Earnings call transcript: Sojitz Corp Q1 2025 sees strategic growth moves

In its Q1 2025 earnings call, Sojitz Corp reported a consolidated profit of 21.1 billion yen, representing 18% of its full-year forecast. With a market capitalization of $5.3 billion and trading at an attractive P/E ratio of 7.6x, the company maintains optimism about its strategic investments and market expansion despite a decrease in gross profit and rise in total liabilities. The stock price remains unaffected as trading was closed during the announcement. According to InvestingPro analysis, the company appears fairly valued based on its comprehensive Fair Value model.

Key Takeaways

• Consolidated profit reached 21.1 billion yen, 18% of the annual target.
• Gross profit declined by 2.7 billion yen year-over-year.
• Notable strategic investments include acquiring Nippon A and L Inc.
• Expansion into new markets with a business jet co-ownership service and automobile sales in Panama.

Company Performance

Sojitz Corp’s Q1 performance shows a mixed financial landscape. While consolidated profit aligns with 18% of the annual forecast, the gross profit fell by 2.7 billion yen compared to the previous year. The company continues to focus on strategic growth through acquisitions and market expansion. This strategic direction is evident in its recent investments and new market entries, such as Panama.

Financial Highlights

• Consolidated Profit: 21.1 billion yen (18% of full-year forecast)
• Gross Profit: 82.2 billion yen (down 2.7 billion yen YoY)
• Total Assets: 3.174 trillion yen (up by 86.7 billion yen)
• Total Liabilities: 2.187 trillion yen (up by 107.8 billion yen)
• Total Equity: 941.8 billion yen (down by 27.2 billion yen)

Outlook & Guidance

Sojitz Corp maintains its full-year forecast, expecting a 40-60 profit split between the first and second halves of the fiscal year. The company plans to focus on structural reforms in underperforming sectors and accelerate investments in promising areas. Future earnings projections include an EPS of 3.88 USD for FY2026 and 4.87 USD for FY2027, with revenue forecasts of 16,657.94 USD and 17,919.31 USD respectively.

Executive Commentary

Makoto Shibuya, an executive at Sojitz, highlighted the company’s growth ambitions: "We want to enhance expectations for growth and PER by sharing the process with all stakeholders." He emphasized the focus on expanding investments and enhancing existing businesses to drive future growth.

Risks and Challenges

• Geopolitical and market uncertainties could impact future performance.
• Challenges persist in the Metals, Mineral Resources, and Automotive segments.
• Increased SG&A expenses due to changes in consolidated subsidiaries.
• Negative cash flow from investing activities, totaling -54.4 billion yen.
• Free cash flow remains negative at -55.1 billion yen.

Sojitz Corp’s Q1 2025 results reflect its ongoing commitment to strategic growth through market expansion and investment. While challenges remain, the company’s forward-looking strategies aim to bolster its competitive position and achieve its ambitious growth targets.

Full transcript - Sojitz Corp CFD (2768) Q1 2026:

Makoto Shibuya, Financial Presenter/Executive, SOJITSU: Afternoon. This is Makoto Shibuya. In this briefing, I will be referring to the slide deck titled Presentation Materials for Financial Results for the First Quarter Ended 06/30/2025, which is available on our website. Slide four summarizes Q1 results. Consolidated profit for the period was 21,100,000,000.0 yen down 1,900,000,000.0 yen from the same period last year.

This is 18% against the full year forecast of 115,000,000,000 yen announced at the beginning of the financial year. We expect the split between the first half and second half to be 40 to 60, and therefore, Q1 results represent a solid start. Core operating cash flow was also solid at 22% against the full year forecast. We will continue our pursuit of profit growth accompanied by cash. Before we discuss the breakdown by segment, let me first provide an overview of Q1 results.

While some segments such as Energy Solutions and Healthcare and Chemicals performed solidly, there were negative factors, including absence of onetime gains recorded in the previous year, decline in coking coal prices and delayed recovery in automotive. With regard to the business environment, uncertainty remains, but the impact of U. S. Tariffs has been limited so far. At this point in time, we expect to manage the impact within the 5,000,000,000 yen buffer we factored in the initial forecast.

