アズビル（6845） – [Delayed]Summary of Consolidated Financial Results for the Fiscal Year Ended March 31, 2022 (Based on Japanese GAAP)

Notice: This document is a translation of the original Japanese document and is only for reference purposes. In the event of any discrepancy between this translated document and the original Japanese document, the latter shall prevail.Summary of Consolidated Financial Resultsfor the Fiscal Year Ended March 31, 2022(Based on Japanese GAAP)May 13, 2022Company name:Azbil CorporationStock exchange listing:Tokyo Stock Exchange Prime Market (Code 6845)URL:https://www.azbil.com/Representative:Kiyohiro Yamamoto, President andGroup Chief Executive OfficerContact:Kazuhisa Yamazaki, General Manager, AccountingDepartment, Group Management HeadquartersPhone:+81-3-6810-1009Scheduled date of ordinary general meeting of shareholders:June 23, 2022Scheduled date to file Securities Report:June 23, 2022Scheduled date to commence dividend payments:June 24, 2022Preparation of supplementary materials on financial results:YesHolding of financial results meeting:Yes (for institutional investors and analysts)(Amounts less than one million yen are rounded down)(1)Consolidated financial resultsPercentages indicate year-on-year changesNet salesOperating incomeOrdinary incomeNet income attributable to owners of parentMillions of yen%Millions of yen%Millions of yen%Millions of yen%Year ended March 31, 2022256,5513.928,2319.829,51912.120,7844.3Year ended March 31, 2021246,821(4.9)25,720(5.6)26,338(5.0)19,9180.6Note: Comprehensive incomeYear ended March 31, 202221,334 million yen(5.3)%Year ended March 31, 202122,535 million yen16.8%Net income pershareDiluted net incomeper shareReturn on equityOrdinaryincome/total assetsOperatingincome/net salesYenYen%%%Year ended March 31, 2022150.79－10.410.511.0Year ended March 31, 2021142.77－10.49.410.4Total assetsNet assetsShareholders’equity ratioNet assets per shareMillions of yenMillions of yen%YenAs of March 31, 2022280,052203,14171.51,459.08As of March 31, 2021284,597200,60769.61,420.52Reference: Shareholders’ equityAs of March 31, 2022As of March 31, 2021200,314198,190 million yen million yenCash flows from operating activitiesCash flows from investing activitiesCash flows from financing activitiesCash andcash equivalentsat the end of periodMillions of yenMillions of yenMillions of yenMillions of yenYear ended March 31, 202210,120(3,990)(20,584)77,891Year ended March 31, 202122,603283(6,996)90,6521.Consolidated financial results for the fiscal year ended March 31, 2022 (from April 1, 2021 to March 31, 2022)(2)Consolidated financial position(3)Consolidated cash flowsDividend per shareTotal amount of cash dividends(annual)Payout ratio (consolidated)Dividend on equity (consolidated)1st quarter-end2nd quarter-end3rd quarter-endFiscal year-endTotalYenYenYenYenYenMillions of yen%%Year ended March 31, 2021－25.00－30.0055.007,78138.54.0Year ended March 31, 2022－30.00－30.0060.008,35339.84.2Year ending March 31, 2023 (forecast)－32.50－32.5065.0041.5Percentages indicate year-on-year changesNet salesOperating incomeOrdinary incomeNet income attributable to owners of parentNet incomeper shareMillions of yen%Millions of yen%Millions of yen%Millions of yen%YenFirst half120,9004.88,400(10.6)8,700(11.9)5,700(17.6)41.52Full year275,0007.229,8005.630,2002.321,5003.4156.60(1) Changes in significant subsidiaries during the period (changes in specified subsidiaries due to changesin the scope of consolidation):Noa. Changes in accounting policies accompanying revision of accounting standards, etc.:Yesb. Changes in accounting policies other than (a) above:Noc. Changes in accounting estimates:Nod. Retrospective restatements:NoAs of March 31, 2022145,200,884 sharesAs of March 31, 2021145,200,884 sharesAs of March 31, 20227,912,745 sharesAs of March 31, 20215,681,473 sharesYear ended March 31, 2022137,838,954 sharesYear ended March 31, 2021139,511,724 shares2. DividendsNote: The total amount of cash dividends include the dividends for the stock of Azbil Corporation (“the Company”) held by a trust account as assets in the trust of “Employee Stock Ownership Plan (J-ESOP)” (107 million yen for the year ended March 31, 2021; 116 million yen for the year ended March 31, 2022).3. Forecast of consolidated financial results for the fiscal year ending March 31, 2023 (from April 1, 2022 to March 31, 2023)Note: The Company has resolved, at the Board of Directors meeting held on May 13, 2022, to cancel its treasury shares, repurchase its own stock, and establish a trust in connection with the introduction of Trust-Type Employee Shareholding Incentive Plan. For “Net income per share” in the forecast of consolidated financial results, the impact of these matters is not considered.* Notes(2) Changes in accounting policies, changes in accounting estimates, and retrospective restatementsNote: For details, please see “Changes in accounting policies” in “5. Consolidated financial statements and related notes (5) Notes to the consolidated financial statements” on page 28 of the Accompanying document.(3) Number of issued shares (common stock)a. Total number of issued shares at the end of the period (including treasury shares)b. Number of treasury shares at the end of the periodc. Average number of shares during the periodNote: The Company has introduced an employee stock ownership plan, and the number of treasury shares at the end of the period includes the Company’s stock held by a trust account (1,935,100 shares as of March 31, 2022; 1,958,084 shares as of March 31, 2021). Also, the Company’s stock held by the trust account is included in treasury shares that are deducted in the calculation of the average number of shares during the period (1,947,530 shares for the year ended March 31, 2022; 1,966,690 shares for the year ended March 31, 2021).For details, please see “Additional information” in “5. Consolidated financial statements and related notes (5) Notes to the consolidated financial statements” on page 29 of the Accompanying document.* This consolidated financial results report is not subject to the audit procedures by certified public accountants or auditing firms.* Regarding the appropriate use of forecast, etc.Net sales for the azbil Group tend to be low in the first quarter of the consolidated accounting period and highest in the fourth quarter. However, fixed costs are generated constantly. This means that profits are typically lower in the first quarter and higher in the fourth quarter.The forecast of the azbil Group is based on currently available information and some reasonable assumptions. Due to various factors, actual results may differ from those discussed in this document. For information on the forecast of financial results, please see “1. Overview of financial results and others (1) Overview of financial results 3) Forecast for the next period” onpage 7 of the Accompanying document.