Mitsui & Co Ltd Ord

I'd like to start the briefing on the financial results of first quarter of fiscal year March 2024 of Mitsui & Company. Thank you very much for joining us despite your busy schedule today.

I'd like to introduce you to the presenters for today.

Representative Director, Senior Executive and Managing Officer, CFO, Tetsuya Shigeta. and General Manager of Global Controller Division Masao Kurihara. I am Konishi from IR and I'll be moderating the session today. CFO and Global Controller will give presentations for about 15 minutes Then we will entertain your questions. The copyright of today's video and audio belongs to the company and the managing company. Please refrain from uploading or reproducing or diverting all or part of it without permission for any purpose. This meeting will be recorded and will be available on demand on our website. We'd like to start the presentation, starting with CFO Shigeta. Thank you.

Good afternoon, I'm Tetsuya Shigeta, CFO.

Thank you for joining us today. I will begin by giving a summary of fiscal year March 2024 Q1 operating results. I will then hand over to our global controller Masao Kurihara for details of our operating results. During Q1, the U.S. economy showed global strength, underpinned by consumer spending while monetary tightening continued, and a gradual recovery was seen in the Chinese economy. Going forward, while there continue to be many uncertain factors in the global economy, it is expected to pick up moderately. In this operating environment, we made a good start against the projections of our business plan for both core operating cash flow and profit. I will summarize our operating results for Q1. COCF for the period decreased by 44.5 billion yen year-on-year to 255.9 billion yen, and profit for the period decreased by 22.1 billion yen to 252.9 billion yen. While profit decreased year-on-year due to commodity prices reverting, our results show a progress at the pace exceeding our business plan. Furthermore, after share repurchases announced in the previous fiscal year for the 70 billion yen carried over to this fiscal year, We carried out 61.7 billion yen by the end of June and in July carried out the remaining 8.3 billion yen, thereby completing the share repurchase as planned. The 22 million shares repurchased are scheduled to be cancelled at the end of August. This slide indicates the progress rate of each segment against the four-year business plan. In Q1, although there was some variation in the progress rate across segments, all segments are progressing steadily against the business plan. Lifestyle segments showed a high progress rate in terms of profit, Due to the valuation gain on AIM services, in some segments, the progress rate of profit in Q1 may seem relatively low as asset recycling based on the business plan is expected to occur in the second quarter onwards.

But on a full year basis, things are progressing as planned, if not slightly ahead of expectations.

In this section, I will discuss cash flow allocation for the current period. During Q1, gross investments were steadily executed in line with the business plan. Cash inflow for the period was 308 billion yen, comprising COCF of 256 billion yen and asset recycling of 52 billion yen, including the sale of aircraft in the aviation business. Cash outflow was 297 billion yen comprising investments and loans of 235 billion yen and share repurchases of 62 billion yen. The main investments and loans executed were growth investments, such as making AIM Services a wholly owned subsidiary, the acquisition of an interest in the South Texas Bakero Shale Gas Project in the U.S., and acquisition of Sumitomo Pharma Animal Health. Furthermore, in capital investments related to sustaining existing business, there were outflows for iron ore and metallurgical coal operations in Australia and for oil and gas projects. This table indicates growth investments along the three key strategic initiatives in the current medium-term management plan, MTMP, as well as progress in our studies and development of projects aimed at further expansion of the investment pipeline. I will introduce a few examples regarding progress we have made on investment decisions in each of the key strategic initiatives. In industrial business solutions, in the area of digital infrastructure, we have been moving forward with the tender offer for Elia Communications and business integration with KDDI Evolver. In July, we completed the tender offer and decided to begin operations as Altius Link from September 1st. Through this integration, Altius Link will be one of the largest contact center operations in Japan, a country in which the working population is forecast to decline, and subsequently, corporate outsourcing demand is forecast to rise. In addition to its contact center business, we expect Altus Link to accelerate its digital BPO business, and through taking a significant share of the rising demand, it will aim to become the largest operating company in this space. In global energy transition, we have decided to enter the business of production and sales of e-methanol. We expect to start production in 2024 in what we expect to be the world's first commercial scale and one of the world's largest e-methanol business. In addition to this, we will expand our business pipeline, our investment pipeline, continuing to consider business opportunities with our partners in various areas that will contribute to realization of our decarbonized society, areas such as next-generation fuels, low-carbon metallics and iron making, battery minerals and materials, and CCS, to name a few. In wellness ecosystem creation, as part of the creation of a food and nutrition value chain, we decided to invest in Nutrinova, which manufactures and sells functional food ingredients. This is an investment that has been realized through our long partnership with Celanese that has continued since we began working together in the U.S. methanol business from 2013. NutriNOVA is a business in which stable profitability as well as growth can be expected due to high-quality and differentiated products and can immediately contribute to earnings. In addition, the nutrition team in the chemical segment and the food team in the lifestyle segment work together to combine their respective strengths, knowledge, and networks across industries in an effort to increase NutriNOVA's corporate value. With regard to shareholder returns, as we explained in the current MTMP that we released in May, we will strengthen stable and flexible shareholder returns in line with expansion of our cash generating capability. That completes my presentation today, so I will now hand over to the General Manager of Global Controller Division, Masao Kurihara, for the details of performance in Q1.

