REG - Mitsubishi Elect. - Half-year Report
FOR IMMEDIATE RELEASE
No. 3223
Investor Relations Inquiries
Media Inquiries
Investor Relations Group, Corporate Finance Division
Public Relations Division
Mitsubishi Electric Corporation
Mitsubishi Electric Corporation
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Mitsubishi Electric Announces Consolidated Financial Results
for the First Half and Second Quarter of Fiscal 2019
TOKYO, October 29, 2018 - Mitsubishi Electric Corporation (TOKYO: 6503) announced today its consolidated financial results for the first half and second quarter, ended September 30, 2018, of the current fiscal year ending March 31, 2019 (fiscal 2019).
1. Consolidated Half-year Results (April 1, 2018 - September 30, 2018)
Net sales:
2,170.1
billion yen
(3% increase from the same period last year)
Operating income:
125.9
billion yen
(18% decrease from the same period last year)
Income before income taxes:
141.2
billion yen
(15% decrease from the same period last year)
Net income attributable to Mitsubishi Electric Corp. stockholders:
102.3
billion yen
(15% decrease from the same period last year)
The global economy in the first half of fiscal 2019, from April through September 2018, saw a slight slowdown in China, a buoyant expansion in the U.S. and gradual trends of recovery in Japan and Europe. In addition, from August, the yen weakened against the U.S. dollar and appreciated against the euro compared to the same period of the previous fiscal year.
Under these circumstances, consolidated net sales in the first half of fiscal 2019 increased by 3% compared to the same period of the previous fiscal year to 2,170.1 billion yen with increased sales in the Energy and Electric Systems, Industrial Automation Systems, Electronic Devices and Home Appliances segments. Consolidated operating income decreased by 18% compared to the same period of the previous fiscal year to 125.9 billion yen, due to decreased profits in the Industrial Automation Systems, Information and Communication Systems, Electronic Devices and Home Appliances segments.
Income before income taxes decreased by 15% compared to the same period of the previous fiscal year to 141.2 billion yen.
Net income attributable to Mitsubishi Electric Corporation stockholders decreased by 15% compared to the same period of the previous fiscal year to 102.3 billion yen.
Consolidated Financial Results by Business Segment (First Half, Fiscal 2019)
Energy and Electric Systems
Total sales:
568.6
billion yen
(2% increase from the same period last year which recorded 557.1 billion yen)
Operating income:
15.5
billion yen
(4.9 billion yen increase from the same period last year which recorded 10.6 billion yen)
The social infrastructure systems business saw increases in both orders and sales from the same period of the previous fiscal year. This was due primarily to an increase in orders in the transportation systems business in Japan and an increase in sales in the power systems business in Japan.
The building systems business saw orders and sales both substantially unchanged compared to the same period of the previous fiscal year due primarily to buoyancies in the renewal business in Japan and in new installations of elevators and escalators mainly in Korea and India despite decreases in Japan and China.
As a result, total sales for this segment increased by 2% from the same period of the previous fiscal year. Operating income increased by 4.9 billion yen from the same period of the previous fiscal year mainly due to an increase in sales.
Industrial Automation Systems
Total sales:
730.3
billion yen
(4% increase from the same period last year which recorded 703.7 billion yen)
Operating income:
77.9
billion yen
(18.3 billion yen decrease from the same period last year which recorded 96.3 billion yen)
The factory automation systems business saw a decrease in orders, while sales remained substantially unchanged, from the same period of the previous fiscal year due primarily to a temporary slowdown in capital expenditures in the fields of organic light emitting diodes (OLED) and smartphones outside Japan, despite buoyant demand for exports mainly by machinery and semiconductor-related equipment manufacturers 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 4% from the same period of the previous fiscal year. Operating income decreased by 18.3 billion yen from the same period of the previous fiscal year due primarily to a shift in product mix, increases in material prices and upfront investment for growth drivers.
Information and Communication Systems
Total sales:
186.8
billion yen
(2% decrease from the same period last year which recorded 191.2 billion yen)
Operating income:
2.5
billion yen
(0.7 billion yen decrease from the same period last year which recorded 3.2 billion yen)
The telecommunications systems business saw decreases in both orders and sales compared to the same period of the previous fiscal year due primarily to decreased demand in communications infrastructure equipment.
The information systems and service business saw decreases in both orders and sales compared to the same period of the previous fiscal year, mainly due to a shift in projects for the system integrations business.
The electronic systems business saw an increase in orders, while sales remained substantially unchanged, compared to the same period of the previous fiscal year mainly due to an increase in large-scale projects in the defense systems business.
As a result, total sales for this segment decreased by 2% compared to the same period of the previous fiscal year. Operating income decreased by 0.7 billion yen compared to the same period of the previous fiscal year due primarily to a decrease in sales.
Electronic Devices
Total sales:
101.8
billion yen
(2% increase from the same period last year which recorded 99.5 billion yen)
Operating income:
1.2
billion yen
(5.9 billion yen decrease from the same period last year which recorded 7.2 billion yen)
The electronic devices business saw an increase in orders, and sales rose by 2% from the same period of the previous fiscal year due to an increase in demand mainly for power modules used in automotive and railcar applications, despite decreased demand for optical communication devices.
