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Progress of Medium-term Management Plan

Medium-term Management Plan

Driving Value Creation

2018 2019 2020

External
environment

  • Following the end of the global resources super-cycle, a worldwide shift away from an overreliance on volume expansion to a focus on the pursuit of growth in quality
  • Continued changes at a rapid pace, with shifts such as the move away from a system of global rules led by the U.S. and Europe toward a world in which each region considers what is optimal for them

Mitsui's focus

  • Establish a profit base resilient to external changes and risks
  • Dynamic allocation of resources
  • Strengthening our management foundation

Quantitative
targets

Profit for the year*1

¥450.0 bn(Year to March 31, 2020)

¥440.0 bn(Announced at the launch
of the medium-term management plan)

Core operating cash flow*2

¥640.0 bn(Year to March 31, 2020)

¥630.0 bn(Announced at the launch
of the medium-term management plan)

ROE

10 %(Year to March 31, 2020)

10 %(Announced at the launch
of the medium-term management plan)

  • Profit for the year attributable to owners of the parent
  • Cash flows from operating activities minus cash flows from changes in working capital

FY2020 business plan2018 2019 2020

Profit for the year*1 (for each segment)

  • Steadily enhance revenues in non-resource areas, mainly from Machinery & Infrastructure and Lifestyle segments
Profit for the year Profit for the year

Core operating cash flow*2 (for each segment)

  • Strengthen cash generation in non-resource areas
  • Increase in FY Mar/2020 core operating cash flow associated with application of IFRS 16 "Leases"
Core operating cash flow
  • Resources & Energy
  • Machinery & Infrastructure
  • Chemicals
  • Other areas
  • All others / Adjustments and eliminations
  • Profit for the year attributable to owners of the parent
  • Cash flows from operating activities minus cash flows from changes in working capital
  • After reflecting modifications associated with structural reorganization

FY2020 action plan

  • Strengthen business base and expand to adjacent businesses focused around the environment and health
  • Focus on LNG business, a low-environmental-impact business
  • As the largest shareholder in IHH, strengthen influence on management systems to accelerate the enhancement of corporate value
  • Approach from different business areas and create value by exercising comprehensive strength
  • Capture demand in Asia driven by growing middle class
  • Continuously raise quality of portfolio by increasing profitability of existing assets and strategic recycling

Environment

  • Metals
  • Machinery &
    Infrastructure
  • Chemicals
  • Energy
  • Steadily establish LNG pipeline project
  • Efforts toward Mozambique FID
  • Production start at Cameron LNG Project in U.S.
  • Accelerate initiatives in renewable energy and next-generation power
  • Wind farm in Taiwan, ForeFront Power in U.S. (distributed solar generation)
  • Accelerate initiatives in reducing weight of vehicle frames, commercial vehicle electrification and recycling business
  • Gestamp Automoción in Spain, CaetanoBus in Portugal

Health

  • Chemicals
  • Lifestyle
  • Innovation &
    Corporate
    Development
  • Strengthen profit base of hospitals and hospital ancillary businesses in Asia
  • Strengthen influence on IHH management system, exercise comprehensive strength
  • Steadily drive personalized wellness business
  • Thorne Research in U.S.
  • Strengthen U.S. high-quality prepared foods business
  • Hans Kissle in U.S.
  • Strengthen senior living property business in U.S.

Key initiatives and results of the past two years of medium-term management plan2018 2019 2020

Initiative 1 Build a robust profit base and thoroughly strengthen existing businesses

The three core areas of our medium-term management plan are Resources & Energy, Machinery & Infrastructure, and Chemicals. We aim to generate 90% of our entire core operating cash flow from these three areas. We will continue to add assets through bolt-on acquisitions in these areas of strength, thereby enhancing our strengths.

Resources & Energy
  • Iron Ore
  • Oil & Gas
Machinery & Infrastructure
  • Power generation
  • Marine energy
  • Gas distribution
  • Automotive
  • Shipping
  • Railroads
Chemicals
  • Feed additives/Agricultural chemicals
  • Functional materials
  • Tank terminals
  • Chemical products manufacture and trading

In addition, we will thoroughly strengthen existing businesses and improve the value through 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

Results of the past two years

In FY Mar/2018, the first year of the medium-term management plan, we built a robust profit base and thoroughly strengthened existing businesses. In FY Mar/2019, in addition to strengthening our core areas, we achieved solid improvement in profitability in the Lifestyle and Innovation & Corporate Development segments.

