Ebara : Fiscal Year Ended December 31, 2023(Script)

EBARA Corporation

Results Presentation for FY2023 Ended December 31, 2023

February 14, 2024

Event Summary

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Yamada: My name is Yamada. Thank you for your attendance.

Osaki: Next is Masao Hodai, Executive Officer, and Chief Operating Officer of Precision Machinery Company.

Hodai: My name is Hodai. Thank you.

Osaki: Next is Shugo Hosoda, CFO and Executive Officer responsible for Investor Relations.

Hosoda: I am Hosoda. Thank you for your attendance.

Osaki: I, Osaki from Corporate Strategic Planning Division, will act as moderator. Thank you.

Today's schedule is as follows: CFO Hosoda will give an overview of the financial results, followed by a presentation of the forecast for FY2024 by President Asami. Afterwards, we will take questions from the participants. The meeting is scheduled to end at 7:00 PM.

Now, Hosoda will begin the explanation.

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Hosoda: Let me start with the consolidated financial results for the fiscal year ended December 2023. There are three main points.

First, I think we can say that the financial results for this fiscal year were generally good. In terms of the business and management environment, the semiconductor market was sluggish, the geopolitical situation remained uncertain, and business conditions were not necessarily favorable. Despite these circumstances, the Group's business performance was up YoY in all five segments, and the Group's business performance reached a new record high.

The second point is that although the Precision Machinery Segment has been the driving force behind our growth for the past few years, benefiting from the extraordinary growth of the semiconductor market, for FY2023 other segments, especially Building Service & Industrial and Energy, drove the growth in profit. We believe this shows the benefits of the Group's unique business portfolio.

Third, orders, revenue, and operating profit all exceeded our most recently disclosed forecast. Orders and revenue were slightly higher, but operating profit was particularly high. Some may call our forecasting capabilities into doubt, but the background to this is the transitory aspect of a positive event that could not have been anticipated in Q3. In addition, the profitability of each business segment improved more than expected as a result of the profitability improvement measures that we have been steadily implementing.

Regarding our forecast for FY2024, we plan to achieve a profit level higher than that of 2023, while continuing to make solid investments in growth and infrastructure for the future.

With respect to shareholder returns, our plan for FY2023 was initially an annual dividend of JPY195 per share linked to business performance based on the policy of a dividend payout ratio of 35% or more, however we have decided to raise the dividend to JPY229 per share.

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I will continue with the details.

Please see page five. These are the consolidated results for the full FY2023.

I will explain the YoY comparison.

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Orders were almost on par with the previous year, with a slight increase. Revenue increased by JPY78.4 billion to JPY759.3 billion, operating profit increased by JPY15.4 billion to JPY86 billion, and the operating profit ratio was 11.3%, 0.9 percentage points higher than last year. Profit attributable to owners of the parent company was JPY60.2 billion, reaching the JPY60 billion level for the first time.

The results were higher in all categories than our plan disclosed in November shown on the right side of the table in blue.

I will now compare each the YoY results of each segment. The left-hand side of the table shows the comparison with the previous year, while the right shows the comparison to the plan disclosed in November 2023.

In the Energy Segment, multiple large-scale orders in excess of JPY10 billion pushed orders up 50% from the previous year.

Both the Building Service & Industrial and Infrastructure Segments also increased over the previous year. Environmental Solutions remained mostly unchanged, but orders decreased significantly in the Precision Machinery Segment, affected by the sluggish semiconductor market.

Although there were favorable and unfavorable results among segments, overall consolidated revenue was slightly above last year's level.

Revenue was slightly lower in Environmental Solutions but increased in every other segment. Operating profit in all five segments improved from the previous year, especially Energy and Building Service & Industrial.

Next, regarding the difference from the FY23 plan figures released November 14 on the right-hand side, orders were higher at the end of the year than at the time of the Q3 announcement due to additional orders for relatively large after-sales projects in the Environmental Solutions Segment.

As for revenue, this time, Building Service & Industrial is up significantly. The upward swing is mainly due to higher-than-expected sales growth in the domestic and Chinese markets toward the end of the period.

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Operating profit was boosted by unexpected year-end sales of relatively high-marginafter-sales services in the Energy Segment, including emergency response services for customers, and by better-than-expected results from cost reductions and other measures to improve profitability in other segments.

The results of each of the various segments are up from the plans disclosed November 14, 2023.

Page seven, please.

Operating profit increased from JPY70.5 billion in FY2022 to JPY86 billion in FY2023, making for an increase of JPY15.4 billion.

In FY2023, fixed costs increased overall to JPY23.1 billion, including a significant increase in labor costs due to the impact of performance-linked bonuses and efforts to ensure we can acquire necessary human resources, as well as R&D expenses, which had a negative impact on profits.

However, profitability improved by JPY7.8 billion. There was a slight deterioration of profitability in the Precision Machinery Segment due to project mix and other factors, but there was steady improvement in all other segments, contributing to the increase.

Foreign exchange factors contributed JPY3.7 billion, with a slight contribution from the impact of the yen's depreciation. As a result of the above factors, we ended the year with operating profit at JPY86 billion.

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Page eight shows revenue composition by region.

The dark blue area of the pie chart on the right shows the composition of revenue outside of Japan. 64% of sales in FY2023 were overseas, a high level that has been increasing year by year.

In the bar graph on the left, the upper row shows FY2023 results, and the lower row shows the preceding fiscal year, FY2022. As you can see, the upper row indicates we have grown in all regions YoY.

By region, in China, although there was a slowdown in the construction market, customer investments remained firm in the industrial market, public infrastructure market, petrochemical, electric power, and semiconductor-related markets, and other markets our business faces, resulting in YoY sales growth.

Sales in North America and the Middle East were also strong, especially for the Energy Segment. Particularly in North America, in the Building and Industrial Segment, the increase from the consolidation of Hayward Gordon, a Canadian company acquired in Q3 of 2022, is contributing to inorganic sales growth.

Please also refer to page 35 for detailed information on regional trends by segment over time.

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We will now move on to the details of each segment's performance.

On page 10, we start with the Building Service & Industrial Segment. Orders, revenue, and operating profit all exceeded FY2022 results. In general, the building equipment market saw a slight slowdown overseas, while domestic capital investment remained strong. In China, although real estate markets conditions are sluggish, there is increased demand for energy-efficient products and increasing investment in public infrastructure, which spurred increased orders.

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