The time has come for us to begin the Mitsubishi Heavy Industries Limited [indiscernible] FY 2024 Financial Results briefing. My name is Takashi Inoue, Senior General Manager of the Investor Relations and Shareholder Relations Department. I will be your moderator today. Thank you for joining us. First, I would like to introduce today’s speakers, Hisato Kozawa, Member of the Board, Executive Vice President and CFO. Today, CFO, Kozawa will make a presentation on our first third quarter FY 2024 financial results, after which we’ll have Q&A session. This briefing is scheduled to end at 4

45 Japan Standard Time. We appreciate your cooperation during today’s event. Our presenters will use the Q1, Q2, Q3 FY 2024 financial results slide deck, which is available for download at the investors section of our website. Without further ado, allow me to move on to CFO Kozawa’s financial results presentation.

Allow me to provide an overview of our Q1 to 3 FY 2024 Financial Results using these presentation materials. Since the materials have been released in advance, I will omit a detailed explanation and focus on the key takeaways while providing some additional details. The materials are organized according to the table of content on Slide 2. First, I would like to provide an overview of the financial results. Please refer to Slide 4 and Slide 5. This slide shows the results in several key financial indicators and highlights of the results. Overall performance during Q3 was strong, which continued to trend from Q2. Order intake from last year from FY 2022 and 2023 has increased significantly; this year exceeded even those high levels. So the increase of the order intake last year was in Defense, which was the main driver of order growth in FY 2023. Order intake in GTCC, Aero Engines and Metals Machinery increased significantly, while Defense decreased. As we expect to book even more orders from now through the end of the fiscal year, we increased the full year forecast from JPY6 trillion to JPY6.4 trillion. Revenue increased in all segments and both business profit and net income increased year-on-year. Based on our year-to-date performance, we have revised our full year guidance for all major financial indicators. Moreover, order intake, revenue and nonprofit items saw record highs for a Q1 to 3 period. Slide 6 and beyond provide a little more detail on our financial results. Slide 7 includes information already provided, so I will forego an explanation. Slide 8 shows the balance sheet and cash flows. Total assets increased by JPY568.9 billion on the last year's end to JPY6,825.2 billion. Because the yen depreciated at the end of December 2024 compared to the -- at the end of March 2024, the impact of currency translation effects related to foreign currency-denominated assets served to increase assets by JPY90 billion. Excluding this impact, normalized total assets increased by JPY480 billion. Allow me to provide a breakdown of the increase in assets excluding foreign exchange effects. Trade receivables increased by around JPY150 billion, inventories by around JPY180 billion and cash and cash equivalents by around JPY100 billion. This kind of increase in trade receivables and inventories is typical for MHI, and we assess this is to be within the range of normal fluctuations considering that revenue is currently growing. Regarding cash flows, operating cash flow greatly improved partly due to an increase in profit as well as successful control of the year-on-year increase in operating capital. Considering the strong progress we have made versus the full year plan, we had increased our free cash flow forecast from negative JPY100 billion to zero. Slide 9 shows factors which caused year-on-year changes in business profit. The leftmost bar shows Q1 to Q3 FY 2023 business profit, which was JPY191.6 billion. Although there were some negative factors in Q1 to Q3 FY 2024, including the impact of rate increases, there were also many sizably positive factors. Revenue growth in many businesses, the effects of improved product mix and profit margins as well as the depreciation of the yen in terms of the Q1 to 3 average exchange rate served to increase business profit to JPY264.7 billion in Q1 to Q3 FY 2024. Moreover, this time, we have included a new item called losses from equity method SPC investments. This refers to a portion of onetime expenses booked during Q3 at two power plant operating companies, which are outlined on Slide 15. Allow me to provide some more details about the changes to one-time expenses. So