Operating income decreased by 5.9 billion yen compared to the same period of the previous fiscal year due primarily to a shift in product mix.
Home Appliances
Total sales:
557.1
billion yen
(3% increase from the same period last year which recorded 539.2 billion yen)
Operating income:
33.6
billion yen
(5.7 billion yen decrease from the same period last year which recorded 39.4 billion yen)
The home appliances business saw an increase in sales of 3% from the same period of the previous fiscal year due to an increase in sales of air conditioners for Europe, Japan and North America.
Operating income decreased by 5.7 billion yen compared to the same period of the previous fiscal year due primarily to increases in material prices and sales expenses.
Others
Total sales:
327.8
billion yen
(5% increase from the same period last year which recorded 310.7 billion yen)
Operating income:
10.3
billion yen
(0.6 billion yen increase from the same period last year which recorded 9.6 billion yen)
Sales increased by 5% compared to the same period of the previous fiscal year due primarily to an increase in sales at affiliated companies involved in materials procurement.
Operating income increased by 0.6 billion yen compared to the same period of the previous fiscal year due primarily to an increase in sales.
2. Consolidated Second-quarter Results (July 1, 2018 - September 30, 2018)
Net sales:
1,119.1
billion yen
(4% increase from the same period last year)
Operating income:
64.3
billion yen
(17% decrease from the same period last year)
Income before income taxes:
72.5
billion yen
(15% decrease from the same period last year)
Net income attributable to Mitsubishi Electric Corp. stockholders:
54.7
billion yen
(14% decrease from the same period last year)
Consolidated net sales for this quarter, from July through September 2018, was 1,119.1 billion yen, a 4% increase from the same period of the previous fiscal year, due primarily to increased sales in the Energy and Electric Systems, Industrial Automation Systems, Information and Communication Systems and Home Appliances segments.
Consolidated operating income was 64.3 billion yen, a decrease of 17% from the same period of the previous fiscal year, with decreased profits in the Industrial Automation Systems, Information and Communication Systems, Electronic Devices and Home Appliances segments.
Income before income taxes decreased by 15% compared to the same period of the previous fiscal year to 72.5 billion yen.
Net income attributable to Mitsubishi Electric Corporation stockholders decreased by 14% compared to the same period of the previous fiscal year to 54.7 billion yen.
Consolidated Financial Results by Business Segment (Second Quarter, Fiscal 2019)
Energy and Electric Systems
Total sales:
301.2
billion yen
(4% increase from the same period last year which recorded 288.5 billion yen)
Operating income:
9.5
billion yen
(5.6 billion yen increase from the same period last year which recorded 3.9 billion yen)
The social infrastructure systems business saw increases in both orders and sales from the same period of the previous fiscal year. This was due primarily to an increase in orders in the transportation systems business in Japan and an increase in sales in the power systems business in Japan.
The building systems business saw a decrease in orders, while sales remained substantially unchanged, compared to the same period of the previous fiscal year due primarily to a slowdown in demand related to the Tokyo Olympic and Paralympic Games, as well as impact from the stagnant Chinese market, despite buoyancies in the renewal business in Japan and the new installation of elevators and escalators mainly in India and Korea.
As a result, total sales for this segment increased by 4% from the same period of the previous fiscal year. Operating income increased by 5.6 billion yen from the same period of the previous fiscal year mainly due to an increase in sales.
Industrial Automation Systems
Total sales:
369.3
billion yen
(5% increase from the same period last year which recorded 352.8 billion yen)
Operating income:
33.1
billion yen
(12.4 billion yen decrease from the same period last year which recorded 45.5 billion yen)
The factory automation systems business saw a decrease in orders from the same period of the previous fiscal year due primarily to a temporary slowdown in capital expenditures in the fields of organic light emitting diodes (OLED) and smartphones outside Japan, while sales increased from the same period of the previous fiscal year due primarily to buoyant demand for exports mainly by machinery and semiconductor-related equipment manufacturers 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, Europe and Asian markets outside Japan, 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 5% from the same period of the previous fiscal year. Operating income decreased by 12.4 billion yen from the same period of the previous fiscal year due primarily to a shift in product mix, increases in material prices and upfront investment for growth drivers.
Information and Communication Systems
Total sales:
107.0
billion yen
(6% increase from the same period last year which recorded 101.1 billion yen)
Operating income:
4.3
billion yen
(0.6 billion yen decrease from the same period last year which recorded 5.0 billion yen)
The telecommunications systems business saw decreases in both orders and sales compared to the same period of the previous fiscal year due primarily to decreased demand in communications infrastructure equipment.
The information systems and service business saw increases in both orders and sales compared to the same period of the previous fiscal year, mainly due to an increase in the system integrations business.
The electronic systems business saw an increase in both orders and sales compared to the same period of the previous fiscal year mainly due to an increase in large-scale projects in the defense systems business.
