Mitsui & Co., Ltd. (8031.T) Earnings Call Transcript & Summary

Good afternoon. I am Tetsuya Shigeta, CFO. Thank you for joining us today. I will begin by giving a summary of the FY March 2026 first quarter operating results. I will then hand over to Masao Kurihara, General Manager of the Global Controller Division, who will speak on the details of our operating results. Summarizing our operating results for the quarter, Core Operating Cash Flow, or COCF increased by JPY 0.5 billion year-on-year to JPY 216.3 billion, as we made solid progress against the business plan. Profit declined by JPY 84.5 billion year-on-year to JPY 191.6 billion, mainly due to the absence of gains from asset sales recorded in Q1 of the previous fiscal year. Progress is in line with the business plan at 25%. This slide shows the progress of each segment against the business plan. COCF is showing good progress across the board. Progress of profit varies by segment, but overall, we are on track. Mainly due to seasonal factors, full-fledged contribution from the Energy and Innovation & Corporate Development segments are expected from Q2 onwards. Regarding our cash flow allocation, cash inflows totaled JPY 270 billion with JPY 216 billion from COCF and JPY 54 billion from asset recycling. For cash outflows, investments and loans totaled JPY 208 billion. Key investments and loans included ITC Antwerp, a European tank terminal business, which became a wholly owned subsidiary, and we also started investing in Blue Point, the low-carbon ammonia project. We will continue to steadily execute investments for growth and asset recycling in line with the Medium-term Management Plan or MTMP. Since the start of the current MTMP in FY March 2024, we have executed multiple investments for growth across our three key strategic initiatives of Industrial Business Solutions, Global Energy Transition and Wellness Ecosystem Creation. Some of these projects have already begun contributing to earnings, helping to raise our base profit. Furthermore, investments for growth which fortify our long-term earnings base are also progressing steadily. Entering FY March 2026, we executed and made investment decisions in areas in which we have deep expertise, including making ITC Antwerp a subsidiary, a business expansion via an additional investment in Willis Mitsui & Co. Engine Support, an aircraft engine-related business and began our investment in the Ruwais LNG project. We'll continue to steadily build up carefully selected investments aligned with our key strategic initiatives. There's no change to our shareholder returns policy since the FY March 2025 full year financial results announcement. We'll continue to consider enhancing shareholder returns while maintaining a balance with investments for growth. That concludes my part of the presentation. I will now hand over to the General Manager of the Global Controller Division, Masao Kurihara, for details of the financial results for the quarter.

I am Masao Kurihara, General Manager of the Global Controller Division. I will speak on details of the operating results. COCF for the quarter increased by JPY 0.5 billion year-on-year to JPY 216.3 billion. In the Mineral & Metal Resources segment, there was a decrease of JPY 16.3 billion to JPY 71.9 billion, mainly due to lower iron ore and metallurgical coal prices. In the Energy segment, despite the higher gas prices, there was a decrease of JPY 7 billion to JPY 45.7 billion, mainly due to a decrease in production volume. In the Machinery & Infrastructure segment, there was an increase of JPY 11.7 billion to JPY 36.1 billion, mainly due to the absence of taxes from asset sales in the previous period. In the Chemicals segment, there was an increase of JPY 7.5 billion to JPY 32.7 billion, mainly due to a gain on the reversal of a provision related to a business outside Japan and higher demand in Europe for crop protection. In the Iron & Steel Products segment, there was an increase of JPY 4.3 billion to JPY 6.3 billion, mainly due to trading and dividends from equity method investees. In the Lifestyle segment, there was a decrease of JPY 8 billion, resulting in an expenditure of JPY 1 billion, mainly due to an intersegment transaction with Others, Adjustments and Eliminations. In the Innovation and Corporate Development segment, there was an increase of JPY 4.6 billion to JPY 12.1 billion, mainly due to an increase in dividends from JA Mitsui Leasing. In Others, Adjustments and Eliminations, there was an intersegment transaction with the Lifestyle segment. Mainly due to this and other expenses, interest, taxes, et cetera, not allocated to business segments, COCF totaled JPY 12.5 billion. Profit for the quarter decreased by JPY 84.5 billion year-on-year to JPY 191.6 billion. In the Mineral & Metal Resources segment, there was a decrease of JPY 29 billion to JPY 51.5 billion, mainly due to lower iron ore and metallurgical coal prices. In the Energy segment, despite higher gas prices, there was a decrease of JPY 0.3 billion to JPY 18.9 billion, mainly due to a decrease in production volume. In the Machinery & Infrastructure segment, there was a decrease of JPY 75.3 billion to JPY 50.7 billion, mainly due to the absence of asset sales in the previous period. In the Chemicals segment, there was an increase of JPY 12.7 billion to JPY 30.9 billion, mainly due to a valuation gain on ITC Antwerp. In the Iron & Steel Products segment, there was an increase of JPY 0.5 billion to JPY 6.5 billion. In the Lifestyle segment, there was an increase of JPY 0.8 billion to JPY 14.8 billion. In Innovation & Corporate Development segment, there was an increase of JPY 4.1 billion to JPY 10.3 billion, mainly due to higher profit at JA Mitsui Leasing. Others, Adjustments and Eliminations recorded JPY 8 billion due to expenses, interest, taxes, et cetera, not allocated to business segments. This page provides a summary of year-on-year factor comparison. Base profit increased by JPY 10 billion. This was mainly due to core businesses in the Chemicals segment, LNG-related businesses, affiliated companies in the Innovation and Corporate Development segment and other factors, while there was lower profit from ships subsidiaries. Resources costs/volume decreased by JPY 17 billion, mainly due to higher costs and lower volumes in copper and lower volumes in energy. Commodity prices decreased by JPY 5 billion, while oil and gas contributed to a JPY 10 billion increase, iron ore and metallurgical coal decreased by JPY 15 billion and Forex decreased by JPY 15 billion, mainly due to a stronger yen. As a result, the commodity prices and Forex decreased by JPY 20 billion. Asset recycling decreased by JPY 72 billion, mainly due to the absence of gains in the previous period. Valuation gains/losses and one-time factors increased by JPY 15 billion, mainly due to the valuation gain on ITC Antwerp. Finally, I will speak on the balance sheet as of the end of this quarter. Net interest-bearing debt increased by JPY 0.1 trillion to JPY 3.4 trillion. Shareholder equity increased by JPY 0.1 trillion to JPY 7.6 trillion. As a result net D/E ratio is 0.45x. That concludes my explanation. [indiscernible] the presentation.