Kawasaki Heavy Industries Ltd. · TSE:7012

Kawasaki Heavy Industries — Kawasaki Heavy Industrial — Q2 2022 Earnings Presentation

44 slides from Kawasaki Heavy Industries's earnings presentation, Nov 11, 2022

1. Slide 1: Financial Results for Second Quarter FY2022

   Financial Results for Second Quarter FY2022 For the Year ending March 31, 2023 0 November 10, 2022 © Kawasaki Heavy Industries, Ltd. All Rights Reserved

2. Slide 2: Table of Contents

   0 Table of Contents 1 Consolidated Results for 3 Details by segment Second Quarter FY2022 Summary 3 Aerospace Systems 15 Segment 4 Rolling Stock 19 Statement of Comprehensive income 5 Energy Solution & Marine Engineering 23 Details of Change in business profit 7 Precision Machinery & Robot 27 Statem

3. Slide 3: Consolidated Results for Second Quarter FY2022 - Summary

   Consolidated Results for Second Quarter FY2022 1 –Summary- Revenue and profits grew significantly compared to FY’22 Q1 and FY’21 Q2 Successful price pass-through of rising costs contributed to better results than planned 【Appendix】FY21 Q2 Results under JGAAP (Billion Yen) (Billion Yen) FY22 Q2 YoY F

4. Slide 4: Consolidated Results - Segment

   Consolidated Results for Second Quarter FY2022 1 –Segment- Profits improved in Energy Solution & Marine Engineering due to a reaction to loss provisions in Chinese shipbuilding joint ventures in the same period last year ① Revenue and profits increased in Motorcycle & Engine due to strong outdoor le

5. Slide 5: Statement of comprehensive income

   Consolidated Results for Second Quarter FY2022 1 –Statement of comprehensive income- (Billion Yen) Details FY21 Q2 FY22 Q2 Change % % ① Improved due to increasing sales amount, Revenue 681.0 100.0 759.7 100.0 + 78.7 price pass-through, and Cost of sales 1 depreciation of the yen, 563.1 82.7 619.6 81

6. Slide 6: Statement of comprehensive income (continued)

   Consolidated Results for Second Quarter FY2022 1 –Statement of comprehensive income- (Billion Yen) Details FY21 Q2 FY22 Q2 Change % % ⑤ USD/JPY rate 122.41 Mar. 31,’22 Finance income and Finance costs - 2.8 5.1 + 7.9 144.81 Sep. 30,’22 Net Interest expense (incl. dividend income) - 1.1 - 1.2 - 0.1 G

7. Slide 7: Details of change in business profit

   Consolidated Results for Second Quarter FY2022 1 –Details of change in business profit- The depreciation of the yen and cost reduction covered the rising raw material prices Revenue increase in Motorcycle & Engine also contributed to profits FY’21 Q2 + ¥13.1 billion yen FY’22 Q2 Business Business Pr

8. Slide 8: Details of change in business profit by segment

   Consolidated Results for Second Quarter FY2022 1 –Details of change in business profit- (Billion Yen) FY21 Q2 Details of change FY22 Q2 Business Change in Change in Business Effects of Change share of profit (loss) Change in Profit product mix and of investments SG & A Total Profit (Loss) FX rates※

9. Slide 9: Statement of financial position

   Consolidated Results for Second Quarter FY2022 1 –Statement of financial position- (Billion Yen) End of End of Change Details Mar. 2022 % Sep. 2022 % Cash and cash equivalents 108.5 83.0 - 25.4 ① Increase in Motorcycle and Engine, Rolling Stock, and Trade receivables (Incl. contract assets) 482.9 50

10. Slide 10: Statement of financial position (liabilities and equity)

    Consolidated Results for Second Quarter FY2022 1 –Statement of financial position- (Billion Yen) End of End of Change Details Mar. 2022 % Sep. 2022 % Trade payables 344.2 350.9 + 6.7 ③ Increase in borrowings as a 3 normal business cycle in Q1 Interest-bearing debt 553.9 667.0 + 113.1 Contract liabil

11. Slide 11: Cash Flows

    Consolidated Results for Second Quarter FY2022 1 –Cash Flows- (Billion Yen) FY21 Q2 FY22 Q2 Change Details Profit before tax 14.7 35.9 + 21.1 ① Q2 FY2021 Progress in receivable Depreciation and amortization 38.0 37.5 - 0.4 collection in Plant Engineering Increase and decrease in working capital - 99

