Earnings call transcript: Mitsui reports Q1 2025 profit drop amid market challenges

Mitsui & Co. reported a decline in profit for the first quarter of 2025, with a ¥191.6 billion profit, down ¥84.5 billion from the previous year. Despite this dip, the company remains committed to its strategic initiatives, focusing on industrial business solutions and global energy transitions. The stock price showed a significant increase, reflecting investor confidence in the company’s long-term plans.

Key Takeaways

• Mitsui’s Q1 profit fell by ¥84.5 billion year-over-year.
• Core Operating Cash Flow (COCF) slightly improved to ¥216.3 billion.
• Strategic investments include acquisitions and projects in energy and infrastructure.
• Stock price surged by 63.77% despite profit decline.
• Mitsui maintains a steady investment approach in strategic areas.

Company Performance

Mitsui faced a challenging quarter with a notable decrease in profit compared to the previous year. The decline was attributed to lower commodity prices, particularly in iron ore and metallurgical coal, and decreased production volumes in the energy sector. Despite these challenges, the company achieved a slight increase in Core Operating Cash Flow, indicating operational resilience.

Financial Highlights

• Core Operating Cash Flow: ¥216.3 billion (+¥0.5 billion YoY)
• Profit: ¥191.6 billion (-¥84.5 billion YoY)
• Net Interest-Bearing Debt: ¥3.4 trillion (+¥0.1 trillion)
• Shareholder Equity: ¥7.6 trillion (+¥0.1 trillion)

Outlook & Guidance

Looking ahead, Mitsui expects full contributions from its Energy and Innovation segments in the second quarter. The company plans to continue executing steady investments, balancing growth with shareholder returns. Future EPS forecasts for FY2026 and FY2027 are set at 2.01 USD and 2.23 USD, respectively, with revenue projections also showing growth.

Executive Commentary

CFO Tetsuya Shigeta emphasized, "We will continue to steadily execute investments for growth and asset recycling in line with the Medium Term Management Plan." He also highlighted that some projects have already begun contributing to earnings, aiding in raising the company’s base profit.

Risks and Challenges

• Commodity Price Volatility: Fluctuations in iron ore and coal prices could impact future earnings.
• Forex Impacts: A stronger yen could affect international revenue streams.
• Energy Sector Production: Decreased volumes could continue if market conditions do not improve.
• Investment Execution: The success of strategic initiatives relies on timely and effective execution.
• Global Economic Conditions: Broader economic challenges could influence demand across Mitsui’s segments.

Mitsui & Co. remains focused on its strategic initiatives, aiming to navigate the current market challenges while positioning itself for future growth.

Full transcript - Mitsui Co Ltd CFD (8031) Q1 2026:

Tetsuya Shigeta, CFO, Mitsui & Co.: Good afternoon. I am Tetsuya Shigeta, CFO. Thank you for joining us today. I will begin by giving a summary of the fiscal March 2026 first quarter operating results. I will then hand over to Masaya Uchidihara, General Manager of the Global Controller Division, who will speak on the details of our operating results. Summarizing our operating results for the quarter, core operating cash flow, or COCF, increased by ¥0.5 billion year-on-year to ¥216.3 billion, as we made solid progress against the business plan. Profit declined by ¥84.5 billion year-on-year to ¥191.6 billion, mainly due to the absence of gains from asset sales recorded in Q1 of the previous fiscal year. Progress is in line with the business plan at 25%. This slide shows the progress of each segment against the business plan. COCF is showing good progress across the board.

Progress of profit varies by segment, but overall, we are on track, mainly due to seasonal factors. Full-fledged contribution from the Energy and Innovation and Corporate Development segments are expected from Q2 onwards. Regarding our cash flow allocation, cash inflows totaled ¥270 billion, with ¥216 billion from COCF and ¥54 billion from asset recycling. For cash outflows, investments and loans totaled ¥208 billion. Key investments and loans included ITC Antwerp, a European tank terminal business, which became a wholly owned subsidiary, and we also started investing in Blue Point, the low-carbon ammonia project. We will continue to steadily execute investments for growth and asset recycling in line with the Medium Term Management Plan, or MTMP. Since the start of the current MTMP in fiscal March 2024, we have executed multiple investments for growth across our three key strategic initiatives of industrial business solutions, global energy transition, and wellness ecosystem creation.

