This is your interpreter speaking. The simultaneous interpretation is provided by the third party interpreters for the convenience of non-Japanese speakers. While reasonable efforts are made to provide accurate interpretation, portions may be incorrect. In case of any discrepancy, the original Japanese shall prevail. We will upload a summary of this session shortly in Mitsui's website in English for your re-review. Thank you very much for joining us at this Investor Day 2023 of Mitsui & Co. I'd like to be the emcee. I am Konishi of Investor Relations Division. Thank you very much, once again. This event is being streamed live. The copyright of the images and sound of this session belongs to us, as well as to the management company. Please refrain from copying or using all or part of the session for any purposes without permission.
Today's event is being recorded and will be distributed on demand from our website. We would like to ask for your understanding and cooperation. First of all, we'd like to invite our President and CEO, Kenichi Hori, to deliver opening address and explain management policy.
Good afternoon, I'm Kenichi Hori, President and CEO. Thank you for taking time out of your busy schedules to attend Mitsui & Co.'s Investor Day 2023. Today, I would like to speak about our initiatives to enhance Mitsui's corporate value under the current Medium-Term Management Plan, or MTMP. We have continually transformed our business portfolio to ensure that through our business activities, we can provide real solutions for ever-changing social issues. A look at the past two decades shows that we have reconfigured our business portfolio in response to changes in the operating environment, changed our profit mix, and the continual increase of our market capitalization has reflected these changes. Transforming our business portfolio is a crucial way to generate profits and cash while adapting to diverse business conditions, and it is a driver for our corporate value enhancement.
As I explained when we announced MTMP 2026 in May, to further enhance our corporate value, we will work to improve profitability, strengthen shareholder returns, and pursue an optimal capital structure, and link these approaches to sustainable enhancement in ROE. Today, I will focus on profitability improvement. One of our strategies for improving profitability calls for the enhancement of our base profit. To that end, we're working to drive forward the Middle Game of business, transform our business portfolio, and optimize the allocation of management resources. Here, Middle Game refers to our endeavors to reinforce competitiveness, improve efficiency, and promote various measures for turnarounds in the existing businesses. We're determined to further reinforce the competitiveness of each business, something that has been continuously heightened while overcoming a number of challenges in an ever-changing environment. We'll also continue to transform our business portfolio.
Throughout its history, Mitsui has created and fostered core businesses in a wide range of fields. Through this process, we have gained deep expertise of each business field. The key to our growth investment has been investing in familiar areas of business, where we have extensive expertise, and subsequently, forming business clusters. To succeed with these initiatives at the highest level, we must optimize the allocation of our finite management resources. As shown in this slide, we aim to improve base profit by a total of JPY 170 billion during MTMP 2026. This consists of a hundred ten billion yen profit contribution, resulting from our Middle Game endeavors, and JPY 60 billion from new businesses. Around one half of the JPY 60 billion contribution from new businesses is already in sight.
While we will report on quantitative progress toward the JPY 110 billion contribution from Middle Game initiatives, when we announced on our full year financial results... Today, Tetsuya Daikoku, our Senior Executive Managing Officer in charge of the mobility business, will provide some examples of our Middle Game initiatives. Also, CFO Tetsuya Shigeta will speak about our efforts to improve efficiency and achieve business turnarounds. In addition to our efforts to strengthen our existing businesses, we are accelerating the execution of growth investments. During the previous MTMP, by combining our diverse businesses, we proposed and successfully provided real solutions to the social issues that emerged as a result of changes in the global operating environment. These activities have resulted in significant qualitative and quantitative enhancement of our investment project pipeline.
We see the three-year period covered by the current MTMP as a time to accelerate execution of rigorously selected investments, while further expanding our project pipeline. In the current fiscal year, we plan to execute the investments totaling around JPY 1 trillion, including some projects from the previous MTMP that were carried over into the current plan. Along with the new investments, we are also proactively divesting assets. We estimate that our investment cash inflows will exceed JPY 500 billion in this fiscal year, and we are accelerating our portfolio reconfiguration.
The substantial qualitative and quantitative enhancement of our investment project pipeline enable us to select high-quality projects that meet or even exceed our criteria, despite an environment that requires high investment returns. When selecting projects, we first identify the areas with growth expectations to form the core of business clusters aligned with the three key strategic initiatives defined in the MTMP 2026. Projects that are selected in this way are then assessed from a company-wide perspective by executive officers in charge of multiple business fields. Further, through multilayer discussions by the Portfolio Management Committee and Corporate Management Committee, we delve deeper into these projects in terms of factors including quantitative contribution, management resources, and ESG, before making institutional decisions.
In the first half of the current fiscal year, we executed multiple large-scale investments in the food and nutrition domain to drive one of our key strategic initiatives, Wellness Ecosystem Creation. The Animal Protein business cluster includes the Santa Priscila shrimp farming business in Ecuador, and in the food science area, we invested in the functional food ingredient manufacturer, Nutrinova. Examples in the food service business cluster include Euricom, which manufactures and sells processed rice products, as well as a contract food service company, AIM Services. Also, in the healthcare field, we are pursuing growth investments with the aim of strengthening the competitiveness of the hospital and clinic business centered on IHH. We have expanded our hospital and clinic portfolio by investing in a clinic business that provides both online and face-to-face consultations.
In the testing and diagnosis area, we are working to reduce healthcare costs while bettering treatment benefits through investment in the healthcare technology businesses that can provide hospitals and clinics with advanced technology and solutions, including the vital utilization of healthcare data and AI. All of the businesses that I just mentioned are examples of growth investments in familiar areas of business. In each business field, we have made acquisitions that are highly profitable and/or complement our core business functions. By thoroughly strengthening these newly added businesses through our Middle Game endeavors, we will turn them into drivers of profit expansion. As I have explained, Mitsui is actively executing growth investments while also accelerating strategic asset sales at the same time. Even if an asset is currently contributing to profit, it may be subject to divestment if there is limited upside from Mitsui.
In addition to realizing the intrinsic value of assets, divesting them also enables management resources to be acquired, such as financial and human resources, which can then be reallocated. We accelerate the business portfolio reconfiguration by appropriately allocating such resources. In the current fiscal year, we saw and acted upon several opportunities for strategic asset sales and realized their substantial gains. For example, by divesting MRCE, a locomotive leasing business in Europe, and Thorne HealthTech, which develops, manufactures, and sells high-quality dietary supplements. We are still in the process of intensifying the reconfiguration of our portfolio based on the current business environment and outlook. We therefore expect the level of strategic sales to increase compared with the past. As I said earlier, we estimate that investment cash inflows will exceed JPY 500 billion in the current fiscal year.
Through the initiatives to enhance our portfolio profitability that I have explained today, we have steadily expanded our cash flows. Over the past 20 years, we have increased our dividend per share by 17% per annum in line with this cash flow expansion. Moreover, since FY March 2014, we have used flexible share repurchases to enhance both total payout and cash flow per share. We will continue these efforts to enhance shareholder returns along with cash flow growth. Lastly, changes in global dynamics and the operating environment are expected to continue, and social issues such as climate change and the maintenance of natural capital will become even more complex.
While continuing to provide real solutions to social issues, we are determined to respond to the expectations of our shareholders by sustainably enhancing our ROE and corporate value, underpinned by profitability improvement, strengthening of shareholder returns, and pursuit of an optimal capital structure.
...That completes my presentation today.
Thank you very much, President Hori. I'd like to open the floor for questions. The microphone will be brought to you, so please identify yourself and your affiliation first before you ask questions. If you are participating online through Zoom, we can also entertain questions from you. Please push the Raise Hand function on the Zoom, and, if your turn comes, please, unmute yourself and put your video on and ask questions. And, please ask one question at a time, and we may limit the number of people who can ask questions in the interest of time. I would like to ask for your kind cooperation. Because of simultaneous interpretation service being available, please simplify your question as much as possible. Thank you.
Now, please raise your hand if you have any questions. Thank you for the presentation. I have one question. What you've failed to mention, the optimum capital structure on page three is what I would like to ask about. For example, debt equity ratio at the end of September, 0.48 times. Of course, yen depreciation has increased the equity, stockholders' equity. But at the end of March, if you use JPY 123 to the dollar or JPY 124 to the dollar, it will be probably 0.5 times or so. So for contingency, you'd like to have some buffer, I do understand that, but optimum leverage on slide three, how do you -- how are we supposed to interpret this? Of course, on the right circle, the stronger shareholder returns is also linked.
So can you talk about optimum leverage and your thoughts on that?
Thank you for your question. In our company, for the management environment, we like to be more sensitive, and there are various observation points around the world, and we summarize them, and how much amplitude that we should see to be respond responsibly to the changes. Around the world, there are business environment that we are faced with, and this, the degree of amplitude and the forecasting for the future is becoming increasingly difficult. And to that end, a certain level of cash standby and stability has to be ensured so that we can have a sound operational balance sheet, so that we can respond to contingency if something happens.
Based on that assumption, capital allocation is shown here. For each fiscal year, with the earned cash and also, cash inflow with the portfolio reconfiguration, as I said, like, asset divestment, mainly. Through these, there's cash that has been made available, and we look at that, and also, we have to ensure stability at the same time. We invest in quality projects and improve shareholder returns, and we have to hit the right balance. So in familiar areas of businesses, where we know better, we would like to have projects that have immediate results, and that has been given priority for investment.
So our confidence in our acumen and also cash-generating power and quality of the assets, we will take all these into consideration to enhance the portfolio. In that sense, there's a risk level that we can control to some extent. If there is some risk level or the project itself are quite excellent, then we may be flexible to some extent to expand the business foundation, and that is also well within our options. For shareholder return, for the three-year period of MTMP, a certain percentage for Core Operating Cash Flow has been communicated to you, and we have to ensure that we would carry them out.
As a result of all these efforts, leverage may be within allowable range, with a certain level of flexibility, we will see the numbers fall down to a certain range. Thank you.
