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.