As a result, total sales for this segment increased by 6% compared to the same period of the previous fiscal year. Operating income decreased by 0.6 billion yen from the same period of the previous fiscal year due primarily to a shift in project portfolios.
Electronic Devices
Total sales:
50.4
billion yen
(2% decrease from the same period last year which recorded 51.4 billion yen)
Operating income (loss):
(0.2
billion yen)
(4.3 billion yen decline from the same period last year which recorded 4.1 billion yen)
The electronic devices business saw an increase in orders from the same period of the previous fiscal year mainly due to an increase in demand for power modules used in automotive and railcar applications, while sales decreased by 2% from the same period of the previous fiscal year due primarily to a decrease in demand for optical communication devices.
Operating income declined by 4.3 billion yen compared to the same period of the previous fiscal year due primarily to a shift in product mix.
Home Appliances
Total sales:
276.7
billion yen
(3% increase from the same period last year which recorded 269.3 billion yen)
Operating income:
13.6
billion yen
(1.6 billion yen decrease from the same period last year which recorded 15.2 billion yen)
The home appliances business saw an increase in sales of 3% from the same period of the previous fiscal year due to an increase in sales of air conditioners for North America, Europe and Japan.
Operating income decreased by 1.6 billion yen compared to the same period of the previous fiscal year due primarily to increases in material prices and sales expenses.
Others
Total sales:
172.1
billion yen
(4% increase from the same period last year which recorded 165.8 billion yen)
Operating income:
9.1
billion yen
(1.5 billion yen increase from the same period last year which recorded 7.6 billion yen)
Sales increased by 4% compared to the same period of the previous fiscal year due primarily to an increase in sales at affiliated companies involved in materials procurement.
Operating income increased by 1.5 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 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 42.7 billion yen to 4,262.8 billion yen. The change in balance of total assets is mainly attributable to increases in inventories by 81.2 billion yen as a result of work-in-process as recorded in commensurate with progress in job orders under pertinent contracts, while cash and cash equivalents decreased by 18.5 billion yen, and trade receivables and contract assets decreased by 116.2 billion yen primarily as a result of credit collection.
Total liabilities decreased from the end of the previous fiscal year by 95.6 billion yen to 1,812.7 billion yen. The outstanding balances of debt decreased by 9.0 billion yen from the end of the previous fiscal year to 302.9 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 46.2 billion yen, and other current liabilities decreased by 44.9 billion yen.
Mitsubishi Electric Corporation stockholders' equity increased by 47.1 billion yen compared to the end of the previous fiscal year to 2,341.2 billion yen. The stockholders' equity ratio was recorded at 54.9%, representing a 1.6 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 102.3 billion yen, despite a decrease of 55.8 billion yen due to dividend payments.
An analysis on the status of cash flow on a consolidated basis
Cash flows from operating activities for the first half of fiscal 2019 increased by 18.0 billion yen compared to the same period of the previous fiscal year to 144.3 billion yen (cash in), mainly due to a decrease in payments of trade payables. Cash flows from investing activities increased by 29.2 billion yen compared to the same period of the previous fiscal year to 98.7 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 45.5 billion yen (cash in). Cash flows from financing activities were 68.8 billion yen (cash out) mainly due to dividend payments.
Forecast for Fiscal 2019 (year ending March 31, 2019)
Considering the financial results for the second quarter of fiscal 2019, the latest situation of orders received and other factors, consolidated net sales for fiscal 2019 is expected to exceed the company's previous forecast owing primarily to the weaker yen against the U.S. dollar, while income is expected to fall below the previous forecast in the Industrial Automation Systems and Electronic Devices segments. As a result, the company's consolidated earnings forecast for fiscal 2019, ending March 31, 2019, has been revised from the announcement on July 30, 2018 as stated below.
Consolidated Earnings Forecast for Fiscal 2019
Consolidated
Previous forecast (announced July 30)
Current forecast
Net sales:
4,500.0 billion yen
4,510.0 billion yen
(1% increase from fiscal 2018)
Operating income:
315.0 billion yen
305.0 billion yen
(7% decrease from fiscal 2018)
Income before income taxes:
345.0 billion yen
335.0 billion yen
(5% decrease from fiscal 2018)
Net income attributable to
Mitsubishi Electric Corp. stockholders:
245.0 billion yen
240.0 billion yen
(6% decrease from fiscal 2018)
Exchange rates in and after the third quarter of fiscal 2019 is 105 yen to the U.S. dollar, which is 5 yen weaker from the company's previous announcement, 125 yen to the euro, unchanged from the previous announcement, and 16.0 yen to the Chinese yuan, which is 0.5 yen stronger.