Thank you very much for the presentation today. I would like to also ask about the cash flow allocation. You talked about leverage earlier, and it is showing the cash flow allocation. And as for the leverage, you said that you will look for quality projects. But including your company, looking at the trade companies, the free cash flow is to become positive. Therefore, our net debt will not increase, basically, and the equity will be accumulated, and the ROE will go down if you leave it. So you said you will look for quality projects, but in your scale, projects and to increase leverage means it was going to be a large-scale project. But if it does not appear, the ROE may decline. So the free cash flow after, like, shareholder returns is going to become positive.
When are you going to change that perspective, and when will that change be introduced? That is my question.
Thank you very much for your question. Of course, from free cash flow and after deducting the shareholder returns, it will become positive. And in this era and in this environment, of course, we have to look for the discipline that is required. And in MTMP, I believe that policy is very important. But at the same time, in the management environment in which we see a lot of opportunities, we do see possibilities of seeing larger scale acquisition projects. And we have not maybe realized some of them in the past, however, that is a possibility we'll be seeing going forward.
So opportunities will arise going forward, and if we see such opportunities in the future, of course, we will have a balanced perspective. And within the permissible range of the debt, we will be flexible. But we have to look at the quality of the assets, and from that asset, how much of the profitability we'll be able to secure in the future, that is something that we need to consider going forward. So in the dialogue that we have with all of you, we do say that there is flexibility, but the neutrality of the cash flow in the three-year period, I believe that needs to be maintained. And as for shareholder returns, of course, our capital efficiency needs to be enhanced, and that is something that we need to think about together.
MTMP and afterwards, that is the time axis that we need to be sensitive of. And of course, to the ROE, we need to have, we need to avoid the ceiling in a long-term way, so that we need to think about the enhancement of the earning power. So monitoring will continue, and if necessary, we will take initiatives. So chronologically, we will have communication with the people concerned, so that we'll be able to make the decisions. Of course, it is very important to have a stable access going forward to make such decisions. Thank you very much.
In the interest of time, this is going to be the last question that we can take for this session. The gentleman in the front row, please.
Thank you very much. I have one question. In the President's presentation, it was mentioned that portfolio reconfiguration would increase. But for this fiscal year, JPY 500 billion sounds huge. But at what scale are you going to be able to run this cycle? Because currently, the exchange rate is lower, so I think it's easier to sell the assets. But if yen starts to appreciate, do you plan to maintain that level of scale, or do you have such possibility in sight? Can you talk about the scale and the environment?
Well, thank you. Of course, when we sell the assets, we have to find a partner to sell to, and in the business environment change, we have to consider the context. So it's very difficult to forecast the macroeconomic figures. But degree of reconfiguration is being enhanced. That's what we feel. For example, JPY 200 billion+ per year used to be the cash inflow, but now we are looking at JPY 500 billion this fiscal year. So the level has been enhanced. I think that understanding is quite appropriate. And compared... Well, if there is a buyer that can add more value to the assets that we can, we know that this is a level that we can add value to, and we may have to monetize that once.
Or, the multiples that we can sell at is higher than we bought. If that is the case, then that is quite pleasing to us, so we have to combine all these different cases. And our profitability model does include this reconfiguration. So asset reconfiguration is something that we have to be doing, flexibly, agilely, and at the same time, we have to build up one at a time. So that is how you're supposed to look at the whole exercise. And to add more, around the world, there are many investments that we are making. And we are creating business clusters with excellent partners, and that is expanding.
For example, in Asia, in Indonesia, we are working with CT Corp, and what we announced is, the Metro Pacific or MPIC in the Philippines. There's a long history in the mobility in North America. Penske Group is the partner for us. With all these projects, we have been establishing new business foundations. As you know, in Brazil, gas distribution business-
... So PETRONAS used to be a partner, but now the value chain from sugarcane, there is one of the largest players. We are working with that player, so Cosan Group. And there are various opportunities that are emerging from these partners, potentially. So we would like to establish our foothold in these, and if there are good opportunities for investment or there are already those in the pipeline, so the cash out for the strategic initiative and also cash in. So we would like to have this expansive model. And the activity level is being enhanced, so the cash level is now being enhanced as a basis. Thank you.
With that, we'd like to conclude this Q&A session. Next, let us move on to the panel discussion.
Panelists, first of all, is our President and CEO, Mr. Hori. We have Mr. Takeshi Uchiyamada, External Director. External Audit and Supervisory Board Member, Yuko Tamai. Representative Director, Executive Vice President, CHRO, Mr. Takemasu, Yoshiaki Takemasu. The facilitator is Ms. Atsuko Chitose, Diversity Committee Member. Hand it over to Ms. Chitose now.
Good afternoon. I'll be the facilitator. I am Chitose, Diversity Committee Member. We'd like to talk about the human resources management. This will be the panel discussion. We have panelists on the stage. In September of this year, we issued the Human Capital Report, Empowering People to Build Brighter Future. We would like to talk about the background behind this report, and I'd like to first call upon our CHRO, Mr. Takemasu.
Yes, thank you very much. We have a long history, and through this industry, we have respected the human capital very much. And doing so, for us, means to put the people or human talent in the center of our management. As you are all aware, we have a wide-ranging businesses in the different sectors and industries, and our business is global. As a result, our activities from outside, relatively speaking, is difficult to understand to some extent. So this time, by issuing this Human Capital Report, we wanted to communicate to the wide-ranging stakeholders about the human capital and the human resources strategy, so that our people, the stakeholders, can deepen understanding toward us.
So based on that, to the investors, we have been continuing to focus on the human resources, and this leads to the improvement of the sustainable corporate value, and that is something that we'd like you to understand more and deeper, and this Human Capital Report could help to deepen your understanding. In making this Human Capital Report, the various employees who are working actively, and we took up those talents. In the past several years, we have been focused upon the training program that we have internally and also with external entities, and also some of the major changes that we are making, and some of the human resource-related policies we have been implementing.
So the current status, as well as the future direction, those are the things that we'd like you to understand. And as much as possible, with the management data, we wanted to introduce all of those in an easy-to-understand manner. So we were quite cognizant of all of those factors. And in the executive committee, we have had the discussions, and ultimately, we had an approval by the BOD and managed to issue this report. Now, at the same time, through the preparation to issue this report, there were several improvements that became evident. And concerning those, the from the users, we expect some feedback to come or some requests to come in. And based on those feedback, we would like to make further improvement on the content.
This time, frankly speaking, we wanted to try to issue this report so that we can get the further feedback. Of course, the potential improvements that we need to make will be done through the interactive communication, and we are hoping that this report would help you to give us your feedback. Now, in 2026, it's going to be the last year of the midterm management plan, and we are trying to enhance our capability of the management as a group. In order to realize so, as a HR policy, there are three things. One is the diverse and strong individuals need to be developed and posted, and for that, we need further inclusion being implemented.
Lastly, on the global scale, we have to be able to position the appropriate talent at the appropriate job. So for us, the value of the human capital to maximize at that, that value and to improve those capabilities, and through doing so, we wanted to improve the corporate value in a sustainable manner, and that is the one of the most important management challenges for us. Through investing in the human capital, we believe that we can develop and foster the employees, and those employees who are developed will make a major contribution to improve the corporate value in a sustainable manner. So through the improvement of the corporate value, we can make further investment for the human capital.
So that kind of, virtuous cycle is something that, we would like to realize through updating the content of the Human Capital Report, so that we can show what we have been doing in an easy-to-understand way.
Thank you very much, Mr. Takemasu. So I'd like to call upon, Mr. Uchiyamada and Ms. Tamai. I'm sure that you have worked as directors for other companies. So as External Directors, could you talk about your thoughts on the characteristic of the, human resource strategy and some of the issues that we might have, starting with Mr. Uchiyamada?
Thank you. So when I was looking at Mitsui & Company from outside, I often heard that, Mitsui respect the human capital and makes much of it.
Now I am inside and engaged in the development of the human resources and so forth. I started to learn more about how it is done. And as it was explained by Mr. Takemasu, the three pillars of the human capital strategy, the fostering of the human capital and inclusiveness and appropriate allocation of the human capital and utilization. So those are working very well, and that's how I feel.
With regard to human resources development and strategy, in an open manner, the discussions are underway within the company, and the result has been not just carried out by the shared by the all employees, not just at the job discussion level. And it's not just about human resources or talent. The executive top management and the younger employees, there is direct communications in various occasions, and this is being promoted proactively. So the thought about the human resources development and also bird's-eye view from the top management has been directly shared with the younger employees, and there are so many opportunities given. And President Hori is promoting this proactively, currently.
As a result, many younger employees are given business opportunities, and there are many scenes where they are shining and quite successful. That information is increasingly frequently seen in various occasions. The company is placing priority to human resources development. But if I'm asked to share with you my thoughts on the areas for improvement, the further improvement of diversity, more specifically, the women's empowerment and increasing the success and effectiveness of foreign nationals. I think there is still more to go. Thank you.
Thank you very much, Mr. Uchiyamada. Ms. Tamai, please.
Following what Mr. Uchiyamada said, who actually pointed out quite rightly, I would like to just make some supplementary comments. As for the talent strategy and the features of the company on human resources, in my personal view, is that inclusion, as part of diversity and inclusion. Well, diversity promotion has been done by various companies. All the companies are actually promoting this, but the company has actually taken out or taken up the inclusion specifically and promote that, and that characterize the Mitsui & Company. And what supports that, as Mr. Uchiyamada said, is the internal communication amongst the employees. And it's not just in headquarters or corporate, but between the group companies, the same goes, same is true.
Sometimes I visit the group companies in as an auditor, and the Kurumaza meeting is what I hear a lot. It's a Japanese word, but foreign nationals are also mentioning this word, kurumaza discussion. And the communication is really good as demonstrated by that. And also, the diversity between the generations is a challenge as in other companies. Depending on the generations, the lifestyle, and philosophy, and expectations of the company, and the work is different. So you have to incorporate that in coming up with the human resources strategy, because top management and management is specific centered into a certain age group, so you have to incorporate all these different age groups.
Well, thank you very much.
In last year's Investor Day and External Directors Q&A, as Dr. Kobayashi said that there's an area for improvement. There are many excellent female and foreign employees, but they have failed to reach the top management level on the executive side, and you have to work harder. That's what she said. So as for the D&I, diversity and inclusion, what are the progress that you have seen since then? Mr. Hori, would you like to comment on that?
