating Income by Business Segment
(In millions of yen)
Business Segment
FY '18 9 months
(Apr. 1, 2017 -
Dec. 31, 2017)
FY '19 9 months
(Apr. 1, 2018 -
Dec. 31, 2018)
C - A
D - B
C/A
(%)
Sales (A)
Operating income (B)
Sales
(C)Operating income (D)
Energy and Electric Systems
859,605
28,162
885,852
39,262
26,247
11,100
103
Industrial Automation Systems
1,070,518
149,474
1,094,255
114,096
23,737
(35,378)
102
Information and
Communication Systems
292,274
6,902
287,598
6,623
(4,676)
(279)
98
Electronic Devices
149,860
12,012
148,526
729
(1,334)
(11,283)
99
Home Appliances
779,163
50,370
806,071
50,711
26,908
341
103
Others
477,464
15,228
500,239
16,198
22,775
970
105
Subtotal
3,628,884
262,148
3,722,541
227,619
93,657
(34,529)
103
Eliminations and other
(442,129)
(24,202)
(458,416)
(26,179)
(16,287)
(1,977)
-
Consolidated Total
3,186,755
237,946
3,264,125
201,440
77,370
(36,506)
102
*Notes: Inter-segment sales are included in the above chart.
2. Sales by Location of Customers
(In millions of yen)
Location of Customers
FY '18 9 months
(Apr. 1, 2017 -
Dec. 31, 2017)
FY '19 9 months
(Apr. 1, 2018 -
Dec. 31, 2018)
B - A
B/A (%)
Sales (A)
% of total net sales
Sales (B)
% of total net sales
Japan
1,694,423
53.2
1,802,248
55.2
107,825
106
North America
308,438
9.7
313,960
9.6
5,522
102
Asia (excluding Japan)
816,232
25.6
761,257
23.3
(54,975)
93
China
412,889
13.0
373,921
11.5
(38,968)
91
Europe
319,113
10.0
339,744
10.4
20,631
106
Others
48,549
1.5
46,916
1.5
(1,633)
97
Total overseas sales
1,492,332
46.8
1,461,877
44.8
(30,455)
98
Consolidated total
3,186,755
100.0
3,264,125
100.0
77,370
102
Consolidated Segment Information (Third Quarter, Fiscal 2019)
1. Sales and Operating Income by Business Segment
(In millions of yen)
Business Segment
FY '18 Q3
(Oct. 1, 2017 -
Dec. 31, 2017)
FY '19 Q3
(Oct. 1, 2018 -
Dec. 31, 2018)
C - A
D - B
C/A
(%)
Sales (A)
Operating income (B)
Sales
(C)Operating income (loss) (D)
Energy and Electric Systems
302,471
17,502
317,210
23,698
14,739
6,196
105
Industrial Automation Systems
366,802
53,159
363,905
36,117
(2,897)
(17,042)
99
Information and
Communication Systems
101,058
3,652
100,731
4,121
(327)
469
100
Electronic Devices
50,328
4,778
46,630
(540)
(3,698)
(5,318)
93
Home Appliances
239,913
10,924
248,951
17,046
9,038
6,122
104
Others
166,683
5,568
172,408
5,855
5,725
287
103
Subtotal
1,227,255
95,583
1,249,835
86,297
22,580
(9,286)
102
Eliminations and other
(152,267)
(10,462)
(155,816)
(10,797)
(3,549)
(335)
-
Consolidated Total
1,074,988
85,121
1,094,019
75,500
19,031
(9,621)
102
*Notes: Inter-segment sales are included in the above chart.
2. Sales by Location of Customers
(In millions of yen)
Location of Customers
FY '18 Q3
(Oct. 1, 2017 -
Dec. 31, 2017)
FY '19 Q3
(Oct. 1, 2018 -
Dec. 31, 2018)
B - A
B/A (%)
Sales (A)
% of total net sales
Sales (B)
% of total net sales
Japan
583,919
54.3
633,446
57.9
49,527
108
North America
98,627
9.2
104,106
9.5
5,479
106
Asia (excluding Japan)
268,192
25.0
232,936
21.3
(35,256)
87
China
139,054
12.9
108,634
9.9
(30,420)
78
Europe
104,790
9.7
106,619
9.7
1,829
102
Others
19,460
1.8
16,912
1.6
(2,548)
87
Total overseas sales
491,069
45.7
460,573
42.1
(30,496)
94
Consolidated total
1,074,988
100.0
1,094,019
100.0
19,031
102
Notes to the Condensed Consolidated Financial Statements
(Notes regarding the going concern assumption)
Not applicable
(Notes if there is any significant change in Mitsubishi Electric Corp. stockholders' equity)
Not applicable
Disclosures of Transition to IFRS
The Mitsubishi Electric Group has applied IFRS beginning with the consolidated financial statements for the first quarter of the current fiscal year. The most recent consolidated financial statements prepared in accordance with US GAAP are for the one-year period ended on March 31, 2018. The date of transition to IFRS was April 1, 2017.