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 Half-year Results
(In billions of yen except where noted)
FY '18 1st half (A)
(Apr. 1, 2017 - Sept. 30, 2017)FY '19 1st half (B)
(Apr. 1, 2018 - Sept. 30, 2018)
B - A
B/A (%)
Net sales
2,111.7
2,170.1
58.3
103
Operating income
152.8
125.9
(26.8)
82
Income before income taxes
166.1
141.2
(24.8)
85
Net income attributable to Mitsubishi Electric Corp. stockholders
120.9
102.3
(18.6)
85
Basic net income per share attributable to Mitsubishi Electric Corp. stockholders
56.37 yen
47.70 yen
(8.67 yen)
85
2. Consolidated Second-quarter Results
(In billions of yen except where noted)
FY '18 Q2 (A)
(Jul. 1, 2017 -
Sept. 30, 2017)FY '19 Q2 (B)
(Jul. 1, 2018 - Sept. 30, 2018)
B - A
B/A
(%)
Net sales
1,077.8
1,119.1
41.2
104
Operating income
77.3
64.3
(12.9)
83
Income before income taxes
85.7
72.5
(13.1)
85
Net income attributable to Mitsubishi Electric Corp. stockholders
63.9
54.7
(9.2)
86
Basic net income per share attributable to Mitsubishi Electric Corp. stockholders
29.82 yen
25.52 yen
(4.30 yen)
86
Notes:
1) Consolidated financial statements are made in accordance with International Financial Reporting Standards (IFRS).
2) The Company has 209 consolidated subsidiaries.
Condensed Quarterly Consolidated Financial Statements
Condensed Quarterly Consolidated Statements of Profit or Loss and Condensed Quarterly Consolidated Statements of Comprehensive Income (First Half, Fiscal 2019)
(Condensed Quarterly Consolidated Statements of Profit or Loss)
(In millions of yen)
FY '18 1st half
(Apr. 1, 2017 -
Sept. 30, 2017)
FY '19 1st half
(Apr. 1, 2018 -
Sept. 30, 2018)
(A)
% of total
(B)
% of total
B - A
B/A
(%)
Net sales
2,111,767
100.0
2,170,106
100.0
58,339
103
Cost of sales
1,462,559
69.3
1,530,169
70.5
67,610
105
Selling, general and
administrative expenses
496,013
23.5
514,365
23.7
18,352
104
Other profit (loss)
(370)
(0.0)
368
0.0
738
－
Operating income
152,825
7.2
125,940
5.8
(26,885)
82
Financial income
4,885
0.2
6,629
0.3
1,744
136
Financial expenses
1,525
0.0
1,285
0.1
(240)
84
Share of profit of investments accounted for using the
equity method9,987
0.5
10,007
0.5
20
100
Income before income taxes
166,172
7.9
141,291
6.5
(24,881)
85
Income tax expenses
39,386
1.9
33,259
1.5
(6,127)
84
Net income
126,786
6.0
108,032
5.0
(18,754)
85
Net income attributable to:
Mitsubishi Electric Corp.
stockholders120,972
5.7
102,328
4.7
(18,644)
85
Non-controlling interests
5,814
0.3
5,704
0.3
(110)
98
(Condensed Quarterly Consolidated Statements of Comprehensive Income)
(In millions of yen)
FY '18
1st half (A)
(Apr. 1, 2017 -
Sept. 30, 2017)FY '19
1st half (B)
(Apr. 1, 2018 - Sept. 30, 2018)
B - A
Net income
126,786
108,032
(18,754)
(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 income9,721
(8,429)
(18,150)
Share of other comprehensive income of investments accounted for using the equity method
597
238
(359)
Subtotal
10,318
(8,191)
(18,509)
Items that may be reclassified to net income
Exchange differences on translating foreign operations
31,559
9,386
(22,173)
Net changes in the fair value of cash flow hedges
5
92
87
Share of other comprehensive income of investments accounted for using the equity method
(185)
(1,763)
(1,578)
Subtotal
31,379
7,715
(23,664)
Total other comprehensive income (loss)
41,697
(476)
(42,173)
Comprehensive income
168,483
107,556
(60,927)
Comprehensive income attributable to:
Mitsubishi Electric Corp. stockholders
160,695
100,934
(59,761)
Non-controlling interests
7,788
6,622
(1,166)
Condensed Quarterly Consolidated Statements of Profit or Loss and Condensed Quarterly Consolidated Statements of Comprehensive Income (Second Quarter, Fiscal 2019)
(Condensed Quarterly Consolidated Statements of Profit or Loss)
(In millions of yen)
FY '18 Q2
(Jul. 1, 2017 -
Sept. 30, 2017)
FY '19 Q2
(Jul. 1, 2018 -
Sept. 30, 2018)
(A)
% of total
(B)
% of total
B - A
B/A
(%)
Net sales
1,077,831
100.0
1,119,124
100.0
41,293
104
Cost of sales
745,594
69.2
789,122
70.5
43,528
106
Selling, general and
administrative expenses
254,403
23.6
264,159
23.6
9,756
104
Other profit (loss)
(502)
(0.0)
(1,492)
(0.1)
(990)
－
Operating income
77,332
7.2
64,351
5.8
(12,981)
83
Financial income
1,467
0.2
1,871
0.2
404
128
Financial expenses
762
0.1
675
0.1
(87)
89
Share of profit of investments accounted for using the
equity method7,689
0.7
7,014
0.6
(675)
91
Income before income taxes
85,726
8.0
72,561
6.5
(13,165)
85
Income tax expenses
18,150
1.7
14,536
1.3
(3,614)
80
Net income
67,576
6.3
58,025
5.2
(9,551)
86
Net income attributable to:
Mitsubishi Electric Corp.
