Mitsubishi Corp Ord

Hello, everyone. I'm Torada, the GM of the Investor Relations Department. Thank you for joining us despite your busy schedule today. We'd like to start the call now on Mitsubishi Corporation's FY21 results and Midterm Corporate Plan 2024. There are four people joining the call from our company. They are Katsuya Nakanishi, President and CEO. Yuzo Noji, Chief Financial Officer. Yoshihiro Shimazu, GM of Corporate Accounting. And finally myself, Tatsuhiko Terada, GM of IR. Thank you for joining. And without further ado, I'd like to hand over to Mr. Nakanishi. Hello, everyone. Thank you very much for taking time out of your busy schedule to join us today. I am the president, Mr. Nakanishi. This is the first time I am in this kind of meeting, so I'm a little nervous, but thank you for your support. The other day, we announced the results for the year ended March 22 and midterm corporate strategy 2024. In fiscal 21, the final year of midterm corporate strategy 2021, we achieved record high profits by steadily turning profitable opportunities into profits in each of our businesses amid a tailwind from a rapid recovery in demand following COVID-19 and firm resource prices. We believe that we have made progress in strengthening our business portfolio through a review of asset valuations and other measures and have prepared ourselves for Mid-Term Corporate Management Strategy 2024. First, Mr. Nobuti, our CFO, will explain the financial results for fiscal year 21, and then I will present Mid-Term Corporate Strategy 2024. Thank you very much, Mr. Nakanishi. Next, Mr. Nouchi will present. I am Yuzo Nouchi, the CFO. Thank you very much for taking time out of your busy schedules to join us today. From this call, Mr. Shimazu, General Manager of the Corporate Accounting Division, will be present as well. I'd like to highlight four points regarding the financial results. First, consolidated net income for FY21 was 937.5 billion yen, a record high. Secondly, the annual dividend for FY21 will be 150 yen per share, revised up by 8 yen from the 142 yen per share announced in November. Third, we decided to do a share repurchase of up to 70 billion yen as additional shareholder return. Lastly, we are forecasting consolidated net income of 850 billion yen for fiscal year 22. Now I would like to explain the presentation entitled Results for the Year Ended March 2022 and Forecast for the Year Ending March 2023. Please refer to page 1. First, I'd like to explain about changes from the previous fiscal year. Please refer to the box on the lower left. Consolidated net income for fiscal year 21 was 937.5 billion yen, up 764.9 billion yen from the previous year, reaching a record high. As shown in the box, 7 out of 10 segments posted record high profits. In addition to strong resource prices, the recovery phase of the economy provided opportunities for earnings in various businesses, including the automobile-related and salmon farming businesses, which led to steady growth in profits throughout the fiscal year. In addition, to prepare for the uncertain business environment ahead, we are taking in losses of concern as much as possible by conducting asset valuation reviews and other measures. Next, I'd like to explain our shareholder return policy, please refer to the box at the bottom right of the page. At the time of Q3 results announcements on February 3, we explained that additional shareholder returns would be announced at the time of year-end financial results. Based on FY21 results, we have decided to increase dividends and repurchase shares. First, with regard to the dividend increase, we raised the annual dividend to 150 yen per share for fiscal 21, taking into account the sustainable growth of profits in the future. In addition, we have decided to repurchase up to 70 billion yen of our own shares. The company plans to cancel all of repurchased shares except for those used for stock option grants.