(1) Exemptions and exceptions in IFRS 1
IFRS 1 requires entities adopting IFRS for the first time to retrospectively apply IFRS in principle; however, with regard to certain items, it allows exemption from, or prohibits, retrospective application of IFRS.
The Company and its consolidated subsidiaries use the following exemptions on retrospective application permitted by IFRS 1:
- Business combinations
The Company and its consolidated subsidiaries elected not to apply IFRS 3 Business Combinations retrospectively to past business combinations that occurred on or before December 22, 2015. Consequently, the amount of goodwill that arose from business combinations occurred on or before December 22, 2015 is recorded at the carrying value in accordance with US GAAP. This goodwill was tested for impairment at the transition date irrespective of whether there was any indication of impairment.
- Exchange differences on translating foreign operations
The Company and its consolidated subsidiaries elected to deem the cumulative translation differences for foreign operations at the transition date to be zero. Consequently, the cumulative translation differences for foreign operations at the transition date were transferred from accumulated other comprehensive income (loss) to retained earnings.
- Designation of financial instruments recognized before the date of transition to IFRS
The Company and its consolidated subsidiaries elected to determine the classification of financial instruments on the basis of the facts and circumstances that exist at the date of transition to IFRS.
(2) Reconciliations
Reconciliations for which disclosures are required on first time adoption of IFRS are as follows:
Items that do not affect retained earnings and comprehensive income are presented in "Reclassification," and items that affect retained earnings and comprehensive income are presented in "Recognition and measurement differences."
Reconciliation of Equity as at the Date of Transition to IFRS (April 1, 2017)
(Consolidated Statements of Financial Position) (In millions of yen)
Presentation under US GAAP
US GAAP
Re-classification
Recognition and measurement differences
IFRS
Presentation under IFRS
(Assets)
(Assets)
Current assets
2,500,685
3,062
4,810
2,508,557
Current assets
Cash and cash equivalents
662,469
-
-
662,469
Cash and cash equivalents
Trade receivables
1,037,201
15,261
103,004
1,155,466
Trade receivables and contract assets
Inventories
643,040
-
(83,138)
559,902
Inventories
Prepaid expenses and other current assets
157,975
(12,199)
(15,056)
130,720
Other current assets
-
(3,062)
60,950
1,729,473
Non-current assets
Long-term trade receivables
2,815
(2,815)
-
-
Investments
618,935
(618,935)
-
-
-
181,724
5,634
187,358
Investments accounted for using the equity method
-
362,869
27,710
390,579
Other financial assets
Net property, plant and equipment
732,611
-
(33,133)
699,478
Net property, plant and equipment
Other assets
317,224
74,095
60,739
452,058
Other non-current assets
Total assets
4,172,270
-
65,760
4,238,030
Total assets
(In millions of yen)
Presentation under US GAAP
US GAAP
Re-classification
Recognition and measurement differences
IFRS
Presentation under IFRS
(Liabilities)
(Liabilities)
Current liabilities
1,525,761
7,456
33,082
1,566,299
Current liabilities
Bank loans and current portion of long-term debt
124,368
-
21,987
146,355
Bonds and borrowings
Trade payables
780,202
(145,119)
-
635,083
Trade payables
Other current liabilities
621,191
152,575
11,095
784,861
Other current liabilities
-
(7,456)
6,423
504,768
Non-current liabilities
Long-term debt
227,756
-
-
227,756
Bonds and borrowings
Retirement and severance benefits
194,990
-
8,044
203,034
Net defined benefit liabilities
Other fixed liabilities
83,055
(7,456)
(1,621)
73,978
Other non-current liabilities
Total liabilities
2,031,562
-
39,505
2,071,067
Total liabilities
(Equity)
(Equity)
Mitsubishi Electric Corp. shareholders' equity
2,039,627
-
28,536
2,068,163
Mitsubishi Electric Corp. stockholders' equity
Common stock
175,820
-
-
175,820
Common stock
Capital surplus
212,530
-
(13,785)
198,745
Capital surplus
Retained earnings
1,654,557
-
(60,897)
1,593,660
Retained earnings
Accumulated other comprehensive income (loss)
(2,052)
-
103,218
101,166
Accumulated other comprehensive income (loss)
Treasury stock at cost
(1,228)
-
-
(1,228)
Treasury stock at cost
Noncontrolling interests
101,081
-
(2,281)
98,800
Non-controlling interests
Total equity
2,140,708
-
26,255
2,166,963
Total equity
Total liabilities and equity
4,172,270
-
65,760
4,238,030
Total liabilities and equity
Balance of Debt
352,124
-
21,987
374,111
Balance of Debt
Accumulated other comprehensive income (loss):
Accumulated other comprehensive income (loss):
Foreign currency translation adjustments
18,535
-
(18,535)
-
Exchange differences on translating foreign operations
