Sojitz Corp Unsp/Adr

Good afternoon. This is Kosuke Uemura, President and CEO. Thank you for taking time out of your busy schedule to join us today. I will present results of the first half of the fiscal year ending March 2026 and progress made against the Medium-Term Management Plan 2026 or MTP 2026. And then I will give the floor to our CFO Makoto Shibuya for further details on earnings. Consolidated profit for the first half was 45.3 billion yen, setting 9% against the full-year forecast of 115 billion yen. This is in line with our expectations of around 40% in the first half. The full-year forecast of 115 billion yen remains unchanged from the beginning of the fiscal year. Better-than-expected progress was recorded for aerospace transportation and infrastructure and energy solutions and healthcare, while recovery is taking time for some businesses in metals, mineral resources and recycling, and in automotive. In light of this, we have revised some of the segment forecasts. CFO will later provide more detail by segment. Core operating cash flow is generally in line with plan. Given the current situation, however, particularly for metals, mineral resources and recycling, we have lowered our full-year forecast by 5 billion yen to 140 billion yen. Cash flow from non-resource businesses is growing steadily, and we continue to expect core operating cash flow of around 450 billion yen over the three years of the MTP. U.S. tariffs are affecting some businesses, but the impact is expected to be within the 5 billion yen buffer set at the beginning of the year. Under MTP 2026, we strive to create the Sojitsu growth story by forming multiple distinctly Sojitsu revenue-generating clusters of businesses, or katamari, towards the next stage. By sharing this process with our stakeholders, we hope to build growth expectations and improve our price-earnings ratio. As we presented at the beginning of the year, we are focusing on expanding new investments and enhancing existing businesses to accelerate the realization of the Sojitsu growth story. We are now at the halfway point of MTP 2026. To date, we have executed a cumulative total of about 200 billion yen in new investments. We are steadily building competitive businesses by focusing on areas where we can leverage our strengths. An increasing number of investment projects are in double-digit billions of yen each. Major investments to date include Capella, a major infrastructure developer in Australia, Freestate Electric, an energy-saving services company in the United States with strength in electrical equipment work, Nippon A&L, which produces materials used in lithium-ion batteries. All these businesses have potential to become foundations for future growth and are expected to grow significantly. The drive for new investments will continue. In the essential infrastructure domain, we will expand breadth by rolling up existing businesses and acquiring and expanding functions. In the food value chain domain, the focus is on increasing the value of each project. And for energy and materials solutions, we will strengthen our earning space in areas where we have expertise. We have a sufficient pipeline of projects and expect to invest over 100 billion yen in the second half and over 300 billion yen in the next fiscal year. We will continue to accelerate earnings growth towards achieving 2x growth. For existing businesses, steady progress has been made in strength augmentation and function enhancement. For chemicals, we have strengthened our trading businesses by anticipating changes in the supply chain. Additionally, we have stepped into new areas, such as manufacturing, in niches where we can become the leader. We aim for an annual profit of 30 billion yen in the next stage through synergy of deepening trading functions and new investments. In the food value chain domain, in Vietnam we are strengthening individual businesses and further connecting functions to expand sales channels and maximize profit opportunities. On collaboration with external partners, following the partial transfer of shares in marine vessel trading business last year, we have established a joint management structure in the rail car leasing business in North America with Fuyo General Lease as a new partner. The intent is to further expand the scale of this business by increasing the number of cars leased at an accelerated pace and by diversifying services.

