Mitsubishi Corporation MSBHF CEO Takehiko Kakiuchi on Q1 2020 Results

I am Kazuki Masu, CFO. Thank you for joining our company's financial results announcement despite your busy schedules. First of all, I'd like to explain about fiscal year 2019 financial results and fiscal year 2020 financial forecasts. I would like to talk about the first page of the presentation that is shown in the center. I'd like to explain about three points today. First, fiscal 2019 consolidated net income decreased by 55.3 billion yen from the previous fiscal year to 535.4 billion yen. The second point is that upon achieving the business forecast of 520 billion yen announced in November, the annual dividend for fiscal year 2019 will be 132 yen a share, which is the same as the forecast. The third point is that although the outlook for fiscal 2020 consolidated net income is to be decided, we will continue to uphold the progressive dividend system with a dividend forecast of 134 yen a share for the year. Now please turn to material entitled 'Results for the Year Ended March 2020 and Forecast for the Year Ending March 2021.' Please turn to page one. First of all, please refer to the box at the bottom left where I will explain takeaways of results for the year ended March 2020. Fiscal 2019 consolidated profits decreased by 55.3 billion yen year over year, with both the business-related sector and market-related sectors recording earnings decline. In the business-related sector, profits decreased mainly due to the automotive-related business, LNG-related business, and the petrochemical business. In the market-related sector, the decrease in income was mainly due to the Australian metallurgical coal business. However, we were able to partially make up for the decline in profits due to the rebound from significant one-off losses in the previous year, as well as the restructuring of the copper business in Chile, and the gains on sales etc. resulting from accelerated asset replacement. Next, I'd like to explain our forecast and dividend outlook for the year ending March 2021. Please refer to the box at the bottom right of the slide. Because of the impact from COVID-19, it's difficult to reasonably estimate the business forecast at this time, so we have kept the forecast for fiscal 2020 as 'to be decided.' We will announce it as soon as we gain more insight. Regarding the dividend forecast for fiscal 2020, we will continue the progressive dividend plan stated in the medium-term corporate strategy 2021 and increase the dividend by 2 yen from fiscal 2019 to 134 yen per share. This means that the number of shares that are eligible for dividends will decrease due to share buybacks, but as we keep total dividends at the same level as the previous year, the amount of dividends per share will increase with a smaller denominator. Next, please turn to page two where I will talk about performance of major segments. First of all, petroleum and chemicals was loss-making at 12 billion yen, with net income declining by 47.8 billion yen from 35.8 billion yen in the previous year. This was due to the losses associated with the crude oil derivative transactions at the trading company in Singapore and a decrease in equity earnings in the petrochemical business. Net income in the mineral resources segment decreased by 40.2 billion yen from 252.5 billion yen in the previous fiscal year to 212.3 billion yen. Despite one-off gains related to the reorganization of the Chilean copper business and a rebound from the impairment loss in the Chilean iron ore business in the previous fiscal year, there was a decrease in business revenue in the Australian metallurgical coal business and impairment loss in the overseas smelting business. The net income for automotive mobility was down by 77.6 billion to 19.6 billion from 97.2 billion last year, due to uncertain impairment of investment in Mitsubishi Motors and decline in equity earnings from MMC and other businesses in Asia. The net income in food industry was up by 43.3 billion to 53.2 billion from 9.9 billion last year, due to the absence of impairment loss booked a year ago for overseas food materials business and sales gain of the overseas food business this year. Now I'd like to talk about the state of cash flow. Please turn to page three. Please take a look at the cash flow for FY19, which is indicated by the bar graph on the left. Underlying operating cash flow in gray, which adjusts for the working capital impact from the operating cash flow, was positive 672.1 billion yen due to operating revenue and dividend income. For investing cash flow in orange, despite the one-off profits from selling the state utility's fire business, interest in the Australian thermal coal business, and asset in the North American real estate business, we spent on the acquisition of Enerco preferred stocks of Toyota Corporation, and extended loans for the Chilean corporate business, and spent on maintenance capex for the Australian metallurgical coal business. As a result, the investment cash flow was negative 500.7 billion yen. As a result, as highlighted by the dark blue box on the right, adjusted free cash flow, which is the sum of underlying operating cash flow and investing cash flow, was positive 171.4 billion yen. Now please turn to page four. As we have no clarity on when COVID-19 will subside, our FY20 guidance is to be decided, but here are some of the impacts we anticipate on the business at this point. We expect three major impacts: market decline, dropping demand, and weaker investment appetite. On the first point of market decline, dropping crude oil price and metal resources price would impact the natural gas and mineral resources group. Second point is drop in demand. The impact may be mixed depending on the business, but global travel restriction and lockdown would result in a significant demand decline for automotive mobility, industrial infrastructure, and industrial materials group. On the other hand, lifeline and social infrastructure related services are relatively stable as essential services to support people's lives, and consumer industry, food industry, and petrochemical group would fall into this bucket. Thirdly, we should also anticipate weaker appetite for investment. Asset turnover type of business such as urban development and power solution may be impacted. In summary, given the tough business environment, we took some impairment hits, but we also executed the platform asset reshuffle as stated in the midterm corporate strategy. That is all from my presentation. Thank you very much.

Thank you very much, Mr. Masu. Next, I'd like to hand over to Mr. Kakiuchi. Hello, this is Kakiuchi, CEO of Mitsubishi Corporation.