Sojitz Corporation

Good afternoon. This is Kosuke Uemura, CEO. Thank you very much for joining us today for our Q2 earnings briefing. Let me begin with a summary of the first half results and progress made against our medium-term management plan before our CFO, Makoto Shibuya, reports on further details. First, in the first half, profit for the period and the full year forecast is shown on the slide. Profit for the period was 63.6 billion yen, 49% progress towards the full year forecast. against the full-year forecast of 130 billion yen that is. Chemicals made strong progress due to higher market prices, while progress was relatively slow in automotive, undergoing structural reform and consumer industry and agriculture business. So the breakdown may be mixed, but overall, progress towards the full-year forecast is in line with plan. Usually, 40% of the profit comes in in the first half and 60% in the second half. But for this year, it's a little different. We are getting more profit in the first half than usual. And the situation in the chemicals and that's affected by the situation in the Middle East is a factor. In the second half, we believe the uncertainty may continue. That's why the full-year forecast for the profit for the year remains unchanged at 130 billion yen. There have been some revisions to the breakdown of the forecast by segment, and we'll discuss this later. Regarding structural reform, there has been progress for Coke and Coal business, the Gregory Crinum operations in Australia, with an agreement for transfer signed mid-October. We will discuss this in further detail later. I will also discuss some progress in line with MTP 2026 and discuss some key soldiers' growth stories. So this is a recap of first half results. As I mentioned earlier, profit for the period came to 63.6 billion yen, which is 49% against the full year forecast of 130.0 billion yen. Our forecast remains unchanged and things are in line. This is the slide that we have been using for MTP 2026. I'm sure you are already familiar with this. The idea is to deliver growth by building up distinctly Sojitsu businesses with clear path to success, which we call creating the Sojitsu growth story. More specifically, the two pillars are expansion of new investments and enhancement of existing businesses. And that's eliminating what's not working and enhancing what is doing well and making them better. And with increased new investments, we would like to develop clusters of businesses that are distinctly sojitsu and have clear paths to success. Marine Products Business Domestically, we have had Tri Inc. and the Marine Foods Corporation. Those two companies are in procurement, processing, and sales and have top-level market shares in Japan. And both have realized profit growth since joining the Sawdust Group, as you can see on the right-hand side of the slide. We have recently invested in New England Seafood International in the UK. This is to further reinforce the platform outside of Japan. Combining the existing domestic business platform for marine products with NECI sales and product planning capabilities in Europe would help expand our marine products business internationally and accelerate the growth. Currently, this is worth 4.6 billion yen in profit for the year. In the next stage, we will aim for 8 billion yen plus. The second story is on infrastructure development business. So this is Capella. I've discussed this company several times. Capala Capital was established in 2009 and has since built a track record of over 4 trillion yen in total project value with a bid success rate of above 50%. Amazing. With continued population and economic growth expected in Australia, and they already have a PPP business scheme established, and infrastructure opportunities are abundant there. The project pipeline is worth 3 trillion yen, and Sojitsu investment opportunities are estimated to be worth roughly 180 billion yen. In addition, we expect non-PPP opportunities including outside of Australia. We expect recurring opportunities and the estimate is roughly 1.5 trillion yen worth. As shown in the lower part of the slide, with regards to the infrastructure development, there are opportunities and the cycle, and there are recurring multiple layers of earnings opportunities. By accumulating such, we expect accelerated growth in profit, and we will aim at 10 billion yen plus in the next stage.

Thirdly, energy solution business. In 2021, we did the first acquisition. We acquired McLugar in the U.S. After that, in the U.S. and Australia, we made bold long investment. As you see on the bottom right-hand side, we acquired those companies. We've been expanding, reinforcing business space. In particular, in the U.S., and there is demand to upgrade async infrastructure and also in Australia and the US there is demand for energy conservation and recently there is demand for data center construction we think there are lots of growth opportunities that is the current situation Operating company have network and function in each area and they have their workforce base. By combining them, we aim to achieve efficient business operation, expansion of business base. Going forward, we will continue to reinforce and expand this business. Under the next stage, we aim at the 20 billion yen or more of profit for that year. Last three, let me talk about the chemical business, the fourth business. And this is related to all businesses. This is a number of chemical division numbers. Since five years ago, we've been reinforcing trading functions. We forecast changes of supply chain and we've been responding to them flexibly. By doing so, we've been generating trading business opportunities and expanding earnings. As you see on the bottom right hand side. There is a Middle East situation because of that there are supply chain related issues. Even under such circumstances, we don't miss opportunities for trading business. Or, although and that is because of market price factors, we are growing profit. As for market factors, especially methanol. As with crude oil, market price have been increasing remarkably. That is positive on our profit and that is a forecast for this fiscal year. Going forward, we aim at expansion of earnings, profitability improvement. We will reinforce trading function and expand this business. So far, I talked about the soldiers' growth story, growing businesses. Next, on the other hand, we've been working on the structural reform. Let me talk about that. As I mentioned in the beginning, there was a progress to cooking coal business sales and transfer in Australia. Let me talk about that. and in the middle of October, we signed the transfer agreement of Gregory Kleinem Coking Coal Interest. This was already discussed. Subject to regulatory approval and other procedures, we aim a completion of sales by the end of this fiscal year. In mid-October, we just signed the transfer agreement, but basically, progress is in line with our expectation. On the other hand, regarding Lake Vermont coking coal business at the end of last month, we completed sales. Regarding gains and losses related to those transactions are as you see here in the first half, minus 1.6 billion yen. For the second half, forecast is more than 1 billion yen of what's the figure. Cash recovery in total is expected to be 40 billion yen in total. That's about an Australia Coking Coal sales updated situation. Lastly, shareholder returns. There is nothing special to add. We haven't changed shareholder return policy of the current MTP for this fiscal year and the DOE 4.5% is a target. As for the actual number, annual and dividend target is 180 yen per year, 9% increase year on year. That concludes my explanation. Thank you very much.

Thank you very much. I will also present from the same presentation material and discuss the financial results for the first half and the full year forecast. Let me begin with slide 15. It's a summary balance sheet. Total assets increased by 148.4 billion yen from the end of March. to 3,796,4 billion yen. Trade receivables increased due to tobacco transactions and energy solutions businesses. Investment-related assets increased too. The increase in other assets came from asset replacement associated with structural reforms. Total liabilities increased by 79.6 billion yen to 2,573,800,000 yen with an increase in tobacco-related trade payables and an increase in interest-bearing debt to finance new investments and working capital. Total equity attributable to owners of the company increased by 65.6 billion yen during the same period to 1,156,000,000 yen. Dividend payments were offset by accumulation of net profit. Slide 16 lists key financial indicators. Based on progress so far, we have revised our forecast for total assets, total equity, and associated metrics. slide 17 presents a PL summary gross profit increased by 50.7 billion yen year on year to 222.3 billion yen slide 18 provides a breakdown by segment gross profit increased significantly for chemicals