Good afternoon, ladies and gentlemen. My name is Koguchi, I'm responsible for finance matters at Mitsubishi Heavy Industries. Thank you for your attendance despite your busy schedule today. As usual, we'd like to start with the explanation of the handout material included in your package. First, please turn to the first page. I'd like to start with the discussion on the figures. That's on page four. As you may be aware, starting in FY 2018, we have adopted IFRS. Therefore, for the fiscal year 2017 Japanese GAAP financial results, to explain the variance for the sake of convenience, we converted the 2017 fiscal year numbers into IFRS numbers as well, so that we can see the apple-to-apple comparison. First, orders received, JPY 3.8534 trillion. This was almost unchanged from the previous year because during 2018, there were some cancellations of the large-sized projects in the past year.
If we exclude that factor, it is about JPY 4 trillion. In terms of the revenues, JPY 4.0783 trillion was the result, and the profit from business activities was JPY 186.7 billion. This is 4.6% in terms of the margin. Net profit was JPY 101.3 billion. The profit margin is 2.5%, so there was an improvement of more than JPY 100 billion on those two profits. ROE was 7.2% and EBITDA was JPY 311.6 billion. Free cash flow exceeded the guidance significantly at JPY 243 billion, and which is up JPY 75.4 billion year-over-year. For the MRJ, if it is excluded, we have the fundamental business profit. That is, profit from business activities was JPY 271.9 billion. Net profit, JPY 184.8 billion. EBITDA, JPY 396.4 billion. Free cash flow, JPY 352.2 billion, excluding MRJ. First, we'd like to talk about the orders and revenues by segment.
In Power Systems were unchanged from last year, Industry is up JPY 140 billion year-over-year. The Aircraft, Defense, and Space is down year-over-year. For the Power System, it is unchanged from the last year. In terms of the revenue, it was almost unchanged from the last year. However, for the Aircraft, Defense, and Space, there was a decline. Because of the increase in Power and Industry, on a total basis, it is unchanged from last year. The guidance revenue, JPY 4.2 trillion. Compared with that, there was a decrease of JPY 120 billion. This is mainly the postponement into FY 2019, next year. For the profit from business activities, in all of the business units we had an increase, especially in the Power Systems and the Industry and Infrastructure, we saw a significant improvement.
On the other hand, for the Aircraft, Defense, and Space segment, the booking of MRJ was delayed into later years, and those are the main reasons for the variance. Next, I'd like to move on to the balance sheet. We are challenged in very tough times. In order to increase the earnings, we are working on the improvement of free cash flow and the balance sheet as part of our business plan for some time, and we have been seeing some outcome. Total asset is JPY 5.142 trillion. As of compared with the end of the last fiscal year, there was a decrease of about JPY 100 billion. If we include the increase from the South African projects, the decline is about JPY 200 billion in working capital. As a result, interest-bearing debt is down by JPY 148 billion to JPY 665 billion.
We have been continuously reducing the size of the balance sheet as we had planned. Based on that, these are the main financial measures. Equity ratio was 27.8%. As you are aware, the MRJ-related assets impairment was made. Equity ratio is less than 30%, and this remains at a healthy level, I would say. Regarding the interest-bearing debt, because of the increase in free cash flow, we were able to make repayment and the interest-bearing debt became JPY 665.1 billion, and the debt equity ratio was 38%, down 10 points. For cash flows, free cash flow was JPY 243 billion. Cash flow from operating activities was JPY 404.9 billion, and cash flows from investing activities was a negative JPY 161.8 billion. Regarding investment, compared with last year, the investment was less this year. In the fiscal year for Areva investment, we made those investment.
In FY 2018, we had a sale of Kanazawa plant. Excluding those items, investment level would be appropriate, I would say. Next, I would like to move on to the results by segment. For orders received, as you can see on the slide, the power system was almost unchanged from last year. For the power systems, order is very much challenged. That was our perception, but in this period, gas turbine performed well. Therefore, on a year-on-year basis, gas turbine increased by more than JPY 100 billion. However, at the same time, steam power had a difficult time. All in all, the power systems was unchanged from last year. In green, we have industry and infrastructure. The medium load manufacturing goods performed well, and others performed well, too.