I am Masao Kurihara, General Manager of the Global Controller Division. I will now provide details of our operating results for the first quarter. First, I will explain the main changes in COCF by segment compared to Q1 of the previous fiscal year. COCF for the period was 255.9 billion yen, a year-on-year decrease of 44.5 billion yen. In mineral and metal resources, COCF decreased by 51.1 billion yen to 91.1 billion yen, mainly due to the falling prices of metallurgical coal and iron ore, and the decrease in dividends due to the sale of shares in SMC, an Australian metallurgical coal business, in Q3 of the previous fiscal year. In energy, although affected by decrease in LNG dividends and a fall in gas prices, COCF increased by 2.9 billion yen to 55.3 billion yen, mainly due to the absence of derivative valuation losses in LNG trading, which were recorded in Q1 of the previous fiscal year. In machinery and infrastructure, COCF increased by ¥24.6 billion to ¥60.2 billion, mainly due to an increase in dividends from equity method affiliates in areas such as automotive and construction machinery and IPP, as well as bringing forward some of the dividends within the fiscal year. In chemicals, COCF decreased by ¥11.7 billion to ¥20.3 billion, mainly due to a fall in prices of fertilizers and feed additives. There were no significant changes in iron and steel products and lifestyle. In innovation and corporate development, COCF decreased by ¥4.8 billion to ¥7.1 billion due to the impact of taxes paid in this fiscal year associated with the real estate sales executed in Q4 of the previous fiscal year. Other factors such as expenses, interest, taxes, etc., which were not allocated to business segments, show tools at outflow of 2.1 billion yen. I will now explain the main changes in profit by segment compared to Q1 of the previous fiscal year. Profit decreased by 22.1 billion yen to 252.9 billion yen. In mineral and metal resources, profit decreased by 41.9 billion yen to 77.9 billion yen due to the lower prices of metallurgical coal and iron ore and due to the sale of SMC, an Australian metallurgical coal business, in Q3 of the previous fiscal year. In energy, although affected by a decrease in LNG dividends and a fall in gas prices, profit increased by 3 billion yen to 26.7 billion yen, mainly due to the absence of derivative valuation losses in LNG trading, which were recorded in Q1 of the previous fiscal year. In machinery and infrastructure, although there was an impairment loss at mainstream, profit increased by 13.7 billion yen to 52.6 billion yen, mainly due to the increase caused by the absence of one-time items and valuation losses that were recorded in Q1 of the previous fiscal year, as well as the good performance in the automotive and construction machinery, ship and FPSO businesses. In chemicals, although there was a valuation gain at an associated company, profit decreased by 7.6 billion yen to 15.5 billion yen, mainly due to the falling prices of fertilizers and feed additives. In iron and steel products, profit decreased by 1.4 billion yen to 5.6 billion yen, mainly due to a fall in steel prices. In lifestyle, profit increased by 33.8 billion yen to 60.3 billion yen, mainly due to the fair value gain of AIM services. In innovation and corporate development, profit decreased by 12.3 billion yen to 8.1 billion yen, mainly due to the absence of gain on sale of real estate business which was recorded in Q1 of the previous fiscal year. Other factors such as expenses, interest, taxes, etc., which were not allocated to business segments, totaled a profit of 6.2 billion yen. This page shows the main factors influencing year-on-year changes in profit. Base profit was driven by the absence of advanced recognition of derivative valuation losses in LNG trading and one-time losses recognized in Q1 of the previous fiscal year, as well as the good performance of multiple businesses such as the U.S. food business, losing foods, automotive and construction machinery, ships, FPSO, and fashion. However, there was a decrease in profit from trading in areas such as chemicals and grain due to sales prices reverting, a decrease in energy dividends, and a decrease in profit due to the sale of our shares in the Australian ecological coal business, SMC, in Q3 of the previous fiscal year. These were the main factors behind base profit decreasing by approximately 8 billion yen as a net total. Looking at resources costs, volume, profit decreased by approximately 8 billion yen mainly due to decrease in volumes and increases in depreciation and exploration costs in some energy upstream businesses and decrease in volume and an increase in unit costs in the copper business. Asset recycling resulted in a decrease of approximately 4 billion yen, mainly due to the absence of a gain on sale of real estate business that was recorded in the previous fiscal year, although there was a valuation gain at an associated company in the chemical segment. In commodity prices and forex, due to the decrease in commodity prices, profit decreased by approximately 18 billion yen, For metallurgical coal, 13 billion for oil and gas, 9 billion for iron ore, and 4 billion for copper, which resulted in profit decreasing by approximately 44 billion yen in total. For forex, profit increased by approximately 15 billion yen, mainly due to the weaker yen. Finally, valuation gain loss and special factors contributed to an increase of approximately 27 billion yen, mainly due to the fair value gain of AIM services. Now let's take a look at the balance sheet as of the end of Q1 of the current fiscal year. Compared to the end of March 2023, net interest-bearing debt increased by approximately 100 billion yen to 3.3 trillion yen. Meanwhile, shareholder equity increased by approximately 400 billion yen to 6.8 trillion yen. As a result, the net DE ratio was 0.49 times. We are confident that we have strong financial base sufficient enough to withstand the ongoing uncertainties of this operating environment. That concludes my presentation.