And that’s why we have not made any change with regard to the full year forecast in regard to this matter. Let me discuss further details starting from Slide five. Slide five is the PL summary. Gross profit came down by 2,700,000,000.0 yen from the same period a year ago to 82,200,000,000.0 yen Slide nine shows the breakdown by segment. Metals, mineral resources and recycling came significantly down due to the decline in coking coal prices.

Automotive was also down mainly due to the impact of U. S. Tariffs on automotive sales business in Puerto Rico. Aerospace transportation and infrastructure and chemicals were also down year on year, but only due to the timing of revenue recognition and we do not see it as a concern. Energy Solutions and Healthcare and Retail and Consumer Service were up, thanks to newly consolidated subsidiaries.

Consumer Industry and Agriculture business was up due to increased sales volume at overseas fertilizer businesses, particularly in Thailand. SG and A increased by 5,200,000,000.0 yen year on year of which more than 80% came from changes in consolidated subsidiaries, including additions and reductions. The net of share of profit and loss of investments accounted for using the equity method increased by 2,200,000,000.0 yen year on year to 10,800,000,000.0 yen For the LNG operating company, prices were lower, but production volume increased. With all that, consolidated profit for the period came to 21,100,000,000.0 yen Slide six is a summary of the balance sheet. Total assets increased by 86,700,000,000.0 yen from the March to 3,174,000,000.000 yen The increase is mainly related to investments.

Total liabilities increased by 107,800,000,000.0 yen to 2,187,500,000,000.0 yen The increase was related to new borrowings and investments. Total equity attributable to owners of the company came to 941,800,000,000.0 yen down by 27,200,000,000.0 yen This is despite the profit due to dividend payments, share buyback and the stronger yen. Slide seven shows key financial indicators and the full year forecast, which remains unchanged from the beginning of the financial year. Slide eight shows cash flows. Net cash flow from operating activities was an outflow of 700,000,000 yen due to an increase in working capital despite an increase in core operating cash flow.

Net cash flow from investing activities was an outflow of 54,400,000,000.0 yen due to new investments. Net free cash flow was an outflow of 55,100,000,000.0 yen Slides nine to 11 shows a breakdown by segment for PL related results and forecasts. Slide nine shows gross profit, which I have already discussed. Slide 10 shows the year on year comparison of profit for the period and Slide 11 shows the full year forecast and where we currently stand. As shown on Slide 10, profit for the period increased year on year for Energy Solutions and Healthcare, Chemicals and Consumer Industry and Agriculture business.

Energy Solutions and Healthcare was up thanks to new consolidation in energy saving service businesses, contribution from existing businesses, increased production volume at an LNG operating company and asset replacement in solar power generation business. For chemicals, each business progressed steadily. Consumer industry and agriculture business was up, thanks to increased sales volume in overseas fertilizer businesses, particularly in Thailand. On the other hand, profit for the period was down for metals, mineral resources and recycling, automotive and others. Metals, mineral resources and recycling was affected by the decline in market prices in coal business.

Automotive was down mainly due to the impact of U. S. Tariffs on automotive sales business of Hyundai cars in Puerto Rico. The decline in others comes from a reaction to the gain on change in equity associated with the public offering of Sakura Internet in the same period last year. Slide 11 shows the current outlook against the full year forecast by segment.

Overall progress against the full year forecast is 18%. By segment, progress is generally in line or above except for automotive and metals mineral resources and recycling. For aerospace transportation and infrastructure, aircraft related and defense related transactions are expected to remain solid. For Energy Solutions and Healthcare, the progress rate may appear rather low, but we do not see it as a concern. Earnings from the LNG operating company and other businesses are second half heavy and we expect contribution from new investments as well.

For Chemicals, in addition to the solid performance of existing businesses, we expect contribution from the recent investment in Nippon A and L in June. For Consumer Industry and Agriculture business, earnings from overseas fertilizer businesses tend to concentrate in the first half. For retail and consumer service, while the recovery in consumption in Vietnam needs to be closely monitored as in last year, we expect contribution from solid domestic retail businesses as well as

Executive/Presenter, SOJITSU: from marine products related businesses. We take a slightly bearish view on automotive and metals, mineral resources and recycling. For automotive, we anticipate earnings contribution from businesses in Latin America such as automotive sales business in Panama. Australian used car business was loss making in Q1, but store profitability is improving and we continue to focus on breakeven for the full year. As I said earlier, U.