* How to obtain supplementary materials on financial resultsSupplementary materials on financial results are available on the Company’s website.Accompanying document Contents 1. Overview of financial results and others ········································································· 2(1) Overview of financial results ··············································································· 2(2) Overview of financial position ············································································ 10(3) Basic policy regarding profit sharing and the dividends for the current and next periods ······· 122. Management policy ······························································································· 14(1) Basic policy·································································································· 14(2) Management targets ························································································ 14(3) Medium- to long-term management strategy ··························································· 14(4)(5)Initiatives to strengthen corporate governance ························································· 15Initiatives in response to change of business environment including the spread of COVID-19and parts procurement difficulties ······································································· 163. Activities (present situation) of the azbil Group ······························································ 174. Basic rationale for selection of accounting standards ························································ 195. Consolidated financial statements and related notes ························································· 20(1) Consolidated balance sheets ·············································································· 20(2) Consolidated statements of income and consolidated statements of comprehensive income ···· 22Consolidated statements of income ······································································ 22Consolidated statements of comprehensive income ··················································· 23(3) Consolidated statements of changes in net assets ······················································ 24(4) Consolidated statements of cash flows ·································································· 26(5) Notes to the consolidated financial statements ························································· 28Notes regarding going concern assumptions ··························································· 28Changes in accounting policies ··········································································· 28Additional information····················································································· 29Segment information ······················································································· 30Per share information ······················································································ 34Significant subsequent events ············································································· 356. Other ················································································································ 37(1) Management changes ······················································································ 37(2) Status of orders received ··················································································· 39- 1 -1. Overview of financial results and others (1) Overview of financial results 1) Overview for the current fiscal year Regarding the business environment for the azbil Group, in the field of heating, ventilation, and air conditioning (HVAC) control equipment/systems for large-scale buildings in Japan, demand driven by urban redevelopment plans has continued while growing interest in solutions for improved ventilation and energy saving has meant that demand for refurbishment projects has steadily increased. As for equipment/systems for production equipment in manufacturing industry, due to the rapid growth of teleworking and 5G services, demand has remained high in the semiconductor-related market, and while there have been differences between markets, overall capital investment has continued to rebound. What follows are the financial results for the current consolidated fiscal year. From the second half of the fiscal year onwards, there was an increasing impact from delays in recording sales owing to customers’ advance orders and long delivery times triggered by parts shortages. However, there has been a recovery following the market downturn caused by the COVID-19 pandemic in the previous fiscal year. Overall orders received grew significantly, reversing the decline in the previous consolidated fiscal year caused by the spread of COVID-19. This was mainly due to an increase in the Advanced Automation (AA) business, following a recovery in market conditions and, to some extent, the impact of customers’ advance orders triggered by parts shortages, as well as increased orders received in the Building Automation (BA) business reflecting demand for the refurbishment of existing buildings and service, and increased orders received in the Life Automation (LA) business driven by demand for pharmaceutical equipment. Consequently, overall orders received increased to 286,950 million yen, up 15.8% from the 247,873 million yen recorded in the previous consolidated fiscal year. Net sales were 256,551 million yen, 3.9% higher than the previous consolidated fiscal year, when a figure of 246,821 million yen was recorded. This was mainly due to an increase in AA business sales following a recovery in demand in the manufacturing equipment market, despite performance being partially impacted by longer delivery times. The BA business and LA business also contributed with increased sales. As regards profits, there were higher expenses for adapting the working conditions as part of our COVID-19 responses, and also an increase in R&D expenses reflecting measures included in the medium-term plan. Nevertheless, in addition to the growth in net sales, measures to strengthen business profitability continued to have a positive effect. Consequently, operating income was 28,231 million yen, up 9.8% on the 25,720 million yen recorded for the previous consolidated fiscal year. With this growth in operating income and recording foreign exchange gains, ordinary income was 29,519 million yen, up 12.1% on the 26,338 million yen recorded for the previous consolidated fiscal year. As regards net income attributable to owners of parent, this was 20,784 million yen, up 4.3% on the 19,918 million yen for the previous consolidated fiscal year, when gain on sale of investment securities and gain on sale of non-current assets following the integration of domestic production bases were recorded. In addition, in the current consolidated fiscal year there was an increase in tax expenses following a review of the – 2 -recoverability of subsidiary’s deferred tax assets. Fiscal year 2020 (April 1, 2020 to March 31, 2021) Fiscal year 2021 (April 1, 2021 to March 31, 2022) (Millions of yen) Difference Amount Rate 247,873 246,821 25,720 [10.4%] 26,338 19,918 [8.1%] 286,950 39,076 256,551 28,231 [11.0%] 29,519 20,784 [8.1%] 9,730 2,511 [0.6pp] 3,180 865 [0.0pp] 15.8% 3.9% 9.8% 12.1% 4.3% Orders received Net sales Operating income [Margin] Ordinary income Net income attributable to owners of parent [Margin] What follows are management’s assessment of the results for each segment, together with our 2) Financial results by segment analysis and conclusion. Building Automation (BA) Business Regarding the BA business environment, in the domestic market demand for urban redevelopment projects in the Tokyo metropolitan area and HVAC equipment/systems for factories has continued to grow, and heightened interest has been seen in solutions related to ventilation improvement, energy savings, CO2 reduction, and lower operational costs. Also, the impact of the COVID-19 pandemic on domestic markets was limited, although some negative impact from parts procurement difficulties was evident. As regards