Mineral & Metal Resources

First year (2018)
  • Ramping up of Moatize/Nacala, entered into project finance in Mozambique
  • Acquired additional equity in Collahuasi copper mine in Chile
Second year (2019)
  • Maintained and expanded iron ore business base in Australia (FID to develop South Flank iron ore mine and Robe River JV deposit)
  • Sold its equity interest in Bengalla coal mine in Australia (thermal coal)
Robe River JV
Robe River JV

Energy

First year (2018)
  • Start of Kipper contribution in Australia
  • Tender offer for AWE Limited in Australia
Second year (2019)
  • Steady promotion of LNG projects (Cameron LNG Project in the U.S., Mozambique, agreed business contract extensions in Abu Dhabi LNG)
  • Acquired AWE Limited in Australia through takeover bid
Cameron LNG Train1
Cameron LNG Train1
©2019 Cameron LNG. All
copyrights and trademark
rights reserved.

Machinery & Infrastructure

First year (2018)
  • Improved asset quality through IPP asset recycling
  • Commencement of 2 FPSO charter contracts
  • Additional investment in Penske Truck Leasing Co., L.P. in the U.S.
Second year (2019)

Chemicals

First year (2018)
  • Stable operations of methanol business
  • Strengthened trading
    (Mitsui & Co. Plastics Ltd., European sulphur & sulfuric acid business, etc.)
Second year (2019)

Iron & Steel Products

First year (2018)
  • Promoted business reform
    (made NIPPON STEEL TRADING CORPORATION an equity-method affiliate, sold Champions Cinco Pipe & Supply LLC in the U.S., etc.)
  • Expansion of Gestamp Automoción S.A. business in Spain
Second year (2019)
  • Pursued business transformation
    (strengthened competitiveness of NIPPON STEEL TRADING CORPORATION)
Production line for hot rolled structural steel
Production line for hot rolled
structural steel

Lifestyle

First year (2018)
  • Decision to withdraw from Multigrain Trading AG in Brazil
  • Panasonic Healthcare Holdings Co., Ltd. (currently PHC Holdings Corporation) contributed to profit
  • Acquired Bigi Holdings Co., Ltd.
Second year (2019)
  • Completed withdrawal from Multigrain Trading AG
  • Made additional investment in IHH Healthcare Bhd. to become largest shareholder
IHH
IHH

Innovation & Corporate Development

First year (2018)
  • Strengthened profit base of CIM Group, LLC in the U.S. by increasing assets under management
  • Expanded consumer goods logistics business
    (Mitsui & Co. Global Logistics, Ltd.)
Second year (2019)
  • Expanded domestic ICT-related businesses
    (MITSUI KNOWLEDGE INDUSTRY CO., LTD., etc.)
  • Built up assets of buyout fund
    (expanded portfolio in MSD Investments Ltd., etc.)

Column

The Ultra-Deepwater FPSO Charter Project for Mero Field of Brazilian Offshore Pre-Salt Oil Field

In May 2018, Mitsui and three partners invested in a long-term charter business promoted by MODEC for the purpose of providing a floating production, storage, and offloading system (FPSO) for use in the Mero field off the coast of Brazil. The project is the fifth occasion under which the companies have collaborated to operate FPSOs in Brazil. The FPSO will be named FPSO Guanabara MV31, which will be deployed at the Mero field located in the Libra area in the year of 2021 and will be chartered for 22 years.

FPSO operating in Brazil
FPSO operating in Brazil
©MODEC, Inc.
Mitsui to Participate in Coating Manufacturing and Sales Business in Europe

In April 2018, Mitsui entered into agreements with Kansai Paint Co., Ltd., concerning investment in Kansai Paint's European subsidiary, Kansai Helios Coatings GmbH. By combining Mitsui's Global Group networks, including its customers and partners, with the Kansai Paint group's products and technologies, Mitsui and Kansai Paint work together to expand coating businesses in Europe and other related markets.

Kansai Helios Coatings GmbH

Initiative 2 Establish selected new growth areas

Based on the medium-term outlook for the business environment, we have selected four growth areas in which we can excel and allocate business resources to these areas dynamically.

Mobility

Multifaceted approach to Materials and Mobility & Transportation services based on changing social needs in the environmental society

Healthcare

Build healthcare ecosystem around medical services businesses

Nutrition & Agriculture

Raise productivity, provide stable supplies in agriculture/livestock/fisheries, enhance added value of foods

Retail & Services

Foster next generation digital/logistics/financial functions to meet consumer needs

The expanding middle class of Asia and growing North American economy are core targets
Establish Mitsui's next profit pillars

Results of the past two years

In FY Mar/2018, we accelerated initiatives to establish four new growth areas, mainly in Mobility and Healthcare. In FY Mar/2019, we accelerated initiatives to building a profit base, mainly in Healthcare, including becoming the largest shareholder in IHH.

Mobility

First year (2018)
  • Commercial vehicle electrification initiatives starting in Europe (investment in EV bus business, electric vehicle battery business)
  • Expanded railway-related business (expanded rail network in U.K. passenger rail business, started Taiwan train station business)
  • Initiatives in operating lease and rental car business in Chile
Second year (2019)
  • Contributed to reduction in weight and strengthening of vehicle frames (began production at Matsusaka Plant) of Gestamp Automoción S.A.
  • Accelerated commercial vehicle electrification initiatives (made additional investment in CaetanoBus, S.A.)

