Sojitz Corp Unsp/Adr

This is Masayoshi Fujimoto speaking. Let me explain Soji Corporation's results up to the second quarter of the fiscal year ending March 2022. In the first half of the fiscal year, profit for the period was 39.4 billion yen, our highest ever for a first half. This is thanks to the economy recovering from the pandemic in the United States and China in particular. recovery in materials-related businesses such as steel, chemicals, and automobiles, as well as higher market prices of coal, etc. Core operating cash flow was a net inflow of ¥49.3 billion, exceeding the initial forecast. We are thus successfully generating profit and cash flow. Based on those results, we have upward revised the full year forecast for profit for the period from 53 billion yen to 70 billion yen. Also in conjunction, we are increasing interim dividend from 7 yen per share to 9 yen on a pre-consolidation basis. The year-end dividend forecast after the 145 share consolidation is raised from 35 yen to 45 yen per share. The company's basic policy remains focused on stable and continuous dividends for a consolidated dividend payout ratio of around 30%. Slide three shows the forecast revisions by segment. We have this time upward revised three segments. The automotive segment with year-on-year sales volume increase in overseas automotive businesses. Metals, mineral resources and recycling segment with higher than expected prices for metals resources such as coal. and chemicals with solid performance from methanol and plastic resins. We have also downward revised other segments. We have downward revised aerospace and transportation project, consumer industry and agriculture business, and retail and consumer service, for the impact of the pandemic and the delay in recovery. We have also downward revised infrastructure and healthcare for the delay of earnings contributions from new and ongoing projects. Further details will be provided later from our CFO, Seiichi Tanaka. We might also follow up during the question and answer session. In the next slide, there's a summary of the revision and progress made against the new forecast, segment by segment. Slide five shows cash flow management. Core operating cash flow has come in better than initially expected. We are successfully generating profit and cash inflow. With regard to new investments, when we announced MTP or the medium term plan 2023, we announced a plan for 330 billion yen in three-year total, including non-financial investments. This financial year, we are planning for 150 billion yen. In the first half, we executed about 40 billion yen. This is a rather small figure, but over the full year basis, we intend to be in line with plan. With regard to the core cash flow, it should be net positive on a six-year cumulative basis as was initially planned. There will be more on cash flow later from our CFO. Slide 6 shows earnings contributions from new investments starting from MTP 2017. MTP 2017 investments are delivering earnings contribution of 5 billion yen in the first half. For the full year, we are expecting about 8 billion yen, mostly from non-resource businesses. This figure is higher than what was initially planned. With regard to MTP 2020 investments, We have about 2 billion yen in earnings contribution, mostly from coking coal business in Australia. For the full year, we are expecting around 8 billion yen, excluding possible impact of market conditions. Again, this figure is higher than what was initially planned. With regard to investments under MTP 2023, they have yet to make a significant earnings contribution as of the first half of Compared with the plan, there are some delays with regard to execution of investments. We intend to accelerate this starting from the second half and going forward. This will include some larger investments. We intend to expedite earnings contribution from those investments too. The next slide describes those investments in further details, including progress made so far and plans during the MTP 2023 period. Slide 7 describes major investment projects and progress. As for MTP 2023 investments, we have invested in gas-fired IPP and desalination projects in the Middle East, renewable energy projects in Australia, and electricity retail business in Spain. In the second half, we will continue with more, and we are working vigorously to do so, including traveling overseas for direct negotiations so as to execute 150 billion yen over the full year. With regard to MTP 2020 investments, there was earnings contribution from natural gas fired power project in the United States and Australian coking coal business as the coking coal prices rose and full-fledged sales activities began. There are uncertainties in market conditions going forward, but we expect steady earnings for the full year too. As a result of various efforts, the paper manufacturing business in Vietnam, also part of MTP 2020 investments, achieved single-month profitability in March, April and May this year. Since September, the business has suffered from the resurgence in COVID-19 and related restrictions on activity, including a temporary shutdown, but operations are now resuming in stages. We will continue to implement various improvement measures in anticipation of improved profitability as the external environment recovers. As for MTP 2017 investments, we had solid earnings contributions from the hospital project in Turkey and renewable energy projects, which we expect to continue for the full year. Regarding investments in ASEAN retail, the four temperature-controlled logistics and food wholesale business already achieved profitability during the MTP 2020 period. The convenience store business in Vietnam suffered from the pandemic. To ensure earnings growth once the external environment improves, we are working with partners on business strategy and are reducing procurement costs.