overseas markets, we have observed the prolonged effect impact of the pandemic on some regions, resulting in the postponement of construction projects sluggish demand and construction delays. In this business environment, we have not only engaged in securing orders with a view to enhanced profitability, but have also striven to ensure enhanced capabilities and efficiencies of job execution—particularly on construction and service sites—that meet the requirements of the Japanese government’s work-style reform, while also paying sufficient attention to the safety of both customers and employees. Moreover, we have made progress with the expansion of our products and services to better meet the needs of customers, in Japan and abroad, who are interested in harnessing such technologies as IoT. Consequently, the financial results of the BA business for the current consolidated fiscal year were as follows. As regards orders received, the service field was impacted by the new accounting standard for revenue recognition Note 1. However, in addition to the renewal of multi-year service contracts, orders increased for the refurbishment of existing buildings, reflecting a robust business environment. Also, part of the increase was due to advance orders placed by customers concerned about a shortage of parts. Accordingly, overall orders received were 132,511 million – 3 -yen, up 11.8% on the previous consolidated fiscal year, when a figure of 118,503 million yen was recorded. As regards sales, despite a decrease in the service field owing to the new accounting standard for revenue recognition as well as parts procurement difficulties, there was an increase in fields related to new large-scale buildings, and to the refurbishment of existing buildings. Consequently, sales were 119,764 million yen, up 1.9% from the 117,521 million yen recorded for the previous consolidated fiscal year. Although initiatives to enhance profitability have progressed, higher expenses—for R&D, as stipulated in the medium-term plan, and for personnel required for handling an increase in order received—as well as the expenses, recorded in the first half of the current fiscal year, of adapting working conditions to deal with the COVID-19 pandemic, segment profit was 13,862 million yen, on a par with the 14,023 million yen recorded for the previous consolidated fiscal year. As for the medium- to long-term outlook, in addition to the robust trend seen in domestic orders received in the current period, large-scale redevelopment projects and several retrofit projects for large-scale buildings are still being planned. Building on its track record, the BA business aims to secure this demand. Moreover, there have been growing requirements for energy savings and CO2 reduction as part of decarbonization, as well as rising office demand in the “new normal” era, triggered by the COVID-19 pandemic, for the enhanced safety and peace of mind offered by improved ventilation and access control. In response to this demand, we will supply solutions such as remote maintenance, cloud services and a new HVAC system; we are thus aiming to achieve sustainable growth. Additionally, we will promote digital transformation (DX) and employ business process reforms and other initiatives to further ensure that a high-profit structure is established. Fiscal year 2020 (April 1, 2020 to March 31, 2021) Fiscal year 2021 (April 1, 2021 to March 31, 2022) (Millions of yen) Difference Amount Rate 132,511 14,008 119,764 13,862 [11.6%] 2,242 (160) [(0.4)pp] 11.8% 1.9% (1.1)% Orders received Sales Segment profit [Margin] 118,503 117,521 14,023 [11.9%] Note: 1. Effect of the new accounting standard for revenue recognition on the service field: The main impact of the new accounting standard for revenue recognition has been on the service field where it has reduced the figure for orders received by approximately 3,200 million yen, while the impact on sales and segment profit has been immaterial. Advanced Automation (AA) Business As regards market trends, in Japan and abroad, affecting the AA business environment, expanding investment in 5G has led to sustained high demand in the market for semiconductor manufacturing equipment. The COVID-19 pandemic has yet to abate; however, overall capital – 4 -investment has recovered, particularly in the manufacturing equipment market. Amidst this business environment, our growth strategy for the overseas business—which has been a focus—has borne fruit, and the profit structure has been successfully strengthened by continued implementation of various measures. However, due to the parts shortages, certain products have been affected and, as a result, delivery times have lengthened. The AA business has posted the following results for the current consolidated fiscal year. Overall orders received were 109,562 million yen, up 25.2% on the previous consolidated fiscal year, when a figure of 87,523 million yen was recorded. Although this partly reflects the impact of customers’ advance orders triggered by parts shortages, this considerable increase was mainly due to continued demand in the manufacturing equipment market—against the backdrop of a global expansion in semiconductor-related investment—as well as business growth overseas. Consequently, a significant order backlog has built up. As regards sales, despite growth achieved mainly in the manufacturing equipment market and overseas business, due to the impact of parts procurement difficulties there have been delays in recording sales of some products. Consequently, sales were 94,276 million yen, an increase of just 7.4% on the 87,778 million yen recorded for the previous consolidated fiscal year. Also, as regards segment profit, there was an increase in expenses associated with strengthened sales activities and higher R&D expenses, as stipulated in the medium-term plan. However, thanks to revenue growth as well as the fact segment profit margin continued to improve due to the success of measures to strengthen profitability that had already proved effective, segment profit was up 29.1% at 13,236 million yen (compared with the 10,251 million yen for the previous consolidated fiscal year). In the medium to long term, investment is expected to grow, reflecting the continuing drive to automate manufacturing equipment and production lines. This investment is required to cope with the challenges posed by labor shortages and decarbonization, and to improve productivity through the introduction of new technologies. Based on the three AA business sub-segments (CP, IAP, and SS) Note 2, we will continue our efforts to achieve business growth with high competitiveness by promoting expansion into growth fields, particularly our overseas business; developing new products and services that harness such technologies as AI, cloud computing, and MEMS Note 3; accelerating market launches; and creating the new automation field, unique to the azbil Group. Orders received Sales Segment profit [Margin] Fiscal year 2020 (April 1, 2020 to March 31, 2021) Fiscal year 2021 (April 1, 2021 to March 31, 2022) 87,523 87,778 10,251 [11.7%] (Millions of yen) Difference Amount Rate 109,562 22,038 94,276 13,236 [14.0%] 6,497 2,985 [2.4pp] 25.2% 7.4% 29.1% – 5 -Notes: 2. Three AA business sub-segments (management accounting sub-segments) CP business: Control Product business (supplying factory automation products such as controllers and sensors) IAP business: Industrial Automation Product business (supplying process automation products such as differential pressure