MITSUI & CO.,LTD. Q1 FY2026 earnings call

Overall Financial Performance

• Total basic operating cash flow grew 0.5 billion yen YoY to 216.3 billion yen, remaining steady
• Quarterly net profit fell 84.5 billion yen YoY to 191.6 billion yen, primarily due to the reversal of large prior-year asset recycling gains; the 25% progress against full-year plan is on track
• The balance sheet remains healthy: net interest-bearing debt increased 0.1 trillion yen to 3.4 trillion yen, shareholder equity increased 0.1 trillion yen to 7.6 trillion yen, resulting in a net DER of 0.45x

Cash Flow Allocation and Investment Execution

• Total cash inflow was 270.0 billion yen, combining 216.0 billion yen from basic operating cash flow and 54.0 billion yen from asset recycling
• Total cash outflow for investments and loans was 208.0 billion yen, with key completed actions including full acquisition of European tank terminal business ITC Antwerp, and initial investment in low-carbon ammonia project Blue Point
• Since the start of the current mid-term management plan in FY2024, Mitsui has completed multiple growth investments aligned with its three strategic pillars: Industrial Business Solutions, Global Energy Transition, and Wellness Ecosystem Creation
• Early-completed investments are already lifting underlying earnings power, while long-term growth investments for future revenue base expansion are progressing steadily
• In the first quarter of FY2026, Mitsui has committed to and executed new investments in core high-expertise areas, including ITC Antwerp full acquisition, additional investment in Willis Mitsui & Co. Engine Support, and initial investment in Ruwais LNG

Shareholder Return

• The shareholder return policy unchanged from the FY2025 full-year results announcement; management will continue to consider expanding shareholder return while balancing growth investment needs

Basic Operating Cash Flow (total 216.3 billion yen, +0.5 billion yen YoY):

• Metal Resources: 71.9 billion yen, -16.3 billion yen YoY, driven by lower iron ore and coking coal prices
• Energy: 45.7 billion yen, -7.0 billion yen YoY, with higher gas prices offset by lower production volumes
• Machinery & Infrastructure: 36.1 billion yen, +11.7 billion yen YoY, driven by the tax reversal from prior-year asset recycling
• Chemicals: 32.7 billion yen, +7.5 billion yen YoY, driven by provision reversal on overseas business and higher demand for European agrochemicals
• Steel Products: 6.3 billion yen, +4.3 billion yen YoY, driven by trading activity and dividends from equity-method affiliates
• Living Industry: Negative 0.1 billion yen (net outflow), -0.8 billion yen YoY, driven by inter-segment transactions
• Next-Generation & Function Promotion: 12.1 billion yen, +4.6 billion yen YoY, driven by higher dividends from JA Mitsui Leasing
• Unallocated: +12.5 billion yen, driven by unallocated expenses, interest and taxes and inter-segment adjustments

Quarterly Net Profit (total 191.6 billion yen, -84.5 billion yen YoY):

• Metal Resources: 51.5 billion yen, -29.0 billion yen YoY, driven by lower iron ore and coking coal prices
• Energy: 18.9 billion yen, -0.3 billion yen YoY, with higher gas prices offset by lower production volumes
• Machinery & Infrastructure: 50.7 billion yen, -75.3 billion yen YoY, driven by the reversal of prior-year asset recycling gains
• Chemicals: 30.9 billion yen, +12.7 billion yen YoY, driven by fair value gain from ITC Antwerp acquisition
• Steel Products: 6.5 billion yen, +0.5 billion yen YoY
• Living Industry: 14.8 billion yen, +0.8 billion yen YoY
• Next-Generation & Function Promotion: 10.3 billion yen, +4.1 billion yen YoY, driven by higher earnings from JA Mitsui Leasing
• Unallocated: 8.0 billion yen, driven by unallocated expenses, taxes and interest