Healthcare

First year (2018)
  • Expanded hospital infrastructure business in Southeast Asia (additional investment in Columbia Asia Group)
  • Took initiatives to address new drug needs in Russia (investment in JSC R-Pharm)
  • Expanded healthcare staffing business (acquisition of Accountable in U.S.)
Second year (2019)
  • Expanded base in hospitals and hospital ancillary businesses (became largest shareholder in IHH Healthcare Bhd., improved corporate value of Columbia Asia Group)
  • Expanded high-quality supplement business (invested in Thorne Research, Inc. in U.S.)

Nutrition & Agriculture

First year (2018)
  • Strengthened network and Africa regional strategy (ETC Group Limited investment agreement)
  • Reinforced food science area (SODA AROMATIC Co., Ltd. tender offer)
Second year (2019)

Retail & Services

First year (2018)
  • Expanded assets under management (¥1.4 trillion to ¥1.9 trillion)
  • Acquired planning/marketing platform in fashion and retail business
Second year (2019)

Column

Participation in Mexican Agricultural Supply Company

In June 2018, Mitsui made the decision to acquire 80% of the shares of Consorcio Agroindustrias del Norte, S. A. P. I. de C. V. (CAN) from the company's current shareholders. CAN is the holding company of Nueva Agroindustrias del Norte, S. A. de C. V. (Adelnor), one of Mexico's leading agricultural supply companies. By adding Adelnor to the existing fertilizer distributors in which Mitsui already owns equity (Anagra/Chile and Equilibra/Peru), Mitsui will be able to boost the synergy between the three companies and accelerate integration of their operations, and will contribute to the development of local agriculture.

Participation in Mexican Agricultural Supply Company
Participation in Prepared Foods Manufacturer in the U.S.

In January 2019, Mitsui and KENKO Mayonnaise Co., Ltd., jointly acquired 100% of the shares of Hans Kissle Company, LLC, a food manufacturing and sales company in Massachusetts, U.S. Through this acquisition, Mitsui aims to reinforce Hans Kissle's market position and expand its reach, channels, and territory to evolve in the U.S. prepared foods market by such means as utilizing products of Ventura Foods, LLC, which is a manufacturer and processor of oils and fats.

Participation in Prepared Foods Manufacturer in the U.S.

Initiative 4 Enhance Governance, Personnel, and Innovation functions

Results of the past two years

Strengthen governance

First year (2018)
  • Strengthened the effectiveness of the Board of Directors
  • Increased diversity and improved skill set balance of Board members
  • Created more opportunities for discussion on Mitsui's long-term direction, including its corporate strategies and medium-term management plan
  • Established Sustainability Committee, and promoted management with greater emphasis on the sustainability of both society and Mitsui
Second year (2019)
  • Initiatives related to improvement of Board effectiveness
  • Discussed Companywide themes of significance, such as sustainability
  • Held off-site meetings for Directors and Audit & Supervisory Board members to discuss strategy for sustainable growth
  • Appointed Takeshi Uchiyamada, who has considerable business experience, as Director (External) at shareholders' meeting on June 20, 2019
  • Introduced share performance-linked restricted stock as a component of executive remuneration at shareholders' meeting on June 20, 2019

Strengthen the individual

First year (2018)
  • Shifted corporate staff to business frontline
  • Introduced staggered working hours at an individual level
  • Launched in-house entrepreneur system, currently preparing to commercialize business plans
Second year (2019)
  • Strengthened global human resource management and launched next-generation leadership program for employees hired outside Japan
  • Decision to introduce teleworking in Japan as a "working style reform" measure
  • Introduced merit-based compensation and promotion system

Strengthen innovation functions

First year (2018)
  • Appointed CDO and established Digital Transformation (DT) team
  • Accelerated initiatives of DT, focusing on three areas: reducing costs in existing businesses, increasing sales in existing businesses, and developing new business
Second year (2019)
  • Launched Moon Creative Lab to "create" new businesses
  • Improved efficiency and value of existing businesses and accelerated DT initiatives, aiming for the creation of new business models
Moon Creative Lab
Moon Creative Lab

Integrated Report 2019

This integrated report was completed with reference to the following guidelines:

  • GRI (Global Reporting Initiative), Sustainability Reporting Standard
  • Ministry of the Environment, Japan, Environmental Accounting Guidelines 2005
  • ISO 26000 (Guidance on social responsibility)
  • IIRC (International Integrated Reporting Council), International Integrated Reporting Framework
  • Ministry of Economy, Trade and Industry, Japan, Guidance for Integrated Corporate Disclosure and Company-Investor Dialogues for Collaborative Value Creation
Guidance for Collaborative Value Creation