Next, I'd like to explain our earnings forecast and shareholder return policy for FY22. Please refer to the bottom right section of this slide. The business environment for the current fiscal year is becoming increasingly uncertain due to the Russia and Ukraine situation, as well as monetary tightening cycle mainly in developed countries. In light of these circumstances and reflecting downside risks, we have set our FY22 earnings forecast at 850 million yen, a profit decline of 87.5 million yen from the previous year. Regarding shareholder return policy, we will continue a progressive dividend policy under the Metem Corporate Strategy 2024, which starts from this fiscal year. We aim to achieve a total payout ratio of 30 to 40% and share buybacks will be conducted flexibly with financial discipline. Based on what I have explained, the L422 dividend is projected at 150 yen per share unchanged from L421. Please refer to page 2 for performance buy segments. Next, I'll explain the status of cash flow on page 3. The bar graph on the left illustrates the cash flow for FY21. Underlying operating cash flow, which is operating cash flow adjusted for working capital, was positive 1 trillion 236.5 billion yen, topping the 1 trillion yen mark for the first time. Investing cash flow was a net outflow of 167.6 billion yen. As a result, as shown in the dark blue box of the table on the right, adjusted free cash flows, the sum of underlying operating cash flows and investing cash flows marked 1 trillion and 68.9 billion yen. Next, let me add some comments on the three-year cumulative cash flow generated during the Midterm Corporate Strategy 2021, using the lower part of the table on the right. The three-year underlying operating cash flow shown by the green column totaled to 2 trillion and 533.8 billion yen. Despite the negative impact of COVID-19 on our business last fiscal year, cash flow was generally firm compared to the swing in earnings. Investing cash flow is shown by the light blue column. While we saw progress in the sales of business-related stockholdings and asset reshuffle like the interest in metallurgical coal mines, we also made acquisitions such as Eneco, European energy company, LNG-related business, and made investments such as in casual vehicle copper mine. Net outflow was 1 trillion and 25.6 billion yen. As shown in the darker blue box, the three-year cumulative adjusted free cash flow, the sum of underlying operating cash flows and investing cash flows stood at 1 trillion and 508.2 billion yen. Please refer to the segment forecast on page 4 and the market conditions on page 5 at your convenient time. FY21 was somewhat supported by the market tailwind, but we also made steady progress in strengthening and improving our balance sheet by dealing with unprofitable businesses and making provisions for losses. FY21 was a good year serving as a steady base as we begin to implement the Mid-Term Corporate Strategy 2024. FY22 will be the first year under the new medium-term corporate strategy, and we will renew our efforts in light of the current business environment with increasing uncertainties. This concludes my part on the financial results.

Thank you, Mr. Nochi. Next, I'd like to hand over once again to Mr. Nakanishi. Now, the first thing I'd like to do now is to explain my thoughts regarding how we have formulated Midterm Corporate Strategy 2024, which was announced today. First of all, please refer to the first page of the presentation, which is about our view on the external environment. The international community is becoming increasingly polarized and divided, as seen in the deepening turmoil in Russia and Ukraine, in addition to the struggle for hegemony between the U.S. and China. In this context, we are living in an era of unprecedented uncertainty, including changes in global supply chains, decarbonization, digitalization, and the transformation of lifestyles with COVID-19. In this era of rapid change, we believe it's our mission to continue to meet the needs of society by being more farsighted and enhancing our industrial knowledge and global intelligence even more than before. That is why we are calling for creating MC shared value in the new midterm plan. Please refer to page 1. MC shared value refers to the continuous creation of significant shared value by elevating MC groups' collective capabilities in order to address societal challenges. In the midst of various social issues such as a decarbonized society, sustainable society and lifestyles, innovation and coexistence with local communities, we will leverage our unique strengths to create MC shared value through solutions to these issues. Please turn to page two. Here are five specific measures for achieving creating MC shared value which are growth strategies, business management, management mechanisms, HR policies, and sustainability policies. Today, I will mainly talk about the quantitative targets, shareholder return policies, and our growth strategies. Please see page three for quantitative targets. The outlook for consolidated net income for fiscal year 2022 is 850 billion yen and 800 billion yen for fiscal year 2024. As there is significant impact from market fluctuations, we have formulated our forecast for fiscal year 24 based on a certain level of assumptions for resource prices. If we apply the same resource price assumptions for fiscal year 24 to fiscal year 22, the profit outlook would be about 650 billion yen. We aim to achieve steady growth of profits excluding price factors through growth of existing projects, asset reshuffling based on the value-added cyclical growth model, and new investments. In addition to further strengthening our earnings base, we will pursue upside potential when resource prices rise. We will continue to pay a progressive dividend policy in this mid-term management plan. we will implement a return policy that balances financial soundness, stable dividend growth, and market expectations for shareholder returns. We will maintain and improve double-digit ROE through steady profit growth and shareholder returns. Please turn to page 4. Regarding cash flow and capital allocation, The key is to maintain financial discipline by approximately allocating the approximately 4.5 trillion yen of cash generated over the next three years to investments and shareholder returns. Please turn to page 5. We expect to invest 3 trillion yen over the three-year period of the mid-term plan. While maintaining and expanding our earnings base, we will allocate cash flow generated to EX-related, DX-related, and growth areas as well. In particular, regarding EX-related investments, we plan to accelerate the pace of investments from the 2 trillion yen level by 2030 announced in October last year to 1.2 trillion by fiscal year 2024. We plan to increase the percentage of EX investments in our business portfolio from the current 30% to about 40% by the end of fiscal year 24 and to about 50% in the future around fiscal year 23.