This slide shows the investments and asset replacements. The investments are shown by priority business area. The total new investment was 40.3 billion yen as executions of some of the planned investments were postponed. In terms of asset replacements, progress in divestitures of various businesses and cross-share holdings led to a recovery of 9.4 billion yen. The next slide is about our press release on our new initiative. At 3 o'clock p.m. today, Japan time, we disclosed information on our planned commencement of tender offer for shares of Jalex Inc. By conducting a joint tender offer bid with Japan Airlines, Jalex Inc. will be delisted. By sharing the strengths of each of the parties, us, General Trading Company, Jalex, airline-related trading company, and JAL, an airline, to the fullest, we will seek to maximize the corporate value. For details, please take a look at the press release at your leisure as well. But I just wanted to take this opportunity to share the information with you. Our policy of paying stable and continuous dividends remains unchanged, and we maintain the target consolidated payback ratio of about 30% during the period of the current MTP. At the time of earnings announcement for the first quarter of the year ending March 2022, The interim dividend for the fiscal year would be ¥7 per share based on the price before the share consolidation and year-end dividend of ¥35 per share based on the price after the share consolidation. Given the upward revision to the earnings forecast, however, the interim dividend will be increased by ¥2 to ¥9 based on the pre-share consolidation price and the year-end dividend by ¥10 to ¥45 based on post-share consolidation price. We will continue to focus on growth investments and capital efficiency and strive to enhance shareholder value through accumulation and effective use of retained earnings. The next slide shows changes in our company's share prices as compared to topics. As of the end of September, our stock price has been solid, rising by 60% since the beginning of the year and outperforming the topics in terms of the return by 48%. On the other hand, the PBR stood at 0.67 as of the end of September, but we will continue to run on business with the stock price very much in mind. We are putting efforts into enhancement of disclosure of our non-financial initiatives. As shown here, the information disclosed has been introduced as good practices by external parties. We will continue to work to improve our dialogues with stakeholders through different initiatives. Last but not least, although we demonstrated our steady earnings power in the first half of the year, ending March 2022, countries around the world are still being affected by the COVID-19 pandemic. With the mission of a general trading company of providing goods and services to those who need them, engraved in our heart, based on the foundation of strong partnerships with our customers, we would like to continue to meet the expectations from all the stakeholders. We are determined to turn changes into our opportunities by transforming ourselves and seek to embrace dialogues with all of you. With that, I would like to conclude my presentation. Thank you for your attention.

This is Seiichi Tanaka, CFO. Let me explain Q2 results and the forecast referring to the sheets titled Highlights of Consolidated Financial Results for the first half of the year ending September 30th, 2021 and the one that also says Supplementary Material. Let us go through the middle section where it says Consolidated Statements of Profit or Loss. Revenue, which corresponds to JGAAP net sales, increased thanks to three segments. Metals, mineral resources and recycling segment was up 87.7 billion yen to 258.8 billion yen thanks to higher prices of coal and other resources and demand recovery. Chemical segment was up 77.1 billion yen year-on-year to 260.6 billion yen thanks to increased transaction volume of plastic resins in Asia and higher prices of the mainstay methanol together with increased transaction volume. Automotive segment revenue increased by 49.4 billion yen. In the same period last year, overseas automotive businesses were hard hit by lockdowns, and the reactionary increase more than offset the impact of the semiconductor shortage. Consolidated revenue came to 1 trillion and 700 million yen, up 256.1 billion yen year-on-year. Gross profit came to 117.7 billion yen, up 33.2 billion yen year-on-year, thanks to contribution from the same three segments. SG&A expenses increased by 4.8 billion yen to 83.8 billion yen. Increased transaction volume pushed up personnel expenses. Non-personnel expenses increased as new investments and loans led to due diligence-related outsourcing costs. Newly consolidated companies also pushed up SG&A. There was also provision of allowance for doubtful accounts. Other income and expenses include non-recurring items. The total was a net income of 1.9 billion yen from a sale of an overseas industrial machinery related company. Among financial income and costs, net interest expenses came to 2.3 billion yen, which is an improvement of 900 million yen year on year, thanks to lower market interest rates of the US dollar. On the other hand, dividends received was 1.9 billion yen, slightly up from a year ago. The total was net costs of 200 million yen, an improvement of 1.6 billion yen year on year. Share of profit or loss of investments accounted for using the equity method came to 16.9 billion yen, up 12.3 billion yen, thanks to a large increase in profit from a steel operating company. With all that, profit before tax came to 52.5 billion yen, up 40.5 billion yen year-on-year. After income taxes, profit for the period came to 41.5 billion yen. Profit attributable to owners of the company, highlighted in blue, was up 30.3 billion yen year-on-year and came to 39.4 billion yen. This figure is 56% of the revised full-year forecast of 70 billion yen. Moving on to the right and the statement of financial position. Total assets at the end of September came to 2 trillion 450 billion yen, up 149.9 billion yen from the end of March. Trade and other receivables increased in relation to higher market prices of resources and plastic resins, as well as increased transaction volumes of tobacco and wheat. Other factors include new investments and loans executed, and higher stock prices leading to higher valuation of owned securities as well as aircraft-related transactions.

