Mitsui & Co., Ltd. UK Regulatory Announcement: 3rd Quarter Results

TOKYO–(BUSINESS WIRE)– 

This announcement is for our U.S.$5,000,000,000 Euro Medium Term Note Programme.

Consolidated Financial Results for the Nine-Month Period Ended December 31, 2019 [IFRS]

Mitsui & Co., Ltd. announced its consolidated financial results for the nine-month period ended December 31, 2019, based on International Financial Reporting Standards (“IFRS”).

Mitsui & Co., Ltd. and subsidiaries

(

Web Site

:

https://www.mitsui.com/jp/en/

)

President and Chief Executive Officer : Tatsuo Yasunaga

Investor Relations Contacts : Masaya Inamuro, Investor Relations Division TEL 81-3-3285-1111

1. Consolidated financial results

(1) Consolidated operating results information for the nine-month period ended December 31, 2019

(from April 1, 2019 to December 31, 2019)

 

Nine-month period ended December 31,

2019

 

2018

 

%

%

Revenue

Millions of yen

5,193,989

3.6

5,012,969

37.2

Profit before income taxes

Millions of yen

471,312

△1.5

478,302

0.7

Profit for the period

Millions of yen

358,343

△2.4

367,136

△6.9

Profit for the period attributable to owners of the parent

Millions of yen

335,076

△4.3

350,068

△7.1

Comprehensive income for the period

Millions of yen

239,228

△32.7

355,278

△39.5

Earnings per share attributable to owners of the parent, basic

Yen

192.95

 

201.42

 

Earnings per share attributable to owners of the parent, diluted

Yen

192.82

 

201.27

 

Note:

Percentage figures for Revenue, Profit before income taxes, Profit for the period, Profit for the period attributable to owners of the parent, and Comprehensive income for the period represent changes from the previous year.

(2) Consolidated financial position information

 

 

December 31, 2019

March 31, 2019

Total assets

Millions of yen

12,424,712

11,945,779

Total equity

Millions of yen

4,611,682

4,530,308

Total equity attributable to owners of the parent

Millions of yen

4,338,284

4,263,166

Equity attributable to owners of the parent ratio

%

34.9

35.7

2. Dividend information

 

Year ended March 31,

 

Year ending March

31, 2020 (Forecast)

2020

2019

 

Interim dividend per share

Yen

40

40

 

 

Year-end dividend per share

Yen

 

40

 

40

Annual dividend per share

Yen

 

80

 

80

Note :

Change from the latest released dividend forecast: None

3. Forecast of consolidated operating results for the year ending March 31, 2020 (from April 1, 2019 to March 31, 2020)

 

Year ending

March 31, 2020

Profit attributable to owners of the parent

Millions of yen

450,000

Earnings per share attributable to owners of the parent, basic

Yen

259.44

Note :

Change from the latest released earnings forecast: None

4. Others

(1) Increase/decrease of important subsidiaries during the period : None

(2) Changes in accounting policies and accounting estimate :

(i)

Changes in accounting policies required by IFRS

Yes

(ii)

Other changes

None

(iii)

Changes in accounting estimates

Yes

Note :

For further details please refer to page 22 “4. Condensed Consolidated Financial Statements (6) Changes in Accounting Policies and Changes in Accounting Estimates”.

(3) Number of shares :

 

December 31, 2019

March 31, 2019

Number of shares of common stock issued, including treasury stock

1,742,684,906

1,742,345,627

Number of shares of treasury stock

15,124,194

4,271,539

 

Nine-month period ended

December 31, 2019

Nine-month period ended

December 31, 2018

Average number of shares of common stock outstanding

1,736,551,703

1,737,957,802

This quarterly earnings report is not subject to quarterly review.

A Cautionary Note on Forward-Looking Statements:

This report contains forward-looking statements including those concerning future performance of Mitsui & Co., Ltd. (“Mitsui”), and those statements are based on Mitsui’s current assumptions, expectations and beliefs in light of the information currently possessed by it. Various factors may cause Mitsui’s actual results to be materially different from any future performance expressed or implied by these forward-looking statements.

Therefore, these statements do not constitute a guarantee by Mitsui that such future performance will be realized.

For cautionary notes with respect to forward-looking statements, please refer to the “Notice” section on page 15.

Supplementary materials and IR meetings on financial results:

Supplementary materials on financial results can be found on our web site.

We will hold an IR meeting on financial results for analysts and institutional investors on February 4, 2020.

Contents of the meeting (English and Japanese) will be posted on our web site immediately after the meeting.

Table of Contents

1. Qualitative Information

 

(1)

Operating Environment………………………………………………………………………………….……

2

(2)

Results of Operations………………………………………………………………………………………..