12. Slide 12: Cash Flows trend

    Consolidated Results for Second Quarter FY2022 1 –Cash Flows- Operating CF is improving and approaching the level of FY2014 Q2 Working capital increased slightly from the same period last year, but the balance to profit before tax improved CF from operating acitivities CF from investing activities (

13. Slide 13: Forecasts for FY2022 - Summary

    Forecasts for FY2022 2 -Summary- Business profit forecast was revised up due to strong sales activity mainly in Motorcycle & Engine, and changes in FX assumptions Business profit is expected to increase in the second half of this year, although FX losses associated with FX forward contracts are expe

14. Slide 14: Forecasts for FY2022 - Segment

    Forecasts for FY2022 2 -Segment- Each segment enjoys the depreciation of the yen, and Motorcycle & Engine revised upward due to an increase in sales volume ① Energy Solution & Marine Engineering revised upward due to an increase in share of profit of investments accounted for using equity method ② (

15. Slide 15: Aerospace Systems

    3 Details by Segment -Aerospace systems- FY2022.Q2（vs. FY2021.Q2） FY2022 forecast（vs. Forecast in August） Orders Increased due to an increase for MOD Orders Revised up due to an increase for MOD and received and increase in component parts for received Boeing, and changes in FX assumptions commercia

16. Slide 16: Aerospace Systems results and forecast table

    3 Details by Segment -Aerospace systems- (Billion Yen) FY2021 FY2022 FY2021 FY2022 Forecast Q2 Actual Q2 Actual Change Actual Old FCST New FCST Chg. Vs. FY21 Chg. Vs. Old FCST Q3-4 FCST Orders Received 97.2 125.6 + 28.4 383.3 280.0 300.0 - 83.3 + 20.0 174.4 Aerospace 80.4 92.4 + 11.9 329.5 205.0 225

17. Slide 17: Aerospace Systems revenue and profit trend

    3 Details by Segment -Aerospace systems- Net Sales or Revenue (billion yen) 161.1 Aerospace Aero Engines 135.8 128.7 117.9 122.1 120.5 104.9 105.2 109.3 99.7 93.9 93.3 81.5 74.6 70.0 71.5 63.2 63.4 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q FY2018 FY2019 FY2020 FY2021 FY2022 （IFRS） （IFRS）

18. Slide 18: Aerospace Systems market overview and efforts

    3 Details by Segment -Aerospace systems- Market Overview Specific Efforts  Commercial business  Securing stable revenue in core business – Air passenger demand is recovering from – Cost reductions in existing orders of aircrafts for Boeing and commercial the great impact of COVID-19, with an aircr

19. Slide 19: Rolling Stock

    3 Details by Segment - Rolling Stock - FY2022.Q2（vs. FY2021.Q2） FY2022 forecast（vs. Forecast in August） Orders Increased due to major orders for Orders Revised up due to expected subway car received domestic new commuter trains and other received orders for New York City Transit +¥16.1 bil. projects

20. Slide 20: Rolling Stock results and forecast table

    3 Details by Segment - Rolling Stock - (Billion Yen) FY2021 FY2022 FY2021 FY2022 Forecast Q2 Actual Q2 Actual Change Actual Old FCST New FCST Chg. Vs. FY21 Chg. Vs. Old FCST Q3-4 FCST Orders Received 23.1 39.3 + 16.1 71.5 80.0 300.0 + 228.5 + 220.0 260.7 Domestic & Asia 18.9 31.7 + 12.7 65.1 74.5 56

21. Slide 21: Rolling Stock revenue and profit trend

    3 Details by Segment - Rolling Stock - Net Sales or Revenue (billion yen) Domestic & Asia North America 38.8 38.1 39.0 40.6 36.8 37.5 38.6 32.3 32.3 31.7 31.5 32.1 28.7 28.8 26.4 23.3 22.0 20.4 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q FY2018 FY2019 FY2020 FY2021 FY2022 （IFRS） （IFRS） 5.9

22. Slide 22: Rolling Stock market overview and efforts

    3 Details by Segment - Rolling Stock - Market Overview Specific Efforts  The impact of COVID-19  Compliance with delivery schedules for – Some domestic railway operators are overseas projects reviewing their railway related investment Dhaka ‣The first and second trains are undergoing functional te