For aircraft defense and space, 777 related businesses is at a turning point because of the X, and also for the defense, because of the national budget situation. For FY 2018, there was less orders, so there was a decline of about JPY 100 billion. Moving on to the backlog. Revenue has exceeded and the backlog itself has declined as a result. For renewable energies, we have taken some efforts in the offshore wind, and we do have some JV, and when we add the backlog orders there, it gives us pretty much an on par number. The power decline has been offset by the offshore wind turbine activities. In terms of revenue, as you can see here, the numbers.
I do believe that this is quite self-explanatory, and I would like to skip this page. Moving on to the activities by segment. All of the segments have improved, especially for power systems, as you see here. Nuclear power compressors have increased their revenue line and grown. For I&I transportation systems, especially in the area of material handling equipment, we have increased sales and enhanced profit. For transportation systems, as of last year, we have made some advances or procedures have been applied, and as a result, we have been able to improve our profits. For aircraft defensive space, we have been able to enhance productivity in this realm. Especially for commercial, there has been a drop, it is true, but all in all, for Aircraft, Defense & Space , things are progressing smoothly.
For MRJ, we have decreased some of the cash because there has been some delays. If we include that in the improvement, all in all, we can say that this segment is treading fairly as well. This was a quick depiction of our financial performance. Based on this, we would now like to analyze the current state of our business. This is listed on the following pages. We are focusing on enhancing profit in the items that we have stated in our business plan. We have been making efforts to efficientize our management, and we do believe that we are bearing fruit. For the just closed 2018 fiscal year, our working capital itself has been compressed all the way down to JPY 3,450, and we have now improved the cash conversion cycle to 28 days.
At some point, we had exceeded 100 days CCC, but now we have improved productivity dramatically and resulted in these numbers. If we further utilize cash flow to analyze this trend, as you can see on this next page. I would like to highlight a few points on this page. The first is, if we exclude the extraordinary factors, the free cash flow related to fundamental business earnings, which is shown in the green line, approximately JPY 200 billion plus. This number has been trending for quite some time. Starting from 2016, 2017, and 2018, we have been able to exceed this number quite dramatically, as you can note. This goes back to the suppression of working capital. In the past, we had invested more than JPY 1 trillion and operated projects of JPY 3 trillion.
Now JPY 4 trillion is now brought down to JPY 310 or JPY 15 billion to operate. We have now generated approximately more cash flow as a result. We are improving. During this midterm plan, the cash inflow expectations, as well as if you look down below on the side for the past three years, I know it's a bit difficult, but approximately inflow of JPY 1,320 billion as expected. We are now utilizing this approximately JPY 370 billion for new investments for interest-bearing debt. We will be focusing on investments from here onwards. Rather than suppressing this, we had been focusing on new investments. For the just ending financial term, we have been able to reduce it by approximately JPY 150 billion. Shareholder return is on par with the plan.
Cash flow emphasis has been made in our management, and this is due to our focus to enhance our net profit. When we look at the free cash flow, you can see that there is an alignment. For the past one year, there will be a slight delay, a year or 18 months. This improvement in free cash flow will be contributing to our future solidification of the company. There are some challenges which I would like to refer to. For the current-
assets, we have seen some improvement. If you look at the fixed assets, we are still challenged. In comparison, fixed assets are difficult to improve versus the current assets. However, there's also a fact that we have yet to do to create more focus on fixed asset and improve its turnover. In other words, we have to make new investments and replace the old assets, as well as convert from hard assets to soft assets. Once again, we have to take this trend and further enhance the quality of the overall fixed assets that we possess. This is our focus, and this will further promote a shorter path to generating better profit. We will take steadfast improvements in this direction. The TOP has been stated to overcome these challenges.
We do have some stable cash flow generation, and we do have the solid financial foundation to further promote a TOP. There is still some unbalance between the total assets and revenue, and there are some imbalances between total assets versus the market value. Again, we want to diminish this imbalance as much as possible. 2020, which will be the first year of the next midterm plan, we will hopefully create a better rectangle close up to the 1-1-1, and we plan to land at 0.9, 1, and 0.5. Obviously, we do have some challenges along the way to generate this. I would like to use this slide to explain this. We will further promote asset management, but obviously generating cash flow directly from the balance sheet. At the same time, we want to focus on the balance sheet old assets.
