Mitsui & Co Ltd Ord

We'll now begin the briefing of the financial results of the fiscal year ending March 31, 2025, of Mitsuyun Company Limited. Thank you very much for taking time out of your busy schedule to join us today. Today's briefing will be a hybrid of on-site Zoom webinar and online presentation for institutional investors and analysts. Kenichi Horii, President, and Masao Kurihara, General Manager of the Global Control Division, will give a 20-minute presentation. After that, we'll answer questions from the audience. Moreover, the presentation part will be livestreamed for individual investors to be able to watch on a real-time basis. Please refrain from reproducing or diverting all or part of these materials without permission. Today's meeting will be recorded and will be available on demand on Mitsui's website on a later date. I would now like to introduce today's presenters. Ken Ichihori, President and CEO. Tetsuya Shigeta, Senior Executive Managing Officer and CFO. Masao Kurihara, Managing Officer and General Manager of Global Controller Division. Myself, Konishi, of the Investor Relations Department, will be the moderator. Now I would like to begin. President Hori, over to you, please.

Hello, I am Kenny Chihori, President and Chief Executive Officer. Thank you for joining us today. First, I will speak on our management policy and the progress of the Medium-Term Management Plan 2026. I will then hand over to Masao Kurihara, General Manager of the Global Control Division, who will speak on the details of performance for FI March 2025, and the business plan for FY March 2026. Summarizing the first two years of the medium-term management plan, or MTMP, we are progressing ahead of schedule against the initial action plan. Entering the final year of the plan, we expect a different business environment compared to the past two years. We will continue to secure a wide range of management options and steer towards enhancing corporate value. Firstly, in the enhancement of base profit, we have strengthened existing businesses through comprehensive middle gain strategies. We also feel confident in the earnings contributions from newly acquired businesses as we enhance profitability and expand business clusters through bolt-on investments in core businesses and adjacent areas. Additionally, despite changes in the business environment, that have gone beyond initial projections, we have steadily progressed in enhancing base profit through earnings growth driven by our trading functions. Next, to improve the quality of the business portfolio, we have pushed ahead with asset and capital efficiency, focused management utilizing ROIC, which was introduced in the previous MTMP, and deepened the extent to which we carefully select projects in the management level, Diversification of the portfolio has advanced in terms of industry, time horizons, and regions. As a result of these efforts, strategic asset reconfiguration has progressed ahead of schedule. For example, the combination of the sale of the Python coal-fired power plant and the start-up of all units of the Thai gas-fired power plant is an example of strategic asset reconfiguration in the power generation portfolio. We have made several significant achievements, including investments in projects contributing to near-term earnings, such as in mobility and protein, and the building of a long-term earning space through iron ore and LNG projects together with reliable partners. We have also executed capital allocation, utilizing the strengths of our balance sheet. Mitsui maintains a balance sheet with ample reserve, based on strong recurring cash generation capability and a solid financial foundation. We have allocated significant capital investments for growth, including the Rose Ridge Iron Oil project announced in February this year, and also replenished capital to the management allocation from the balance sheet. We will continue to execute optimal capital allocation. Here are the major projects executed in the first two years of the current MTMP. Leveraging expertise and cross-industry functions built up over many years, MISI has been selected as a partner by leading companies across various industries and regions, and we have been able to acquire new business opportunities across the globe. Examples of collaboration with trusted partners based on expertise gained over many years include the Ruways LNG and Rose Ridge Iron Oil Project. In addition, an example of MISA's unique feature of lower barriers between different segments is the Blue Point Project, a low-carbon ammonia production and sales business in the U.S., jointly pursued by the chemicals and energy segments. Next, I will speak on the progress of the key strategic initiatives in the MTMP and the important actions for FY March 2026. In Industrial Business Solutions, we have decided to invest in the Rose Ridge I&O project. which I introduced earlier, as a project to further strengthen the long-term earnings base. We have also invested in businesses contributing to near-term earnings, such as a U.S. truck auction business. In FY March 2026, we will continue to strengthen collaboration with investors and work to grow our earnings generation. Furthermore, we will capture new earnings opportunities by leveraging our trading functions in responding to changes in the supply chain. In global energy transition, we have made progress in investment in projects such as RACE LNG and low-carbon ammonia. In FI March 2026, we expect further strengthening of our earnings base across various time horizons through the steady launch of projects such as the Weixia gas business in Australia and offshore wind power in Taiwan. In wellness ecosystem creation, we have invested in protein and nutrition businesses contributing to near-term earnings. We have also made progress in capturing growth in the Asian market through the healthcare business. In FI March 2026, will further enhance the earnings