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

Now Japanese shall prevail. We will upload the summary of this session shortly in Mitsui's homepage in English for your review. We will now begin the briefing on the medium-term management plan for 2026 Mitsui & Company. Thank you very much for taking time out of your busy schedule to join us today. There are some housekeeping announcements. We will take on a hybrid format today with participants joining us from the venue, Zoom webinar and online. CEO Hori is going to give a presentation for about 25 minutes using the presentation materials shown on the screen. Then following the presentation, we will entertain your questions. Before we begin, we would like to inform you that copyright of today's audio belongs to us and our management company. Please refrain from reproducing or diverting all or part of the audio without permission for any purpose. Today's meeting will be recorded and will be available on demand on Mitsui's website at a later date. Let me now introduce you to the presenters, CEO, Hori; and CFO, Shigeta. Global Controller, Kurihara; and I'll be moderating this session today from IR. My name is on Konishi. Now we'd like to begin the briefing. Thank you.

Good morning. Thank you for joining us today. I'm Kenichi Hori, CEO. I would like to present the details of our Medium-term Management Plan, 2026. Today, I will begin with a review of the previous Medium-term Management Plan and then address the new Medium-term Management Plan, the theme of creating sustainable futures and we will go over what we are aiming to achieve over the 3-year term as well as the strategies regarding this. The period covered by the previous Medium-term Management Plan, or MTMP was a period in which the company's ability to respond to significant changes in the environment was tested. Under these conditions, Mitsui posted core operating cash flow of JPY 1,205.5 billion and a profit of JPY 1,130.6 billion, both hitting record levels, while ROE reached 18.9%. Shareholder returns as a percentage of core operating cash flow over the 3-year period was 34.4% exceeding our target of 33%. When calculated against profit, the total payout ratio was 46 -- or rather 43.6%. I will now reflect the Mitsui's earnings power over the last 15 years, starting from fiscal year 2009 when the global financial crisis occurred. In fiscal year March 2016, commodity prices plunged. I think you can see that we have been able to stably generate core operating cash flow, which forms the base for future growth investments and shareholder returns even in situations such as these. Furthermore, by reducing costs in each business and making rearrangements in our portfolio, we have been able to build a strong business portfolio that can securely capture the upside of the changing business environment. This led to increases in core operating cash flow and profit, both of which reached over JPY 1 trillion in fiscal year March 2023. Mitsui has expanded shareholder returns by increasing dividends in line with the continuous increase in cash flow and increasing capital efficiency through share repurchases since fiscal year March 2014. As a result, shareholder returns as a percentage of core operating cash flow over the 3 years of the previous MTMP was 34%, cumulative total payout exceeded JPY 1 trillion, and dividend per share increased by 12% annually over the past 15 years reaching JPY 140 per share in fiscal year March 2023, 5 years from previous forecast. When we look at the previous MTMP from a qualitative perspective, Mitsui has increased its ability to generate cash and shareholder returns, as mentioned earlier, by steadily promoting, transform and grow through the execution of our corporate strategy as shown here. I will now outline our new MTMP. The theme of the new MTMP is creating sustainable futures. Mitsui aims to create strong business clusters and new industries by placing sustainability at the center of management, unearthing social challenges in all industries from the perspective of global sustainability and using that as a foundation for creating new business innovation. The theme of creating sustainable futures was established based on key environmental recognition on the largest of skills are planned. We will raise the stakes of our achievements in the previous MTMP and press ahead with further transformation and growth. Next, I will explain our qualitative or quantitative targets of the new MTMP. The core operating cash flow and profit illustrated here are the quantitative targets for fiscal year March 2026, which is the final year of the new MTMP. We will aim for JPY 1 trillion in core operating cash flow and JPY 920 billion in profit. In addition, we aim