Regarding loss-making, underperforming businesses and strengthening headquarters functions, we're not leaving decisions solely to the field. Management is delving into the details so swiftly, determine whether to withdraw or revitalize, downsize or improve. regarding fundamental structural reforms for underperforming segments will advance initiatives with a sense of urgency or speed this includes projects are initiated in the first half as well as businesses currently under negotiations or consideration will provide timely updates on progress going forward this time so this growth story we present is our trading business capturing supply chain change Under our mission to deliver goods and services where there is a need, we have been strengthening trading functions and growing by anticipating shifts in the supply chain and the resulting market needs. Recently, global supply chains have Chains have become increasingly fragmented due to changes in the international landscape and the resulting uncertainty. Critical minerals like rare earths symbolize this trend, and the structure of dependence on a specific nation poses significant risks to economic security. Since the 1960s, we have imported rare earth minerals scarce in Japan and continuously supplied them to Japanese customers concurrently to avoid dependence on specific nations and ensure a stable supply. We have diversified our procurement sources Through our 2011 partnership with Australian company Linus and the establishment of a robust supply chain network, we now hold over 70% of the domestic market share for neodymium, a key light rare earth. Furthermore, alongside Linus, we have built mass production capabilities for medium and heavy rare earths, highly scarce elements essential for next generation energy and EV motors, in addition to traditional light rare earths. Furthermore, for gallium, a mineral essential for manufacturing semiconductors and other products, products, we have commenced initiatives with Alcor in Western Australia toward establishing a refining business. Moving forward, we will continue to look across the entire supply chain, anticipate and respond to its changes, and realize Sojitsu growth stories. The second Sojitsu growth story is Uzbekistan, where we are enthusiastically pursuing future growth. Since the 1990s, we have built strong relationships with trust with the Uzbek government and companies through large-scale projects such as plant exports today uzbekistan is an extremely attractive market backed by central asia's largest population in high economic growth rates with robust infrastructure demand expected to continue We have quickly recognized this growth potential and are initiating projects in infrastructure sectors where demand will increase, such as power generation airports and hospitals. This includes Sirdaria-2 gas-fired power generation project, one gigawatt-scale wind power project, and the Tashkent New Airport, all in collaboration with the local government and key partners." for the samarkand hospital ppp project we're once again partnering with renee saas with whom we collaborated on a hospital ppp project in turkey thus we are steadily creating projects where we can leverage the expertise cultivated internationally viewed collectively these projects represent an investment opportunity of approximately 150 billion yen with an expected roi of around 10 percent Finally, I'll explain the shareholder returns policy. For the dividend for the fiscal year ending March 2026, we plan to pay ¥165 per share, a 10% increase from the previous year. This continues our policy of a progressive, predictable and stable dividend based on a DOE of 4.5% of shareholders' equity. Alongside dividends, we continue to implement stock repurchases as another method of shareholder returns. The repurchase announced in May 2025 is as detailed here. Furthermore, in August 2025, we cancelled 15 million shares from the Treasury stock previously acquired. through realizing sojitsu's growth story will continue to expand earnings accompanied by cash flow thereby further increasing shareholder returns thank you very much

Good afternoon. This is Makoto Shibuya, CFO. My presentation will be using the part of the earnings material that is marked Index 2. Financial results for the first half ended September 30, 2025, and full year forecast of fiscal year ending March 31, 2026. Page 12 is appeal summary. Gross profit in the first half was 171.6 billion yen, up 6 billion yen from the same period last year. The breakdown by segment is shown on page 16. On a year-on-year basis, gross profit increased for aerospace, transportation and infrastructure, energy solutions and healthcare, chemicals, and retail and consumer service. On the other hand, automotive, metals, mineral resources and recycling, consumer, industry and agricultural business were down. Energy solutions and healthcare recorded large gross profit increase thanks to contribution from newly consolidated energy-saving businesses in the United States and Australia. A significant decline was recorded for metals, mineral resources and recycling, which was impacted by lower coal prices. SD&A expenses increased by 14.9 billion yen. Nearly 80% of this is related to changes in consolidated subsidiaries. The rest was mainly due to increased personnel expenses. Share of profit or loss of investments accounted for by the equity method was 20.9 billion yen, almost unchanged from a year ago. With all that, consolidated profit for the period came to 45.3 billion yen, as mentioned earlier by our CEO. Page 13 shows the balance sheet summary. Total assets at the end of the period stood at 3 trillion 249.4 billion yen, up 162.1 billion yen from the end of March, mostly related to investments. Total liabilities increased by 145.8 billion yen to 2 trillion 225.5 billion yen. The increase comes from new borrowings and investments. Total equity attributable to owners of the company came to 980.4 billion yen, up 11.4 billion yen, thanks to profit for the period, despite dividend payments and stock repurchase. Please refer to page 14 for key financial indicators and forecasts for the end of the fiscal year. These forecasts remain unchanged from the beginning of the year. Page 15 is on cash flow. Cash flow from operating activities was a net inflow of 31.3 billion yen due to increased core operating cash flow despite an increase in working capital. Cash flow from investing activities was a net outflow of 75.6 billion yen mainly due to new investments. The resulting free cash flow was a net outflow of 44.3 billion yen. Pages 16 to 18 show PL-related numbers by segments. On page 16, I won't discuss gross profit except to say that given progress so far, we have downward revised the full-year forecast from the initial 400 billion yen to 380 billion yen. We have revised segment forecasts for automotive, metals, mineral resources and recycling, and consumer industry and agriculture business. Page 17 shows profit for the period and a year-on-year comparison. Page 18 shows the full-year forecast and the current outlook. On page 17, let me discuss the segments that have large year-on-year difference, namely aerospace transportation and infrastructure, energy solutions and healthcare, metals, mineral resources and recycling, and others. For aerospace transportation and infrastructure, profit increased significantly as defense-related and aircraft-related businesses grew steadily, and thanks to gains from the partial sale of rail car leasing business in the United States. Energy Solutions and Healthcare enjoyed earnings contribution from newly consolidated energy-saving businesses as well as from existing businesses. The segment also benefited from increased production volume at the LNG operating company. Metals, mineral resources and recycling was down significantly due to the decline in the coal market and sluggish production efficiency. The decrease in others comes from a reaction to the gain on change in equity associated with the public offering of Sakura Internet, which was recognized in the same period last year. On page 18, we present our current outlook for the full year for each segment. The consolidated full year forecast of 115 billion yen stands unchanged. However, given the current situation, we have revised the forecast for some segments. Let me briefly explain by segment.

