Good afternoon. I am Makoto Tanaka, CFO. Thank you for joining us today. Firstly, we'd like to express our deepest condolences to those who lost their lives in the earthquake in Kumamoto, and extend our heartfelt sympathies to all those affected by this disaster. At this point, no material impacts on the business activities of the Mitsui & Co. Group has been confirmed. However, we'll continue to closely monitor the situation and assess any damage. We'll also consider appropriate support measures and responses going forward. I'll begin by giving a summary of the operating results for the first 3 months. I'll then hand over to Masao Kurihara, General Manager of the Global Controller Division, who will speak on the details of the operating results. Let me begin with a summary of our financial results for the quarter.
Core operating cash flow, COCF, increased by JPY 64.6 billion year-on-year to JPY 280.9 billion, while profit increased by JPY 102.5 billion year-on-year to JPY 294.1 billion. Both posted substantial growth. Profit reached a record high for Q1. Both COCF and profit are progressing at a pace well ahead of our business plan, driven by asset recycling and our middle-game initiatives. In light of our strong performance, and with the aim of improving capital efficiency and enhancing shareholder returns, we have decided on a share repurchase of JPY 200 billion to be completed by the end of January 2027. To continuously enhance per-share value, all shares acquired through this repurchase will be canceled. While closely monitoring development in the Middle East, we'll be revising our full-year earnings forecast and the profit time based on the high level of progress against our business plan and our forward outlook. Next page.
This slide shows the progress of each segment against the business plan. The Innovation & Corporate Development segment made extremely good progress, mainly driven by gains from large-scale asset recycling. The Chemicals segment also made good progress, mainly from trading and methanol business, supported by our middle-game initiatives. In the Energy segment, we expect full-fledged earnings contribution from Q2 onwards, mainly from LNG-related businesses and gains from asset sales. I'd like to explain the updates to capital allocation under Medium-term Management Plan 2029. Given we have made a strong start to Medium-term Management Plan 2029, and in line with our policy of executing share repurchases in a flexible manner, we have decided to conduct a JPY 200 billion share repurchase. Top-tier investment for growth opportunities are progressing steadily, and preparations for new growth projects are also advancing well.
Given the high likelihood that we will continue providing additional shareholder returns during this Medium-term Management Plan, we have updated our shareholder returns as a percentage of COCF target to over 50%, which clearly demonstrate management's commitment to shareholder returns. The base case for the management allocation is JPY 2.4 trillion, and JPY 200 billion share repurchase announced today will be funded from this allocation. Through our middle-game initiatives, we'll further strengthen our COCF base and enhance asset value. At the same time, we'll accelerate asset recycling to expand management allocation and balance our capital deployment between highly competitive investments for growth selected from a robust pipeline exceeding JPY 6 trillion, and shareholder returns through dividends and share repurchases.
To ensure we achieve ROE of 12% in FY 2029, we will determine the amount and use of management allocation in response to changes in the operating environment while continuing engagement with our stakeholders. This slide shows the forecast and results of our capital allocation. Cash inflows totaled JPY 340 billion, consisting of COCF of JPY 281 billion and asset recycling of JPY 59 billion. Cash outflows consisting of investments and loans totaled JPY 147 billion. Given the stronger-than-planned start to the fiscal year, we intend to review our capital allocation in the second quarter, as we have done in the past, in conjunction with our full-year earnings forecast update. Next, I will explain our current outlook regarding the timing of earnings contribution from new projects. Investments for growth executed under Medium-term Management Plan 2026 are progressing steadily.
Waitsia, the natural gas project in Australia that began commercial production in FY 2026, started to contribute to earnings this quarter. In addition, the solar power generation project in the U.S., invested in 2025, was completed within budget and is expected to begin contributing to earnings in the second quarter. In line with the three evolved key strategic initiatives announced in May 2026 for Medium-term Management Plan 2029, we will continue to carefully select and execute investments from a robust pipeline, including projects that were not incorporated at the time of formulating the plan, and pursue further growth together through our middle-game initiatives across our existing businesses.
