MITSUI MATSUSHIMA CO., LTD.

Transcription

1 MITSUI MATSUSHIMA CO., LTD. Presentation for Financial Results Ended March 2014 May 2014

2 Contents FY2013 Financial Results P.3 FY2014 Consolidated Earnings Forecast P.10 Growth Strategy P.15 Guide to the Corporate Group s Businesses P.19 Reference Material: Coal Business Outline P.35 2

3 FY2013 Financial Results 3

4 Consolidated Income Statement Net sales, operating profit: A drop in coal prices and lower sales volume in the Fuel Business (Coal sales) as well as a price drop in the Fuel Business (Coal production) reduced both net sales and operating profits. Non-operating profit: Posted exchange rate gains of 474 million yen (up 381 million yen from the previous fiscal year), received Interest of 240 million yen (drop of 28 million yen from the previous fiscal year) and equity method investment returns (GDM, LCS*) of 21 million yen (drop of 1 million yen from the previous fiscal year). Extraordinary profit: Posted gain on sale of noncurrent assets of 464 million yen, subsidies received of 268 million yen. Extraordinary loss: Posted impairment loss of 401 million yen, loss on reduction of noncurrent assets of 248 million yen, loss on sales of noncurrent assets of 199 million yen. * Note: Affiliated companies accounted for by the equity method: GDM = PT. Gerbang Daya Mandiri, LCS = Liddell Coal Sales Pte. Ltd (Million yen) FY2012 FY2013 Yr/Yr Change Net sales 84,009 77,300 (6,708) Operating profit 3,820 1,891 (1,928) Non-operating profit Non-operating expenses Ordinary profit 4,108 2,524 (1,584) Extraordinary profit Extraordinary loss 1,205 1,105 (99) Net profit before income taxes 3,078 2,153 (925) Income taxes - current 1, (530) Corporate taxes - deferred 99 (129) (229) Net profit 1,699 1,532 (167) 4

5 Consolidated Segment Information Fuel Business (coal sales and production): Details noted in Breakdown of Fuel Business (Coal sales and production) on the next page. Contract Service Business: Operating losses due to amortization of goodwill, etc. [Sales] Business (Million yen) FY2012 FY2013 Yr/Yr Change Fuel (Coal sales) 66,529 60,149 (6,380) Fuel (Coal production) 16,093 15,829 (264) Contract service 4,562 5,946 1,383 Construction material 3,064 2,655 (408) Real estate Recycling and ferroalloys (64) Others 2,439 1,704 (735) Adjustment (9,528) (9,773) (244) Total 84,009 77,300 (6,708) [Operating profit] Business (Million yen) FY2012 FY2013 Yr/Yr Change Fuel (Coal sales) (38) (100) (62) Fuel (Coal production) 4,248 2,110 (2,138) Contract service 32 (85) (118) Construction material (189) (68) 120 Real estate (15) (53) (37) Recycling and ferroalloys (187) Others (35) Adjustment 5 4 (0) Total 3,820 1,891 (1,928) * The Contract Service Business included nine months of financial results for FY2012 and twelve months of financial results for FY2013 as a result of acquisition of M&M Service Co., Ltd. in 2Q/FY2012. * The Fuel Business (Coal production) recorded 62 million yen as amortization of goodwill and the Contract Service Business recorded 133 million yen as amortization of goodwill. * "Others" includes the Solar Power Generation Business, Nursing Care Business, Stevedore and Warehouse Business, and Coal Mining Technique Transfer Business. The Supermarket Business was sold in 2Q/FY2013. * Sales" represents sales before the elimination of inter-segment transactions. 5

6 Breakdown of Fuel Business (Coal Sales and Production) Coal sales: Coal production: Sales decreased due to a drop in coal prices and a decline in sales volume in coking coal. Operating profit fell on lower sales volume. Sales decreased compared to the previous year as a drop in coal prices outweighed the benefits from the favorable exchange rates for both US$/A$ and /A$ as well as increased sales volume. Operating profit fell due to a drop in coal prices. [Sales] (Million yen) Coal sales Sales volume (million tonnes) Coal production Sales volume (million tonnes) FY2012 FY2013 Yr/Yr Change 66, , , , (6,380) (0.15) (264) 0.08 Adjustments (9,427) (9,723) (296) Fuel business total 73,195 66,255 (6,940) [Operating profit] (Million yen) FY2012 FY2013 Yr/Yr Change Coal sales (38) (100) (62) Coal production 4,248 2,110 (2,138) Adjustments Fuel business total 4,210 2,010 (2,200) Coal sales (Apr-Mar) Coal production (Jan-Dec) Major Index FY2012 FY2013 Change Average coal price of import and sales 11,048 10,247 ( 801) Exchange rate /US$ (Average rate) Average coal price: Thermal coal US$ US$94.96 (US$23.59) Average coal price: Semi-soft coking coal US$ US$ (US$48.14) Exchange rate US$/A$ (Average rate) US$ US$ A$ weakens (US$0.0625) Exchange rate /A$ (Settlement: Average rate during period) Yen weakens

