MITSUI MATSUSHIMA CO. LTD. Presentation for Financial Results of the Second Quarter Ended September November 2014

Transcription

1 MITSUI MATSUSHIMA CO. LTD. Presentation for Financial Results of the Second Quarter Ended September 2014 November 2014

2 2 Contents of FY2014 Financial Results P.3 Business Outlook P.9 Reference Material P.13

3 of FY2014 Financial Results 3

4 4 Consolidated Income Statement Net sales Sales decreased in the Fuel Business (Coal sales) due to a drop in coal prices and a decline in sales volume. Operating losses Profit decreased in the Fuel Business (Coal production) due to a drop in coal prices, etc. Non-operating profit Posted equity method investment returns (LCS and GDM) of 97 million yen (increase of 40 million yen from the previous corresponding period) and received interest of 109 million yen (drop of 11 million yen from the previous corresponding period). Non-operating expenses Posted an exchange rate loss of 188 million yen (compared with exchange rate gain of 291 million yen in the previous period) Extraordinary profit Posted subsidies received of 268 million yen, and a gain on sales of investment securities of 37 million yen. Extraordinary loss Posted a loss on reduction of noncurrent assets of 248 million yen, a loss on valuation of investment securities of 102 million yen, and provision for loss on compensation of 134 million yen. (Million yen) FY2013 FY2014 Yr/Yr Change <For reference> Released May 2, 2014 Financial forecast Net sales 39,556 31,978 (7,578) 32,000 Operating profit (losses) 669 (649) (1,318) (600) Non-operating profit (291) Non-operating expenses Ordinary profit (losses) 1,149 (639) (1,788) (400) Extraordinary profit Extraordinary loss Quarterly net profit(loss) before income taxes 1,169 (847) (2,016) Income taxes-current (143) Corporate taxes-deferred 49 (333) (383) Quarterly net profit (loss) 786 (703) (1,490) (400)

5 5 Consolidated Segment Information The Company has changed the classification of reporting segments since FY2014 1Q based on the change of the business structure and the growth of each business. Major changes are as follows. - The Solar Power Generation Business which was included in Others is newly established as the Renewable Energy Business. - Construction Material Business and the Recycling and Ferroalloy Business are integrated into Others. Due to the increased importance in terms of volume in FY2014 1Q, the Stevedore and Warehouse Business which was included in Others has become an independent reporting segment. Fuel Business (Coal sales and production) Details noted on Breakdown of Fuel Business (Coal sales and production) on the next page. Renewable Energy Business Sales and profit increased due to the start of operation of Mega Solar Tsuyazaki No.2 Power Station in FY2013. [Sales] Business (Million yen) FY2013 FY2014 Yr/Yr Fuel (Coal sales) 31,894 23,944 (7,949) Fuel (Coal production) 7,464 5,847 (1,616) Renewable Energy Beverage & Food Packages - 1,813 1,813 Contract Service 3,092 2,883 (209) Real estate (87) Stevedore and Warehouse Others 1, (940) Adjustments (5,386) (4,039) 1,346 Total 39,556 31,978 (7,578) [Segment profit] Business (Million yen) FY2013 FY2014 Yr/Yr Fuel (Coal sales) Fuel (Coal production) 1,021 (479) (1,500) Renewable Energy Beverage & Food Packages Contract Service 7 2 (5) Real estate (37) Stevedore and Warehouse Others (54) (32) 21 Adjustments (638) (660) (22) Total 669 (649) (1,318) * Others include the Nursing Care Business and the Coal Mining Technique Transfer Business, etc. * Sales represent sales before the elimination of inter-segment transactions. Segment profit in the Fuel Business (Coal production) includes equity method investment returns (/FY2013: 56 million yen, /FY2014: 97 million yen). * Segment profit includes amortization of goodwill, which amounts to 32 million yen for the Fuel Business (Coal production), 45 million yen for the Beverage & Food Packages Business and 66 million yen for the Contract Service Business. * Adjustments of segment profit are mainly concerning general and administrative expenses of the headquarters not allocated to each reporting segment.

