Sojitz Corporation ($2768)

Good afternoon. This is Kosuke Uemura, CEO. I would like to explain results for the FY '25 that ended March 2026 and progress of the Medium-Term Management Plan 2026 or MTP 2026. After that, our CFO, Makoto Shibuya, will explain details of the financial results. FY 2025 was year 2 of the current 3-year medium-term management plan or MTP 2026, we did a net income of JPY 103.6 billion for an ROE of 10.1%. And both falling short of the plan that was published together with the -- this expansion and earnings contribution centered around Energy Solutions and Health care, chemicals trading as well as defense and marine product-related businesses. On the other hand, structural reforms in Automotive and the Australian coking coal business, had a temporary negative impact. During the year, we continuously implemented various measures for growth towards our next stage. By implementing new investments that contribute to high-quality growth, we have been able to steadily build out clusters of businesses with clear path to success. We have also implemented measures to address underperforming businesses. It may have had a temporary negative impact on profit figures but allowed us to surely transform our learning space into one that generates stable profits into the future. In FY '26, we will build on the achievements and aim for JPY 130 billion in profit for the period and 12% ROE. This slide was first presented when we announced the MTP 2026. Our approach towards the next stage remains unchanged even with the situation in the Middle East and the progress we have made to date. We will focus on both scale and capital efficiency. By creating the Saudis growth story, we aim to achieve our target of JPY 200 billion in net income or profit for the period and 15% ROE and JPY 2 trillion in market cap. MTP 2026 remained positioned as a Phase II build a footing for that next stage of growth. Our assessment at this point after 2 years is that we are making steady progress towards the next stage along with business portfolio transformation. Let me explain some specific initiatives and progress made. The Saudis growth story is realized by expanding new investments and enhancing existing businesses, which in turn drive business portfolio transformation. New investments are expanding in business areas where we can leverage our competitive edge. We are successfully building businesses that have clear and scalable path to success as well as Katamati or revenue-generating clusters of businesses that organically work together and deliver sustained profit. For existing businesses, we are bolstering earnings power while enhancing functions, utilizing our existing strengths. We are also expanding earnings power through co-creation with external partners. At the same time, for loss-making and underperforming businesses, we are working with a sense of urgency to improve profitability or make necessary judgment through coordinated implementation, we are realizing earnings growth and improving capital efficiency at the same time. Our business portfolio is transforming into one with an earnings structure conducive to sustainable growth. Let me now provide specific examples. When formulating MTP 2026, we set forth the KATI model,KATI KAT as the core concept of our growth strategy. based on this model, our growth strategy is centered on developing multiple businesses or business domains where we can leverage our competitive edge. The CAT model starts with businesses in which we have expertise and proven track records, expand them by extending or deepening existing functions and increases earnings power at Katamati scale. During the current MTP period, we have not just accumulated individual projects or businesses but have also steadily developed a number of Katmai through linkages with existing businesses and enhancing our expanding capabilities. The unique point is that by explicitly defining path to success, we have shifted our focus from onetime individual business opportunities to a model that structurally develops and business domains capable of delivering sustained growth. In Energy Solutions business in the United States, Competition is intensifying around renewable energy generation. While our starting point was power production and the insights and human capital developed through experience, we shifted our perspective to the power reduction side. This led us to focus on energy efficiency, where competition is limited, and we can still leverage our strength. Through the acquisition of McClure, we entered the ECO business or engine saving service business. We also made a bolt-on investment in Free State Electric, which brings in additional strength and client base all different from McClure. We are thus expanding breadth and aggregating into a new Katamati in this area. This approach in the United States is now being replicated in Australia, where we seek to develop another catenary of Energy Solution businesses. This slide shows the infrastructure development business in Australia. Prior to full-fledged participation in the PPP business, we were only a joint developer. It meant we were challenged in our ability to proactively develop new opportunities or create multilayered earnings opportunities. The acquisition of Capella, a major lead developer in the PPP field has allowed immediate functional transformation and enhancement. We can now leave the full process through development, investment and operations. In Australian PPP Capella has competitive advantages such as top-tier development track record, extensive know-how and high-level professionals. With the addition of financial strength and operational capability of our group to capitalize functions speed and potential of growth of the business is reinforced substantially also by using our global network. We are working toward expanding into new domains and areas. In chemicals domain, based on a strong customer base of over 5,000 companies and trading capabilities by forecasting environmental changes, such as industry restructuring and