Mitsubishi Corp Ord

I'm Nauchi, the CFO. Thank you very much for taking the time out of your busy schedules to attend our fiscal 25 third quarter earnings briefing today. First, I'll walk you through an overview of our fiscal 25 third quarter results, as well as key updates under corporate strategy 2027. Please turn to page three of the earnings presentation. First, let me begin with our financial results. In fiscal 25 Q3, underlying operating cash flow was 763.3 billion yen and consolidated net income was 607.9 billion. Supported by improved market conditions, enhanced profitability and revenue growth across multiple businesses, performance remained stronger than we had initially anticipated. Regarding the full year forecast, we have reflected changes in the business environment since the second quarter earnings announcement, as well as updated second-level risk assessments. Accordingly, we have revised our forecast for underlying operating cash flow upward by 20 billion yen to 920 billion, while maintaining consolidated net income at 700 billion yen. Progress against the revised forecast are at high levels with 83% for underlying operating cash flow and 87% for consolidated net income. While there is a possibility that full year results may exceed the revised forecast, given the continued uncertainty in parts of the business environment toward fiscal year end, we will carefully monitor conditions across each business and work steadily toward realizing potential upside. Next, I will discuss progress under Corporate Strategy 2027. With respect to our value creation framework of Enhance, Reshape, and Create, we have announced several new initiatives since our previous earnings release. By way of example, in the CREAT initiative, as announced at our recent briefing, we decided to participate in the U.S. shale gas business, representing the largest investment in our history. In addition, under the ENHANCE initiative, we have reached an agreement to acquire upstream gas assets in Brunei. Through these initiatives, we expect to generate profit contributions of meaningful scale. Details of each project are provided on page 14 of the presentation materials for your reference later. Beyond these examples, initiatives under Enhance, Reshape, and Create are all making steady progress. Under Enhance, expected profit contributions from projects already executed alone account for roughly half of the planned target. Under Reshape, in addition to the completed full consolidation of Mitsubishi Shokuhin, several other projects are currently under consideration. And as for Create, the U.S. shale gas project alone that I mentioned earlier accounts for approximately 80% of the planned progress. Taking other projects into account, we believe that even in the first year, we are already well on track to achieve the plan by a certain degree. An overall view of progress across all initiatives, as well as a breakdown of enhance, which represents the largest profit contribution, is provided on pages 11 and 12 of the presentation materials. Next, please turn to page four. underlying operating cash flow for fiscal 25 Q3 was essentially flat year-on-year despite variations among segments Consolidated net income was also at a similar level when excluding the absence of large capital recycling gains and losses as well as one-time items Even amid a challenging business environment each business performed more solidly than expected With signs that performance has bottomed out and steady progress being made across various initiatives, we are gaining increasing confidence in achieving the quantitative targets set forth under Corporate Strategy 2027. We will continue to push forward strongly with our Enhance, Reshape and Create initiatives. In addition, Our share buyback program of up to 1 trillion yen, announced on April 3, continues to progress steadily. As of the end of December, the total repurchase amount reached 794.3 billion yen. Please turn to page 5. I will now explain progress against the cash flow allocation plan under Corporate Strategy 2027, as well as our financial leverage position. Cash inflows consisted of ¥763.3 billion in underlying operating cash flow and ¥334.8 billion in cash inflows from divestitures. Major capital recovery items this period included loan repayments from the Queja Vico copper project and collection of deferred payment related to the divestiture of two Australian steelmaking coal mines in the previous fiscal year. On the other hand, we executed investments totaling $913.9 billion as cash outflows. During the period, we completed acquisitions including the salmon farming business at CIRMAC. As shown in the investment progress section, sustaining capex as well as enhanced reshape and create initiatives are all progressing smoothly against plan. Also, as of the end of fiscal 25 , Our net debt-to-equity ratio, net DER, which we use as an indicator of financial soundness, stood at 0.46 times. Due to the recently approved investment in the U.S. shale gas business, net DER is expected to temporarily exceed 0.6 times. However, we will manage leverage so that it returns to an appropriate level, with 0.6 times as an upper guideline by the end of fiscal 2027, thereby maintaining financial soundness. Furthermore, as we continue to have sufficient leverage capacity during the corporate strategy 2027 period, we plan to flexibly and proactively allocate additional capital to growth investments and shareholder returns, taking into account attractive investment opportunities and market expectations. That concludes my remarks. Next, Mr. Shimazu, GM of Corporate Accounting, will provide a detailed explanation by segment. My name is Shimazu, the GM of Corporate Accounting. I'll provide additional details on fiscal 25Q3 results. Please turn to page 6 of the presentation. First, I'll explain the year-on-year changes in underlying operating cash flow, focusing on segments with larger fluctuations. The segment at the top, environmental energy, recorded 124.1 billion yen, a decrease of 32.3 billion year-on-year. While there was a reduction in tax burden due to differences in the timing of payments in the Asia-Pacific LNG business, this was more than offset by factors such as upfront costs associated with the start of production at LNG Canada and the North American LNG business. Next, the third segment from the top, mineral resources, posted 118.8 billion yen, a decrease of 45.3 billion year-on-year, mainly due to declining market conditions in the Australian steelmaking coal business and lower dividend income from the iron ore business. By contrast, the urban development and infrastructure segment beneath recorded $96.9 billion, an increase of $40 billion year-on-year, primarily driven by improved profitability at Chioda Corporation following contract amendments for the U.S. Golden Path LNG project. Next, please turn to page 7 for consolidated net income. In addition to the factors explained for underlying operating cash flow, due to the absence of major capital recycling and one-time gains recorded in fiscal 24, such as gains on the sale of coal mines and Australian steelmaking coal business within mineral resources and re-evaluation gains related to Lawson within SLC, the decline in consolidated net income is larger than that of underlying operating cash flow. From this period onward, we have disclosed a factor analysis of year-on-year changes in consolidated net income separating capital recycling and one-time items from adjusted consolidated net income. This analysis is summarized on page 8 for your reference later. Next, I'll explain the full year forecast by segment. Please turn to page 9. As our CFO, Mr. Noach, explained earlier, We have revised our full year forecast for underlying operating cash flow upward by 20 billion yen to 920 billion. We have revised forecasts for all segments. The fourth segment from the top, urban development and infrastructure, is expected to reach $104 billion, reflecting a $20 billion upward revision from the November forecast, mainly due to improved profitability at Shioda Corporation, as explained in the year-on-year comparison. The bottom segment, power solution, is projected to reach 114 billion, reflecting a 10 billion yen upward revision from the November forecast, driven by increased trading profits in the European integrated energy business and the North American power business. Finally, please turn to page 10 for consolidated net income. We are maintaining the full-year consolidated net income forecast at 700 billion yen, while revising the outlook for several segments. The second at the top, environmental energy, is expected to reach 143 billion yen, reflecting a 15 billion downward revision from the November forecast, mainly due to reduced volumes associated with extended timeline to reach full production at LNG Canada. The third segment from the top, mineral resources in the Australian steelmaking coal business, while a decline of profits is expected due to factors such as operational issues at underground coal mines and volume decreases resulting from rainfall impacts, taking into account higher copper prices and the strong performance of the mineral resources trading business, is expected to reach 110 billion yen, reflecting an upward revision of 15 billion from the November forecast. Underneath, regarding the urban redevelopment and infrastructure segment, it's expected to reach $76 billion, reflecting a $16 billion upward revision from the November forecast, driven mainly by improved profitability at Chioda Corporation, consistent with the underlying operating cash flow outlook. Additional details by segment and assumptions regarding market conditions are provided on page 17 onward. That concludes my explanation.