6 Breakdown of Fuel Business (Coal sales and production) 6 Coal sales Sales: Decreased due to a drop in coal prices and a decline in sales volume. Segment profit: Increased due to a decrease in selling expenses. Coal production Sales: Decreased due to a drop in coal prices Segment profit: Decreased due to a drop in coal prices and an increased operating costs of Liddell Coal Mine [Sales] (Million yen) Coal sales Sales volume Coal production Sales volume FY ,894 3,030,000 tons 7, ,000 tons FY ,944 2,530,000 tons 5, ,000 tons Yr/Yr (7,949) (500,000 tons) (1,616) (40,000 tons) Adjustments (5,362) (4,008) 1,354 Fuel business total 33,996 25,784 (8,211) [Segment profit] (Million yen) FY2013 FY2014 Yr/Yr Coal sales Coal production (of which, equity method investment return) 1,021 [56] (479) [97] (1,500) [40] Adjustments Fuel business total 1,193 (268) (1,462) Major index FY2013 FY2014 Change Coal sales (Apr-Sep) Coal production (Jan-Jun) Average coal price of import and sales 10,511 9,443 ( 1,068) Exchange rate /US$ (Average rate) Yen depreciation 3.50 Average coal price Thermal coal US$ US$ (US$ 13.1) Average coal price Semi-soft coking coal US$ US$ (US$ 20.46) Exchange rate US$/A$ (Average rate) US$ US$ A$ depreciation (US$ ) Exchange rate /A$ (Average rate) Yen appreciation ( 3.15)

7 Consolidated Balance Sheet Mar 31, 2014 Sep 30, 2014 Change Major changes Amount (Million yen) Ratio (%) Amount (Million yen) Ratio (%) (Million yen) Current assets 23, , (4,194) Fixed assets, Deferred assets 36, , Total assets 59, , (3,599) Current liabilities 12, , (4,375) Cash and deposits (2,427), Accounts receivable (2,530) Tangible fixed assets (217), Intangible fixed assets (355) Long-term deposit +1,240 Accounts payable (909), short-term debt (2,937) Fixed liabilities 14, , ,404 Long-term debt +1,604 Total liabilities 27, , (2,971) Total net assets 32, , (628) Total liabilities and net assets 59, , (3,599) Quarterly net loss (703), Dividend payment (554) Deferred gains or losses on hedges +347 Foreign currency translation adjustment +254 Cash and deposits (including Long-term deposit) Mar 31, 2014 Sep 30, ,362 13,175 Debt (including bonds) (13,573) (12,202) Net cash and deposits <<Management Index>> Capital ratio (%) D/E ratio (times)

8 8 Consolidated Cash Flow (Million yen) FY2013 FY2014 Main factors FY2014 Quarterly net profit (loss) before income taxes Depreciation Working capital Others Cash flow from operating activities 1, (379) (563) 1,160 (847) 1,060 1, ,732 Decrease in accounts receivable Change in fixed assets Others Cash flow from investing activities (1,515) 9 (1,505) (893) (18) (911) Decrease due to acquisition of assets at Mitsui Matsushima Change in debt and corporate bond Dividend payments Others Cash flow from financing activities (196) (687) 505 (379) (1,382) (551) (34) (1,968) Decrease due to repayment of short-term debt Decrease due to repayment of lease obligations Effect of exchange rate changes on cash and cash equivalents 457 (109) Change in cash and cash equivalents (266) (1,257) Cash and cash equivalents at beginning of period 9,182 11,145 Cash and cash equivalents at end of period 8,915 9,887