for ROE averaging about 12% for the 3 years of the MTMP. Also to further expand shareholder returns, we will target raising the level of shareholder returns as a percentage of operating cash flow to around 37% for the 3 cumulative years of the MTMP. We will newly introduce a progressive dividend with a minimum annual dividend of JPY 150 per share in fiscal year March 2024, JPY 10 increase from fiscal year March 2023. This graph shows the cash flow trend of adjusted core operating cash flow based on commodity prices and foreign exchange assumptions for fiscal year March 2026. Through continuous transformation of the business portfolio, we have shown resilience to the downward pressure in our ability to generate cash flow even in the COVID-19 environment, and have also captured pent-up demand in the recovery period from COVID-19 to achieving significant growth. You should be able to see that our business portfolio has burst downside resilience and the ability to capture upside potential depending on the business environment. From fiscal year March 2024, we have assumed that commodity prices will revert. But even in such an environment, we are projecting a stable core operating cash flow of around JPY 1 trillion in fiscal year March 2026 onwards. Also, it is possible that we will capture further upside depending on the business environment. This graph shows the base profit that excludes onetime factors and adjustable commodity prices and foreign exchange set at the levels we expect them to be in fiscal year March 2026. With these assumptions, base profit in fiscal year March 2020 and fiscal year March 2023 are calculated as JPY 560 billion and JPY 750 billion, respectively. In the previous MTMP, we have enhanced our base profit through a stable supply function, including trading and the expansion of business clusters in adjacent areas. Our intention is to increase the base profit by JPY 170 billion to JPY 920 billion in fiscal year March 2026 by accelerating the initiatives that showed material achievements in the previous MTMP. Next, I will explain the strategies we will employ to address our theme of creating sustainable futures laid out in the new MTMP. We have newly established 5 company-wide corporate strategies and 3 key strategic initiatives for the allocation of management resources with priority. The first corporate strategy is the enhancement of the ability to make global cross-industry proposals. Cross-industry approach in a global scale is essential in providing solutions to increasing complex global issues. Mitsui's business unit system and global metric system has the strength of low barriers between business units and regions, enabling flexible and dynamic coordination. By utilizing this, it is possible to combine Mitsui's functional strengths globally and across industries to enhance the ability to offer the most optimal of solution at the time in response to increasingly complex social issues. I will explain the approach in the domestic business. We view the structural changes in Japanese industry to be business opportunity and will contribute to the sustained growth of Japan as a global company with our roots here by creating cross-industry businesses together with diverse stakeholders. The second corporate strategy is a promotion of our business model. Our intention is to drive forward our business model of create, grow and extend, which is unique to Mitsui, and form cross-industry business clusters by combining our core and the adjacent businesses. By strengthening business and forming business clusters in these familiar areas where Mitsui have knowledge of this business, we aim to increase the probability of success and achieve growth. One of the foundations for create in our business model is a Moon Creative Lab that became operational in 2019. Moon is a platform that handles the R&D functions of Mitsui, forming new businesses and accelerating challenges to address new businesses. The third corporate strategy is further deepening of sustainability management. In order to realize the theme of the new MTMP, creating sustainable futures, we are driving responses to social issues such as climate change, natural capital and business and human rights throughout the entire supply chain. We provide optimal solutions to these issues through our business and seek for both sustainability and profitability. In our responses to climate change, we will continue to transform our business portfolio for the realization of our decarbonized society. Mitsui's target for 2030 is to halve the GHG impact compared to fiscal year March 2020 and achieve a renewable energy ratio of over 30% in our power generation portfolio. In fiscal year March 2026, which is the final year of the new