The proposal announced on July 22nd to acquire the free float shares of Penske Automotive Group, Inc. has not been included in this slide at this time. We will provide an update at an appropriate time, depending on our future developments. As previously explained, in light of our good progress in terms of results and within the aim of improving capital efficiency and enhancing shareholder returns, we have decided on a JPY 200 billion share repurchase program to be completed by the end of January 2027. All shares acquired will subsequently be canceled. In line with the expansion of our highly reproducible cash-generating capability, we will continue to increase dividends and will make flexible decisions regarding share repurchases as part of our shareholder returns policy, including the amount and timing, with the objective of improving capital efficiency, among other things.
Going forward, we will continue to enhance shareholder returns while maintaining a balance with investments for growth, and will achieve our target shareholder returns as a percentage of COCF of over 50%. This concludes my presentation.
I am Masao Kurihara, General Manager of Global Controller Division. I will now provide details of our operating results for the first three months. First, I will explain the main year-on-year changes in COCF by segment. COCF for Q1 amounted to JPY 280.9 billion, an increase of JPY 64.6 billion year-on-year. In Mineral & Metal Resources, despite higher iron ore and metallurgical coal prices, there was a decrease of JPY 2.9 billion to JPY 69 billion, mainly due to higher metallurgical coal costs. In Iron & Steel Products, there was a decrease of JPY 1.9 billion to JPY 4.4 billion.
In Energy, there was an increase of JPY 31.7 billion to JPY 80.1 billion, mainly due to FVTPL valuation gains associated with the IPO of an energy business outside Japan and higher earnings in the U.S. gas business. In Mobility, Digital & Infrastructure, there was an increase of JPY 13.1 billion to JPY 46.5 billion, mainly due to increased dividends from equity method investees and investments in general companies. In Chemicals, despite the absence of a gain on the reversal of provisions recorded in the previous period, there was an increase of JPY 8.2 billion to JPY 14.9 billion, mainly due to higher earnings from trading and the methanol business. In Wellness Ecosystem, there was an increase of JPY 8.6 billion to JPY 7.6 billion, mainly due to the absence of intersegmental transaction with others, adjustments, and eliminations recorded in the previous period.
In Innovation & Corporate Development, there was an increase of JPY 12.6 billion to JPY 24.7 billion, mainly due to FVTPL valuation gains associated with the IPO of a quantum computing business. Others, adjustments, and eliminations recorded a decrease of JPY 4.8 billion to JPY 7.7 billion, mainly due to expenses, interest, and taxes not allocated to segments, as well as intersegmental transactions with Wellness Ecosystem. Next, I will explain the year-on-year changes in profit by segment. Profit for Q1 amounted to JPY 294.1 billion, an increase of JPY 102.5 billion year-on-year. In Mineral & Metal Resources, there was an increase of JPY 9.7 billion to JPY 61.2 billion, mainly due to higher copper, iron ore, and metallurgical coal prices, as well as higher iron ore volumes. In Iron & Steel Products, there was a decrease of JPY 1.2 billion to JPY 5.3 billion.
In Energy, there was an increase of JPY 14.2 billion to JPY 34.4 billion, mainly due to FVTPL valuation gains associated with the IPO of an energy business outside Japan and higher profit in the U.S. gas business. In Mobility, Digital & Infrastructure, there was an increase of JPY 23.6 billion to JPY 73 billion, mainly due to higher profit in the automotives and gas infrastructure businesses. In Chemicals, despite higher profit from trading and the methanol business, there was a decrease of JPY 4.3 billion to JPY 26.6 billion, mainly due to the absence of valuation gains and one-time factors recorded in the previous period. In Wellness Ecosystem, while there was an absence of asset sale gains recorded in the previous period, there was an increase of JPY 3.6 billion to JPY 18.4 billion, mainly due to higher profit in food businesses, particularly protein-related operations.