7 Consolidated Balance Sheet Mar 31, 2013 Mar 31, 2014 Change Major changes Amount (Million yen) Share (%) Amount (Million yen) Share (%) (Million yen) Current assets 20, , ,988 Fixed assets, Deferred assets 35, , Cash and deposits +2,149, Accounts receivable+687 Tangible fixed assets (1,475), Goodwill +1,401, Investment securities +454 Total assets 56, , ,532 Current liabilities 12, , (160) Fixed liabilities 12, , ,014 Accounts payable (1,095), Short-term debt +994 Long-term debt +863, Long-term leases +984 Total liabilities 25, , ,854 Total net assets 31, , ,678 Total liabilities and net assets 56, , ,532 March 31, 2013 March 31, 2014 Cash and deposits 12,212 14,362 Debts (including bonds) (11,839) (13,573) Net cash and deposits Net profit +1,532, Dividend payment (693), Foreign currency translation adjustment +1,304 As a result of acquisition of Nippon Straw Co., Ltd. in February 2014, assets and liabilities increased as below. Assets +5.6 billion yen Liabilities +2.5 billion yen (end March 2014) 7

8 Consolidated Cash Flows (Million yen) FY2012 FY2013 Main Factors Net profit before income taxes Depreciation and amortization Working capital Others Cash flows from operating activities 3,078 1,474 1,272 (1,379) 4,446 2,153 1,905 (1,351) (376) 2,331 Decrease in accounts payable Changes in fixed assets Acquisition of consolidated subsidiary Others Cash flows from investing activities (487) (2,474) 262 (2,699) 732 (1,726) (214) (1,208) Increase due to sale of Mitsui Matsushima company assets Decrease due to acquisition of Nippon Straw Co., Ltd. shares Decrease due to acquisition of LCS shares (affiliated company accounted for by the equity method) Changes in debt and bonds Dividend payments Others Cash flows from financing activities (1,326) (551) (43) (1,921) 270 (689) Increase due to long-term debts Increase due to sale and lease back Effect of exchange rate changes on cash and cash equivalents Changes in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period ,962 8,557 9,182 9,182 11,145 8

9 <Reference> Major Financial Indicators -Consolidated; actual performance for the past 6 years FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 Net sales (million yen) 107,691 61,014 87,658 98,063 84,009 77,300 Operating profit (million yen) 6,441 4,803 3,102 6,290 3,820 1,891 Ordinary profit (million yen) 4,251 5,250 2,553 6,577 4,108 2,524 Net profit (million yen) (1,251) 3,463 4,480 4,880 1,699 1,532 Earnings per share (EPS) (yen) (11.89) Total net assets (million yen) 9,040 20,203 24,251 26,853 31,129 32,807 Shareholders equity ratio Balance of liabilities with interest (incl. leases) (%) (million yen) 24,952 19,908 15,698 10,583 11,839 14,674 Debt/equity ratio (times) Book value per share(bps) Return on assets (ROA) (yen) (%) Total number of shares outstanding (thousand) 105, , , , , ,677 Dividend per share (yen) * * The above figures are based on the annual securities report. * Includes 1 yen commemorative dividend 9

10 FY2014 Consolidated Earnings Forecast 10

11 FY2014 Consolidated Earnings Forecast Net sales, Operating profit, Ordinary profit, Net profit Although Nippon Straw Co., Ltd. (Beverage & Food Packages Business) acquired in February 2014 will contribute to FY2014 earnings, lower coal prices and sales volume in the Fuel Business (Coal sales and production) are expected to reduce the Company s sales and profits. FY2013 Results FY2014 Forecast Change (100 million yen) Term 1 st half 2 nd half Term Net sales (123) Operating profit 19 (6) 4 (2) (21) Ordinary profit 25 (4) 6 2 (23) Net profit 15 (4) 5 1 (14) * The forecasts above is based on information available as of the date of this publication. Actual results may vary due to various factors occurring in the future. 11