The non-performing businesses, as well as the low-value businesses, we would like to eliminate this and improve the PL. With the generated cash flow, we would like to convert that to investments in new businesses as much as possible and reflect that on our profit and loss sheets. This will be the cycle, as you see depicted, that we would like to follow through, and we have focused on the triple one proportion program, the TOP, based on this. You can see some imbalances in this structure. Portfolio management and cash flow management has been our focus for the past few years. If you take this perspective, 50%, 60% of our revenue is focused on the transformation and improvement areas. It's also true that there are some non-performing businesses that will remain.
Once again, we would like to further promote this activity and make sure that we will create focus in moving forward. 50% is grow/maintain, and 60% is the remaining that we will focus on in TOP. We would also like to further improve cash flow, and this has been the foundation of our midterm plan, and we do believe that we are bearing specific fruits. We are coming to the next stage where we have to grow new businesses. That's the phase that we are in at the moment. That's our perception. On this point, later on, President of the company is going to take you through the details later. With that, based on the financial results that we just explained, I'd like to now move on to the forecast for fiscal year 2019. Please jump to page 22. Orders received.
Earlier, I talked about the cancellations of orders. Last year, there was about JPY 100 billion, large-sized orders that was postponed from FY 2018 to FY 2019. That was a postponement, and that is the reason for the downward revision of the orders received at the beginning of the year. That's why for this forecast, we have JPY 4.3 trillion. For revenue, our forecast at JPY 4.2 trillion before. However, because of the postponement of the revenues, we increased it to JPY 4.3 trillion, and this is much higher than the same period of last year. For profit from business activities, it is up JPY 33 billion to JPY 220 billion, and the net profit up JPY 8.6 billion to JPY 110 billion. ROE is projected at 8% and EBITDA JPY 350 billion. Free cash flow is estimated, at this point, with a great improvement.
Therefore, we are investing into growth domains. That's why free cash flow will be limited to JPY 50 billion. For the dividend, last year in FY 2018, based on the results of FY 2018, we decided to distribute JPY 150 per share. This is an increase of JPY 20 per share. On later pages, there are different reference materials, so please take a look at them at your leisure. This concludes my presentation on the financial results for fiscal year 2018. Thank you. Now, we would like to introduce Mr. Izumisawa, President, to talk about the FY 2018 medium-term business plan progress.
Thank you. I am Izumisawa. I'm President and CEO, CSO. I'd like to take you through the progress on fiscal year 2018 business plan progress. First of all, I'd like to talk about what we have achieved so far. After that, we'd like to give you the current status of the various initiatives.
In terms of the progress, earlier our CEO has explained some of this, so there may be some overlap, but the targets for 2020 is JPY 5 trillion in business scale and total asset, JPY 5.3 trillion or less, ROE 11%, and cash flow, JPY 1.32 trillion, so that we can make investment into growth domains as well as the healthy balance sheet. For FY 2018, free cash flow exceeded our guidance drastically, and for the achievement of our fiscal 2018 business plan, that gave a good momentum.
Going forward, in order to cope with the difficult market situation, we'd like to further derive efficient management so that we can secure a profit from business activities. For FY 2019, medium load products were doing well. However, because of the steam power cancellation and the market shrinkage, there was some decline. Going forward, we would like to secure orders by strengthening service business. For the growth domains, both from short-term to middle to long term, we are promoting these growth business domains. These are the results for fiscal year 2018, but our CFO has just taken you through these details. In FY 2018, there were cancellations and delays of a large size project. Because of that, we couldn't achieve the targets.
For the profit from business activities, because of the cash flow management and the successful implementation of the strategy at each business unit, we were able to make steady progress. As for free cash flow, we also exceeded the plan and the guidance. The management reform is now bearing fruits, and we are generating good financial results based on this. These are the guidance for FY 2019. There were some postponement of the projects from FY 2018. We would like to secure those sales, and we would like to increase revenue as well in the Power Systems and I&I. For the profit from business activities, for the I&I made-to-order, we were able to make some improvements, we will see some improvement in the earnings as well. We would like to further promote productivity and asset efficiency so that we can secure profits.
For FY 2020, we kept the target for 2018 business plan unchanged. Now I'd like to talk about the progress of status on core measures. You can see the summary here. Regarding MHPS gas turbine, for FY 2018, there was a shrinkage of the market, we focused on the new model introduction with competitiveness so that we can increase the share position in the market. For the gas turbine, we think that we have a good outlook going forward. We would like to further enhance our share in the market. Regarding the reduction of the fixed cost, our efforts are going well in line with the plan, as you are aware, the steam power plants market is likely to shrink further. We would like to further transform this business and shift to the service business.