Now we'd like to start taking questions.

Those of you who are participating in Zoom, please push the raise hand function on the Zoom, and if your hand comes, then your name will be called. Please unmute yourself and identify yourself and a few usual first before asking questions. Please limit the questions to two per person, and please ask all the questions at a time. And you can ask as many times as possible, but sometimes we may limit the number of people who can ask questions in the interest of time.

If you have any questions, please raise your hand. The first question.

Thank you very much.

Thank you for the presentation.

There are two questions. First, the first quarter evaluation is what I'd like to ask about.

Earlier, Mr. Shigeta said that in all segments, the progress has been made steadily. But there are several one-time factors involved, so at a glance, in each of the segments, how to interpret and evaluate the progress is quite unclear. So looking from outside, if you look at the true earnings capability, machine and infrastructure is strong, and nutrition and agriculture and chemicals are weaker on a basis excluding one factor, there is some differences and variations from segment to segment.

So if you look at the two status of each segment, how do you evaluate each of the segments?

The base profit, 170 billion yen growth that you're expecting for medium-term medicine, if you can also relate your response to that contest, if you can share that with us, that would be appreciated. And in the news conference, if there is an additional shareholder return, that would be considered. I think that's what you said, and for the prospect for the rest of the year. And there are not many risk factors that you are sensing. That's what I glanced based on your comments. In the stock market, there is no concern for the recession, so stock prices are quite strong. But if you look at the results of the first quarter and the most recent voices from the front lines, Is there any changes or signs of changes that you're looking, observing, and especially focusing on risks? If you can answer the question, that would be appreciated. Thank you very much for the questions. For the true status of basis, It's not just a comparison with the plan, but the trend from the previous quarter. What are the trends? I think that's what you're asking about. First of all, Compared to the previous fiscal year, there was a pent-up demand after the COVID-19 that will be settling down. And so the logistics trading, or rather trading prices reverting or settling down, I think that has been incorporated in the plan. And also the trends from the previous fiscal year or year before last, we have come up with a plan for this fiscal year. But there is variation from segment to segment. So the machinery and infrastructure, especially the mobility, especially the automotive sector, the business was quite strong. So in the expansion in the previous quarter and the quarter before last, there was some decline in the profit, but we are feeling the strength.

