Speaker 1
Thank you for taking time today. Consolidated net profit for FY25Q13 increased by 4.3% year-on-year, a record high of 705.3 billion yen, representing solid progress at 78% toward the full-year forecast of 900 billion yen. The slowdown in resource sector, such as metals and minerals, was offset by record high profits in non-resource sector, including food, the eighth, and textile. Core profit was 573.5 billion yen, remaining roughly at the same level as the previous fiscal year. Gross investments on a cash-out basis amounted to 697 yen billion, and decisions on high-quality investment projects have been progressing steadily. Regarding shareholder returns, at the time of the first half-business results announcement, we disclosed a 2 yen increase in dividends per share on a post-share split basis and raised the dividend payout ratio to 33%. Given the solid performance, we have decided on an additional share buyback of 20 billion yen to be completed by the end of March 2026. This raises the total payout ratio from 50% to 52%, further enhancing shareholder returns there are three material subsequent events disclosed on page 12 of the consolidated financial results first the five for one common share split effective january 1st 2026 second a newly announced 20 billion yen share buyback third the issuance of 48.7 billion yen in corporate bonds as of February 5, 2026. Segment results are detailed on pages 5 to 6 of the presentation materials. Food was the main growth driver, achieving a record high in core profit with strong performance in provisions-related transactions and companies. Dole made a turnaround in both packaged foods business and the Asian fresh produce business, delivering favorable results. Nippon Access and Itochu Shokuhin in the food distribution sector also performed extremely well, benefiting from product price increases. Family Mart, of the eighth with results already disclosed, also posted a record high core profit, with higher daily sales from strengthened product competitiveness and various marketing initiatives, as well as store rebuilding and strong results from new businesses. In addition, we executed new investments in Seven Bank and Enpharma, advancing new initiatives. Core profit and textile also reached a record high, driven by robust performance in Descente, especially in China, as well as steady progress in overseas sports-related and OEM businesses. In others, in addition to a gain from the sale of CPP in Q1, CITIC's profit contribution was slightly negative year-on-year due to yen appreciation, but overall performance was supported by solid results in the comprehensive financial services segment. Machinery achieved a record high in consolidated net profit. Although core profit declined slightly due to the absence of gains on ship sales in the previous year, core businesses such as the North American power business and increased profit contribution from Hitachi construction machinery remained robust. In ICT and financial business, although the increase in profit is not significant, core profit reached a record high. Core businesses such as CTC and Hokano Mataguchi continued to perform well. Valuation gains in funds increased at quarter end, and overseas retail finance business also performed strongly, offsetting the negative impact from the termination of contracts in mobile phone insurance business. In energy and chemicals, although the decline of car life segment at Itochu NX and volume and price decreases at Japan, South Saka Oil and Seikoazur, these were offset by solid performance in chemical businesses such as C.I. Takaron and Itochu Plastics. Regarding the factors behind the slight weakness in core profit, metals and minerals and general products in realty were major factors, as in the first half. In metals and minerals, the turnaround projects, two coking coal projects, did not achieve the initially expected profit improvements this fiscal year. However, appropriate measures have been taken and these projects are expected to return to profitability from the next fiscal year. The Brazilian iron ore business, CM, in which we made an additional investment last fiscal year, was negatively impacted by foreign exchange valuation losses. As appreciation of the Brazilian real against the U.S. dollar led to exchange valuation losses on U.S. dollar holdings at the sales company. Structural changes are underway to prevent this impact in the next fiscal year. Although loss from CM in Q13 was minus 0.1 billion yen and remained in deficit, operations themselves are steady, and a full-year profit is expected. The impact from the appreciation of Brazilian real was an unexpected factor. EMEA, in addition to lower sales prices, increased costs due to inflation and resulted in a significant year-on-year decline in profit margins. For Marabeni Itochu Steel, weak performance in North American steel and pipe markets has continued. Due to these factors, the decline in profit in metals and minerals has widened. In general products and realty, as disclosed on February 5, we have decided to partially sell our shares in Metsa Fiber and will classify as a non-affiliated company. As explained in previous quarterly earnings presentations, we took fundamental measures, including capital restructuring. Following the deterioration in profit structure, resulting from factors such as the rise in Finnish timber prices after the start of the Russia-Ukraine war, we engaged in negotiations on raw material prices and made approaches to Finnish government. After long-term negotiations with local management regarding the proportion and amount to sell, we decided on a partial sale at this time. As a result, losses will not be carried over into the next fiscal year, though losses up to Q3 remain recognized. In addition, Daiken, which is Japan Domestic Building Materials business, remained sluggish, and the North American Construction Materials business also underperformed due to rebound from the previous fiscal year etc resulting in weak performance for the entire segment this summarizes the favorable and unfavorable performances by segment other major quantitative items are as follows please refer to page 33 of the presentation