transmitters, pressure transmitters, and control valves) SS business: Solution and Service business (offering control systems, engineering service, maintenance service, energy-saving solution service, etc.) 3. Microelectromechanical systems (MEMS): devices built using microfabrication technology to integrate sensors, actuators and electronic circuits on substrates. Life Automation (LA) Business The LA business covers three fields: Lifeline (gas/water meters, etc.), Life Science Engineering (LSE: pharmaceutical/laboratory fields), and Lifestyle-related (residential central air-conditioning systems). The business environment differs in each field. The Lifeline field, which accounts for the bulk of LA sales, depends on cyclical demand for meter replacement as required by law. Though demand can be expected to remain basically stable, some changes in some markets have been observed, such as that for LP gas meters, for which cyclical demand is currently at a low ebb. Also, in the LSE field, investment in equipment for pharmaceutical plants continues to grow. Reflecting these business conditions and initiatives, the financial results of the LA business for the current consolidated fiscal year were as follows. Overall orders received rose by 8.1% to 46,845 million yen (compared with the 43,350 million yen recorded for the previous consolidated fiscal year). This mainly reflects an increase in the LSE field driven by growing demand for equipment in the pharmaceutical market. As regards sales, the Lifeline field saw a decrease owing to changes in market conditions, the COVID-19 pandemic and parts procurement difficulties. The pandemic also affected sales in the LSE field; nevertheless, sales growth was achieved thanks to the increase in orders received in the previous consolidated fiscal year. As a result, overall sales stood at 44,238 million yen, up 3.0% on the 42,942 million yen recorded for the previous consolidated fiscal year. However, segment profit was 1,151 million yen, down 19.7% on the 1,434 million yen recorded for the previous consolidated fiscal year, owing mainly to the fall in profits associated with the decrease in sales in the Lifeline field. Though the LSE field achieved revenue growth, an increase in expenses for business expansion, price hikes for raw materials, and increases in energy and transportation costs had a negative impact on profits as well. Going forward, we will continue our efforts to stabilize and improve profits in each of the three fields that comprise the LA business. At the same time, in order to grasp the opportunities provided by changes in the business environment for the energy supply market, in addition to our traditional business of supplying products, we will strive to expand sales and increase profits, creating a new business that provides services based on data collected from meters by utilizing IoT and other technologies. – 6 -Fiscal year 2020 (April 1, 2020 to March 31, 2021) Fiscal year 2021 (April 1, 2021 to March 31, 2022) (Millions of yen) Difference Amount Rate 46,845 44,238 1,151 [2.6%] 3,494 1,295 8.1% 3.0% (283) [(0.7)pp] (19.7)% Orders received Sales Segment profit [Margin] Other 43,350 42,942 1,434 [3.3%] In Other business, primarily consisting of our insurance agent business, orders received in the current consolidated fiscal year were 54 million yen (compared with the 54 million yen for the previous consolidated fiscal year), sales were 54 million yen (compared with the 54 million yen for the previous consolidated fiscal year), and segment profit was 6 million yen (compared with the 6 million yen for the previous consolidated fiscal year). 3) Forecast for the next period The azbil Group has set out its long-term targets for FY2030, and as the first step toward achieving them we have created a four-year medium-term plan (FY2021-FY2024). Based on this, we are making progress with initiatives to achieve our goals. As we work toward realizing a sustainable society, we are currently witnessing the emergence of various issues confronting society and our customers. Automation is expected to play an increasing role in providing solutions to these issues, so demand for automation is expected to increase. Following our medium-term plan, we aim to achieve sustainable growth by seizing such business opportunities and providing solutions to these new challenges by leveraging the azbil Group’s unique technologies, products, and services. In the coming fiscal year, the business environment for the azbil Group is expected to remain uncertain owing to such factors as a resurgence of the COVID-19 pandemic, supply chain disruptions, difficulties in procuring parts and materials, inflation, and geopolitical risks. Nonetheless, demand for HVAC control equipment/systems for large-scale buildings is expected to remain strong. Overall demand for production equipment for factories and plants is also expected to remain robust, particularly thanks to the brisk market for semiconductor manufacturing equipment, supported by the growth in demand that will result from the progress of DX. Taking into account the business environment described above, in FY2022, while factoring in the effect of parts procurement difficulties, we plan to increase sales by responding promptly and appropriately to changes in the business environment, tapping into the robust market demand in Japan for large-scale buildings and manufacturing equipment. Revenue will also benefit from the large order backlog at the beginning of the fiscal year. As regards profit, in – 7 -addition to the measures to enhance profitability that we have been engaged in, we plan to further improve operational efficiency by promoting DX on a global basis. Also, while making investments for growth in R&D and facilities and equipment, we will seek to increase profits. In the BA business, demand for HVAC control equipment/systems for large-scale buildings remains at a high level, and we expect sales and profits to increase thanks to both the order backlog for new buildings at the beginning of the fiscal year and expanding demand for the profitable business of refurbishing existing buildings. The AA business is expected to be affected by the continuing parts procurement difficulties. However, we plan to increase sales and profits thanks to the order backlog—which has accumulated as a result of the market recovery in the previous fiscal year, as well as customers’ advance orders—and the growth in our overseas business resulting from measures to strengthen sales capabilities. services in the Lifeline field. Sales and profits in the LA business are expected to increase thanks to growth in the LSE field, reflecting expanding demand in the pharmaceutical market, and the development of cloud The forecast of the azbil Group is based on currently available information and some reasonable assumptions. Due to various factors, actual results may differ from those discussed in this document. – 8 – (Billions of yen) Fiscal year 2021 results Fiscal year 2022 forecast Difference Amount Rate 119.7 13.8 [11.6%] 94.2 13.2 [14.0%] 44.2 1.1 [2.6%] 0.0 0.0 [11.1%] 256.5 28.2 [11.0%] 29.5 20.7 [8.1%] 129.0 14.5 [11.2%] 99.5 14.0 [14.1%] 46.5 1.3 [2.8%] 0.1 0.0 [0.0%] 275.0 29.8 [10.8%] 30.2 9.2 0.6 [(0.3)pp] 5.2 0.7 [0.0pp] 2.2 0.1 [0.2pp] 0.0 (0.0) [(11.1)pp] 18.4 1.5 [(0.2)pp] 0.6 21.5 [7.8%] 0.7 [(0.3)pp] 7.7% 4.6% 5.5% 5.8% 5.1% 12.9% 82.7% – 7.2% 5.6% 2.3% 3.4% Building Automation Advanced Automation Life Sales Automation Other Sales Segment profit [Margin] Sales Segment profit [Margin] Segment profit [Margin] Sales Segment profit [Margin] Net sales Consolidated Operating income [Margin] Ordinary income Net income attributable to owners of parent [Margin] – 9 -(2) Overview of financial position Analysis of assets, liabilities, net assets and cash flows Assets Total assets at the end of the current consolidated fiscal year-end stood at 280,052 million yen, a decrease of 4,545 million yen from the previous consolidated fiscal year-end. This was mainly due to a decrease in cash and deposits of 9,557 million yen, despite an increase of 6,257 million yen in construction in progress following capital investments to enhance our R&D base, Fujisawa Technology Center. Liabilities Total liabilities at the end of the current consolidated fiscal year-end stood at 76,910 million yen, a decrease of 7,079 million yen from the previous consolidated fiscal year-end. This was mainly due to a decrease of 8,961 million yen in notes and accounts payable-trade by a change of the Company’s standard payment terms. Net assets Net assets at the end of the current consolidated fiscal year-end stood at 203,141 million yen, an increase of 2,534 million yen from the previous consolidated fiscal year-end. This was mainly due to an increase of 20,784 million yen by the recording of net income attributable to owners of parent, despite a reduction in shareholders’ equity, which was attributed to a decrease of 9,999 million yen by repurchasing own stock based on a resolution at the Board of Directors meeting and a decrease of 8,421 million yen as the payment of dividends. As a result, the shareholders’ equity ratio was 71.5% compared with 69.6% at the previous consolidated fiscal year-end. Net cash flow from operating activities Cash and cash equivalents (hereinafter “net cash”) provided by operating activities in the current consolidated fiscal year were 10,120 million yen, a decrease of 12,482 million yen compared to the previous consolidated fiscal year. This was mainly due to an increased payments of trade payables by a change of the Company’s standard payment terms, as well as an increase of trade receivables and inventories with a backdrop of increase in net sales and orders received. Net cash flow from investing activities Net cash used in investment activities in the current consolidated fiscal year were 3,990 million yen (in the previous consolidated fiscal year net cash provided by these activities (proceeds) was 283 million yen). This was mainly due to an increase in expenditures from purchase of property, plant and equipment following capital investments to enhance our R&D base. Net cash flow from financing activities Net cash used in financing activities (expenditure) in the current consolidated fiscal year were 20,584 million yen, an increase of 13,588 million yen compared with the previous consolidated fiscal year. This was mainly due to an increase in the payment of dividends, in addition to the – 10 -expenditures resulting from the repurchase of own stock based on a resolution in the Board of Directors meeting. As a result of the above factors, net cash at the end of the current consolidated fiscal year was 77,891 million yen, a decrease of 12,761 million from the previous consolidated fiscal year-end. – 11 -(3) Basic policy regarding profit sharing and the dividends for the current and next periods For the azbil Group, returning profits to our shareholders is an important priority for management. We would also like to maintain stable dividends, taking into consideration the consolidated financial results and such indicators as levels of dividend on equity (DOE), return on equity (ROE), and retained earnings required for future business development and ensuring the healthy financial foundation. While striving to raise the level of dividends, our basic policy is to maintain stable dividends. Under the medium-term plan (FY2021-2024), as strategic investments for future business development and growth, we will be upgrading and reinforcing our business foundation—including advanced global development and production systems—while also planning investments for growth such as improving and expanding our lineup of products and services. Additionally, we are striving to ensure business continuity necessary to meet unexpected contingencies such as natural disasters. In FY2021, we have raised our R&D budget and made the necessary capital investment to enhance the functions of our R&D base (Fujisawa Technology Center). Going forward, as well as making steady progress with such investments for growth, we will continue to promote shareholder returns, in accordance with the basic policy above, while ensuring that we maintain a healthy financial foundation. As to specifics regarding the distribution of profits to our shareholders, regarding the dividend for the fiscal year ended March 31, 2022, despite the impact of parts procurement difficulties, we have been able to achieve increases in both net sales and profits compared to the previous fiscal year, and we have maintained a strong financial foundation. It is thus planned to pay an annual dividend of 60 yen per share, as announced at the beginning of the fiscal year. Consequently, a DOE of 4.2% is expected for the fiscal year ended March 31, 2022. The outlook for the global economic environment is expected to remain uncertain for the time being, and difficulties in parts procurement are also expected to have an impact. However, we expect to increase net sales and profits in FY2022, by ensuring that we tap into robust demand in large-scale buildings in Japan and manufacturing equipment market, implementing investment in R&D and DX to realize sustainable growth, and promoting further measures to strengthen business profitability. Furthermore, from a medium- to long-term perspective, we expect stable and sustainable growth based on the strategic development and business environment outlook of each business, including initiatives in the three growth fields. Thus, based on our policy of enhancing shareholder returns and raising the level of stable dividends, it is planned to further increase the ordinary dividend by 5 yen to make an annual dividend 65 yen per share for the fiscal year ending March 31, 2023. In addition to the above, based on the present status and outlook for our businesses and financial results, we plan to further improve capital efficiency while ensuring a disciplined capital policy, further increasing shareholder returns and implementing a flexible capital policy able to respond to a changing business environment. In order to make this possible, we will repurchase the Company’s own stock up to a maximum of 10.0 billion yen (maximum of 4,000,000 shares) between May 16, 2022 and September 22, 2022. Also, on May 31, 2022, we will cancel 1,500,000 shares of treasury shares held as of March 31, 2022. (For details of treasury shares, please refer to “Significant subsequent events” in “(5) Notes to the consolidated – 12 -financial statements” on page 35). As mentioned above, the azbil Group will continue its ongoing efforts to improve the return of profits to our shareholders. – 13 -2. Management policy (1) Basic policy Based on the philosophy of “human-centered automation,” the azbil Group strives—through its business operations—to contribute “in series” to the achievement of a sustainable society. In this way we ensure our own medium- to long-term development and continuously improve enterprise value. We are thus committed to meeting the expectations of all our