In Innovation & Corporate Development, there was an increase of JPY 54.9 billion to JPY 65.2 billion, mainly due to the asset recycling gains in association with the restructuring of the U.S. real estate ownership and operation business, CIM Group, and FVTPL valuation gains associated with the IPO of quantum computing business. Others, adjustments, and eliminations recorded an increase of JPY 2 billion to JPY 10 billion, mainly due to expenses, taxes, and interest not allocated to segments. This page provides a summary of the year-on-year factor comparison for profit. In base profit, there was an increase of JPY 46 billion, mainly due to higher earnings in Chemicals trading, automotives, food-related businesses centered around protein, and the methanol business.
In resource costs and volumes, which are a component of base profit, there was an increase of JPY 1 billion, mainly due to higher sales volumes and lower costs in iron ore and Energy, despite higher costs for metallurgical coal. In commodity prices, there was an increase of JPY 14 billion, mainly due to higher copper, iron ore, and metallurgical coal prices. In foreign exchange, there was an increase of JPY 17 billion, mainly due to yen depreciation. As a result, commodity prices and foreign exchange contributed a combined increase of JPY 31 billion. In asset recycling, there was an increase of JPY 42 billion, mainly due to the restructuring of CIM Group. In valuation gains, losses, and one-time factors, there was a decrease of JPY 17 billion. I will now explain the balance sheet at the end of the quarter.
Total assets decreased by JPY 0.1 trillion from the end of March 2026 to JPY 20.7 trillion. Net interest-bearing debt increased by JPY 0.3 trillion from the end of March 2026 to JPY 4.4 trillion. Meanwhile, shareholder equity increased by JPY 0.2 trillion compared with the end of March 2026 to JPY 9 trillion. As a result, the net D/E ratio was 0.49 times. This concludes my explanation. Now, I would like to take questions. Are there any questions? Now, the first question, please.
Thank you very much for the presentation. I have two questions. The first question is on page 13, the factor comparison, increase and decrease of profit, especially for the left. The power business base profit is what I would like to ask about. FVTPL increase has been significant, but excluding FVTPL, the sustainable improvement of base profit. From that perspective, if you look back on the quarter 1, what are the businesses that you think are quite growing, and what is the background for that growth? That's the first question. The second question is about capital allocation, page seven. This is the usual expression that you use, but capital allocation, the amount and allocation of capital to be reviewed in quarter 2, what is the background behind this sentence? What is the item that you consider reviewing?
The core operating cash flow, where you see more progress in Q1, but what about the recycling of assets and new investments directions and other additional possibilities that you might have in mind? If you can share them with us, that would be appreciated.
Thank you for the two questions. The first one is base profit. What is the sustainable one and what are the factors behind it? Chemicals trading. The basic Chemicals trading is bringing in cash flow, especially the sulfur. Based on the Middle East situation, the commodity prices, or rather the volume of trading is very tight, and also the tanks and tankers for logistics. Combination of these is packaged as a service to the customers. This has been an extension of what we have been already doing. Of course, the volatility with the market prices is still high. If you ask us whether this will be sustained for extended period of time, no. But, in terms of probability of confidence, we have the opportunities to exercise our roles in this business.
The methanol business, which is also a Chemicals business, this is easier-to-understand structure. Celanese is the one that we are working with, the production business in the U.S. and also business in the Middle East. There are two of them. For the Middle East, of course, you can't bring the products out, so there is a negative impact from that. But offsetting that, the businesses that we have in the U.S. has a gas as a feedstock, and we use the gas other than the U.S. We can procure the gas that is lower than the market because the gas in the U.S. is lower, and methanol is sold at the market price. So there is a margin spread is higher. We believe that the situation is to be continued for some time. So there is some sustainability here.
With regard to automotive business, generally speaking, we're not saying that some parts of automotive business is particularly strong. But in North America and South America, gradually, we have been accumulating profits. There has been some positive factor from the JPY's depreciation. As for food, this is a chicken business. There has been a strong consumption in each of the regions. There's not much of explosive growth, but there is a steady sustainability of the strength. So that is the explanation for base profit. With regard to capital allocation,
Morimoto, you said that this is a usual expression. That is exactly right. Over 50% is the target of the shareholder return percentage, and we have said that this has been update of what we have said. Since the announcement in May, it's not the case that we have changed our policies. Obviously, the first quarter strong results is behind this updating at this timing. That's the first part of the answer. The next timing, in the second quarter, usually, we would review the business plan at that timing of the year. COCF will also part of that review, obviously. If the current pace continues, then there could be a possibility of upward revision. What about management allocation in that case? In that case, recycling of assets or new investment projects that we're working on.