materials for the balance sheet shareholders equity increased by 558 billion yen from the end of march 2025 to 6.3 trillion yen total assets increased by 1.4 trillion yen to 16.6 trillion yen due to yen depreciation etc net der stands at 0.52 times gross interest bearing debt is 3.8 trillion yen and net interest bearing debt is 3.3 trillion yen extraordinary gains and losses are detailed on page 31 of the presentation materials As of the first half, extraordinary gains and losses amounted to 121.5 billion yen. In Q3, we recorded around 10 billion yen in extraordinary gains, mainly from the sale of businesses in textile and group reorganization of a battery-related company in power and environmental solution division, bringing the cumulative total to 132 billion yen. There is a slight gap compared to the annual forecast of around 100 billion yen. For group companies, please refer to page 13 of the presentation materials. Among 267 group companies, the ratio of profitable companies is 87.6%, and we are steadily working toward achieving 90% for the full year. Total profit of profitable companies is about 600 balion yen, a decrease of around 20 billion yen year-on-year, which is almost entirely attributable to a 19.6 billion yen decline at IMEA, reflecting the significant drop in resource sector profits this fiscal year. The number of companies with increased profit year-on-year was 139, and those with profit below 2 billion yen accounted for around 55 percent of the total 148 companies there are eight group companies with profit exceeding 10 billion yen as of the end of q3 citic emia family mart ctc tokyo century marabeni itochu steel nippon access and ipower which oversees the north american power business as of the end of december there are three listed subsidiaries Itouchu Inex, Prima Meat Packers, and Itouchu Shokuhin, 14 domestic listed equity method affiliates, including Seven Bank and Suji Hongo IT Consulting, and a total of 24 listed subsidiaries and affiliates including overseas entities. For investments, please refer to page 12 of the presentation materials. Gross investment in Q3 alone was 305 billion yen, a relatively high amount, bringing the cumulative total to about 697 billion yen. New investments totaled approximately 500 billion yen, and capex at approximately 200 billion yen, resulting in cumulative investments of approximately 700 billion yen. While the target image up to 1 trillion yen has not been reached, we have steadily executed investment projects contributing to future growth up to Q3, and are continuing discussions on many projects in Investment Consultative Committee in Q4. Major investments in Q3 include 63.7 billion yen in Seven Bank, tens of billions of yen in Wood Partners, a North American multifamily residential developer, 21.6 billion yen in the North American power business, and 16.2 billion yen in Pharma, a generic pharmaceutical business in Japan. Major investments in the first half included Kawasaki Motors, the squeeze out of Descente, additional investment in Hitachi Construction Machinery, and Aishi Corporation. Gross investments breakdown by segment is around 200 billion yen in machinery, slightly less than 130 billion yen in the eighth, 80 billion yen in general products and realty, and 40 to 60 billion yen in each other's segments, etc. Rather than making massive investments in specific sectors, we conduct careful selection of projects, including capex, and execute investments while maintaining diversification. For shareholder returns, please refer to page 10 of the presentation materials. In November 2025, we announced an increase in dividends per share from 200 yen to 210 yen on a pre-share split basis. In line with our long-term management policy of the higher of 200 yen per share or 30 percent payout ratio the initial dividend per share was rolled over at 200 yen however through a dialogue with shareholders we became aware that the absence of dividend increases and progressive dividends may not have fully aligned with shareholder expectations we proactively decided to implement a visible 10 yen per share increase which is equivalent to 20 billion yen following strong first half results as for share buybacks 150 billion yen out of the initial plan of 170 billion yen was under progress until end of december the remaining amount would be addressed according to progress afterward therefore we described the amount as 150 billion yen or more on this occasion given the robust progress in consolidated net profit with the progress rate reaching 78.4% of the initial full-year plan and a marking record high, we decided today to announce additional share buybacks of the remaining 20 billion yen within this fiscal year in order to complete the initial plan of 170 billion yen. As a result, we have exceeded the long-term management policy of a dividend payout ratio of 30% and a total payout ratio of 40% or higher for the second consecutive year and also surpassed the level of previous fiscal year. In doing so, we have further strengthened shareholder returns, achieving 11 consecutive years of dividend increases and continuously executing share buybacks for 10 consecutive years. This approach is based on the belief that the amount of share buybacks set in the initial plan should be firmly executed as a commitment. It also serves as supplementary information to help stakeholders understand our perspective for the next fiscal year and beyond, taking into account the financial matrix presented in our management policy. While though the period is short, only two months or 29 business days in practice, we intend to proceed with the purchases swiftly. Regarding the forecast for FY25, I will explain in detail. While there is no change to the consolidated net profit forecast of 900 billion yen, individual segments have been revised. Metals and minerals is revised downward by 10 billion yen, the eighth is revised upward by 3 billion yen, and others, including CITIC, are revised upward by 7 billion yen. The core profit forecast, which was previously disclosed as a range of 800 to 820 billion yen, has now been revised to approximately 800 billion yen. This change reflects the revision of the foreign exchange assumption