Pension liability adjustments
(156,993)
-
156,993
-
Remeasurements of defined benefit pension plans
Unrealized gains on securities
136,352
-
(35,223)
101,129
Financial assets measured at fair value through other comprehensive income
Unrealized gains on derivative instruments
54
-
(17)
37
Net changes in the fair value of cash flow hedges
Reconciliation of Equity as at the End of the Third Quarter of the Previous Fiscal Year
(December 31, 2017)(Condensed Quarterly Consolidated Statements of Financial Position) (In millions of yen)
Presentation under US GAAP
US GAAP
Re-classification
Recognition and measurement differences
IFRS
Presentation under IFRS
(Assets)
(Assets)
Current assets
2,490,034
1,017
(22,019)
2,469,032
Current assets
Cash and cash equivalents
551,670
-
-
551,670
Cash and cash equivalents
Trade receivables
902,389
16,168
142,456
1,061,013
Trade receivables and contract assets
Inventories
842,281
-
(149,865)
692,416
Inventories
Prepaid expenses and other current assets
193,694
(15,151)
(14,610)
163,933
Other current assets
-
(1,017)
45,536
1,738,485
Non-current assets
Long-term trade receivables
1,798
(1,798)
-
-
Investments
671,641
(671,641)
-
-
-
182,265
5,192
187,457
Investments accounted for using the equity method
-
372,218
27,666
399,884
Other financial assets
Net property, plant and equipment
757,869
-
(32,062)
725,807
Net property, plant and equipment
Other assets
262,658
117,939
44,740
425,337
Other non-current assets
Total assets
4,184,000
-
23,517
4,207,517
Total assets
(In millions of yen)
Presentation under US GAAP
US GAAP
Re-classification
Recognition and measurement differences
IFRS
Presentation under IFRS
(Liabilities)
(Liabilities)
Current liabilities
1,368,433
8,293
(1,075)
1,375,651
Current liabilities
Bank loans and current portion of long-term debt
110,782
-
514
111,296
Bonds and borrowings
Trade payables
652,998
(113,978)
-
539,020
Trade payables
Other current liabilities
604,653
122,271
(1,589)
725,335
Other current liabilities
-
(8,293)
30,163
476,540
Non-current liabilities
Long-term debt
207,935
-
-
207,935
Bonds and borrowings
Retirement and severance benefits
173,911
-
32,422
206,333
Net defined benefit liabilities
Other fixed liabilities
72,824
(8,293)
(2,259)
62,272
Other non-current liabilities
Total liabilities
1,823,103
-
29,088
1,852,191
Total liabilities
(Equity)
(Equity)
Mitsubishi Electric Corp. shareholders' equity
2,254,351
-
(3,996)
2,250,355
Mitsubishi Electric Corp. stockholders' equity
Common stock
175,820
-
-
175,820
Common stock
Capital surplus
212,543
-
(13,785)
198,758
Capital surplus
Retained earnings
1,778,978
-
(62,003)
1,716,975
Retained earnings
Accumulated other comprehensive income (loss)
88,937
-
71,792
160,729
Accumulated other comprehensive income (loss)
Treasury stock at cost
(1,927)
-
-
(1,927)
Treasury stock at cost
Noncontrolling interests
106,546
-
(1,575)
104,971
Non-controlling interests
Total equity
2,360,897
-
(5,571)
2,355,326
Total equity
Total liabilities and equity
4,184,000
-
23,517
4,207,517
Total liabilities and equity
Balance of Debt
318,717
-
514
319,231
Balance of Debt
Accumulated other comprehensive income (loss):
Accumulated other comprehensive income (loss):
Foreign currency translation adjustments
58,591
-
(15,153)
43,438
Exchange differences on translating foreign operations
Pension liability adjustments
(116,271)
-
116,271
-
Remeasurements of defined benefit pension plans
Unrealized gains on securities
146,615
-
(29,374)
117,241
Financial assets measured at fair value through other comprehensive income
Unrealized gains on derivative instruments
2
-
48
50
Net changes in the fair value of cash flow hedges
Reconciliation of Equity as at the End of the Previous Fiscal Year (March 31, 2018)
(Consolidated Statements of Financial Position) (In millions of yen)
Presentation under US GAAP
US GAAP
Re-classification
Recognition and measurement differences
IFRS
Presentation under IFRS
(Assets)
(Assets)
Current assets
2,606,493
(1,434)
(22,324)
2,582,735
Current assets
Cash and cash equivalents
599,199
-
-
599,199
Cash and cash equivalents
Trade receivables
1,087,593
14,225
89,711
1,191,529
Trade receivables and contract assets
Inventories
741,782
-
(95,520)
646,262
Inventories
Prepaid expenses and other current assets
177,919
(15,659)
(16,515)
145,745
Other current assets
-
1,434
63,345
1,722,845
Non-current assets
Long-term trade receivables
1,965
(1,965)
-
-
Investments
614,295
(614,295)
-
-
-
187,828
6,480
194,308
Investments accounted for using the equity method
-
335,474
27,697
363,171
Other financial assets
Net property, plant and equipment
740,448
-
(16,191)
724,257
Net property, plant and equipment
Other assets
301,358
94,392
45,359
441,109
Other non-current assets
Total assets
4,264,559
-
41,021
4,305,580
Total assets
(In millions of yen)
Presentation under US GAAP
US GAAP
Re-classification
Recognition and measurement differences