The automotive division is experiencing negative impacts from U.S.

tariff measures on its Puerto Rico operations, among other factors. Recovery in its Australian-used car sales business is also slightly delayed. For this segment, we have initiated structural reforms, including improvements to underperforming businesses, and have revised the forecast downward by ¥3 billion to ¥3 billion. The Aerospace Transportation and Infrastructure Division expects continued solid performance in aircraft-related and defense-related transactions, including gains from the partial sale of the railcar leasing business. The forecast has been revised upward to 17 billion yen. The Energy Solutions and Healthcare Division, while showing a low progress rate, has been steady progress across various businesses. Factoring in significant second-half earnings recognized from LNG companies and asset replacements, the forecast has been revised upward by 7 billion yen to 30 billion yen. The Metals, Mineral Resources and Recycling Division has been significantly revised downward, reflecting the current situation in the coal business. The Chemicals Division is largely in line with initial forecasts supported by steady performance in existing businesses and anticipated earnings contributions from Nippon A&L Inc. The Consumer Industry and Agriculture Business Division has been revised slightly downward based on current progress. The retail and consumer service division expects to achieve its initial forecast, anticipating profit contributions from marine products and domestic retail businesses starting in the third quarter, along with some asset replacements, others are stated. Page 19 details the cash flow management status. Please refer to it. Based on the segment by segment revisions to the profit forecast explained earlier, we have slightly adjusted the forecast for core operating cash flow, asset replacements, and the resulting core cash flow. For core operating cash flow, we have revised the forecast downward by 5 billion yen for fiscal 2025, but the cumulative forecast for the mid-term management plan 2026 remains unchanged. As shown on page 20, similar to profit for the period, non-resource businesses are expected to account for more than 85%, of core operating cash flow, indicating that our business structure is increasingly capable of generating stable cash flow. Page 21 shows the investment contributions under the Mid-Term Management Plan or MTP-2026. The contribution from MTP 2020 and 2023 has decreased compared to the initial plan for MTP 2026, primarily due to the Australian coking coal and the used car sales businesses not progressing as planned. Progress in all other businesses is generally on or above plan. We will therefore focus on thoroughly improving these two businesses to increase their earnings contribution. Regarding the earnings contribution from new investments in MTP 2026, we have included the expected returns from the 300 billion yen planned for execution by fiscal 2025. Even at this stage, we expect that we will be able to significantly raise earnings above the assumptions made at the beginning of the MTP. While we target Executing additional new investments of 300 billion yen in fiscal year 2026, the key to achieving the MTP 2026 and realizing the next stage early lies in how effectively we can further accumulate upside potential for earnings contributions. Starting on page 22, we have included investments and asset replacement. Commodity prices, foreign exchange and interest rates, segment information and supplemental information. Please refer to these sections. Finally, the second quarter of the fiscal year ending March 2026 marks the midpoint of the MTP 2026. Despite uncertainties in the business environment, many initiatives are progressing smoothly. steadily and we are firmly on track to achieve our forecast for fiscal year 2025. At the same time, it is also true that some segments require more vigor while others need restructuring. As explained by the President, we will realize multiple Sojitsu growth stories Simultaneously, we will boldly transform the business structure in segments requiring revitalization. This will establish us as a company with a portfolio of sustainable, high-performing businesses. We are committed to quickly achieving our next stage goals, doubling growth, reaching a profit of the period of 200 billion yen, achieving an ROE of 15% and a market capitalization of 2 trillion yen. We sincerely appreciate your continued understanding and support. This concludes my remarks. Thank you very much.