stockholders63,987
5.9
54,750
4.9
(9,237)
86
Non-controlling interests
3,589
0.4
3,275
0.3
(314)
91
(Condensed Quarterly Consolidated Statements of Comprehensive Income)
(In millions of yen)
FY '18 Q2 (A)
(Jul. 1, 2017 -
Sept. 30, 2017)
FY '19 Q2 (B)
(Jul. 1, 2018 -
Sept. 30, 2018)
B - A
Net income
67,576
58,025
(9,551)
(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 income18,855
(15,817)
(34,672)
Share of other comprehensive income of investments accounted for using the equity method
310
107
(203)
Subtotal
19,165
(15,710)
(34,875)
Items that may be reclassified to net income
Exchange differences on translating foreign operations
19,019
18,538
(481)
Net changes in the fair value of cash flow hedges
2
110
108
Share of other comprehensive income of investments accounted for using the equity method
672
81
(591)
Subtotal
19,693
18,729
(964)
Total other comprehensive income
38,858
3,019
(35,839)
Comprehensive income
106,434
61,044
(45,390)
Comprehensive income attributable to:
Mitsubishi Electric Corp. stockholders
101,168
56,204
(44,964)
Non-controlling interests
5,266
4,840
(426)
Condensed Quarterly Consolidated Statements of Financial Position
(In millions of yen)
FY '18 (A)
(ended Mar. 31, 2018)
FY ' 19
1st half (B)
(ended Sept. 30, 2018)
B - A
(Assets)
Current assets
2,582,735
2,528,623
(54,112)
Cash and cash equivalents
599,199
580,690
(18,509)
Trade receivables and Contract Assets
1,191,529
1,075,231
(116,298)
Inventories
646,262
727,462
81,200
Other current assets
145,745
145,240
(505)
Non-current assets
1,722,845
1,734,194
11,349
Investments accounted for using the equity method
194,308
191,008
(3,300)
Other financial assets
363,171
348,309
(14,862)
Net property, plant and equipment
724,257
746,544
22,287
Other non-current assets
441,109
448,333
7,224
Total assets
4,305,580
4,262,817
(42,763)
(Liabilities)
Current liabilities
1,488,249
1,418,025
(70,224)
Bonds and borrowings
122,895
143,825
20,930
Trade payables
579,566
533,365
(46,201)
Other current liabilities
785,788
740,835
(44,953)
Non-current liabilities
420,112
394,728
(25,384)
Bonds and borrowings
189,055
159,083
(29,972)
Net defined benefit liabilities
171,520
176,866
5,346
Other non-current liabilities
59,537
58,779
(758)
Total liabilities
1,908,361
1,812,753
(95,608)
(Equity)
Mitsubishi Electric Corp. stockholders' equity
2,294,174
2,341,291
47,117
Common stock
175,820
175,820
－
Capital surplus
199,442
202,495
3,053
Retained earnings
1,811,348
1,857,619
46,271
Accumulated other comprehensive income (loss)
109,492
108,339
(1,153)
Treasury stock at cost
(1,928)
(2,982)
(1,054)
Non-controlling interests
103,045
108,773
5,728
Total equity
2,397,219
2,450,064
52,845
Total liabilities and equity
4,305,580
4,262,817
(42,763)
Balance of Debt
311,950
302,908
(9,042)
Accumulated other comprehensive income (loss):
Exchange differences on translating foreign operations
17,549
24,313
6,764
Remeasurements of defined benefit pension plans
－
－
－
Financial assets measured at fair value through other comprehensive income
91,952
83,968
(7,984)
Net changes in the fair value of cash flow hedges
(9)
58
67
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
120,972
120,972
5,814
126,786
Other comprehensive income (loss)
39,723
39,723
1,974
41,697
Comprehensive income
－
－
120,972
39,723
－
160,695
7,788
168,483
Transfer to retained earnings
7,638
(7,638)
－
－
Dividends paid
(38,642)
(38,642)
(5,326)
(43,968)
Purchase of treasury stock
(698)
(698)
(698)
Reissuance of treasury stock
0
0
0
0
Transactions with non-controlling interests, etc.
4
4
(65)
(61)
Balance at Sep. 30, 2017
175,820
198,749
1,683,628
133,251
(1,926)
2,189,522
101,197
2,290,719
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
102,328
102,328
5,704
108,032
Other comprehensive income (loss)
(1,394)
(1,394)
918
(476)
Comprehensive income
－
－
102,328
(1,394)
－
100,934
6,622
107,556
Transfer to retained earnings
(241)
241
－
－
Dividends paid
(55,816)
(55,816)
(4,571)
(60,387)
Purchase of treasury stock
(1,054)
(1,054)
(1,054)
Reissuance of treasury stock
0
0
0
0
Transactions with non-controlling interests, etc.