So the Kobayashi, who is a former external director, all the External Directors are asking about the progress in D&I, and they are quite appreciative and give us support and guidance at a quite high level. And we are aligned as a top management.
We are building up one case at a time. For the past year, especially, as for the women leaders, leader candidates, the mentoring has been making progress. More than 20 individuals are in this program, and out of them, 9 have been assigned to M1 or General Manager level. Also, managing officers, female Managing Officers amongst the new university graduates, are being hired. There is the first female Managing Officer that was born this year, but we need to expand the talent pool to increase the layers in the pool. Same goes for global employees. In our case, those who are hired in Japan are all dispatched to overseas and as expats, and that has been the case throughout history.
But those that are hired in other countries can be transferred to some other countries as expats. This has been institutionalized, and there are increasing examples of them. And this would actually help revitalize the company. And this has led to the shared understanding of having a diverse team. And from the group companies, there are some executives that are transferred to the parent company, and inside and outside of Japan. And we would like to increase those cases so that we can strengthen the talent pipeline, so that we can have a broader perspective for Mitsui and company.
Thank you very much, Mr. Hori.
After the shareholders' meeting this year, Ishiguro-san, Casanova-san, and Tan-san have become new External Directors, so the ratio of female and foreign directors has increased. So how do you think the D&I are contributing to the board? Mr. Uchiyamada, as Chair of Nomination Committee, would you like to comment?
There are six External Directors, and 4 of them are female, and two are male directors. Excluding myself, other five External Directors are non-Japanese foreign nationals, and they are working and living outside of Japan, so I'm the pure local director. After June, what has immediately changed was that after the Board of Directors, we would chat, and that dialogue will be held in English, and I am facing difficulties. But jokes aside, after the June Board of Directors meeting, the scope of discussion has changed with improved diversity of the members of the Board of Directors. For example, discussion related to sustainability or about the reconfiguration of portfolio for the future, and as was mentioned earlier, the utilization of human capital or female or non-Japanese employees to be empowered.
These are the areas in which we have seen expansion of the scope of the discussions held. Improvement of diversity has been taken up and requested by the Nomination Committee to the executives. So the External Directors will be proactive, and we are seeing improved diversity, and that as a starting point, we hope it will be expanded to the directors and employees within the company going forward.
Thank you very much. So the current D&I issue is to accelerate women empowerment. Tamai-san, from your point of view, in order to create a workplace for women employees to be promoted, what are the initiatives needed?
Yes, of course, we need to organize a workplace for women, and there are two points that we need to focus on. First, to create a workplace without unnecessary stress.
So many women are working, rearing children at the same time, so their time is limited, but the limited time should be made to the optimal so that they'll be able to be proactive in the workplace, so they shouldn't be feeling unnecessary stress at the workplace. And of course, at Mitsui, there is a good system and organization, so I think we need to work on the operation about the awareness. The utilization of the systems offered should be offered in a comfortable and in a happy manner so that it is going to lead to better performance of the female workers. I think that is very important. And the second point is something very positive.
So in the work that they are worked in, I think they need to feel worthwhile, and they need to be aware that they're growing through the work that they are conducting. I think that is something that they need to feel through the work offered at the workplace.
Thank you very much. I'd like to ask, CHRO Takemasu-san. At, Mitsui, there are many HR initiatives, including human capital strategy. Operation-wise, how much has it penetrated in-house? And has awareness or understanding among employees improved in that area?
As I mentioned, earlier, next year, we are going to have a great transformation of HR initiatives. And some of you may be feeling concerns or are becoming very considerate of what may happen.
The HR and also general affairs are working so that we have offered explanatory sessions to a majority of employees. We have held town hall meetings, and we have been very creative to have interactive communication to explain about the new HR system to the employees so that the understanding can be deepened. Of course, it is very important that as CEO Hori mentioned earlier and has given a number of messages about the HR new system, we are going to hold such specified approaches when it comes to the new system, so that it will be understood in a correct manner.
The line managers and managers of the front line are going to be very proactive in introducing those HR systems, so we want to put our focus on providing training and education to those people who are concerned as well. And when we talk about transformation of HR, it would mean that we will be able to offer a wider scope when it comes to their future careers. And the expectations of the company is that with this revision of the system, each of the employees will be able to accumulate more value-added work. And as an organization, we would like to offer more productive work so that we'll be able to shift how we work. That is the expectations of the company. The other thing is about the human resource or human capital.
When we talk about human capital, of course, we need to fully be able to invigorate it, and that is done only by the employees themselves. So enhancement of the engagement by the employees is going to be more important going forward. And also, the human capital itself basically belongs to the individual employees, so this is not an unconditional asset of the company. So we want to improve the retention rate, and so the company can focus on retention of the human resources, and that is something that, as a company, we need to work on. Of course, the globalization of human capital and also flow of the human capital is going to be invigorated, but we want to become an attractive company. An attractive workplace should be offered to the employees.
So, we will be introducing the HR transformation so that we'll be able to meet that end.
I'd like to ask CEO Hori to comment. Our human resource strategy, D&I initiative, how is it linked to the improvement of the value of the company? And, what are the points that you want to focus on going forward?
Yes. Thank you very much.
... So vis-a-vis the various social issues, we have to provide solutions. So the team of Mitsui that we, who can provide such a solution, have to have that way, that kind of way of thinking. So professional background, first of all, is something that we need. We have to have a diverse professional background. And in terms of the different races, gender, nationality, and age, we have to be able to come up with various ideas. We need a diverse group. I think that could give us a lot of ideas. So we have to respect each other, and we have to really focus on the inclusion, and especially in the developed area and the Global South, so-called Global South markets, we have to have both perspectives in order to come up with the different solutions.
So experiences in the different countries, getting together and others, we need a combination of all of those. We need to create teams in a very flexible manner so that that would help to improve our added value. So in that sense, D&I will be the source of the corporate value. And I think that other panelists also discussed the important policies and measures, and based on them, we want to enhance those areas.
Thank you, Mr. Hori. So other panelists, thank you very much. Now I would like to take questions. So if you have any questions, please raise your hand and wait for the microphone, and give us your name and affiliation before asking your question. So you can also tell us to whom you want to ask your questions to.
So I would like to limit the number of the questions to one question per person. We might not be able to take all the questions due to the shortage of time. We have simultaneous interpretation, and we will ask all the people who are asking questions to be brief in asking questions. So any questions?
Thank you very much. Narita from Nomura Securities. I have a question to Mr. Takemasu. Well, I think that we are talking about qualitative matters. So in terms of quantitative matters, I think you have an engagement survey internally. So I think that through various measures, are you seeing the increased engagement? Could you talk about some trends? And at Mitsui, are there any areas where the satisfaction is low?
So based on the result of the survey, if you can talk about this.
Yes, thank you, Mr. Takemasu.
Yes, thank you for your question. About the engagement survey, the result of it, actually, the head of the each line and evaluation of that head is directly linked to that. So engagement survey is a very wide-ranging survey. There are a lot of items to be checked. And as a result of those, of course, that we should avoid being happy or unhappy about the results. We have to really look at the trend of the scores. How is it? Did it change year-over-year? So that's where we are focused upon. So for the head of the line managers, the evaluation of them will be impacted from this result.
For the important jobs, for example, when we have the important items that requires the approval of the executive committee member, we will have the evaluation. One of the information that we use is this survey results in order to get the approval about the potential measures in HR, human resources. So, you asked about the survey. It's difficult to explain briefly, because engagement survey score there are differences depending on the region. For example, in Japan, the result of the survey in Japan and also the survey outside of Japan, and also Western countries and Asia could be very different, including the assumptions for the survey.
So, I think if you are only asking about Japan, then in the past three years, relatively or comprehensively speaking, the engagement score in major items have gone up. But for us, one of the biggest challenges is the next year, the score of the next year. As I said, there will be a major revision of our HR measure, which will be introduced next year. And understanding of the front line, and this takes root, there will be have a negative impact on the engagement score. So, as I said, to make sure that this root take root fully at the front line is something that we are working on.
Thank you. Next question?
The gentleman in the second row, please. Thank you.
Takemasu-san and Tamai-san, I have this question. This Human Capital Report, I looked at it, and the parent company's turnover rate is about 1.14% for the whole company. This is an absolute number, so maybe this is something that you cannot avoid or you have to be resigned to that or the smaller, the better? There is no argument for that. So is there any room for pushing this down? 1.79 for women and 1.25 for men. So the turnover rate is higher for women, and that has been the case for the past five years. So is there any thoughts or awareness about this issue?
Thank you for the questions. Takemasu-san, please go ahead.
Thank you for the question. So I actually share the same sense of crisis and also the fear. So the turnover rate for women is a bit higher, and the women's empowerment is one of the priority management issues. And in the hiring of new graduates, close to 40% is female. However, on the other hand, those who are leaving our company, who are female employees, is something that we have to keep an eye on and track of. Otherwise, the representation of women in the managerial level is not going to go up in terms of quantity, as well. And when women leave the company, we do the exit interviews for those who voluntarily leave the company, every single one of them.
HR conducts this interview, and through these interviews, what we found is that the reason for retirement of the women is not just about the job itself, but the way you work, the working environment in our company. If there had been a bit more improvement, we could have retained this person. There are many cases like that in the past. So, about the turnover rate, how we look at this, we believe that this is extremely important index, and in the Management Committee meeting, we are having discussions in order to reduce the number as much as possible.
Thank you. Tamai-san, would you like to make some comments?
Well, if I can add something, then, what I said is a bit related to this, but, there is some deficiency in the system or institution, and you have to fill that gap. But, when women are in doubts about staying on with the company or leaving the company, if there is some voice from the superior to ask them to stay, or if there is the help provided by the colleagues, then the women can stay, and it has led to the stability. And that's what I've seen in many other companies, not just Mitsui. So communication and people asking and talking to the people who are wondering about leaving is really important, and that is a comment I sometimes make in our company.
But, I would like to closely watch as how things will play out in the future.
Let us move to the next question. The person in the front row, please.
Thank you. So I think there was exchange of in the previous question, but from the conceptual discussion, how you can grasp the benefit of investments, I think Mitsui has given this guideline, and it appreciates the initiatives by the company. But how to grasp the benefits and effect of the human capital resources and investment, what sort of KPIs do you use? As you build up the track record, that will become more necessary. In terms of data, what sort of level are you aiming for?
