Itochu Corp

Hello, everyone. I am Keita Ishii, the President of Itochu Corporation. Thank you very much for joining us today. Let me explain an overview of the business results for the first half of FIE 2025. Please refer to the FIE 2025 first half business results summary released today. Starting with page 3, This is a summary of the first half financial results. Consolidated net profit increased by 6% or 25.5 billion yen year-on-year to 438.4 billion yen, achieving 50% of the annual forecast. As a trend in our company, the core profit tends to grow in the second half rather than being evenly distributed across the quarters. We believe the progress is steady. In addition to the solid profit base in non-resource sectors, the turnaround of the previously struggling pork business and the accumulation of extraordinary gains from asset replacement have also contributed to the steady progress towards achieving our annual forecast. Our core profit reached 396 billion yen, maintaining the second-highest profit level after FIE 2023. By sector, textile, chemicals, food, construction and real estate, ICT, and the eighth showed strong performance, resulting in a 12.5 billion yen increase in core profit, which is 3% growth year-on-year. In a particularly volatile second quarter, We effectively adapted to changes and were able to minimize the impact of fluctuations. I believe we have successfully demonstrated our resilient profitability in response to environmental changes. Furthermore, the performance of our group companies, which is one of our strengths, also showed favorable trends, with the ratio of group companies reporting profits reaching 87.5%, the highest for the first half. The core operating cash flows exceeded 500 billion yen for the first time in all the half-year results and reached 513 billion yen, setting an all-time high. Next is page 4. This shows the business results by segments. For the first half results, textile, machinery, food, the eighth, and others saw an increase in profit compared to the same period last year. Textile saw an increase in profit driven by an apparel business resulting from continued inbound consumption and stable performance in the sports sector which is expected to grow further. so on an increase in profit due to a strong sales in Enase's new and used car sales, steady sales in overseas automobile business and aerospace-related companies, along with gains from sale of Australian infrastructure company and the UK's energy from waste project company. Food saw an increase in profit due to steady profit improvement from turnaround of High Life, the pork farming business, and strong performance in Nippon Access and Itochu Shokuhin due to increased consumer activity and expanded transactions. The eighth. saw a significant increase in profit with continued strong performance of Family Mart, an extraordinary gain on the group reorganization of Chinese business. In CITIC, despite the poor performance in iron ore and steel businesses in subsidiaries, profit increased from the impact of weaker yen and reduced interest expenses and others. Profit of others increased along with improved profitability from CP pork hand due to the recovery of pork market and reduced feed costs. Metals and minerals, energy and chemicals, and general products and realty saw a decrease in profit. In metals and minerals, despite increased dividends from the Brazilian iron ore business, profit declined due to deteriorating profitability in Marubeni Itochu Steel's North American business and operational issues in cooking coal companies. In energy and chemicals, although chemicals' performance was steady, profit decreased significantly due to the absence of large external gain in the previous fiscal year's power and environmental solution. In general products and realty, despite improved profitability in domestic operations and higher profits from the consolidation of Daiken and steady performance in the domestic real estate business, profit was down due to the decrease in North American construction materials business affected by higher cost and market downturn. in ICT and financial business, results were almost flat year on year due to the absence of extraordinary gains recorded in the previous fiscal year and lower profit in the mobile phone business, offsetting the strong performance of our core business of CTC, supported by continued strong demand for digitalization. Next, Some additional comments on the four-year forecast shown on the right-hand side of the page. For textile, we expect a 40 billion yen increase in profit to 73 billion yen due to an extraordinary gain from the consolidation of descent in the second half. For metals and minerals, we have revised the forecast down by 40 billion yen to 200 billion yen due to the impact of falling iron ore prices and operational issues in caulking coal companies. Additionally, due to the realization of extraordinary gain from the group reorganization of Chinese business in Family Mart in the first half, which was included in the outlook for others at the beginning of this fiscal year, when the project was in progress, we have revised the forecast for the eighth upward by 30 billion yen to 65 billion yen and reduced the forecast for others by the same amount. The overall annual forecast remains unchanged at 880 billion yen. Next, please refer to page 5, which is on the core profit for the first half of FYE 2025. The core profit, which represents the earnings power excluding extraordinary gains and losses, as mentioned, increased by 12.5 billion yen year-on-year to about 396 billion yen. The core profit in no-resource sector increased by 10 billion yen to 306 billion yen, with the effect of the forex being a positive 11 billion yen and effect of interest rates being a negative 1 billion yen. Excluding these effects, the net remained almost flat. Despite the slowdown in Marubeni Itochu Steel and the North American construction materials business affected by the downturn in North American construction demand, the profit improvement from the turnaround of the pork business and strong performance of CTC supported the earnings. The core profit in the resource sector increased by 3 billion yen to 89.5 billion yen, with the effect of resource prices being negative 14 billion, defect of the forex being a positive 8 billion, and defect of interest rates being a positive 0.5 billion yen. Excluding these, the net was a positive 8.5 billion yen due to increased iron ore volumes and dividends received. Overall, we secured an increase in core profit by offsetting the negative factors from the decline in resource prices and economic impact on certain businesses, not only through the effect of the weaker yen, but also through the growth of existing businesses and steady progress in turnarounds, maintaining the all-time second highest profit level. Next, please skip to page 7, which shows the cash flows. Operating cash flows reached 578.6 billion yen, setting the record high due to a stable performance from the operating revenues in the eight machinery and the food, as well as dividends received from the equity method investments in metals and minerals. Additionally, the core operating cash flows surpassed 500 billion yen for the first time on the half year basis, reaching 513 billion yen, also setting a new all-time high. The net investment cash flows resulted in a net cash outflow of 192 billion yen due to the investment in wheat cars in general products and realty and acquisition of equity method investments in machinery and the purchase of fixed assets in the aid, general products and realty, and food. The core free cash flows amounted to a surplus of 321 billion yen. Regarding investments, we have seen an accumulation of investment projects being reviewed in each segment in the second half, as well as additional investments in Descent and CI Takiron, whose tender offers were successful. Next, please refer to page 8 for the financial position. Total shareholders' equity increased by approximately 170 billion yen from the end of previous fiscal year to 5.6 trillion yen, despite the forex impact of stronger yen and execution of shareholder returns. Net DER improved slightly to 0.47 times. We will continue to maintain a financial foundation based on the balance between three factors, growth investments, shareholder returns, and control of interest-bearing debts. While steering toward the growth investments, we will maintain a strong financial foundation. Finally, please refer to page 9. Regarding the shareholder returns, we will continue to fulfill our commitment announced at the beginning of the fiscal year. For FYE 2025, we aim for a total payout ratio of 50%. with a dividend per share of 200 yen, an increase of 40 yen from the previous fiscal year, making the 10th consecutive year of dividend increase. Additionally, as already announced, we are carrying out the largest ever share buybacks of 150 billion yen. As of the end of October, we have already completed the buybacks of about half, amounting to 71.5 billion yen. This concludes my overview of the business results for the first half. FIE 2025 is the first fiscal year under the new management policy, the Brand New Deal. Keeping in mind the principles of profit opportunities are shifting downstream and no growth without investment, our line in the management policy will push forward with growth earnings. as the United Company and steadily fulfill our commitments. In addition to achieving this fiscal year's forecast, we will also aim to strengthen our profit base through the growth investments, looking ahead to the next fiscal year and beyond, and enhancement of existing businesses to meet the expectations of all stakeholders and further enhancement in corporate value in the second half. Thank you for your attention.