Sojitz Corp Unsp/Adr

Good afternoon. This is Makoto Shibuya, CFO. Let me use Document 1, Financial Results for the Third Quarter and Full-Year Forecast of Fiscal Year Ending March 31, 2025, which is available on our website. Slide 4 is the summary for Q3. Consolidated profit for the period increased by 900 million yen year-on-year to 76.1 billion yen, which is 69% against the full-year forecast of 110 billion yen. After Q2, we were at 40%. In Q3 alone, from October to December, we gained about 30%. We are thus making steady progress toward achieving the full-year forecast. Core operating cash flow increased 13.1 billion yen year-on-year to 97.3 billion yen, coming to 75% of the full-year forecast. We are thus successfully generating profit accompanied by cash. Slide 5 shows the profit and loss summary. growth profit increased by 18.3 billion yen year-on-year to 260.6 billion yen, which is 74% against the full-year forecast. As shown in slide 9, where we provide the breakdown by segment, growth profit decreased in metals, mineral resources, and recycling due to decline in coal prices, but increased in automotive, energy solutions, and healthcare and retail and consumer service thanks to newly consolidated operating companies. Aerospace transportation and infrastructure, chemicals, and consumer industry and agriculture business were also up thanks to earnings growth in existing businesses. SD&A increased by 22.9 billion yen year on year. About half is due to difference in consolidated subsidiaries. About 20% is due to the weaker yen. The rest comes from increased personal expenses, business development expenses, and other effects of inflation. For other income and expenses, which include one-time items, we booked gain on changes in equity resulting from the Sakura Internet public offering and gain on sales of overseas industrial parks, but given the gain on negative goodwill recorded last year, there is not much year-on-year difference. For financial income and expenses, the net of interest earned and paid was negatively affected by higher interest rates, but not significantly. On the other hand, dividends received from non-equity method investments, including those related to industrial salt, increased so that net expenses decreased. Share of profit or loss of investments accounted for using the equity method increased year-on-year to 30.5 billion yen. With all that, consolidated profits over a period came to 76.1 billion yen. Slides 6 and 7 show the balance sheet summary. As shown on slide 6, total assets increased by 190 billion yen from the end of the previous fiscal year. This was mainly due to an increase in working capital in retail and aerospace-related businesses and the acquisition of new consolidated subsidiaries. In addition, foreign currency translation of overseas operations had an upward impact of about 20 billion yen. Total liabilities increased by about 150 billion yen from the end of March, mainly due to an increase in funding commensurate with the increase in working capital. As with total assets, foreign currency translation of overseas operations had an impact too. Total equity attributable to owners of the company increased by 34.4 billion yen to 958.5 billion yen, even with the share repurchase and dividend payments. Slide 7 shows key management indicators and the forecast for the end of March. We have revised some figures in light of progress achieved so far and current foreign exchange rates. Slide 8 shows cash flow. Cash flow from operating activities was a net inflow of 12.2 billion yen. Working capital increased, but core operating cash flow more than offset that. The increase in working capital came mainly from expenses related to defense systems and aerospace and an increase in inventories. Cash flows from investing activities were a net outflow of 72.9 billion yen due to new investments. The resulting free cash flow was a net outflow of 60.7 billion yen. Core cash flows have been kept in line with the cash flow management policy under the medium-term plan. Slide 9 to 11 show the breakdown by segment for profit and loss-related results and outlook. I will not discuss slide 9 and gross profit figures today except to mention that the consolidated Q3 gross profit stands at 74% of the full-year outlook revised after Q2. Slide 10 shows the year-on-year difference in profit for the period. Slide 11 shows the full-year forecast and the current outlook. Now on slide 10, profit increased year on year for aerospace, transportation and infrastructure, chemicals and consumer industry and agricultural business. Aerospace, transportation and infrastructure was up due to increased transactions for business jet and defense system related businesses, earnings contribution from overseas industrial park business, and an asset sale. Chemicals was up thanks to the reaction to a one-time loss in the same period of previous year, increased transaction volume in overseas regional training, and dividend income from industrial salt-related business. Consumer industry and agriculture business was up thanks to profit growth in overseas fertilizer business. On the other hand, profit decreased for metals, mineral resources and recycling, retail and consumer service, and automotive. Metals, mineral resources and recycling was affected by the decline in market prices of coal. Retail and consumer service was down despite earnings contribution from commercial food wholesaler business in Vietnam and solid performance in marine products and domestic retail businesses due to gains recorded in the previous year on negative goodwill and sale of domestic commercial property. automotive was down despite earnings contribution from automobile sales business in Panama due to slow improvement in used car sales business in Australia and lower sales volume in the Americas. Slide 11 shows the full-year forecast and our current outlook by segment. Consolidated results after Q3 were at 69% of the 110 billion yen full-year profit forecast, but the percentage achieved figures are rather low for automotive, metals, mineral resources and recycling, and energy solutions and healthcare. Let me briefly explain each segment. For automotive, we expect to achieve the full-year forecast with solid progress in our Latin American business, including Panama and Brazil, recovery in sales volume in the North American business, and moderate improvement in used car sales business in Australia. The used car sales business in Australia has been a cause of concern, but it is on track to become profitable in Q4. Aerospace transportation and infrastructure is expected to be generally in line with the forecast. For energy solutions and healthcare, the percentage achieved figure may appear rather low, but we expect this segment to achieve the full-year forecast with solid earnings continuing from the energy savings service business, strong earnings from the LNG business in Q4, and planned sale of some assets. For metals, mineral resources and recycling, earnings from coal, steel and aluminum melting businesses are expected to increase. On the other hand, for the coal business, we changed the assumption for coking coal price during the second half from $230 to $200 after Q2, but market prices have fallen further since. In addition, there have been delays in the recovery of production and sales volumes and in improving production costs, so for the current year we cannot be too confident. Chemicals has remained firm and may even exceed forecast. For consumer industry and agricultural business, the fertilizer business has been firm. For retail and consumer service, although personal consumption in Vietnam has remained weak, marine products and domestic retail businesses have been firm, and we expect the segment to come in generally in line with forecast.