this is as shown as positive JPY30 billion. During Q1 to Q3 FY 2023, we booked around JPY40 million in one-time expenses from the PW1100G engine program as well as some unexpected claims related to some international projects. There were no large losses through the first half of this fiscal year. But unfortunately, as we are forecasting additional expenses in some international projects, we booked around JPY10 billion losses in Q3. The difference between the rebound of JPY40 billion in expenses from the previous fiscal year and the JPY10 billion in losses booked this fiscal year resulted in the positive JPY30 billion shown on this year. So basically, is that during this year, we have a JPY20 billion buffer, but this JPY10 billion was used at this timing. Slide 10 shows the summary of order intake, revenue and business profit by segment. Over the next slides, I will explain the situation in each segment. Please note that due to the establishment of GX Solutions in April 2024, we have made some adjustments to our reporting segments. The Q1 to 3 FY 2023 figure shown here have been retroactively adjusted to reflect these changes. Slide 11 shows the situation in the Energy Systems segment. Order intake, revenue and profit all increased year-on-year, marking strong progress toward the full year guidance. In particular, strong order intake in GTCC continued due to booming demand in the gas turbine market. Considering the strong performance versus the plan made in each of the major businesses in this segment, we have increased our full year order intake, revenue and business profit forecast. Slide 12 shows the situation in the Plants & Infrastructure Systems segment. In the segment as well, order intake, revenue and profit all increased year-on-year, marking strong progress towards the full year guidance. The booking of large projects in Metals Machinery, Waste-to-Energy Systems and Machinery Systems contributed to a large year-on-year growth in order intake. In particular, order intake in Metals Machinery has outperformed initial projections. Based on the situation, we have increased this segment's full year order intake forecast by JPY100 billion, and the profit forecast by JPY10 billion. Slide 13 showed the situation in the Logistics, Thermal & Drive Systems segment, or LT&D. The segment total for order intake and revenue were slightly higher year-on-year. But when excluding foreign exchange effects, normalized revenue was down. Profit decreased in turbochargers due to the impact of production disruptions caused by issues at the supplier. Both revenue and profit were down in Logistics Systems due to a decline in units sold outside Japan. Slide 14 shows the situation in the Aircraft, Defense & Space segment. Although order intake decreased year-on-year due to the booking of several large Defense projects in Q1 to Q3 FY 2023, orders were still high compared to past levels, and performance was strong versus the full year forecast. Revenue exceeded our plan due to steady progress on the execution of our large order backlog. Profit continued to increase due to the impact of revenue growth as well as yen depreciation. Based on year-to-date performance, we have increased our full year revenue forecast by JPY50 billion and our profit forecast by JPY20 billion in this segment. Slide 15 outlines an important topic for Q3. This is regarding our Nakoso and Hirono Power Plant operating businesses, which we are working on as part of the Fukushima revitalization project. These two projects, in addition to building two power plants, we also had a 40% stake in the SPC special project companies have to operate the power plant. In Q3, we decided to acquire the equity stakes from two other companies in order to move forward with optimizations to plant operations. These plants are attempting to utilize the scaled up version of a new technology called Integrated coal Gasification Combined Cycle or IGCC. The plants have experienced several technical issues, but we recently completed a series of repair work and confirmed the efficacy of those improvements. We believe that by increasing MHI's involvement in the project overall, we will be able to further improve plant reliability. Slides 17 through 20 show the FY 2024 earnings forecast. At this time, we have revised our full year forecast in terms of order intake, revenue, business profit, net income and free cash flow. I have already explained the details of the revision, so please allow me to omit an explanation. This concludes my explanation. Thank you for your attention.