IFRS
Presentation under IFRS
(Liabilities)
(Liabilities)
Current liabilities
1,471,367
8,586
8,296
1,488,249
Current liabilities
Bank loans and current portion of long-term debt
122,430
-
465
122,895
Bonds and borrowings
Trade payables
719,404
(139,838)
-
579,566
Trade payables
Other current liabilities
629,533
148,424
7,831
785,788
Other current liabilities
-
(8,586)
(349)
420,112
Non-current liabilities
Long-term debt
189,055
-
-
189,055
Bonds and borrowings
Retirement and severance benefits
171,017
-
503
171,520
Net defined benefit liabilities
Other fixed liabilities
68,975
(8,586)
(852)
59,537
Other non-current liabilities
Total liabilities
1,900,414
-
7,947
1,908,361
Total liabilities
(Equity)
(Equity)
Mitsubishi Electric Corp. shareholders' equity
2,259,355
-
34,819
2,294,174
Mitsubishi Electric Corp. stockholders' equity
Common stock
175,820
-
-
175,820
Common stock
Capital surplus
213,250
-
(13,808)
199,442
Capital surplus
Retained earnings
1,857,741
-
(46,393)
1,811,348
Retained earnings
Accumulated other comprehensive income (loss)
14,472
-
95,020
109,492
Accumulated other comprehensive income (loss)
Treasury stock at cost
(1,928)
-
-
(1,928)
Treasury stock at cost
Noncontrolling interests
104,790
-
(1,745)
103,045
Non-controlling interests
Total equity
2,364,145
-
33,074
2,397,219
Total equity
Total liabilities and equity
4,264,559
-
41,021
4,305,580
Total liabilities and equity
Balance of Debt
311,485
-
465
311,950
Balance of Debt
Accumulated other comprehensive income (loss):
Accumulated other comprehensive income (loss):
Foreign currency translation adjustments
34,149
-
(16,600)
17,549
Exchange differences on translating foreign operations
Pension liability adjustments
(141,075)
-
141,075
-
Remeasurements of defined benefit pension plans
Unrealized gains on securities
121,413
-
(29,461)
91,952
Financial assets measured at fair value through other comprehensive income
Unrealized gains (losses) on derivative instruments
(15)
-
6
(9)
Net changes in the fair value of cash flow hedges
Notes to reconciliation of equity
The principal effects of transition to IFRS in the reconciliation of equity above are as follows:
(1) Reclassification
The main elements of reclassification are as follows:
(a) In accordance with the presentation provisions under IFRS, other financial assets are presented separately.
(b) Part of trade receivables, prepaid expenses and other current assets and other assets, etc. are reclassified based on the definition and recognition criteria of IFRS.
(c) Part of trade payables, other current liabilities and other fixed liabilities are reclassified based on the definition and recognition criteria of IFRS.
(2) Recognition and measurement differences
The main elements of recognition and measurement differences are as follows:
(a) Employee benefits
Under US GAAP, actuarial gains and losses and past service costs are deferred in accumulated other comprehensive income, subsequently amortized for a specified future period and recognized in profit or loss. Current service costs, interest costs and expected return on plan assets are recognized in profit or loss for the fiscal year.
Under IFRS, on the other hand, changes resulting from remeasurement of defined benefit obligation and plan assets relating to defined-benefit corporate pension plans and lump-sum payment plans required by IFRS are recognized in other comprehensive income, and reclassified from accumulated other comprehensive income directly to retained earnings, not through profit or loss. Past service costs arising from plan amendments are fully recognized immediately in profit or loss. Current service costs are recognized in profit or loss. Interest costs are recognized in profit or loss at the amount determined by multiplying the net amount of the defined benefit obligation and plan assets by the discount rate used to determine the present value of the obligation.
(b) Equity instruments
Under US GAAP, non-marketable equity instruments are recognized at their cost. If fair value of equity instruments has decreased and the decrease is considered not to be temporary, impairment loss is recognized for the amount of the cost of the equity instruments in excess of fair value. Gains or losses on the sale of these equity instruments are recognized in profit or loss.
Under IFRS, on the other hand, all equity instruments are recognized at fair value irrespective of whether there is an active market. Since it is permitted to recognize changes in fair value in other comprehensive income, the Company and its consolidated subsidiaries have elected to recognize changes in fair value of equity instruments in other comprehensive income. Accordingly, loss on impairment and gains or losses on the sale of equity instruments recognized in profit or loss under US GAAP are recognized in other comprehensive income as well.