geopolitical risks we've been enhancing trading functions, including supply chain rebuilding. In the areas in which we accumulated in size through trading, we are expanding into manufacturing and creating synergies with trading businesses. acquisition of Nippon AL in the battery material area is exactly the embodiment. In the same way, in area of layers, we ensure cat model forecast changing international situation and materialize for this growth story by committing to past success. There is something common to these initiatives, namely, we move beyond the starting point, find our past success, transform functions, expand the scope of our business by applying the functions and aggregate businesses for discontinuous growth. As a result, the producibility and scalability of profit is enhancing, which is leading to sustainable earning base resilient to external environment. We continue to discover our path to success in each business, enlarge the scale of Katamari centering around cutting model to expand earnings. Based on KATI model, we are growing businesses with competitive advantages into Katamati through addition and transformation competitive advantages are not expected, we maintain stable profit generation at earning base, implement initiatives or enforcement or conductor review, including the possibility of replacement and withdrawal in each business. Even if we can all strengthen competitive advantages on our own, when we charge leveraging partner strength will lead to sustainable growth. We form a business or capital alliance. For example, in marine vessel business areas America and commercial facility business through capital alliance or co-creation with external partners, we can enhance probability of scale expansion and profitability improvement. In businesses, we are establishment of competitive advantages is typical. Even with various initiatives or reviews for business improvement, we determine withdraw wall promptly and ship resources to growth areas. By executing these in parallel will enhance profitability and capital efficiency of existing businesses. For business portfolio review and withdrawal, we already set exit strategies and will complete them early in this fiscal year. We are promoting digital in all as a foundation to support the transformation. Specifically, we enhanced the precision of strategies and execution by running a cycle of data-driven accurate understanding of the current situation, hypothesis setting execution and verification. Given advancements in AI, firstly, we are promoting AI utilization in the field and visualization of insights and experiences accumulated within the individual. Through these initiatives, we will review our business process itself and enhance business quality and speed by incorporating the necessary AI. Besides, through sharing and horizontal development of insights gained through this process will establish competitive advantages and aggregate businesses. In addition, through cultivation of DX experts, we will reinforce our business foundation, enabling us to anticipate environmental changes and define and execute our past success. Under MTP 2026 stores achieving next stage, we are focusing on the enforcement of human capital, social competitiveness of Sojitz Group centered on strengthening individuals and organizations utilizing individual potential we are transforming human capital and organizations. In a laboratory changing environment, it is important for each individual to think try and keep learning through that process. We basically think such autonomous thinking and actions enhances individual potential. To translate individual potential strengthened with [ autonomous ] thinking into growth organizations and empowerment of the frontline, we value 2-way and multidirectional feedback to create an environment in which we support growth as a whole company insights obtained by actively listening to and accepting each other and thinking through dialogue, we create a cycle of growth opportunities and sense of growth to strengthen frontline capabilities. In this way, in FY '25, aiming for next stage. From various perspectives, we've been steadily implementing actions for growth. In this fiscal year, the final year of MCP 2026, we aim to add at least 3 business clusters new Katamari. Through this, we will complete solidification of foundation for next stage, including structural reform. The past we reached next stage by further expanding businesses, which are becoming Katamari and realizing this continuous growth is our story for next stage. That concludes my presentation.

Good afternoon. This is Makato Shibuya, CFO. My part will be using the presentation materials part titled Financial Results for the year ended March 31, 2020. and full year forecast for fiscal year ending March 31, 2027, Slide 15 summarizes FY '25 results. Consolidated profit for the period was JPY 13.6 billion, down JPY 7 billion year-on-year and 90% of the full year forecast of JPY 115 billion. Core operating cash flow rose by JPY 1.2 billion year-on-year to JPY 136.4 billion, 97% of the full year forecast. ROE came to 10.1% and although we were expecting the number to be in the 11% range. During the fiscal year, while various initiatives for growth made progress, onetime losses were recorded in the process of structural reforms and the numbers still short of the full year plan. In FY '26, however, now that the negative factors for FY '25 have been addressed, we will reaccelerate our efforts towards the next stage. The full year forecast is for JPY 130 billion in consolidated profit for the period, up JPY 26.4 billion year-on-year. Core operating cash flow is expected to rise accordingly. For ROE, we aim for 12%. The FY '25 year-end dividend is JPY 82.5 per share as planned. The full year dividend forecast for FY 2026 is JPY 180 per share, reflecting shareholders' equity at the end of March. Further details are provided on Slide 16 and onwards. Slide 15 shows a summary balance sheet. Total assets came to JPY 3.64 trillion of JPY 60.7 trillion from the end of March