Mitsubishi Corporation (OTCPK:MSBHY) F1Q 2012 Earnings Call August 2, 2011 1:00 AM ET
Ryoichi Ueda – CFO
Good afternoon. I am Ryoichi Ueda, Chief Financial Officer of Mitsubishi Corporation. Thank you for taking the time to attend our presentation of operating results for the first three months of the year ending March 2012. Today I will discuss our operating results with reference to the accompanying PowerPoint presentation titled Results for the Three Months Ended June 2011. Additional materials can be downloaded for your reference by the links on the left side of the screen.
Please look at page three. Net income in the first three months was 115 billion yen. This result was 25.8 billion yen or 18% down year-on-year. It represented an achievement rate of 26% against our full-year forecast of 450 billion yen. While we recorded a year-on-year decline in net income, the results in the first three months of the previous fiscal year included over 30 billion yen in one-time income. This included gains on a share transfer at the Chilean iron-ore related subsidiary and gains on listed share sales.
Excluding these one-time factors, earnings affected the increase. We were concerned that the damage to suppliers and logistics from the Great East Japan earthquake could have a large indirect impact on our performance. There wasn’t a significant impact in the first three months as the post disaster recovery moved ahead quicker than expected.
Please look at page four. This slide shows a year-on-year comparison of net income by operating segment. The Industrial Finance, Logistics and Development Group shown in green at the very top of the bar graph, recorded net income of 0.6 billion yen. This was down 40% from 1.0 billion yen in the previous fiscal year’s first quarter when the segment recorded a one-off gain on ship sales in the distribution related business.
Next the Energy Business Group shown in red, recorded net income of 30.1 billion yen, up 14% from 26.3 billion yen. This increase came despite the fact that in the previous fiscal year’s first quarter, the segment recorded gains on the sale of investment securities. The increased net income was due to higher dividend income from overseas resource-related business investees and higher crude oil prices.
Under this segment, in mustard color is the Metals Group which saw net income fall 30% from 82.1 billion yen to 57.7 billion yen. This decrease reflected the recording in the previous fiscal year of gains on a share transfer at a Chilean iron-ore related subsidiary of approximately 20.0 billion yen on a post-tax basis, along with lowest sales volume at Mitsubishi Development Pty Ltd, MDP.
The Machinery Group shown in purple, recorded net income of 14.2 billion yen, down 30% from 16.4 billion yen. This decrease mainly reflected the absence of gains on sales of marketable securities in the first quarter of the previous fiscal year and lower sales units due to the impact of the Great East Japan earthquake on the Asian automobile related operations.
In yellow, the Chemicals Group recorded a 49% year-on-year increase in net income from 7.7 billion yen to 11.5 billion yen. This increase was attributable to strong transactions at the Parent, as well as at the petrochemical business related company. Finally the Living Essentials Group shown in pink, posted net income of 10.7 billion yen, 16% higher than the 9.2 billion yen result in the previous fiscal year’s first quarter. This increase came despite natural disaster-related losses at affiliated companies in Japan. Segment net income rose on higher revenues on transactions at food-related subsidiaries.
Please look at page five. Total shareholders equity on June 30, 2011 was a record 3,310.3 billion yen, 25.9 billion yen higher than at March 31, 2011. While unrealized gains on shareholdings declined slightly, this was outlaid by higher retained earnings due to the net income result. The net debt-to-equity ratio, an indicator of financial soundness was maintained at 0.9 the same level as March 31, 2011.
Please look at page six. The table on the top of the slide shows foreign exchange rates, interest rates and commodity prices. The figures in blue are the assumptions for our forecasts for the year ending March 2012. First quarter figures were higher than these assumptions. As you can see from the table at the bottom of the slide, the share market was largely flat, meaning that share write-downs in the first quarter were limited.
Please look at page seven. Here I would like to explain our investment activity. In the first quarter, we made investments totaling a 120.0 billion yen. Firstly in so called strategic domains, we invested approximately 10.0 billion yen in overseas IPP businesses. Next in mineral resources and oil and gas resources, we invested approximately 50.0 billion yen. These included investments for maintenance and expansion of Coking Coal and Thermal Coal businesses in Australia and an investment in the Donggi-Senoro LNG project.
In non-resource fields, we made total investments of approximately 60.0 billion yen. Investments here included a Corporate Investment Fund, Furuya Metal Company Limited, Metal One, Aircraft Leasing assets and the shipping business. There has been a delay in the execution of certain investments we had planned to have in place by this stage of mid-term corporate structure 2012.
However, we have not changed our plan to invest 2.0 trillion yen to 2.5 trillion yen during the course of mid-term corporate strategy 2012. The current fiscal year is the second year of our three year mid-term corporate strategy 2012, which ends in March 2013. Given that our net income result was 26% of our full-year forecast, I believe that we have made a solid start to the year. That said, we must closely watch the impact of fiscal problems in Europe and the U.S. on the financial markets.
We must also continue to pay close attention to market movements including commodity price movements. At present, we have yet to incur any large losses not included in our initial full-year forecast. As long as the economic and business environments do not rapidly deteriorate, we believe we will remain on track to achieve our 450.0 billion yen full-year forecast. Therefore at this time we have not revised that forecast.
That completes my presentation. Thank you for your attention.
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