We cannot name names, so we would like you to wait for a while. But by the second quarter earnings results, we can give you more specific names. So we would like to review the allocation from that perspective. You are talking about shareholder returns toward the end. So at this moment, we are saying that over 50%. But for this single year, we are at a level of 57%. So if the second and third year is to be 50%, then we will obviously exceed 50% for the three-year period. So every year, we would review this, and that is our practice. So we are not disclosing bold numbers upfront. But if you have seen what we have done in the previous MTMPs, maybe you can understand what our practice is. Thank you for the first question. As for automotive business.
The automotive business in Americas has been quite strong. You said that North and South America are both strong, but it is not skewed to any particular region. But in general, continued profitability has been achieved and it is expected to continue. Is that how you are looking at that?
Yes. That is the view as a management. Thank you.
Yes, I would like to ask two questions, please. My first question, the CFO just mentioned that, of course, you are exceeding the plan at the moment, but of course, there may be some transient matters that are included, including FVTPL, because of the timing of the profit contribution. I am sure you have internal plans. So, can you talk about whether your current situation is 20% or 30% above that internal plan? As for Energy, in the first quarter, there was not much profit. However, I am sure you have an outlook. So compared to the plan, can you be more specific whether there has been any better results that you are gaining at the moment? My second question, in this quarter, Marubeni Corporation and Mitsubishi Corporation, in order to achieve ROE, they said they would enhance the leverage so that they will be able to have a more better profitability.
That may be an area in which you are not able to comment on in the midterm, but other companies are showing outlook in that sense. You have revised and updated your outlook of over 50%. But in order to achieve ROE in the second quarter, you said you will review the allocation. But is there intense discussion that is going on inside, or are you looking at different options at the moment? What is the flow of discussion that you are having in-house? That is what I would like to know.
Yes, thank you very much for your question. First of all, in the first quarter, of course, I cannot give you in percentage how much better we are from the plan. But in a company, when we look at the quarter, each quarter, we cannot just divide simply by 4. But in the first quarter, some of our businesses may have a slow start in the first quarter, and we may be stronger in the third quarter. LNG trading and dividends are involved in that area. But in the first quarter, every year, we do not show any strong starts. There have been transient factors. However, in the past, we were able to be over 30%, which was quite good. And of course, we were able to see record highs for the first quarter.
In real terms, I think we were able to show very strong numbers in the first quarter, and we are very confident with our numbers. As was explained earlier, as with the FVTPL and CIM
They are showing numbers that are above the plan. However, in the first quarter, there were some transient factors that are showing phasing when it comes to profit recognition. Even if we offset those items, I think we were very strong in the first quarter. That is the impression we have of this quarter. As for Energy, of course it may be weak. However, the recycling that we were looking for did not appear in the first quarter. The LNG dividend is expected after the third quarter in the second half. As for LNG trading, we are strong in the third quarter and fourth quarter, naturally. That is why Energy may seem weak, but it will be catching up with the energy programs going forward. The second question regarding ROE.
I have not read the comments by the different companies, but the ROE of 12%, I think in the May explanation session, Holly said that this was a number one priority KPI for us. So by March 29, we would like to achieve 12%, but we have more than 2 and a half years, so we would like to see good paths going forward. Our stance is not to say anything final at the moment, but as you said, we would like to have as many options as possible now. So every quarter, we would like to have this discussion with you so that we can share our thinking so that you will be able to understand our perspectives. We will be conducting JPY 200 billion of repurchase, and we will be putting into gear the returns. With management allocation, JPY 2.4 trillion is the number that we are targeting.
There are many ways to go about it, but in the three-year period, we would like to make sure that we will show good growth, and we would like to control those numbers in that way. Thank you very much.