[Operator Instructions] Hi. First, from Nomuro Securities, Michael san, please.

Thank you very much for your presentation. I have two questions. Both are based on Page 20 in terms of your revision of your, outlook in terms of your, order intake and business profit. So energy, plant, and infrastructure, I think you have been able to increase your outlook in terms of the content contents of energy. I think, basically, it's focusing on gas turbine, and I would like to know how much, this has impact to your output revision. In terms of the difference in space, you haven't changed your, outlook. But, I think, basically, it seems to be the progress is going well. It means that against your initial plan, it may be a bit more bullish. So I would like to talk about the progress of the business advice in space. That's my first question.

Thank you. In terms of the, upward revision, in terms of the basis of this, as shown here, basically, in energy, this would be coming through gas turbines. And to follow-up, I thought that maybe it'll be even better. I think this is a conservative type of revision for this segment. In terms of the defense segment, the progress has been high, but going forward, there are some projects that will be coming up. In terms of the orders intakes, that, we have been getting, I think we'll be clear in in that. Will it be able to go up another hundred? I don't know about that. So that's the reason we didn't do, put revision. So in terms of the future contracts, so we don't know how this is going to turn out. In terms of the range, there is a possibility that, we may see some upward moves in this business. Thank you.

So let's just see a follow-up for the, nuclear power plants. Maybe I think the progress was good, but it you had a makeup revision. You're talking about ordered intake. Right?

Yes. Well, actually, last fiscal year, the nuclear power plant order intake was -- level was high. So year-over-year, maybe not as high as last year. But currently, against the full year outlook, and we do not think that it is exceeding that, by large margin.

Thank you. In terms of the revision of your business profit, so energy systems, you have made up with revision, and plants infrastructure systems, you have made the upward revision. Plants and infrastructure, I would like to talk about, ask about the background. Is it sustainability, any capacity, and space, and others? And I think with the others, it does include SPC. I would like to, ask about the background why you have made these revisions for each of the segments.

Well, let me start from backwards with others, as you have pointed out. So of the equity portion of SPC that, I think basically include included in corporate elimination. So there's a minus JPY20 billion that has been reflected. And for the, aircraft defense in space, here, the currency impact, the weaker yen, for the commercial aircraft, I think, basically, compared to what we have initially forecasted, it's more it has a more positive impact in terms of defense. In terms of revenue, it's sort that, we it would be better than initial outlook. Well, what we have been pushed up to revenue is the contracts that we have received from last year and onwards. Meaning, like, compared to the past, the margins are higher for these defense contracts. And the revenue has started to come in from these type of contracts, and that's another, reason. And to be frank, the previous announcement or the, forecast has been a bit conservative overall. So I think, basically, we have revised our outlook based on the situation. And plant and infrastructure system. For plants and infrastructure, it's not that something special is happening. However, every project and every product gradually has seen an improvement. So we are anticipating that we'll be able to see some upside. So that's the reason of our upward vision. And energy systems originally, we had a JPY20 billion buffer. We have talked about that. Out of which JPY10 billion, we have already used that. But we have JPY10 billion buffer in this segment. And, having said that, so the -- if you look at the progress of various projects gradually, we have been able to get, has seen a progress made to the projects, and I think that's the reason why we have seen a positive impact. That's all. Thank you.

So I would like to think, as a follow-up in the aircraft and defense in space, and you still have JPY20 billion. So I think in terms of the currency sensitivity, it's not multi less than JPY10 billion. So most of these upward provisions coming from defense business. Is that correct?

In terms of the sensitivity, yes, it's about maybe what you have mentioned in terms of numbers. So JPY20 billion would be larger. Maybe, the defense will have a larger portion. In terms of the space business, luckily so the other day, I think, the launch has -- we have been able to speed the launch of our products. So I think the space business, has been more positive than we have initially thought. That's another reason.

Understood. Thank you very much.

Thank you, Mr. Maekawa. Let us go on to the next person. The next person will be from Mizuho Securities, Mr. Ito.

This is Ito. My first…

Mr. Ito, your voice is very small and inaudible. Please raise your voice.

So I have a question about the gas turbines. Gas turbines. The units that -- orders and units [indiscernible] were large, and the Americas are large. What's the cause of that? Could you provide a little bit more color behind that? Recently, there's data center. Is it related to those new demand or is the demand related to demand that existed in the past? Could you speak about that? And recently, and the interest industry, GE, Chevron, they have a joint venture to do new movements in gas turbines. So through partnerships, could you achieve further growth in gas turbines? Is that an idea that you have? If possible, could you explain that? That would be -- that's all for myself.

