Sojitz Corp Unsp/Adr

Good afternoon. This is Seiji Tanaka, CFO of Soldis Corporation. Thank you very much for joining us for the Q3 briefing. I will refer to the two sheets in landscape format that have been made available on the web beforehand, titled Highlights of Consolidated Financial Results for the third quarter ended December 31st, 2020. first on the business environment. The Chinese economic growth has recovered early, and fiscal stimulus policies have been mobilized by the United States and Japan. IMF says that by the latter half of 2021, the global economy may return to pre-coronavirus or COVID-19 levels. And so manufacturing is recovering and the supply and demand balance is tightening and resource prices are recovering. But the state of emergency has been reissued in Japan. Lockdowns are reinstated in Europe and Southeast Asia. In the United States, the spread of the virus is dampening personal consumption and jobs. So we need to remain vigilant against this backdrop. Our Q3 results are mixed by segment. For the full-year consolidated results, we are maintaining the total figure. However, we have revised the forecast by segment. I will discuss this in further detail later. Let's turn to the middle box where we look at the profit and loss. First on revenue, which is equivalent to JGAAP sales. The chemicals segment suffered. In the first half, metal prices were very low and transaction volume of synthetic plastics were down, particularly in Southeast Asia. The segment was down 14% year-on-year, or rather revenue was 288.6 billion yen. Automotives in Q3, Puerto Rico and Thai automotive sales did recover, but that was not enough to make up for the slowness in the first half. Automotive revenue came down 26% at 232 billion yen. Retail and lifestyle business was hard hit by COVID-19. This was down year on year by 20.9 billion yen, came in at 211.5 billion yen. So total revenue came down by 158.9 billion yen, and so it was only 1,159.7 billion yen. Down to gross profit. Coal prices and coal transaction volume fell, and there was part of interest sold at the end of the previous year, so metals and mineral resources division was down. And just as the case with revenue, automotives and chemicals were also down. With all this combined, gross profit came down year-on-year by 26.9 billion yen to 132.5 billion yen, which is 66% of the full-year forecast figure. Further down to SG&A. Total SG&A improved by 10.4 billion yen, and the expenses came to 119.5 billion yen. Initially, we meant to reduce expenses by 8 billion yen over the full year. We would try to work further to expand the reduction. Further down, other income and expenses, which cover the non-recurring items. Up to Q3, asset sales at affiliated companies and partial sale of U.S. solar power, or rather, natural gas-fired power project company. contributed so that the net total came to an income of 6 billion yen. Further down, financial income and costs. Interest expenses on a net basis improved by 1.2 billion yen year on year. However, dividend receipts were also down, so the total of financial income and costs came to a net cost of 2.8 billion yen. That is worth 300 million yen compared with the same period previous year. Share of profit or loss of investments accounted for using the equity method came to 7.9 billion yen, down 10.6 billion yen due to lower profit from the steel operating company. Profit before tax came to 20... 4.1 billion yen, down 22.7 billion yen year on year. After income tax expenses, profit for the period came to 18.7 billion yen. Further down, the profit attributable to owners of the company, which is highlighted in pale blue, came to 16.7 billion yen. That's down 20.8 billion yen year on year. Towards the right, we show the percentage achieved against the full year forecast, which is 56%. Further to the right, let's look at the balance sheet. Total assets at the end of December 2020 came to 2 trillion 203.4 billion yen. That's down 26.9 billion yen from the end of March. Further down, total liabilities at the end of December came to 1 trillion 585.8 billion yen. That's down 22.6 billion yen from the end of March. This is mostly due to the repayment of interest-bearing debt. Further down, the equity section, if you look at the second line item from the bottom, the total equity attributable to owners of the company, this came to 578.7 billion yen at the end of December, which is almost unchanged from the end of March. Further down, we show a number of key performance indicators. Third from the top is the net debt to equity ratio. This came to 1.0 at the end of December, again, mostly due to the repayment of interest bearing debt. This is 0.06 points down from the end of March. If you look at the lower left-hand side where we show the cash flows, please. Cash flows from operating activities was a net inflow of 81.5 billion yen. Cash flows from investing activities was a net outflow of 20.2 billion yen. That's because of 47 billion yen of new investments and loans executed by Q3. Total free cash flows came to a net inflow of 61.3 billion yen. Further down, we are showing core operating cash flow and core cash