12 Consolidated Earnings Forecast by Segment Fuel Business (Coal sales and production): Due to lower coal prices and sales volume, both sales and profits are expected to decrease. Beverage & Food Packages Business: Business will start contributing to full-term earnings in FY2014. [Sales] [Segment profit] Business (100 million yen) FY2013 Results FY2014 Forecast Yr/Yr Change Business (100 million yen) FY2013 Results FY2014 Forecast Yr/Yr Change Fuel (Coal sales) (136) Fuel (Coal production) (28) Renewable energy Fuel (Coal sales) 4 4 (0) Fuel (Coal production) 24 2 (22) Renewable energy Beverage & Food Packages Beverage & Food Packages 4 4 Contract service (1) Real estate 6 4 (2) Others (13) Adjustments (98) (78) 20 Total (123) Contract service (0) 0 0 Real estate 2 1 (1) Others Adjustments (11) (11) 0 Total 19 1 (18) * Because of the changes in business structures and business scales, from FY2014 the Company plans to change the business segments. The main changes are listed below. The Solar Power Generation Business now included in Others will be newly established as the Renewable Energy Business. The Construction Materials Business and Recycling and Ferroalloys Business will be integrated into Others. * Others now includes the Nursing Care Business, Stevedore and Warehouse Business, and Coal Mining Technique Transfer Business. * Sales represents sales before the elimination of inter-segment transactions. Segment profits include gains/losses on investment by the equity method. 12

13 Major Indices in the Fuel Business (Coal sales and production) and Effect on Net Profit of Exchange Rate Fluctuation Coal sales (Apr-Mar) Major Index FY2013 Results FY2014 Forecast Sales volume (million tonnes): Average coal price of import and sales: 10,247 9,000 Exchange rate /US$ (average rate): Sales volume (million tonnes): Coal production (Jan-Dec) Average coal price: Thermal coal US$94.96 US$84.00 Average coal price: Semi-soft coking coal US$ US$94.00 Exchange rate US$/A$ (average rate) US$ US$0.927 Exchange rate /A$ (Settlement: average rate during period) Effect on Net Profit of Exchange Rate Fluctuation US$/A$ For each 1 cent the A$ depreciates, net profit increases approx. 90 million yen 13

14 Coal Prices: Current Situation and Our Outlook <Current Situation of Coal Prices> Global demand for coal continues to trend upward, but new coal mines have been developed and infrastructure (coal ports, railways) expanded to meet the recent demand surge from China and other developing countries, so the coal supply has hugely increased. due to the Chinese economy s slowdown, demand is not growing as fast as previously. shale gas has arisen as an alternative in the United States. For these and other reasons, the supply-demand gap is widening. Coal prices are depressed because of this supply-demand gap. <Our Outlook for Coal Prices> Coal Demand Demand for coal is expected to remain strong, and it should continue to expand over the medium to long term. (See P38 Global Coal Consumption Outlook ) New coal-fired power plants are expected to be built in Japan, and domestic coal demand is forecast to increase. Japan s electric power companies plan to build new thermal power plants with over 10 million kilowatts of generating capacity, and those plants are expected to be coal-fired due to coal s advantages in terms of economics and security. Coal Supply Due to current stagnant coal market, some companies are scaling back production. e.g. Glencore Xstrata Plc. has suspended U/G operations at its Australian Ravensworth mine. Further demand growth and production adjustments are expected to close the supply-demand gap, allowing coal prices to rise. 14

15 Growth Strategy 15

16 Business Environment The Mitsui Matsushima Group s Business Environment Earnings Opportunities Coal is a leading energy source filling about 25% of the world s energy demand. Global demand for coal is expected to increase, especially in developing countries. (million tonnes) 11,000 9,000 7,000 6,863 Outlook for global coal demand 7,661 8,391 9,123 Approx. 150% increase 9,678 10,086 10,218 Threats The Fuel Business s results are greatly affected by external factors such as coal prices and exchange rates. With the rise of renewable energy and shale gas, structural changes are proceeding in the energy field. (billion yen) Operating profit in the coal production and sales segment Earnings fluctuate widely on coal prices, exchange rates 2.0 5, (year) Source: EIA International Energy Outlook 2013 TableA7. World coal consumption by region, Reference case, (* Units converted from Btu to metric tons using the coal conversion calculator in the EIA website.) Source: Mitsui Matsushima financial results 16