Thank you very much for today. There are two questions. The first question is about Energy. I would like to know more. Earlier, you talked about LNG trading, and there will be profits made in the second half. If you look at the first quarter results of other trading firms, LNG trading has produced more profits. I had thought that you would produce more in LNG in your company. You are saying that profits will be produced in second half. You have affirmed that this will be delivered in autumn or winter, but that produced profit is not produced in first quarter, but in the second half. Is that what you are saying? Can you tell us more? That is the first question. The second question is about shareholder returns this time. Substantially, the total shareholder return ratio is 57%, so it is more than 50% already.
You are saying over 50%. It could be 60% or 70%. It is still over 50%. If you consider your future improvement in ROE, the total shareholder return has already at the stage of having to be increased compared to other trading firms. What is your view on that? Thank you.
The first question is about the LNG trading. Details of trading is something that is very difficult to disclose in more detail, but as a basic concept, as you said, rather than producing profits right now, there will be more deliveries made in second half. Then, regardless of the stock prices, we have the structure that we can produce profits. It will be difficult for you to understand with this explanation, but I would like to ask for your understanding.
As for the second question, in order to have a sustained improvement in ROE, of course, equity is building up more rapidly. That is what you are talking about, probably. Basically, of course, if you are talking about 50% numerically, that is the case. What we are thinking about for the moment is how we can improve ROE and by increasing our. As you have calculated, probably we will not be able to reach that target, if we do not do anything unusual. If you can stretch that part, then we can get closer. What can we do about that? There are middle game initiatives and also more rapidly effective new projects, or investment projects, and we would like to demonstrate in numerical terms. That is what we said in May, but we have not been able to show that yet.
Probably it is uncertain for you and unclear to you. But if you can wait more, then you will be convinced by our explanation that these specific projects are the background of what we are saying. But in order to sustain 12%, whether 50% shareholder return ratio is appropriate or not, that is the question that we always ask ourselves, and this is always the point of discussion internally. That's what I'd like you to understand.
Based on what you said, in order to increase ROE, and you increase R and make investments for growth, I understand. But if you have to do investment growth, then how you can increase the net D/E? There are cap in net D/E that is indicated by other companies, but what is your view on that? Thank you.
This is not that changed from what I said when I was a different position, but net D/E may suffice, but even if you just have to increase with this as a target, there are so many volatile and variables, and with the slight changes in the market prices, this could change. So, having pinpointed numerical targets in this has not been the practice of what we have done. But for other companies, a similar balance sheet is there and same rating agency has been used, and we are at the same rating. Probably the conversations that they are having are similar to what we are having. Net D/E has been coming out, and 0.6 is what they are saying, and we may say that we can get to 0.8. Of course, we are having similar discussions with our rating agencies.
So 0.6, this number, we're not saying that we totally ignore this number. But we have this in mind in our discussion or in our top management meetings. But we have to look at the macroeconomic situation and what are the future investments, because we know what's in the pipeline and we know how much will be needed, but we cannot disclose that. Then leverage has to be changed. But on a quarterly basis or even more often, like on a weekly basis, talking to President Hori about this level. It's not the case that we're not mindful of leverage and ROE. It is not. Thank you.
The other day, you made an announcement regarding Penske Automotive Group, and I think this is a symbolic middle game project and kickoff of such a project. So I'd like to ask you about this project. The amount has not been decided, and of course, for its implementation, all these are not decided. So within the management allocation, it has not been allocated yet. But if it's successful, I'm sure allocation will be made going forward. Of course, with gross investment, anything that has been decided will be implemented, and the remaining part, I'm sure, will come from the allocation part going forward. That is my basic understanding. But in the next three years, how are you going to make the allocation? You need to put it early in order to accumulate the R that you mentioned just now, or you will be delayed.
I think time allocation is going to be important. The final year, ROE 12% for it to be achieved, I think proactive allocation into investment may be needed. Balancing it with shareholders' return is going to be very important. Can I have your thoughts on the time axis when it comes to the allocation, please? The second question, regarding the middle games, of course, I think this would contribute in short-term, but for the investment capital enhancement, I think the returns need to bring synergistic effect. Of course, you need to make sure that collaboration alignment is achieved so that it is realized early, so that you will be able to lead it to enhancement of ROE. Because this is a middle game, I think you need to be more creative in how the business models develop in order to meet the returns.