3,053
3,053
3,677
6,730
Balance at Sep. 30, 2018
175,820
202,495
1,857,619
108,339
(2,982)
2,341,291
108,773
2,450,064
Condensed Quarterly Consolidated Statements of Cash Flows
(In millions of yen)
FY '18 1st half
(Apr. 1, 2017 - Sept. 30, 2017)
(A)
FY '19 1st half
(Apr. 1, 2018 - Sept. 30, 2018)
(B)
B - A
I
Cash flows from operating activities
1
Net income
126,786
108,032
(18,754)
2
Adjustments to reconcile net income to net cash provided by operating activities
(1) Depreciation, amortization and other
81,508
81,407
(101)
(2) Decrease in trade receivables and contract assets
122,083
126,701
4,618
(3) Decrease (increase) in inventories
(54,678)
(70,970)
(16,292)
(4) Increase (decrease) in trade payables
(100,984)
(49,041)
51,943
(5) Other, net
(48,452)
(51,828)
(3,376)
Cash flows from operating activities
126,263
144,301
18,038
II
Cash flows from investing activities
1
Purchase of property, plant and equipment
(88,562)
(88,211)
351
2
Proceeds from sale of property, plant and equipment
1,351
1,502
151
3
Purchase of short-term investments and investment securities (net of cash acquired)
(3,915)
(7,874)
(3,959)
4
Proceeds from sale of short-term investments and investment securities
28,302
3,484
(24,818)
5
Other, net
(6,634)
(7,626)
(992)
Cash flows from investing activities
(69,458)
(98,725)
(29,267)
I + II
Free cash flow
56,805
45,576
(11,229)
III
Cash flows from financing activities
1
Proceeds from long-term debt and repayment of long-term debt
(14,374)
(14,551)
(177)
2
Increase (decrease) in bank loans, net
(20,537)
872
21,409
3
Dividends paid
(38,642)
(55,816)
(17,174)
4
Purchase of treasury stock
(698)
(1,054)
(356)
5
Reissuance of treasury stock
0
0
0
6
Other, net
(6,733)
1,676
8,409
Cash flows from financing activities
(80,984)
(68,873)
12,111
IV
Effect of exchange rate changes on cash and cash equivalents
8,522
4,788
(3,734)
V
Net increase (decrease) in cash and cash equivalents
(15,657)
(18,509)
(2,852)
VI
Cash and cash equivalents at beginning of period
662,469
599,199
(63,270)
VII
Cash and cash equivalents at end of period
646,812
580,690
(66,122)
Consolidated Segment Information (First Half, Fiscal 2019)
1. Sales and Operating Income by Business Segment
(In millions of yen)
Business Segment
FY '18 1st half
(Apr. 1, 2017 -
Sept. 30, 2017)
FY '19 1st half
(Apr. 1, 2018 -
Sept. 30, 2018)
C - A
D - B
C/A
(%)
Sales (A)
Operating income (B)
Sales
(C)Operating income (D)
Energy and Electric Systems
557,134
10,660
568,642
15,564
11,508
4,904
102
Industrial Automation Systems
703,716
96,315
730,350
77,979
26,634
(18,336)
104
Information and
Communication Systems
191,216
3,250
186,867
2,502
(4,349)
(748)
98
Electronic Devices
99,532
7,234
101,896
1,269
2,364
(5,965)
102
Home Appliances
539,250
39,446
557,120
33,665
17,870
(5,781)
103
Others
310,781
9,660
327,831
10,343
17,050
683
105
Subtotal
2,401,629
166,565
2,472,706
141,322
71,077
(25,243)
103
Eliminations and other
(289,862)
(13,740)
(302,600)
(15,382)
(12,738)
(1,642)
－
Consolidated Total
2,111,767
152,825
2,170,106
125,940
58,339
(26,885)
103
*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 1st half
(Apr. 1, 2017 -
Sept. 30, 2017)
FY '19 1st half
(Apr. 1, 2018 -
Sept. 30, 2018)
B - A
B/A (%)
Sales (A)
% of total net sales
Sales (B)
% of total net sales
Japan
1,110,504
52.6
1,168,802
53.9
58,298
105
North America
209,811
9.9
209,854
9.7
43
100
Asia (excluding Japan)
548,040
26.0
528,321
24.3
(19,719)
96
China
273,835
13.0
265,287
12.2
(8,548)
97
Europe
214,323
10.1
233,125
10.7
18,802
109
Others
29,089
1.4
30,004
1.4
915
103
Total overseas sales
1,001,263
47.4
1,001,304
46.1
41
100
Consolidated total
2,111,767
100.0
2,170,106
100.0
58,339
103
Consolidated Segment Information (Second Quarter, Fiscal 2019)
1. Sales and Operating Income by Business Segment
(In millions of yen)
Business Segment
FY '18 Q2
(Jul. 1, 2017 -
Sept. 30, 2017)
FY '19 Q2
(Jul. 1, 2018 -
Sept. 30, 2018)
C - A
D - B
C/A
(%)
Sales (A)
Operating income (B)
Sales
(C)Operating income (loss) (D)
Energy and Electric Systems
288,590
3,948
301,245
9,586
12,655
5,638
104
Industrial Automation Systems
352,899
45,569
369,351
33,106
16,452
(12,463)
105
Information and
Communication Systems
101,170
5,033
107,085
4,342
5,915
(691)
106
Electronic Devices
51,410
4,178
50,434
(217)
(976)
(4,395)
98
Home Appliances
269,358
15,258
276,786
13,609
7,428
(1,649)
103
Others
165,877
7,647
172,174
9,183
6,297
1,536
104
Subtotal
1,229,304
81,633
1,277,075
69,609
47,771
(12,024)
104
Eliminations and other
(151,473)
(4,301)
(157,951)
(5,258)
(6,478)
(957)
－
Consolidated Total
1,077,831
77,332
1,119,124
64,351
41,293
(12,981)
104
*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 Q2
(Jul. 1, 2017 -
Sept. 30, 2017)
FY '19 Q2
(Jul. 1, 2018 -
Sept. 30, 2018)
B - A
B/A (%)
Sales (A)
% of total net sales
Sales (B)
% of total net sales
Japan