So first, in the third quarter, the orders for gas turbines, the Americas had a lot of growth. But we are thinking about data center directly attached. Are those type of projects? Not necessarily. But basically, data centers are included, data center included. Power demand is going up very robustly. And in order to respond to that, there is a necessity for stable power supplies and gas turbines are being adopted. So, it's mostly through utilities with that is starting to come up. So, indirectly, data centers might be related to what is happening here, but it is not directly caused by data centers. But overall, it's not just the Americas, I believe, but power demand, Japan, the seventh power plant has come out, but the power demand is going up. And there needs to be necessary facilities, various entities are procuring the necessary facilities to respond to power demand. And new business models, new customer forms. There's some oil type. And I believe that it does exist. I'm not going to mention any specifics here. Will we have a strong partnership with someone? That might be difficult, but there are various conversations with various customers.

Thank you for that. The second question I have is about Nakoso and Hirono SPCs. Could you provide a little more color explanation about that? The major question I have in terms of profitability, is that going to worsen in the future? What sort of cases should we keep in mind? The plant operational ratios, if those go down, decline, the profitability could worsen in the future. Should we expect that in the future? And you have acquired equity. How much is the cash out implicate here? And third quarter, fourth quarter cash flow movement, we can guess it from the cash flow movement, but if possible, if you could specify that cash flow amount, that would be helpful.

So first, we acquired stake. We have a larger stake of equity to the acquisition. And to be honest, the SBC profitability, if we say we are sure of the profitability, it might be sent to us, but I am fairly confident. That's why we acquired the stake, the equity. And in the future, we will be improving the facilities. That's going to be part of what we do, and I think that it can further improve the margins of this business. So, on the SBC side, is there any margins that could have negative impact on our business? I don't think that's something we can expect in the near future. But if something unexpected happens and things do not move, of course, there is risk, but I don't think there are that many large risks in terms of loss. And in the previous, modification works, we have been able to improve quite a bit of the situation. But as I repeat, if there is something unexpected happen, to be extreme, regardless of whether we have a increased stake or not, there may be a sum of losses, but that is the situation I hope that I'm explaining. And about the cash out, sorry. Regarding the cash out, we cannot disclose specific numbers. So, please, understand, the reason that I'm be kind to answer that question.

Thank you. I understand. Lastly, in, energy business margins, could you provide a little bit more color just to confirm? You use about JPY10 billion buffer for the additional project cost. Is that in energy? And where -- what business does that really correspond to? And, GTCC, is becoming better in terms of margins. I think the entire industry is speaking about you have also been speaking about that. And in terms of that, perspective, in terms of revenue growth, in terms of better margins, if you just look at the third quarter, it doesn't look like it's been contributing. So what's the situation there? When you look just at energy, the margins should be coming better. But where does the JPY10 billion bill fall into? Could you explain that?

So the JPY10 billion buffer that we used, that corresponds to energy. And in terms of revenue, you said there's a lack of visibility. I think it's related to the, Slide 11, the waterfall chart. I think that's what you are alluding to. And in every quarter, we gradually make progress, and we also compare year-on-year against the previous year. So what sort of work happened in the previous fiscal year event can lead to some shift. So I don't have anything specific to mention, but overall, energy, gas turbines, and steam power to the base. Well, it takes some of the businesses, but I think we are making progress in terms of our improvements.

Thank you. I understand very well. That's all for myself.

Thank you, Mr. Ito. Next. Morgan Stanley MUFG Securities. Ibara san, please.

Hello. Ibara from Morgan Stanley. Can you hear me?

Yes. We can.

So my first question is about the Nakoso and Hirono situation. So my basic question is, so entity a, entity b, if you look at these stakes, this power generating business will become consolidated. Isn't that so? Isn't my understanding correct? So when you consolidate this business, which, segment is this going to be classified? And because I was saying you talked about this will be profitable. And, of course, you don't -- can't say the specific numbers. In terms of the contribution to the profitability, how much are you looking at this? That's my first question.

So we have been buying the other entity stake. So it used to be 40% of our stake. Right now, we have about 90% of stake, but this is not a joint equity. This is a kind of a joint company operation. So for the economic equity, we have 90%. So based on risk and return. But the company operation in itself, us and the other stakeholders are basically, if an we are on even footing. So I think this is basically a kind of a jointly controlled company. And for the, accounting, office -- company, we are discussing this will not be completely consolidated, and that is the reason why, we consider this as an equity company -- equity related company. So the plant was built under our energy systems segment, and we just -- this is an investment. So, basically, it'll be categorized as others. So, in terms of the people who's looking after this, directly report to us. And that is basically, what we are looking at. And as I have said, with this SPC business, going forward, we think -- I think, that they will stably generate cash. Not they won't because you're reading, tens of billions, and they will not have a major impact on the overall, business. But as an image, every year, maybe plus of this single digit level of billions yen of contribution will be coming from this business.