And on the other hand, As you rightly said, in temples,

NA, nutrition and agriculture, and fertilizer materials and raw materials, the prices went down and there's more reduction in profit. So it really depends on the segment that you're talking about. But structurally speaking, I suppose in this first quarter, Relatively speaking, there are some segments and business units that have started late. There will be cost reduction or pass on some cost increase into the prices. Those approaches will be taken on a full year basis. So throughout the year, we will be able to make some recovery. As for fertilizer materials, there is some seasonality to be taken into account. So in the previous fiscal year, March 2020, three segments that were extremely well, Compared to that, there may be some decline, but if you compare the levels on a pre-pandemic basis in each of the segments, the performance and base profit, I think there are some sectors that have achieved the improvements in terms of levels of base profit. That's what we sense. You're not asking about comparison with the plan, but throughout the year, compared to the forecast in the beginning of the fiscal year, we'll probably be able to achieve the exceedance or overachieve the forecast. ¥170 billion for the medium-term management plan. In terms of breakdown for that, At this moment, we're not in a position to respond immediately. But for this, we'd like to build up our performances and results so that we'll be able to explain more. And part of 170 billion yen actually is something that we have seen already. And as for additional return, shareholder return, the base profit and core operating cash flow increase, especially The fundamental level improvement through that cash dividend will be made in the form of progressive dividend. That's what we explained at the beginning of the fiscal year. So we'd like to improve the level. and also depending if there is an upside from the commodity prices, and then we would like to make additional return. There is no change from the conventional policy, but we would like to continue to consider that. There are many risk factors, geopolitically or environmentally, In light of this, there are various risks or integrated risks that are being heightened. However, if you look at the economy for this fiscal year in the U.S., we are away from the concern about serious recession for the U.S.

and in Japan.

Monetary policy and dialogue with the market seem to be going well, and we don't expect to face any shocks. On the other hand, the economic slowdown is prolonged in China, so effective stimulus measures

could bring about recovery.

There is some expectation on that, but there's a concern that that expectation may not be met. But in Europe and also in Europe, the economic slowdown could be prolonged. So those are some of the risks that we have to address properly. So we have a strong profit foundation in the global south, we have to ensure the profitability there. And also we have to build up the growth investments. And so it's not the case that we don't sense any risk factors. There is a concern about integrated risks. but we'd like to build up the profits so that we won't face the downside risk.

Thank you.

As for the second question, you explained from the macroeconomic perspective, but if you look at this from the bottom-up perspective, from the front lines, any ominous signs that you're not hearing, is that correct? Well, it's not the case that there is none, honestly speaking. But in the new projects, the starting up may not be going as well as expected. And of course, inclusive of measures against those, how they are addressing this. IS SOMETHING THAT WE'RE LOOKING AT. THERE ARE NUMEROUS EXAMPLES. I THINK THIS IS SOMETHING THAT WE SEE ON A DAY-TO-DAY BASIS. BUT THERE IS INFORMATION COMING UP FROM THE HOMELINES WITH THE TRANSPARENCY ABOUT BAD NEWS AND HOW TO AVOID LOSS MAKING IS WHAT THEY ARE ADDRESSING. So it's not the case that there's no concern. But on the other hand, if there is any huge impairment loss that is impending, that is not the case. We don't feel that.

Thank you. So next question, please. Thank you very much for taking my question.

I'd like to ask two questions.

First question.

I ask this question every time about energy. Can you hear me?

Yes.

So my first question is on energy. I asked at the beginning of the year as well. So cost and volume, there is a downside that has been projected. In the first quarter, I don't think that really surfaced. But after the second quarter, do you think there will be... decline in profit. When we look at the trading last year, there was like a derivative assumption that was incorporated. But in the first quarter, when it was explained by the CFO, you said that the progress is good. However, from first quarter to the second quarter, is there negatives that you had projected? Is that going to appear going forward? And the second question, The CFO earlier said that China may be concerned, and I think the market is thinking the same. Maybe I can ask Konishi-san, but I know the market may be strong, there may not be demand, but maybe we are seeing strings. which is underlying. So maybe we can talk about demand and supply as well. But how do you see the situation? Is there a risk that it may decline? Or do we not have to worry about such risks? May I ask for your comments, please? Yes, the second will be answered by Konish-san from IR department. But first question on energy. Yes, currently, as we had projected at the beginning of the year, cost increases and also a decline in volume. We believe that that is going to appear from the second quarter onwards. And with that assumption, we are making responses, initiatives in each of the projects. In Western Australia, there is a plan that the negative volume is something that we had incorporated. compared to that plan, we are going to increase the production. That is something we are starting to see. So the negative factors that we had included in the plan is something, yes, we are projecting. However, we hope to make sure that we can shrink it as much as possible. So that was the answer to your first question. So if that is the case, Of course, the progress was about 20% or so in the first quarter. So from the second quarter onwards, of course, if there are negative factors, then the start may not have been good. Is that how you value this? And with dividends included, with this progress, do you think this is on par with your plan? How should we interpret this? Yes, of course, there are seasonal factors, and if that is adjusted, I think we are on the line that we will be able to achieve the plan. Seasonality and dividend and LNG trading, that is strong in the winter months. So if we consider all these factors, yes, I think we are on par with the plan. Thank you. Understood. As for your second question about the situation in China, about the market of iron ore, of course, this is very solid when it comes to its foundation and when we look at the trends. When we look at demand and supply, of course, You mentioned that the demand may be slow, but I don't think that's what we are seeing with crude steel. And of course, when we look at our interest, of course, the cost curve on the left-hand side, We are securing enough merging. That is a kind of asset situation that we have at the moment. So I don't know. I think that is going to be quite strong and and the margin from I know I think is going to be quite strong for us as well. So that was a plan and at the moment the plan has not changed. Did that answer your question?

