• 1. Approach taken in FY ended March 2017 following consolidated loss in FY ended March 2016
• 2. New Medium-term Management Plan: Initiatives for further growth
• 3. Quantitative targets
• 4. Four key initiatives for 2020
• 5. Shareholder returns policy (dividends/share buybacks)
• 6. "Driving Value Creation": What it means

FY ended March 2016

 

FY ended March 2017

 

External environment

Along with the end of the global resources super-cycle, the world is shifting away from an overreliance on volume expansion to a focus on the pursuit of growth in quality.
Meanwhile, other changes continue at a rapid pace, with shifts such as the move away from a system of global rules led by the US and Europe towards a world in which each region considers what is optimal for them.

Our focus

The consolidated loss made in the FY ended March 2016 exposed our lack of downside resilience in the face of a slump in commodity markets, so our number one priority has been to establish a profit base resilient to change and risk. Additionally, rather than accumulate a wide-ranging array of risk assets, we must ascertain growth areas where we are strong and allocate our limited resources accordingly.

 

Four key initiatives for 2020

In response to these challenges, the new Medium-term Management Plan sets out four key initiatives.

[1] Build robust profit base and thoroughly strengthen existing businesses	[2] Establish selected new growth areas	[3] Cash flow focused management; Strengthen financial base	[4] Enhance Governance, Personnel and Innovation functions

For the FY ending March 2020, we are targeting profit for the year ¥440bn, which will be our highest ever profit.
For core operating cash flow, a key performance indicator for us, we are aiming for ¥630bn, and we will also work to raise ROE to 10%.
Cash flow management was one of the key initiatives in the previous Medium-term Management Plan and we will focus more strongly on this in the new plan.

•  
  [1] Build robust profit base and thoroughly strengthen existing businesses
•  
  [2] Establish selected new growth areas
•  
  [3] Cash flow focused management; Strengthen financial base
•  
  [4] Enhance Governance, Personnel and Innovation functions

[1] Build robust profit base and thoroughly strengthen existing businesses

The three core pillars of the new Medium-term Management plan are Resources & Energy, Machinery & infrastructure, and Chemicals. These are the overwhelmingly our dominant core businesses and we intend to generate 90% of our entire core operating cash flow in these areas during the new plan.
We will continue to add assets to these areas of strength through bolt-on acquisitions, making our strongest businesses even more robust.

We will thoroughly strengthen and raise the value of existing businesses using the following initiatives:

• Realize latent value (raise value through operational improvement, business revitalization, and industry reorganization）
• Pursue business entry and exit coordinated with business cycle
• Reinforce trading by upgrading our selling power and value add

Build robust profit base and
thoroughly strengthen existing businesses

Key investment projects during the new Medium-term Management Plan

The chart below shows the accumulation of high quality assets and the start of their contributions to earnings and cashflow. We will strengthen its business foundation by accumulating new income sources from projects where investment is committed.

•  
  [1] Build robust profit base and thoroughly strengthen existing businesses
•  
  [2] Establish selected new growth areas
•  
  [3] Cash flow focused management; Strengthen financial base
•  
  [4] Enhance Governance, Personnel and Innovation functions

[2] Establish selected new growth areas

It is important for companies to continuously create value by applying their capabilities to find solutions to social issues and then share this value with their stakeholders, so that both the company and society grow together. We are paying close attention to medium-term changes in the external environment and have established four growth areas in which we have strength, into which we will dynamically allocate business resources.

The expanding middle class of Asia and growing North
American economy are core targets

Establish our next profit pillars

•  
  [1] Build robust profit base and thoroughly strengthen existing businesses
•  
  [2] Establish selected new growth areas
•  
  [3] Cash flow focused management; Strengthen financial base
•  
  [4] Enhance Governance, Personnel and Innovation functions

[3] Cash flow focused management; Strengthen financial base

Cash flow management was a key initiative in our previous Medium-term Management Plan, and we will pursue this even further under the new plan. Below is our basic cash flow management direction.

Key cash flow management policies

• Minimum dividend payments based on stable core operating cashflow*
• By achieving positive free cash flow after shareholder returns, we plan to manage the level of interest-bearing debt
• Free cash flow after minimum dividend payment will allocated as follows:
• 
• 
• 
• Maintain an A or higher rating from credit rating agencies

* Stable core operating cash flow is the level of core operating cash flow that we are able to generate stably during the Medium-term Management Plan period.

Outlook for cash flow allocation

This is the cash flow allocation outlook for the new Medium-term Management Plan based on the basic policy above.
We expect a cumulative free cash flow after minimum dividend payment for the three year period of ¥200-400bn.

Allocation of Investment

We will continue to maintain strict investment discipline and invest in carefully selected targets.
The total investment will be ¥1.7-1.9tn. The red line on the right shows that about 65% will be invested in core areas (about half of which will be in Resources & Energy), and the blue line on the left shows that about 35% will be invested in growth areas.

•  
  [1] Build robust profit base and thoroughly strengthen existing businesses
•  
  [2] Establish selected new growth areas
•  
  [3] Cash flow focused management; Strengthen financial base
•  
  [4] Enhance Governance, Personnel and Innovation functions

[4] Enhance Governance, Personnel and Innovation functions

To carry out sound business and steadily execute our key initiatives, we need to strengthen our management base. Key Measures in achieving this will be the enhancement of governance, personnel, and innovation functions.

* For details of Mitsui’s governance, see slides 26-29 of the presentation materials.

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Presentation Materials (PDF 847KB)

Assuming annual core operating cash flow of 400 billion yen, we have set a minimum total dividend payout of 100 billion yen, and we aim to steadily increase annual dividend payout as core operating cash flow grows.
We will continue to consider buybacks flexibly, including amount and timing, taking into account the overall business and market environment.

Annual dividends	Minimum total dividend payout of ¥100bn
Share buybacks	Flexible response depending on the business environment

We aim to be a company that incubates and develops new businesses.
Our diverse pool of talented professionals take the initiative in creating businesses and leverage our comprehensive strengths and unrivalled partner and customer networks to create new value.

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