Itochu Corp

This is Hachimura CFO. Thank you very much for taking the time out of your busy schedule to join us today. I'd like to give you the overview of Q3 results and segment information will be provided by Yamaura, the general manager of accounting. Please refer to the PowerPoint presentation material. Starting with page three, summary of financial results. So our forecast for the full year is 880 billion yen based on the assumption that we make 10% growth. So we are aiming for the highest ever profit. In comparison, the net profit during the time was 676.5 billion yen, up 11% year-on-year. The progress was 77%. 83% came from non-resource businesses, which are very strong. From Q2 to Q3, there were some declines of the earnings in the resources business, but we offset that with the revaluation gain of DeSant TOB and realized this positive number. I will explain the investments later. Cash out of some investments will emerge in the next fiscal year, but we are on track in terms of making decisions about the investments. In metals and minerals, there were lower prices of the materials and the coking coal operation was sluggish, and also extraordinary gain was booked in the previous year in energy and chemicals, and also the worsening of the profitability of North American construction material in general products and the realty. Textile, machinery, food, ICT, financial and aid and civic CP were strong in non-resource businesses and also there was extraordinary gain of the descent and the profit increased by about 64.8 billion yen year-on-year. Next page will be explained by Yamaura. Going to page 5, this shows the core profit. As a whole, in comparison to the previous year, there was a worsening of 2 billion yen. The worsening of the natural resources on the right-hand side shows that compared with 139.5 billion yen, it came down to 116 billion yen and down 23.5 billion yen. In addition to lower prices in the natural resources, in metals and minerals, there were sluggish operation of the coal business and also the upstream interest in energy and chemicals were also included. So those are the negative factors, but in non-resource businesses, coal profit increased by about 21 billion yen or 5% to 464 billion yen, excluding forex. On the right-hand side, you see the numbers and the core profit, non-resource numbers being pushed down with, for example, in metals and minerals, steel business, and also the general products in the realty, North American construction material, and the mixed fiber was sluggish. So those numbers were not very good in food, dough, and other fresh food, and also some provisions were worsening. To offset all these, CP, CITIC, and CTC in ICT and financial business, and EIC, family mart, and textile were strong. If you look at the different segments, of course, those are included at the back. The strength was shown in the chemicals as well as food distribution. they recorded the highest ever core profit. And also ICT and machinery also showed strength. As for the non-extraordinary items, page 6, in Q3, the major one was the revaluation gain of the descent, 50 billion. And also in Q3, there are several There was also exclusion of the Orient Corporation from the equity method, that's 2 billion yen. In total, during the nine months, 95 billion extraordinary gains were booked. Out of that, in Q3, it was 52.5 billion yen. As for the quarterly information, this is shown on page 27. On page 27, at the top, consolidated total is shown and this is after tax. you can see the steady growth every quarter. And page 29 shows the quarterly core profit. From Q1, Q2, Q3, the numbers are slightly declining. However, in the non-resources, we are seeing the steady increase. Also, page 25 shows the group company performance. The total number of the group companies is 263. 229 are making profit and 34 are loss-making. The number of the loss-making company compared with last year was reduced by eight. So eight companies less in loss-making. Among those, the major ones, including the startups, we are making some small investments. Fourteen is in ICT and financial business and five in machinery. But loss-making machinery company was reduced by four. So we are making good progress in reducing the loss-making companies and increasing the percentage of the profit-making companies. What is not shown here is that as of now, there are three listed subsidiaries and 11 affiliated companies in Japan. And out of them, we privatized the Descent and the CI Takiron. And also, there was an exit of Japan Foods. Based upon the capital policy, we are proactively replacing assets. About the investments, page 21. So here, not much details are shown, but if you look at 24, which is consolidated cash flow, which has more detailed information. On the right-hand side, for nine months, the biggest factor was the conversion of DESANT into the consolidated subsidiary. This was the investment of 136.3 billion yen. And also another factor was the additional investment of CSN, rather, 119.2 billion yen. And in Q3, as you can see on the right-hand side, non-resources, 254 billion, and in natural resources, 137 billion. Including capex, it was 391 billion. After exit, gross, after exit, it was 346 billion, and the gross for year was 628 billion. on page 39 we are showing the profit contribution from growth investments and as you can see there are some investments that we already made the decisions for However, the cash out of those investments might not be booked in Q4. So including the cash out of the ones that we already made a decision for amounts to 950 billion yen. In November, we mentioned that we have already accumulated to 850 billion. And we mentioned at the beginning of the fiscal year that we will make the 1 trillion yen level investments and we are making a good progress toward that. So those will start to contribute in inorganic growth in the next fiscal year and onwards. As for the shareholder return, those are mentioned on pages 9 and 22. We completed the share buyback on the 14th of January. And other than that, we are on track. So 50% total payout ratio is our target. And as for the dividend, it's 200 yen per share or payout ratio of 30%, whichever higher. So based on the assumption of 880 billion yen profit, The 200 yen per share dividend would mean the payout ratio of 33% and that is included in our plan. We are not changing any forecast numbers. As of now, metals and minerals and energy and chemicals We do not expect that the major turnaround in Q4. So in addition to a steady increase in the non-resources, extraordinary gains and also with the buffers that we have not yet used, that we can increase the profit by 10% and aim for the 880 billion yen. And we already mentioned 880 billion yen that we mentioned in November and this remains unchanged. But there are some differences of the progress depending on the segment and businesses. And finally, as