Itochu Corp

Thank you. I'd like to now present the financial results and make presentations based on the PowerPoint presentation material that you have. Before talking about the details, There are three key points that I'd like to describe about the Q3. Last year, there were 130 billion yen extraordinary gains. So at the end of the first half, there were views that it's going to go below the year before. But at the end of the Q3, although the increase was small, we once again recorded the highest. net profit next is the operating cash flow we had the record high number two years in the row 10 increase year-on-year excluding the working capital the core operating cash flow also grew by 13 year-on-year so I think we can say that our capability to generate cash remains very strong. The point three is that the trends stay the same, as I mentioned at the end of the first half, and the non-resource businesses, especially the consumer-related, remain strong. But in Q3, we started to see some differences among the different companies. and we are making a good progress. In addition to those three points, based on the results up to Q3, we have decided to execute the additional 25 billion yen share buyback as a return to our shareholders, and I will explain the details later. In January, We announced the management structure for FIE24. We have a good results of the management team and our management policy will continue and management team including CEO are basically the same. So I think you can feel reassured that we would achieve the targets of the brand new deal 2023. Starting with page 2, I'd like to now explain the numbers. Now the net profit was 682.2 billion yen, the record high number, up 0.5% year on year. The trends remain the same as the first half, especially Q3. The Q3 net profit was 199.2 billion yen, which is the record high number. The next page shows this, but the food company, the progress is 53%. ICT and financial business is 60%. So they are at low levels. But the metals and minerals, machinery and energy and chemicals have updated their highest record profit number. And we are also seeing the strength in general products and realty. And vis-à-vis our forecast of 800 billion, the overall progress is 85%, and the percentage of the non-resource is 76%, which continues to be at high level. Next page shows the segment numbers, but before explaining that, in order to make things easier for you to understand, we are now giving the breakdown of core profit. You see the total on the right and you see the breakdown of non-resource and resource and others. Now the core profit of $634 billion is a record high and 15.3% higher. And among the growth, $84 billion is the total increase of the core profit. And 73% comes from the non-resource. The non-resource is 61 billion and 19.5 billion for the resource business. And there was a major impact of the weaker Japanese yen. And the impact of the foreign exchange is 69 billion yen and the improvements of the covid related is 18 billion yen and at the same time the iron ore and other natural resource prices the impact was 8.5 billion yen excluding all of those factors the net increase was 5.5 billion yen. Non-resource account for 11 billion. The resource is minus 8.5 billion yen. For your reference, the foreign exchange impact is 50% from non-resource and the remaining 50% from resource businesses. In non-resource, ICT and financial business minus 19 billion, CITIC CP 14 billion in a negative area, and the food is minus 11.5 billion, energy and chemicals is minus 10 billion. I would explain this later, but there were funds and mobile phone related in ICT and financial business, and CDC Connexio are included here. And as for the CP and CITIC, Especially CP, the pork price in China, in Vietnam were sluggish. And also as for CITIC, there was an extraordinary evaluation gain. CITIC has been very profitable. And CITIC securities evaluation, again, if you look at the core profit there, it is strong. but there is a sign of iron and in comparison to that there is a negative impact and in cedic and cp we look at it as a one segment so this includes the investment by the cedic and it shows negative food i would explain this later but in q3 the door and high life did not improve very much and the profit declined as for energy and chemicals the price and forex impact was big But excluding them, the upstream dividend was low, and Azerbaijan and Japan's oil volume were down. So this is a net negative. And so this is the new information that we are making it easier for you to understand. The page five is the extraordinary gains and losses. The total of the Q1 to Q3, the total as you can see on the right hand side was 48 billion yen. Last year it was 129 billion yen. So it's down by 81 billion yen year on year. In Q3, as you can see here, It was the loss of 5 billion yen. In machinery company, there was a losses on the aircraft, at least to Russian airlines, and that was booked. And that was the major item. There are no other major ones. So if you look at the major impairment losses, There is a sale of North American beverage equipment maintenance company, and also, as I mentioned, a lease to the Russian Airlines, and a revaluation gain on securities business in CITIC Limited. Those are included, and they are major ones. In Q4, we do not expect any major impairment losses. So in comparison to our annual forecast of 800 billion yen, core profit is 770 billion yen. So extraordinary gains and loss is 30 billion yen. And as of now, you can see that it's 48 billion yen included. So that means that about the loss of 18 billion can be expected for Q4. Now, it is the second year of our medium term plan. And of course, toward the end of the fiscal year, we would discuss the potential impairment losses with SCP. But there are no major concerns that we have. If I may talk about the annual forecast on page 30. here