Thank you. The second question is about the GTCC order intake. My first question is a simple confirmation. The order intake, you have made upward revision. So I think it's the, record high for three years in a row. I want to confirm if that is true. And I think the order intake, increase has been quite large. Maybe, were you able to win over your competitors? Or maybe some prospects came up earlier than you have expected? Or maybe you were conservative about your outlook with this business. But at this timing, you have raised your outlook quite strongly. So I would like to ask about, the background. So maybe it's too early. If it's a kind of front loaded order intake that you have been able to see, do you for next fiscal year, we do -- are you expecting the order intake pipeline to be quite substantial? Are you expecting that? Well, you talked about a record high level. Is that is that for the GTCC order intake?

Yes. Yes. Order intake for the GTCC business. Well, I do not have the data right now. Well, according to my memory, quite a time ago, there was a quite a GTCC boom. And but maybe in terms of the volume, I think we had a had a higher level. Sorry. I do not have the right numbers. Or if, my colleague, would be able to find the numbers, I'll be answering you afterwards. But, if not, I would like to answer that in a separate occasion. So you said that the order intake numbers has been revised upwards. Rather than a special, unexpected [indiscernible] coming in, rather than that, there were some projects that we had that was waiting the pipeline. It was just a time ago when this is going to be materialized. So in the past, we saw more of a delay of the order intake. But, basically, I think right now you're seeing more order intakes coming in as planned. So that has been happening. But next fiscal year on onwards. At this point, I cannot mention, specifically. But as you know, as a market, the demand is quite high. So in terms of the inquiries, for the business negotiations, we have a lot of, in the pipeline. But in terms of the production capacity, we will have to consider how much, we can utilize the production capacity. So we'll, next year, we'll continue growth at this pace. Well, I cannot mention about next year numbers. Also, basically, that will be my response.

Understood. Thank you very much.

Thank you, Mr. Ibara. We will go on to the next person from SMBC Nikko, [indiscernible] You do not have a question. Are you okay? There may be some communication issues with this. Just go on to the next person from Jefferies Securities, mister Fukuhara. Mr. Fukuhara, can you hear us? There may be some communication issues. Mr. Fukuhara? Can you hear our side of the audio? If you can react in chat, maybe we can understand what the situation is. Excuse us. It seems that we have some poor transmission right now. Could you could you test the audio for a second? Could you turn on your mic and see if you can speak? He seems to have some communication problems. We are trying to fix the problem. We thank you for your kind patience. So, from Citigroup Securities, Graeme McDonald. Would you be able to speak? Are you able to hear us?

Hello. Can you hear me?

Yes. We can hear you. Thank you. Please, ask your question.

So this is again about gas turbines. And in terms of cash flow, Kozawa san mentioned that there was a negative JPY100 billion that's now going to be zero. So similar to last year compared to the initial outlook, it's going to go up and I mean, that's a positive. But the background, I think the gas turbines are performing very strong. And I believe the customers are providing quite a bit of endless payment, and I think that's improved the debt related to those contracts. Is that the right way to look at it? In the future, the cash flow situation, will that if there's strong gas turbine demand, how should we look at cash flow in the future? Well, that's my first question.

So can you hear me? So I think you pretty much gave the right answer. The uptick that we've seen, it's not just gas turbines, but order intake, went up significantly caused by gas turbines. And metal, metals, machinery had robust orders. So the advanced payments, there's the contract test, etcetera. That's going up. The best payments are going up, and that's led to the uptick in, the cash flow revision. So that's how you should understand it. Regarding gas turbines, originally, it's not good in terms of the payments that are made, but the recent market environments have led to strong capture of advanced payments, and that's something that has been very impactful for us. So for the time being, I believe this form will continue where the gas turbines will positively contribute. I believe that will continue to happen. But that said, it's still an just an advanced payment. At some point, we may need to kind of use that. So is it going to be more and more positive? I wouldn't say so. But compared to the past, the conditions are better, in terms of the initiatives that we are able to capture, and I think that's a plus. And I think it's going to be a little bit more positive in the future. So ultimately, the cash flow compared to the past, it's, point improvement.

