Mitsui & Co Ltd Ord

Good morning. I'm Kenny Chihori, CEO. Thank you for joining us today. I will begin with an overview of the first half operating results and the full year forecast. I will then hand over to Masao Kurihara, General Manager of the Global Controller Division, who will speak on the financials in more detail. First, I would like to provide a summary of the first half of this fiscal year and the forecast for the second half. Progress was steady against the full-year business plan for cooperating cash flow, or COCF, exceeding 50% for the first half. Progress was also made in asset reconfiguration through the sale of large-scale assets and listed stocks and cash inflows expanded from both operations and asset sales. We are encouraged by the progress made in strengthening existing businesses as well as efficiency improvements and turnarounds, which contributed to enhancing base profit. We also worked on strengthening our long-term earning space through competitive investments for growth. such as a revised LNG project, and in addition, we decided to flexibly make additional share repurchases, observing cash inflows and share price levels, being conscious of balancing investments for growth and flexible shareholder returns. Based on the progress made in the first half and the latest forecast for the second half, we have revised up our full-year profit forecast. We will continue in the second half with initiatives aimed at enhancing base profit and continuous growth. In particular, we will further strengthen existing and new businesses focusing on LNG, mobility, healthcare, and protein, which will be the main growth drivers during the current MTMP. In addition, we will actively continue asset reconfiguration focusing on improving ROIC. With these measures, we will continue to work on improving our business portfolio and strengthening our earnings base in order to achieve our plan not only in the second half of the fiscal year but throughout the rest of the MTMP and targeting further growth beyond. We aim to take advantage of our global business portfolio to seize new business opportunities while reinforcing our risk management in light of heightened geopolitical risks and changes in major economies. We will continue to focus on maintaining and further enhancing ROE while continuously being conscious of the balance between investments for growth and shareholder returns. I will now summarize our operating results for the first half of this fiscal year. COCF increased by 63 billion yen year-on-year to 538.1 billion yen, and profit decreased by 44.5 billion yen to 411.8 billion yen, both showing good progress against the business plan. Taking into account the progress made in the first half of the fiscal year and the upside expected in the second half, we have revised up our full-year profit forecast by 20 billion yen to 920 billion yen. As announced on September 11, we increased the share repurchase by 200 billion yen up to 400 billion yen and extended the repurchase period to the end of February 2025. I will now speak on the full-year forecast for COCF. Although we expect the mineral and metal resources segment to be affected by commodity prices, we expect the company as a whole to achieve the business plan of ¥1 trillion as planned, mainly due to good performances in the energy segment.