stakeholders. Therefore, while strengthening business profitability and developing a global business foundation, we are implementing business growth measures based on our three fundamental policies—namely, being a long-term partner for the customer and the community by offering solutions based on our technologies and products; taking global operations to the next level by expansion into new regions and a qualitative change of focus; and being a corporate organization that never stops learning, so that it can continuously grow stronger. Specifically, in our three businesses—Building Automation (BA), Advanced Automation (AA), and Life Automation (LA)—we are supplying products and services based on the concept of “human-centered automation” and with a focus on measurement and control technologies, thus contributing to meeting the needs of our customers and finding solutions to the issues facing society. This is how we aim to achieve sustainable growth for ourselves as well as for our customers and society in general. (2) Management targets The azbil Group’s basic goal is to improve consolidated return on equity (ROE) and thus increase shareholder value. Through improvements in profitability and capital efficiency, we are aiming to achieve net sales in 400 billion yen range, operating income in 60 billion yen range, an operating income margin of approximately 15%, and an ROE of approximately 13.5%; these are the Group’s long-term targets Note 1 for FY2030. Toward achieving these long-term targets, our four-year medium-term plan sets out as targets for FY2024, the final year of the plan, net sales of 300.0 billion yen, operating income of 36.0 billion yen, an operating income margin of 12%, and an ROE of approximately 12%. The azbil Group has thus set out its long-term targets for FY2030, aiming to contribute “in series” to the achievement of a sustainable society and to our own sustainable growth. To this end, we have positioned the Sustainable Development Goals (SDGs) as an important guidepost for management and we are promoting several initiatives designed to achieve the azbil Group’s SDGs: those to be achieved through our business activities are (1) the environment and energy, and (2) new automation, while those to be achieved through our corporate activities are (3) supply chain and social responsibility, and (4) health & well-being management Note 2 and an organization that never stops learning. (3) Medium- to long-term management strategy As we work to contribute to the achievement of a sustainable society, a variety of societal and customer issues are emerging in our business environment—ranging from responses to climate – 14 -change and decarbonization, to changes in social structure and values. There are also issues involving how to ensure safety and peace of mind in a climate where people are learning to live with the coronavirus. As we confront these major changes, demand is expected to increase for automation, which, because it can provide solutions, will be valued even more. As far as the azbil Group is concerned, we will focus on the three growth fields—namely, new automation, environment and energy, and the life-cycle solution—that can particularly benefit from azbil’s unique technologies, products, and services. By providing solutions to these new challenges, we will realize growth for our BA, AA and LA business segments. In line with our medium-term plan (FY2021-2024), to ensure growth in the three growth fields mentioned above, we are promoting such measures as increased investment to strengthen our capabilities to develop new products and services, and the expansion of points of contact with our customers. In fiscal year 2021, the first year of the medium-term plan, as part of this initiative, progress has been made with upgrading the Fujisawa Technology Center, our R&D base, to enhance our ability to develop advanced system solutions as well as advanced, high-performance devices employing MEMS technologies. We have also made progress with enhancing our manufacturing capabilities: as part of strengthening our global production base, we have completed a new factory building at our production subsidiary in Dalian, China. As regards enhancing profitability, in addition to implementing those measures that have already proven successful—such as improving margins at order receipt, and expanding overseas production and procurement—we will further strengthen profitability by improving operational efficiency globally through the promotion of DX. Additionally, as part of focusing on capital cost-conscious management, we will introduce return on invested capital (ROIC). Also, by maximizing the efficiency of management resource utilization based on profitability from invested capital, and implementing good business portfolio management, we will improve enterprise value for the entire Group (raise ROE). (4) Initiatives to strengthen corporate governance An important management issue is the enhancement of corporate governance as the foundation for sustainable growth in enterprise value. The azbil Group has therefore been working to strengthen the supervisory and auditing functions of the Board of Directors, to improve the transparency and soundness of management, and to clarify the system of executive responsibility. Aiming to further reform our corporate governance, the Board of Directors resolved at its meeting held on February 25, 2022 to transition to a new board structure based on three committees Note 3 consisting of a majority of outside directors. This will enable a significant delegation of authority for business execution, previously undertaken by the Board of Directors, to corporate executives with clear legal responsibilities. Moreover, once this transition (to a new board structure based on three committees) is achieved, we plan to introduce a stock compensation plan using a trust. In conjunction with this, we plan to prepare a new executive compensation policy by a resolution of the Board of Directors and the Remuneration Committee, which is due to meet after the ordinary general meeting of shareholders scheduled for June 23, 2022. – 15 – (5) Initiatives in response to change of business environment including the spread of COVID-19 and parts procurement difficulties The spread of COVID-19 has yet to be contained, so we continue to see the global disruption of supply chains and problems with the procurement of materials and parts. Moreover, the world economy is being impacted by heightened geopolitical risks in Europe and elsewhere, by soaring energy prices, and by concerns about inflation, making the business outlook uncertain. We expect such changes in social conditions and the business environment to have an impact on the Group’s businesses. However, through dialogue with our stakeholders—namely, our shareholders, our customers, our suppliers and other business partners—we will respond, as a Group, promptly and appropriately to these changes in the business environment. In response to the COVID-19 pandemic, we will continue to meet the needs of society—preventing infection while maintaining vital social infrastructure and our customers’ important facilities—by continuing on-site operations (production, engineering, and service) with the safety of our customers and employees as our top priority. At the same time, for enhanced crisis management, we will continue our initiatives to strengthen pandemic prevention measures, to develop our business continuity planning (BCP), as well as securing a solid financial structure through reinforcement and diversification of financing. As regards the difficulties being encountered in procuring parts and materials, we are stiving to reduce the impact of these by improving production operations and collaborating with other companies in the supply chain. We will also contribute to preventing the spread of infection by promoting DX-based work-style reforms and expanding telecommuting among our employees. Moreover, adopting the concept of activity-based working (ABW) Note 4, we aim to develop hybrid work styles that improve productivity by combining remote work and telecommuting. Notes: 1. On May 14, 2021, the azbil Group published its long-term targets and the medium-term plan (FY2021-2024). 