3

(3)

Financial Condition and Cash Flows………………………………………………………………………..

8

 

 

 

2. Management Policies

 

(1)

Forecasts for the Year Ending March 31, 2020………..…………………………………………………….

12

(2)

Profit Distribution Policy…………………………………………………………………………………….

15

 

 

 

3. Other Information…………………………………………………………………………………………….

15

 

 

 

4. Condensed Consolidated Financial Statements

 

(1)

Condensed Consolidated Statements of Financial Position………………………………………………..……………….

17

(2)

Condensed Consolidated Statements of Income and Comprehensive Income………………………….……………

19

(3)

Condensed Consolidated Statements of Changes in Equity………………………………………………………………..

20

(4)

Condensed Consolidated Statements of Cash Flows………………………………………………………………………….

21

(5)

Assumption for Going Concern………………………………………………………………………………………………………

22

(6)

Changes in Accounting Policies and Changes in Accounting Estimates………………………………………………..

22

(7)

Segment Information…………………………………………………………………………………….……………………………….

24

(8)

The Fire Incident of Intercontinental Terminals Company LLC……………………………………………………………

25

 

1. Qualitative Information

As of the date of disclosure of this quarterly earnings report, the review procedures for quarterly financial statements in accordance with the Financial Instruments and Exchange Act are in progress.

(1) Operating Environment

In the nine-month period ended December 31, 2019, the global economy continued to exhibit slowing growth attributable to a more moderate tempo of economic expansion in the U.S. and ongoing economic deceleration in China.

In the U.S., although consumer spending continues to be resilient supported by a favorable environment for employment and employee income, the impact of trade friction between the U.S. and China is noticeable particularly in the manufacturing sector, and the pace of economic expansion is expected to drop. Meanwhile, a further weakening of growth is expected in Europe, owing to its weak export growth and slowdown in Germany, its leading economy, despite underpinning support from consumer spending. In Japan, the continuing trend of weakening exports and the effect of the hike in consumption tax in some parts of the economy has led to expectations of further slowdown of the economy. Among the emerging economies, China’s economy is still expected to continue slowing partly due to the residual impact of trade friction with the U.S., although stimulus by its government is providing certain underlying support. On the other hand, the economies of both Brazil and Russia are expected to bottom out, mainly due to the reduction of policy interest rates.

Despite a sense of stagnation throughout the global economy overall, any significant downside swing is expected to be averted given the trends of monetary easing in major countries and the recovery in market sentiment subsequent to the U.S. and China reaching agreement on a Phase One trade deal. However, careful attention should be given to the risk of downward pressures on the global economy caused by the spreading effect of novel coronavirus.

(2) Results of Operations

1) Analysis of Consolidated Income Statements

(Billions of Yen)

Current Period

Previous Period

Change

Revenue

5,194.0

5,013.0

+181.0

Gross profit

640.4

633.1

+7.3

Selling, general and administrative expenses

(437.9)

(417.4)

(20.5)

Other Income (Expenses)

Gain (Loss) on Securities and Other Investments—Net

2.6

6.5

(3.9)

Impairment Reversal (Loss) of Fixed Assets—Net

(11.6)

(3.6)

(8.0)

Gain (Loss) on Disposal or Sales of Fixed Assets—Net

7.2

5.8

+1.4

Other Income (Expense)—Net

26.2

(3.3)

+29.5

Reversal of Provision Related to Multigrain Business

11.1

(11.1)

Finance Income (Costs)

Interest Income

32.5

31.4

+1.1

Dividend Income

82.1

88.5

(6.4)

Interest Expense

(69.4)

(59.9)

(9.5)

Share of Profit (Loss) of Investments Accounted for Using the Equity Method

199.2

186.0

+13.2

Income Taxes

(113.0)

(111.2)

(1.8)

Profit for the Period

358.3

367.1

(8.8)

Profit for the Period Attributable to Owners of the Parent

335.1

350.1

(15.0)

* May not match with the total of items due to rounding off. The same shall apply hereafter.

Revenue

Revenue for the nine-month period ended December 31, 2019 (“current period”) was ¥5,194.0 billion, an increase of ¥181.0 billion from ¥5,013.0 billion for the corresponding nine-month period of the previous year (“previous period”).

Gross Profit

Mainly the Mineral & Metal Resources Segment, the Machinery & Infrastructure Segment and the Energy Segment recorded an increase, while the Chemical Segment and the Lifestyle Segment recorded a decline.

Selling, general and administrative expenses

Mainly the Mineral & Metal Resources Segment recorded a decline.