a year ago. Operating assets increased due to trade or transactions related to aerospace, defense, tobacco and marine products. acquisition of new consolidated subsidiaries and the effect of foreign currency translation at overseas affiliates also pushed up the number. Total liabilities increased during the year by JPY 41.5 billion to JPY 2 trillion 94.2 billion. In addition to new financing, there were an increase in operating liabilities and increase in newly consolidated subsidiaries and the effect of foreign currency translation at overseas affiliates. Total equity attributable to owners of the company increased by JPY 121.4 billion during the year to JPY 1.090.4 trillion. The number exceeded JPY 1 trillion despite dividend payments and stock repurchase, thanks to accumulated profits. Shareholder equity, which is the basis for dividends increased by JPY 39.2 billion to JPY 818 billion. Slide 17 shows key financial indicators and the FY '26 forecast. Overall, the balance sheet will expand, but net DER will be managed at around 1x. ROE declined in FY '25, but we aim to raise it to 12% by increasing profit for the period. Towards the 15% ROE target for the next stage, improving ROE in the current year is one of the management's priorities. Slide 18 is a PL summary. Gross profit rose JPY 20.7 billion year-on-year to JPY 367.5 billion. Newly consolidated subsidiaries contributed significantly to the increase, but the effect was offset by declines such as in the Australian coal business. SG&A increased by JPY 35.2 billion year-on-year, of which approximately 90% was attributable to newly consolidated subsidiaries. Other income and expenses included gains from the sale of businesses and assets as part of operating activities, gain on share out for co-creation with external partners, impairment losses in Australia for the coal business and used car sales business, both associated with the restructuring process, and gain on partial sale of equity stake in Sakura Internet. Share of profit or loss of investments accounted for using the equity method came down JPY 5.6 billion year-on-year to JPY 44 billion. With all that, consolidated profit for the period came to JPY 103.6 billion. For FY '26, the forecast is JPY 130 billion in consolidated profit for the period, up JPY 26.4 billion or 25% year-on-year. Slide 19 and onwards provide information by segment. Let me go through this part with a focus on profit for the period. Slide 20 shows a year-on-year comparison of profit for the period by segment. The overall trend was similar to how it was up to Q3. Main factors driving year-on-year differences are listed on the slide. Earnings contribution mostly came from infrastructure-related businesses in aerospace, transportation and infrastructure and Energy Solutions and Healthcare as well as from chemicals. In retail and consumer service, profits from co-creation with external partners contributed to the increase. On the other hand, automotive posted loss, metals, mineral resources and recycling was significantly down due to impairment losses associated with restructuring. In the other segment, we recorded gain on a partial sale of equity stake in Sakura Internet as part of structural reforms. Slide 21 compares the results against the forecast as of Q3. The difference mostly comes from gains and losses related to structural reforms. Slide 22 shows a breakdown by segment for the FY '26 forecast -- described our current outlook based on FY '25 profit for the period. Let us go through each segment. Automotive expects an improvement in losses from the Australian used car sales business and unprofitable businesses in Japan as well as earning contribution from no automotive sales business in Latin America. Regarding the Australian used car sales business, we reviewed our business plan at the end of the previous fiscal year, took stock of current business conditions and improvements made and decided to book impairment loss. Profit margins are improving, and the focus will be on improving retail margins in the state of Victoria, which has been an issue for some time. Although we expect downward pressure on the market to continue with rising fuel prices and interest rates, we plan to turn to profitability during the first half of the fiscal year and then increase the number of vehicles traded. For aerospace and transportation infrastructure. Existing businesses such as aerospace, defense, business jets and overseas industrial parts are expected to deliver solid profit growth including through broadening their operations into new areas. We also expect earnings contribution from new investments and improvements in loss-making businesses. In Energy Solutions and public infrastructure, as mentioned by our CEO, new customary that will drive earnings growth for the entire company are developing. This includes the Energy Solutions businesses in North America and Australia and the Australian infrastructure development business. In addition to existing hospital PPP and thermal and renewable power generation businesses, the electricity retail business is also expected to make solid earnings contribution. The LNG business, while expecting while we expect an increase in cost for the Indonesian interest, the Australian interest are expected to contribute to earnings from the second half -- the situation in the Middle East requires close attention, but we do not expect a major negative impact. In Metals, Mineral Resources and recycling, we incorporated the improvement of loss in coal business to structure form. In Chemical, although we need to closely monitor the impact of the prolonging situation in a measure is we expect performance of existing businesses and profit contribution from Nippon and consolidated newly in the previous fiscal year. This is one of the segments driving the entire company as Katamari of the continued growth business area. April 2026, Industrial Minerals was transferred from metals, mineral resources and recycling. In consumer industry and agriculture business, the business of Sojitz foods previously