Good morning. I am Kenichi Hori, President and CEO. Thank you for joining us today. I will begin by explaining the progress of Medium-Term Management Plan, MTMP 2029. I will 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 first half results and the assumptions and forecasts for the second half.
In a business environment in which high volatility and significant stress on supply chains have become the norm, we have expanded and strengthened our business foundation with reproducible earnings by demonstrating our functions. As a result, our base profit has expanded, and profit reached a record high for the first half. In light of this progress, we have revised up our full-year forecast for Core Operating Cash Flow, COCF, to JPY 1.12 trillion, and profit to JPY 1.05 trillion.
Commodity prices and the business environment for the second half are based on the assumption that the situation in the Middle East will not have normalized during this period. In addition, there has been progress across multiple investments for growth that will begin contributing to earnings in the near term. Regarding shareholder returns, as announced at the first quarter results, in August this year, we decided on a share repurchase of JPY 200 billion, and we plan to cancel all shares acquired throughout the purchase. I will now speak on the summary of the operating results for the first half. COCF increased by JPY 63.1 billion year-on-year to JPY 511.6 billion, representing progress of 49% against the business plan. Profit increased by JPY 151.2 billion year-on-year to JPY 574.9 billion, reaching a record high for the first half, while progress against the business plan was strong at 62%.
In light of this strong progress and the outlook for the second half, we have revised up our full-year forecast. We have revised up the COCF forecast by JPY 70 billion- JPY 1.12 trillion, and the profit forecast by JPY 130 billion-JPY 1.05 trillion. I will now speak on our full-year forecast for COCF. During the first half, there was a good performance in chemicals, iron and steel products, mineral and metal resources, and mobility digital infrastructure. In energy, we expect further contribution in the second half, mainly from LNG dividends and trading, and have revised up the forecast by JPY 60 billion. For wellness ecosystem, we have revised down the full-year forecast, but expect a recovery in the second half. I will now speak on our full-year profit forecast.
During the first half, progress against the business plan was particularly high in chemicals and innovation and corporate development. In the second half, in addition to LNG trading in energy and methanol in chemicals, we expect earnings contributions from asset recycling across multiple segments and revised up our forecast for five segments. I will now speak on the impact of the situation in the Middle East on our operating results. For FY March 2027, we expect a net positive impact of JPY 40 billion on full-year profit, reflecting both positive and negative factors across our businesses. Continuing on from the first half, we expect positive factors mainly in oil and gas projects and trading in energy, and the U.S. methanol business in chemicals, while we also expect negative factors, including increases in logistic costs and diesel costs.
Along with capturing rising commodity prices, we leveraged our global business base to address challenges such as supply chain disruption and fragmentation. By flexibly reconfiguring procurement, supply chains, and sales, we are continuously optimizing our supply structure. Through this, while fulfilling our responsibility to supply products to customers, we are rebuilding trade flows and strengthening the customer base. Furthermore, in energy, mainly in LNG trading and projects, initiatives are progressing to secure future earnings by capturing opportunities arising from the current market environment. As the impact of higher volumes and more sophisticated functions will be reflected more substantially in FY March 2028, we expect net further upside of over JPY 40 billion. I will now speak on the progress of our investments for growth. Investments for growth undertaken jointly with partners with whom we have cultivated relationships through many years of collaboration are one of the sources of Mitsui's competitiveness.
This fiscal year as well, we have made investment decisions on multiple investments for growth based on such partnerships that are expected to start contributing to earnings in the near term. In October 2026, we entered into an agreement regarding the going private of Penske Automotive Group, one of the world's leading retailers of passenger vehicles and commercial trucks. This investment for growth will further strengthen our mobility business foundation and is expected to begin contributing to earnings at an early stage. The investment amount is approximately JPY 248 billion, and we expect additional earnings contributions to begin from FY March 2028. In September 2026, we decided to acquire additional shares in Nutrinova, which manufactures functional food ingredients, including artificial sweeteners. Through making Nutrinova a consolidated subsidiary and integrating it with an intermediate raw materials manufacturing company, we will strengthen our raw materials procurement capabilities and cost competitiveness.