Other Income (Expenses)

Gain (Loss) on Securities and Other Investments—Net

For the previous period, a gain on securities was recorded in the Lifestyle Segment.

Impairment Reversal (Loss) of Fixed Assets—Net

For the current period, an impairment loss on fixed assets was recorded in the Lifestyle Segment.

Gain (Loss) on Disposal or Sales of Fixed Assets—Net

For the previous period, a gain on disposal of fixed assets was recorded in the Iron & Steel Products Segment.

Other Income (Expense)—Net

For the current period, the Chemical Segment recorded insurance proceeds in the business in North America and the Innovation & Corporate Development Segment recorded a valuation profit on a derivative in relation to a put option of an investment. Furthermore, a gain on the sales of property management business in Mitsui & Co. Foresight Ltd. was recorded in the Lifestyle Segment.

Reversal of Provision Related to Multigrain Business

For the previous period, the Lifestyle Segment recorded a gain on the reversal of the provision for the withdrawal from business.

Finance Income (Costs)

Dividend Income

Mainly the Energy Segment recorded a decline, while the Mineral & Metal Resources Segment recorded an increase.

Share of Profit (Loss) of Investments Accounted for Using the Equity Method

Mainly the Machinery & Infrastructure Segment and the Energy Segment recorded an increase, while the Mineral & Metal Resources Segment recorded a decline.

Income Taxes

Income taxes for the current period were ¥113.0 billion, an increase of ¥1.8 billion from ¥111.2 billion for the previous period. The effective tax rate for the current period was 24.0%, an increase of 0.8 points from 23.2% for the previous period.

Profit for the Period Attributable to Owners of the Parent

Profit for the period attributable to owners of the parent was ¥335.1 billion, a decrease of ¥15.0 billion from the previous period. For the current period, an impairment loss of ¥22.1 billion was recorded for the Moatize mine business and the Nacala Corridor rail & port infrastructure business.

2) Operating Results by Operating Segment

Real estate business and materials business, which were part of the Lifestyle Segment, were transferred to the Innovation & Corporate Development Segment and Chemicals Segment, respectively, effective April 1, 2019. In accordance with the aforementioned changes, the operating segment information for the previous period has been restated to conform to the current period presentation.

Iron & Steel Products Segment

(Billions of Yen)

Current Period

Previous Period

Change

Profit for the period attributable to owners of the parent

3.5

10.2

(6.7)

 

Gross profit

18.3

20.7

(2.4)

 

Profit (loss) of equity method investments

9.2

14.6

(5.4)

 

Dividend income

1.7

1.5

+0.2

 

Selling, general and administrative expenses

(19.8)

(21.1)

+1.3

 

Others

(5.9)

(5.5)

(0.4)

・ Others include the following factor:

– For the previous period, a one-time gain of ¥5.9 billion was recorded due to the sale of land of an affiliated company.

Mineral & Metal Resources Segment

(Billions of Yen)

Current Period

Previous Period

Change

Profit for the period attributable to owners of the parent

135.9

127.6

+8.3

 

Gross profit

176.5

135.9

+40.6

 

Profit (loss) of equity method investments

43.5

45.2

(1.7)

 

Dividend income

18.4

16.8

+1.6

 

Selling, general and administrative expenses

(33.5)

(25.0)

(8.5)

 

Others

(69.0)

(45.3)

(23.7)

・ Gross profit increased mainly due to the following factors:

– Iron ore mining operations in Australia recorded an increase of ¥55.5 billion mainly due to higher iron ore sales prices.

– Coal mining operations in Australia recorded a decrease of ¥13.4 billion mainly due to lower coal sales prices.

・ Profit (loss) of equity method investments declined mainly due to the following factors:

– For the current period, an impairment loss of ¥5.1 billion was recorded for Nacala Corridor rail & port infrastructure business in Mozambique, reflecting the revisions to our various assumptions.

– Iron ore mining operations in Australia recorded an increase of ¥11.4 billion mainly due to higher iron ore sales prices.

・ Selling, general and administrative expenses decreased mainly due to the following factor:

– For the current period, an impairment loss of ¥9.8 billion for doubtful debt was posted, reflecting the revisions to our various assumptions regarding the Moatize mine business in Mozambique.

・ Dividend income increased mainly due to higher dividends from iron ore mining operations in Australia.

・ In addition to the above, the following factor also affected the result:

– For the current period, iron ore mining operations in Australia recorded a decrease of profit amounting to ¥20.3 billion mainly due to the increase of income tax caused by gross profit increase.