we are showing a bar graph of the annual forecast the progress up to q3 is shown here so annual forecast is 800 billion yen and remains the same and the progress is 85 percent the first half it was 60 percent so we are making a steady progress and we have not yet used the buffer of 20 billion yen And there are some differences among the segments, but we are not making any revisions to the numbers of segments. the strength is seen in metals and minerals and energy and chemicals and food is weak later on if you refer to pages 12 to 20 you find that if you only look at the q4 the conservative views are in machinery general products and realty and the eighth because in q4 The construction machinery, for example, the IPP business in North America, and also the car trading and export numbers. And also, we have a conservative view on some of the assets that we have. In general products and realty, the pulp price, which remained at the high level, is expected to come down. And also in North America, with the deceleration of the economy, the construction material-related business is expected to slow down. And freight market is coming down. So we have a conservative view on the general products and beauty. As for eighth, in Q4, less cross-holding and also the family mart. as the lowest earnings and also the lowest customer traffic in Q4. So because of that, the numbers are considered to be conservative in Q4. Next, going back. To page 9, which is about the additional shareholders' return, as I mentioned, we decided to execute 25 billion yen additional share buybacks. As we announced at the beginning of October, The 35 billion share buyback was already executed by the January 31st this year as planned. But in the medium term business plan, we say that we execute the share buyback actively and continuously. without any numerical target. So in January, we have completed the share buyback of 35 billion. So we would like to continue with this. And at the end of the first half, as we explained to you, we will make judgment about the share buyback based on the level of the excess cash at the end of each quarter. At the first half end, the core free cash flow was 127 billion yen. And this time, as you see on page 22, the core free cash flow was 182 billion yen. So the difference is about 55 billion. And as we did before, the half of that will be used for shareholder return. That is our way of thinking. And in the medium term, in FIE23, the total shareholder returns was 33%. In addition to that, there is a commitment to a dividend payout ratio of 30% in FIE 2024. So as we promised, we are reviewing the cash flow frequently. And in addition to the qualitative targets, we are making the steady initiatives. And as for Odisha buyback, Part of it will be off auction using TOSNET 3 and also the small lot purchase from the market until March. Now let me talk about each segment now. So page 3 has the details. It shows the net profit changes. The ones with the asterisks, three companies recorded the highest numbers. And others also has the asterisk. There are a lot of extraordinary items. And now we refer to four companies. And the details are shown from pages 12 to 20. So net profit of 682.2 billion yen. And I'd like to talk about the businesses with higher core profit. And the highest core profit was recorded by the metals and minerals, also based on the net profit. And the core profit was 197.9 billion yen, which is a little less than 40 billion yen higher than the year before. There was a major impact of the weaker yam. In addition, in the metals and minerals, there is a trading business of the non-resource. And Marubeni Tochu Steel, which sells the steel products, showed strength mainly in North American construction materials and pipes and so forth. And in comparison to last year, the coal price has recovered. So EMEA coal business showed strength. And the iron ore business in Brazil, the dividend increased. And The iron ore price is down year on year, so EMEA iron ore core profit is down, but still we made more than 40 billion yen increase and achieved the core profit of 197.9 billion yen. The second highest core profit is the machinery and they had the highest net profit and the core profit was 82.6 billion yen up 24 billion yen year on year it has a wide ranging businesses and overall they show strength north american ipp business and the import of the cars, Yanase in Japan, and American, the construction machinery business, Mauti Equip, and also Hitachi Construction Machinery, which started to come in from Q3, and also the car dealer business overseas. Those were all strong. And the Russian-related leasing of the aircraft, that was negative, but all of those contributed significantly. So the third... Also, the highest core profit is the energy and chemicals. Core profit was 79.8 billion yen. The trading of the energy and the power were strong, and also Azerbaijan business was strong. Now overseas and Japan, the chemical companies, there are good ones and bad ones. And there was no dividend of the Saharan business. So offsetting the negative factors, there were 18.5 billion yen growth. So achieving the core profit of 79.8 billion yen. The one without that risk, the general products and realty, also had a core profit of 79.8 billion yen. which is up by 17.2 billion yen year-on-year. Construction material-related business in North America and also Japan were strong, and the pulp price stayed at the high level, and therefore the pulp business in Finland was very strong. And European tire business, e-tail, was successful in increasing the prices and increased the profit. And Itochu Property Development, selling the condominiums in Japan, they also had good results up to Q3. And including the freights, the logistic prices were high, and Itochu logistics showed strength. So it was not the highest record, but they did contribute significantly. So in