That's a good thing. But in terms of the shareholder returns, there seems to be no change in the midterm plan KPI, DOE, 6% or higher, I think, 4% or higher. From your perspective, can we look forward to more dividends from your perspective, Mr. Kozawa?

Hello. So, it's an advanced payment. So quite a bit of it is money that we will need to use. And once it translates into profits, it's where we would make a move. That's our honest view in terms of shareholder returns. And in terms of dividends, DOE 4% plus is the base of the dividends. We haven't changed anything this time around, but when we close the financials, what's going to be the actual equity depending on that, we, would like to consider what we do. It's still not the right timing to make that decision. So as of the third quarter, we have not changed anything. That's the current situation.

Understood. And lastly, briefly, orders are very strong for gas turbines. In the future, how much speed do you need to would you need to increase the capacity? In the past explanation meeting, you said that headcount will need to increase by 10%, capacity. It may need to increase by about 30%. But if maybe you need to, increase your CapEx even more. The demand needs to be very strong, especially in North America. The President, it's very difficult to read his feelings, tariff risk, especially for gas turbines. How should we look at the tariff risk for gas turbines?

So in terms of capacity, 30% increase. We've been speaking about that in the past, but currently, originally, we had a certain amount of size. And in the Americas, we also have a plant that has a certain amount of capacity. So based on that, compared to the past, we need to have a really big increase that wouldn't say so. And based on our past experience, yes, turbines, if we just increase capacity more and more, there can be a rebound from that. So we need to want to do it in a very planned manner with discipline. And if we need more capacity, we may want to first improve the rotation of the capacity. That's how we'd use our resources. And in terms of tariffs, we don't know what will happen there. But in the current state, for the America's market, we actually have been able to build a supply chain inside the America. Of course, there are some things parts that we need to take in from Japan. But in terms of the overall order intake cost, it's not that large. It's not a large ratio of the overall amounts. I will not say no impact, but it's controllable or it can be pass-through in terms of cost nets [indiscernibel] believe.

Thank you.

McDonald, thank you very much. Next, I would like to turn back to SMBC Nikko Securities, Mr. Taninaka. Taninaka san, please.

So, this is Taninaka, SMBC Nikko Securities.

Yes. We hear you.

So, Nakoso, Hirono situation. Sorry. I don't know much, but this JPY20 billion, we took losses, is it a one off losses? Or what is the reason? Or it's just the utilization was not? If due to the utilization, so, you said that, this will bring in cash, and it will be able to, conduct stable profitability. So it doesn't match that story. So you're getting losses from the if you're losing losses on the, utilization, can you really go back to, this business they're in profit next fiscal year?

So this is a loss of basically, because of the SPC in itself, to be frank. The SPC has, basically, that hasn't gone through the cost, been able to take care of the cost. So we are going to take the lead. So well, we are going to have processed all that cost. So in that sense, all of that losses that has been accumulated has been, taken care of, at one go. And I think, that's the reason why we think it's a onetime loss. So it worries about the future in terms of the what we are anticipating. And in terms -- if they'll be able to maintain utilization rate that we are anticipating, I think, basically, they'll be able to generate profit based on our estimations.

Thank you. Another question is this is with the additional cost. With the international project, you said that, you can't use the JPY10 billion buffer due to the losses coming from the international project. So going forward, is there a risk that some additional costs will be incurred for these projects?

That's a difficult question. The project is still ongoing. So currently, any, anticipated losses. I think, basically, we have already reflected that already. But, unfortunately, if there are further losses, there is a possibility there, or the risk will not be zero. But I think we have more or less taken care of the losses coming out from this project. I hope that there were no further losses that's going to be incurred. But to be frank, I do not think that the possibility is zero.