2. Health and well-being management is azbil’s unique approach to fostering healthy, happy, and vibrant workplaces and people. 3. Three committees: Nomination Committee, Audit Committee, and Remuneration Committee. The transition to a new board structure based on three committees is subject to approval of the necessary amendments to the Articles of Incorporation at the 100th ordinary general meeting of shareholders scheduled to be held on June 23, 2022. 4. Activity-based working (ABW): A work style that allows a worker to pick the optimal environment (location, time, etc.) to perform a certain job. – 16 -3. Activities (present situation) of the azbil Group The azbil Group consists of the Company, 55 subsidiaries and 3 affiliates, and is pursuing “human-centered automation” that aims to realize safety, comfort and fulfillment in people’s lives and contribute to global environmental preservation. The Group operates in three core business segments: Building Automation (BA) business in the building market, Advanced Automation (AA) business in the industrial market, and Life Automation (LA) business in markets closely related to lifelines and everyday life. The BA business develops and manufactures a comprehensive lineup, from building management and security systems to application software, controllers, valves and sensors, and also provides instrumentation design, sales, engineering, maintenance, energy-saving solutions, and operation and management of facilities. The Group also draws on its original environmental control technologies to create comfortable and productive office and factory spaces and to develop business that contributes to environmental load reduction. The AA business is focused on solving issues in the materials industries such as oil, chemical, steel, and pulp and paper, as well as in the processing and assembly industries including automobiles, electrical and electronic, semiconductors and food, through the provision of products, solutions, instrumentation, engineering and maintenance to support the optimum operation of equipment and facilities throughout their lifecycle. The Group develops advanced measurement and control technologies, aims to create production spaces that are safe and enhance human capabilities, and conducts business to create new value by collaboration with customers. The LA business applies measurement, control and metering technologies cultivated over many years in the building and industrial markets, as well as to lifelines such as gas and water, living spaces, the pharmaceutical and medical fields and life science research. The Group conducts this business to support active lifestyles. – 17 -As for the previously mentioned business contents, our company and related companies are positioned as shown in the following business chart. Customers in Japan, overseas Japan Production, Engineering, Sales Advanced Automation business/Others Azbil Trading Co., Ltd.*1 (Sales, design and instrumentation of equipment for control, measurement, testing, safety, environmental, etc.; engineering management services) Azbil TA Co.,Ltd.*1 and 1 unconsolidated subsidiary*2 (Manufacture and sale of pneumatic equipment and related equipment) Tem-Tech Lab.*3 (Manufacture, sales and entrusted R&D of various sensors) Life Automation business Azbil Kimmon Co., Ltd. and 4 consolidated subsidiaries*1 (R&D, manufacture and sales of gas/water meters and related equipment) Building Automation business/Others 1 other*3 Azbil Corporation R&D, Manufacture, Sales, Installation, Maintenance Japan Production Azbil Taishin Co., Ltd.*1 (R&D and manufacture of electronic and precision equipment) Azbil Kyoto Co., Ltd.*1 (Manufacture of electronic and precision equipment) Japan Others Azbil Yamatake Friendly Co., Ltd.*2 (Cleaning; safety management; collection and delivery; assembly of measurement and control components) Overseas Production, Engineering, Sales 】Advanced Automation business Shanghai Azbil Automation Co., Ltd.*1 (Instrumentation; software development; manufacture and sales of measurement and control equipment) Yamatake Automation Products (Shanghai) Co., Ltd.*1 (Sales of control equipment) Azbil North America, Inc.*1 (Sales of measurement and control equipment) Azbil Mexico, S. de R. L. de C.V.*2 (Sales of measurement and control equipment) Azbil Mexico Services, S. de R. L. de C.V.*2 (Provision of maintenance service for measurement and control equipment) Azbil VorTek, LLC*1 (R&D, manufacture, sales of flow instruments) Azbil Europe NV*1 (Sales of control equipment) Azbil Saudi Limited*1 (Production and sales of control valves) 2 others*2 Building Automation business / Advanced Automation business Azbil Korea Co., Ltd.*1 Azbil (Thailand) Co., Ltd.*1 Azbil Singapore Pte. Ltd.*1 Azbil Taiwan Co., Ltd.*1 Azbil Control Solutions (Shanghai) Co., Ltd.*1 Azbil Hong Kong Limited*1 PT. Azbil Berca Indonesia*1 Azbil Vietnam Co., Ltd.*1 Azbil Malaysia Sdn. Bhd.*1 Azbil Philippines Corporation*1 Azbil India Private Limited*1 (Above subsidiaries: Instrumentation; sales of measurement and control equipment)1 other*2 Life Automation business Azbil Telstar, S.L.U.*1 and 15 consolidated subsidiaries,*1 and 1 affiliate company that is accounted for by the equity method (R&D, manufacture, sales, installation, maintenance of manufacturing equipment and environmental equipment for pharmaceutical plants, laboratories and hospitals) Azbil Kimmon Technology Corporation*1 (Manufacture and sales of gas meters) Overseas Production Azbil Control Instruments (Dalian) Co., Ltd.*1 (Manufacture of electronic and precision equipment) Azbil Information Technology Center (Dalian) Co., Ltd.*2 (Software development) Azbil Production (Thailand) Co., Ltd.*1 (Manufacture of electronic and precision equipment) 1 other*2 Notes: *1 Consolidated subsidiaries*2 Unconsolidated subsidiaries that are not accounted forOverseas Azbil North America Research and Development, Inc.