MTMP, we expect to reduce the GHG impact down to 27 million tons and to increase our renewable energy ratio to 27%. The next corporate strategy is strengthening of group management capability. It is necessary to increase productivity per person in order to continuously drive the transformation of Mitsui's business portfolio. We will efficiently and effectively implement greater achievements with the same number of personnel through those data-driven management and full utilization of group assets. The fifth corporate strategy is the promotion of globally diverse individuals. We will further accelerate investing in our people in order to promote autonomous career development. The 3-pronged human resources strategy of developing capable individuals, inclusion and strategic assignment to personnel remains unchanged from the previous MTMP. Furthermore, will support the transformation of the business portfolio by improving the productivity of each employee and seeking value-added work. I will now explain the key strategic initiatives in our new MTMP. Based on the deepening of the strategic focus initiatives of the previous MTMP and key changes in the environment occurring in recent years, we have established 3 key strategic initiatives as areas where Mitsui can demonstrate its strengths. The first key strategic initiative is Industrial Business Solutions. This diagram shows our strategy and path to profit enhancement through the creation and growth of business clusters in adjacent business areas. In industrial business solutions, we provide advanced schemes contributing to stable supply through our globally extended business portfolio. This is an initiative related to resource development, materials and food, et cetera, essential for the advancement of society, and the Mobility and infrastructure including digital, et cetera, supporting industry. I will introduce our efforts in the Mobility area as a specific example. By utilizing our business portfolio spanning globally by region and function, we plan to form Mobility business clusters supporting industry. For example, in North America, we'll seek synergies with existing businesses such as Penske Group and develope businesses in adjacent areas. In Asia, we will form business clusters capturing the economic growth of each country. Through these initiatives, we will increase the number of business clusters in the Mobility area from 3 in fiscal year March 2023 to 9 in fiscal year March 2026. The second key strategic initiative is Global Energy Transition. We will provide the latest available optimum solutions through business from the perspective of both stable energy supply and climate change in order to transition into a decarbonized society in a sustainable manner. Our path to create and grow businesses by providing various solutions to achieve a decarbonized society while fulfilling the responsibility for stable energy supply is shown on this slide. This is the overview of projects worldwide that Mitsui is working on, projects that are under operation and fulfilling the responsibility of stable supply such as LNG are plotted in the map. In addition, we have plotted many businesses that are expected to reach turning point such as final investment decisions or commencement of operation during the new MTMP. We will carefully select the opportunities from our pipeline and promote those businesses in order to realize a decarbonized society. As a result, we expect a new increase in invested capital in this area by approximately JPY 1 trillion over 3 years of new MTMP and aim for ROIC to be over 5% in fiscal year March 2026 and over 9% in fiscal year 2030. This is the value chain we intend to realize through Mitsui's global energy transition. In addition to existing businesses such as natural gas, LNG, copper and renewable energy, we will actively engage in the business development of areas such as next-generation fuels and direct reduced iron and strive to create new value chains during the period covered by the new MTMP. The third key strategic initiative is Wellness Ecosystem Creation. In addition to Healthcare and prevention, we will contribute to improvement in quality of life through the provision of healthy food and nutrition. This is the food and nutrition value chain realized through wellness ecosystem creation. We will create much added value along the value chain such as stable supply of food, reduction of environmental impact and the provision of food in response to diverse needs. In the wellness business cluster we will contribute to health through nutrition and food and provide efficient and effective health care and prevention through accelerated coordination of health care-related businesses by data utilization. As I have explained