Sojitz Corp Unsp/Adr

Good afternoon, this is Seiichi Tanaka, CFO of Soldis Corporation. Thank you very much for joining us for the earnings briefing of Soldis Corporation for the first quarter. I'd like to begin using the two landscape sheets titled Highlights of Consolidated Financial Results for the First Quarter, ended June 30th, 2020, and another one that says Supplementary Materials. This material has been made available on our website. First, the business environment. Initially, we were expecting that the impact of COVID-19 on the economy would be under control within three months. However, we do see some difference in the impact and the degree to which it is controlled, depending on the geographical region and segment. In China and parts of Southeast Asia, things are relatively under control and the economies are reopening. But in the U.S. West Coast and Latin America and in Japan, the situation warrants caution. Given that and given the Q1 results, we have revised the earnings forecast for the full year as is shown towards the bottom part of the results highlights column. We made the initial forecast that we published at the end of April when we announced full year results of the previous year, but we have now published a revised forecast. With regard to cash dividends, if you see further down, We have also made an announcement, and after my presentation, our president and CEO, Masayoshi Fujimoto, will discuss that. So now let's move to the middle part, which says consolidated statements of profit or loss. Revenue, which is equivalent to JGAP sales. This is significantly down. Automotive sales was significantly down due to the lockdown everywhere across the globe. Revenue was down 60%, only 24.6 billion yen. Chemicals was also down due to metal prices and the synthetic resin transaction volumes down in Southeast Asia. Metals and mineral resources were also down due to coal market prices and the revenue was down 88.1 billion rather and 20% year on year to 349.3 billion yen. Gross profit, again, automotive, metals, and mineral resources, as well as chemicals, were the three segments that had the most impact. Gross profit was down year on year by 15.9 billion yen at 39 billion yen. With regard to SG&A, the total was less, 4 billion yen at 38.8 billion yen. With regard to other income and expenses, which are the non-recurring items, in Q1, thanks to gain on partial sale of a natural gas-fired thermal power company in the United States, the net was an income of 1.6 billion yen. Further down, financial income and costs. The interest expenses, the net was almost unchanged year on year. The expense was in the amount of 2 billion yen. But the dividends received were down and therefore the total net was an expense of 900 million yen that was down 300 million yen year on year. Share of profit or loss of investments accounted for using the equity method was 1.7 billion yen down 5.1 billion yen year on year. This is due to lower profit from steel operating company, which was the major reason for the downward revision. With all that, profit before tax came to 2.6 billion yen. After income tax expenses, profit for the period came to 2.7 billion yen. Profit attributable to owners of the company, which is highlighted in light blue, came to 2.4 billion yen. This is down 11.9 billion yen year on year. Against the revised full-year forecast of 30 billion yen, This figure stands at 8%. Further to the right, let's look at the balance sheet where it says consolidated statements of financial position. At the end of June, total assets stood at 2 trillion 208 billion yen. That's down 22.3 billion yen from the end of March. Total liabilities came to 1 trillion 602.6 billion yen, down 5.8 billion yen from the end of March. This is due to automotives and chemicals for which the decline in transaction volume pushed down trade and other receivables as well as payables. To the equity section, if you look at the total equity attributable to owners of the company, which is underlined, The figure came to 567.1 billion yen at the end of June, which is down 12 billion yen from the end of March. This difference is due to two figures that are circled above. One is the purchase of treasury stock, the other is about dividend payment. Further down, we are showing six KPIs. If you look at the third from the top, that's net debt equity ratio. At the end of June, it stood at 1.08. That's up 0.02 from the end of March. Now, if you could turn to the bottom of the sheet where we are showing cash flows. Cash flows from operating activities in Q1 was a net inflow of 15.7 billion yen. Cash flows from investing activities was a net inflow of 2.9 billion yen, thanks to progress in asset replacement. The resulting free cash flow came to a net inflow of 18.6 billion yen. Further down, Core operating cash flow came to a net inflow of 10.9 billion yen. Core cash flow, however, came to a net outflow of 3.5 billion yen. That is due to the purchase of treasury stock and dividends paid. Now please turn to the second sheet, which says supplementary material. I would like to look at segment performance, focusing on profit for the period. I would particularly focus on segments where there is a large year-on-year difference. First, automotives. Profit for