Mitsubishi Corp Ord

This is Nakanashi, CEO, Mitsubishi Corporation. Thank you very much for participating in our earnings presentation meeting for the third quarter of fiscal year 2024. First, from my side, I will explain about this quarter's highlights and cash flow allocations. Please turn to page 3 of the presentation material. First, for the consolidated net income for the nine months ended December 31, 2024, was, excuse me, December 25, was 827.4 billion yen. In the Japanese offshore wind power business, due to a dramatic change in the business environment, we have recorded impairment of 52.2 billion yen. Based on the situation, we are conducting a downward revision for the power solution segment. However, as we have booked large gains coming from revaluations and sales of assets, and as we are expecting some segments to perform better compared to the outlook of our previous quarterly announcement. Accordingly, we expect we'll be able to achieve the 950 billion yen outlook for the full year that we have previously announced. The projects that have gone through impairments are three. one at the offshores of Noshiro City, Mitanecho, and Oga City of Akita Prefecture, one at Yurihonjo City at Akita Prefecture, and one at Choshi City of Chiba Prefecture. Since we have successfully won the bid in December 2021, we have been conducting development for around three years. However, the change of the business environment surrounding wind power triggered by geopolitical risks such as a global acceleration of inflation and yen depreciation, constraints in the supply chain, and the rise of interest rates were much greater than our initial assumptions.

In light of this situation... we have recorded an impairment of 52.2 billion yen, the maximum amount that can be recorded at this time. This amount has already been contributed or committed to this project. As explained in the press release on February the 3rd, we are currently re-evaluating the business potential of this project in order to explore various measures to improve profitability. We plan to announce our future policy based on the business revaluation results. Next, I'll explain the outlook for cash flow allocation in the Midterm Corporate Strategy 2024. In the previous quarter's earnings announcement, we explained that the outlook for free cash flow after shareholder returns in the cash flow allocation plan was 0.4 trillion yen. As we continue to make progress steadily in line, we will keep the outlook as it is. Regarding the additional earnings, Next, our CFO, Mr. Nauchi, will explain the financial results overview.

Hello, I'm Nomuchi, CFO. From my side, I will give some additional explanation of the summary results. Please turn to page 4. Consolidated net income of the third quarter of FY2024 was 827.4 billion yen, up 130.8 billion yen year over year. We recorded impairments in our Japanese wind power business in the third quarter. On the other hand, as we have accumulated major gains on valuation and sale of assets and received dividends in our LNG-related business, the progress rate of this quarter was high at 87% against our full-year forecast. For the full-year forecast, as CEO Nakanishi explained at the beginning, we reviewed the status of each segment and have decided to maintain the full-year outlook of 950 billion yen. Please turn to page 5. We have compiled the cash flow allocation plan in the Midterm Corporate Strategy 2024. I will explain the progress as of the third quarter of this fiscal year. Keshen was underlying operating cash flow of 771.4 billion yen, on top of that 466.1 billion yen of cash flows from divestitures, in total 1 trillion 237.5 billion yen. Underlying operating cash flow has been suddenly created edge businesses. At the same time, cash flows from divestitures through asset turnover have been progressing smoothly, including sales of coal mines and are still making coal business. On the other hand, on the cash outside, we have executed 793.2 billion yen of investment. As a result, adjusted free cash flow was a positive of 444.3 billion yen. The cumulative progress under the midterm plan was 3.2 trillion of underlying operating cash flow and 1.9 trillion in divestitures. both in line with our outlook. Investments have been going up to 2.6 trillion yen on a cumulative basis. Cumulative adjusted free cash flow was 2.5 trillion yen. Based on the steady progress, we are anticipating additional distributable cash from post-return free cash flow to be 0.4 trillion yen. As CEO Nakanishi has explained, you will not carry over this to the next midterm matching plan period, but use it entirely for additional investments and shareholder returns. For the progress of quantitative targets, it is written on page 8. Please refer to this later.

Now, I'll explain the results for the third quarter by segment. Please refer to page 6. Next slide, please. For the smart life creation segment, which is the next line, profits increased by 90.7 billion yen from 83.2 billion yen year-over-year to 173.9 billion yen due to factors such as the revaluation gain accompanying the conversion of loss into an equity method affiliate despite the absence of the gain on the sale of shares of affiliates in the same period of the previous year. Going down to the power solution segment, despite the improvement in the earnings of the power business in the Americas and the gain on the sale of the European power transmission business, there was an impairment loss on the domestic offshore wind-powered business and the absence of a strong performance of the European integrated energy business in the same period of the previous year, resulting in a loss of 21.1 billion yen, a decrease of 42.5 billion from the 21.4 billion yen profit in the same period of the previous year. Next, I'll explain the forecast by segment. Please turn to page 7. As I explained earlier, we are maintaining our full-year forecast of 950 billion yen, but we have revised the outlook for several segments. I will explain the segments that were revised the most. First, in the environmental energy segment, we have revised the November forecast by 11 billion yen to 186 billion yen. due to market factors in the shale gas business, as well as a decrease in expenses and delays in contributions for new business development. In the mineral resources segment, we have revised up the November forecast by 20 billion yen to 235 billion due to factors such as an increase in dividend income from the copper business. At the very bottom is Power Solutions, in which we expect a loss of 15 billion yen, a downward revision of 45 billion yen from the November forecast due to factors such as impairment losses in the domestic offshore wind power generation business, despite gains on the sale of the European power transmission business. The market assumptions for the forecast are shown on page 30, so please refer to that later.