For example, are you going to compare yourself to industry peers? Is that the perspective that you have? Or as a company representative of Japanese companies, of listed companies, you would like to produce some tangible results, or you can actually disclose that number. There are various perspectives that you can use, but you started out on this initiative. But as you grasp the benefits and the results and effects, how are you going to measure that, Mr. Hori?
Well, thank you for the question. Well, there are various KPIs that we have in mind, but what we have to be cautious about is that the output from every single employee is reflected in the competitiveness and productivity. How closely should we watch that is important.
In the group companies, there are employees hired, and they are in line with the business model of that company affiliate, and so the number is set in accordance with that. But in the parent company, on a standalone basis, the productivity of these people is different in nature, so KPIs should be different. And in our company, in the parent company, there are people who are engaged in trading operations, but there are others that are providing services for the whole company. The KPIs for those two different groups should be different. So you have to distinguish between these different types of jobs and environments. So within, we're not looking at the same industry or trading companies as a peer, but rather than that, we're looking at the businesses that we are in, and benchmarking within those businesses.
Profitability of the parent company and assets that is run and managed, and how operational leverage is being reflected in increasing the assets. So that is what we're looking at. So it's very complicated system, but as a top management, that is what we are closely watching. But you often talk about per capita something, but then that is too rough number, and you may lose sight of the whole picture. So that is what we are closely watching. This is very important theme, so we will continue to look at this in various opportunities of engagement. So that is my answer to your question.
Thank you, President Hori. Any other questions? So the person in the front rows, please.
Thank you. I have a question to Mr. Takemasu.
The human resource system is going to be significantly changed next year, and there was a press announcement, and business and administrative staff distinction will be eliminated. That's what you said. But as far as I look at this, you have to have sufficient communication and engagement. That's what you said, but I'm not sure if you need that much level of communication, because in the human resources system, relatively speaking, objectively speaking, I think things are working well for you. But you are intending to make this huge transformation, and you have to convince people and persuade employees. I think you are in the process of doing that. So in the next fiscal year, what is it that you're going to change?
It's something that is more than what has been press released, something that in your mind, so please share that with us.
Thank you very much for the question. So anything that is not written in the press release, so I do not know where to start. But you may have felt that we are over conscious about what we need to do, but the transformation of the system will start next year, and it may have an impact on the engagement score. Because the change in the awareness of the employees, that is expected, and that may be the reason why. As was mentioned, we do have administrative staff and also their career tracks as well. So there are differentiation of different tasks that is expected from the staff. And as for the administrative staff, of course, they may not have a career path, and of course they may have some different ideas when it comes to dispatching them overseas.
Of course, in the past, before we had the equitable gender recruitment, that kind of idea has been followed and introduced in the company. But of course, the differentiation of the career and the administrative staff is remaining. However, there may be some transfers between the different segments, and that is some kind of proactive offering that we have been offering. So we have lowered the hurdle so that people will be able to try out in different segments. But with that differentiation, not only for those working in the administrative, but in the career staff as well. I think the administrative staff have the awareness, and they still feel that there is a hurdle, and that has become the hurdle to overcome.
So that has become the hurdle for the company in improving the productivity of the company. So those people in the career tracks, of course, there are many people who are working in the operation areas, and they are taking on the burden in their operation of the company. And as a trading company, of course, we have the distribution or logistics business, which is very large for our business. So they take the core roles when it comes to those businesses. So their experiences should be utilized further, and their ability needs to be entertained more, so that the productivity of the company as a whole will be enhanced, and that is a fact. And this HR system transformation is being introduced for that purpose. I hope I answered your question.
Yes, I understood very well. Thank you very much for the explanation.
Thank you very much, Mr. Takemasu. It is almost time, so we'd like to make the next question the last question for this session. Any other question?
... So I'd like to ask a question to Uchiyamada-san, please. In 2019, you became the external director of the company, so it's been about four years. Giving green light to investment within the Board of Directors meeting, has that changed from the year that you were appointed and now? Of course, the number of projects and also the quality of the discussion may have improved dramatically, but what are the changes that you've seen ever since you become the external director? That is my question.
Thank you very much for the question. Would you be able to answer this question, Mr. Uchiyamada?
As for the characteristics of the company, the number of projects that is taken up at the Board of Directors meeting, of course, it makes up a majority of the discussions.
Because there are so many numbers, we had revised the recommendation criteria. At the Board of Directors meeting, we have a prioritized project in which we take up the priority projects and focus on them, and the remaining candidates will be taken up at the Management Committee meeting. At the different intervals, the projects will be considered, and of course, a report of those projects will be given to those meetings as well. The recommendation criteria have been revised, and at the Board of Directors meeting, the higher scale and higher cost projects are now being focused. In reality, the time allocated for each of the projects has been lengthened, and some say the time allocated at the Board of Directors meeting is not enough.
So we will have a pre-explanation session in which the outline of the projects will be explained before the meeting, and the time is allocated for that purpose. So External Directors are not involved in each and every project every day. However, at the Board of Directors meeting, of course, we need to make resolution on those items. So we take time to study each and every projects, and of course, we need to really understand the total strategy in order to understand the individual projects. So we ask the company to provide us with the portfolio strategy, and we ask each of the business domains to explain to us in order of their strategies, so that our background understanding is enhanced, so that we'll be able to work on each of the projects that come up.
Thank you very much, Mr. Uchiyamada. So with that, we'd like to end the Q&A session. Thank you very much, everyone, and thank you so much to the panelists.
Uh,
Now, we would like to take a break. We would like to begin at 4:20. 4:20. Thank you very much.
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Thank you very much for waiting. I would like to resume the session. Next is the session on the progress on activities toward a decarbonized society. We have Representative Director, Senior Executive Managing Officer, Chief Strategy Officer, Mr. Makoto Sato.
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Hello, everyone. I am Sato, CSO. I will discuss our climate change response, focusing on mainly on the progress that we have made since last year's Investor Day. We have set two goals, to halve our GHG impact by 2030 compared to 2020, and to achieve net-zero emissions by 2050. This is our path to halving our GHG impact by 2030. We expect our GHG impact in FY March 2026, the final year of the current Medium-Term Management Plan, or MTMP, to be 27 million tons. The calculation for this uses the emission of 37 million tons in FY March 2023, the final year of the previous MTMP, as the starting point. We then add the increase in emission of 3 million tons and subtract the decrease in emission of 7 million tons and reduction contribution of 6 million tons.
Emissions reduction contributions were approximately 4 million tons during the previous MTMP, and are forecast to be about 7 million tons during the current MTMP, for the total about 11 million tons, and are based on the asset divestment of thermal power plants, as well as from the consolidated subsidiaries, switching their consumption to renewable energy sources and increasing their energy efficiency. Promotion of the reduction contribution in light blue include the launch of the new renewable energy power businesses, such as Hai Long offshore wind power project and the start of the operation in our next generation fuel business, and are forecast to be to six million tons during the current MTMP. We continue our efforts toward halving our GHG impact by 2030. This page shows our initiatives in the next generation fuels business. Initiatives in this area are highly important for realizing a decarbonized society.
By selecting from among various pathways, we will create a global portfolio and simultaneously advance multiple businesses from both supply and demand side. As highlighted, we have many projects connected to our next generation fuel business. I will introduce the progress of the next generation fuel business in this fiscal year. Together with European Energy, we invested in the world's first e-methanol production business. We also concluded a joint venture agreement with Galp in hydrotreated vegetable oil and sustainable aviation fuel production businesses, and we invested in Teréga, a renewable natural gas producer as well. This investment come to over JPY 60 billion in total. Going forward, we anticipate significant demand for low-carbon e-methanol, produced by combining green hydrogen with CO2 derived from biomass.
This is a good example of collaboration between the chemical segment, with its track record in methanol production in the U.S. and Saudi Arabia, and our machinery and infrastructure segment. Multiple segments collaborate on next generation fuels initiatives, and I believe that connecting the cross-industry expertise and wide network we have cultivated over many years will enable development of new businesses that are unique to us. The next generation fuels business also has an important role in terms of income. In the MTMP, we set a ROIC, or R O I C, target for global energy transition of over 9% for FY March 2030. Within this, in the next generation fuels business, we are aiming for nearly JPY 500 billion in investing capital and ROIC of around 12%.
I believe that next generation fuels are the business area where Mitsui can leverage its strength, and therefore, we would like to create, grow, and extend this business scope.
... cluster across multiple projects in this sector. Next, I'll explain the initiatives related to the creation of clean ammonia value chain. We are advancing efforts toward a final investment decision on the multiple clean ammonia production projects. This year, we have made particular progress in initiatives of value chain creation. We are supplying fuel to an ammonia pilot project of JERA. We are conducting ammonia floating storage and regasification unit the feasibility study with Fukui Prefectural Government and Hokuriku Electric Power Company, and also conducting a joint study of hydrogen and ammonia supply chain concept in Osaka Coastal Industrial Zone with IHI Corporation, Mitsui Chemicals, and the Kansai Electric Power.
Together with the domestic and overseas partners, we will build a value chain with initiatives that are unique to us, leveraging our leading share in ammonia trading for import to Japan, our track record in natural gas and LNG development and production, and our strength in shipping business. Now I will explain our steel production, gas, and automotive value chain initiatives from a GHG perspective. These are the areas where we can make significant impact. Last week, we enhanced our Scope 3 GHG emissions disclosure, which covers from category 1 to 15 on our sustainability website. Initiatives throughout the entire value chain are necessary to reduce Scope 3 emissions. Together with our partners and customers, Mitsui is advancing initiatives in every industry in a broad range of businesses, from upstream to downstream, to reduce emissions across the whole of society.
First, in the steel production value chain, we're working to reduce carbon emissions in mining, as well as steel production. Specifically, we're conducting a study on Direct Reduced Iron production in Oman. We're conducting a feasibility study with Kobe Steel and steadily progressing discussions with raw material suppliers and customers. For the future, we're looking into switching in to hydrogen-reduced iron and utilizing carbon capture, utilization, and storage, or CCUS, and see this as a sector that can potentially contribute to a significant reduction in GHG emissions. Next is the gas value chain. As my colleague, Toru Matsui, explained at last year's Investor Day, Mitsui positions its natural gas and LNG business at its core, while advancing initiatives towards a decarbonized society.