power of the acquired protein and nutrition businesses and optimize food trading. We have recently conducted a reassessment of the five key material issues we identified as a materiality and announced the results today. This time we have reviewed it from the perspective of double materiality and added a new item, Cultivate a Society that Respects Human Rights. Given the heightened interest regarding the impact of the U.S. tariffs and policy changes, I will speak on our operations in the U.S. Profit from our business in the Americas was approximately 300 billion yen in FY March 2025. Within that, our U.S. business can be categorized into three business forms – domestic operations, exports, imports, and sales. Domestic operations have the largest profit share, and we expect this to have a relatively smaller direct impact from tariffs. However, tariff policies have a significant impact on the macroeconomic environment and will increase uncertainty. we will be increasingly alert to changes in the business environment and will be taking defensive measures as needed. We see changes in the business environment and supply chain as an opportunity to leverage our global network and demonstrate our enhanced trading capabilities. In FI March 2026, we will continue to work towards improving ROE. Considering changes in the business environment, we will further strengthen risk management and enhance downside resilience. We will execute asset reconfiguration being mindful of capital efficiency and with regular investment discipline. At the same time, we will also look at new opportunities that can be found in such a business environment. In our cash flow allocation framework, the management allocation is a source of capital to be strategically allocated to investments for growth and shareholder returns from cash earned through operations. In an uncertain business environment, we believe the importance of capital allocation becomes even greater. Therefore, we have maintained sufficient management allocation at the beginning of this fiscal year. we will keep our management options wide open and flexibly respond to various scenarios while achieving optimal capital allocation that balances investments and shareholder returns.

Here are the results of FI March 2025 and a business plan for FI March 2026. Co-operating cash flow, or COCF, has reached the 1 trillion yen level for the fourth consecutive fiscal year. Considering the solid cash flow, we plan to increase the dividend per share by 15 yen for fiscal year March 2026. On the other hand, in formulating the quantitative plan for FI March 2026, we have reflected the recent changes in the business environment. While the enhancing of base profit is steadily progressing, we have incorporated a certain degree of conservatism and set COCF at 820 billion yen and profit at 770 billion yen. We have taken into consideration the ongoing normalization of margins in the North American automotive business and time required to respond to changes in the business environment such as inflation, interest rates, and exchange rates. I will speak on the cash flow allocation results for FY March 2025. Cash inflows amounted to ¥1,629 billion, combining COCA for ¥1,028 billion and asset recycling of ¥601 billion, including multiple large-scale projects. In asset recycling, ¥50 billion was obtained from the sale of our shareholdings in 23 listed companies executed in FY March 2035. Cash outflows amounted to 1 trillion 457 billion yen, comprising investments and loans of 765 billion yen and shareholder returns of 692 billion yen. Next, I will speak on the MTMP three-year cumulative cash flow allocation forecast. We have revised down our COCF due to the revision of our plan for FI March 2026, but at the same time revised up asset recycling compared to the previously announced figures, leading to total cash inflows of Fortune 370 billion yen. In addition to the investment decision in Rose Ridge, we have made progress in other carefully selected investments, newly allocating 370 billion yen to investments and 40 billion yen to shareholder returns from the management allocation. At the time of disclosure of Rose Ridge in February this year, we announced that we would replenish 400 billion yen to the management allocation from the balance sheet. In a significantly changing business environment, we'll maintain sufficient management allocation of 400 billion yen To keep our management options wide open, we'll continue to balance capital allocation between investments for growth and shareholder returns. Next, I will speak on the progress in enhancing base profit. Adjusting commodity prices and exchange rates to the assumptions of FY March 2026 at the time of MTMP announcement and excluding one-time factors will expand base profit by 170 billion yen over the three years of the MTMP. Against this target, we have progressed to an increase of 120 billion yen as of the end of FY March 2025. While some businesses in the turnarounds and new investments are struggling due to changes in the business environment, the strengthening of existing businesses and exit from loss-making businesses are progressing smoothly, and overall we are on track. We will continue to persistently push ahead with each measure to achieve the target in the final year of the MTMP. Earnings contribution from new projects inside and out of Japan are progressing smoothly. We are advancing the selection and timely execution of investments, as well as enhancement of profitability after asset acquisition ahead of schedule, while responding to changes in the business environment. Including the three projects highlighted at the beginning of this presentation, I am confident that our investments for growth, which will exceed 2.3 trillion yen during the MTMP period, will dramatically fortify our earnings base and raise earnings levels significantly from FY March 2027 onwards. finally i will speak on the shareholder returns