Some of these projects have already begun contributing to earnings, helping to raise our base profit. Furthermore, investments for growth, which fortify our long-term earnings base, are also progressing steadily. Entering fiscal March 2026, we executed and made investment decisions in areas in which we have deep expertise, including making ITC Antwerp a subsidiary, a business expansion via an additional investment in Wells Mitsui & Co. engine support, an aircraft engine-related business, and began our investment in the Ruis LNG project. We will continue to steadily build up carefully selected investments aligned with our key strategic initiatives. There is no change to our shareholder returns policy since the March 2025 full-year financial results announcement. We will continue to consider enhancing shareholder returns while maintaining a balance with investments for growth. That concludes my part of the presentation.

I will now hand over to the General Manager of the Global Controller Division, Masaya Uchidihara, for details of the financial results for the quarter. I am Masaya Uchidihara, General Manager of the Global Controller Division. I will speak on the details of the operating results. COCF for the quarter increased by ¥0.5 billion year-on-year to ¥216.3 billion. In the mineral and metal resources segment, there was a decrease of ¥16.3 billion to ¥71.9 billion, mainly due to lower iron ore and metallurgical coal prices. In the energy segment, despite the higher gas prices, there was a decrease of ¥7 billion to ¥45.7 billion, mainly due to a decrease in production volume. In the machinery and infrastructure segment, there was an increase of ¥11.7 billion to ¥36.1 billion, mainly due to the absence of taxes from asset sales in the previous period.

In the chemicals segment, there was an increase of ¥7.5 billion to ¥32.7 billion, mainly due to a gain on the reversal of a provision related to a business outside Japan and higher demand in Europe for crop protection. In the iron and steel products segment, there was an increase of ¥4.3 billion to ¥6.3 billion, mainly due to trading and dividends from equity method investees. In the lifestyle segment, there was a decrease of ¥8 billion, resulting in an expenditure of ¥1 billion, mainly due to an intersegment transaction with others adjustment and eliminations. In the innovation and corporate development segment, there was an increase of ¥4.6 billion to ¥12.1 billion, mainly due to an increase in dividends from JA Mitsui Leasing. In others adjustments and eliminations, there was an intersegment transaction with the lifestyle segment.

Mainly due to this and other expenses, interest, taxes, etc., not allocated to business segments, COCF totaled ¥12.5 billion. Profit for the quarter decreased by ¥84.5 billion year-on-year to ¥191.6 billion. In the mineral and metal resources segment, there was a decrease of ¥29 billion to ¥51.5 billion, mainly due to lower iron ore and metallurgical coal prices. In the energy segment, despite higher gas prices, there was a decrease of ¥0.3 billion to ¥18.9 billion, mainly due to a decrease in production volume. In the machinery and infrastructure segment, there was a decrease of ¥75.3 billion to ¥50.7 billion, mainly due to the absence of asset sales in the previous period. In the chemicals segment, there was an increase of ¥12.7 billion to ¥30.9 billion, mainly due to a valuation gain on ITC Antwerp.

In the iron and steel products segment, there was an increase of ¥0.5 billion to ¥6.5 billion. In the lifestyle segment, there was an increase of ¥0.8 billion to ¥14.8 billion. In the innovation and corporate development segment, there was an increase of ¥4.1 billion to ¥10.3 billion, mainly due to a higher profit at JA Mitsui Leasing. Others adjustments and eliminations recorded ¥8 billion due to expenses, interest, taxes, etc., not allocated to business segments. This page provides a summary of year-on-year factor comparison. Base profit increased by ¥10 billion. This was mainly due to core businesses in the chemicals segment, LNG-related businesses, affiliated companies in the innovation and corporate development segment, and other factors, while there was lower profit from ship subsidiaries. Resources cost volume decreased by ¥17 billion, mainly due to higher costs and lower volumes in copper and lower volumes in energy.

Commodity prices decreased by ¥5 billion, while oil and gas contributed to a ¥10 billion increase. Iron ore and metallurgical coal decreased by ¥15 billion, and forex decreased by ¥15 billion, mainly due to a stronger yen. As a result, commodity prices and forex decreased by ¥20 billion. Asset recycling decreased by ¥72 billion, mainly due to the absence of gains in the previous period. Valuation gains, losses, and one-time factors increased by ¥15 billion, mainly due to the valuation gain on ITC Antwerp. Finally, I will speak on the balance sheet as of the end of this quarter. Net interest-bearing debt increased by ¥0.1 trillion to ¥3.4 trillion. Shareholder equity increased by ¥0.1 trillion to ¥7.6 trillion. As a result, net D/E ratio is 0.45 times. That concludes my explanation.

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