Mitsui & Co Ltd Ord

Simultaneous interpretation is provided by third-party interpreters for the convenience of non-Japanese speakers. While reasonable efforts are made to provide accurate interpretation, portions may be incorrect. In case of any discrepancy, the original Japanese shall prevail. We will upload the summary of this session shortly in Mitsui's homepage in English for your review. It is time, so we'd like to commence Mitsui & Company's financial results briefing for the second quarter of the fiscal year ending March 2026. Thank you very much for joining us today despite your busy schedules. Today's session is being held as hybrid event for institutional investors and analysts accessible via the venue, Zoom webinar, and online streaming. President Hori and General Manager of Global Controller Division Kuihara will provide approximately 15 minutes of explanation. Afterwards, we will take questions from the audience. Additionally, to enable individual investors to view the earnings briefing in real time, we are providing a live stream. Please refrain from unauthorized reproduction or use of images or audio from today's presentation. Please note that today's presentation is being recorded and will be available on demand on the Mitsui & Co. website at a later date. Now, allow me to introduce today's presenters. President and Chief Executive Officer Kenichi Hori, Executive Vice President and CFO Tetsuya Shigeta, Global Manager of Global Control Division, Masao Kurihara. I am Konishi from IR department, serving as a moderator. Thank you for your cooperation. We will now begin the briefing. Present Hori, please.

Hello, I'm Kei Chahori, President and Chief Executive Officer. Thank you for joining us today. First, I will speak on the progress of the Medium-Term Management Plan, MTMP. I will then hand over to Masao Kurihara, General Manager of the Global Control Division, who will speak on the details of the financial performance. Let me start with an overview of the first half of this fiscal year and our initiatives for the second half. For the first half, both cooperating cash flow, COCF, and profit progress steadily at 55% against the business plan. When we formulated the plan, we incorporated a certain level of conservatism regarding uncertainties over U.S. tariffs and associated macroeconomic conditions. However, the direct impact of U.S. tariff in the first half was limited. We're seeing solid growth in base profits through our middle game initiatives. We have also made progress in bolstering our long-term earning space, steadily proceeding with carefully selected investments for growth, such as Rose Ridge Iron Ore, Ruiz LNG, and Blue Point Low Carbon Ammonia. Additionally, for mainstream, which has continued to make losses, we have made impairments in accordance with the narrowing down of the development plan, thereby reducing the book value of investments and loans on an accounting basis. Based on this progress in the first half and the latest outlook of the second half, we have made an upward revision for our full-year forecast for COCF by 80 billion yen and profit by 50 billion yen. We will, however, target achieving further upside exceeding these new targets. We have also decided to allocate the entire remaining management allocation to investments for growth and shareholder returns and have decided to make 200 billion yen of share repurchases. During the current MTMP period, we expect investments for growth to have a total 2.5 trillion yen and total shareholder returns to have total 1.6 trillion yen. In the second half of this fiscal year, we'll continue to put emphasis on our integrated risk management, considering geopolitical risks and the financial landscape. We'll continue to work on improvement measures for our remaining challenges and further expansion of base profit to enhance ROE. Next, I will give an overview of our financial performance for the first half of the fiscal year. COCF decreased by 89.6 billion yen year-on-year to 448.5 billion yen, while first-half profit increased by 11.9 billion yen year-on-year to 428.5 billion yen. The main reason for the year-on-year decrease in COCF was the absence of large LNG dividends recorded in the previous period, which are from FY March 2024, but the timing of receipt was delayed into the following fiscal year. Excluding this impact, COCF is at a similar level compared to the previous fiscal year. Given the solid progress in the first half and the outlook for continued solid performance in the second half, we decided to make an upward revision. Compared to the business plan, the four-year forecast will be revised up to 900 billion yen for CoCF, an increase of 80 billion yen and 820 billion yen for profit. an increase of 50 billion yen. As mentioned earlier, we will target achieving further upside and intend to finish strong through to the end of the MTMP. Based on solid cash flows and review of the cash flow allocation, we have decided to make share repurchases of 200 billion yen, which is to be completed by March 19, 2026, in order to continuously improve our value per share will cancel all shares acquired in this repurchase by the end of March 2026. Next, I will give an overview of the four-year forecast for COCF. Based on strong progress and outlook in each segment, such as capitalization of interest expenses associated with the acquisition of Rose Ridge and increase in dividends from equity method investees in mineral and metal resources, LNG-related items in energy, and dividends from equity method investees in machinery and infrastructure, we have made an upward revision to the four-year forecast by 80 billion yen to 900 billion yen.

The full-year forecast for profit has been revised upward by 50 billion yen to 820 billion yen, reflecting strong progress and outlook in mineral and metal resources, energy and machinery and infrastructure. I would like to provide an update on the impact of U.S. tariffs and policy changes. Profit from our business in the Americas in the first half was around 170 billion yen, of which profit from the U.S. was around 110 billion yen. When divided into three business types, domestic operations, exports, and imports and sales, the share of profit from domestic operations remained the largest, and the direct impact of tariffs was limited. In the second half, we will continue to enhance our awareness to changes in the business environment and take agile measures as needed. Cash inflows during the current MTMP period are expected to increase by 60 billion yen from 4.37 trillion yen announced this May to 4.43 trillion yen. Since our last update in May, the management allocation expanded from 400 billion yen to 460 billion yen. Taking into consideration our current investment pipeline, and enhancement of capital efficiency, ¥260 billion of this has now been allocated to investments for growth and ¥200 billion to shareholder returns, meaning the entire management allocation for the current MTMP has now been allocated. However, we will continue to manage this in a flexible manner. Next, I will speak on the cash flow allocation results for the first half. In the first half, we executed investments for growth aligned with the key strategic initiatives, including LNG, European Tank Terminal Business, ITC Antwerp, which was made 100% subsidiary, and phase investment in the low-carbon ammonia business, Blue Point. We also made steady progress in asset sales, including our stakes in several listed companies. Although not included in the first half results, in October we began to deploy capital for the acquisition of interest in the Rose Ridge Iron Ore Project. Cash inflows totaled 562 billion yen, comprising COCF of 449 billion yen and asset recycling of 113 billion yen. Cash outflows totaled 498 billion yen, comprising investments and loans of 339 billion yen and shareholder returns of 159 billion yen. Many projects executed during the current MTMP that started contributing to near-term earnings have further strengthened profitability, elevating base profit. There are several projects that have undergone concrete progress this fiscal year. The Waitsea Natural Gas Project in Australia is scheduled to start commercial production soon. The Taiwan Offshore Wind Power Project has begun operations in stages and started contributing to earnings, progressing within budget and on schedule towards full commercial operation in 2026. The Sneha Boraila business in India has also started contributing to earnings. Investments or growth that fortify the long-term earnings base are also progressing steadily. In October, we started deploying capital for the world's rich iron ore project and expect to complete the acquisition of our 40% interest soon and are on track for first ore by 2030. The Tatonka Shell Gas Upstream Project in Texas is scheduled to start production this calendar year. We expect a good productivity and earnings contribution from fiscal year March 2027. The $2.5 trillion in investments for growth during the current MTMP will significantly bolster the depths of our earnings base. Steady progress in these projects will significantly enhance our earnings ability, enable us to absorb market fluctuations, and provide us the edge to compete at a higher level. For FI March 2027 and beyond, we will continue to enhance our earnings base by executing new investments for growth, carefully selected from our abundant investment pipeline while maintaining our strict investment discipline. We will significantly enhance our cash generation capability based on a variety of competitive high-quality assets.