Yes, thank you very much. Thank you very much. Thanks.

Next question, please.

Thank you very much for today. I have two questions. First, it's about trading.

In the segments, chemicals, especially methionine probably, prices overall are weak in terms of trading, it seems. And you explained that chemicals and grains, prices are declining.

That's what you said.

But profit in trading in your initial forecast, compared to that, is it weakening? And how do you see the chemicals, energy, steel, and grain? How do you see your prospect going forward after the second quarter? point is the shareholder returns. You told us your policy on shareholder returns, but if you can do the sound and in light of other companies movements, I'd like to ask this question. Mitsubishi Corporation in fourth quarter of March 2023 for 300,000 300 billion yen share buyback was announced and 200,000 was started because of the improvements in balance sheet. And the financial position is quite similar in your regard. And in order to maintain the balance in the core cash flow, if you just look at the 37%, then ROE is bound to decline. And so how to maintain that ROE level? Also, I'd like to ask about if you explain more about your policy in shareholder return. In this regard, that would be appreciated. Thank you. As for the trading, chemicals, energy, steel products, and the grain, that's what you asked about. For each one of these, I will explain. For chemicals, BM and NA business units, in the previous fiscal year, there was a pent-up demand and there was a tailwind industry in that regard. But there was some declining trend now compared to the previous fiscal year. Of course, I'm not saying that it keeps deteriorating, but the opportunities to gain margin or margin rate shrinkage was seen compared to the previous fiscal year. So in terms of environment, the things will continue to be challenging for the time being. That's my frank view. China or Southeast Asia, In those areas, the economic recoveries and also the volume and prices associated with the economy, if there is any rebound, we can capture profitability and profits. And of course, we are taking that into account. And we are taking every measure to reduce cost, working with partners and business partners. And so I'm not saying that we would be in the financial position to keep losing money, but how to secure margin is something that we have to address.

With regard to energy,

In terms of trading, we are covering with long-term contracts for the most part, so we have to perform that contract. And so the basis is quite strong. But beyond that, with improved production, the spot sales depending on the volume, equivalent to the increased volume. If there is any such opportunities, we'd like to aim for further upside. As for LNG trading in the previous fiscal year, Camera on production was performing quite well, so there was a big positive number. Compared to that, we cannot avoid a decline in profits. But we would like to exhibit our functionality so that we can secure a certain level of profits. And that is what we are going to continue to do throughout the year. And as for steel products, In the previous fiscal year and the year before last, there has been continuing trend of strength from Japan to Japan and also trilateral trading is something that we excel. And so we are pursuing business opportunities. And of course, in addition to the profits from various businesses, some businesses in the trading, we would like to also secure profits. And as for grain,

UGC and other base businesses are available, but

international commodity prices are affecting grains. And so if there is more volatility, there'll be more profitability opportunities for us. So we like to capture that. And as we did in the past, we are expecting the environment to be challenging. while at the same time capturing trading profits properly. And from the perspective of food, I think there is a great impact from the climate. So there will be continued fluctuations in prices. So we have to maintain the supply chain or contribute to the maintenance of supply chain and aim for capturing upside. I have been a bit vague in my response, but I have responded to the trading questions on four commodities.

As for shareholder returns, In 2014, since that year, we have been performing share buybacks on a continuous basis, slowly but steadily.

