Mitsubishi Corp Ord

Ladies and gentlemen, thank you very much for coming to the fiscal 23 Q2 results press conference and briefing. Despite your busy schedule, I'll be your emcee today. I'm Okamoto from Corporate Communications at Mitsubishi Corporation. At 1 p.m. today, on November the 2nd, Thursday, we disclosed our results for Q2 fiscal 23. We will first have an explanation from our president as well as the CFO to present about the results. Then after, we will have a Q&A session with the press. After a 15-minute break from 2.15 p.m., we will have a Q&A session with investors and analysts. We have People from the press, investors, and analysts are participating in this meeting in person, in the room, as well as from online. First, let me introduce who's here today. The second person from the right is our representative director, president, CEO, Katsuya Nakanishi. To Mr. Nakanishi's left, we have our representative director, executive vice president and CFO, Yuzo Nouchi. To the right of Mr. Nakanishi is our Executive Officer and CSEO, Kenji Kobayashi. And at the very left is our Senior Vice President and GM of Corporate Accounting, Yoshihiro Shimazu. And I am Okamoto from Corporate Communications. So talking about the flow for today, we will first have Mr. Nakanishi, our CEO, talk about the outline of Q2 fiscal 23 results and also an update on our mid-term corporate strategy 2024. Then after, details will be presented by Mr. Noichi, our CFO. Then we will get questions from the press. For investors and analysts, we will have a Q&A session from 2.15 p.m. Just to give out some instructions out to the media, If you would like to film, please use the podiums for cameras at the back from the left and the right. And if you would like to film in the front, please ensure that you stay within the lines. We will explain the deck entitled result for the first six months of fiscal year 2023 presentation material. We have distributed the material for those who are in the room. And if you are online, we have sent you it through email. And we will also project it on the screen through Zoom. Mr. Nakanoshi, over to you. I am Nakanishi, President and CEO. Thank you very much for taking time out of your busy schedule today to join our company's fiscal 23 Q2 results meeting. First, I'll give an overview of the financial results and also an update on Midterm Corporate Strategy 2024. then our CFO, Mr. Onouchi, will explain the detailed FY23 Q2 results and the outlook for fiscal year 2023. Now, please refer to presentation material, page 3. First, consolidated net income for FY23 Q2 was 466.1 billion yen, the second highest ever first half results following the previous fiscal year. Although net income decreased by 253.9 billion yen year-on-year, mainly due to the drop-off of soaring resource prices, etc., each business steadily accumulated profits, maintaining high levels. Next, I will explain the full year forecast for fiscal year 23. We have revised up the full year forecast from 920 billion yen announced in May to 950 billion yen. We are revising up our forecast now because segments such as natural gas, automotive and mobility, industrial materials and consumer industry are trending steadily, and we have been able to confirm the firmness of profit levels going forward. Moreover, the revised full-year forecast includes additional losses from items of concern which were not anticipated at the beginning of the fiscal year. in light of changes in the business environment. The 900 billion yen forecast accounts for this item. I will also talk about shareholder return later, but the full-year dividend forecast has been increased by 10 yen per share to 210 yen. I would like to talk about the progress of Midterm Corporate Strategy 2024. Please turn to page 4 shown on the bottom right. Here is an update on the cash flow allocation plan raised in Midterm Plan 2024 as of Q2 fiscal 23. Cash inflows during the period amounted to ¥608.2 billion in underlying operating cash flow and 467.9 billion yen in divestments. Cash outflows included 434 billion yen in investments, resulting in adjusted free cash flow of 642.1 billion yen. As for the cumulative results under Mid-Term Plan 2024, underlying operating cash flow was 1.9 trillion yen, and cash flow from divestments was 1.2 trillion yen, showing steady progress against the forecast. The cumulative total of investments amounted to 1.3 trillion yen, which has been building up steadily, including committed projects. We expect a cumulative total of 1.1 trillion yen worth of shareholder return based on what has already been announced.