The investment amount is JPY 21 billion, and we expect additional earnings contribution to begin from third quarter of FY March 2027.
I will now speak on our capital allocation forecast. In light of the upward revision to our full-year operating results forecast and progress in asset recycling, we are increasing our three year MTMP cash inflows forecast to JPY 4.87 trillion. Accordingly, we have expanded the management allocation by JPY 130 billion. From this amount, in addition to the previously decided JPY 200 billion share repurchases, we will allocate JPY 350 billion to highly competitive investments for growth, thereby updating the management allocation to JPY 1.98 trillion. Next is the capital allocation results. As we executed investments for growth and asset recycling in line with MTMP 2029, first half cash inflows amounted to JPY 674 billion, and cash outflows amounted to JPY 603 billion. I will now speak on the overview of our capital allocation.
Of the updated management allocation of JPY 1.98 trillion, investments for growth that have yet to reach an investment decision, but for which the likelihood of execution is increasing, amount to approximately JPY 800 billion. Based on the enhancement of our cash-generating capability, we contribute to have ample scope to expand the management allocation going forward. Furthermore, while maintaining financial soundness, we will also utilize our financing capacity and pursue an appropriate level of leverage and long-term capital efficiency. We will continue to pursue highly competitive investments for growth, carefully selected from our extensive pipeline, as well as further shareholder returns through our progressive dividend policy and flexible share repurchases. Toward achieving the quantitative targets of MTMP 2029, such as ROE, we expect the net D/E ratio at the end of FY March 2029 to be between 0.5x and 0.6x after executing this capital allocation.
I will now speak on the outlook for earnings contributions from investments for growth. The transaction regarding Penske Automotive Group, which I explained earlier, was not incorporated when MTMP 2029 was announced and has now been newly added. Our pipeline continues to become increasingly robust, and we expect that various projects not yet included on this slide will also be added going forward as investments for growth that are highly likely to be executed. In addition, the approximately JPY 800 billion of investment capacity that I mentioned in the overview of capital allocation is expected to be allocated to the projects indicated by the white circles with green outlines on this slide. These include large-scale projects that are expected to begin contributing to earnings at an early stage, and multiple investments for growth are making progress.
We are in final discussions toward making an investment decision and are steadily working toward making an announcement in the near future. Next, shareholder returns. We will continue to target exceeding shareholder returns as a percentage of COCF of over 50% for the three years of MTMP 2029. Regarding the share repurchase of up to JPY 200 billion decided in August 2026, we plan to complete the repurchase by January 2027 and subsequently cancel all shares acquired. Going forward, we will continue to pursue both profit growth and improved capital efficiency and continuously enhance per-share value. I will now speak on the roadmap toward achieving our targets for FY March 2029. We forecast profit of JPY 1.05 trillion for FY March 2027. Excluding JPY 140 billion from asset recycling and valuation gains/losses and one-time factors, profit will be JPY 910 billion.
With the strong start achieved during the first six months of MTMP 2029, we have been steadily building up our base profit and have raised the starting point for profit growth toward FY March 2029, which will be higher than initially anticipated. Starting from this JPY 910 billion, through our middle game initiatives and earnings contributions from investments for growth, we aim to exceed the targets set out in MTMP 2029 for FY March 2029 and achieve profit of over JPY 1.1 trillion and ROE of over 12%. Specifically, through middle game initiatives in each segment, we will strengthen existing businesses and execute turnarounds, seeking to expand base profit by more than JPY 70 billion from the next fiscal year onward. In addition, we expect investments for growth under MTMP 2026 and MTMP 2029 to contribute a combined total of more than JPY 120 billion to earnings going forward.