583,032
54.1
627,368
56.1
44,336
108
North America
103,330
9.6
106,756
9.5
3,426
103
Asia (excluding Japan)
273,614
25.4
258,046
23.0
(15,568)
94
China
133,445
12.4
125,104
11.2
(8,341)
94
Europe
102,259
9.5
111,488
10.0
9,229
109
Others
15,596
1.4
15,466
1.4
(130)
99
Total overseas sales
494,799
45.9
491,756
43.9
(3,043)
99
Consolidated total
1,077,831
100.0
1,119,124
100.0
41,293
104
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 (losses) 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 Second Quarter of the Previous Fiscal Year
(September 30, 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
2,486,482
2,838
(14,798)
2,474,522
Current assets
Cash and cash equivalents
646,812
－
－
646,812
Cash and cash equivalents
Trade receivables
915,510
16,874
113,789
1,046,173
Trade receivables and contract assets
Inventories
742,105
－
(114,477)
627,628
Inventories
Prepaid expenses and other current assets
182,055
(14,036)
(14,110)
153,909
Other current assets
－
(2,838)
64,217
1,729,406
Non-current assets
Long-term trade receivables
2,920
(2,920)
－
－
Investments
614,786
(614,786)
－
－
－
175,075
5,269
180,344
Investments accounted for using the equity method
－
350,237
27,760
377,997
Other financial assets
Net property, plant and equipment
755,261
－
(32,420)
722,841
Net property, plant and equipment
Other assets
295,060
89,556
63,608
448,224
Other non-current assets
Total assets
4,154,509
－
49,419
4,203,928
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
1,405,615
7,599
8,065
1,421,279
Current liabilities
Bank loans and current portion of long-term debt
121,647
－
5,018
126,665
Bonds and borrowings
Trade payables
661,741
(124,109)
－
537,632
Trade payables
Other current liabilities
622,227
131,708
3,047
756,982
Other current liabilities
－
(7,599)
23,987
491,930
Non-current liabilities
Long-term debt
216,945
－
－
216,945
Bonds and borrowings
Retirement and severance benefits
182,432
－
24,992
207,424
Net defined benefit liabilities
Other fixed liabilities
76,165
(7,599)
(1,005)
67,561
Other non-current liabilities
Total liabilities
1,881,157
－
32,052
1,913,209
Total liabilities
(Equity)
(Equity)
Mitsubishi Electric Corp. shareholders' equity
2,170,547
－
18,975
2,189,522
Mitsubishi Electric Corp. stockholders' equity
Common stock
175,820
－
－
175,820
Common stock
Capital surplus
212,534
－
(13,785)
198,749
Capital surplus
Retained earnings
1,747,050
－
(63,422)
1,683,628
Retained earnings
Accumulated other comprehensive income (loss)
37,069
－
96,182
133,251
Accumulated other comprehensive income (loss)
Treasury stock at cost
(1,926)
－
－
(1,926)
Treasury stock at cost
Noncontrolling interests
102,805
－
(1,608)
101,197
Non-controlling interests
Total equity
2,273,352
－
17,367
2,290,719
Total equity
Total liabilities and equity
4,154,509
－
49,419
4,203,928
Total liabilities and equity
Balance of Debt
338,592
－
5,018
343,610
Balance of Debt
Accumulated other comprehensive income (loss):
Accumulated other comprehensive income (loss):
Foreign currency translation adjustments
43,223
－
(13,747)
29,476
Exchange differences on translating foreign operations
Pension liability adjustments
(139,120)
－
139,120
－
Remeasurements of defined benefit pension plans
Unrealized gains on securities
132,981
－
(29,247)
103,734
Financial assets measured at fair value through other comprehensive income
Unrealized gains (losses) on derivative instruments
(15)
－
56
41
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 corporate pension plans, defined benefit obligation on lump-sum payment plans and plan assets 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 Half of the Previous Fiscal Year (from April 1, 2017 to September 30, 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
2,076,342
－
35,425
2,111,767
Net sales
Cost of sales
1,412,241
(124)
50,442
1,462,559
Cost of sales
Selling, general and administrative expenses
513,273
482
(17,742)
496,013
Selling, general and administrative expenses
Loss on impairment of long-lived assets
1,532
(1,532)
－
－
－
(387)
17
(370)
Other profit (loss)
Operating income
149,296
787
2,742
152,825
Operating income
Other income
41,701
－
－
－
Interest and Dividends
4,885
21,289
(21,289)
4,885
Financial income
Equity in earnings of affiliated companies
9,967
(9,967)
－
－
Other
26,849
(26,849)
－
－
Other expenses
5,754
－
－
－
Interest
1,439
19
67
1,525
Financial expenses
Other
4,315
(4,315)
－
－
－
9,967
20
9,987
Share of profit of investments accounted for using the equity method
Income before income taxes
185,243
(477)
(18,594)
166,172
Income before income taxes
Income taxes
48,529
(477)
(8,666)
39,386
Income tax expenses
Net income
136,714
－
(9,928)
126,786
Net income
Net income attributable to:
Net income attributable to the noncontrolling interests
5,590
－
224
5,814
Non-controlling interests
Net income attributable to Mitsubishi Electric Corp.