9 Consolidated Earning Forecast 9

10 10 Consolidated Earning Forcast Expected losses in FY2014 were initially reported in the earning forcast for this fiscal year released on May 2, FY2014 results were almost the same level as initially estimated, except that overseas subsidiaries posted exchange losses as non-operating expenses and that loss on valuation of investment securities was recorded as extraordinary loss. For the full-year earning forecast remains unchanged from the estimated figures released on May 2, 2014 partly because overseas subsidiaries see the favorable impact of foreign exchange rates for 3Q and successive quarters. (Million yen) Released May 2, 2014 Financial forecast FY2014 results FY2014 Financial forecast Net sales 32,000 31,978 65,000 Operating profit (losses) (600) (649) (200) Ordinary profit (losses) (400) (639) 200 Current-term net profit (loss) The actual results were recorded almost the same level as initially estimated, except that overseas subsidiaries posted exchange losses as non-operating expenses and that loss on valuation of investment securities was recorded as extraordinary loss. Our full-year earning (400) (703) forecast remains 100 unchanged as overseas subsidiaries see the favorable impact of foreign exchange rates for 3Q and successive quarters.

11 Fuel Business for the Future Growth Strategy Increase profitability in core businesses by securing mining rights for new coal mines Stabilizing and diversifying profitability by developing new business The Fuel business constitutes the core of the Group s business. We will continue to seek new coal mines in line with this growth strategy. Meanwhile, the upstream coal business (coal mine interests) is greatly affected by external factors such as coal prices and exchange rate. In the Fuel business, we will seek to acquire coal mine interests in the upstream sector, while offering a variety of services to meet customer needs in the midstream and downstream sectors. By committing to these activities, we will endeavor to consolidate our profitable basis and control fluctuations in revenues caused by external factors, such as sharp changes in coal prices and exchange rates in the fuel business. <Fuel Business for the Future> Mine owner Upstream Midstream Downstream Customer Continuing to seek new coal mines as a core source of profit Shifting from the conventional commission-based business, and establishing profitable basis by offering a wider variety of services to meet customer needs 11

12 Current Initiatives under the Growth Strategy Growth Strategy Increase profitability in core businesses by securing mining rights for new coal mines Stabilize and diversify profitability by developing new business The performance of the Group s core fuel business is greatly affected by external factors, such as coal prices and exchange rates. In line with the Growth Strategy, our Group has been developing and strengthening new businesses other than the Fuel business for the purpose of stabilizing and diversifying sources of profit. Current Initiatives FY2014 Estimated segment profit July 2012 Turing M&M Service Co. into a subsidiary Entry into the Contract Service Business zero million yen August 2012 Entry into the Solar Power Generation Business 100 million yen February 2014 Turing NIPPON STRAW Co. into a subsidiary Entry into the Beverage & Food Packages Business 400 million yen Segment profit Expected contribution of about 500 million yen to the revenues for the current fiscal year On the strength of the current solid financial basis of the Group, we will continue to stabilize and diversify sources of profits by aggressively developing and strengthening new businesses, including mergers and acquisitions, for the purpose of ensuring sustainable growth and development of the Group through construction of a stable business portfolio. 12