*1 (R&D and entrusted services of technological research) *3 Affiliate companies that are not accounted for by theby the equity methodequity method-18 -4. Basic rationale for selection of accounting standards Group consolidated financial statements are prepared according to Japanese standards. We are currently continuing reviewing procedures, including the possibility of voluntarily applying International Financial Reporting Standards (IFRS). – 19 -5. Consolidated financial statements and related notes (1) Consolidated balance sheets As of March 31, 2021 As of March 31, 2022 (Millions of yen)Assets Current assets Cash and deposits Notes and accounts receivable – trade Notes receivable – trade Accounts receivable – trade Contract assets Securities Merchandise and finished goods Work in process Raw materials Other Allowance for doubtful accounts Total current assets Non-current assets Property, plant and equipment Buildings and structures Accumulated depreciation Buildings and structures, net Machinery, equipment and vehicles Accumulated depreciation Machinery, equipment and vehicles, net Tools, furniture and fixtures Accumulated depreciation Tools, furniture and fixtures, net Land Leased assets Accumulated depreciation Leased assets, net Construction in progress Total property, plant and equipment Intangible assets Software Other Total intangible assets Investments and other assets Investment securities Deferred tax assets Retirement benefit asset Other Allowance for doubtful accounts Total investments and other assets Total non-current assets Total assets 68,51182,142−−−36,5005,3606,98712,1668,299(369)219,59941,416(27,481)13,93418,520(16,461)2,05920,232(17,864)2,3676,4112,741(1,278)1,46382527,0624,1431,3395,48222,7802,38247,384(99)32,45364,998284,59758,954−14,97154,98816,17630,8006,1416,08816,4546,644(423)210,79442,136(28,578)13,55818,897(16,721)2,17620,541(18,343)2,1976,4413,049(1,336)1,7137,08233,1694,9447925,73719,6353,31637,481(87)30,35069,257280,052- 20 – As of March 31, 2021 As of March 31, 2022 (Millions of yen) Liabilities Current liabilities Notes and accounts payable – trade Short-term borrowings Income taxes payable Advances received Contract liabilities Provision for bonuses Provision for bonuses for directors (and other officers) Provision for product warranties Provision for loss on orders received Other Total current liabilities Non-current liabilities Long-term borrowings Deferred tax liabilities for land revaluation Retirement benefit liability Provision for retirement benefits for directors (and other officers) Provision for share awards Other Total non-current liabilities Total liabilities Net assets Shareholders’ equity Share capital Capital surplus Retained earnings Treasury shares Total shareholders’ equity Accumulated other comprehensive income Valuation difference on available-for-sale securities Deferred gains or losses on hedges Foreign currency translation adjustment Remeasurements of defined benefit plans Total accumulated other comprehensive income Non-controlling interests Total net assets Total liabilities and net assets 31,9519,0356,0704,039−9,85313551824614,60976,4593131811,6601691,6343,5697,53083,99010,52211,670177,900(13,709)186,38411,10824699(26)11,8052,416200,607284,59722,9908,0466,758−6,07810,7621255129314,08669,4523001811,6901991,9273,1587,45776,91010,52211,670190,263(23,667)188,7899,173(74)2,442(16)11,5242,827203,141280,052- 21 -(2) Consolidated statements of income and consolidated statements of comprehensive income (Consolidated statements of income) (Millions of yen) Year ended March 31, 2021 (April 1, 2020 to March 31, 2021) Year ended March 31, 2022 (April 1, 2021 to March 31, 2022) Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating income Non-operating income Interest income Dividend income Foreign exchange gains Rental income from real estate Reversal of allowance for doubtful accounts Other Total non-operating income Non-operating expenses Interest expenses Commitment fees Expenses of real estate Office relocation expenses Other Total non-operating expenses Ordinary income Extraordinary income Gain on sale of non-current assets Gain on sale of investment securities Total extraordinary income Extraordinary losses Loss on sale and retirement of non-current assets Loss on business restructuring Loss on sale of investment securities Loss on valuation of investment securities Total extraordinary losses Income before income taxes Income taxes – current Income taxes – deferred Total income taxes Net income Net income attributable to non-controlling interests Net income attributable to owners of parent 246,821147,45199,36973,64825,720131546913212611,06613520801149744826,3386301,5722,203435−861053228,0096,7228907,61220,39747819,918256,551150,845105,70577,47428,2311566466322602531,715123193813610942829,51928608631162183−33830,0448,3722508,62321,42163720,784- 22 -(Consolidated statements of comprehensive income) Net income Other comprehensive income Valuation difference on available-for-sale securities Deferred gains or losses on hedges Foreign currency translation adjustment Remeasurements of defined benefit plans, net of tax Total other comprehensive income Comprehensive income Comprehensive income attributable to: Owners of parent Non-controlling interests Year ended March 31, 2021 (April 1, 2020 to March 31, 2021) Year ended March 31, 2022 (April 1, 2021 to March 31, 2022) (Millions of yen)20,3972,26453(170)(8)2,13822,53522,04349221,421(1,935)(99)1,9379(87)21,33420,502831- 23 -(3) Consolidated statements of changes in net assets Fiscal year 2020 (April 1, 2020 to March 31, 2021) Share capital Capital surplus Retained earnings Treasury shares Shareholders’ equity (Millions of yen)Total shareholders’equity Balance at beginning of period 10,522 11,670165,055(13,740) 173,508Changes during period Dividends of surplus Net income attributable to owners of parent Purchase of treasury shares Disposal of treasury shares Net changes in items other than shareholders’ equity Total changes during period Balance at end of period Changes during period Dividends of surplus Net income attributable to owners of parent Purchase of treasury shares Disposal of treasury shares − 10,522 (7,073)19,91812,844177,9000011,670(13,709) (6) 37 31 (7,073)19,918(6)3712,875186,384(7,073)19,918(6)372,42915,305 304 304 Accumulated other comprehensive income Valuation difference on available- for-sale securities Deferred gains or losses on hedges Foreign currency translation adjustment Remeasure-ments of defined benefit plansTotal accumulated other comprehensive income Non-controlling interests Total net assetsBalance at beginning of period 8,843 (28)893(27)9,680 2,112 185,301Net changes in items other than shareholders’ equity Total changes during period Balance at end of period 2,264 2,264 11,108 535324(193)(193)69900(26)2,125 2,125 11,805 2,416 200,607- 24 -Fiscal year 2021 (April 1, 2021 to March 31, 2022) Share capital Capital surplus Retained earnings Treasury shares Shareholders’ equity (Millions of yen)Total shareholders’equity Balance at beginning of period 10,522 11,670177,900(13,709) 186,384Changes during period Dividends of surplus Net income attributable to owners of parent Purchase of treasury shares Disposal of treasury shares Net changes in items other than shareholders’ equity Total changes during period Balance at end of period − 10,522 −11,67012,363190,263Accumulated other comprehensive income Valuation difference on available- for-sale securities Deferred gains or losses on hedges Foreign currency translation adjustment Remeasure- ments of defined benefit plansTotal accumulated other comprehensive income Non-controlling interests Total net assetsBalance at beginning of period 11,108 24699(26)11,805 2,416 200,607(8,421)20,784(10,003) (10,003)45 45 (9,958) (23,667) (8,421)20,7842,405188,789(8,421)20,784(10,003)451292,534Net changes in items other than shareholders’ equity Total changes during period Balance at end of period (1,935) (1,935) 9,173 (99)(99)(74)1,7421,7422,44299(281) (281) 410 410 (16)11,524 2,827 203,141 Changes during period Dividends of surplus Net income attributable to owners of parent Purchase of treasury shares Disposal of treasury shares – 25 -(4) Consolidated statements of cash flows Year ended March 31, 2021(April 1, 2020 to March 31, 2021) Year ended March 31, 2022 (April 1, 2021 to March 31, 2022) (Millions of yen)Cash flows from operating activities Income before income taxe