Understood. Thank you very much. That's all from me.

Thank you, Mr. Taninaka. Let us go on to the next person from Daiwa Securities, Tai san.

Sorry. It's an extension of the previous question. SPC JPY20 billion. Next fiscal year, that's going to go away. Is that what we should assume?

Yes. Please, understand it that way. I, believe so.

I understand. And in that case, this fiscal year and next fiscal year, when compared, that JPY20 billion is going to be an uplift. And whether you actually use a volatile buffer and you've already used JPY10 billion buffer. Will you use that again? Maybe those are the differences between this year and next year.

Yes. And in that sense, between this year, well, I don't know whether I should be speaking about the outlook for next fiscal year, but in terms of next year compared to this year, I believe asset, real estate, sales, profits, is going to be quite a bit in terms of the overall year at the very end of the year, and I think that might be decreasing in the next year.

So that's going to be the other, the JPY50 billion is going to become smaller.

Yes. Yes.

Understood. And one more theme, it's a different topic, but, in terms of [indiscernible], there were some reports in the end of the year. It wasn't a release from [MHR] (ph). It's just a release, so it may be difficult for you to comment. Do you have any updates in terms of, which is next?

At the current point in time, I unfortunately have nothing I can comment on that topic.

In terms of speed velocity, the new team, would there be any decision by that point in time? How would that happen?

Well, it's just also, depends on another entity, but whether it's moving or not moving, I don't understand. So it's very difficult for me to respond. However, personally, this kind of deal notwithstanding, but if we can make decisions, I think, it's generally better to make quicker decisions as a general principle of business management. That's what I did believe day to day. And lastly, gas turbines, as, we heard previously, it's also related to capacity. At the end of December, energy, the order intake we made, I think it's about JPY5 trillion, close to JPY5 trillion, [indiscernible] It's inclusive of everything, air engine, singular power, but yearly revenue is about JPY1.8 trillion. So it's about 2.5 years’ worth of orders. So it's quite a bit of lead time.

The GTCC salespeople, how did -- what sort of conversations do we -- they do to get their jobs? It's going to be a project that's going to be three years in the future. That's how they try to get the contract. And the customers that come to buy something so far in the future is pretty incredible. And agreeing on the price, there's a lot of risks involved in agreeing on the price. So it seems quite abnormal from my perspective. And I was wondering how, MHI is responding to that sort of message. It's quite a bit of an unusual question, but I would appreciate your answer.

So, the amounts, I cannot mention precisely, but I think you had a very good number, in terms of remaining orders with the order backlog. That does include especially in terms of gas turbines, like, LTS. There are some very long-term agreements that we do have. So there may be several trillions worth of that. Is that how many years are they going to be consumed? And that's not how we would look at that. Some of them are very long term in nature. And is it all three years or more in the future? Not necessarily. But in terms of our, manufacturing slots for gas turbines, earlier slots are pretty much the fold. That's the reality as you did point out. So, in terms of manufacturing, if you kind of facilitate the site, it doesn't -- if we need to prepare the site, we can install something quickly in the next year. The gas turbines are very large. So I don't think that the wind is quickly changing. That's not how the front lines are working in terms of this business. And in terms of the manufacturing slots or capacity, we sometimes are not able to manufacture at the time that the customer wants it. That is something that we do see, in terms of reality. So we don't want to be too old. We want to have real conversations to really do this business? That's what I tell to the people in the front lines. I hope this answers your question.

Well, I'm not super concerned, but it's kind of a sell side market, so you can get good prices. But in the future, if there might be strong inflation in the Americas, and that's your main playground, and then the next two, three years, if there's more inflation than expected, and then your take is becoming, smaller, like, for, wind turbines. The market, crashed partly because of the subsidy situation. Could I hope that wouldn't happen in the gas turbines, and that's the spirit of the question? And I think you're applying the pricing with all of that in mind, but that was the nature of the question.

Yes. Is there is a risk? I wouldn't say so. But in terms of various perspectives, we discuss with the customers to build things into the contract clauses, conditions. I can't mention any specifics here, but we do have various countermeasures built in.