Machinery & Infrastructure Segment

(Billions of Yen)

Current Period

Previous Period

Change

Profit for the period attributable to owners of the parent

59.9

55.5

+4.4

 

Gross profit

99.9

97.6

+2.3

 

Profit (loss) of equity method investments

75.8

63.0

+12.8

 

Dividend income

4.4

4.2

+0.2

 

Selling, general and administrative expenses

(98.3)

(92.7)

(5.6)

 

Others

(21.9)

(16.6)

(5.3)

・ Gross Profit increased mainly due to the following factor:

– For the current period, Bussan Auto Finance recorded an increase of ¥3.1 billion due to good sales in motorcycle and car financing business.

・ Profit (loss) of equity method investments increased mainly due to the following factors:

– For the previous period, a loss was recorded at an equity accounted investee due to its overseas rail project.

– For the current period, a gain was recorded at an automobile company in Canada due to good sales results.

– For the current period, investments in gas distribution companies in Brazil recorded an increase reflecting the refund of service tax payments through arbitrations.

– For the previous period, deferred tax assets were recorded at an equity accounted investee due to the change of the investment structure in the IPP(Independent Power Producer) business.

・ In addition to the above, the following factor also affected the results:

– For the previous period, deferred tax assets were recorded at a holding company due to the change of the investment structure in the IPP business.

Chemicals Segment

(Billions of Yen)

Current Period

Previous Period

Change

Profit for the period attributable to owners of the parent

16.6

23.7

(7.1)

 

Gross profit

89.7

110.7

(21.0)

 

Profit (loss) of equity method investments

10.0

11.0

(1.0)

 

Dividend income

2.5

2.6

(0.1)

 

Selling, general and administrative expenses

(77.4)

(79.2)

+1.8

 

Others

(8.2)

(21.4)

+13.2

・ Gross profit declined mainly due to the following factors:

– A decline of ¥4.9 billion was recorded mainly due to price drop of methanol in MMTX, Inc.

– A decline of ¥4.7 billion was recorded mainly due to price drop of main products in Novus International, Inc.

– Decline was recorded in Intercontinental Terminals Company LLC mainly due to the accidental incident.

・ Others included the following factor:

– For the current period, insurance proceeds were recorded in the business in North America.

Energy Segment

(Billions of Yen)

Current Period

Previous Period

Change

Profit for the period attributable to owners of the parent

97.5

86.9

+10.6

 

Gross profit

110.1

109.9

+0.2

 

Profit (loss) of equity method investments

33.1

26.5

+6.6

 

Dividend income

47.0

54.6

(7.6)

 

Selling, general and administrative expenses

(33.2)

(33.7)

+0.5

 

Others

(59.5)

(70.4)

+10.9

・ Gross profit increased mainly due to the following factors:

– Mitsui & Co. Energy Trading Singapore Pte. Ltd. recorded an increase of ¥6.8 billion mainly due to good performance in the oil trading business.

– Mitsui Oil Exploration Co., Ltd. recorded an increase of ¥6.1 billion mainly due to increase in production.

– Mitsui E&P Australia Pty. Ltd. recorded a decrease of ¥5.6 billion mainly due to decrease in production.

– AWE Pty Ltd. recorded a decrease of ¥4.7 billion mainly due to increase in depreciation costs.

– MEP Texas Holdings LLC recorded a decrease of ¥3.4 billion mainly due to lower oil and gas prices.

・ Profit of equity method investment increased mainly due to the following factors:

– Mitsui E&P Mozambique Area 1 Limited recorded an increase of ¥12.1 billion mainly due to the recognition of deferred tax assets in accordance with the Final Investment Decision for the project.

– Japan Australia LNG (MIMI) Pty. Ltd. recorded a decrease due to lower crude oil and gas prices.

・ Dividends from six LNG projects (Sakhalin II, Qatargas 1, Abu Dhabi, Oman, Qatargas 3 and Equatorial Guinea)

were ¥45.1 billion in total, a decrease of ¥8.6 billion from the previous period.

Lifestyle Segment

(Billions of Yen)

Current Period

Previous Period

Change

Profit for the period attributable to owners of the parent

18.1

33.6

(15.5)

 

Gross profit

103.4

106.4

(3.0)

 

Profit (loss) of equity method investments

16.5

18.3

(1.8)

 

Dividend income

3.9

4.5

(0.6)

 

Selling, general and administrative expenses

(107.0)

(100.7)

(6.3)

 

Others

1.3

5.1

(3.8)

・ Gross profit declined mainly due to the following factor:

– For the current period, suspension of drug development in the drug development fund invested through MBK Pharma Partnering Inc recorded a ¥4.1 billion loss in the valuation of fair value.