13 Reference Material 13

14 Outlook for Coal (1 million tonnes) 12,000 10,000 8,000 6,000 4,000 2,000 0 Outlook for global coal consumption 6,863 7,661 8,391 9,123 9,678 10,086 10, (Year) Source: EIA International Energy Outlook 2013 TableA7. World coal consumption by region, Reference case, (*Unit of Btu converted to metric tons using the coal conversion calculator provided on the EIA site) Others Russia and Eastern Europe Western Europe North America Asia and other regions Australia & New Zealand Korea Japan India China Because of coal s advantage in price and stable supply, Global coal demand is expected to increase along with the economic growth of emerging countries. In Japan, mid- and long-term coal demand is expected to increase with construction of new coal-fired plants. In Japan The Basic Energy Plan, determined by the Cabinet on April 11, 2014, pointed out that coal is the least subject to geopolitical risk of all fossil fuels and the lowest in price per thermal unit and that coal will be an important fuel for base-load power in supply stability and cost efficiency. Low geopolitical risk Coal mines are found and available even in politically-stable advanced nations and thus can ensure stable supply. Japan s dependency on Middle East for fossil fuels Crude oil: 83%, Natural gas: 30%, Coal: 0% Economic efficiency Oil-based thermal power generation Agency for Natural Resources and Energy The Current Status and Challenges of Coal, May 9, 2014 LNG-based thermal power generation Coal-based thermal power generation Capital cost Operation maintenance cost Fuel cost Total Source: Capital cost and Operation maintenance cost from a report of the Cost Verification Committee (December 19, 2011) (equipment utilization rate of 80%, operational period of 40 years, 2010 model plant); Fuel cost from the Advisory Committee for Natural Resources and Energy, the Basic Subcommittee, the Electricity Supply-Demand Verification Subcommittee (Material 2 from the 6th meeting of April 25, 2014) Demand growth outlook Coal demand in Japan is expected to increase by about 10% in coming years, based on the information obtained from interviews with major industry experts and other public information. Agency for Natural Resources and Energy The Current Status and Challenges of Coal, May 9, 2014 In the coal market, coal prices have remained low due to shrinking demand. In the future, however, prices is expected to turn upward in line with growing demand. The price of coal per thermal unit is the lowest in fossil fuels 14

15 Reorganizing our Group for achieving the Growth Strategy 15 Growth Strategy Increase profitability in core businesses by securing mining rights for new coal mines Stabilize and diversify profitability by developing new business In order to accelerate the Growth Strategy, we reorganized our Group into a dual-division system on July 1, Energy Division Promoting the core coal business Mission Establish stable supply to meet customer demand, and seek new coal mines that could market to emerging potential customers and that could be an attractive target of investment and thus consolidating sources of profit. Non-energy Division Promoting businesses free from effect of coal markets and currency markets Mission Seek to enhance our profitability in order to contribute to our performance even when coal prices are sluggish.

16 16 Energy Division - In the coal business, we are committed to pursuing interests in coal mine, while offering a wider variety of services. - Starting with the solar power business, we will endeavor to secure a variety of energy sources by entering other energy fields. Fuel Business (Coal production) Liddell Coal Mine, Australia Development of GDM Coal Mine in Indonesia We are providing know-how to GDM concerning our proprietary underground mining method, which enables the country s first large-scale mechanized underground mining. In the future, planned annual coal production will be raised to about one million tonnes. Coal production under our interests to increase to about 300,000 tons a year in the future (Our group owns 30% of GDM shares) Operation of Liddell Coal Mine in Australia Hunter Valley area of New South Wales Mitsui Matsushima Australia, a local subsidiary, owns 32.5% of the interests A joint venture with Glencore, which is a major Swiss natural resource developer. High-quality coking coal and thermal coal produced and mainly imported to Japanese leading customers Annual production of about 7 million tonnes, including about 1.5 million tonnes under our interests GDM Coal Mine Fuel Business (Coal sales) In addition to the Liddell Coal Mine, which our group owns 32.5% of its interests, we procure coal from other parts of Australia, Indonesia, Canada, China, and other countries. Our coal consumers include Japan s leading power companies, steel makers, cement firms, and those in other industries. Renewable Energy Business Mega-Solar Tsuyazaki No.3 Power Station in operation MM Energy Co., Ltd., engaged in the renewable energy business, operates a 4 MW solar power generation station by using two thirds of our piece of land (about 100,000 m 2 ) in Fukutsu, Fukuoka Prefecture. A 2 MW solar power generation station was added to the site and started operation on November 1, The station can generate a total of 6 MW of electricity annually, capable of supplying electricity to about 2,000 households. When the 6 MW station operates throughout the year, we can expect about 300 million yen in sales and about 120 million yen of segment profit. Exploration by Square Exploration Pty. Exploration in a joint venture with Square Resources Holdings of Australia A joint venture Square Exploration Pty. Ltd. was established to explore coal mines We seek to discover promising mines in the initial exploration phase. Other Businesses Coal Preparation and Resource Recycling Plants Business Nagata Engineering Co., Ltd., which is operating in this business, is Japan s sole owner of a coal preparation technology.