17 Growth Strategy ~ Construction of Stable Business Portfolio~ Growth Strategy Increase profitability in core businesses by securing mining rights for new coal mines By using our three competitive advantages, we will work out new coal mine projects Marketing to major coal users in many sectors Coal mining technology backed by a century of activities Planning and proposal ability underpinned by international coal investments Stabilize and diversify profitability by developing new business Develop new businesses in non-coal fields where earnings will not fluctuate by external factors such as coal prices and exchange rates. M&A In-house ventures Sustained growth and development through construction of a stable business portfolio 17

18 Growth Strategy ~ Up to Now and Future Direction~ Increase profitability in core businesses by securing rights for new coal mines Up to Now Future Direction Make efforts to secure promising mining rights Make efforts to secure mining rights from exploration stage in joint venture with Australia s Square Resources Pty Ltd Acquisition of Nagata Engineering Co., Ltd., which solely possess the coal separation technology in Japan. Acquisition of GDM (Indonesia GDM coal mine) shares The whole group will use its technological prowess to judge risk and participate in promising projects at an early stage, in order to holding down initial investments. While raising their value, it will finally bring projects to the coal-shipment stage. Stabilize and diversify profitability by developing new business Up to Now Fostering new non-coal businesses Acquisition of M&M Service, Co., Ltd. (Contract Service Business) Started solar power generation business (Third phase construction slated for completion in FY2014 with 6MW of generating capacity) Acquisition of shares in Nippon Straw Co., Ltd. (Beverage & Food Packages Business) Entering into Nursing Care Business Future Direction As the Company fosters the businesses it has bought or newly launched, it will continue to seek new proposals. 18

19 Guide to the Corporate Group s Businesses 19

20 About the Fuel Business 20

21 Structure of Fuel Business (Coal Sales & Production) Fuel Business (Coal Sales) Operations: Coal sales to domestic users by Mitsui Matsushima s Fuel and Energy Business Coal obtained from Australia, Indonesia, Canada, the US, and China primarily from mines in which the Company has invested is sold to Japanese users, such as steel companies, power companies, and general industry. Sales: In FY2013, sales volume was 5.87 million tonnes. (About 57% went to the steel industry and 43% to power companies and general industry. About 20% was coking coal and 80% thermal coal.) The Fuel Business (Coal sales) accounts for the most part of the Mitsui Matsushima Group s sales. Profit structure: Commission sales Income is basically commission income, so coal price fluctuations in the Fuel Business (Coal sales) have a strong impact on the Corporate Group s sales, but not so strong on profits. Sales to users Steel companies Power companies General industry Mitsui Matsushima Tokyo Branch Fuel and Energy Business Mitsui Matsushima Fukuoka Head Office <Reference> How Coal Prices are Decided Price to the Japanese buyer were decided by negotiations carried out between a champion negotiator representing the buyer and the seller. The champion negotiator from each side is usually the biggest buyer/supplier. This system is referred to as the Benchmark Pricing system. This price is often applied by the Fuel Business (coal sales and production). Thermal coal prices are negotiated in annual contracts, which often start in April. Coking coal prices are set in quarterly negotiations. Spot prices are set by negotiation based on the price of a global standard thermal coal loaded at Australia s Newcastle Port. This is a traded price, including futures trades on an exchange established by globalcoal. It does not necessarily reflect actual supply-demand conditions. Liddell Coal Mine User needs analyzed and transmitted to development and operations Two-way cooperation Information on new coal businesses provided, as well as planning and proposals Fuel Business (Coal Production) Operations: Mainly coal production and sales of Liddell Coal Mine. About Liddell Coal Mine Operating form: JV between MITSUI MATSUSHIMA AUSTRALIA Pty Ltd., 32.5%, and Glencore Xstrata plc 67.5% JORC resource: 660 million tonnes Measured: 100 Mt ; Indicated: 210 Mt ; Inferred: 350 Mt Reserves: 56 Mt (data as of end December 2013) Productivity: 11,188tonnes / person / year, clean coal in 2013 cf. Productivity in NSW, Australia : 7,830 tonnes/p/y, total of open-cut and underground mining Liddell Coal Mine is therefore one of the most productive in NSW. Production capacity: 7.50 Mtonnes/year (maximum capacity for the coal preparation plant Profit structure: 32.5% of the Liddell Joint Venture s profits are proportionally included in consolidation 21