23. Slide 23: Energy Solution & Marine Engineering

    3 Details by Segment - Energy Solution & Marine Engineering - FY2022.Q2（vs. FY2021.Q2） FY2022 forecast（vs. Forecast in August） Orders Increased due to an increase in orders for Orders Revised up due to an increase in LPG/LAG received LPG/LAG carriers, power generation facilities, received carriers a

24. Slide 24: Energy Solution & Marine Engineering results and forecast table

    3 Details by Segment - Energy Solution & Marine Engineering - (Billion Yen) FY2021 FY2022 FY2021 FY2022 Forecast Q2 Actual Q2 Actual Change Actual Old FCST New FCST Chg. Vs. FY21 Chg. Vs. Old FCST Q3-4 FCST Orders Received 164.2 238.4 + 74.1 343.5 360.0 390.0 + 46.5 + 30.0 151.6 Energy, Plant & 137.

25. Slide 25: Energy Solution & Marine Engineering revenue and profit trend

    3 Details by Segment - Energy Solution & Marine Engineering - Net Sales or Revenue (Note) The prior results of previous segment have been reclassified to current segment (billion yen) Energy, Plant & Marine Machinery Ship & Offshore Structure 100.1 103.8 99.3 95.5 88.2 82.5 73.0 70.5 72.2 70.5 72.8

26. Slide 26: Energy Solution & Marine Engineering market overview and efforts

    3 Details by Segment - Energy Solution & Marine Engineering - Market Overview Specific Efforts Providing of products and services for a  Energy system & Plant Engineering low-carbon and decarbonized society Domestic Emerging Markets Orders and Deliveries (Q2 FY’22) Steady demand for Steady demand f

27. Slide 27: Precision Machinery & Robot

    3 Details by Segment - Precision Machinery & Robot - FY2022.Q2（vs. FY2021.Q2） FY2022 forecast（vs. Forecast in August） Orders Increased due to an increase in hydraulic Orders Expected to remain at the same level received components, as the impact of the lockdown in received China eased, and various r

28. Slide 28: Precision Machinery & Robot results and forecast table

    3 Details by Segment - Precision Machinery & Robot - (Billion Yen) FY2021 FY2022 FY2021 FY2022 Forecast Q2 Actual Q2 Actual Change Actual Old FCST New FCST Chg. Vs. FY21 Chg. Vs. Old FCST Q3-4 FCST Orders Received 128.1 139.5 + 11.4 271.8 270.0 270.0 - 1.8 - 130.5 Hydraulic 78.4 80.7 + 2.3 171.6 160

29. Slide 29: Precision Machinery & Robot revenue and profit trend

    3 Details by Segment - Precision Machinery & Robot - Net Sales or Revenue (billion yen) Hydraulic Components & Systems Robotics 86.6 73.1 67.8 70.3 65.0 60.6 61.2 55.2 57.6 54.1 52.1 53.6 52.6 47.9 48.3 49.8 48.8 45.4 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q FY2018 FY2019 FY2020 FY2021

30. Slide 30: Precision Machinery & Robot market overview and efforts

    3 Details by Segment - Precision Machinery & Robot - Market Overview Specific Efforts  Construction machinery  Developing electrification and automation – China’s lockdown under the zero-COVID technology for construction machinery policy once depressed demand, but now – Development and supply of t

31. Slide 31: Motorcycle & Engine

    3 Details by Segment - Motorcycle & Engine - FY2022.Q2（vs. FY2021.Q2） FY2022 forecast（vs. Forecast in August） Increased due to an increase in motorcycles Revised up due to changes in FX assumptions Revenue for North America and Southeast Asia, four- Revenue and an increase in motorcycles for emergin

32. Slide 32: Motorcycle & Engine results and forecast table

    3 Details by Segment - Motorcycle & Engine - (Billion Yen) FY2021 FY2022 FY2021 FY2022 Forecast Q2 Actual Q2 Actual Change Actual Old FCST New FCST Chg. Vs. FY21 Chg. Vs. Old FCST Q3-4 FCST Revenue 206.7 265.1 + 58.4 447.9 520.0 550.0 + 102.1 + 30.0 284.9 Motorcycles for developed contries 78.6 90.0