to this point, we will promote the expansion of business along each key strategic initiative. But each initiative is also closely linked to 1 another. Therefore, we can create new value chains and ecosystems by combining these initiatives. For example, in the future of global energy transition and industrial business solutions, the Energy Solutions Business Unit is serving as a hub to amass knowledge from inside and outside the company and accelerate cross-industry initiatives. As a result, we have been able to concurrently promote numerous and various projects as indicated in this diagram. In another example, by combining industrial business solutions and wellness ecosystem creation, we will support stable supply of food from further upstream in the value chain such as seed, fertilizer and crops and make the wellness ecosystem devised by Mitsui much stronger. As a result, we expect net invested capital in this area to be approximately JPY 350 billion over the 3 years covered by the new MTMP, and aim for ROIC to be over 5% in fiscal year March 2026. From here, I will explain the allocation of management resources and the shareholder returns policy. We have worked on ROIC-based management and enhancement of shareholder returns during the previous MTMP. We will further deepen this approach in the new MTMP and promote earnings improvement, enhanced shareholder returns and optimal capital structure. Based on these initiatives, Mitsui has established a 3-year average ROE of over 12% as a KPI for the new MTMP and aims for sustained improvement of ROE that exceeds the cost of equity. In terms of ROIC management, since the previous MTMP, we have been establishing ROIC targets for different businesses and monitoring the progress of achieving those targets as well as coming up with ways for improvement. To use our Lifestyle segment as an example on the left, we will optimize the amount of invested capital by reducing working capital, reducing low profitability assets and making strategic asset recycling, while at the same time, making growth investments in areas expected to make early contribution to profit. Our target is to improve ROIC in this segment by 2% in fiscal year March 2026. Now I will explain cash flow allocation. Under the new MTMP, we will thoroughly enhance cash management, a feature of Mitsui. We forecast cash-in of JPY 3.62 trillion, comprising core operating cash flow of JPY 2.75 trillion and asset recycling of JPY 870 billion. As for cash out, we forecast JPY 570 billion for sustaining or existing businesses and JPY 1.17 trillion in post-FID and policy confirmed growth investments. This includes large-scale investments such as making AIM Services, our wholly owned subsidiary. And the tender offer and business integration of Relia, including this, there are approximately JPY 400 billion worth of investments, which were intended during the previous MTMP but did not reach execution. In addition, there are pipeline projects for which negotiations are currently ongoing and probability of execution is considerably heightened. As for shareholder returns, the remaining amount of ongoing share repurchase announced in February 2023 is JPY 70 billion. And the total minimum dividend is expected to be JPY 680 billion. Based on these cash-in, out projections, our management allocation is expected to be JPY 1.13 trillion. Through the management allocation framework, we will continue strategic cash allocation aimed at balancing carefully selected growth investment and enhancement of additional shareholder returns while maintaining our basic policy of positive cash flow after shareholder returns. This slide shows the expected timing of profit contribution by investments made during the previous MTMP and growth investments scheduled to be executed during the new MTMP. You can see that we expect steady expansion of profits along each key strategic initiative during the period covered by the new MTMP. Moving on to shareholder returns, we will stably and flexibly enhance shareholder returns in line with the expansion of cash flow. Specifically, as explained earlier, we will increase the annual dividend from the previous forecast by JPY 5 to JPY 140. We will further increase the dividend by JPY 10 to JPY 150 per share from the previous period in fiscal year March 2024 and show stability through the introduction of a progressive dividend, and also continue to flexibly make share repurchases as we have done in the past. Finally, we will continue with the challenge and innovation concept to solve issues and aim to be the partner of choice among various stakeholders, doing so through creating sustainable futures, the theme of our new MTMP. That concludes my presentation. Thank you very much.