22 Development of Overseas Fuel Businesses As of April 1, 2014 Walter Energy Inc. (shares owned / exclusive marketing rights in Japan) CY2013 Wolverine Coal Mine Production vol.: approx. 1.6 Mt Brule Coal Mine Production vol.: approx. 2 Mt Willow Creek Coal Mine China Xstrata Coal Canada Resources Ltd. (exclusive marketing rights to Japan) Lossan Mine Coking Coal/PCI coal (development planned) resources: 240 Mt Canada Shenhua Group and Jincheng Group Collaborating with Shenhua Group and Jincheng Group on sales of coal products for Japanese market. Indonesia PT. Anugerah Bara Kaltim ABK Coal Mine (exclusive marketing rights to Japan) Thermal coal production volume: approx. 7 Mt (CY2013) PT. Gerbang Daya Mandiri (30% capital investment / exclusive marketing rights to Japan) GDM Coal Mine Thermal coal production volume: approx. 100,000 t (CY2013) [open-cut mining] (Underground mining: 1 Mt/year planned) Tiger Energy Trading Pte. Ltd. (marketing rights to certain customers in Japanese) JMB Coal Mine Thermal coal production volume: approx. 9 Mt (CY2013) Sebuku Coal Mine Thermal coal production volume: approx. 4 Mt (CY2013) Australia Liddell Joint Venture (32.5% equity participation / exclusive marketing rights in Japan) Liddell Coal Mine Coking coal 25%; Thermal coal 75% Coking coal production capacity: 7.5 Mt (CY2013) New proposal: Square Exploration (exploration activities) 22

23 Fuel Business Organizational Chart As of April 1, 2014 Capital participation (ratio) Return of profits Flow of coal sales Consolidated subsidiary Capital participation ratio less than 20% Customers Mitsui Matsushima Co., Ltd. Walter Energy Inc. (US) Brule Coal Mine (Canada) Wolverine Coal Mine (Canada) Willow Creek Coal Mine (Canada) Tiger Energy Trading Pte. Ltd. (Singapore) JMB Coal Mine (Indonesia) Sebuku Coal Mine (Indonesia) 100% MITSUI MATSUSHIMA INTERNATIONAL PTY.LTD. (MMI) Dividend Dividend 100% MMI Indonesia Investments Pty Ltd Dividend 100% MITSUI MATSUSHIMA AUSTRALIA PTY.LTD. Dividend Hold equity 32.5% Liddell Coal Marketing* (Singapore) Liddell Coal Sales <Equity method applied> PT. Anugerah Bara Kaltim (Indonesia) ABK Coal Mine (Indonesia) Profit/ Dividend Hold equity 30% PT Gerbang Daya Mandiri (Indonesia) GDM Coal Mine operations <Equity method applied> Profit Interest 32.5% Liddell Joint Venture (Australia) Liddell Coal Mine operations 配当 * A new sales company was established in Singapore to strengthen and streamline marketing, and sales have begun through that channel. Some sales do not go through this company. 23

24 Liddell Coal Mine (Australia):1 Operation : JV between Mitsui Matsushima Australia Pty Ltd., 32.5%, and Glencore Xstrata plc JORC Resource : 660 million tonnes Measured : 100 Mt ; Indicated : 210 Mt ; Inferred : 350 Mt Reserves : 56 Mt Productivity : 11,188tonnes / person / year, cleaned coal in 2013 cf. Productivity in NSW, Australia : 7,830 tonnes/p/y, total of open-cut and underground mining Production Capacity : 7.50 million tonnes / year [ maximum capacity for the coal preparation plant ] Australia Liddell Coal Mine Good location : about 107 km to the port Northern Territory 港 Western Australia South Australia Queensland New South Wales Newcastel Sydney Victoria Canberra World s largest coal port Mitsui Matsushima International Pty. Ltd. Mitsui Matsushima Australia Pty. Ltd 24

