Mitsubishi Corp Ord

I'm Kazuyuki Matsu, CFO. Thank you very much for taking time out of your busy schedule to join our financial results briefing today. I would like to explain the fiscal year 2020 financial results and fiscal year 2021 earnings forecast. I will use the presentation material in the middle of the screen entitled results for the year ended March 2021 and forecast for the year ending March 2022. Please turn to page one. There are three points I will explain. First, consolidated net income for fiscal 2020 decreased by 362.8 billion yen year on year and reached 172.6 billion. Secondly, although we did not achieve the 200 billion yen forecast announced in August, we will maintain the annual dividend at 134 yen per share as forecasted at the beginning of the fiscal year. Lastly, consolidated net income forecast for fiscal 2021 is 380 billion yen, and the dividends will be 134 yen per share, the same amount as fiscal year 2020. Now, please refer to the bottom half of page one. First of all, I'd like to explain the takeaways of results for the year ended March 2021 at the bottom left box. Due to the impact of COVID-19, and stagnation of resource prices, earnings fell sharply in the businesses we have strengthened, such as the Australian metallurgical coal business, as well as in LNG-related and automobile-related businesses. In addition, earnings declined by 362.8 billion yen compared to the previous fiscal year due to the absence of one-off gains on the reorganization of the Chilean copper business recorded in the previous fiscal year and the impairment loss on Goodwill. and intangible assets attributed to Lawson recorded in the current fiscal year. Next, I'd like to explain our forecast for the year ending March 2022. Please refer to the bottom right box. First of all, earnings for the year ending March 2022 is forecasted to be 380 billion yen, an increase of 207.4 billion compared to the previous fiscal year. In addition to the absence of interim losses on loss imposed in fiscal 2020, we have factored in a steady recovery in demand, mainly in the automotive and mobility and natural gas segments. On the other hand, in the mineral resources segment, our assumptions are that the recovery will be limited. Our view is that the sharp rise in the current prices of copper and iron ore is not expected to last long, and we feel the need to carefully assess the situation in light of the slump in coking coal prices. The annual dividend forecast is set at 134 yen per share, the same amount as in fiscal 2020. And we will continue to uphold a progressive dividend with no reduction policy.

Next, let me show the performance by segment on page two. I will skip the details on natural gas, mineral resources, automotive and mobility, and consumer industry as they've already been covered. In industrial materials, profits decreased mainly due to lower demand in the steel business and carbon businesses. In petroleum and chemicals, absence of the loss on crude oil trading derivatives booked last year resulted in higher profit. In industrial infrastructure, food industry, and power solutions, net income was down due to the rebound from one-off gain booked last fiscal year. Urban development segment profit declined due to the impairment loss on aircraft leasing business and lower customer traffic for the airport-related businesses. Compared to the previous year, profit in all segments except for petroleum chemicals was down. However, in food industry, we captured steady underlying demand, mainly driven by stable products. And in urban development, we enjoyed capital gains through the asset reshuffle. Even with COVID-19, we are still building up our profit base. Now, let's move on to the cash flow on page three. The bar graph on the left shows the cash flow for fiscal 2020. The gray bar is the underlying operating cash flow, which is operating cash flow net of working capital. And it was 625.2 billion yen, mainly underpinned by operating revenue and dividend income. The orange bar is the investment cash flow. Sales of business-related stocks and asset sales in the North American real estate business were some of the cashing items, while we had investment cash outflows, such as investment in huge technologies, CapEx and LNG business, Australian metallurgical coal business, and integrated energy business in Europe. In sum, the investment cash flow was negative 357.3 billion yen. As a result, adjusted free cash flow, which is the sum of underlying operating cash flow and investing cash flow, was 267.9 billion yen, as shown by the blue shaded box on the table. Although consolidated net income declined due to impairment losses of Lawson and others, cash flow remained strong and the company maintained robust financial soundness. Please refer to the segment forecast on page 4 and the market conditions on page 5 at your convenient time. In summary, fiscal 2020 was a very difficult year for us as our strong businesses were deeply impacted by COVID-19 as well as the impairment loss of Lawson. In our guidance for the new fiscal year, we have made slightly conservative assumptions for crude oil and copper prices compared to the current level which should give us a buffer to withstand a certain level of decline in commodity prices. This will be the end of my presentation results.

Thank you, Mr. Masu. Next will be Mr. Kakiuchi, our president. Thank you very much for taking time out of your busy schedule to join us today. I would like to explain the highlights of our financial results. Please refer to page one of the presentation. Our fiscal year 2020 net income was unfortunate. It was 172.6 billion yen in net income. However, automotive-related and meteorological coal-related in Australia and COVID had an impact. And for Lawson, there was impairment losses. And we were originally budgeting 200 billion, but we underperformed and we take this seriously. Going forward, we would like to ensure that we achieve our forecast. and socially, economically, and politically, we would like to account for various types of conditions so that we could build on our results. The impairment losses related to Lawson is due to the fact that daily sales went down due to COVID-19. And it was hard for us to expect, we expected that profitability recovery is going to take a longer period of time. But Lawson has a network of more than 14,000 stores in Japan, and we believe it has great potential as an infrastructure for people's daily lives and community-based and decentralized society going forward that will utilize digital technology. The company will also contribute to the enhancement of value by providing new services in combination with electric power and other businesses. And we would like to ensure that to the community we are able to cater to various types of needs and be able to establish a new format. The forecast for fiscal 2021 has been set at 380 billion yen. For the dividend, we will maintain the dividend at 134 yen per share under the progressive dividend policy as our business portfolio has maintained its resistance to changes in the business environment. The bottom of the document summarizes shareholder return during the midterm management plan. As we have continued a progressive dividend policy, the three-year dividend is expected to add up to approximately 600 billion yen.

Although the economic environment has been picking up since fiscal 2020 and is on a gradual recovery track, the recurrence of the state of emergency and the delay in vaccine rollout in Japan are causes for concern. In addition, we need to continue to be vigilant about geopolitical risks. The conflict between U.S. and China stems from the difference in ideologies and values between democracy and capitalism and state capitalism. Until now, politics and economics have been separated from the global economy. In the future, we will need to keep a close eye on the economic situation, which may lead to decoupling, depending on development in China, where politics and economics are integrated. Furthermore, we are in a time of great change, as we call the X. we expect a further acceleration to digitalization. And also, EX, I think there is going to be an energy revolution to aim for carbon neutral. We will also capture the changes happening from COVID-19, and we'll try to evolve our business model so that we will be able to adapt to the changes happening in the environment. And also, in order to enhance the value of the invested companies, we will be making efforts And if our further involvement cannot contribute to the growth of these companies, we will be reshuffling our portfolio so that we can pursue sustainable growth by focusing on the value-added circulation-based. We have some explanations about the action on page two, which I will skip for now.