Now we'd like to begin Q&A session. [Operator Instructions] And now I would like to open the floor for questions.

There are 2 questions. It's a qualitative question. So in the Medium-term Management Plan this time, the overall concept is I'd like to ask. In terms of tactics, in the previous MTMP was not wrong and you're just following the same path based on that assumption, and there is no major change in overall concept. But as you promote the new MTMP and then after that MTMP what will be the list -- the important point that you would like to emphasize and appeal to the investors at present? For example, differentiation from other trading houses or positioning of Mitsui & Company on the global positioning. What would be the point that you would like to appeal and emphasize most? So maybe the partner of choice, aiming for that? Maybe your answer, but that's my first question. And the second question, on Page 33, the optimum capital structure. The KPI is all mentioned. And what will be the balance sheet in 3 years' time? That is not clear to me. After the March 2023, 0.5x is the starting point. And that [ one ] is going to be reduced. So how did you discuss this optimal capital structure? What will be the optimal structure in 3 years' time? And in the previous MTMP, JPY 1.2 trillion in cash on hand is still unused. So how are you going to go about utilizing that in the balance sheet during the new MTMP? So the optimum balance of capital structure is something that I'd like to ask about.

Thank you for the questions. So President Hori will answer the question.

Thank you for the questions. First, on the first question, well, including geopolitics, the global volatility has been heightened as much as you have seen, and there are so many issues that are facing the world. And creating sustainable future is the theme that we have come up with, with that in mind. In order to realize that, we are rooted in this in Japan as a global company. We see it as such and global and intercompany consortium can be formed. And we have to have a track record and capability to be able to do that in order to survive as an excellent global company. And through this new MTMP, various initiatives will have to be realized to become companies like that. That's what we are aiming for. And what characterizes the trading houses as a whole is that there are so many different business units and departments. And as you saw in the slide today, we have lowered the barriers through -- across the business units significantly. And you have to also be quite robust in each country in order to respond to global situation. So we would be deepening our footprint in the countries that we have businesses in. And we have utilized our knowledge. And after that, only after that, we can form the consortium and we can function as a corporation that can realize that. And that is something that we should be mindful of. Fortunately, for us, not just for Japan, obviously, but in the U.S. or in Asia and in Americas, Asia and then the Southern Hemisphere derived businesses are done, and we are also taking on new challenges in Europe and China, also obviously has potential as a market. So we are doing various activities on a global scale, and we have to hit the right balance on a global basis. And there are several cases that you've seen, and we have to strengthen them further so that we have a history of cost of businesses, and then we have to strengthen that further. And we have to get united to work on that. And to answer your second question, ROE or balance sheet, how you are looking at that. So in the previous MTMP, the management allocation was more than JPY 1 trillion, and that's the cash on hand. So engagement as we have explained in engagement. And we have tentatively allocating that to strengthen balance sheet as we said. But there is an ever-changing business environment. We have to be well prepared. And that's what we have been able to do. That's how I feel as a CEO of the company. And how we can actually deploy that position is the question. So after the COVID-19 settles down, subsides, all employees have to go to the field and actually look at the projects in person and explore various projects with various multiple people. That's what we have done. But there are several times more in terms of the number in the pipeline than the ones that we already have as projects. But in the second half of the pandemic period, including those who are in the front line globally, we have been able to move functionally. And so there are some projects that have been formed at earlier stage. And it was not included in the cash out in the previous MTMP, but that will be also included in the cash in the new MTMP. And these are all excellent projects. So you we'll give priority to those in terms of execution. So among those rich list of pipelines, higher profitability will be looked at. And also cost of capital is now on the increase, and that's how we analyze as in other companies. And furthermore, there's inflationary economy in place. And we have to be able to form prices in businesses. And we have to select those businesses that allow us to do that. And we have to be very selective in order to do that. So selectivity of projects and enhancement of quality of the projects and control of timetable of the projects, those are things that we have to do. And there might be some good performing projects that may come out. And so the preparations that we've done in the previous MTMP will bear fruit in the new MTMP. And in the model, the present model for cash allocation for the 3-year period, the investment activities have been selected carefully and also returns that we'd like to give back to shareholders and also financial position that can will be resilient in the downside and also resilience in the very challenging environment. Those are all taken into account. And DE ratio has been quite low, very low and comfortably low. But as a company, we have to be able to agile and we do have a room to allow us to do that. And based on that, we would like to proceed. So ROE is important, and we have to enhance capital efficiency and returns have to be done on a certain level. And so increasing capital efficiency and we have to churn the equity at a certain cycle. So that's how we have come up with this plan. So it's not that we are sticking with a single index. So you have to look at the future business environment, and there could be various moves that are potentially done. And we have to -- we have to be broad enough to cover that. And also, we also have to take into account various KPIs. Does that answer your question? Thank you.