25 Liddell Coal Mine (Australia):2 Production Results and Plan ( raw coal ) As of Dec.31, Owner operation started Liddell (total) actual 2010actual 2011actual 2012actual 2013actual 2014plan Mitsui Matsushima portion Mining site 25

26 Coal Import and Sales Trends (By type of coal) Sales by type of coal 100 million yen 1,000 Thermal coal Coking coal FY2011 FY2012 FY2013 FY2014 Sales volume by type of coal Ten thousand tonnes Thermal coal Coking coal FY2011 FY2012 FY2013 FY

27 Coal Imports and Sales by Customer Industry Coal sales by customer industry Cement 3% General Industry 6% Cement 3% General Industry 7% Cement 2% General Industry 10% Cement 4% General Industry 14% Electricity 20% Iron and Steel 71% Electricity 20% Iron and Steel 70% Electricity 28% Iron and Steel 60% Electricity 28% Iron and Steel 54% FY2011 ( 82.4 billion) FY2012 ( 66.5 billion) FY2013 ( 60.1 billion) Coal sales volume by customer industry FY2014 ( 46.6 billion) Planned Cement 4% General Industry 8% Cement 3% General Industry 8% Cement 3% General Industry 11% General Industry 15% Cement 4% Electricity 25% Iron and Steel 63% Electricity 24% Iron and Steel 65% Electricity 29% Iron and Steel 57% Electricity 28% Iron and Steel 53% FY2011 (6.50 Mt) FY2012 (6.02 Mt) FY2013 (5.87 Mt) FY2014 (5.16 Mt) Planned 27

28 Impact of Exchange Rates on Coal Production Business Coal Sales US$ denominated <Quantity x coal price (US$)> MMA Non-consolidated P&L Accounted for in A$ Mitsui Matsushima Consolidated P&L Accounted for in = Net sales (US$) Exchange Rate Conversion (1) US$ to A$ Net sales (A$) Sales cost (A$) General expenses (A$) Net sales ( ) Sales cost ( ) General expenses ( ) Operating profit (A$) Non-operating P&L (A$) Ordinary profit (A$) Extraordinary P&L (A$) Exchange Rate Conversion (2) A$ to Operating profit ( ) Non-operating P&L ( ) Ordinary profit ( ) Extraordinary P&L ( ) Corporate tax (A$) Corporate tax ( ) Net profit (A$) Net profit ( ) Coal sales in the Mitsui Matsushima Australia (MMA) Coal Production Business are denominated in US$. MMA, an Australian company, converts its US$-denominated coal sales into A$ using (forex conversion (1)) P&L accounts other than sales (coal production, sales cost, etc.) arise in A$ and are not affected by forex conversion (1) To calculate the Mitsui Matsushima Group s consolidated results, the P&L accounts of MMA must be converted into using (forex conversion (2)). 28

29 How Coal Production Business s Earnings Change Due to Exchange Rate When US$/A$ rate = 1.0 When US$/A$ rate = 1.2 Coal sales (US$) US$100M Forex conversion MMA nonconsolidated P&L (A$) Sales A$100M Sales & production cost 1.0 A$60M Profit A$ 40M If A$ strengthens against US$ Sales volume x coal price is assumed to be constant Coal sales (US$) US$100M Forex conversion 1.2 MMA nonconsolidated P&L (A$) Sales A$83M Sales & production cost A$60M Profit A$ 23M Profit down Sales decline on the exchange rate Sales & production cost is unaffected When US$/A$ rate = 1.0 When US$/A$ rate = 0.8 Coal sales (US$) US$100M Forex conversion 1.0 MMA nonconsolidated P&L (A$) Sales A$100 Sales & production cost A$60M Profit A$ 40M If A$ weakens against US$ Weaker A$ is advantageous Coal sales (US$) US$100M Forex conversion MMA nonconsolidated P&L (A$) Sales A$125M Sales & production cost 0.8 A$60M Profit A$ 65M Profit up Sales rise on the exchange rate Sales & production cost is unaffected 29

