Itochu Corp

Thank you. This is Hachimura speaking. Thank you very much for joining us. Let me now present the Q3 business results. I will be using the PowerPoint presentation material that you have. First of all, the net profit attributable Itochu was 611.7 billion yen. In November, we revised the forecast from 780 billion to 800 billion yen. And as expected, we are making steady progress. The progress rate is 76%. As you can see on the following page, the percentage of the non-resource was 77%. The full year target of 800 billion yen is unchanged. And I will touch upon this later. This fiscal year is the last year of the medium term management plan. And last year, the results was 800.5 billion yen, and we have not yet used the buffer. And last year from Q3 to Q4, the Dow and High Life faced difficulties. And as of now, we believe that the bottom figure of the medium-term management plan would be 800.5 billion yen. And based on that, we would like to make plans for the next fiscal year. As for the detailed number by segment, Mr. Yamaura, the general manager of the accounting, will present later. Let me now explain briefly on the core profit on page four. First of all, higher profits were recorded in three companies, including the eighth, food, and ICT and financial business. The core profits increased in five companies, including food, Eighth, machinery, ICT, and financial business and textile. The high progress rates were achieved in eighth, food, machinery, and energy and chemicals. And lower profits and lower core profits were recorded in three companies, including metals and minerals, energy and chemicals, and general products and realty. In terms of the low progress rate, textile was also low because of the fact that we could not execute extraordinary gains and losses up to Q3. Now going back to the core profit, the total was 583.5 billion yen, which is down by 50.5 billion yen, or 8% year-on-year. The reasons behind that was that forex impact was 15 billion yen positive, interest was 28 billion minus, and resource prices was 26 billion yen minus. So the net was 11.5 billion yen. The non-resource part, core profit, on this page shows 443 billion yen, down 25 billion yen, or 5% year on year. Most of that is due to higher interest rates. The interest impact, excuse me, the Forex impact was 4 billion yen positive, but the interest was minus 30 billion yen. So net impact was 1 billion yen positive. In food, last year, The Dow struggled, and there was a recovery from that. And Nippon Access continues to be strong. And grains business in United States also show strength. So the total was 27 billion positive. And second largest was in eighth company, 14 billion yen. This is because of the family mart related. And the machinery, 14 billion yen. And this is mainly due to the recovery of the semiconductor and the automobile dealer business or export business, and also the IPP business in North America, which faced a very hot summer last year. And there was a start of the equity pickup from Hitachi Construction Machinery, so 14 billion yen positive. And as for the 13 billion in ICT and financial business, major factor was the CTC. And also, with more people moving around, the Hoken no Madoguchi showed strength. As for the negative side, energy and chemicals, the energy trading, especially the LNG and chemical-related trading transactions, including sulfur, were lower, and in general products and realty, the lower pulp prices led to the lower IFL. It was generating profit, but the number was quite poor. As for the Forex impact, overall impact was 15 billion yen. In comparison to the end of December, yen weakened by 8.3 yen. And out of this 15 billion yen forex impact, two-thirds is in metals and minerals related to IMEA. And the weaker yen pushed up the total assets by 300 billion yen. the shareholders' equity by 135 billion yen. Now, talking about interest, negative impact of the interest was 28 billion yen. This is mainly due to the higher interest rate based on the U.S. dollars. The impact was big where the working capital is in dollars. such as CITIC, Equity Company Orchid, and Marubeni Dojo Steel, Do, Itel, and North American-related businesses. As you can see on page 8, the exchange rate and other assumptions are shown here. So iron ore price, was up by 2% year-on-year. Thermal coal was down by 62%. Coking coal, down by 13%. In non-resources, hardwood pulp was down by 17%. Those are influencing the natural resource prices and others shown on page 4. Now turning to extraordinary gains and losses on page five. In Q3, the major one was the Fuji Oil Equity Company, a bloomer in North America. The impairment loss was booked and our negative number was 6.5 billion yen. This business faces some difficulty. I also visited there. In Q3, there was a conversion of the daiken into consolidated subsidiary and sale of the business related to the senior delivery services. And net results was minus 1.5 billion yen. From Q1 to Q3, the extraordinary number was 28 billion yen plus. And in Q1, there was a major impact of 16.5 billion yen in relation to 24M. Cash flow on page 6 with the brisk operating activities. The operating cash flow was strong in eighth, food, and general products and realty, 626.3 billion yen. Looking only at Q3, the core operating cash flow was 240 billion yen. So we are generating cash steadily. As for the cash flow from the investing activities, this does not include CTC or DAICAM, so it Looking at the core operating