(c) Income taxes
Under US GAAP, tax expenses incurred by sellers are deferred using the deferral method for differences arising from unrealized profits and losses from intercompany transactions.
Under IFRS, on the other hand, a difference between the carrying amount and the sale price of an asset sold is recognized as a future deductible temporary difference based on the asset-and-liability approach. A deferred tax asset is recognized for the future deductible temporary difference using purchaser's effective tax rate while taking its recoverability into consideration.
Under US GAAP, deferred tax liabilities for temporary differences associated with investments in equity investees are recognized using tax rates applicable on the premise that the temporary difference will be reversed at the time of sale of the equity investees even if a company intends to continue to hold the investments. In principle, deferred tax liabilities are recognized for the undistributed earnings of subsidiaries, etc.
Under IFRS, deferred tax liabilities are in principle recognized for all the taxable temporary differences using tax rates applied when the taxable temporary differences reverse, such as when receiving dividends or selling the investments. Deferred tax liabilities are recognized for the taxable temporary differences associated with investments in subsidiaries etc. which are probable to reverse in the foreseeable future.
(d) Exchange differences on translating foreign operations
Cumulative exchange differences on translating foreign operations are all deemed to be zero at the date of transition to IFRS. Consequently, exchange differences on translating foreign operations included in accumulated other comprehensive income as at the transition date were fully reclassified to retained earnings.
(e) Exclusion of equity investees
Under US GAAP, when an investee no longer qualifies as an equity investee, the difference between the sale price and the carrying amount of the interest sold is recognized in profit or loss. If an investor retains a residual interest, gains or losses recognized in prior periods remain included in the carrying amount of the residual interest.
Under IFRS, on the other hand, when an investee no longer qualifies as an equity investee, the residual interest is measured at fair value if an investor retains a residual interest. The sale price and the difference between the fair value and the carrying amount of the residual interest at the point when an investee no longer qualifies as an equity investee is recognized in profit or loss.
(f) Government grants
Under US GAAP, government grants related to acquisition of assets are not reflected in the carrying amounts of assets because there are no accounting standards for such government grants.
Under IFRS, on the other hand, government grants related to assets are recognized as reducing the carrying amount of the asset by the government grants received.
(g) Impairment of non-financial assets
Under US GAAP, if there is an indication that a fixed asset may be impaired, the carrying amount and the undiscounted estimated future cash flows of the asset is compared. If the carrying amount exceeds the estimated future cash flows, any excess of the carrying amount over the fair value is recognized as an impairment loss.
Under IFRS, on the other hand, if there is an indication that a fixed asset may be impaired, any excess of the carrying amount over the recoverable amount of the fixed asset (the higher of value in use or fair value less costs of disposal) is recognized as an impairment loss of the fixed asset.
(h) Business combinations
Under US GAAP, in business combinations, the acquirer measures the acquiree as a whole (including non-controlling interests) at fair value and goodwill is recognized including the portion of goodwill attributable to the non-controlling interests.
Under IFRS, on the other hand, in business combinations it is permitted to elect to apply either method: the acquirer measures the acquiree as a whole (including non-controlling interests) at fair value and goodwill is recognized including the portion of goodwill attributable to the non-controlling interests; or non-controlling interest is measured as a proportional interest in the fair value of the acquiree's net identifiable assets and goodwill is recognized only for the acquirer's share. The Company elected the method of measuring non-controlling interest as a proportional interest in the fair value of the acquiree's net identifiable assets and recognizing goodwill only for the acquirer's share. Capital surplus is recognized when non-controlling interests are additionally acquired after the date when control was obtained.
Reconciliation of Profit or Loss and Comprehensive Income for the First 9 Months of the Previous Fiscal Year (from April 1, 2017 to December 31, 2017)
(Condensed Quarterly Consolidated Statements of Profit or Loss) (In millions of yen)
Presentation under US GAAP
US GAAP
Re-classification
Recognition and measurement differences
IFRS
Presentation under IFRS
Net sales
3,115,012
-
71,743
3,186,755
Net sales
Cost of sales
2,112,607
(4)
94,750
2,207,353
Cost of sales
Selling, general and administrative expenses
768,464
723
(26,992)
742,195
Selling, general and administrative expenses
Loss on impairment of long-lived assets
1,532
(1,532)
-
-
-
290
449
739
Other profit
Operating income
232,409
1,103
4,434
237,946
Operating income
Other income
51,587
-
-
-
Interest and Dividends
7,247
22,124
(21,825)
7,546
Financial income
Equity in earnings of affiliated companies
15,696
(15,696)
-
-
Other
28,644
(28,644)
-
-
Other expenses
6,769
-
-
-
Interest
2,044
6
(6)
2,044
Financial expenses
Other
4,725
(4,725)
-
-
-
15,696
30
15,726
Share of profit of investments accounted for using the equity method
Income before income taxes
277,227
(698)
(17,355)
259,174
Income before income taxes
Income taxes
75,883
(698)
(8,620)
66,565
Income tax expenses
Net income
201,344
-
(8,735)
192,609
Net income
Net income attributable to:
Net income attributable to the noncontrolling interests
8,226
-
313
8,539
Non-controlling interests
Net income attributable to Mitsubishi Electric Corp.