17 17 Non-energy Division - In order to stabilize and diversify our Group s revenue sources, we will develop and reinforce businesses that are free from fluctuations in the coal prices and exchange rates. - We have started new businesses, such as Contract Service Business, Beverage & Food Packages Business, and Nursing Care Business, that are integral part of people s lifestyle and we will continue to develop our business in these areas. Beverage & Food Packages Business NIPPON STRAW Co., Ltd. - Since its development a telescopic straw in 1983, the Company has been leading the domestic straw market with a dominating market share by taking advantage of its unique technology and know-how accumulated for years as a front runner. - We will promote sales in overseas markets and explore new sources of domestic demand, such as products answering the needs of the nursing care field. Nursing Care Business MM Life Support Co., Ltd. - MM Life Support Co., Ltd., a business operator, was established in January 2014 to provide nursing care services. - Two Housing for elderly with nursing care services will be opened, under our concept a place where I would like to have my parents live and where I would like to live in the future, in Sawara Ward, Fukuoka City. Contract Service Business M&M Service Co., Ltd. The company provides services for recreation facilities, training centers, and other sites on behalf of their owners - private firms and local governments - by exploiting its long experience and know-how in high-quality services provided to customers with the spirit of hospitality. Oyadonet You can reserve rooms in nationwide recreation facilities owned by major companies, as well as public-owned hotels, at any time easily. Other Businesses Real Estate Business Stevedore and Warehouse Business Industrial Machinery and Electrical Equipment Coal Mining Techniques Business Recycling and Ferroalloys Business Keburikawa, Kyoto

18 18 Opening two Housing for elderly with nursing care services Two Housing for elderly with nursing care will be opened in Sawara Ward, Fukuoka City, where is livable and located in midtown district. These Serviced Homes are managed by our group, and will provide a safe home for elderly people, through cooperation with nursing and medical professionals. For more details, please visit MM Life Support Co. s homepage ( or directly call us at (9:00 am to 5:30 pm). * Image of the building 55 rooms (For one or two persons) Scheduled to open in January 2015 About 4 minutes on foot to Muromi Station on Fukuoka Municipal Subway s Airport Line Easy access to Tenjin and Hakata Station Easy access by families A clinic for internal medicine and a pharmacy are built in the building. Scheduled to open in December rooms (For one person) A day care center and a visiting care facility annexed to the apartment buildings will ensure a safe and secure living environment for senior citizens. About 11 minutes on foot from Fujisaki Station on the Fukuoka Municipal Subway s Airport Line, or about 2 minutes on foot from Yayoi 2-chome on the Nishitetsu Bus line * Image of the building

19 Trend of Contract Prices of Australian Coal for Export to Japan 19 (US$/Mt) * Quarterly prices are shown FY1995 FY1996 FY1997 FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 1Q FY2012 FY2012 3Q FY2012 4Q FY2013 1Q FY2013 FY2013 3Q FY2013 4Q FY2014 1Q FY2014 FY2014 3Q Heavy caking coal (steel material) Non-slightly-caking coal (steel material) Thermal coal (for power generation and general industrial use) (Contract prises are based on our survey) * Thermal coal prices are those applied in April each year

20 20 These materials contain forward-looking statements that are in no way guarantees of future performance. Future performance is affected by risks and uncertainties. Future performance may vary due to changing assumptions and conditions in the business environment. These materials should not be relied on as the sole source of information, and should be used with discretion. Mitsui Matsushima Co., Ltd. is in no way responsible for any damages caused as a result of relying on or using these materials. <IR Contact> General Affairs Dept./Business Planning Dept. TEL