From slide 12 to 15, the Sojitsu growth story is shown. This time, slide 12 introduces production and sales business of beef in Vietnam, and from slide 13 to 15, acquisition of Australia's infrastructure developer, business model transformation and development of Katamari clusters announced on January 31st. Firstly, as for production and sales of beef business in Vietnam, as we explained before, Sojutsu and Vina Milk Group began full-scale operation of Vietnam's largest beef process plant in December last year. We'll preemptively address needs in Vietnam's food market and lifestyle transformation, and with our partner in Vietnam's growing beef market, we'll maintain reliable supply of high-quality refrigerated beef under comprehensive frameworks encompassing everything from fattening to sales, Local team in Vietnam, consumer industry and agriculture business and retail and consumer service are taking the lead in a company-wide effort to expand this business by also connecting to our group's Vietnam retail chain. Next, we'll introduce acquisition of Australia's major public infrastructure developer and the associated Sojutsu growth story. Through this deal, we intend to transform and strengthen Soji's business model further in essential infrastructure area, one of the focus areas of MDP, area of energy solutions and healthcare, and aerospace, transportation, and infrastructure. Today, Nishikawa, COO, Energy Solutions and Healthcare Division will directly explain this initiative and its contribution to the division's growth strategy. COO Nishikawa, please. This is Nishikawa of Energy Solutions and Healthcare Division. I'll briefly explain based on the slides. As shown on slide 13, on January 31st, Friday last week, we signed a share purchase agreement to acquire shares in Capella Capital Partnership, Australia's major public infrastructure developer and related PPP investment platform. Total investment including funds for share acquisition and planned investment in ongoing project will be about 47 billion yen. We plan to obtain the 90% share we will own. We plan to obtain Australia regulatory approvals and execute the investment. We struck a record of 3.4 trillion yen of project amount in infrastructure development and more than 50% of win rate in bidding. Capella is one of the largest Australia's infrastructure developer. In the business and revenue model, Capella develops infrastructure business and make investments to obtain success fee for project formation, asset management income, dividend income, and gain on sales from asset recycling. In the Australian market, as population and economy grow, many infrastructure development plans are expected. Using Capella's strengths, we will advance business development and aim to acquire large-scale revenue. Next, on slide 14, I will briefly explain the aims of this investment. In infrastructure development, we partner with highly specialized developers called lead developers like Capella in business development. As shown in the middle, by acquiring lead developer functions through this acquisition, various effects and strong impacts can be expected as follows. Increasing independence, business development and realization, acquisition of diverse and large-scale revenue that I mentioned earlier, improvement in profitability and capital efficiency through asset recycling, and human resource development through OJT from business development to OJT. operations. Lastly, on slide 15, I'll give you a progress report on the path to the division's growth. To the participants of the division's briefing held at the end of November last year, we used this slide to show our vision for next stage. More specific progress and the background ideas are added to the slide this time. As you see in the lower center, strategies for transformation and growth include themes such as acquisition or business creation foundation, investment in growth businesses, continuous investment, leveraging customer base, and pursuing synergies. We assume majority ownership. in development of new businesses. As specific initiatives along the theme as shown in number three, we are taking measures to expand renewable energy, electricity and retail service business in Europe. As in number two, we are taking measures to reinforce and expand energy saving service business in the US and Australia. And as a new initiative in number one, we acquired Capella to dramatically transform initiatives in infrastructure business. By growing these businesses further and examining and making additional investment in related businesses, we want to acquire earning power to generate more than 40 billion yen of annual profit and develop human resources to promote even higher growth. That's all from me. Under MTP 2026, while pursuing competitive advantages and unique capabilities to execute growth strategies, we set up the KACHI model to promote initiatives contributing to business model transformation. market development and addition focusing on building business Katamari. Production and sales of beef business in Vietnam is an initiative for addition in Kachimodo. The project in Australia is an initiative for transformation and addition of Kachimodo. We continue to create attractive businesses where soldiers grow slowly meeting expectation of stakeholders. Next, going back to the material. Next, slide 16 shows cash flow management and slide 17 shows progress of investments and asset replacement. Cooperating cash flow has been generated well and progressing in line with the plan. New investments for 63.5 billion yen for the 9 months. Progress on cash outflow is slow, but including the projects introduced earlier, investments for various projects were decided. Multiple projects are in the stage of final negotiation before cash outflow. New investments for FI24 are expected to be around 120 billion yen We are not in a situation where execution of investment planned in MTP 2026 is difficult. We would like to make those investments. We continue to manage cash flow based on the MTP policy. Slide 18 shows shareholder returns policy. Share by box are being implemented as we announced at the end of September last year. As DOE 4.5% is our dividend policy, I think feasibility of FY24 forecast as well as predictability of dividends for FY25 is enhancing. Slide 19 indicates results and assumption of commodity prices for an exchange and interest rate. Please refer to that. As detailed segment information is attached as index 2 and supplemental data as index 3. Please use them. Lastly, as I explained earlier, profit for the 9 months increased to 69% of the full year forecast. Besides, we've been steadily taking actions to realize Surge's growth story set out in MTP 2026. Although we cannot deny uncertainties in external environments, we'll make sure to achieve a three-year forecast for FY24 firstly, and under cash flow management policy, we'll allocate generated cash to growth investments based on catch model and shareholder returns and continue to work on enhancement of sustainable business value and PERM.