Within this business, we are leveraging the technical expertise related to subsurface structure cultivated from the oil and gas production business, as well as our partner network, to proactively drive the carbon capture, utilization, and storage, or CCS and CCUS business. Specific examples include a joint survey with Cameron LNG partners and our work at Storegga in the UK. Storegga is the operator of Acorn CCS project, which was selected by the UK government in July to start operation by 2030. The value chain also includes transportation. Tetsuya Daikoku will touch on this later, but through Mitsui's strength in the shipping business, we're advancing the supply of next-generation marine fuels and greater marine fuel efficiency through AI. Mitsui is also undertaking initiatives towards realizing a decarbonized society in the automotive value chain. In 2017, we invested in CaetanoBus, which manufactures and sells electric buses.
Some of those electric and fuel cell buses use battery systems of Forsee Power and the hydrogen fuel supply systems of Hexagon Purus. Moreover, batteries are reused as storage batteries to manage energy demand in the business handled by The Mobility House. We are also in the business of recycling metal products and lithium-ion batteries used in automotive, automobiles. Mitsui is an investor in all these companies, and by combining our strong relations with partners, together with the businesses of our investees, this will accelerate the creation of a value chain that will achieve decarbonization. Through our investments and efforts in the value chain, we're keenly aware of the growing importance of climate change. Beyond these efforts, we recognize that business and human rights, as well as natural resources and governance, play an important role in sustainability management.
We have identified natural capital as a particularly high-priority business field and are conducting impact and dependence analysis related to risk and business opportunities through LEAP analysis. On that basis, we will determine the direction of our initiatives, taking the actual situation into account. In our initiatives related to respect for human rights, we believe it is important to continue to steadily conduct due diligence and to respond conscientiously to suggestions for improvement and other matters according to the survey results. In the social field, we have issued our first Human Capital Report, Empowering People to Build Brighter Futures. Last but not...
... least is governance. Portfolio reform is important in responding to climate change, and we are strengthening collaboration between Sustainability Committee Portfolio Management Committee, and carefully selecting investment projects from a comprehensive perspective that includes factors such as profitability and climate change. We place not only climate change, but sustainability in general, at the center of management. The Board of Directors is responsible for overseeing Mitsui's sustainability management efforts. The Board of Directors determines the evaluation method for the directors and Audit and Supervisory Board members' remuneration system introduced last year, which includes ESG elements among its management evaluation indicators. Regular reports related to sustainability initiatives, as well as the results of discussions, were reflected in Mitsui's activities via the officers in charge.
We will continue the steady implementation of sustainability management in our business operations under an appropriate governance system, striving to contribute to the development of society as a whole and Mitsui's further growth. That concludes my explanation. Thank you very much for your attention.
Thank you, Mr. Sato. Now I would like to take questions. We'll bring the microphone to you, so please raise your hand and give us your name and affiliation before asking your questions. If you are participating online, please use the Raise a Hand function. We'd like to limit the number of the questions to one question per person.
Thank you very much for this opportunity. On page four, the next generation of fuel business, I have a question. Here, ROI, the JPY 500 billion and JPY 60 billion, and ROI of 12%. So this new energy of fuel, it's become a red ocean, so ROI is low. That does mean the understanding. But in your case, how do you achieve this high ROI in this area?
Specific strategies, I'm sure, are confidential, but how do you create this environment where you can have a high ROI?
Thank you for your question.
Well, I think you're asking for our secrets, and I cannot just say that it's confidential. But as I mentioned in my presentation, the, in, on the playing field, I think we have a strong position in ammonia, methanol. Mitsui traditionally has been very strong in these business areas. And national oil company and a power company, utility company, we have had a very strong relationship in energy segment. So we also have a very strong positioning. So it's not just trading, but in chemicals, we have a CF Industries and the manufacturing, the biggest ammonia manufacturer. We have built the network with that. So by combining those, I think that we can improve our profitability. And also, there are a lot of projects like that.
And out of them, if I may say, we can choose that. So we have that choice. And also, in order to improve the product profitability further, we can negotiate and talk about the conditions. And if you only look at a single business, I already mentioned the ROIC number, but if you look at the left-hand side, right-hand side, for example, the on the side of the ships or SAF or aviation, in those areas, there is a business network, and including the trading, we have we can build the businesses. So chain and cluster through both of them, we can make sure that we can generate profitable profit. I hope that answers your question. I can only give you a vague question, I'm afraid.
Thank you.
Are there any other questions? I see a hand in the middle.
Thank you very much. I have one question. Page five, clean ammonia. Clean ammonia is promoted by the Japanese government, and thermal coal-fired power can be utilized fully, and this is a wonderful solution, among others. But the mixed firing is used, so coal-fired thermal power could be extended in life. That is one of the tools that is used. So what are the discussions that are ongoing in your company? How did you decide to promote this? And if there is such criticism from society, how would you respond to those comments?
Thank you for the question. It's not just our company, but the position that Japan is in is actually the origin of this question, in my view. So it is extremely important issue, and you have to seek consensus and agreement and buy-in from around the world, and it is quite difficult. And Japan and Korea, South Korea, and other Asian countries that are developing coal-fired thermal power plants that are existent already, and also, in order to have energy security and power supply stability, they have to build those thermal power plants, and that is a reality. Then there are countries like South Korea and Japan, where there is already thermal, coal-fired thermal power.
Are we going to be able to switch over to nuclear overnight? There is another totally different issue. So there is a gradual process that is needed. So LNG and gas-fired thermal power is quite similar in nature, and this coal-fired thermal power that are existing you could reduce the GHG emissions. And of course, if nuclear fusion becomes a reality, that could change the society as whole, but it takes time. So while ensuring the stability of electricity supply, reducing GHG is also important. So 100% ammonia firing and also mixed firing, both are important. And clean ammonia in Asia and other and including South Korea, of course, there is this application for firing in thermal power.
But as a fuel in mobility, the dual-fuel, include, using ammonia, is being used in ships that are running already. And so there is this application, and, traditional, fertilizers and chemicals, of course, cost, would be totally different in level, so you can't substitute, replace them, overnight. But, for other applications, the clean ammonia is now being gradually, demanded and replacing the existing ones. So maybe I'm deviating from the question that you asked, but, as for the thermal power, in, electricity transition, energy transition, it is necessary, and that's why we're promoting clean ammonia. Thank you.
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Next question.
So in the presentation, you talked about the steelmaking and how you apply this. And Vale, together with Kobe Steel, including the hydrogen, you are, have been doing the demonstration feasibility studies, so you will be entering into the cultivation stage. So hydrogen-based alloy, and I think that some of the projects are already going on in Europe. So Middle East is what you are starting with the natural gas. So scalability and considering the future, if when you have a hydrogen infrastructure, can you... I think you can go to the next step. So in the business development, natural gas and hydrogen, in from the initial stage to the next step, how do you include them in your vision?
Maybe it's a bit premature, but if you can talk about the direction at least.
Yes. Thank you for your question. Last year, in the Investor Day, I talked about the green steel, or there was a question on that. I wanted to talk about that then, but because of the confidentiality agreement, the announcement was one year delayed. So in Oman, the natural gas and the Midrex method is being utilized. And initially, as the direct reduction of steel and compared to the blast furnace, the CO2 emission can be lowered. And when you start from the zero or scratch, in well, in comparison to the blast furnace, then it's down. And that's how we are proceeding with this.
As I mentioned in my presentation, of course, that the CO2, which is generated through the CCS and CCUS, we try to avoid to emit that in the air. So we do that in combination. So it's not right after the production. It's not, the CCS will start a little bit later, but that's what we are going to do. And Midrex itself, as you know, the 100% hydrogen, the hydrogen reduction, that technically has been established already. So in Europe, the hydrogen reduction using Midrex is being done. So to start with that right away, or to use the conventional reduction steel and then convert that to the hydrogen, so that's the difference.
So our approach is that, first of all, we will go with the conventional natural gas, reformed gas, and we start the production, and then we ramp up. And then after that, we would convert to the hydrogen reduction. So we will be using or we will need the clean hydrogen then. So of course, that needs to catch up, and when that is available, we will switch to the hydrogen. So that's in our view. So CCS, CCUS, it's being- it's included in Oman, and also the further steps is also considered in our plan.
Uh-
Thank you very much. Any other questions? I see a hand in the front row.
... Thank you very much for the presentation. I have a question on page three. So as Mr. Sato said, in front of you, there are a lot of different pieces in pipeline, and you have to select, get to choose, and you're in a very advantageous position in my- But I may need to learn more, but at a glance, what would give you the highest ROIC? I don't know. I have no idea. So maybe everything would give you the higher ROIC, but if you look at the future portfolio transformation in your company, how do you select and also disregard the pipeline? PAT JPY 60 billion in 2026, at what timetable are we going to recognize that? Thank you for the question.
So, green business, including business investments, when it comes to that, people may wonder, the profitability may be lower, may not catch up, or may come later. This is a general idea and general criticism that we face. In certain area, that is really true. But, when it comes to fuel-related business, sooner than later, the cash return will come. Because already, as I have been saying, on the heavy oil base, the ships are already sailing, and, those people who are engaged in logistics and shipping, because of regulation, they have to change. So there is a demand to a certain degree. And, of this demand, given, you have to be a first mover, and then you can have a first mover advantage.
From 4 years ago, we have established an ES business unit, and we've been approaching this area from early on, so we are a first mover. E-methanol was one of the examples. I think this is going to be the world's first case. So being a first mover, and also demand is steadily increasing for a longer period of time, and cost curve can be reduced. So by forming projects in that way, you can ensure profitability. But the timing of profitability, of course, it varies from project to project. It's mixed, but as I said, at March 2030, we are mentioning the ROIC, but so you can actually have this visibility up until that time, as we form the projects. Does that answer your question? One. Request?