from 145 yen to 150 yen to the US dollar, the incorporation of recession risk into organic growth. At this point, there are no factors hindering the achievement of 900 billion yen in consolidated net profit and do not anticipate issues in achieving ROE of around 15%. While it is difficult to forecast the share price at fiscal year end, we believe that from the perspective of average balances used in finance and borrowings, our market capitalization is the highest among the trading companies in the most of days. We will continue to aim for the triple crown among trading companies and will remain focused in Q4. Regarding the full year forecast on page 7 of the presentation materials, extraordinary gains and losses which supplement core profit are unchanged at approximately 100 billion yen, representing the difference between consolidated net profit of 900 billion yen and core profit of 800 billion yen. The term approximately is used to reflect the potential for fluctuations between core profit and extraordinary gains and losses in Q4. Possible factors of this fluctuation include the exchange rate sensitivity of approximately 0.8 billion yen per 1 yen in Q4. Forecast is based on 150 yen to the dollar, but the recent rate is around 156 158 to the dollar in addition some businesses such as ctc textile food and part of machinery are expected relatively strong performance during q4 in some segments gains on sales from asset replacements are included in core profit there may also be upward or downward fluctuations in the year-end evaluation of assets and in the case of disposals these are included in extraordinary gains and losses in consideration of these factors we maintain the forecast for extraordinary gains at approximately 100 billion yen to reiterate the thinking behind the forecast recession risk has been incorporated into organic growth for each segment and impact of increased u.s import tariffs or geopolitical risks which were concerned through the first half are not expected to have an excessive impact in Q4. Recession risk, organic growth, and profit contributions from new investments in FY25 are integrated with a fluctuation factor of plus 15 billion yen. The growth in core profit is slower than that of consolidated net profit, which forms the basis for shareholder return calculations and should be evaluated over multiple years rather than a single year. Furthermore, we have consistently increased consolidated net profit in increments of 100 billion yen, steadily strengthening our foundation at each stage, which has enabled us to reach the current profit level of 900 billion yen. The resource sector, which once accounted for about 25% of core profit, has recently gradually declined in absolute terms, and now accounts for less than one-sixth, or around 15% of total core profit. The current structure, which supplements this decline with growth in high-quality non-resource sector and profit contributions from new investments has been in place since FY21, when we reached the profit level of 800 billion yen. Non-resource sector is inherently less volatile and delivers steady profit growth, although the growth tends to be gradual. The reason for the slowdown in core profit growth this fiscal year is entirely due to the delay in improvements at two coking coal projects and IFL pulp business. Measures for these have already been completed and positive effects are expected from the next fiscal For example, even if the profit from the two coking coal projects is zero combined with IFL, we expect an improvement in core profit of tens of billions of yen. Considering profit contributions from new investments made since FY24, we expect the slowdown in core profit growth to ease from the next fiscal year. Regarding the individual factors in the full-year forecast on page 7 of the presentation materials, the initial full-year plan assumed a forex impact of minus 40 billion yen at 140 yen to dollar, but this has been revised to 150 yen to dollar with an impact of minus 10 billion yen expected, which is a slightly more conservative assumption than the recent market condition. The impact of resource prices remains unchanged, at minus 10 billion yen from the initial full year plan, for a combined impact of minus 20 billion yen from forex and resource prices. Turnarounds were initially expected to contribute plus 30 billion yen, but were revised to plus 20 billion yen as of end of first half, reflecting the underperformance of two coking coal projects and IFL, with no further revision at Q3. The status of improvement in two coke and coal projects is unchanged from first half. Losses widened at IFL, but, as described, measures have been taken, and being offset by the strong performance of Dole, which serves as a positive factor. The profit contribution from new investments in FY24 was initially expected to be plus 20 billion yen, revised downward to about plus 15 billion yen as of end of first half, including a negative forex valuation impact of about 5 billion yen at CM in the Brazilian iron ore business, which has already been addressed. Performance of Dicente and others is much higher than expected. The initial full-year plan for recession risk was about minus 40 billion yen, of which the direct tariff impact was estimated at about minus 15 to 20 billion yen with reference to the decline in core profit during the covid 19 pandemic based on results up to first half the impact of tariffs and geopolitical risks was deemed limited and the forecast was revised to minus 20 billion yen as a first half and further incorporated into organic growth this time the forecast for organic growth and profit contributions from new investments in FY25 was initially presented as a range of plus 40 to 80 billion yen, revised to plus 50 to 70 billion yen as of end of first half, and now, considering delays in becoming profitable of new investments and the inclusion of recession risk of minus 20 billion yen, is set at net plus 15 billion yen. Extraordinary gains and losses have accumulated to 132 billion yen as of Q3, but the forecast remains at approximately 100 billion yen. We will continue to monitor the various factors that may cause increases or decreases in Q4.