for fiscal year ending 2026, as usual, we will have a management meeting in April and we would disclose the plan in May and we have already started our discussion internally. And based upon the long-term brand new deal, we have been engaged in various initiatives. And some of the businesses are showing strong performance and others are not really showing the good performance. And there are some businesses which probably have already peaked out. and need to be replaced. There are different results of the investments. So toward the next fiscal year, we will try to be proactive in replacing assets so that we can show you the sustainable growth going beyond 880 billion yen. That concludes my part, and I would ask Yamaura to report on each segment. This is Yamaura speaking. So CFO has already given you the overview. I'd like to make some additional explanation. Please refer to page 4. This is the net profit attributable to Itochu by segment. Let me start with textile. In textile, 9-month net profit was 70.4 billion yen, up 51.5 billion yen year-on-year. Significant growth. Below 51.5 billion, we are showing the number in smaller letters. Those represent extraordinary gains and losses. The descent was converted into the consolidated subsidiary. The extraordinary gain was 50 billion yen. Excluding the extraordinary items, core profit increased by 1.5 billion yen. Especially in sports, mainly descent, the businesses in China and Hong Kong were strong. On the right-hand side, progress toward fiscal year ending 2025, the forecast of 73 billion, we reached 96%. In machinery, net profit increased by 7.3 billion yen to 103.8 billion yen. In terms of core profit, it was up by 3.3 billion yen. North American electric power related business was strong in the previous year, and the construction machinery related business such as Hitachi Construction Machinery, the demand was sluggish abroad, and also the profits were lower as a result. But the aerospace and auto related businesses were strong, and Yanase profit increased with the strong new and pre-owned car sales. The progress toward the full-year forecast of 130 billion yen, that progress was 80%. In metals and minerals, net profit was down by 31.3 billion yen year-on-year to 133.1 billion yen. The impact of the lower iron ore and coal prices was big and there was a sluggish coking coal operation in Australia and North America. And Marubeni Tochu Steel, the steel materials and prices declined and profitability declined. As a result, the profit was much lower. And the progress was 67% vis-à-vis the four-year forecast of 200 billion yen. In energy and chemicals, net profit was 50.6 billion yen. And in the previous year, there was extraordinary gains of the lithium-ion battery business 24M. And so the core profit declined by 19.5 billion yen. Core profit base was down by 1 billion yen as a result. And due to the lower market prices, energy and the power trading and also the Seiko Azeo, Japan's South Saha Oil profits were lower. CI Takiron was privatized in this fiscal year and the business was strong, which drove the overall higher profit of the chemicals and partially offset the decline in this segment. Vis-a-vis the full year forecast of 90 billion yen, the progress was 56% as we expect the dividends from the upstream interest as well as the extraordinary gains in Q4. In food, net profit was 60 billion yen up 5 billion yen year-on-year. Core profit was down by 2 billion yen. Door production volume declined, and the North American grain-related business was strong in the previous year. Offsetting this was the turnaround of high life from the deficit of the previous year, and Nippon Axis' Ito Chuishokuhin were also strong. And the provisions-related trading was also another driver. In comparison to the four-year forecast of 75 billion yen, the progress was 80%. In general products and realty, net profit was 42.6 billion yen, Down 9.5 billion yen year on year. North American construction related business, exterior building materials, master house, outer USPTM, the profitability worsened and retail in European tire business, the expenses increased and profitability worsened. And DAIKEN, which was made into the subsidiary in the previous year, the domestic business profitability improved and compared with the four-year forecast of 90 billion yen, the progress was 47% and as we expect extraordinary gains in Q4. ICT and financial business net profit was 58 billion yen, up 3.8 billion yen year-on-year. Core profit-wise, it was up by 6.3 billion yen. The previous year, the CTC was privatized, and both order and order balance were record high, and it offset the decline of the mobile-related business and the financial retail business. And compared with the four year forecast of 82 billion, the progress was 71%. This is a high number in terms because this company has a peak results in Q4. The eighth, in Q2, we booked a dexterity gain of 29.5 billion yen on the group reorganization of the Chinese businesses. Net profit increased by 27.2 billion yen to 63.9 billion yen. In terms of core profit, various cost increases were offset by increase of the daily sales, customer traffic, and the spend per customer. The profit increased. In comparison to the four-year forecast of 65 billion yen, the progress was 98%. Finally, others, there was a CPP turnaround, which booked the loss in the previous year. And also in CITIC, comprehensive financial services were strong. And extraordinary gain and weaker yen and lower interest expenses more than offset the stagnant iron steel and the steel-related businesses, which were sluggish. And a profit as a whole segment increased by 30.4 billion yen to 94 billion yen. That concludes the segment explanation. Next page is about the core profit. and extraordinary gains and losses are skipped. And please turn to page 7, which shows the cash flow. Supported by the strong inflow of a core profit of non-resources business, the core operating cash flow at the top and the core operating cash flow excluding the changes in the working capital in the middle were 706.2 billion yen and 720 billion yen respectively. As a result of accumulating the growth investments, net investment cash flow, which is shown in the middle, was the record high net outflow of 538 billion yen, as mentioned at the beginning. Finally, the financial position is shown on page 8. The total assets increased by 1.2 trillion yen or more from the end of the last fiscal year and reached 15.7 trillion yen level due to the weaker yen and others. And the consolidated dissent was made into the consolidated subsidiary. The impact of that was 290 billion yen, which is included. And the weaker yen impact is about 220 billion yen on total asset and 120 billion yen on shareholder equity on the positive side. The increase of the interest-bearing debt led to the net DER of 0.55 times but this is within the range of our expectations.