Next, I will speak on the four-year forecast for profit. Although here, too, we expect the mineral and metal resources segment to be affected by commodity prices, due to the upside in energy, machinery and infrastructure and innovation and corporate development segments, we have revised our four-year forecast upward by 20 billion yen from our business plan to 920 billion yen. Now I will discuss the results of cash flow allocation. In the first half, we steadily made investments for growth in line with the three key strategic initiatives set out in the MTMP and also executed large-scale asset recycling. Cash inflows for the period were 884 billion yen, comprising COCF of 538 billion yen and asset recycling of 346 billion yen. Cash outflows were 720 billion yen comprising investments of 372 billion yen and shareholder returns of 348 billion yen. We are implementing carefully selected investments for growth in line with the key strategic initiatives set out in the MTMP. The projects shown on this slide in bold have already started to contribute to profit. We are balancing near-term profitability and building a long-term earning space in our investments for growth, and the enhancement of base profit through new projects is on track. Thai gas-fired power generation No. 2 Unit 4 was completed on October 1 this year and has begun commercial operation and contribution to earnings. With the start of operations at all four units of No. 2, the total installed capacity, including No. 1, is now 5 GW. Mitsui has been working on this large-scale project, which will meet approximately 10% of Thailand's power demand, for six years since the start of construction of No. 1 in 2018. we have been deploying our project management expertise that we have refined over time and reached the completion within budget and on schedule. Contribution to earnings from the Thai gas-fired power generation No. 1 and No. 2 from fiscal year March 2026 onwards is expected to be similar in scale as the Python coal-fired power plant project, which was sold in May this year. Over the three years of MTMP, we plan to increase our base profit by 170 billion yen, excluding the impact of one-time factors, commodity prices, and foreign exchange. Next, I will explain the progress in enhancement of base profit. In the full year forecast for fiscal March 2025, the second year of MTMP, we expect to achieve an enhancement of up to 120 billion yen against the 170 billion yen target. For strengthening existing businesses, we are seeing steady progress in our middle game initiatives in areas such as mobility, chemicals, Japanese domestic businesses in food and retail, and innovation and corporate development and healthcare. We expect to see a cumulative increase of 45 billion yen by the end of fiscal March 2035. For efficiency improvements and turnarounds, although the scale of impact for each individual item is not large, we expect to see an enhancement of 35 billion yen through existing loss-making businesses and accumulation of improvements in business performance. For new businesses, we expect to see an increase of 40 billion yen as a result of the commencement of earnings contribution from multiple new projects during the current fiscal year in addition to the full-year profit contribution from businesses invested during the previous fiscal year. Cash inflows are expected to increase by 170 billion yen from 4.2 trillion yen to 4.4 trillion yen During the current MTMP period, due to the increase in asset recycling, as a result, the management allocation would increase from 560 billion yen at the time of the business plan announced in May to 730 billion yen. From this increased management allocation, 90 billion yen has been allocated to investments and 190 billion yen to shareholder returns. meaning the management allocation is expected to be maintained at a sizable level of 450 billion yen. In addition, given our strong financial base, there is potential for us to add to the management allocation. We will continue to allocate capital in a balanced manner between investments for growth and shareholder returns, bearing in mind our solid balance sheet.

Next, our shareholder returns policy. As I mentioned earlier, we decided to increase the share repurchase amount by 200 billion yen this September. As a result, shareholder returns as a percentage of COCF during this current MTMP period is expected to exceed 45%. We will continue to work to achieve sustained ROE growth by increasing profit with cash-through investments for growth and middle-game initiatives, as well as enhancing shareholder returns along the way. That completes my presentation today. I will now hand over to the General Manager of the Global Controller Division, Masao Kurihara, for details of our financials. I am Masao Kurihara, General Manager of the Global Controller Division. I will now provide details of our operating results for the first half. First, I will explain the main changes in COCF by segment compared to the previous period. COCF for the first half was 538.1 billion yen, a year-on-year increase of 63 billion yen. In mineral and metal resources, COCF increased by 14.3 billion yen to 192.1 billion yen, mainly due to a decrease in tax burden. In energy, COCF increased by 107 billion yen to 184.5 billion yen, mainly due to an increase in LNG-related earnings such as dividends and trading. In machinery and infrastructure, COCF decreased by 41.9 billion yen to 73.8 billion yen, mainly due to a consolidated subsidiary becoming an equity method investee and an increase in taxes associated with asset sales. In chemicals, COCF increased by 18.2 billion yen to 42.5 billion yen, mainly due to improvement in performance in consolidated subsidiaries and trading. In iron and steel products, COCF increased by 0.3 billion yen to 1.5 billion yen. In lifestyle, COCF decreased by 15.3 billion yen to 14.4 billion yen, mainly due to lower dividends from equity method investees. In innovation and corporate development, COCF increased by 1.1 billion yen to 20.3 billion yen. Other factors, such as expenses, interest taxes, etc., which are not allocated to business segments, totaled a gain of 9 billion yen. I will now explain the main changes in profit by segment compared to the first half of the previous fiscal year. Profit for the first half decreased by 44.5 billion yen to 411.8 billion yen. In mineral and metal resources, there was a decline in metallurgical coal and iron ore prices, but profit increased by 26.9 billion yen to 161.5 billion yen, mainly due to the absence of impairment loss in the Chilean copper business recorded in the previous period. In energy, profit increased by 39.3 billion yen to 65.3 billion yen, mainly due to an increase in LNG-related profits such as foreign exchange related to dividends and good performance in trading. In machinery and infrastructure, although there was an increase in asset sale gains, profit decreased by 16.2 billion yen to 148.2 billion yen, mainly due to a decrease in profit in the IPP and the automotive businesses.