We have been building up the repurchases. And that has contributed to the capital efficiency, or we have given priority to shareholder return. And in line with that philosophy, we have been continuing with this practice. And as you said, In order to maintain a high level of ROE, how to maintain equity is a question, and how you can improve R part of ROE, and also to what extent we use leverage. Net DR is only 0.49 times for this quarter, so it has been maintained at the lowest level And so the balance of those three, the growth investment, through growth investment, base profit increase, improvements, and equity level focusing on capital efficiency and leverage looking at the total balance sheet. You have to hit the right balance between these three factors and we are in a position to be able to pursue that because of the performance improvement that is in sight still. So while looking at this balance and closely watching the balance, We are trying to improve each of these in a positive direction, and we are hoping that this will be the case in the discussion within the management. And as you said, of course, this will be directly link to the evaluation from the market, including all of you. So we'd like to eat that expectation. I'd like to ask more about shareholder return. After the last medium-term management plan, management allocation of about 1 trillion yen was there to spare. And this has been carried over to this fiscal year. And in March, there was some financial crisis in the US, and there was some stability pursued back then. But now, in society, in general, that view has been weakened. So, net DER compared to that time, is something that you can more solidly look at. So 0.49 times is the end of June NET-DR with the further decline. So what would be the property level that you see as NET-DR? Well, there's no fixed numerical target or the appropriate level that we have come up with as a consensus. We haven't had that discussion. So if you look at the balance sheet, we're looking at various growth investments, the size of the balance sheet itself, whether it is appropriate or not. We haven't decided which size is appropriate specifically, so the appropriate equity level throughout this medium-term management plan period probably we would end up with a perfect percentage or rate in terms of the efforts, as part of the efforts to improve to an extent we can enhance the capital efficiency. That will be part of our efforts.

Thank you.

Thank you very much for taking my question.

My first question, I just want to confirm what was presented.

In the one-time factor

You talked about 9 billion. I'm sure it is not that big. However, this 9 billion is something that I want to confirm with you today, and about Python, about the delay in the sale of shares. Is this not a major project? So how can we interpret the sense of delay? Is it going to impact the cash flow for the full year or not? That is something that I want to confirm with you today. And also on page 7 about growth investments, you gave explanation about some pipeline and project investments. When it comes to energy transition, They are very interesting projects that we see, but agreement of contracts for business, what is the time axis from agreement to implementation of business? So what can we expect for the projects, the time axis for important projects? If that can be shared, it will be appreciated. Okay, thank you very much. About the mainstream, this is Chile renewable energy and impairment has been recorded. I'd like to ask the global controller to give us details, but the mainstream, of course, globally and into the future, we are going to develop these pipelines going forward. So this is the kind of business that we have. After acquiring, we are facing impairments and, of course, we want to utilize this further globally as a renewable energy project, and we want to continue to work on new projects so that we can expand this business further. The global controller will explain the details later. And as for Python, Yes, I'm sorry we made a disclosure that there will be some delays and of course we are waiting for the signatures of the relative parties. So I hope you will wait a little while for this to be closed. And your second question about the pipeline project. MTMP, of course, when we asked for your understanding, I think it is very important that we see the progress of those investments. That's why we added a slide about this. And, of course, we talked about investments being made and agreements being made to invest, et cetera, and, of course, the contract that has been agreed to and closed. the progress is different. But anyway, when it comes to a basic agreement that has been reached with a number of projects, of course, we may be cool uh operating with their projects and of course we may have a remit on paper for some of these projects so we believe that in a short time so time access was about uh next generation fuel local metal leaks and iron making ccs etc we hope that with short time access we'll be able to implement these projects So the time access is as such for the projects that are listed on this page. As for the impairment of mainstream that you asked about in Chile, as for the assets in Chile, of course, we need to think about the receivable of energy in Chile. And of course, we have to look at the spot prices, and there is a difference between the receivable and the spot prices. And this is to be paid by the energy company. And of course, with the Ukraine status, of course, the spot prices went up and the difference has expanded and the cost is increasing. And of course, we want to have thermal energy. and that fuel prices, that is to be paid by the energy company, and the cost is increasing there. Therefore, including mainstream, the RE companies are taking on the losses at the moment. And of course, maintenance of the lines, energy lines, there are losses there as well. So we have Akan, which is a partner, and for the Chile asset, There is uncertainty that is continuing. Therefore, fixed asset impairment has been recorded. And in us as well, we are recording it as the equity share that has been lost. Thank you very much.

Understood. Thank you very much. There is only 10 minutes left.

