Mitsubishi Corp

TSE:8058

Earnings Call Transcript 2022-Q3

[Kazuyuki Masu, executive]

This is Masu, the CFO. Thank you very much for taking time out of your busy schedule to attend our financial results briefing for the third quarter of FY 2021. I would like to start with a high level overview of the results. And then it will be followed by a detailed plus explanation by Mr. Nouchi, General Manager of Corporate Accounting.

On Page 1, I would like to highlight 3 key points. First, consolidated net income for the third quarter of FY '21 increased by JPY 475.7 billion year-on-year to JPY 644.8 billion; second, we have further revised our portfolio earnings guidance from JPY 740 billion, which is what we announced in November to JPY 820 billion. Last but not least, in view of the upward revision, we will consider additional shareholder returns, and the details will be shared when we announce the full year results. I would now like to explain the year-on-year fluctuations. So please refer to the box on the lower left. In the same period last year, our financial results were heavily affected by COVID-19, such as holding resource prices and declining demand.

However, with the subsequent resumption of global economic activities in areas including unrelated business, some firming and steel products business. And we steadily converted profit opportunities into actual profit. We also benefited from solid resource prices, such as metallurgical coal, copper and iron ore. As a result, consolidated net income for the third quarter increased by JPY 475.7 billion year-on-year, surpassing the previous record high full year income just in the first 9 months of the year. This was also the highest quarterly profit ever recorded by the company.

Next, I'd like to explain the earnings forecast for the year and the shareholder returns. Please refer to the box at the bottom right. We have decided to revise our portfolio forecast again from JPY 740 billion announced in November to JPY 820 billion, an increase of JPY 80 billion. The upward revision is based on the better-than-expected progress in each business segment, including thermal filming and auto-related business as well as recent trends in resource prices. The revised forecast of JPY 820 billion incorporate all possible downside risks and is therefore considered to be a forecast with high conviction. In addition, based on the separate revision, you will consider additional returns to shareholders and we'll share the details at the time of the full year results announcement.

A specific method of shareholder returns will be determined comprehensively, including share buyback option. In summary, we have maintained strong performance in a wide range of fields as in the first half. And with the cumulative profits in each business, we have exceeded the past record high full year profit just in the first 9 months of the year. We view the performance as strong results.

On the other hand, we believe that the favorable business environment for the current fiscal year will not last forever and that ups and downs are bound to occur. For this reason, we will not be flared by the good results of a single year, but we'll continue to work steadily on the tasks at hand, such as strengthening the functions of each business in reshaping assets in order to enhance profitability and corporate value. This will conclude my presentation on the overview of the results. Now Mr. Nouchi from Corporate Accounting will provide a detailed explanation, focusing on the status by segment.

[Yuzo Nouchi, executive]

I'm Nouchi speaking. So from my side, I would like to give you some follow-ups. So by segment for the third quarter results, I would like to explain about that. So please turn to Page 2. So for the third quarter results, out of the 10 segments, all of the segments have increased the income compared to previous year. For natural gas, year-over-year from JPY 16.6 billion has increased by JPY 68.5 billion to JPY 85.1 billion.

This is due to the LNG-related business. The dividend income has increased. In terms of the LNG-related business and the North American Shell gas business, there was an increase in earnings. In terms of the iron business and the North America plastics and business has improved. And the plastic building materials business, Industrial Materials, it was increased by -- from JPY 1.2 billion, increased by JPY 30.7 billion to JPY 31.9 billion. With Petroleum & Chemical Solutions, LPG-related business and the [indiscernible] Chemicals business has increased earnings in terms of equity holdings and increased income as well. In terms of the Mineral Resources, the Australian metallurgical coal business increased market prices has contributed. And the copper business, the dividend income has increased.

And for the iron ore business, that has been increased earnings in terms of equity holdings. Compared to previous year's JPY 54.8 billion, it has increased by JPY 193.2 billion, ending at JPY 248 billion. And going to the right-hand side of the presentation, for the automotive and mobility, there has been losses related to the Mitsubishi Motors in the previous year, there was -- have been one-off losses and they had an increase from that. And [indiscernible] Motors and the Asian automotive business, there has been an increase in equity holdings. There was a JPY 8.7 billion deficit last year, but it has increased by JPY 94.5 billion and the net income was a profit of JPY 85.8 billion.

So the sum of farming business has improved earnings for the food industry overall. Last year was JPY 30.23 billion, but we saw an increase of profit by JPY 39 billion and ended at JPY 71.3 billion. For the consumer industry, compared to the previous year, the company store business and the tire-related business have seen increased earnings. Lastly, going to the Urban Development business. It increased fund evaluation profit and the disposal gains paces in the real estate development business contributed. Despite the impairment losses on the sales of the aircraft leasing company, so last year was JPY 10.9 billion, but this year, it has increased by JPY 94 billion and ended at JPY 30.3 billion.

Next, going to Page 3. This is about the cash flow status. Going to the right-hand side of the bar graph at 2021 third quarter, looking -- please look at the cash flow situation. The gray, underlying operating cash flows, JPY 848.2 billion of cash in. The orange investing cash flow is JPY 180.4 billion is cash out. As a result, the adjusted free cash flow is JPY 667.8 billion of adjusted free cash flow. So the breakdown of the investing cash flows is on the over right. Please look at the orange color boxes. In terms of the cash out for the copper business, Australian metallurgical coal business and LNG-related business, we have conducted investments and loans. So this was JPY 533.5 billion in terms of cash ins with the North American real estate business and the North American share business, we collected investment, JPY 353.1 billion. Investment cash flows on a net basis, JPY 180.4 billion of cash out was seen. Please go to Page 4. So as explained at the beginning of the presentation, the full year forecast, in November against that revised forecast, we have further revised this upward by JPY 80 billion to JPY 820 billion. By segment, out of 10 segment, at 7 segments, we are conducting a upward revisement, Natural Gas, Industrial Materials, Petroleum & Chemicals Solutions, Mineral Resources, Automotive & Mobility, Food Industry, Urban Development in the 7 segments.

So since 2018, it is going to have a record high level of the earnings since we have started to report in the segment. So I would like to focus on the 4 segments where there has been a more upward revisions. With the Natural Gas, we have an increased earning on transaction profits in the LNG-related business. We have write this upwards from the November numbers by JPY 10 billion of JPY 102 billion would be the outlook. So going to the Mineral Resources, in the copper business, increased dividend income is expected. In the iron ore business, the earnings is going to increase. Based on this situation, JPY 60 billion of upward revision is been going to be conducted, ending at JPY 356 billion forecast.

Going to the right-hand side of the presentation, and very top, we had automotive and mobility. In the Asian automotive business, we are going to see an increased earnings. This will be a JPY 12 billion of upward revision and JPY 100 billion will be the forecast for this segment. Lastly, going to the food industry. For the salmon farming business, increased earnings will be seen.

So this will be JPY 19 billion upper revision and JPY 79 billion will be the revised forecast for this segment.

On to Page 5, this will be the market conditions for our forecast. So please refer to this. That ends my presentation. Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]