30 About New Domestic Businesses 30

31 Subsidiary Acquisition of Nippon Straw Co., Ltd. Main businesses and strengths Company Overview Name: Nippon Straw Co., Ltd. Location: Shinagawa-ku, Tokyo Employees: 155 Business operations: Manufacture of drinking straws, milk cap and other plastic products Sales distribution of Solo Cup Company products Licensing business for cups and food containers Earnings for year ended December 2012 Net sales: 3,818 million yen Operating profit: 304 million yen Ordinary profit: 301 million yen Net profit: 141 million yen Since developing the world s first telescopic straw in 1983, Nippon Straw (NS) has been an industry pioneer with an overwhelming 65% market share (survey by NS.) Highly trusted by its blue-chip clients, including major dairy goods and beverage producers, NS achieves strong performance. NS s strengths are its unique technological skills, product development capability, comparative advantages in ability to manufacture diverse products and in quality control. Telescopic straw Growth Potential By establishing NS as a Group subsidiary, we will promote sales in overseas markets, where telescopic straws are not a mainstream product. We will explore new sources of domestic demand, such as products answering the needs of the nursing care field. Transactions in single straws have begun mainly for convenience stores. Utilize our straw technology to develop straws for non-beverage use. Multipurpose straw, extension bellows 31

32 Entering Nursing Care Business and Establishment of Nursing Care Business Management Corporation On January 10, 2014, the Board of Directors resolved to enter nursing care business and to establish a nursing care business management corporation. The first step of this new business will be to build two apartments for the elderly with nursing care services on company-owned land. These properties will be managed by the newly established MM Life Support Co., Ltd. (capital 80 million yen, wholly owned by Mitsui Matsushima), which also will offer various nursing care services, including both outpatient and in-home nursing care. The concept is a place where I would like to have my parents live and where I would like to live in the future. The Mitsui Matsushima Group will utilize its management resources based in Fukuoka to fostering this type of nursing care business, that answer the needs of an aging society. (Provisional name) Plan for Serviced Homes for the Elderly in Muromi, architectural rending Location: Overview: Construction start: April 2014 Operations start: and Muromi, Sawara-ku, Fukuoka Reinforced concrete structure, five-story building, 55 units Planned tenants include a clinic and pharmacy January 2015 (planned) (Provisional name) Plan for Serviced Homes for the Elderly in Fujisaki, architectural rendering Location: Yayoi, Sawara-ku, Fukuoka Overview: Reinforced concrete structure, three-story building, 26 units Joint construction with outpatient nursing care center and in-home nursing care center Construction start: April 2014 Operations start: December 2014 (planned) 32

33 Third Phase Construction of Solar Power Generation Project on February 7, 2014, The Board of Directors passed a resolution that MM Energy Co., Ltd. (headquarters: Fukuoka), a wholly owned subsidiary conducting operations related to renewable energy projects, is to build a new 2 MW solar power station. MM Energy is already operating 4MW solar power stations, utilizes two-thirds of our company-owned land (approx. 100,000 m 2 ) located in Fukutsu, Fukuoka. We are now planning to use the remaining portion of the company-owned site (approx. 32,000 m 2 ) to build a 2 MW solar power station. After completing the construction, we will have a total power generating capacity of 6 MW. Overview of Third Phase Construction Plan Name of Power Station: Mega-Solar Tsuyazaki No. 3 Power Station Power Generating Capacity: Approx. 2 MW Output: Approx. 2,000,000 KWh/year (equivalent to power used by 600 to 700 of general households) Installation Site: Aza Nishitatekawa, Tsuyazaki, Fukutsu City, Fukuoka Prefecture Total Investment: Approx. 600 million yen Construction Schedule: Commencement: February 2014 Completion: October 2014 (planned) General Overview of Operations Following Completion of Third Phase Construction Power Generating Capacity: Approx. 6 MW Output: Approx. 6,000,000 KWh/year (equivalent to power used by 2,000 of general households) Solar Panels: Manufactured by Toshiba, 25,536 panels used Land Area Used Approx. 100,000 m 2 Total Investment: Approx. 1.8 billion yen Mega-Solar Tsuyazaki No. 1, No. 2 Power Stations 33

34 M&M Service Co., Ltd. Mitsui Matsushima acquired all shares in July Business details: Offering management services for recreational facilities, training centers and other facilities owned by private companies and local governments around Japan. Future developments: Promote consigned management services, especially in the Kyushu region where M&M Service has not fully developed it s business, to support stabilization and diversification of group s income. "OYADO-NET" A website operated by M&M Service that provides information about recreational facilities and lodgings owned by major corporations and local governments. Hotel Fuuka in Yatsugatake (Example of facilities) Keburikawa Resort in Kyoto Resort KUMANO CLUB in Mie 34