193,118
-
(9,048)
184,070
Mitsubishi Electric Corp. stockholders
(Condensed Quarterly Consolidated Statements of Comprehensive Income) (In millions of yen)
Presentation under US GAAP
US GAAP
Re-classification
Recognition and measurement differences
IFRS
Presentation under IFRS
Net income
201,344
-
(8,735)
192,609
Net income
Other comprehensive income (loss), net of tax
(Other comprehensive income (loss), net of tax)
Items that will not be reclassified to net income
Unrealized gains on securities
10,379
(829)
13,795
23,345
Financial assets measured at fair value through other comprehensive income
Pension liability adjustments
40,693
(352)
(40,341)
-
Remeasurements of defined benefit pension plans
-
1,181
(352)
829
Share of other comprehensive income of investments accounted for using the equity method
-
-
(26,898)
24,174
Subtotal
Items that may be reclassified to net income
Foreign currency translation adjustments
43,830
(1,127)
3,278
45,981
Exchange differences on translating foreign operations
Unrealized gains (losses) on derivative instruments
(65)
3
65
3
Net changes in the fair value of cash flow hedges
-
1,124
(44)
1,080
Share of other comprehensive income of investments accounted for using the equity method
-
-
3,299
47,064
Subtotal
Total
94,837
-
(23,599)
71,238
Total other comprehensive income
Comprehensive income
296,181
-
(32,334)
263,847
Comprehensive income
Comprehensive income attributable to:
Comprehensive income attributable to
the noncontrolling interests12,074
-
199
12,273
Non-controlling interests
Comprehensive income attributable to
Mitsubishi Electric Corp.284,107
-
(32,533)
251,574
Mitsubishi Electric Corp. stockholders
Reconciliation of Profit or Loss and Comprehensive Income for the Third Quarter of the Previous Fiscal Year (from October 1, 2017 to December 31, 2017)
(Condensed Quarterly Consolidated Statements of Profit or Loss) (In millions of yen)
Presentation under US GAAP
US GAAP
Re-classification
Recognition and measurement differences
IFRS
Presentation under IFRS
Net sales
1,038,670
-
36,318
1,074,988
Net sales
Cost of sales
700,366
120
44,308
744,794
Cost of sales
Selling, general and administrative expenses
255,191
241
(9,250)
246,182
Selling, general and administrative expenses
-
677
432
1,109
Other profit (loss)
Operating income
83,113
316
1,692
85,121
Operating income
Other income
9,899
-
-
-
Interest and Dividends
2,362
921
(536)
2,747
Financial income
Equity in earnings of affiliated companies
5,729
(5,729)
-
-
Other
1,808
(1,808)
-
-
Other expenses
1,028
-
-
-
Interest
605
73
(73)
605
Financial expenses
Other
423
(423)
-
-
-
5,729
10
5,739
Share of profit of investments accounted for using the equity method
Income before income taxes
91,984
(221)
1,239
93,002
Income before income taxes
Income taxes
27,354
(221)
46
27,179
Income tax expenses
Net income
64,630
-
1,193
65,823
Net income
Net income attributable to:
Net income attributable to the noncontrolling interests
2,636
-
89
2,725
Non-controlling interests
Net income attributable to Mitsubishi Electric Corp.