What are the commitments that you will make to the accumulation of synergies going forward? That is something that I would like to know. With middle game as the core, how you will be able to accumulate the returns going forward? That is what I would like to know.
Thank you very much for your question. First of all, about the Penske Automotive Group. Currently, we have put forward a joint non-binding proposal to acquire free float shares to PAG. A special committee meeting will be held going forward, so nothing more I can say on the deal itself. However, with Penske, this is a long-term relationship that we have with that group. We do have a relationship of trust. As you can see, the track record is very strong, and we are working in the track
lease business as well. Independently, we have made investment in their track option business as well. We are seeing growth, expansion of this business with good track record. This is going to bring profit in short-term, and we believe that this is a stable project because of the track record. By accumulating such projects, we hope we will be able to show the completeness of the returns that we can provide. We need to make sure that it is shown early, or we will lose the trust of the investors, and the contribution to returns will be low. Therefore, we would like to see a wet close when it comes to this Penske item. In the chart that you see here, these are the timings that we are looking for.
In each of the business units, to keep up with this timing is their mission. Of course, if this becomes a project itself, we will be getting funds from the growth investment framework, nowhere else. As for your second question about the middle games, as for AIM Services, I think it is a good example. With Aramark, we had a 50/50 share. Domestically, it had been a cash cow for us. By making further growth investment, we were hoping to increase the revenue. We went for 100% so that we can work on improving the revenue with this. With that, we are expanding the capital expenditure. Of course, because of the industry, the capital expenditure is not that big. Accumulation of such project is going to be very important for us.
As for the loss-making businesses, we are looking for turnaround or exit. For example, the coffee business or the sugar business. These are the areas that we will be focusing on. In this quarter, we are resting assured with JA Mitsui Leasing. There was some transient loss. However, we were able to increase investment so that we were able to show good results in this quarter. Such accumulation of numbers is going to be very important, and we hope in the next quarter we will be able to show you good results going forward. Yes, please. Yes, thank you very much.
Thank you for the presentation. I also have two questions. First one is page 26, at the bottom, Mobility, Digital & Infrastructure, base profit by segment, increase in profit. In total, plus JPY 199. But if you add up all these items, it does not add up to JPY 199. What are other positive factors that will go into this number? Page 27 is another question. The Chemicals, plus JPY 130, is the number. But trading is not included here, so maybe that is a big part in the Chemicals, tank terminals and trading that you said that sulfur. I am not sure this is sulfate or sulfur itself. Is it the major part? Can you give more details about that?
Thank you. As for Mobility, Digital & Infrastructure, there is not much that we can describe here because there are very small pieces added up to constitute this. For Mobility, there are so many associated companies and affiliated companies, and each bit has contributed to this current analysis. Is there anyone who can answer more? If there is, then they will answer that later. As for Chemicals, what you understood is correct. There is no trading that is included here.
Hashimoto, I would like to make some additional comments. As for Mobility, Digital & Infrastructure, base profit, other than automotive, gas infrastructure business and tanker-related business and Mobility, the general company's dividends and IPP, et cetera. Sewage processing facility in Mexico. So many of those bits and pieces have been adding up to this strong growth. As for Chemicals, as you understood, trading part is quite big. That is the reason for that.
Thank you for the explanation. That's all. Thank you.
Thank you very much for your explanation today. I'd like to ask two questions, please. My first question about the capital allocation, about the share repurchase. Completion is planned for end of January. But in this fiscal year, we have two months more. Would that mean that there will be an additional possibility of share repurchase in the remaining two months of the fiscal year? In the three years of management allocation, is that the period that you are looking at or are you looking at the ROE, so you'll be able to manage in one-year periods at a time? That is what I'd like to know. In the chart that you showed us earlier, there were some dots that were showing timing. There may have been explanation given before.