comparison to the year before, based on the core profit, this company showed a growth. Now other companies, textile and the eight. Numbers are smaller. The eight has grown by 3 billion and textile has grown by 3.9 billion yen. As for family mart, their costs, water and electricity included, have come up and also the support expenses increased. In order to recover to the daily sales before COVID, they have increased prices and they're making good progress. And the annual target of 33 billion is likely to be achieved. And the textile is smaller, but we are capturing the recovery from the COVID, so apparel business is positive. It's not the company, but the CP SIDIC. The total is 8.3 billion yen increase of the core profit SIDIC. The iron ore price was down and the cyanine iron was down, but the CITIC Bank and CITIC Securities showed strength. And also, yen was weaker vis-à-vis the renminbi, so they're making a good progress. Now the CP Group, the pork-related businesses in Vietnam and China, Just like food business, the pork prices were lower, therefore the negative performance up to Q3. So including the eighth and textile and food, we see positive trend in seven segments. Now in terms of the progress, There are some concerns in ICT and financial business and food. ICT and financial business, there was extraordinary gain, the major one last year. And excluding that, we are struggling. Last year, the share prices were at high level and it has come down. As a result, the investment by our venture capital funds suffered significantly. So venture capital fund related numbers have not yet recovered from Q2. And also the mobile phone related, the sale of the used phones and others, we are not showing the growth that we achieved last year. And the other day, CDC announced their earnings. The top line and the gross profit are strong, and also the backlog log is at the highest level. But in ICT, there is a shortage of semiconductor as well as the personnel, and there have been delay of the projects, so they have lowered the annual forecast. They have not yet absorbed the increased cost. As for Conexio, there is a lower volume of sales. So because of this, the ICT and the financial businesses, the core profit is down by 17 billion. But our net profit forecast of 64 billion, As you know that Nojima is doing the TOB of Conexio and next week this TOB will be completed. So there will be a replacement of the assets and we are likely to achieve the net profit target. As for food company, here You see that the results of the food is here 36.7 billion and 33.2 billion in core profit, which is down by 12.1 billion year-on-year. As it happened in the first half, the upstream area has been very strong. But it was Shokuhin and Nippon access, the food distribution is also strong. But dough has been weak. And due to the lower pork price, the high life is suffering. That's what I said in the first half. And these two actually worsened in q3 very quickly and we are taking countermeasures and we expect the recovery but in q4 probably this is likely to continue to some extent but So in Q3, we saw the quick decline of the North American business. And so those businesses are suffering. But the food, the negative trend and also the ICT and financial businesses are likely to catch up in Q4. So overall, We believe that we are making a good progress vis-à-vis our overall forecast. Now I'd like to talk about cash flow. Page six. The operating cash flows, the metals and minerals and energy and chemicals, those three companies are generating operating cash flows. 11% increase year-on-year, the operating cash flow of 632 billion yen was achieved. Excluding the working capital, the core operating cash flow increased 13% and reached 691 billion yen. At the bottom, you see the core free cash flows and net investment cash flows, which shows 386 billion, which is the third highest. And I would explain this later on, on page 22. The total of the major new investment is 518 billion yen. So we are making good progress there. we are showing the financial position with the weaker yen and new investments the total assets increased 1.4 trillion and reached 13.6 trillion the total shareholders equity due to the higher profit and weaker yen increased 1.5 trillion to 4.7 trillion yen the page 8 shows the assumptions and those assumptions have not changed from November Now I'd like to talk about the foreign exchange impact. So the total impact was 69 billion yen, which is shown on page 4. And if you look at assumptions, The exchange rate average is 135.08. So yen weakened by 24.53. So this is the impact. The total assets... there was an impact of 210 billion yen and 79 billion yen on equity and net interest-bearing debt was up by 64 billion yen. That's the calculation. As for investments, I'd like to go over to page 21. As I mentioned, the gross investment up to Q3 was 518 billion yen exit was 132 billion yen net investment amount was 386 billion yen which is the third highest in the history this includes the construction material construction machinery chemicals and iron ore and storage batteries and so forth in the three quarters there are many small ones But for the future growth of the profit, we are making those investments so that we can grow the profit within the cash that we have. So on this page, the biggest investment was in the second quarter, the investment in Hitachi Construction Material, 132.5 billion yen. The second is the iron ore business held by ArcelorMittal in Canada. And the third is the North American construction material investment. If you only look at the Q3, as you can see between the parentheses, the gross investment was 161 billion yen. This includes the investment in Canada for iron ore and also the share buyback of Yanase and the investment for the chemical distributor in the United States. That concludes my presentation. Thank you for your attention.