cash flow, it was the cash out of 419 billion yen. Concerning this, page 19 shows some details. The net investment cash flow was the net cash outflow of 419 billion yen. In Q3, there was a DAICAN TOB and out of the 419 billion, excluding capex, the three quarters of the new investment was related to CDC and DICAM, TOB. Now I'd like to hand the microphone to Mr. Yamaura to talk about the segment numbers. Thank you. This is Yamaura speaking. Let me now explain the net profit by segment. Please refer to page 3, which shows the net profit attributable to Itochu by segment. Also, pages 10 to 18 show details for your reference, starting with textile. The extraordinary gains on partial sale of the industrial materials business was booked in the previous year, and the net profit declined slightly by 0.6 billion yen. But we have seen the stable performance in apparel-related companies, and the core profit increased year on year. Progress was 57%. Next is machinery. Last year, there were extraordinary gains and losses of the sale of the North American medical device maintenance business, so compared to that, the profit went down slightly, but the Earnings were high in North American electric power related business and also the start of the equity pickup of the Hitachi Construction Machinery. The core profit improved significantly. The progress was 84%. In metals and minerals, due to the lower core prices and lower earnings in Marubeni Itochu Steel, resulting from the absence of the favorable performance in North American steel pipe business, the profit declined by 33.9 billion yen. The progress was 69%. In energy and chemicals, there was a favorable performance in energy trading transactions and chemical-related transactions last year. And the lithium-ion battery company 24M. There was a revaluation gain, but still the profit declined by 11.3 billion yen. The progress was 80%. In food, there was an improvement in logistics cost in DOH, and the food distribution business, Nippon Access, continued to be strong. And there was an improvement in earnings of North American meat product-related company. And in Q3, there was an impairment loss in relation to the Fuji oil. And as a result, the profit increased by 14.6 billion yen. The progress was 90%. Next is general products and realty. The domestic construction materials related company and overseas real estate business were strong last year. And there was extraordinary gain for the North American business last year. Also, the pulp prices became low, which affected the pulp related company in Europe. So as a result, the core profit Profit declined by ¥34.4 billion. The progress was 64%. ICT and financial business, CDC continued to show strength, and there was a higher agency commission in Hokei no Madoguchi Group, and the improvement of re-measurement gains and losses for fund-held investment and extraordinary gains on the sale of overseas companies. The profit increased significantly by 15.7 billion yen, the progress 69%. The eighth, the family mart cost increased in various ways, but through the enhancement of product appeal and sales promotion, the number of customers spent per customer and daily sales increased. and external gain on the sale of the domestic company was made, and as a result, the profit increased significantly by 16.8 billion yen. The progress reached 122%. Other adjustments and eliminations. At CITIC, the comprehensive financial services segment was strong. However, The increase in interest expense with higher U.S. dollar interest rate and lower earnings in CP pork hound resulting in the lower pork prices led to the decline of the profit by 36.6 billion yen. Due to the lower market prices and higher interest rates, profits were lower in some companies. But the higher profit was recorded in food, ICT, financial business, and eighth. and excluding the extraordinary items, core profits increased in textile, machinery, food, ICT, and financial business, and D8. So earnings have been quite steady. Let me add some comments on the forecast for Q4. Concerning the forecast of 800 billion yen, We are not changing the detailed numbers and we increased the forecast from 780 billion to 800 billion in November, increase of 20 billion yen. We are doing well, but we still see the mixed performance. Some companies are still lower than expectation, but it doesn't mean that we have any concerns. If you go back to last year, our outlook was 800 billion yen, and at the end of Q3, the progress was 85%. And at that time, toward the end of the year, we already explained that there were some concerns about the Dow and High Life. And due to the rapid deterioration of those businesses, we booked the extraordinary loss of 27 billion yen in Q4. As a result, the extraordinary number came down by 35 billion yen, and the overall results ended at 800.5 billion yen. and right now the progress is 76% and we have a buffer and we do not have any many concerns. Of course toward the end of the fiscal year it is necessary to evaluate the fair value of all the projects but currently we do not have any concerns. But of course that the market declines and some of the upsides that we expect could be postponed to the next year because this happened in the past. But we do not expect to go lower than 800.5 billion yen. So in terms of medium-term business management plan, When we move to the next fiscal year, we do not expect any downward or parallel trend. That concludes my presentation. Thank you for your attention.