Regarding MRJ, starting in March this year, we have started the flight test for the acquisition of the type certification. The growth strategy is supported by both short-term and the middle to long-term measures, we are looking at the new framework for this as well. In terms of the global group management, we would like to further enhance and stabilize the measures that we have taken so far. I'd like to go into details about the MHPS restructuring. In the gas turbine market, as I mentioned earlier, at the moment, the market is shrinking. For the middle to long-term basis, we believe that the market will perform well again. We would like to further enhance our product competitiveness so that we can make a share gain in the market. For the large size models, we have the highest efficiency, 64% in the world.
We have achieved this so that we can contribute to the reduction of CO2. This is the JAC type. We have already received unofficially the offer for 25 units. We are planning to make the first delivery in November this year. For the next generation model, we are also promoting R&D as well and are launching them sooner or later. For the middle size, small size gas turbine, we have the expected potential order for the load following, stand-alone, and machine driving applications. From the oil major companies, for their compressor machine driving purposes, we have got the product type certification. We would like to increase the order for this. Also, as new technology, in order to promote carbon-free society, we are trying to achieve 100% hydrogen gas turbine. For 30%, we have already confirmed this.
Auto operation technology for the power generation facility is being promoted, and this should help contributing to the reduction of CO2 and efficient operation of the plant. Regarding steam power business, as I said earlier, up until 2020, we can maintain the utilization at the high level with the existing orders in place. For the carbon-free society, after 2021, the new installation should decline. Therefore, we like to contribute to the low carbon society with the existing plants. We would like to focus on the optimization of operations using AI and IoT technologies. In order to contribute to the reduction of the environmental burden, we would like to expand the scope of the utilization of the low carbon and the low CO2 desulfurization equipment. We like to focus on the shorter lead time inspection and provision of the service to other company's products utilizing drones.
For the reduction of our fixed cost and relocation of the sites, we are promoting our plan as scheduled. Now we are accelerating those plans going forward. Next is MRJ business. In MRJ, starting in March this year, we have started the flight test for the type certification acquisition. On March the 14th, from FAA, Federal Aviation Administration, we have acquired letter of authorization for our flight test. This has come to a very important stage for the TC acquisition. We like to work closely with various business departments, so that we can get the type certification. Next is the growth strategy. Regarding growth strategy, growth strategy is supported by short-term measures initiated by SBUs, as well as middle to long-term measures promoted by the group headquarters.
For the implementation of the strategy, we would like to strategically allocate resources to growth domains, and we like to promote the usage of the common platform, such as digitalization and other technology, and globalization technology. We like to promote the use of the platform so that we can generate and maximize the synergy for the group. Moving on to our short-term strategies. As for the mass and medium lot manufacturing, we would like to generate capital from a solidified financial platform, and further promote M&A, as well as enhancing our structure for manufacturing. We will also leverage our technology synergy, and we have also focused on creating very competitive products versus our competition. As a result, in comparison to 2012, our business scale has expanded by threefold.
For the future, we still enjoy minimum share in this area. We do believe that there's potential for growth, especially for sales services we need to strengthen. There is a movement towards electrification as well as automation. Components, products and services that relate to these factors will be developed and further promote growth of the business. For instance, in terms of technology synergy, gas turbine, which is state-of-the-art advanced technologies that have been developed for other products, can be applied to, for instance, [electrical CAC] and forklift automotive driving, and we can hence create more competitive products. Now for offshore, wind offshore, this is expanding quite greatly, and we do believe that we can expect more potential growth. We have a joint venture with the onshore Vestas, and in 2014 April, we established MHI Vestas Offshore Wind. The market share is growing steadfastly.
For our group, we believe that we can contribute to production technology, management and quality, hence prepare for a large scale expansion as well as support the evolution in the Asian region. We do see some growth in areas relating to SDGs as well, and we do believe that there is growth potential in this element as well. As you see here, we have utilized many technologies and products in this realm, and we have focused on low carbon as well as mitigating environment burden and promoting EV. We have contributed to many aspects of society in this way. For instance, the barrier-free passenger boarding bridge or station home doors are iconic examples of our developments. By creating systems out of such products and also combining these systems with AI and IoT, we do believe that we can resolve many more social challenges.