Understood. Thank you so much. That's all for myself.

Thank you very much, Mr. Tai. Next, from BofA Securities [indiscernible] please. Can you hear me?

Hello? Can you hear me?

Yes. Yes. Please go ahead.

So one simple question. So, in terms of the way to think about your guidance, so JPY380 billion in business profit. You made that a provision. So the fourth quarter, it means that fourth quarter should be [indiscernible]. So from the normal seasonality, the fourth quarter numbers, seems to be a bit low. I want to confirm two points. One, with the towards the fourth quarter, okay, some concerns that you have been in mind or the maybe the composition of the business has changed in the one year. So, maybe 60% to 65% of the profit will be coming out in the fourth quarter in the past, but it has anything changed in the structure of the business? Can you comment on that?

Well, in terms of the way the numbers are coming out, it is true that when the overall performance was low and when we were dealing with a high level of fixed cost, so the sale revenue was the breakeven point, or maybe the revenue was close to the breakeven point. Well, they if the revenue goes up slightly, then the profit goes up. So if the fourth quarter revenue is high, then maybe the profit coming out of the first quarter is high. But currently, compared to the past, from the first quarter, we have been able to generate good numbers. So, the quarterly balance, looking at how the numbers are performing, the -- on a quarterly basis, I think maybe they will be misleading. For instance, in the quarter numbers that we're looking at right now, to be frank, maybe it'll be higher than this, but it's not that low. My -- this is my frank opinion. I do not know how others are thinking about this. For the first quarter to third quarter, for our business. So, it's still a bit different from the, mass product those products, and it's different from year by year. So I think trying to understand if this is just, looking each quarter independently, I think I'm trying to look at the whole year forecast. It's a bit risky. That's what I feel.

Understood. Thank you. That's good. So I just wanted to confirm, from my point of view. So that's all for me.

Thank you. We are getting close to the end of our time, so this is going to be the last question, from UBS Securities, Mr. Sasaki.

Can you hear me? I'm Sasaki from UBS.

Yes. We can hear you.

So I have two quick questions. First, GTCC profitability, I would like to hear about that. So JPY10 billion was about loss. But third quarter, I think the margins are 12.9%. So when you include the loss, it's a 12%. Maybe it's about 30%. Is it close to your real power? And I think, the margins are going up. It's good in terms of the order. In terms of energy systems, how much margin improvement is there? If you have more high margin items or you can have more volume impact, how much can you improve the margins in the future for the energy business? Could you provide some comment on that?

So regarding your question, I don't know whether you mentioned it, but the JPY10 billion cost in terms of segment, it is energy, but it's not, precisely correspond to GTCC. So I think I should mention that. And the profitability margins are going up and further improvements. To be honest, I think we're getting at a pretty good level, to be very honest. So right now, I don't have any, ill performing projects, so that's a good positive for us. At the current point in time, as I imagine things, I cannot imagine this going up to, like, 15%. It's not something that I can imagine in the near future, but it's a little above 10%, 11% to 12%, those numbers. And even when it become larger, we want to continue to have those stable margins. I think that's the first thing we need to focus on, and I think that is definitely possible. I know I'm not really answering your question, but that's my view.

And, energy margins. Without the loss cost, I think 12% might be the power that you have as your true power. And without the JPY10 billion, I think you might have been able to have 13%. And how do you then expand your business profits, their spirits from demand? And we did discuss capacity, so I think it might be about growing your top line in terms of amount. Is that the right way to understand how you would grow further?

Basically, we want to increase in terms of size. We are trying to invest so we can manufacture more gas turbines. And if that is successful, we are going to grow larger in size, and the profits will also come. So without the [indiscernible], would it have been 13% or not? To be honest, with each project, the numbers can be quite different. So 13%, I think that might be a significant outperformance. And the onetime cost only being a JPY10 billion, maybe that might be a great performance. It's very difficult to comment about that, but 12% to 13%, we very much would like to produce that stably.

Thank you. That was good reference information. Thank you so much.

Thank you, Mr. Sasaki. So, we have reached the end of our time today, so we would like to end today's session. Thank you so much for participating during your busy schedules.