At this moment, there are four people who are raising hands. I would like to take as many questions as possible from as many people as possible. So if you ask questions, if you limit your question to one, that would be really appreciated. The next question, please.

Thank you very much. Can you hear me? Yes. So, only one question. So, I have a question on investments, especially the management allocation, 1.13 trillion yen.

How to spend that compared to the beginning of the year? Is there an increased pipeline? And what is your mindset on the investment? Is there any change? In the Q&A, as comments, there are some heightened risks, but there's no less risk for serious recession in the US. So what is your mindset toward investments right now? Is my only question. Thank you. Pipeline investment and pipelines compared to the beginning of this fiscal year after now. Double the amount that is shown or more than double the amount. worth of projects are building up. So we're now severely selecting the projects. There is some, I don't know, this is a correct word, but there's some sort of competition for funds. STRATEGIC MESS AND RARENESS AND IMMEDIATELY CONTRIBUTING PROFIT OR NOT OR EXPERTISE IN EXISTING BUSINESS OR STRONG RELATIONSHIP WITH PARTNERS AND OWN FIELD DEALS. FROM THESE PERSPECTIVES, WE ARE PRIORITIZING THE PROJECTS THROUGH DISCUSSIONS. And so originally in our company, amongst existing businesses, Bolton and adjacent peripheral businesses and business clusters are the ones that we are pursuing. That's our business model. Of course, sometimes it depends on the prices. So the timing of investment decision should be carefully considered. But we'll spend time, enough time to build up these projects. So from the beginning of the fiscal year up to now, the pipeline of investments has not changed in terms of Thank you for the question.

Thank you. Thank you very much.

I'd like to ask one question. About Moeko, about the Hokkaido in Niseko, there has been some eruption of the gas. So if there is any information that you can give us, please let us know. We believe that the incident is ongoing, so if you cannot disclose, please let us know that way too. As for this incident, of course, to the people living in the neighborhood and to the municipality. We are sorry for the inconvenience and for causing concern, so we'd like to give a sincere apology. But we believe this is something serious, and with Moeko, we hope that we'll be able to respond appropriately, and we are supporting their efforts at the moment. about the eruption of the vapor. That is something that we need to suppress and that is something that we are prioritizing at the moment. As for whether it is going to have impact on the business, that is something that we need to think about later.

As for the first quarter, the setting of the pipes and

emergency engineering or consultation responses. So the third party is supporting this matter. So these costs compared to the business scale, it is not that big, but these costs are being recorded. If there's going to be a big impact on the performance, we will share that information. in a speedy manner, but currently we are not at a stage of giving any estimation at the moment.

Thank you very much.

Thank you very much for answering my question.

Thank you very much. We are close to ending time, so the next question will be the last one that we can take.

Next question, please. Thank you. I have one question. With regard to investments, in the first quarter, 235 billion yen in gross investments, what will be the full year amount? And in these investments, in this fiscal year and next fiscal year, what will be the projects or investment that will give you immediate returns? If there are any.

Well, in the framework of cash flow allocation, cash inflow and cash outflow should be balanced, and that hasn't changed.

And from the previous medium-term management plan, there has been some investment projects that have been carried over. So ultimately what would happen, it should be looked at from the three-year perspective. And in that sense, the amounts that are shown in the cash flow allocation is what we would like to fulfill and perform during the three-year period.

So immediate contribution.

So through quarterly disclosure, we like to share the information with you.

For example,

As I explained, collaboration with Celanese in this project, because this is an existing project business, there's some immediate effect we can expect. So when this is expected to start contributing to profit, it's something that we'd like to share with you in some way or other. I haven't been able to answer your question exactly. Sorry. Let me make some additional comments. As for the timing of the starting of the contribution to profit, in the medium-term management plan, page 35, the new project starting time. This is the focus that we had at the beginning of the current medium term management plan. So we'd like to take a proper follow up and keep you posted. So I'd like to ask for your kind understanding. Thank you.

So it is time, so we'd like to end the Q&A session for today.

We have some announcements regarding the IR events. As you can see on the last page of the PowerPoint material, September 21st from 4 p.m., we are going to have a business explanation session at the Otemachi Museum Hall. And November 30th afternoon, we are going to have investor day. in Desautomachi Mitsui Hall as well. So, the details will be sent to you by email. We hope that you'll be able to participate. With that, we'd like to end this briefing for today. Thank you very much for your participation despite your busy schedule.