Sojitz Corp Unsp/Adr

Good afternoon. This is Sage Tanaka, CFO of Soldiers Corporation. Thank you very much for joining us for the earnings briefing for Q1 that ends June 30, 2022. I'd like to use two documents as usual. One is titled Highlights of Consolidated Results for the First Quarter Ended June 30, 2022, and the other also says Supplementary Material. Both documents are available on our website. So first on this highlights slide or document with regard to the business environment as summarized in the results highlight section. Russia's military invasion of Ukraine triggered a global inflation. In response, main developed countries, excluding Japan, are raising interest rates, and this is in turn causing concerns of economic recession. In China, with their no-COVID or zero-COVID policy, lockdowns have been instituted and supply chain disruptions have happened. As such, Uncertainties are building up and sometimes even materializing for the global economy. Against that backdrop, let us discuss our quarterly results. Continuing from last period, there are continued high prices of coal. Prices of materials such as chemicals and building materials are also high. There is also the benefit of weaker yen, and we were able to get off to a good start. However, currently there are signs of change with regard to resources and material prices. Foreign exchange rates are getting unstable. The situation therefore warrants caution going forward. Moving on to the middle block, the consolidated statements of profit or loss. Top line or revenue, the metals, mineral resources and recycling division revenue increased by 42.8 billion yen to 166.9 billion yen thanks to higher coal prices. The consumer industry and agriculture business revenue increased by 26.3 billion yen to 96.7 billion yen thanks to high building material prices. Chemicals was also up. The lockdowns in Shanghai meant that plastic resin transactions were down in China. However, the main state business, the methanol, remained strong. And in North America, the petrochemicals business was strong. As a result, the chemicals revenue was up 22.9 billion yen to 156.6 billion yen. The consolidated revenue increased year on year by 125.7 billion yen to 618.5 billion yen. Gross profit, Three divisions that contributed to revenue and among them particularly metals, mineral resources and recycling had a major contribution. The increase in gross profit was 28.6 billion yen. That was a big part of 40.5 billion yen year-on-year increase of gross profit to 96.9 billion yen. Down to SG&A. thanks to increased transaction volume and SG&A increases at new consolidated companies, increased bonus payments tied to improved performance, and the weaker yen pushing up the costs at overseas operations when converted to yen, and the inflation pushing up costs, SG&A increased year-on-year by 9.7 billion yen to 51.5 billion yen in the quarter. For other income and expenses, these are non-recurring items. And a major factor here was the gain on partial sale of an overseas telecommunications tower operating company in the Philippines and the revaluation of the remaining portion. The total of other income expenses came to net income of 3.3 billion yen. For the financial income and costs, The interest expenses came to a net expense of 1.0 billion yen, but dividends received increased by 400 million yen to 1.6 billion yen. The total came to a net income of 1.2 billion yen that was up year on year by the same amount. Share of profit of investments accounted for using the equity method. Thanks to higher profit from steel operating company, an LNG company, and European wind power business, The figure was up 3.1 billion yen year-on-year to 10.6 billion yen. With all that, profit before tax came to 60.5 billion yen. That's up 37.3 billion yen year-on-year. After income tax expenses, profit for the period came to 46 billion yen. Profit attributable to owners of the company, which is shaded in light blue, came to 45.2 billion yen. That's up 28.3 billion yen year on year. The quarterly figure comes to 53% of the 85 billion yen full year forecast. So this 53% figure is quite high for a Q1 figure. Moving on to the right-hand side where we show the consolidated statements of financial position or the balance sheet. Total assets at the end of June came to 2,841.9 billion yen. That's up 180.2 billion yen from the end of March. There were three major drivers. One is the weaker yen and the yen-based value of foreign denominated assets overseas increased. Second was higher prices of coal, plastic resin, and fertilizers. And the third was the execution of new investments and loans. For total liabilities, this increased by 103.1 billion yen from the end of March to 2 trillion and 900 million yen at the end of June. Going to the equity part, the total equity attributable to owners of the company, which is underlined, increased by 73.4 billion yen from the end of March to 814 and 1.4 billion yen. Retained earnings increased by 31.4 billion yen thanks to profit for the period. And then one line up, the other components of equity increased by 41.9 billion yen. A major contributor here was the foreign currency translation differences for overseas operations. Further down, we are showing six key financial performance indicators. Third from the top is the net debt to equity ratio. At the end of June, this came to 1.00. This is down 0.06 from the end of March. Let's now look at cash flow. cash flow from operating activities benefited from the net positive core operating cash flow, which is shown second from the bottom. The figure was 61 billion yen for core operating cash flow, and the cash flow from operating activities was a net inflow of 38.1 billion yen. For cash flow from investing activities, in Q1, we executed investments in the amount of 21 billion yen, including non-financial investments. The investment cash flow was a net outflow of 21.4 billion yen. Free cash flow was a net inflow of 16.7 billion yen. The core cash flow at the bottom was a net inflow of 29.7 billion yen. Now let's look at the other sheet that says supplementary materials. I'd like to first focus on the middle part where we are showing segment performance and particularly the profit for the period. I would like to particularly highlight the segment where the Q1 results greatly deviate from 25% of the full-year forecast. First, infrastructure and health care, which is third from the top. Full-year forecast is 9 billion yen. Quarterly result was 6.2 billion yen. That's 69% of the full-year figure. This is thanks to a new investment in loans in the United States being consolidated, information service company with new servicing contract, and gain on partial sale of equity in a telecommunication tower business in Philippines, and the associated revaluation of the remaining portion. Below that, metals, mineral resources and recycling. The full year forecast is 51 billion yen. The quarterly figure was 24.7 billion yen. That's 48% of the full year figure. Coal prices, both thermal and cooking coal were up. The prices were more than 200% of the year before. The Australian dollar was stronger against the yen and the steel products business was strong in Northern America and Central America. As a result, the quarterly profit figure was more than four times that of the previous year and came in at 24.7 billion yen. For chemicals, the full year figure, the forecast was 12.5 billion yen. Q1 result was 5.6 billion yen, that's 45%. The lockdowns in Shanghai pushed down plastic resin transactions, but methanol and petrochemicals and rare earth, or indeed chemicals in general, enjoyed higher prices and higher transaction volumes. The line item below, consumer industry and agriculture business. The full year forecast is 3 billion yen. Quarterly figure is actually higher than that at 3.2 billion yen. Continuing from the previous year, building materials for homes enjoy higher prices and transaction volumes. And for overseas chemical fertilizers, the higher raw material prices are now successfully passed on to sales prices. Onto retail and consumer service. The full year forecast is 5 billion yen, but the quarterly figure is only 500 million yen, so it's only 10%. The newly acquired marine foods did contribute to revenue, but the integration-related expenses were also booked, and that's why the quarterly figure is almost unchanged from a year before, and the percentage against the full year forecast is low. And then to the left where we are showing operating results and financial position. So as I said, the quarterly profit attributable to owners of the company stands at 53% of the full year forecast, very high. And in the financial position part, total assets and total equity are both above the forecast for the year end. But those are dependent on market prices and currency exchange rates, which are both currently in a flux. We will keep an eye on developments and decide if we should revise our forecast going forward. This concludes my presentation. Thank you very much for your kind attention.