・ In addition to the above, the following factors also affected the results:

– For the current period, there was a ¥12.5 billion decline in tax burden in relation to income taxes recognized as other comprehensive income corresponding to sales of financial assets measured at FVTOCI, including the share of Recruit Holdings Co., Ltd.

– For the current period, an impairment loss of fixed assets of ¥5.8 billion was recorded mainly due to a partially poor business performance in Accountable Healthcare Holdings Corporation conducting healthcare staffing in the U.S.

– For the current period, Mitsui & Co. Foresight Ltd. recorded a gain on the sales of property management business.

– For the previous period, Multigrain Trading AG recorded a gain of ¥11.6 billion on reversal of the provision for the withdrawal from business.

– For the previous period, ¥7.5 billion gain was recorded due to the dilution of the stake in IHH Healthcare Berhad.

Innovation & Corporate Development Segment

(Billions of Yen)

Current Period

Previous Period

Change

Profit for the period attributable to owners of the parent

6.0

5.8

+0.2

 

Gross profit

42.3

50.7

(8.4)

 

Profit (loss) of equity method investments

11.1

9.1

+2.0

 

Dividend income

2.9

3.0

(0.1)

 

Selling, general and administrative expenses

(47.4)

(47.0)

(0.4)

 

Others

(2.9)

(10.0)

+7.1

・ For Others, the following factor affected the results:

– For the current period, a valuation profit on the derivative of ¥4.4 billion was recorded in relation to a put option of an investment.

(3) Financial Condition and Cash Flows

1) Financial Condition

(Billions of yen)

December 31, 2019

March 31, 2019

Change

Total Assets

12,424.7

11,945.8

+478.9

 

Current Assets

4,106.8

3,996.3

+110.5

 

Non-current Assets

8,317.9

7,949.5

+368.4

Current Liabilities

2,689.5

2,740.3

(50.8)

Non-current Liabilities

5,123.5

4,675.2

+448.3

Net Interest-bearing Debt(*)

3,611.2

3,592.0

+19.2

Total Equity Attributable to Owners of the Parent

4,338.3

4,263.2

+75.1

Net Debt-to-Equity Ratio (times)

0.83

0.84

(0.01)

(*) Since current period, Interest-bearing debt is calculated by excluding lease liability from short-term debt and long-term debt. As a result of this change, the Net Interest-bearing Debt at March 31, 2019 has been restated.

Assets

Current Assets:

・ Cash and cash equivalents declined by ¥9.9 billion.

・ Other financial assets increased by ¥75.0 billion, mainly due to increases in trading volume of derivative trading in the Innovation & Corporate Development Segment and the Energy Segment.

・ Inventories increased by ¥82.0 billion, mainly due to increases in trading volume in the Energy Segment, the Lifestyle Segment, and the Machinery & Infrastructure Segment.

・ Advance payments to suppliers declined by ¥45.0 billion, mainly due to declines in trading volume in the Machinery & Infrastructure Segment.

Non-current Assets:

・ Investments accounted for using the equity method increased by ¥90.9 billion, mainly due to the following factors:

– An increase of ¥36.5 billion due to correction of Mitsui E&P Mozambique Area 1 Limited’s company category to investments accounted for using the equity method;

– An increase due to an acquisition of shares in Arctic LNG 2 Project in Russia through Japan Arctic LNG B.V.;

– An increase of ¥16.9 billion due to an investment in Minh Phu Seafood Joint Stock Company, a shrimp producer and processor in Vietnam;

– An increase of ¥12.0 billion due to an investment in Mitsui E&P Mozambique Area 1 Limited, which participates in the Mozambique LNG Project;

– An increase of ¥199.2 billion corresponding to the profit of equity method investments for the current period, despite a decline of ¥139.7 billion due to dividends received from equity accounted investees; and

– A decline of ¥38.5 billion resulting from foreign currency exchange fluctuations.

・ Other investments declined by ¥82.8 billion, mainly due to the following factors:

– A decline of ¥36.2 billion mainly due to a partial sale of investment in Recruit Holdings Co., Ltd.;

– Fair value on financial assets measured at FVTOCI and FVTPL declined by ¥22.3 billion and ¥10.2 billion, respectively; and

– A decline of ¥5.8 billion resulting from foreign currency exchange fluctuations.

・ Property, plant and equipment increased by ¥300.6 billion, mainly due to the following factors:

– An increase of ¥257.6 billion corresponding to adoption of IFRS 16 “Leases”;

– An increase of ¥57.1 billion corresponding to time charter parties of LNG ships for Cameron LNG Export Project in the U.

Contacts

Mitsui & Co Ltd

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