policy in fi march 2025 cocf reached the one trillion yen level for the fourth consecutive year highlighting our strong cash flow based on this we'll raise the ratio of shareholder returns as a percentage of cocf forecast for the three years of the current mtmp to the 50% level. For FY March 2026, we will increase the annual dividend per share from the current 100 yen to 115 yen, an increase of 15 yen. The interim dividend is set at 55 yen and the year-end dividend at 60 yen, reflecting our mindset of continuously strengthening shareholder returns based on our progressive dividend policy. In addition to the track record of cash flow, our company's strength lies in the clear path to significantly growing the earning space through the significant investment projects and middle game achievements highlighted today. Based on this, our policy is maintain the progressive dividend policy beyond the current MTMP. Accordingly, Once the current MDMP is concluded, we consider 120 yen as a new starting line for four-year dividends. We have also continued to make share repurchases in an agile manner and have cancelled all those shares in order to increase the capital efficiency per share in a constant manner. Our policy remains unchanged, so we will continue to study the right opportunity for an agile share repurchase, including its timing. Considering the current business environment, we have adopted a conservative approach for this fiscal year's plan. However, we have been consistently building up a track record of achieving COCF and profit of around 1 trillion yen. Additionally, over the past two years of the current MTMP, we have balanced investments in high-quality projects that expand our earning space with enhanced shareholder returns, thereby managing the company to realize a commitment of maintaining high ROE. Through these efforts, we are establishing a business foundation which will be capable of consistently generating profit levels well exceeding 1 trillion yen toward 2030. In terms of US dollars, the global benchmark currency or image would be a portfolio capable of generating COCF in the order of 10 billion US dollars. Against the uncertainty of the global economy, we'll leverage the high-quality business portfolio we have built over many years, characterized by diversification of industries, time horizons, and regions. In key regions such as North America, South America, Asia, including Japan and Australia, we'll refine both domestic operations in each region and business involving the global supply of highly competitive products. We appreciate your trust and remain committed to delivering our on our company's long-term growth. That concludes my part of the presentation. I will now hand over to the General Manager of the Global Control Division, Masao Kurihara, for details of financial results for FY March 2025 and FY March 2026 business plan.

I am Masao Kurihara, General Manager of the Global Control Division. Now I will explain the details of the financial results for FY March 2025 and the FY March 2025 business plan. Sorry, FY March 2026 business plan. First, I will speak on the year-on-year change in COCF by segments. COCF for FY March 2025 increased by 31.7 billion yen, to 1 trillion 27.5 billion yen. In mineral and metal resources, COCF decreased by 51.2 billion yen to 357.9 billion yen, mainly due to the decline in iron ore and metallurgical coal prices. In energy, COCF increased by 115.6 billion yen to 363.4 billion yen, mainly due to the increase in energy dividends. In machinery and infrastructure, COCF decreased by 31.7 billion yen to 145.2 billion yen, mainly due to a consolidated subsidiary becoming an equity method investee, as well as higher taxes and lower dividends due to asset sales. In chemicals, CLCF increased by 27.2 billion yen to 90.6 billion yen, mainly due to the strong performance in the methanol business, FBTPL, and higher profit from trading. In iron and steel products, COCF decreased by 2.5 billion yen to 6 billion yen. In lifestyle, COCF decreased by 22.1 billion yen to 18.1 billion yen, mainly due to lower dividends from equity method investors and lower profit from coffee trading. In innovation and corporate development, COCF decreased by 18.4 billion yen to 27 billion yen, mainly due to the increase in taxes associated with asset sales. In others, adjustments and eliminations, COCF increased by 14.8 billion yen to 19.3 billion yen, mainly due to expenses, interest, taxes, etc., which are not allocated to business segments. Next, I will speak on the year-on-year change in profits by segment for FY March 2025. profit decreased by 163.4 billion yen year-on-year to 900.3 billion yen. In mineral and metal resources, profit decreased by 49.7 billion yen to 285.4 billion yen mainly due to the decline in iron ore and metallurgical coal prices. In energy, profit decreased by 108.2 billion yen to 173.5 billion yen mainly due to the absence of one-time profit in the previous fiscal year and the decline in profit in LNG trading. In machinery and infrastructure, profit decreased by 15.8 billion yen to 232.9 billion yen mainly due to the decline in profit in automotives and lower profit due to asset sales. In chemicals, profit increased by 36.7 billion yen to 75.9 billion yen, mainly due to methanol business, FBTPL, gains from asset sales and higher profit from trading. In iron and steel products, profit increased by 2 billion yen to 13.2 billion yen. In lifestyle, profit decreased by ¥40.4 billion to ¥53.7 billion, mainly due to the absence of evaluation gain on AIM services recorded in the previous fiscal year and lower profit from coffee trading. In innovation and corporate development, profit increased by ¥33.5 billion to ¥87.3 billion. mainly due to the sale of rental property in Japan. In others, adjustments and eliminations, profit decreased by 21.5 billion yen to a loss of 21.6 billion yen, mainly due to an amendment to the retirement benefit system.