I would like to ask 2 questions. The first question, JPY 920 billion of net profit, which is a target this time, I do not know the specifics so it depends on the launching pad. But the actual ability, maybe the recycling is an ability that is included, but I think excluding the onetime figures, it will be about JPY 900 billion. So in the 3 years, it will be up JPY 220 billion. So of course, you talked about the key strategic initiatives, but energy transition may be the area in which is going to be producing a lot of profit. So how you are going to grow? And on Page 35, you talk about the starting point of the profit contribution from the past pipelines. What is the return you expect each of the projects. That is not visible from the outside, the possibility of successes. In the past, you were able to cut the loss projects and you were able to move on to profit-making initiatives, and it was quite easy to see. However, you are looking at new investments and also profit contribution for each 1 of the initiatives we are going to start. So maybe I'm asking for you to explain Page 35 in detail. But can you talk about the possibility of success of the different projects outlined on Page 35, please. And my second question, so as for the 37% of the total shareholder returns, I think it's been heightened, so which was good. But originally, we have COCF of JPY 1 trillion. But it was originally about JPY 500 billion. The period around JPY 500 billion has been quite some time. And depending on the environment, maybe there will be a downward pressure. I think that was what you explained. So 37% was a figure given. And on the other hand, you also want to make investments. So free cash flow may go into the red. But do you still want to keep with this figure with a profit level, with the pull of the capital available? Is it not going to be an issue? So that is my question. So what does the 37% include, will mean? I believe the volatility is going to be higher going forward. So is it okay to reach 45% or 50% going forward? So can you talk about how you will be managing this going forward?

Thank you very much for your question. In the new MTMP, the base profit that we have shown you for March '26, we are looking at the commodity prices, assumptions and ForEx assumptions, and that is what we have come up with. So from March '24, we have made a calculation. And using this as a base, I'd like to give you my explanation. So about JPY 170 billion plus in base profit is shown as you can see here. So I think by explaining this slide, I think I'll be able to answer your first question. So please give me some time. So when we made the alignment of the business plans with different business heads, these are the cumulative figure that we have reached. And in the previous MTMP, we have looked at the commodity market and of course, because of the market volatility, of course, we had to create opportunities through such businesses. And we are looking at standardization going forward. So against our volatility, there will be more opportunities for making profit as a track record shows. But this is not something that we have incorporated. Therefore, we are going to see a stabilization when it comes to commodity market going forward. So there may be a rebound going forward. But excluding that, we are looking to achieve JPY 170 billion increase in base profit. And in the new contribution of the different pipelines. And on Page 35, you can see the profit contribution of different projects. And many of the projects have already been announced and disclosed already, and you may know of them already. And it will be about JPY 60 billion. So we may divide them by 3 key strategic initiatives. We will have 1/3 each for global energy transition, wellness ecosystem and Industrial Business Solutions. And with that, we'll be able to complete the fiscal year March 2026. So there are a number of projects without a proper name. But for example, in Nutrition & Wellness, food science area is something that we are working on as one of the projects, or there's another project related to proteins as well. And a name has not been given yet on this chart, but these are some of the projects that we are working on. And we have a new project such as that. And also, we have a project which is coming from organic growth which is about JPY 110 billion. So dividing them by key strategic initiatives, of course, we can [ like ] them to different businesses. But in industrial business solutions, it will be about JPY 30 billion or more that you will be allocating. And what is very strong is we are creating clusters of mobility and new clusters are going to be quite big. In Asia, we are working on automobile business in Asia. And there are other machinery-related business, which are a global operation. And in Chemicals, methanol ammonia products not our new energy ammonia, but in the existing energy, we will be working on ammonia going forward as well. And we have logistic businesses such as tanks. These are organic growth projects that we can expect. And here, material, energy and also in Metals, we are looking at qualitative expansion as well. So quantitative expansion is something that we are looking for. And with the neutral projects, we are looking for JPY 30 billion. And ecosystems, organic JPY 10 billion growth is expected. Proteins and wellness businesses that we have on hand, these organic growth will come to about JPY 10 billion we expect. And as for business efficiency and turnaround or loss-making projects, we may withdraw from or turning them into profit. All these combined will come to about JPY 40 billion. So March '23, the numbers were granular -- were not granular, and there were some trading areas as well, including coffee business. And up to March '23, all the businesses were doing well, but the coffee business in that fiscal year, the profit was weak, but we believe that it will become normal, and we believe we will be able to show good results going forward. So with efficiency and also turnaround, we are looking for about JPY 40 billion in total. In energy transition, from early investments, we are looking at some projects that will move to the transformation period in which they will now start showing profit, and that will come to about JPY 20 billion. So we have JPY 60 billion in total and JPY 110 billion added. And we believe these figures will give us that revenue that we are forecasting at the moment. That is all for the explanation about the base profit. So I'm talking about the base profit so far. We will be heightening base profit, and this will allow the company to level up the cash flow generation, and that is going to be the basis of the answer for my second question. So in other words, looking at the market commodity and neutralizing that in your assumption, and of course, there will be volatility in the energy area as well. And calculating the base profits forecast, then we can come to the capital allocation, which is going to lead to shareholder returns. That will be the answer to your second question. And of course, from 2014, we have been working on the cash flow efficiency repurchases per share. So we believe we have reached a certain level, and we will, of course, continue to consider agile shareholder returns going forward and also share repurchases. But we believe that through such initiatives, we are close to realization of our objectives. And minimum dividend per share has been said from the model that I have just explained. And with our shareholders, we hope to continue to have dialogue. In the previous MTMP, the management allocation is one of the buffer to the volatility in the new MTMP. That is how we are welcoming the MTMP as you touched on in your question. So with the combination of all these, we can look at the capital allocation that we have structured for this new MTMP. I think that will be a good way of looking at our new MTMP.