131,124
－
(10,152)
120,972
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
136,714
－
(9,928)
126,786
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
(3,296)
(597)
13,614
9,721
Financial assets measured at fair value through other comprehensive income
Pension liability adjustments
17,869
(342)
(17,527)
－
Remeasurements of defined benefit pension plans
－
939
(342)
597
Share of other comprehensive income of investments accounted for using the equity method
－
－
(4,255)
10,318
Subtotal
Items that may be reclassified to net income
Foreign currency translation adjustments
26,665
128
4,766
31,559
Exchange differences on translating foreign operations
Unrealized gains (losses) on derivative instruments
(82)
14
73
5
Net changes in the fair value of cash flow hedges
－
(142)
(43)
(185)
Share of other comprehensive income of investments accounted for using the equity method
－
－
4,796
31,379
Subtotal
Total
41,156
－
541
41,697
Total other comprehensive income
Comprehensive income
177,870
－
(9,387)
168,483
Comprehensive income
Comprehensive income attributable to:
Comprehensive income attributable to
the noncontrolling interests7,625
－
163
7,788
Non-controlling interests
Comprehensive income attributable to
Mitsubishi Electric Corp.170,245
－
(9,550)
160,695
Mitsubishi Electric Corp. stockholders
Reconciliation of Profit or Loss and Comprehensive Income for the Second Quarter of the Previous Fiscal Year (from July 1, 2017 to September 30, 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
1,070,743
－
7,088
1,077,831
Net sales
Cost of sales
731,009
(85)
14,670
745,594
Cost of sales
Selling, general and administrative expenses
263,152
21
(8,770)
254,403
Selling, general and administrative expenses
Loss on impairment of long-lived assets
1,532
(1,532)
－
－
－
(530)
28
(502)
Other profit (loss)
Operating income
75,050
1,066
1,216
77,332
Operating income
Other income
13,387
－
－
－
Interest and Dividends
1,298
1,532
(1,363)
1,467
Financial income
Equity in earnings of affiliated companies
7,562
(7,562)
－
－
Other
4,527
(4,527)
－
－
Other expenses
2,442
－
－
－
Interest
762
(4)
4
762
Financial expenses
Other
1,680
(1,680)
－
－
－
7,562
127
7,689
Share of profit of investments accounted for using the equity method
Income before income taxes
85,995
(245)
(24)
85,726
Income before income taxes
Income taxes
19,288
(245)
(893)
18,150
Income tax expenses
Net income
66,707
－
869
67,576
Net income
Net income attributable to:
Net income attributable to the noncontrolling interests
3,327
－
262
3,589
Non-controlling interests
Net income attributable to Mitsubishi Electric Corp.
63,380
－
607
63,987
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
66,707
－
869
67,576
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
18,342
(310)
823
18,855
Financial assets measured at fair value through other comprehensive income
Pension liability adjustments
5,392
(163)
(5,229)
－
Remeasurements of defined benefit pension plans
－
473
(163)
310
Share of other comprehensive income of investments accounted for using the equity method
－
－
(4,569)
19,165
Subtotal
Items that may be reclassified to net income
Foreign currency translation adjustments
21,945
(727)
(2,199)
19,019
Exchange differences on translating foreign operations
Unrealized gains (losses) on derivative instruments
(19)
11
10
2
Net changes in the fair value of cash flow hedges
－
716
(44)
672
Share of other comprehensive income of investments accounted for using the equity method
－
－
(2,233)
19,693
Subtotal
Total
45,660
－
(6,802)
38,858
Total other comprehensive income
Comprehensive income
112,367
－
(5,933)
106,434
Comprehensive income
Comprehensive income attributable to:
Comprehensive income attributable to
the noncontrolling interests5,113
－
153
5,266
Non-controlling interests
Comprehensive income attributable to
Mitsubishi Electric Corp.107,254
－
(6,086)
101,168
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
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