includedreincluded in retail and consumer service was transferred to this segment. In particular, food-related businesses, mainly meat businesses were consolidated in this segment to put more efforts -- in this segment, expansion of food business as well as initiatives to strengthen sales in overseas fertilizer businesses that struggled in the previous year, optimization of selling prices and strengthening cost control will lead to increased profit in this fiscal year. In retail and consumer service, higher profit is expected due to steady performance of money in products, tobacco and domestic retail businesses partial asset replacement. Although retail businesses in Vietnam are sluggish, we aim to increase profit through growth of high-end both in commercial food wholesale businesses and portfolio review and improvement of other loss-making businesses. Slide 23 shows pathway from FY '25 to FY '26. We First, there is a net negative impact of about JPY 10 billion from impairment losses in Australian coal and used cost sales businesses booked in the process of structural reform and gain on sales of equity holdings in Sakura Internet booked in FY '25. Based on that, and we consider JPY 115 billion as a baseline, excluding restructuring impacts, we expect plus JPY 10 billion from of loss-making businesses, which booked impairment losses. In addition, despite businesses, which will decrease profit year-on-year. such as LNG business, we expect plus JPY 6 billion from profit growth of existing businesses, such as overseas fertilizer defense tobacco and overseas industrial parts. As for profit contribution from MTP 2020 and MTP 2023 new investments, minus JPY 4 billion is expected due to profit impacts of asset replacement and restructuring in FY '25, despite profit increase in Energy Solutions businesses in North America and Australia. From MTP 2026 investments, profit contributions of about as JPY 12 billion is expected due to accumulation of profit from Infrastructure Development businesses in Australia, aircraft-related businesses, including business jets and Nippon A&L. About 90% of this plus JPY 12 billion is profit from investments already made and decided. By deducting positive factors such as foreign exchange gain on asset recovery and tax cost reduction, we forecast profit for the year will be JPY 130 billion. Although we need to monitor across the impacts of the prolonged situation in the major East we just there is a reasonable probability in realization of the forecast. Slide 24 shows cash flow. Cash flow from operating activities recorded an inflow of JPY 16.8 billion due to accumulation of core operating cash flow despite increases in working capital. Cash flow from investing activities recorded an outflow of JPY 86.6 billion, mainly due to new investment. As a result, free cash flow recorded a net outflow of JPY 69.8 billion. Slide 25 shows cash flow management in the current [indiscernible] 2-year are core operating cash flow was JPY 271.5 billion, and investment recovery from asset replacement was JPY 108 billion, progress versus three your aggregate forecast in MTP is 60%, respectively. We continue to accumulate cash profit. In this fiscal year, we shared more than JPY 100 billion of investment recovery from asset replacement. 3-year aggregate is expected to exceed the plan, about JPY 300 billion of new investments were executed compared to plan of JPY 600 billion, there is visibility to cash outflow of about JPY 200 billion, and we will execute the remaining JPY 100 billion if there are good opportunities. Main cases of new investments and asset replacement are shown on Slide 26. So please refer to that. Slide 27 presents status and outlook of earnings contributions from investments as a return on investment under MTP 2020 and MTP 2023, earnings contributions are lower than expectations due to losses in Australian coking coal and used car sales businesses. ROI to year-end balance is about 7%, excluding the 2 businesses. As a return on new investments under MTP 2026 contributions are higher than expectations, both in scale of profit and profitability. For profitability improvement by segment, we set and monitor cash return on invested capital target. On Slide 28, you see progress by segment versus target ROE of 15% in next stage. In FY '25, although supported by investment recovery through asset replacement profitability of aerospace, transportation and infrastructure and energy solutions and public infrastructure operating infrastructure-related businesses increased to the level of value creation targets in chemicals, high profitability is maintained while new investments are made. We will continue to enhance profitability by accelerating earnings contributions from new businesses and improving loss making businesses through ongoing structural reform and ensuring portfolio review of underperforming businesses. Slide 29 is about dividend. There is no change to shareholder return policy. Our policy is progressive and predictable stable dividend. As a result, as I discussed in the beginning, annual dividend forecast for FY '26 is JPY 180 per share, up JPY 15. Please refer to Slide 30 for commodity prices, foreign exchange and interest rate results and assumptions and Slide 31 onward for segment information and supplemental information last week, this fiscal year is the final year of MTP 2026. We need to assume the situation which cannot be controlled by one company such as the situation in the major East. However, even in such a situation as President explained, we will add at least 3 business clusters, which will be new Katamari [indiscernible] restructure reform and complete solidification of foundations for next Stage. In performance, we aim at JPY 130 billion net in profit for the year centering around infrastructure-related businesses and chemicals. We also aim at ROE of more than 12%. I would appreciate your continued understanding and support. That concludes my presentation. [Statements in English on this transcript were spoken by an interpreter present on the live call.]