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Edited Transcript of 8058.T earnings conference call or presentation 5-Feb-20 9:15am GMT

Q3 2020 Mitsubishi Corp Earnings Presentation

Tokyo Feb 7, 2020 (Thomson StreetEvents) -- Edited Transcript of Mitsubishi Corp earnings conference call or presentation Wednesday, February 5, 2020 at 9:15:00am 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

* Yuzo Nouchi

Mitsubishi Corporation - Senior VP & GM of Corporate Accounting Department

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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 coming to our financial results briefing for the fiscal 2019 first 9 months. First, I will give an overview. And then Corporate Accounting Department General Manager, Yuzo Nouchi, will add more details. Please turn your attention to the center of the screen. I will begin with Page 1 of the presentation materials titled Results for the 9 months Ended December 2019.

Consolidated net income for the first 9 months declined by JPY 68.9 billion year-over-year to JPY 373.3 billion. As a result, we reached 72% of November's revised full year consolidated net income forecast of JPY 520 billion. Please look at year-over-year fluctuation on the lower left of the page and the graph on the lower right.

In the business-related sector, net income fell by JPY 23.3 billion. Despite a rebound from one-off losses recorded in the previous year, including those from Chiyoda Corporation, this was mainly due to losses on crude oil trading derivatives as well as lower operating income in the LNG-related business, automotive-related business and petrochemical business.

In the market-related sector, net income fell by JPY 44.3 billion. This was mainly due to declining market conditions and increased production cost in the Australian metallurgical coal business as well as decreased business revenue due to the disposal of the thermal coal business despite a rebound from one-off losses last year. As a result, consolidated net income for the first 9 months declined by JPY 68.9 billion year-over-year.

Next, I will explain our progress toward the forecast for the full year published in November. Please look at progress against the forecast for the year on the lower left of the page. In the business-related sector, progress remained at 71%. This was due mainly to losses on crude oil trading derivatives recorded in the second quarter and lackluster performance in the automotive-related business and because we expect gains on asset replacement in the fourth quarter. In the market-related sector, progress came to 79%. This was due mainly to price factors in the iron ore business and shale gas business. As a result, at the end of the first 9 months, progress toward the full year forecast remained at 72%.

In summary, due in part to the slowing of the global economy caused by U.S.-China trade frictions, a worsening business environment and sluggish markets, financial results for the first 9 months of the year remained challenging. Having reached only 72%, achieving the full year forecast of JPY 520 billion will not be easy, but some businesses, like Chiyoda Corporation, are showing signs of improvement, and we will all do our utmost to reach the forecast. This concludes my general overview.

Next, Corporate Accounting Department General Manager, Yuzo Nouchi, will give more details mainly on results by segment.

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Yuzo Nouchi, Mitsubishi Corporation - Senior VP & GM of Corporate Accounting Department [2]

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Hello. I'm Yuzo Nouchi, General Manager of the Corporate Accounting Department. I'd like to go into a little more detail. First, results by segment. Please turn to Page 2. I will focus on the main factors affecting earnings. First, in Natural Gas, net income decreased JPY 13 billion from JPY 78.2 billion in the first 9 months last year to JPY 65.2 billion, mainly due to decreased equity earnings in the LNG-related business.

Skipping down to Petroleum and Chemicals saw a JPY 58.2 billion decrease from net income of JPY 38.1 billion last year to a net loss of JPY 20.1 billion, mainly due to loss related to crude oil trading derivatives at the Singapore petroleum subsidiary and decreased equity earnings in the petrochemical business.

In Mineral Resources, net income decreased JPY 47.1 billion from JPY 163.4 billion last year to JPY 116.3 billion, mainly due to declining market conditions and increased production cost in the Australian metallurgical coal business and decreased business revenues due to the disposal of the Australian thermal coal business, despite a rebound from impairment losses in the Chilean iron ore business last year.

Industrial Infrastructure saw a turnaround of JPY 64.4 billion from a JPY 27.1 billion net loss last year to net income of JPY 37.3 billion, mainly due to a rebound from one-off losses related to Chiyoda Corporation last year.

Next, please look at the right side of the page. In Automotive and Mobility, net income decreased JPY 29.3 billion from JPY 70 billion last year to JPY 40.7 billion mainly due to decreased equity earnings from Mitsubishi Motors Corporation and the Asian Automotive business. In Food Industry, net income increased JPY 24 billion from JPY 5 billion last year to JPY 29 billion, mainly due to rebound from impairment losses recorded in the overseas food materials business last year.

Please turn to Page 3. Next, I would like to explain cash flows. From fiscal 2019, repayments of lease liabilities for operating leases are no longer included in operating cash flows due to a revision to the IFRS standard for lease accounting. This caused underlying cash flows to appear larger than before. To account for this, we adjusted the method of calculating underlying cash flows. I will now explain our cash flows.

Please look at the cash flows for the 9 months ended December 2019, on the right side of the bar graph. Underlying operating cash flows shown in gray were an inflow of JPY 531.8 billion, while investing cash flows in orange were an outflow of JPY 78.7 billion. The sum of these adjusted free cash flows was, therefore, an inflow of JPY 453.1 billion. Investing cash flows are broken down in the orange section of the table at the middle right.

Outflows came to JPY 412 billion, including the purchase of preferred shares of Chiyoda Corporation and investment in the copper business, Australian metallurgical coal business, convenience store business and LNG-related business. As indicated by the note at bottom right, as in the first half, new sustaining investments includes an infusion of JPY 134.2 billion in cash held by Chiyoda Corporation due to the company's consolidation.

Inflows totaled JPY 333.3 billion, including the sale of the Australian thermal coal business, the sale of property in North America real estate business, the sale of equity in the overseas power business and the sale of listed stocks. This resulted in a net outflow of JPY 78.7 billion.

For reference, Page 4 summarizes market condition assumptions. So please take a look at your leisure. This concludes my explanation.

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