61,994
-
1,104
63,098
Mitsubishi Electric Corp. stockholders
(Condensed Quarterly Consolidated Statements of Comprehensive Income) (In millions of yen)
Presentation under US GAAP
US GAAP
Re-classification
Recognition and measurement differences
IFRS
Presentation under IFRS
Net income
64,630
-
1,193
65,823
Net income
Other comprehensive income (loss), net of tax
(Other comprehensive income (loss), net of tax)
Items that will not be reclassified to net income
Unrealized gains on securities
13,675
(232)
181
13,624
Financial assets measured at fair value through other comprehensive income
Pension liability adjustments
22,824
(10)
(22,814)
-
Remeasurements of defined benefit pension plans
-
242
(10)
232
Share of other comprehensive income of investments accounted for using the equity method
-
-
(22,643)
13,856
Subtotal
Items that may be reclassified to net income
Foreign currency translation adjustments
17,165
(1,255)
(1,488)
14,422
Exchange differences on translating foreign operations
Unrealized gains on derivative instruments
17
(11)
(8)
(2)
Net changes in the fair value of cash flow hedges
-
1,266
(1)
1,265
Share of other comprehensive income of investments accounted for using the equity method
-
-
(1,497)
15,685
Subtotal
Total
53,681
-
(24,140)
29,541
Total other comprehensive income
Comprehensive income
118,311
-
(22,947)
95,364
Comprehensive income
Comprehensive income attributable to:
Comprehensive income attributable to
the noncontrolling interests4,449
-
36
4,485
Non-controlling interests
Comprehensive income attributable to
Mitsubishi Electric Corp.113,862
-
(22,983)
90,879
Mitsubishi Electric Corp. stockholders
Reconciliation of Profit or Loss and Comprehensive Income for the Previous Fiscal Year (from April 1, 2017 to March 31, 2018)
(Consolidated Statements of Profit or Loss) (In millions of yen)
Presentation under US GAAP
US GAAP
Re-classification
Recognition and measurement differences
IFRS
Presentation under IFRS
Net sales
4,431,198
-
13,226
4,444,424
Net sales
Cost of sales
3,030,902
-
53,024
3,083,926
Cost of sales
Selling, general and administrative expenses
1,061,778
729
(34,623)
1,027,884
Selling, general and administrative expenses
Loss on impairment of
long-lived assets19,881
(19,881)
-
-
-
(20,990)
15,820
(5,170)
Other profit (loss)
Operating income
318,637
(1,838)
10,645
327,444
Operating income
Other income
60,414
-
-
-
Interest and Dividends
8,611
23,637
(23,637)
8,611
Financial income
Equity in earnings of affiliated companies
22,261
(22,261)
-
-
Other
29,542
(29,542)
-
-
Other expenses
14,473
-
-
-
Interest
2,727
4,726
(657)
6,796
Financial expenses
Other
11,746
(11,746)
-
-
-
22,261
1,686
23,947
Share of profit of investments accounted for using the equity method
Income before income taxes
364,578
(723)
(10,649)
353,206
Income before income taxes
Income taxes
82,239
(723)
5,291
86,807
Income tax expenses
Net income
282,339
-
(15,940)
266,399
Net income
Net income attributable to:
Net income attributable to the noncontrolling interests
10,459
-
185
10,644
Non-controlling interests
Net income attributable to Mitsubishi Electric Corp.
271,880
-
(16,125)
255,755
Mitsubishi Electric Corp. stockholders
(Consolidated Statements of Comprehensive Income) (In millions of yen)
Presentation under US GAAP
US GAAP
Re-classification
Recognition and measurement differences
IFRS
Presentation under IFRS
Net income
282,339
-
(15,940)
266,399
Net income
Other comprehensive income (loss), net of tax
(Other comprehensive income (loss), net of tax)
Items that will not be reclassified to net income
Unrealized gains (losses) on securities
(14,875)
392
14,431
(52)
Financial assets measured at fair value through other comprehensive income
Pension liability adjustments
15,857
(596)
6,062
21,323
Remeasurements of defined benefit pension plans
-
204
(34)
170
Share of other comprehensive income of investments accounted for using the equity method
-
-
20,459
21,441
Subtotal
Items that may be reclassified to net income
Foreign currency translation adjustments
17,023
(1,908)
1,877
16,992
Exchange differences on translating foreign operations
Unrealized gains (losses) on derivative instruments
(88)
(6)
23
(71)
Net changes in the fair value of cash flow hedges
-
1,914
(45)
1,869
Share of other comprehensive income of investments accounted for using the equity method
-
-
1,855
18,790
Subtotal
Total
17,917
-
22,314
40,231
Total Other comprehensive income
Comprehensive income
300,256
-
6,374
306,630
Comprehensive income
Comprehensive income attributable to:
Comprehensive income attributable to
the noncontrolling interests11,852
-
68
11,920
Non-controlling interests
Comprehensive income attributable to
Mitsubishi Electric Corp.288,404
-
6,306
294,710
Mitsubishi Electric Corp. stockholders
Notes to Reconciliation of Profit or Loss and Comprehensive Income
The principal effects of transition to IFRS in the reconciliation of profit or loss and comprehensive income above are as follows:
(1) Reclassification
The main elements of reclassification are as follows:
(a) In accordance with the presentation provisions under IFRS, financial income and financial expenses are presented separately.
(b) In accordance with the presentation provisions under IFRS, part of other income and other expenses, etc. is included and presented in operating profit.
(c) Unrealized gains (losses) on securities, pension liability adjustments, foreign currency translation adjustments and unrealized gains (losses) on derivative instruments in other comprehensive income that are attributable to equity investees are reclassified in accordance with the presentation provisions under IFRS.
(2) Recognition and measurement differences
The main elements of recognition and measurement differences are as follows:
(a) Reconciliation of sales and cost of sales
Under US GAAP, if amounts of construction contracts cannot be reliably estimated, all construction costs and construction revenue are recognized when the construction is complete.
Under IFRS, on the other hand, revenue from a performance obligation satisfied over time is recognized using the cost recovery method if the outcome cannot be reliably estimated. Revenues using the cost recovery method are only recognized for costs incurred to the extent that it is probable that the cost will be recovered and costs are recognized as expenses in the period in which they are incurred.