Here we compare profit for FY March 2035 with the previous fiscal year and summarize the changes by factor. Base profit decreased by 54 billion yen. There was an increase in profit due to contribution of earnings from new businesses, methanol business, and shipping related subsidiaries, while there was a swing back from additional dividends from Vale in the previous fiscal year. a decline in coffee trading profit and a decrease in profit from Penske truck leasing. Resources costs volume remained far erroneous, with an increase in volume in crude oil gas and iron ore, which were offset by the increase in costs in iron ore. Commodity prices and forex decreased by 25 billion yen. Commodity prices decreased by 65 billion yen, mainly due to the decline in iron ore with a 43 billion yen impact and metallurgical coal with 22 billion yen. Forex increased by 40 billion yen, mainly due to the depreciation of the yen. Asset recycling decreased by 16 billion yen, with 147 billion yen from the sale of assets including python and rental properties, offset by the absence of 163 billion yen recorded in the previous fiscal year. Valuation gains and losses and one-time factors decreased by 68 billion yen, mainly due to the amendment to retirement benefit system and impairment of mainstream. I will speak on the balance sheet as at the end of FY March 2025. Compared to the end of March 2024, net interest bearing debt decreased by 0.1 trillion yen to 3.3 trillion yen. Shareholder equity was 7.5 trillion yen flat year-on-year. As a result, the net DE ratio fell to 0.44 times. This slide contains segment-wise details of COCF for the FI March 2026 business plan. The plan is 820 billion yen, a decrease of 207.5 billion yen from the previous fiscal year. This is mainly due to a decline in iron ore and metallurgical places, a decrease in dividends from equity method investees, an increase in interest expenses associated with the acquisition of raws rich in mineral and metal resources, and a decrease in LNG dividends in energy. The segment-wise details of profit for FY March 20, 2026 business plan is shown on this slide. The business plan for profit is 770 billion yen, a decrease of 130.3 billion yen from the previous fiscal year, mainly due to a decline in iron ore and metallurgical core prices in mineral and metal resources, an increase in interest expenses associated with the acquisition of roads rich, a decline in energy dividends and crude oil prices in energy, an absence of gains from asset sales recorded in the previous fiscal year in machinery and infrastructure, and innovation and corporate development. Page 26 compares the plan for FY March 2026 with actual results of FY March 2035 showing the changes by element. Base profit, we expect an increase in profit of 24 billion yen. We expect lower energy dividends, increased interest expenses associated with acquisition of Roseridge, and lower profit from automotives, while we expect higher profit from food trading and protein-affiliated companies such as those in innovation and corporate development and iron and steel product segment, and from chemical trading. resources cost and volume we expect a decrease in profit of 50 billion due to an increase in operating costs in upstream energy and iron ore businesses and a decline in volume in upstream energy and copper businesses commodity prices and forex we expect a decrease in profit of 86 billion yen due to a decline in iron ore prices and metallurgical core prices and appreciation of the year Asset recycling, we expect a decrease in profit of 98 billion yen due to absence of asset recycling gains of 147 billion yen recorded in the previous fiscal year, although we anticipate asset sales of 49 billion yen from the multiple projects. Valuation gains and assets and one-time factors, we expect an increase in profit of 80 billion yen including 21 billion yen from valuation gains centered around ITC rubies and our farm, and absence of 59 billion yen of losses from the previous year. That concludes my presentation.

Thank you.