Of course, there are, of course, cross-segmental profitability, not in the segmental manner, so you have to divide up the profitability between different segments. So, please avoid invisibility to the outside investors. Well, I'll tell that to CFO Shigeta. So in our company, the boundaries between business units are quite low and blurred, and the teams and multiple business units are collaborating in the projects other than this already. And in those cases, as you said, and as you rightly estimated, we have shared the profitability and profits. But in the financial results, we have divided up the profits, and the profits are recognized and posted in each of the segments, and this will change. Will not change, unless the CFO changes his mindset.
So we will make sure that it will not be ambiguous, and it will be continuously reported so that it'll be easier to understand. Of course, we have to... We may have to consult with stakeholders, and we have to fill the accountability and responsibility to explain. Thank you for the question. As an IR division, we would like to be mindful of that.
So that concludes the Q&A for this session. Thank you, Mr. Sato. We'd like to go to the initiatives aimed at enhancing base profits, steady execution and post-merger integration, turnarounds and exits, and the Representative Director, Senior Executive Managing Officer, CFO Tetsuya Shigeta will make presentation.
Good afternoon, I'm Tetsuya Shigeta, CFO. Today, I will speak about our initiatives aimed at enhancing base profit.
In the current Medium-Term Management Plan, we are aiming to improve base profit by JPY 170 billion. From the next slide, I will touch upon specific examples of turnarounds and post-merger integration, or PMIs, which are necessary for ensuring returns from new investments. On this slide, I will explain the main progress made in efficiency improvements and turnarounds. With regard to taking loss-making businesses and making them profitable, the tide turned significantly FY March 2022 in the market for the coffee business, and in both FY March 2022 and March 2023, losses were in the single-digit billions of yen range. Specifically, inventory and forward positions were reduced, increasing resilience to market fluctuations and also continuing to re-reduce the cost of inventory and hedging.
These measures have already reduced working capital related to the coffee business by approximately JPY 100 billion at present, compared to the end of FY March 2022, which also contributed to an improvement of ROIC. Combined with improved conditions in the coffee market, losses have been eliminated as of the end of the first half of this fiscal year. We will continue to improve our earnings and maintain a stable supply chain. Furthermore, we are proceeding to exit from unprofitable businesses, and although it is an accumulation of small losses, the total amount of losses in FY March 2023 for companies from which we have now exited was JPY 2 billion. Talking of turnarounds, one specific example is MBK Human Capital, which achieved a turnaround from losses of approximately JPY 400 million in FY March 2019 to a profit of approximately JPY 4.1 billion in FY March 2023.
MBK Human Capital is a temporary staffing business specializing in healthcare in the U.S. and mainly dispatches nurses, doctors, and therapists. Mitsui made an investment in the business in 2014, but performance deteriorated in 2018 due to changes in the operating environment and intensified competition. In September 2019, we began a management reform of the business. A main point in this example is that we appointed a new CEO from within Mitsui, and we initiated the reform as a global Mitsui team. Through the reform, we appointed leaders from within the business instead of bringing in talent from the outside. Working as a group, global group, Mitsui employees then speedily worked as one to turn around the business.
Specifically, we implemented reforms such as reforming managerial accounting, altering organizational and evaluation systems, resetting strategic initiatives, and fully utilized our expertise in healthcare and temporary staffing, where we have worked for many years, and business management for labor-intensive business developed at AIM Services. Furthermore, in the process of determining the risks Mitsui can and cannot take, we utilized locally rooted risk management expertise on legal and tax affairs internally accumulated in our local offices. It is an example of turnaround achieved by skillfully combining human and intellectual capital. The profit in FY March 2023 was approximately JPY 4.1 billion, and EBITDA margin used as a KPI has grown to be in the top class range within the industry.
While working to address the issue of supply and demand gap for healthcare specialists, we're targeting around JPY 10 billion of annual profit by improving the earnings of similar companies we will acquire, utilizing our experience from business turnarounds. Furthermore, the insights obtained in this turnaround will lead to successful turnarounds in other cases for our global group in the future. I will introduce an example of a successful PMI with Certis Belchim, which is a key site in Europe in the agrochemicals business cluster. In 2021, we obtained a stake in Belchim Crop Protection, which was integrated with Mitsui's European sales company, Certis Europe, in 2022 to form Certis Belchim. So this PMI is divided into the two phases of acquisition and subsequent integration. In explaining this, it is important to cover the accounting fraud that was discovered when we were considering the acquisition of Belchim.
Mitsui decided to purchase the company under bank control due to it being insolvent, at a price that could be adequately explained. We executed the PMI by dispatching personnel from our Tokyo head office and affiliated companies. By reducing working capital and leveraging Mitsui's network to refinance the company from day one of the PMI, we succeeded in resolving a debt default situation which had been caused by a breach of financial covenants under a loan agreement, significantly reducing the financing cost and improving the financial structure. During the integration, we proceeded with the consolidation of sites and organizations while paying particular attention to merging the corporate culture of Belchim, acquired from the founder, and existing subsidiaries, Certis Europe. Realizing sales synergies and cost synergies with understanding and cooperation from stakeholders, such as shareholder partners like Japanese crop protection companies.
At the same time, we worked to build processes such as the strengthening of internal controls, and were able to complete the PMI successfully this summer. As shown on the right side of the slide, performance has steadily improved since 2021, and in FY March 2023, profit after deducting one-time factors was approximately JPY 2.5 billion. We aim for stable earnings in the range of JPY 3 billion-JPY 4 billion from FY March 2024.
... The final example I will present is a case of Nutrinova, for which we are beginning to fully implement the PMI. As previously announced, Mitsui acquired a 70% interest in Nutrinova from Celanese, a U.S. partner in the methanol business, in September 2023. This case was a carve-out of an existing business and a case that is contributing to earnings immediately without any significant PMI risk. By effectively utilizing Mitsui's human and intellectual capital, as shown in the slide, and steadily proceeding with PMI aimed at early stable operation of the business, we aim to realize mid-single-digit billion JPY profit by FY March 2026. We also aim to improve profitability as a business cluster, including in adjacent areas, by aiming to pursue synergies with Mitsui's existing businesses, such as fragrances and sugar alcohol, and expand sales channels utilizing Mitsui's existing sales network.
While working to improve the quality of individual businesses day to day, Mitsui is constantly endeavoring to improve portfolio quality throughout the year. A future Mitsui's approach is how we review the holding policy for all investments in the Asset Portfolio Review in the middle of every fiscal year. Through this review, we identify around 30% in number of investment projects and 10% in terms of book value, that we consider the feasibility of exits, including profitable assets and listed companies. For example, we actually completed the exit of around 120 investments in FY March 2023. Based on these figures, I think you can see that recycling has become common practice for us.
Furthermore, we have also strengthened the five review points stated on the slide, properly addressing the justification of holding on to businesses that are not performing well, leading to active strategic recycling. Mitsui emphasizes efforts aimed at obtaining stable and additional cash inflow by replacing assets through a portfolio review. As explained by the CEO earlier, the asset recycling of Mitsui's businesses has become common practice, and looking back over the past five years, we have realized cash inflows on average of JPY 250 billion. Through the evolution of the Asset Portfolio Review and the establishment of ROIC, which was introduced in the previous MTMP, we have been steadily increasing our focus on portfolio reconfiguration and pushing for further efforts toward making strategic and profitable asset sales.
In addition, we will continue to reduce the number of listed shares of companies that have become less significant for us to own. This slide looks at cash inflow from a slightly different perspective. Over the past five years, Mitsui's average rate of recovery of cash from equity accounted investees has been over 80%. We apply core operating cash flow as a key performance indicator. Therefore, regardless of what form the investment takes, we are extremely mindful of cash recovery. One of the reasons we have maintained a high rate of cash return from equity accounted investees that are not subsidiaries, is simply the fact that Mitsui's functions and strengths are appropriately applied on the business front line, and Mitsui's voice is reflected in management.
Each business unit and corporate unit will continue to work as one with the business front line to improve cash management of affiliated companies, and aim to maintain and expand core operating cash flow through dividends. This graph shows a trend of Mitsui's ROE and ROIC. The equity cost has a range of sources, such as those based on the CAPM-based calculation, analyst calculations, and figures from financial information providers. I think the important thing is to be aware of cost and capital figures, range, and changes according to the current operating environment, and to expand the equity spread. When considering investments for growth, which we are actively pursuing under the current MTMP, we are always conscious of the upper range of the cost of capital, and we continue to consider the significance of keeping existing investments in light of the rising trend of cost of capital.
Just as I have explained today, by presenting turnarounds and PMIs as examples of initiatives aimed at enhancing base profit, we will continue to try to provide explanations that are easy for everyone to understand, and would like to provide a deeper understanding of Mitsui's business model by improving management transparency through dialogue.
... We also ensure that the suggestions and comments received through dialogues are provided as feedback within the company to be utilized in improving management. By building up such efforts, we will reduce the cost of capital, and along with this, by improving capital efficiency through the day-to-day efforts on the business front line and in management, as we have introduced today, we will enhance corporate value. That completes my part of the presentation today. We will now move on to Q&A.
Thank you very much, Mr. Shigeta. We'd like to open the floor for questions. The microphone will be brought to you, so please identify yourself and your affiliation first, before asking questions. And, if you are participating online, please push the Raise a Hand button, and, we would like to limit the question to one per person. Yes, please.
Thank you very much. One question, please. Maybe I should have asked this question earlier, but you are talking about next-generation fuel that you're engaged in, but going forward, as you make investment and reconfigure the portfolio, so roughly speaking, what would be the volatility of your business performance? Would that be reduced? Ammonia could become a business to compensate for the price difference. So unless there is a subsidy, it will not spread. And so compared to the conventional business, the volatility may be reduced. So there are many potential projects that you make investments. So as in the eyes of a CFO, how are you looking at this future volatility of the business of your company?
Thank you for the question.
So KPI of the business performance, the volatility of KPI should be reduced as much as possible and makes it stable, as stable as possible. Of course, that would lead to the reduction of capital costs, as I mentioned, and so we would like to enhance the stability, and that's what we're working on. We're talking about next-generation technologies and next-generation fuel and energy. And as part of that, of course, there are things that are are inherently uncertain, and also monetization or contribution to profit could be further down the road in some cases. But in order to make this contribute to profit stability, you have to take up something that is immediately expected to produce results that's combined with the ones that are longer term.