(b) Equity instruments
Non-marketable equity instruments are recognized at their cost under US GAAP. If fair value of equity instruments has decreased and the decrease is considered not to be temporary, impairment loss is recognized for the amount of the cost of the equity instruments in excess of fair value. Gains or losses on the sale of these equity instruments are recognized in profit or loss.
Under IFRS, on the other hand, equity instruments are recognized at fair value irrespective of whether there is an active market. Because it is permitted to recognize changes in fair value in other comprehensive income, the Company and its consolidated subsidiaries have elected to recognize changes in fair value of equity instruments in other comprehensive income. Accordingly, loss on impairment and gains or losses on the sale of equity instruments recognized in profit or loss under US GAAP are recognized in other comprehensive income as well.
Notes to Reconciliation of Cash Flows
There are no significant differences in the statement of cash flows resulting from transition from US GAAP to IFRS.
Cautionary Statement
The Mitsubishi Electric Group (hereafter "the Group") is involved in development, manufacture and sales in a wide range of fields including Energy and Electric Systems, Industrial Automation Systems, Information and Communication Systems, Electronic Devices and Home Appliances, and these operations extend globally, not only inside Japan, but also in North America, Europe, Asia and other regions. While the statements herein are based on certain assumptions and premises that the Group trusts and considers to be reasonable under the circumstances on the date of announcement, actual financial standings and operating results are subject to change due to any of the factors as contemplated hereunder and/or any additional factor unforeseeable as of the date of this announcement. Such factors materially affecting the expectations expressed herein shall include but are not limited to the following:
(1) Important trends
The Group's operations may be affected by trends in the global economy, social conditions, laws, tax codes and regulations.
(2) Foreign currency exchange rates
Fluctuations in foreign currency markets may affect the Group's sales of exported products and purchases of imported materials that are denominated in U.S. dollars or euros, as well as its Asian production bases' sales of exported products and purchases of imported materials that are denominated in foreign currencies.
(3) Stock markets
A fall in stock market prices may cause a decline in value of the Group's marketable securities and pension assets.
(4) Supply/demand balance for products and procurement conditions for materials and components
A decline in prices and shipments due to changes in the supply/demand balance, as well as an increase in material prices due to a worsening of material and component procurement conditions, may adversely affect the Group's performance.
(5) Fund raising
An increase in interest rates, the yen interest rate in particular, would increase the Group's interest expenses.
(6) Significant patent matters
Important patent filings, licensing, copyrights and patent-related disputes may adversely affect related businesses.
(7) Environmental legislation or relevant issues
The Group may incur losses or expenses owing to changes in environmental legislation or the occurrence of environmental issues. Such changes in legislation or the occurrence of environmental issues may also impact manufacturing and all corporate activities of the Group.
(8) Flaws or defects in products or services
The Group may incur losses or expenses resulting out of flaws or defects in products or services, and the lowered reputation of the quality of all its products and services may affect the entire Group.
(9) Litigation and other legal proceedings
The Group's operations may be affected by lawsuits or other legal proceedings against Mitsubishi Electric, its subsidiaries and/or equity-method affiliated companies.
(10) Disruptive changes
Disruptive changes in technology, development of products using new technology, timing of production and market introduction may adversely affect the Group's performance.
(11) Business restructuring
The Group may record losses due to restructuring measures.
(12) Information security
The performance of the Group may be affected by computer virus infections, unauthorized access and other unpredictable incidents that lead to the loss or leakage of personal information held by the Group or confidential information regarding the Group's business such as its technology, sales and other operations.
(13) Natural disasters
The Group's operations, particularly manufacturing activities, may be affected by the occurrence of earthquakes, typhoons, tsunami, fires and other large-scale disasters.
(14) Other significant factors
The Group's operations may be affected by the outbreak of social or political upheaval due to terrorism, war, pandemic by new strains of influenza and other diseases, or other factors.
###
About Mitsubishi Electric Corporation
With nearly 100 years of experience in providing reliable, high-quality products, Mitsubishi Electric Corporation (TOKYO: 6503) is a recognized world leader in the manufacture, marketing and sales of electrical and electronic equipment used in information processing and communications, space development and satellite communications, consumer electronics, industrial technology, energy, transportation and building equipment. Embracing the spirit of its corporate statement, Changes for the Better, and its environmental statement, Eco Changes, Mitsubishi Electric endeavors to be a global, leading green company, enriching society with technology. The company recorded consolidated group sales of 4,444.4 billion yen (in accordance with IFRS; US$ 41.9 billion*) in the fiscal year ended March 31, 2018. For more information visit:
www.MitsubishiElectric.com
*At an exchange rate of 106 yen to the US dollar, the rate given by the Tokyo Foreign Exchange Market on March 31, 2018
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.ENDQRTGSGDDXXGBGCS
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