S. Tariffs are negatively impacting automotive sales business in Puerto Rico and continuous monitoring is necessary. For Metals, Mineral Resources and Recycling, the Australian coal business is impacted by market prices and production volume is now increasing. We’ll continue to focus on strengthening production capacity. Please refer to Slide 12 for the status of cash flow management and Slide 13 for investments and asset replacement.

Under MTP 2026, which started in April, we aim for creating the SOJITSU growth story and focus on creation of distinctly attractive SOJITSU revenue generating clusters of businesses Katamari. We want to enhance expectations for growth and PER by sharing the process with all stakeholders. To accelerate creation of the SOJITU! Growth story, continuing from last year, we are focusing on expansion of new investments and enhancement of existing businesses. For new investments, as shown on Slide 13, we steadily executed investments contributing to future growth.

In FY 2025, the second year of MTP, we intend to accelerate structural reform further in underperforming businesses to enhance existing businesses. Today, we highlight three examples of the SOJITSU growth story, starting with Chemical businesses on Slide 15. Inner Chemical businesses, we’ve been creating value for customers and strengthening businesses by predicting supply chain changes and making various proposals to a broad customer base. As a result of these initiatives to enhance trade functions, we achieved profit growth exceeding JPY 10,000,000,000 compared to pre COVID-nineteen. Besides, in June, we acquired Nippon A and L Inc.

As a consolidated subsidiary. The company is engaged in the manufacturing, sales and R and D of resin for automotive and home appliances and materials using lithium ion batteries and paper coatings. We’ve been working together with the company since more than twenty years ago in treating of materials for lithium ion batteries in particular. Through this new investment in areas of expertise, we will expand into manufacturing in other new fields and create new trading opportunities to reinforce earning base and power further. Our paths to success in Chemical businesses are clear.

By achieving and strengthening many paths, we will achieve target profit of JPY 30,000,000,000 in next stage immediately. Next, Slide 16 shows the Sojutsu growth story in aviation related business. For nearly seventy years since 1956, as agency for commercial aircraft of Boeing, we’ve delivered over 1,000 aircraft to domestic airlines. Also as agency for Western defense manufacturers, we’ve been dealing with defense equipment for a long time, contributing to Japan’s national security. By leveraging information gathering ability and foresight in identifying needs backed by long standing industry network and highly specialized human capital.

Through collaboration with the aviation industry, we are expanding into new domains such as asset business, including leasing operation business, including business jet operations airport and other infrastructure business and services business, including JALUX and in flight catering. Recently, business jet operations launched in 2003 provides trading support, operation management and charter services and has become able to generate profit more than JPY 1,000,000,000. The other day, we announced the start of a co ownership service for business jets that meets customer needs. We are expanding the business further. We will create a SOJUTSU growth story by forecasting changes in the aviation market and creating new value and revenue opportunities with a foundation of accumulated history and results.

On Slide 17, automobile sales business in Panama is shown as a SOJITU’s growth story in automotive business. In automobile sales business, we need to change our strategy continuously according to strategy of automobile manufacturers or market characteristics. One of our current paths to success is to develop competitive position by providing lots of added value such as services based on our expertise and concentrating resources in high potential niche markets. This is being realized in automobile sales business in Panama. The results achieved in Hyundai Brand Vehicle sales business in Puerto Rico and the manufacturer’s confidence in our business foundation and business development capability to start automobile sales business in Panama, leveraging expertise and human capital in niche markets led to this new investment.

The growth story in this business domain is to build and deepen value chain covering import retail service used across sales, finance, logistics and insurance to increase earning power further. We will expand into businesses in which we can follow the path to success. Please refer to Slide 18 onwards for commodity prices holding exchange and interest rate, shareholder returns policy, segment information and supplemental information. Lastly, once again, Q1 overall results were almost in line with the forecast. Although impacts of U.

S. Tariffs are partially felt, I think we can manage the impacts within initially incorporated minus JPY 5,000,000,000. Although there are many points requiring continued monitoring due to tariffs and from geopolitical viewpoints, we work on initiatives towards 2x growth, net profit JPY 200,000,000,000, ROE 15% and market cap JPY 2,000,000,000,000 for next stage. I would appreciate your continued understanding and support. That concludes my presentation.

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