Furthermore, as I explained earlier, our full-year forecast for FY March 2027 incorporates a positive impact of JPY 40 billion from Mitsui leveraging its functions in response to heightened global volatility and significant stress on supply chains. From next fiscal year onward, against the backdrop of higher volumes and sophistication of functions for certain businesses, mainly in the energy segment, we expect to realize upside substantially exceeding the JPY 40 billion positive earnings impact incorporated in the current fiscal year. As shown in this graph, this upside will strongly boost profit in FY March 2029. Through this profit growth, we aim to achieve ROE of over 12%. In the business environment in which high volatility and significant stress on supply chains have become the norm, Mitsui will capture changes by leveraging its sophisticated functions and will continue to steadily expand its base profit.
Furthermore, we will continue to pursue carefully selected investments for growth and additional shareholder returns. We will achieve profit of more than JPY 1.1 trillion and ROE of over 12% in FY March 2029, and translate this into further enhancement of corporate value. This concludes my presentation. I will now hand over to Masao Kurihara, General Manager of Global Controller Division, who will explain the details of our operating results.
I am Masao Kurihara, General Manager of the Global Controller Division. I will now explain the details of the operating results. First, I will explain the main year-on-year changes in COCF by segment. COCF for the first half amounted to JPY 511.6 billion, an increase of JPY 63.1 billion year-on-year. In mineral and metal resources, there was an increase of JPY 27.7 billion -JPY 189.9 billion, mainly due to lower costs and higher volumes in iron ore business and higher prices in the metallurgical coal business. In iron and steel products, there was an increase of JPY 2 billion- JPY 8.5 billion, mainly due to the reclassification of steel processing and port business from an equity method investee to a consolidated subsidiary.
In energy, despite the absence of strong LNG trading results in the previous period and lower LNG dividends, there was an increase of JPY 28.1 billion -JPY 134.7 billion, mainly due to one-time factors related to energy businesses outside Japan, higher prices and volumes in oil and gas production businesses, and oil trading. In mobility, digital, and infrastructure, despite lower dividends from equity method investees, there was an increase of JPY 18.7 billion- JPY 108.5 billion, mainly due to increased interest income from loans to a refinery outside Japan, the absence of valuation losses on loans to Mainstream recorded in the previous period, and increased dividends from the investments in general companies.
In chemicals, despite the absence of gains from the reversal provisions recorded in the previous period, there was an increase of JPY 16.4 billion -JPY 71.6 billion, mainly due to higher prices and volumes in trading and higher prices in the U.S. methanol business. In wellness ecosystem, despite lower dividends from equity method investees, tax payments associated with asset recycling in the previous fiscal year, and FVTPL valuation losses, there was an increase of JPY 3.1 billion, resulting in outflows of JPY 1.9 billion, mainly due to the absence of inter-segment transaction with others, adjustments and eliminations recorded in the previous period. In innovation and corporate development, despite higher earnings from commodity derivatives trading, there was a decrease of JPY 3.6 billion -JPY 15.9 billion, mainly due to the lower dividends received on classified shares of JA Mitsui Leasing and FVTPL losses.
Others adjustments and eliminations recorded a decrease of JPY 29.3 billion, resulting in an outflow of JPY 15.6 billion, mainly due to the absence of inter-segment transactions with the wellness ecosystem recorded in the previous period, as well as expenses, interest, and taxes not allocated to individual segments. Next, I will explain the year-on-year changes in first half profit by segment. Beginning with this presentation, we are also showing for each segment profit excluding asset recycling and valuation gains/losses and one-time factors. Profit for the first half amounted to JPY 574.9 billion, an increase of JPY 151.2 billion year-on-year. In mineral and metal resources, despite higher costs in the metallurgical coal business, there was an increase of JPY 25.4 billion- JPY 139.7 billion, mainly due to higher prices in the copper and metallurgical coal and lower costs in iron ore business.
