President Izumisawa's 2023 New Year Message (Summary)

2022: MTBP Progress Despite Growing Global Uncertainty

• Global uncertainty, arising from Russia's invasion of Ukraine and the unstable global economy, is driving concerns toward national security, value chains, energy, and food supplies.
• Today, initiatives aimed at achieving a decarbonized world are transitioning from solely seeking renewable energy solutions to more pragmatic pathways that utilize existing facilities to balance the environment and the economy. This shift is consistent with the scenarios and direction of MHI Group's MISSION NET ZERO(Note1).
• Even amid the acute changes taking place in our business environment, this past year our 2021 Medium Term Business Plan (MTBP) stayed mostly on track. I express my sincere gratitude for everyone's hard work that made this possible.
• In terms of strengthening our profitability, we are seeing results from efforts made in all our businesses and outperformance by our mass and medium-lot products and aircraft engine components groups on the back of the market recovery from the pandemic. Orders increased markedly for gas turbines and metals machinery.
• In our quest to open up growth areas, in the Energy Transition field we launched feasibility studies on carbon capture and other projects, and these moves are expected to expand in the future. In the area of Smart Infrastructure (New Mobility & Logistics), various projects are making progress toward real-world deployment: for example, we conducted a pilot test of an automated warehouse picking solution at Yokohama Hardtech Hub (YHH)(Note2).

As We Head into the Final Year of 2021 MTBP

• This April we will enter the final year of our 2021 MTBP.
• We are still only partway toward realizing our stated goal of a 7% business profit margin. We will continue striving toward that goal by reducing our fixed costs through digitalization of our business processes, efficiency improvements, expansion of after-sales services, etc.
• Our growth strategies are now being embodied in specific projects. Enactment of the Inflation Reduction Act (IRA)(Note3) in the United States will accelerate the clean energy transition, which offers us an opportunity to embark on co-creation to build value chains: for example, a supply network for alternative fuels that spans from production to use.
• In the area of Smart Infrastructure, we will enhance value creation by making our machines more intelligent and better optimized, including existing projects such as logistics automation and integrated solutions for data centers.

Three Things to Keep in Mind to Achieve 2021 MTBP

• First, go above and beyond in order to meet the challenge. Thinking outside the box - for example, copying ways in which other sites excel or incorporating different perspectives - is important not only on the front lines but equally so in our corporate divisions.
• Second, "leverage synergy." In order to capitalize on our foremost strength - our vast range of manufacturing businesses - I urge you to make lateral connections wherever possible. Bringing together technologies and products in novel ways will give birth to valuable new solutions.
• Third, "share goals." Our MTBP sets out specific goals for each division: let's all work to achieve them together. I especially ask those of you in management positions to remain sensitive to management policies, our customers'needs and social trends, and put them into action based on a comprehensive view of your own divisions.

• 1MISSION NET ZERO is MHI Group's declared commitment to achieve net zero carbon emissions, on both the demand and supply sides, by 2040. For further information:
  https://www.mhi.com/company/aboutmhi/carbon-neutral
• 2Yokohama Hardtech Hub (YHH) is a co-creation space, located within the Honmoku Plant of MHI's Yokohama Dockyard & Machinery Works, where venture firms, business corporations, governmental agencies, educational institutions and other partners jointly participate in new product development, etc. See:
  https://www.mhi.com/news/201026.html
• 3The Inflation Reduction Act was enacted by the U.S. Congress in August 2022. It incorporates tax incentives to companies that invest in environmentally beneficial solutions: for example, solar, wind and battery power.