Maybe I'm deviating from the ammonia issue, but LNG and natural gas is something that we will still continue to work on. Because during the energy transition, the LNG position as a transition fuel is appreciated. And so in existing business and the business that are under development, it should be completed successfully to cover the short term and midterm, because they can become a profit pillar. So that we can compensate for those projects that will have to wait until down the road to do the monetization, so we can buy time.
Yes, and those that have are uncertain, and if there are some projects that have to assume several different scenarios, but we are not going to reduce investment hurdle or bar because of that. Of course, there is uncertainty incorporated and inherently, but that would not make us and force us to reduce and lower the hurdle for investment. Getting back to the question that you asked, by combining all these different projects, KPI, core operating cash flow, PAT, stability of these KPIs is something that we have to ensure, and we will work on that. Thank you.
So next question, please.
Thank you very much for the explanation. On page two of the material, you talk about efficiency improvements and turnarounds. March 2026, you are aiming for JPY 920 billion, so the profit will be increased by JPY 170 billion. Can you talk about the details? Efficiency improvements and turnarounds, you have given very good examples, and so we if we accumulate them, maybe we will reach it, but it's JPY 40 billion improvement. How much progress have you seen so far? And Mr. Shigeta, by aiming for this JPY 40 billion, what are the challenges, issues that you need to overcome? So with MTMP starting, what is your perspective at the moment? That is my question.
Thank you very much for the question. Currently, the numbers have been accumulating, and-
... what was limit is the small scale accumulation, and we have been able to improve JPY 2 billion. When it comes to exits from unprofitable businesses, this has been promised. And in the second quarter, it was very difficult to do the calculation, tell you the results. Today we have expressed what we have at the moment on this slide. But I do understand that we need to give detailed explanation of the situation, so we will continue to respond. So please give us more time. That is, that will be my response. But so making loss and making businesses profitable, and also by improving those efficiencies, so this drastic improvement or conducting recycling, those are the initiatives.
Of course, the significance of it is being understood within the company. Of course, when it comes to unprofitable businesses or loss-making businesses, that has not been ignored. But from the previous MTMP, we have introduced ROIC, and in the different businesses, we have different risk levels. But we are becoming very conscious of it, and we do have a track record that we can look at. So as to how to respond and what measures to be taken, we are aware that we need to work on them further. So we are feeling very good responses so far. So this JPY 40 billion of efficiency improvements and turnarounds, we believe it can be accomplished. So there are no concerns about not meeting them at the moment or giving up on them.
However, this strengthening existing businesses of JPY 70 billion, some are going to continue to improve, so we would like to evaluate them further. But, making loss, making businesses profitable or exiting from unprofitable businesses, so by revision, making revisions and improving efficiency, in the existing MTMP, we believe that we'll be able to accomplish the target we have set for ourselves. Thank you.
Thank you.
Yes, I see a hand in the front row, please.
Thank you very much. The capital cost reduction is something that you're working on, and you have been proactively explaining, and this is the first time that I heard, I heard that. And in this, in these initiatives, the how to hit the balance and also how to look at the timetable, that's what you have explained, also. But what about the project risk and country risk exposure? You are disclosing this as data, but the projects that you have been making progress after investments, reviewing the efficiency is something that you can do flexibly. So of course, impairment check is something that you are strictly doing. That's what I understand.
But in some cases, country risk could change, and what is required as a return may be heightened, and it may be added uncertainty to reach the required target, and you may need some measures to take. In the actual resources projects, there may be some projects that may be taking more time than expected. So whether you should post or charge the impairment loss or not, other than that, you have to be more flexible in reviewing the project. So in order to, I think this will lead to enhance the credibility of the projects and enhance the effort to reduce capital costs. So can you share with us your thoughts on that?
Thank you for the question. Before answering the question, I'd like to say that the business performance, stability and the future potential, and, reproducibility and sustainability of business models, and the growth potential for the future, these have to be explained so that you can be sold and convinced. I think that would help reduce the cost, and that is what we would continue to work on. That's what I would like to say first and foremost. And, for example, well, answering the question, about the country risks. Traditionally, there is a certain range of country risks that we are willing to take, and we will take within that.
In the most recent example, Russian sanctions, international sanctions, a violation of international rules in terms of energy, I think this is something that is totally different. There are different forms of country risks, and we can take, and we would like to take on challenges as far as we can. Country risk premium, if that is heightened, you have to look at the individual cases in the end. In the higher risk areas, there are not so many projects, but project-based valuation is something that we do every year or on a regular basis, in some cases on a quarterly basis. We're repeating this process. So as...
Of course, impairment loss should be done in an accounting process, but ahead of that, or at the same time, we have to look at and review the significance of holding on to that asset. And at the entrance, you have to make sure that you have exit. That is what we are quite meticulous about. And in the assumed exit strategy, is that being still secured? That is revisited on a regular basis, and that is going to lead to the review of the significance of holding onto the assets. So risk premium height, higher risk premium, if there is those cases, then we will repeatedly review that. So that is how we are working on this. Does that answer your question?
Thank you.
Any other question?
Because of time constraint, we'll make it the last question.
Thank you very much. Well, I wouldn't ask this question normally, but this week, in the automotive sector, there has been some elimination of the cross-sharing among the different companies, and that has been focused. But on page seven, you talk about a reduction of cross-shareh olding going forward. We do understand this. Not only your company, but other trading companies are trying to diminish the significance of holding. But this is JPY 410 billion when it comes to the book value. So of course, in stages, you'll be reducing that cross-share holding. But what is your message as a CFO going forward?
Thank you very much for the question.
So March 23, 105 is a number that we have had, and the number is decreasing. I went and had a look, and there has been reduction by 6, so there it is now in the two digits. The bigger policy is that, of course, when it comes to cross-share holding, of course, the number of it is going to be reduced further. But before that, we need to have a quantitative level check. That should be done as well. With non-listed shares as well as listed shares, we'll be looking at dividend, interest rate, and also the profit from distribution. Of course, that will be considered.
So of course, the quantitative level will be considered, and if anything does not clear that level, then we did immediate revisions. So of course, our capital cost should also be considered in conjunction. And if it is at the level, of course, there are some that it is at that around that level, but the minimum condition is that it does clear that level. But I may be repeating myself, but as a whole, with the increasing capital cost, we are going to make the hurdle higher, and we are going to reflect your voices so that we will continue to reduce the listed shares with the diminished significance of holding within our management scope. So this effort will continue.
Thank you very much.
Thank you very much, Mr. Shigeta.
With that, we'd like to end the Q&A session. Thank you very much. So this is our last program of the day, presentation on Mobility Business Strategy by Representative Director, Senior Executive Managing Officer, Tetsuya Daikoku.
I am Tetsuya Daikoku, and from this fiscal year, I have been in charge of Energy Solutions Business Unit, Infrastructure Projects Business Unit, Mobility Business Unit I, and Mobility Business Unit II. This will be the last presentation today. Today, I will explain our strategy in the mobility field. Businesses in this field have continued to steadily grow over decades by responding to changes in industry structure and meeting the diverse needs of customers. Recently, there have been concerns about heightened geopolitical risks and the associated slowdown of the global economy. But even in such a business environment, we have globally and organically combined businesses and continuously strengthened our earnings base.
As you can see, in the mobility field, we handle various types of mobility, including land, sea, air, and space. For all of these, each business shares the common strengths of providing services that respond to changing times, a wide-ranging customer base and network, and engaging in co-creation with leading partners. In the field of mobility, Mitsui is creating large-scale mobility infrastructure that supports industry across the globe. In this field, Core Operating Cash Flow and profit for fiscal year March 2023 exceeded JPY 130 billion. First, I will explain the basic strategy and policy in the mobility field. We have laid out three basic policies, namely execution of business cluster strategies, strengthening the value chain, and portfolio management, which enable us to create and strengthen a sustainable earnings base. Today, I will explain mainly the automotive and ship businesses, while presenting specific examples.
Leveraging this earning base, we are also taking on next generation businesses, such as decarbonization initiatives, which I will explain later. To begin with, I will describe our first basic strategy of execution of business cluster strategy. For this example, I will speak on land mobility, which includes automotives and construction and mining machinery. In May this year, we explained this as an example of the business strategy and the Industrial Business Solutions, which is one of the three key strategic initiatives of our Medium-Term Management Plan. Here, we have continued to create and expand business by leveraging the strong relationship with partners spanning decades, starting with trading. There are over 100 affiliated companies worldwide, which form a geographically and functionally diversified business portfolio.
Going forward, by not only clustering these businesses, but also developing adjacent businesses and generating synergies between existing businesses, we aim to provide solutions with high added value as business clusters. From the next slide, I will use the automotive business cluster in North America as an actual example to specifically explain our process of business cluster formation. Even in the North American automotive market, which is the largest and most competitive in the world, the Penske business continues to have an overwhelming presence. Penske Automotive Group, or PAG, and Penske Truck Leasing, or PTL, have both transformed and expanded their business through M&A, and have steadily executed the enhancement of operations, incorporating the latest technology through digital transformation.
As a result, PAG is not only one of the largest, dealer groups, mainly handling premium brands of passenger cars in the U.S., but has a very diversified portfolio operating in nine countries, including the U.K. and Australia, in addition to the diversified product lineup with trucks and used cars, et cetera. In addition, PTL has exhibited its strength to maximize customers' vehicle, utilization rates by providing full maintenance service leasing through its own maintenance workshops, and now manages around 440,000 vehicles, showing an overwhelming presence in the U.S. The company is continuing to grow by seeking to differentiate without easing up on investment in maintenance technology, digital technology, and human resources.
We will strengthen downside resilience by deepening such operational excellence, efforts of each group company, and also utilize Mitsui's global network to actively lead development of adjacent businesses and overseas expansion, and promote the formation of business clusters to further solidify our earnings base.