33. Slide 33: Motorcycle & Engine revenue and profit trend

    3 Details by Segment - Motorcycle & Engine - Net Sales or Revenue (billion yen) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q FY2018 FY2019 FY2020 FY2021 FY2022 （IFRS） （IFRS） Operating Profit or Business Profit (billion yen) 13.1% 11.0% 10.6% 10.2% 10.9% 8.2% 8.8% 5.6% 4.5% 5.3% 0.9% 2.3% -

34. Slide 34: Motorcycle & Engine market overview and efforts

    3 Details by Segment - Motorcycle & Engine - Market Overview Specific Efforts  U.S.  Supplying products as much as demanded – Demand for off-road motorcycles and four- – All efforts to achieve production plans wheelers remains strong – Changing production and revenue plans promptly – Strong demand

35. Slide 35: Shareholder Return

    4 Shareholder Return Dividend Policy Dividend for FY2022  Profit attributable to owners of the parent was revised 30% The medium- to long-term upward by 16 billion yen from the initial forecast, on the consolidated dividend payout ratio back of good results in MC&E and the depreciation of the yen 

36. Slide 36: Project Topics: Four-wheeler business growth

    To increase production 4 The Lincoln plant in the U.S. Project Topics capacity in North America A new plant in Mexico will begin producing off-road four-wheelers in FY 2023, Four-wheeler business growth because the Lincoln plant, which produces all of the off-road four-wheelers  Investment to incre

37. Slide 37: Project Topics: Municipal incineration plant market

    4 Project Topics Booming domestic municipal incineration plant market  Plants built in the 1990s against dioxin are now 20 to 30 years old, and replacement demand are expected in the coming years Received Orders FCST Expected high 2017 2018 2019 2020 2021 2022 2023 2024 (Fiscal)  Recently, we awar

38. Slide 38: Project Topics: Helicopter business growth

    4 Project Topics Helicopter business growth - as a total solution provider  Delivered 188 popular BK117 series helicopters  Crew Resource Management training services using VR simulator Latest H145//BK117 D-3 model Applications Order backlog (units) Space-sharing technology unique to VR for Medica

39. Slide 39: Project Topics: New York City Transit R211 order

    4 Project Topics New York City Transit places order for 640 additional Subway Cars, known as R211  This order (Option1) will further expand our presence in the New York area  If Option2 is exercised, it will be the largest rail car deal in our history Of the 22,400※ vehicles in operation across th

40. Slide 40: Project Topics: Sustainable finance

    4 Project Topics 2021/7 Sustainability Bond Our first SDGs Bond issuance 2021/8 Positive Impact Finance Loan agreement with Sumitomo Mitsui Trust Bank, Limited Promotion of strategic Sustainable Finance 2022/3 Sustainability Linked Loan through the establishment of an advanced framework Loan agreeme

41. Slide 41: Appendix: CAPEX, Depreciation, R&D, Employees

    4 Appendix - CAPEX, Depreciation and Amortization, R&D Expenses, Number of employees - (Billion Yen, Persons) FY2021 FY2022 FY2021 FY2022 Q2 Actual Q2 Actual Change Actual Old FCST New FCST Chg. Vs. FY21 Chg. Vs. Old FCST CAPEX 34.9 41.9 + 6.9 77.6 100.0 90.0 + 12.4 - 10.0 Depreciation and amortizat

42. Slide 42: Appendix: Order backlog, revenue by region

    4 Appendix - Others -  Order Backlog （billion yen)  Order Backlog in Ship & Offshore (billion yen) FY21 Q2 FY22 Q2 Actual Actual Change Q2/E Q4/E 206.5 Aerospace Systems 494.8 619.0 + 124.1 191.6 Rolling Stock 408.9 368.9 - 39.9 162.7 Energy Solution & 101.6 Marine Engineering 507.6 611.0 + 103.4

43. Slide 43: Appendix: Foreign currency revenue and IFRS changes

    4 Appendix - Others -  Revenue in Foreign Currencies by Segment (USD) (Note)Major changes in the income statement associated with the adoption of IFRS (billion USD) JGAAP IFRS Net Sales Revenue FY2021 FY2022 Cost of sales Cost of sales Actual Actual Q3-4 FCST Gross profit Gross profit Aerospace Sys

44. Slide 44: © Kawasaki Heavy Industries, Ltd. All Rights Reserved

    © Kawasaki Heavy Industries, Ltd. All Rights Reserved

Kawasaki Heavy Industrial — Q2 2022 Earnings Presentation on 6ix