As for liabilities, likewise, with the increase in trade receivables, trade payables have increased, and with the execution of new investments and loans, we have taken interest-sparing debts, resulting in the balance of liabilities of ¥1,758.9 billion up ¥133.3 billion from the end of March. As for total equity, please look at the second line item from the bottom in parentheses, total equity attributable to owners of the company. The consolidated net assets as of the end of September was 657.6 billion yen, up 38.6 billion yen from the end of March. In the first half, due to purchase of treasury stock, assets declined by 14.5 billion yen, But as explained, profit increased in the first half. And other component of equity, including valuation gains on investment securities due to rising stock prices, increase in foreign currency translation adjustment, has made up for the decline by the purchase of Treasury stock. Below that are six financial indices. and due to new investment and loans, net interest bearing debts increased by 73.9 billion yen from the end of March. But as I said, due to the increase in net assets, as shown in line 3, net debt equity ratio increased by 0.05 points from the end of March to only 1.04. Please take a look at cash flow status further below at the left. Cash flow from operating activities resulted in a net cash inflow of 29.6 billion yen, as was explained by the President, due to the steady increase in core operating cash flow to 49.3 billion yen. The cash flow from investing activities ended up with 67.1 billion yen in net cash outflow due to the new investment and loans. Consequently, we had a net negative free cash flow of 37.5 billion yen. Let me now turn to the supplementary materials. Here I will focus on the middle part that says the profit for the period by the segment. For all seven segments, we have revised our forecast for the full year made at the beginning of the fiscal year. So let me briefly explain about each segment. Starting from the top, in automotive segment, the first half posted 3.4 billion yen up 4.9 billion yen year-on-year due to the absence of the lockdown measures taken by different countries in the first half of the previous year. For the full-year forecast, we have assumed a slight slowdown due to the demand running its course and shortage of semiconductors, and made a limited upward revision from 5 billion by 500 million to 5.5 billion yen. As for aerospace and transportation project, 1.4 billion yen was recorded, up 1.7 billion yen year-on-year, because of the increase in profits due to strong marine vessel-related business and higher profits in aircraft-related transactions. But delay in recovery in some aircraft-related businesses, such as parts-out business, the initial full-year forecast of 4.5 billion yen was reduced to 4 billion yen. As for the infrastructure and healthcare, profit decreased due to the absence of gains from assets replacement in power generation business posted in the previous year. Regarding the four-year forecast, the oil price increase is expected to push up the profits of LNG Japan. But due to prolonged impacts by the COVID-19, earnings contributions of new and ongoing projects have been delayed. So we have made downward revision of 1 billion yen from 7.5 billion yen to 6.5 billion yen. In metal, mineral resources and recycling, as was explained, due to a significant rise in coal prices and the recovery in the demand for steel, the profit increased by 18.2 billion yen year-on-year to 16.2 billion yen. For the second half, we expect a slight softening of the market, but we have raised the initial forecast of 12 billion yen by a significant 19 billion yen to 31 billion yen. In chemicals, in the first half, the recovery of methanol prices and strong performance of plastic resins pushed up the profit by 5.5 billion yen to 6.8 billion yen. As for the full-year forecast, considering the results in the first half, the initial forecast of 10.5 billion yen was revised upward by 1.5 billion yen to 12 billion yen. As for consumer industry and agricultural business, the mainstay business of overseas fertilizers, due to steady rainfall and increase in the prices of raw materials passed on to the product prices, showed progress in line with expectations. In the first half, due to the rise in lumber prices, construction material business was also performing well, resulting in 800 million yen increase in profit to 4.8 billion yen. But for the full year, paper-making business in Vietnam was affected by the closure of the factory due to the lockdown in September, and therefore the forecast was revised downward by 1 billion yen from 5 billion to 4 billion yen. As was explained by the President, the paper-making factory in Vietnam has already resumed the operation. Finally, as for the retail and consumer services, sales volume of US-made imported beef was strong, but due to absence of gains from sale of shopping mall posted in the previous year, profit in the first half dropped year-on-year. For the full year, considering expected delay in recovery of Southeast Asian retail business, among others, the initial forecast of 5 billion yen was reduced by 1 billion yen to 4 billion yen. Let me now explain about the financial position shown at the left bottom. Considering the actual results in the first half and revised forecast for the full year, total assets forecasted at the beginning of the year at 2 trillion 450 billion yen has been raised by 50 billion to 2 trillion 500 billion yen. and the total equity has been raised by 40 billion yen from 640 billion to 680 billion yen. The forecast for net interest-bearing debts and net DE ratio has been rift unchanged. That's all from me. Thank you for your attention.