The second basic strategy is strengthening the value chain. Here, I would explain this using the ship business as an example. We have not had many opportunities to provide a comprehensive description of Mitsui's ship business in the past, so I'd like to provide a detailed explanation here. The former Mitsui & Co. before the war played a role as an export agent for ships built by Japanese shipyards starting in the 1900s, and the current Mitsui E&S and Mitsui O.S.K. Lines are also originated from the former Mitsui ship division. Just after the establishment of the current Mitsui & Co. in 1947, we engaged in the ship business and established a subsidiary, Orient Marine, in the 1980s.
Since then, we have provided a wide range of services other than selling new ships, such as secondhand ship brokerage, charter arrangement, and operational and technical support of ships that we have sold. Furthermore, in addition to the asset investment and ship ownership that we have been engaged in, since the early days, we have strengthened the joint ownership of ships and related joint businesses with the leading shipping players and the Japanese shipyards since the 2010s. Now, we have approximately 350 professional personnel globally and are number one, Japanese, trading house in terms of the industry-leading organizational and information capability, as well as our track record in making deals.
We are also steadily implementing development of the businesses related to the decarbonization, including environmentally friendly ships, and are maintaining and expanding our business base, combining three aspects of trading and services, asset investment, and business development. Our ship business covers a variety of customers and partners in value chain and provides complex services shown here. In asset investment and business development, we participate in investment opportunities jointly adopted with influential partners to realize well-timed investment and recycling amid the volatility of the shipping market conditions. As a result, we have continuously and steadily enhanced the base profit through both flow and investment, and the ROIC has constantly been at the high level between 8%-mid-teens % range.
Furthermore, through the maximization of the value provided, such as Mitsui's services and functions, we are constantly endeavoring to grow the Japanese maritime cluster, thereby indirectly contributing to the stable supply of various materials to Japan, over 90% of which depends on the marine transportation, further strengthening the value chain. Now I'll explain the third basic strategy, portfolio management. This is an initiative to enhance the portfolio value through efforts combining to combine the three aspects of the business cluster strategy I just explained, as well as strengthening the group management capability and strategic recycling. We will improve the quality of the geographically and functionally diversified business portfolio by implementing the business cluster strategy, and proceed to maximize the added value provided by two stakeholders.
Strengthening of a group management capability as an initiative to promote the autonomous management of each group company by measures such as strengthening the governance through the Board of Directors of each group company. By doing this, we will realize improvement of enterprise value of group companies forming business clusters. However, we will decide to withdraw from and proceed with the strategic recycling of businesses that do not match our business cluster strategy or are deemed to be difficult to further increase corporate value by our group, while determining the appropriate timing. These have already produced results to some extent, and some of the recent achievements that we have made in 2022 and 2023 are shown here at the bottom.
We aim to achieve the profit in the range of JPY 150 billion by FY March 2026, by enhancing business portfolio value through these three business strategies. We also aim to constantly generate ROIC in the excess of 8%. Finally, I will explain the businesses aim to realize a decarbonized society as initiatives leveraging our track record and expertise in the field of mobility. The projects shown here are actual examples of initiatives in 2023. We respond to the demand of various stakeholders in the value chain, and also realize complex value provision in combination with the functions of other business units, aiming for further promotion and utilization of next-generation fuels such as hydrogen, electricity, methanol, ammonia, and biodiesel.
Although not shown on this slide, we aim to support the future of Japanese logistics and work with diverse shareholders and partners, such as Preferred Networks, engaged in AI development and Mitsubishi Estate, to proceed with development and proof of concept of trunk line transportation services utilizing Level 4 Autonomous Driving technology. Please refer to our integrated report. That concludes my presentation. Thank you very much for your attention.
Thank you very much, Mr. Daikoku. Now, we'd like to move on to the Q&A session. The microphone will be brought to you, so please state your affiliation and your name before you ask your questions. If you're asking by through Zoom, please use the Raise Hand function. Please limit yourself to one question at a time. Anybody with a question?
Thank you very much for the explanation. In the mobility, of course, expanding this revenue, we have been following this segment, and the profit is expanding, and it is very positive, and you're aiming for JPY 150 billion going forward. Of course, the performance is improving dramatically, but it is high profitability, and it is supported by the economy, and also supply shortage is also helping that as well.
So what is going to happen going forward is a concern. In that kind of situation, you are going to expand investment, but what about the strengths of not having the profit go down further? Even if the economy goes down, what is the actual ability of the segment to keep the profit high?
Thank you very much for your question. As for the downward support, during the COVID-19 pandemic, that is what I want to talk about. In 2020, so March 2021 fiscal year, in the first half, this mobility area was the most impacted business area of the company. So in the early COVID-19 days, it was very difficult, and of course, there were group companies that went into the red, loss-making.
With COVID-19, we were not able to travel, and what we needed to do, we needed to make efforts every day. So each group companies, individually, of course, they reduced SG&A, and of course, they tried to compress the balance sheet. So they made steady efforts, and by accumulating such efforts, as a result, we were able to enhance the downward pressure support. And of course, the business priority or priority had been reviewed, and during the COVID-19 period, it was redone. We looked at the businesses in which we felt that it was difficult to continue, we made decisions to exit, and these were the efforts made in the past three years.
Of course, through such efforts, of course, economy recovery, and when the tailwind is there, of course, we were looking at the different businesses, and mobility field became very important, and its impact, its importance was realized. As for the first half of the year, from the start, we thought that we would see normalization. However, there are variations per regions and per products. There may be backlogs and back orders in some of the markets. During COVID-19, of course, the competition became more difficult in some of the areas. These are the efforts that we are making, and the business is improving considerably, so we feel that this business portfolio itself, of course, we are seeing quality improve.
In that kind of situation, as I mentioned earlier, the three basic policies, so of course, improving the value chain and also the portfolio management that I talked about, these are the areas in which we are working on. Of course, there are different things that we need to work on, but I think we are more focused on working on such endeavors. This is something that I want to continue to do. Execution of business, cluster strategies, strengthening the value chain, and portfolio management is what we're doing. Of course, we are working on new businesses, and through operation, we are going to improve them. If we see growth in the market, then we will see growth, but if the market goes down, it will be difficult, and I'm sure you're concerned about that.
But these are what we have on our mind. At the same time, we will continue with our efforts to make endeavors in the policies. So we are not just making anything from green, but we are combining adjacent businesses, and we are making bolt-on investments. So organic growth and inorganic growth will be thought about in combination. And of course, by doing so, of course, we may be exposed to market conditions, but through such endeavors, of course, we will not only be dependent on the market moves. So in May, when we made the announcement, we said there are three business clusters, but we are going to increase it to nine. So this is a very aggressive target.
But if we are able to realize our target, then the base profit is going to be the foundation of the profit is going to be made bigger. And of course, we are going to see different functions and will be strong against the vulnerability. We'll be able to cover even if the market go down. Thank you.
Thank you for the details.
Thank you very much. Any other questions? No other questions?
Follow-up question. On page nine, you mentioned JPY 150 billion, and earlier, as you mentioned, the business clusters are to increase it to nine. Create a grow extent will take time. So looking at this slide, JPY 150 billion profit, I think that the core cash operating cash flow will come down. Selling of the assets probably is included into this JPY 150 billion profit. From three to nine business clusters, so you would have a big size. And in terms of the time frame, it'll be not really in the MTMP, but longer perspective. So through the normalization, maybe the performance will come down, so it's not going to keep growing in a linear manner.
So could you talk about the time frame?
Thank you for your question. So nine business clusters, it's a very ambitious number. As Shigeta mentioned, some of the business clusters focus on the carbon-neutral or next generation areas. So in the process of creating those clusters, the earnings or the growth some of them would be will have a high growth, or others will probably have or ROI could go up to 2030, but not really during the next MTMP, so it would be the combination. So there will be a plus and minus. And so as a result, if you combine all of them, this would be the size. And as it was explained, it's the sale of the asset included.
So JPY 150 billion, it does not include the one time or extraordinary numbers, so the potential sale are not included.
... As Shigeta-san explained earlier, the new business opportunities are increasing, and when the market conditions change, or in the past, I think that accumulating the portfolio was how we expanded the balance sheet. So rather than that, in the medium to long term, there will be a strategic recycling or the revision, so adding and subtracting will be conducted.
Thank you very much.
Next question, please. Thank you very much.
S o in the initiatives I mentioned, decarbonization is something that you mentioned as well. In the explanation given earlier, so as a company, you'll be working on net-zero, and as a mobility group, how you will relate to this is going to be very important, because you may be exiting from some of the businesses. But in the existing businesses and creating businesses in the trucks or vessels, you'll be trying to reduce decarbonization. But net-zero initiatives and as a mobility division, how are you going to make a contribution is my question. If you have any perspective on the contribution rate, please explain.
Yes, as you have mentioned, of course, there are different roles that we can play.
As you have mentioned, in the existing businesses, of course, carbon-neutral is something which is a matter of fact that we need to work on. And as was mentioned earlier, next generation fuel energy is an area in which Mitsui can play its strengths. So instead of working as one segment, I think, Team Mitsui or one team, as one team, we need to work on it going forward. So carbon-neutrality and GHG reduction is going to be very important when it comes to transportation. I mean, there will be a lot of room for reduction in the transportation area, and we need to change what we can do. So we need to make sure that we take on initiatives in automotive and these areas.
I think, for example, in automotives and in vessels, et cetera, we need to work on these areas. And by taking on such initiatives, we believe that the energy business or fuel business or energy team projects, which is in the upper stream, these can be made a feasibility. So I think we need to play a role of a demand creator. So we talk about next generation fuel or carbon-neutrality, but the horizontal barriers are being eliminated, and there are many projects that we can work on together. So the position of the mobility business is going to be very important. It is not very clear into the future, but by making such projects feasible, I think we need to create a demand before we go into production.three Thank you very much.
Thank you very much. If there are no other additional questions, we have passed already the given time. So with that, we'd like to end this session. Mr. Daikoku, thank you very much for the presentation. So with that, we have completed all the program for today. In the online live streaming, it seems that there were some technical issues, and we would like to apologize for that. And at the very end, we would like to ask you to participate in the survey. You will see the QR code on the screen, or from this QR code, you can go to the survey. And please give us your feedback, and we'll be sending the email to ask for the feedback. And with that, we'd like to end the Investor Day 2023 of Mitsui & Co.
Thank you very much indeed for your participation today.