If all the investments go well, then the growth investment of JPY 2.4 trillion for management allocation, that would be complete. In other words, all these dots in the three-year period, what is the relationship between those dots and the period? My second question, about the iron ore business. The first quarter results were quite strong, but at the beginning of the year, you were looking for a reduction in the production volume, and I thought you were very conservative. But with the first quarter just ended, is that the outlook that you are keeping? The iron ore prices are going down, so can you talk about the outlook of iron ore going forward?
There was also a strike in Port Hedland in Australia. Can you talk about the business as a whole and environment as a whole, whether there were some differences in the plan from the beginning of the year or not? Thank you very much.
I would like to talk about the capital allocation first. Of course, we will complete the share repurchase at the end of January. Whether there will be additional repurchases in the remaining two months of the year, we cannot say yes or no as of now. Of course, we are looking at the three-year period to make a good balance. It is not as if we are trying to have in and out at zero. But in the three-year period, with that included, together with the discussion with the rating agencies, we would like to manage the leverage appropriately.
Therefore, as for the additional returns, including buybacks and increases in the dividends, we would like to think of it in the three-year term. However, are we not going to do anything for the majority of the time and make a balance at the very end by making adjustments of a few hundred billions of JPY? That is not the case. Of course, every single year, we would like to review. However, we would like to make sure that there are no concerns among the investors. Therefore, we are saying that for this time, we are going to make a repurchase of JPY 200 billion, and it will be completed by the end of January. We will be looking at the situation then.
As for the numbers, we are not that sure of. Of course, the Middle East situation is full of uncertainty, so we would like to take more time and like to have your understanding going forward. As for your question on the chart on page eight, of course, there are many projects that are not included here, so not all these dots is going to be everything. However, the majority of them is included here. With this, I think majority of the JPY 2.4 trillion will be filled. As for those that are not included here, will not be reflected. In other words, in the Medium-term Management Plan, there are nothing that are not included because they are all included in the management allocation. We will look at things that we can exit from or recycle. That is something that we will reconsider in the next step.
As for your second question about the Mineral & Metal Resources, maybe the IR head will make additional comments later. But as you mentioned, as for the production volume, I think we are seeing a good volume than we had estimated. But we are not looking to change the numbers in 1-year term. We are not giving you any assumptions. But because of impact from China, the spot price is not that strong, we feel. Looking at FOB, the place a bit higher in prices. Therefore, the situation is not that easy, as you understand. However, we believe that we had a good start, so we would like to maintain that going forward. Do you have anything to add, please?
Yes. As for the volume, yes, the volume is stronger than what we had expected at the beginning.
Rio Tinto is making a lot of efforts when it comes to production, so we are feeling confident. As for the increases in production going forward, we have to think about other factors as well. So at the end of the second quarter, we would like to consider the situation. As for the strike that you mentioned, BHP is understanding the situation and taking appropriate measures. They are introducing temporary workers so that they would like to make their impact as small as possible. That is their practice. So they do not want to prolong the situation, and they do not want to exacerbate the problems either. They feel that it is manageable. As for the demand and supply, of course, as Tanaka mentioned, of course, plates are doing well. However, domestically, it is not that very well.
Of course, AI, EV is not doing well, but I think this is coming back as well. So we hope that this is something that we need to monitor closely going forward. Of course, China, the domestic cost, we would like to look at it bottoming out so that the market will be supported. So in the future, I do not see any issues going forward.
The first point, at the end of January, you said that you will not be able to make a clear statement today, but our year 12% will be three years later. That is when you are targeting. So, what do you need to consider in order to make the decision whether it is achievable or not? I mean, whether there will be excess capital at the end of the year. Is that what you are saying?
Well, before that, I think we need to look at growth investments, how the new projects are progressing. After some time, of course, things may become different from when we had planned it in May. So if something goes differently, how do we respond? Is something that we need to consider. Hori often mentions that if a good project comes up, we will take it looking at the scale of that project. So with that kind of projects as well, these are the possibilities that each business unit is exploring all the time. So some projects may just pop up. So we would like to think about them as a whole. So in the three-year period, to make a definitive decision, as of now, it is going to be difficult. That is what I wanted to say. Thank you very much.