flow. Both are positive on an aggregated basis up to Q3. Now let's turn to the second sheet. Towards the middle, we are showing the segment performance, and I'd like to focus on the part that says profit for the period, and particularly with regard to the segments where the progress made against the four-year forecast is low, or whether we have made adjustments with regard to the forecast figure. To the left, we are showing operating results. Now the total forecast for the profit attributable to owners of the company remains unchanged. However, we have made some changes in the line items. For example, gross profit has been downward revised by 3 billion yen, and then SG&A and other expenses have been also revised. So let's look at the segment performance. First, the automotive segment. After Q3, the segment posted a loss of 400 million yen, that's 1.4 billion yen short of the full-year target of 1 billion yen. In Q1, there were global lockdowns, and therefore the sales locations were closed, and that impact was significant. Therefore, after the first half, they posted a loss of 1.6 billion yen, However, there were signs of recovery seen from the latter half of Q2 at the Americas dealers, Puerto Rico and Thailand. So in Q3, those regions led the recovery. And so in Q3, a quarterly profit of 1.2 billion yen was recorded. In Q4-2, those three regions will drive profit. so as to deliver a quarterly profit at the same level of Q3, and therefore we believe that the four-year target of 1 billion yen can be achieved. Moving on to aerospace and transportation project. The full-year target is 5 billion yen. After Q3, this segment stood at a loss of 100 million yen, so it is very behind with regard to progress. There was a global ban on international travel, and that almost wiped out international air travel, so the situation is very difficult. Against this environment, the question would be, how can we come to 5 billion yen? through Q4 performance alone? Well, there is the seasonal factor. In Q4, the defense-related transactions will be coming in, and in India, the freight rail project construction will fully resume after the suspension due to the lockdown. With regard to business jets, there's related income from aircraft transactions and operation management, they all come in Q4. And then there's this usual revenue from the subsidiary that is in the ships and marine equipment business. So they all come in. and contribute to Q4. But the largest factor is, as we mentioned, in Q2. That's related to the larger deals for which we are still negotiating. The negotiations are continuing. The counterpart needs are still there, so we are continuing our efforts. Moving down to machinery and medical infrastructure. At the end of Q3, they had recorded profit of 3.4 billion yen. The previous forecast was 4.5 billion yen for the full year, but given the situation, we have raised it by 500 million yen to 5 billion yen. Stable income is generated from the hospital project in Turkey, and investment in smartphone-related equipment is coming in strong. Industrial machinery subsidiary is also doing well, among others. for energy and social infrastructure. After Q3, they have posted a profit of 2.2 billion yen. So against the forecast that we published at the end of October, this figure stands at 63%. We are expecting good revenue from overseas renewable power generation business, and there's the seasonal factor of dividends from overseas investments coming in in Q4. So we have reflected that and upward revised the forecast by 1 billion yen. With regard to metals and mineral resources, After Q3, the segment was at a loss of 2.4 billion yen, so it is struggling. The initial forecast for the full year was 13 billion yen, but then coal prices plunged, and because of the lockdowns, that led to a slowdown in steel product demand. So after Q1, we downward revised it to 3 billion yen. Coal prices are now rising, but throughout the Q3, there was the Chinese import ban on Australian coal, which has had a great impact. So although we expect some recovery from higher coal prices, given the situation up to Q3, we believe that 3 billion yen over the full year is difficult to achieve, and therefore we have downward revised the forecast to 1 billion yen. For the chemical segment, After October, the forecast was 5 billion yen, and we are now at 74% of that, at 3.7 billion yen after Q3. In China, the early recovery in the manufacturing has led to increased demand for plastic resin feedstock. And there has been a rapid recovery in methanol prices since Q2. And that has meant that we were able to fully make up for the slowness in Q1. Given that situation, we have upward revised the October forecast by 500 million yen to 5.5 billion yen. With regard to foods and agriculture business and retail and lifestyle business, they have very high percentage achieved against the full-year target, so there's not much to say today. With regard to the financial position box in the lower left-hand side, there has not been any change from what we said at the end of Q2. So with this, I'd like to end my presentation. Thank you very much for your kind attention.