In iron and steel products, there was a decrease of JPY 0.8 billion -JPY 10.5 billion. In energy, despite the absence of strong LNG trading results in the previous period and lower LNG dividends, there was an increase of JPY 1.1 billion -JPY 103.3 billion, mainly due to higher earnings from oil trading, one-time earnings related to energy businesses outside Japan, and higher profit from higher prices in the oil and gas production businesses, and gains from the partial sale of Oman oil and gas fields. In mobility, digital, and infrastructure, despite the absence of FVTPL valuation gains associated with the IPO of a space-related business recorded in the previous period, there was an increase of JPY 51 billion- JPY 153.7 billion, mainly due to gains and losses associated with the deconsolidation of a Brazilian passenger railway subsidiary and higher earnings from automotives, gas infrastructure, and tankers.
In chemicals, despite the absence of fair value valuation gains associated with making ITC Antwerp a subsidiary recorded in the previous period, there was an increase of JPY 26.7 billion -JPY 70.2 billion, mainly due to higher earnings from trading and U.S. methanol business, gains and losses associated with making Nutrinova a subsidiary, and a partial reversal of impairment losses in a chemicals business outside Japan. In wellness ecosystem, despite the absence of asset recycling gains recorded in the previous period and FVTPL valuation losses, profit remained unchanged year-on-year at JPY 20.8 billion, supported by higher earnings in food businesses, including coffee and protein, gains and losses associated with making Nutrinova a subsidiary, and higher earnings from the IHH hospital business.
In innovation and corporate development, despite lower dividends received on classified shares of JA Mitsui Leasing and FVTPL valuation losses, there was an increase of JPY 35.6 billion -JPY 60.9 billion, mainly due to asset recycling gains in the U.S. real estate ownership and operations business. Others adjustments and eliminations recorded an increase of JPY 12.2 billion to a profit of JPY 15.8 billion due to expenses, taxes, and interest not allocated to individual segments.
This page provides a summary of the year-on-year factor comparison for first half profit. In base profit by business, there was an increase of JPY 19 billion, mainly due to oil trading, chemicals trading, and automotives. In resources costs and volumes, which are a component of base profit, there was a decrease of JPY 5 billion. This reflected lower costs and higher volumes in iron ore, offset by higher costs in areas including metallurgical coal and energy, as well as lower volumes in areas including energy and copper. In commodity prices, there was an increase of JPY 29 billion due to higher prices for copper and other commodities, metallurgical coal, energy, and other factors. In foreign exchange, there was an increase of JPY 24 billion, mainly due to yen depreciation. As a result, commodity prices and foreign exchange contributed to a combined increase of JPY 53 billion.
In asset recycling, there was an increase of JPY 59 billion, mainly due to the restructuring of the U.S. real estate ownership and operations business, the deconsolidation of Brazilian passenger railway subsidiary, and the sale of Soda Aromatic. In valuation gains and losses and one-time factors, there was an increase of JPY 25 billion, mainly due to gains and losses associated with making Nutrinova a subsidiary. This page provides a summary of the factor comparison between our full-year forecast and the business plan. In base profit by business, we expect an increase of JPY 20 billion, mainly due to increases of more than JPY 10 billion each in automotives and U.S. methanol, in addition to higher earnings from oil trading, chemicals trading, and other businesses.
In resources costs and volumes, we expect an increase of JPY 9 billion, mainly due to higher volumes and lower costs in the iron ore business, despite higher costs in copper and other businesses. In commodity prices and foreign exchange, we expect an increase of JPY 55 billion, reflecting higher energy and copper prices, as well as the impact of yen depreciation. In asset recycling, we expect an increase of JPY 38 billion. In valuation gains and losses and one-time factors, we expect an increase of JPY 8 billion. I will now speak on the balance sheet at the end of the first half. Total assets decreased by JPY 0.3 trillion from the end of March 2026 to JPY 20.5 trillion. Net interest-bearing debt increased by JPY 0.1 trillion- JPY 4.2 trillion. Meanwhile, shareholder equity increased by JPY 0.2 trillion -JPY 9 trillion.
As a result, the net D/E ratio was 0.47 x. This concludes my presentation.