Please turn to page 5. We created this new page for your better understanding of the progress of a value-added cyclical growth model. The current mid-term corporate strategy aims to optimize the business portfolio by implementing the value-added cyclical growth model, and investments for future growth are made by redeploying the management resources. As announced, we have divested a real estate management company last fiscal year and a company in the food industry group this fiscal year. Through such strategic rebalancing of the business portfolio, we are promoting to reallocate the management resources. To promote this model, we have established a policy of either divesting or keeping the business, screening the list of businesses where ROIC is underperforming the industry average, or those achieving only low growth using our business management systems. The aim is to improve capital efficiency by reducing losses through independent asset replacement and improving the profitability of companies we continue to hold. The profit improvement through these asset replacements and efforts to turn around the EVA of companies we kept to positive was approximately 30 billion yen in FY22 compared to FY21, and we will continue the asset replacement and value enhancement of the businesses we keep to increase this amount to roughly 100 billion yen by FY24, the final year of the mid-term corporate strategy. We will redeploy the management resources generated from executing the value-added cyclical growth model for growth investment to nurture the seeds and pillars for further growth. Next, on page six, I will provide the breakdown of the investment plan and the progress. We are steadily investing in a variety of opportunities in each of the areas outlined in the mid-term plan. We are expanding the investment pipeline as well, and the current mid-term corporate strategy calls for an investment of over 3 trillion yen, including the investments already made. Having said that, the goal is not just about achieving this number. We'll continue to closely monitor the market to carefully select opportunities while maintaining the investment discipline. Please turn to page 7. Past investments are starting to make steady earnings contributions, and the investment pipeline expected to contribute to earnings during the next midterm corporate strategy is also building up. With our eyes on further growth, we will invest in businesses to create future core businesses. Page 8 summarizes the shareholders' returns. In light of the upward revision of the full-year guidance, expectations for sustainable profit growth to the future, and stock market expectations, we are raising our annual dividend guidance by ¥10 per share to ¥210 per share. In addition to the dividend hike, we will also implement the stock split as announced today. Mitsubishi Corporation stock has been trading at around 700,000 yen for the past few months, above the 500,000 yen mark, which is the level suggested as a desirable investment unit by Tokyo Stock Exchange. With the Japanese government advocating Japan to stand as an asset management nation and setting a policy goal to grow the retail investor base, we believe that we should also play our part in creating a more market-friendly environment. Drawing a conclusion to conduct a 3-for-1 stock split effective January 1, 2024. As a result, the annual dividend of 210 yen per share will be 78 yen per share after adjusting for the stock split. This fiscal year is positioned as the year to execute the mid-term corporate strategy. We will steadily carry out our growth strategy and implement the value-added cyclical growth model to further enhance our corporate value. The progress against the quantitative target under the mid-term strategy is summarized on page 9, so please refer to the slide at your convenient time. We are now halfway through the mid-term corporate strategy 2024 and are now at the stage of accelerating the execution of investment plans and other measures to achieve our goals. At the same time, we must be fully cognizant of the rising uncertainties in the external environment and will brace ourselves in the remaining period under the mid-term strategy to strive for our goals. With that, I will end my explanation and hand over to Mr. Nauchi, the CFO, to cover the details of the FY23 second quarter results and the guidance for the full year. Thank you for your attention.

I am Nochi, the CFO. I would like to add some comments. I will start with Q2 results by segment, so please turn to page 11, shown on the bottom right of the page. I will talk about segments that exhibited significant changes on a year-over-year basis. Starting from the top left, regarding The top, natural gas, due to the absence of trading losses in the LNG sales business in a previous year, net income increased by 35 billion yen from 46.4 billion yen to 81.4 billion yen. As for mineral resources, the fourth from the top, mainly due to lower prices in the Australian metallurgical coal business, Mainly due to lower prices in Australia metallurgical coal business, net income decreased by $187.4 billion from $321.5 billion to $134.1 billion year over year. Next, on the right side of this slide, the first segment on the top right, automotive and mobility, decreased by 23.8 billion yen from 89.4 billion to 65.6 billion yen Iran-year, mainly due to decreased equity and earnings of Russia-related and ASEAN automobile businesses. The next segment below, food industry, was up by 21.5 billion yen to 63.6 billion from 42.1 billion year-over-year, mainly due to gains on sales of shares in an affiliated company. In urban development, at the very bottom, net income decreased by 102.5 billion yen from 114.6 billion for the same period of the previous year to 12.1 billion, mainly due to the absence of gains on sales of a property management company recorded in the same period of the previous year and lower equity and earnings in a property business in North America. I'll now explain fiscal year 23 full year forecast by segment. Please turn to page 12 at the bottom right.