So as you have just said, as for the shareholder returns, of course, dividend and share repurchases, which is more important was discussed before. But from your explanation, I think the more weight is on payment of dividend. Is that correct? Because how do you utilize the share repurchase, our thinking has not changed.

So if there is an upside phases going forward, well, if the commodity market goes up more than we had expected. And if there is a large cash flow more than what we expect, then we will put that into share repurchases. And that is the thinking that we still hold. And if there is a large asset recycling, maybe there will be a onetime cash need. Therefore, we will respond with share repurchases. Like in the past 3 years, we want to have a good dialogue with our shareholders in shaping our thinking. The stock price level at the moment over the time will be monitored. And of course, against the management environment, whether the balance sheet is optimal is something that we will also look at. So different factors will be analyzed to look at our decisions of share repurchases. But I think these are the benchmarks that we will incorporate in making the decisions. And debt level, after shareholder returns, we want to make it neutral, but dependent on the different phases, we would like to make agile responses against our balance sheet. So we want to be disciplined in conducting and implementing initiatives, but we also want to be flexible. So we want to secure flexibility so that we'll be able to expand the options going forward.

There are 2 questions. Firstly, as you explained, JPY 170 billion growth model and cash flow allocation, the relationship between these 2 is my question. On Page 34, cash flow allocation plan is shown and management allocation is JPY 1.13 trillion, either for growth investments or shareholder returns are allocated but the total shareholder return as a percentage of core cash operating cash flow is 37%. So JPY 750 billion is allocated. And then JPY 1 trillion is used and JPY 250 billion is in new terms. So you can also do the investments. And that JPY 170 billion increase in profit. So post-FID and confirmation -- policy confirmation made. Based on those plans, have you come up with that? Or you are going to assume that some allocation will be made from the growth investment budget as well to achieve that JPY 170 billion increase in profit?

Is that your only question?

No, the second question, there's the second question, and for the company-wide capital structure was asked about. And I also would like to ask a follow-up question on that. So shareholders' equity has been accumulating it seems. And probably the number of employees is based on the selective headcount has not been increased. And you have said that productivity per person will be enhanced. But compared to the number of employees shareholders' equity seems to be increasing. And ROE being 12% in plan, JPY 520 billion in the last MTMP, probably that will be the natural level that you will achieve. But what I'm going to do beyond that, if you continue with this then, the shareholders' equity will be accumulating continuously. And also the assets will be increased towards the leverage. And the investment per person will have to be increased. Otherwise, you cannot maintain the ROE on a long-term basis. So to your company, what will be the most optimum asset scale, as you see it, in your investment plan presently, in the energy transition, JPY 1 trillion increase in net increase is planned. So from JPY 15 trillion in assets which is the present value, it seems that you're going to increase furthermore. But what will be your optimum total assets scale that you have in mind?