Earnings Call: Q1 2022

Aug 3, 2021

This is Masu speaking, CFO, Masu speaking. Thank you very much despite being scheduled for attending the results meeting for the 3 months ended in June 2021. I would like to give you an overview. And after that, our general manager of the corporate accounting department, Nanuji, will give you more details. In terms of the fiscal year 2021 Q1 consolidated net income compared to the previous year, it has gone up by JPY 150,900,000,000 to JPY 187,600,000,000 against the outlook of JPY 380,000,000,000 600,000,000. Against the outlook of JPY 380,000,000,000, the progress ratio is 49%. Then please go to Page 1 of the presentation material. In terms of the year over year fluctuation, I would like to first explain that. So please look at the box on the lower left hand side. All of the excuse me, 8 groups have shown an increase of profit. We saw a decline of profit for the Power Solutions Group and Industrial Infrastructure Group, but this is due to the timing of the asset sales and in terms of the litigation related loss of Chiyoda, Kakuo. So these are special factors. Last year, we saw a plunge in the resource prices and saw a contraction of the demand for the automotive sector. And last year was when the COVID-nineteen hit us very hardly. But through the recovery of the economic activity worldwide and we saw a demand of recovery in automotive related business and the resource prices has gone up such as copper and iron ore. And we have been able to lead this steady earnings in each of the businesses through this business environment recovery. In terms of the Q1 net income year over year, it has gone up by JPY 150,900,000,000. So we have seen a substantial increase. Going into the outlook for the of our performance. Please look at the box on the over right hand side, progress against the forecast. So in terms of the orange far, this is the Mineral Resources segment. Due to the impact of the planned maintenance at the planned export Australia metallurgical coal And in terms of the increase of prices for the copper and iron ore, and as planned in the first place, the profit should be concentrated in the Q1. And on top of that, we have run off gains due to disposal of the aluminum smelting business. In terms of the progress, it was high. It was high 82%. On the green bar, which is a non mineral resource business, we have been able to tap into the global demand recovery and have been able to book annualized gains for the funds and have been able to see increased opportunities in trading. So the progress has been over 40%. As a result, against the full year outlook, the progress ratio has been 49% and this is at a high level. As you can see, this time's results, compared to last year, which was strongly impacted COVID-nineteen, we are seeing a substantial increase of profit. Although there are some concentration in where the profit is coming from in terms of the first quarter profit, is the 2nd highest following the 2018 Q1, which was the highest in the IFRS 3. We have been able to leverage the business environment improvement to strong recovery of our earnings. For the full year, there is a high possibility that we'll be able to exceed our outlook that we have disclosed in May. However, there has been a resurgence of COVID in Southeast Asia, and you have to observe how the resource crisis will trend, which is at a high level. But towards the Q2, we will continue to observe the situation carefully and decide accordingly. Towards the improvement of our performance, in terms of the role of the unprofitable business, the reshuffling of our asset portfolio, and we will go accumulate profits from existing investments. We will go about implementing these initiatives 1 by 1. So that has been the overall situation. Going to the overall segment situation, General Manager, Corporate Accounting Department, General Manager, Mr. Nobuji will speak. So this is Noichi speaking from the Corporate Accounting Department, General Manager. So I would like to add on to the just made presentation. I would now like to look at the Q1 segment results. So please refer to Page 2 of the material. I would like to start off with natural gas. JPY 7,200,000,000 last year, we increased by JPY 11,300,000,000, landing at JPY 18,500,000,000 for the Q1. This is because of LNG related business earned dividends as well as North America shale gas business. Moving on to Industrial Materials, iron ore business improved. Moving down 2 to Mineral Resources. The dividend income increased, copper business and earnings improved. And the aluminum smelting business, one off gains, it gave us versus JPY 20,000,000,000 last year increased by JPY 45,900,000,000, landing at JPY 65,900,000,000 for the Q1. Moving on to the right side of the same material. Last year, the Mitsubishi Motors one off losses were acknowledged, but because of this Mitsubishi Motors as well as the Asian Automotive business, we saw an increase in equity earnings and automotive mobility all in all. Last year was JPY 22,700,000,000 negative. We increased by JPY 50,000,000,000, landing at JPY 27,300,000,000 positive for Q1. Moving on to food industry. Yen 6,500,000,000 last year, we increased by yen 13,200,000,000, amounted to yen 19,700,000,000 for the Q1. This was due to the improvement in equity earnings for our salmon farming business. And for consumer industry versus last year, we have been able to improve our equity earnings. I would now like to move on to Power Solution. From a RMB6.7 billion last year, we dropped by CNY 10,000,000,000, so this is a CNY 3,300,000,000 minus. So disposal gains of power generating assets have decreased as well as overseas power businesses dropped as well. Lastly, I would like to touch upon urban development. JPY 600,000,000 was last year's number. We increased by JPY 21,100,000,000, remaining at JPY 21,700,000,000 for the Q1. This is due to the valuation profits as well as lease business integrated merge gains. Allow me to move on to Page 3. I would like to depict the situation of our cash flow. On the bar chart, please refer to the 1st 3 months cash flow, the gray, which is operating cash flow, is JPY238,600,000,000 and the orange investment cash flow is JPY 79,300,000,000 cash out. So when we augment these numbers, the adjusted free cash flows is JPY 159.3 1,000,000,000. Now the breakdown of investments, if you can refer to the orange box in the middle of the same slide. Australian metallurgical coal business as well as copper business and LNG related business. So investments in such projects as well as leasing business, equity investments, all in all amounted to JPY 170,000,000,000. For sales and collection, North American Real Estate Business as well as the shale gas business in North America resulted in JPY 19,700,000,000 and net JPY 79,300,000,000.