To give an example, in the country Australia, in order to disperse the functions of the metropolitan areas in Western Sydney, we are involved in the planning of a city area, and we are considering offering solutions for energy management in this district. We are focused on very strong solutions that are closely tied to the community. For total solution activities, we will focus on safety and security. For instance, to embrace cyber attacks as well as natural disasters, the needs of safety and security are expanding within society. In the past, we have accumulated much knowledge within defense and space. We do believe that these can be actually applied to cybersecurity needs as well as ambient monitoring and a wide area-
a monitoring systems. We would like to make sure that we offer solutions to accommodate these needs. Moving on, I would like to explain briefly of MHI FUTURE STREAM. This activity, MHI FUTURE STREAM, focuses on the long-term potential society phenomena. We first focused on Mega Scan, which is to generate business opportunities. We also have a mid to long-term perspective that focuses on shifting existing businesses. This is Shift the Path. We also have technology scouting, which focuses on the necessary technologies and game changing possibilities to further embrace advanced technologies. For the year 2018, we focused in the area of Mega Scan, the innovation of technology, as well as the changes in society. We realized that the shift is happening from supply to demand, or the user side.
We believe that more and more machinery systems will be equipped with intelligence, and we further probed into what we needed to do to accommodate this change. In light of these changes, we considered the perspective from energy in the area of Shift the Path, and also carbon cycling from the area of Shift the Path as well. For technology scouting activities, we are currently coming up with new technology and business model ideas, and we will create a occasion for co-creation. From the energy perspective, as you see on the left, for Shift the Path, we had been exerting a value in providing the infrastructure. For instance, a good example is centralized power sources, and we will further enhance these activities to offer low cost and stable supply, as well as focusing on low carbon.
At the same time, the social infrastructure is changing as well, and technology is ever advancing as well, we do believe that we need to offer more value. Electrifying the logistics or automating logistic activities, as well as infrastructure. Digital technologies will be utilized, and we will further promote solutions that will open new gateways for new businesses as well. Moving on to Shift the Path from the perspective of carbon cycling. From the aspect of protecting the planet, the needs for a carbon neutral society is heightening. As you see on the very left, and right as well, we are reaching the limit of carbon cycle within the world of nature. This is due to the fact that society has been very focused on exploiting fossil resources.
To further enhance the supply systems and also focus on creating much more efficient energy, we believe that we do have to proceed with carbon neutral activities. We will efficientize our green gas energy systems, as well as focus more on offshore wind activities and biomass utilization, as well as plant factories and capturing and storing carbon. Again, we have developed many products surrounding these themes, and we would like to further create systems to promote society's carbon neutral. We are also considering a co-creation for internal and external partner, and this is under the umbrella of MHI FUTURE STREAM. We will focus on nurturing venture activities, and also give back to society as a result. Also nurture and cultivate the entrepreneurship mindset of our employees.
Different from IT venture activities, we have technologies that are very focused on the creation of things, and we have offered many utilities as well. This is a means in ways how we can promote various new startups. Lastly, I would like to focus on our global group management. The Japanese market, which has been our main focus, is now becoming more mature and saturated. Our thermal power business as well, has also become much more mature. For future growth, we have to focus on areas that have potential growth on the global markets, as well as make sure that we participate in such activities. Since the 2010 business plan, we have undergone various structural reforms. The focuses have been, as you see here, simultaneous achievement of stability and growth, autonomous management business sections or group synergies, and flexible, speedy management.
This slide is quite a conceptual depiction, but in the area of autonomous management, SBUs and group synergies, we are focusing on creating a stable portfolio. Within the MHI FUTURE STREAM activities, we would like to set a strong direction as a group for the mid to long-term, and selectively allocate our resources within the group. We also need to make sure that we further go beyond our existing business as well, so we do have a directly guided function under our head office. We have allocated specific budget and authority for this team, so they can be mobile and agile in establishing their activities.
For the autonomous management of the group and synergy, again, we believe that we will further be able to promote optimal management structure, and at the same time, create a common platform to extend group synergy that we can share amongst ourselves. In the area of flexible and speedy management, we would like to be as simple and flat in terms of management as possible. At the same time, human resources are the most treasured asset within the company. We need to nurture, cultivate new talents, existing talents, as well as enhance employee engagement, and these initiatives are underway. This is a depiction of how we put this all together. You see the check marks, these are in progress. For those that still are unchecked, we will further enhance these activities throughout 2018 business plan. Thank you.