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Edited Transcript of 8058.T earnings conference call or presentation 12-May-20 6:30am GMT

Full Year 2020 Mitsubishi Corp Earnings Presentation

Tokyo Jun 19, 2020 (Thomson StreetEvents) -- Edited Transcript of Mitsubishi Corp earnings conference call or presentation Tuesday, May 12, 2020 at 6:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Kazuyuki Masu

Mitsubishi Corporation - Executive VP, Corporate Functional Officer, CFO & Director

* Takehiko Kakiuchi

Mitsubishi Corporation - CEO, President & Representative Director

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Presentation

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Kazuyuki Masu, Mitsubishi Corporation - Executive VP, Corporate Functional Officer, CFO & Director [1]

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I am Kazuyuki 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 of the first page of the presentation that is shown in the center. I'd like to explain about 3 points today. First, fiscal 2019 consolidated net income decreased by JPY 55.3 billion from the previous fiscal year to JPY 535.4 billion. The second point is that upon achieving the business forecast of JPY 520 billion announced in November, the annual dividend for fiscal year 2019 will be JPY 132 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 JPY 134 a share for the year.

Now please turn to the material entitled Results for the year ended March 2020 and forecast for the year ending March 2021. Please turn to Page 1. 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 net profits decreased by JPY 55.3 billion 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. And 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, et cetera, 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 JPY 2 from fiscal 2019 to JPY 134 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 2, where I will talk about performance of major segments. First of all, petroleum and chemicals was loss-making at JPY 12 billion, with net income declining by JPY 47.8 billion from JPY 35.8 billion 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 petrochemicals business.

Net income in the mineral resources segment decreased by JPY 40.2 billion from JPY 252.5 billion in the previous fiscal year to JPY 212.3 billion. 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 and mobility was down by JPY 77.6 billion to JPY 19.6 billion from JPY 97.2 billion last year due to asset impairment of investment in Mitsubishi Motors and decline in equity earnings from MMC and other auto business in Asia.

The net income in food industry was up by JPY 43.3 billion to JPY 53.2 billion from JPY 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 3. Please take a look at the cash flow for FY '19, 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 JPY 672.1 billion due to operating revenue and dividend income. For investing cash flow in orange, despite the one-off profits for setting the stake in overseas power business, interest in the Australian thermal coal business and asset in the North American real estate business, we spent on the acquisition of Eneco, preferred stocks of Chiyoda Corporation and extended loans for the Chilean copper business and spent on maintenance CapEx for the Australian metallurgical coal business. As a result, the investment cash flow was negative JPY 500.7 billion. As a result, as highlighted by the dark blue box on the right, adjusted free cash flow, which is a sum of underlying operating cash flow and investing cash flow, was positive JPY 171.4 billion.

Now please turn to Page 4. As we have no clarity on when COVID-19 will subside, our FY '20 guidance is to be decided. But here are some of the impacts we anticipate on the business at this point. We expect 3 major impacts: market decline, drop in demand, and weaker investment appetite. On the first point of market decline, drop in 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 take some impairment hits, but we also executed the plan for asset reshuffle, as stated in the midterm corporate strategy.

That is all from my presentation. Thank you very much.

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Unidentified Company Representative, [2]

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Thank you very much, Mr. Masu. Next, I'd like to hand over to Mr. Kakiuchi.

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Takehiko Kakiuchi, Mitsubishi Corporation - CEO, President & Representative Director [3]

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Hello. This is Kakiuchi, CEO of Mitsubishi Corporation. Thank you for joining today despite your busy schedules. First of all, I would like to extend our thoughts and prayers to those who have unfortunately passed away due to COVID-19. We also sincerely hope that people around the world, who are still suffering from the virus, will be able to recover quickly and the pandemic will come to an end. Our company puts the highest priority on the safety of our employees and stakeholders and preventing the spread of the virus. Ever since February 28, we have continued to adhere to a strict work-from-home policy as we continued on with our business.

Now I'd like to go into the executive summary. Fiscal 2019 was a tough environment with the new coronavirus spreading on a global scale from about February, whilst the global economy was slowing down. Details were explained by Mr. Masu, our CFO, earlier.

Regarding the earnings forecast for fiscal year 2020, as we are not able to see an end to COVID-19 at this moment, we have determined that it's difficult to present a logical forecast and have kept the forecast undecided. Our group is comprised of various affiliated companies that conduct business globally in a broad range of fields, such as manufacturing and retail. Some of these companies are major affiliates whose impacts are difficult to reasonably estimate and account for into the 2020 fiscal year budget. Therefore, we believe that announcing an earnings forecast for the entire company at this point in time lacks persuasive grounds and have decided to hold back on announcing a forecast. We will announce the business forecast outlook promptly when it is possible to determine the impact as well as the effects that respective measures have had in each field of our business.

Next, I'd like to touch upon shareholder returns. Although the business environment is extremely uncertain, we will continue to employ the progressive dividend plan that was raised in Midterm Corporate Strategy 2021. Financial discipline is firmly maintained, our business portfolio replacement is progressing, and we continue to have tolerance towards a deteriorating environment. In light of this situation, although the environment may be severe for us, we will continue on with this policy with the unwavering will of our management.

Dividends have progressively increased from JPY 80 in FY 2016. For fiscal 2019, dividends will be JPY 132 a share as planned. In addition, we have decided to increase the dividend forecast for fiscal 2020 by JPY 2 to JPY 134 a share. Moving forward, we will continue to strive to meet shareholder expectations as much as possible by having a long-term perspective.

Last but not least, in accordance with 1 of our 3 principles, global understanding for your business, we have developed the global business over many years. With a bird's eye view of overall industries, we'll aggregate that wisdom built in each sector to cope with the changing business environment. We are thankful that with deep commitment to the business, we have built the intelligence based on relationship of trust with our domestic and global partners over many years. This remains intact, and I believe that we can fully play our role in each region and industry.

I believe it will require a long time to recover from the impact of COVID-19. We will continue to keep our financial discipline, while responding to the change in the external business environment.

This concludes my presentation. Today, I wanted to allocate sufficient time for a Q&A session. And this will be the end of my presentation. Thank you very much for your attention.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]