the period was down 3.3 billion yen came to a loss of 1.8 billion yen. In Q1, a lot of dealership outlets were closed here and there, and there was a great impact of that. However, compared with the initial outlook, there was some upside. Particularly, there was a positive contribution from the US West Coast dealership of BMW cars, where the online sales was strong. In Q2 and onwards, we are expecting results from the Thai Motor Show, and we're also expecting recovery in Puerto Rico, where the dealerships are opening. And therefore, we believe that this full year forecast of 1 billion yen is achievable. Next, aerospace and transportation project. Profit for the period was down 700 million yen, came in at a loss of 500 million yen. This Q1 result was in line with initial expectation. If you look at the progress overview column, we have been negotiating this large scale project and we have a higher likelihood of winning that deal. And therefore, with regard to this 6 billion yen full year forecast, we have not revised it. Skip one line and go to energy and social infrastructure. This was up 1.5 billion yen year on year. 1.8 billion yen is the profit for the period, which is 51% of the full year forecast. From the beginning, we were expecting asset replacement. A lot of that happened in Q1, and that's why the percentage against the full year is apparently high, but it will come down to the natural level over time. Next is metals and mineral resources. This was the driver for the downward revision this time. This segment posted a loss of two billion yen, that's down 9.1 billion yen year on year. The coal market was stagnating and the steel demand was also hard hit, both in terms of pricing and volume. One line down in chemical segment. Profit was down 2.3 billion yen year on year. Q1 results were break even level. In Q1, the methanol price was much lower than initial expectation. But in the China area, the economy is reopening ahead of others, and we are expecting recovery in the transaction volume of synthetic resin. And we were expecting a loss in Q1 anyway, so that's better than expected. With regard to the 5 billion yen full-year forecast, the methanol prices are now showing trends of recovery. and we are expecting increased revenue from rare earth and green plastics, and therefore we are not concerned about this forecast level. With regard to foods and agriculture business, The profit came in at 2 billion yen, that's up 1.3 billion yen year-on-year. Against the 3 billion yen full-year forecast, the profit for the quarter was 67%, so this is doing strongly. The three businesses of overseas fertilizers are posting volumes that are in line with initial expectation, and raw material prices are stably low. Retail and lifestyle business, this was down 500 million yen year on year. Q1 results are 11% of the full year forecast. The first quarter profit was 600 million yen. Personal spending was down, so textile and apparel was down, and rent income was also down from tenants as the commercial facilities were closed. But as we discussed in the progress overview column, the performance is expected to be in line with forecast as a result of projected asset replacement activities. In other words, this 5.5 billion yen figure is doable. So that would be all from myself. I would now like to yield the floor to our president and CEO, who would like to discuss the revision of the forecast and the dividend announcement. Good afternoon. This is Masayoshi Fujimoto, President and CEO. Once again, thank you very much for joining us this afternoon. I'd like to discuss the revised forecast and the annual dividend outlook. First, with regard to the revised forecast, we announced back in the 30th of April the full-year profit forecast of 40 billion yen. This time, we have revised that to 30 billion yen. That is because of the COVID-19 impact. The impact on the steel demand and the resource prices, including that of coal, was larger than what we expected initially, and we expect this to continue further. The metals and mineral resources segment has a forecast revised from 13 billion yen to 3 billion yen. This 10 billion yen breakdown is 5 billion yen from steel products due to the demand decline, which comes from metal one, and the resource prices decline, including that of coal, accounts for another 5 billion yen. For other segments, as our CFO just explained, there has been some difference by geographical region and segment, but as a whole, they are generally in line. We will continue to make sure we minimize costs and achieve the revised forecast. Now with regard to dividend, given the Q1 results and the current outlook that we just discussed, we have made an announcement for 10 yen per share on an annual basis. This will bring the consolidated payout ratio to 40%. Our dividend policy has long been about stable and continued payout. This time, We believe that the impact of COVID-19 on our business performance is only temporary and not permanent. And we also take into consideration the fact that we had announced for a full year profit of 40 billion yen. And that's why we have made an announcement for 10 year per share on an annual basis this time. With this, I conclude my presentation. Thank you very much for your kind attention.