Thank you. There are two questions. First question is about what was said in the previous question on underlying pro basis. What has been the upside in this first quarter results? You do not have to say the numbers, but by segment, what are the upside and the downside and with the background factors included? The second question is of capital allocation. That will be reviewed on the second quarter as usual, but it has not been three months, but only JPY 59 billion for recycling in the first quarter. Is it because of timing only, or has there been any changes in the environment? Thank you very much.
First of all, as for the strong strengths and weaknesses by segment, with regard to Mineral & Metal Resources, in general, it is not that bad. But in the metallurgical coal, Dawson has been affected by the rain, also diesel prices has gone up, so the cost has increased. So this has been a bit weaker than expected, but everything else has been within expectation and dissipation for Mineral & Metal Resources. As for Energy, the recycling assets were fewer. That is what is rated. But there was some time lag, and in terms of profit and loss and cash flow, we were affected. So it looks as if it has been downside, but it is just a time lag, so we can catch up sometime down the road. As for cash flow part, as I said, from the second quarter onward, we will be able to steadily catch up.
So there is not that much of a worry for us.
As for Mobility, Digital & Infrastructure, as I said, overall the business is strong, so we do have confidence, and so is the Chemicals. As for Innovation & Corporate Development, if I can take this up first. This has been originally planned, but be it FVTPL or CIM recycling, the prices were stronger than the business plans, so there has been a great upside factor. As for commodity derivative trading, in the first quarter, there was a high volatility, and there was a great contribution to earnings. So there is a great upside, and the situation is not that bad. As for Wellness Ecosystem, well, if you ask us, this is almost breakeven, or there is no upside or downside in particular. So protein has been good, but in terms of retail, it has been almost in line with the plan. So we have to closely watch that.
That is the general overview.
Recycling has been a bit weaker. Yes. Okay. So as I said, in Energy, the recycling of assets has been delayed, but there is also soda industry in Chemicals. So we have already announced the first release, but it was supposed to be in this quarter, but that was not the case, so it looks a bit weaker. So that is why the recycling of assets looks a bit weaker. But both are because of the timing. So there is no special changes or particular changes in the environment? No. That is our understanding. Thank you.
When it comes to efficiency or turnaround, I think these were the expression used to explain your businesses in the past. This fiscal year, I do not think that is the expression that you are using. But in the first quarter, was there any progress that you were able to see in efficiency or turnaround?
Oh, thank you for repeating the question. Yes. In the previous Medium-term Management Plan 2026, with the middle games or turnarounds we mentioned, this is something that will not be completed. Therefore, this is something that we need to work on forever. So middle game and turnaround will go on, because with the changes in the business environment, the profitable business may get weaker and their outlook may change. But we need to be able to look into the future so that we can make the decision as to exit, so that we can enhance the exit values. That is the kind of initiatives that we are taking with the current Medium-term Management Plan 2029 as well. Loss-making businesses, of course, we need to work on in a quantitative manner.
Even if they are small projects in which we cannot look for growth, I think we need to make sure that we look further and in an expanded way, so we can look at subsidiaries and related companies so that we will be able to improve the quality of the portfolio that we have. We hope that we will be able to look at each of the businesses with ROIC so that we will be able to take on the Digital capabilities, so that we will be able to make better the exit strategy planning that we can work on going forward. That is what we would like to do until the fall of this year. The aromatics that I mentioned earlier, it was not loss-making, it was profitable. However, it had ended its role that we had expected. Therefore, we decided that that company should take on a different ownership.
Therefore, we had good conditions when it comes to pricing. Therefore, we were able to make that decision. That is what we look at when we look at the growth prospects to make the decisions. I hope we answered your question. Thank you very much. I hope you will be able to give us follow-up information going forward.
Well, thank you very much. It is time to end this session. With that, we would like to end this Q&A session. Now, we would like to make an announcement about the IR event. December 3rd, Thursday, in the afternoon, we are going to hold the Investor Day 2026. I hope you will keep it in your calendar. With that, we would like to end this financial results briefing. Thank you very much for your participation despite your busy schedule today. Thank you very much.