• Overall full-year net profit plan of 770.0 billion yen is confidently expected to be achieved, with management targeting to approach the mid-term plan's stretch full-year target of 920.0 billion yen
• The Energy segment is expected to outperform its initial full-year plan, with upside likely to be reflected in the Q2 full-year guidance update; basic operating cash flow for the segment will increase in the second half, with full-year progress on track or better than plan
• Coking coal segment: if current low market prices continue, the segment will remain under earnings pressure due to temporary idled operations at two mines that still incur fixed costs
• Iron ore prices are expected to stay broadly supported with limited upside barring large Chinese economic stimulus; the ramp-up of the Simandou mine will be gradual, with only 1 million tons of shipments in the first year, limiting near-term supply impact
• Taiwan offshore wind project: 5 turbines have entered commercial operation by end-June, full 37 turbines in the first zone will start operation this year, with earnings contribution starting in FY2026 March term as originally planned; the second zone will start operation next year as scheduled
• Coffee trading: results have improved significantly from the prior year fourth quarter, but position normalization is still ongoing, and it will take more time to eliminate further downside risk
• IHH Healthcare: the YoY decline in Q1 profit is due to a one-off deferred tax asset gain in the prior year; underlying core earnings are in line with plan, and business expansion via M&A and bed capacity growth remains on track
• Underlying earnings power growth from mid-term plan initiatives is showing tangible progress, with chemicals and steel products performing particularly well on a one-off adjusted basis in Q1

• US tariffs: while direct Q1 impact on earnings was limited, it is too early to draw conclusions due to pre-tariff inventory build and pull-forward demand; the impact will be reassessed in Q2

• Asset recycling gains: elevated uncertainty from US tariffs, inflation and sustained high interest rates means stakeholders remain in a wait-and-see posture; additional capital gains will only be guided in once certainty improves
• Mainstream Renewable Power is facing headwinds from broader global slowdown in renewable energy investment; management will narrow focus to core regions and pursue turnaround
• Niigata offshore wind project is facing challenges from rising construction costs and unfavorable exchange rate movements; management will not proceed with investment unless economic returns are met
• Coking coal operations: two mines are currently temporarily idled (one from accident response, one from difficult mining geology), leading to fixed costs without offsetting revenue
• Mitsui E&P USA: the strong Q1 result is partially driven by timing of strong winter Northeast US gas prices; the full-year expected cost increase from the Waitsia gas project in Australia has not yet been incurred and will impact earnings from Q2 onward
• Coffee trading: position reduction is still incomplete, so further downside risk remains even after recent improvement

Q: Management built conservatism into the full-year plan to account for US tariff uncertainty; has this assessment changed after Q1? / A: Mitsui built in two layers of conservatism: larger direct/indirect tariff impacts, and lower planned asset recycling gains. Direct tariff impacts were minimal in Q1, but Q1 results are distorted by existing inventory and pull-forward demand, so the situation will be re-evaluated in Q2. Diversified business portfolios can offset a portion or all of tariff impacts. For asset recycling, uncertainty still remains high from inflation and high interest rates, so additional capital gains will only be added to guidance once visibility improves. (337 characters)

Q: Mitsui E&P USA posted much stronger Q1 profits than expected despite flat Henry Hub prices; what drove this performance and what is the outlook? / A: The business operates in the Marcellus region serving the Northeast US market, which has different pricing than Henry Hub. Q1 results reflect January-March winter prices (timing difference from reporting periods), where cold winter pushed prices higher YoY. Higher productivity also reduced depreciation unit costs. The large planned full-year cost increase from Australia's Waitsia gas project has not yet been incurred, and will impact earnings starting from Q2. (356 characters)

Q: With the Rhodes Ridge investment planned, how will cash allocation policy change, and will additional growth investment be taken outside the existing mid-term plan framework? / A: When approving the Rhodes Ridge investment, Mitsui allocated an additional 400.0 billion yen from the balance sheet to the management allocation pool to preserve flexibility for the remaining 9 months of the mid-term plan. Some imbalance in cash in/out over the 3-year plan is expected. The investment is not fully outside the existing framework, and the balance sheet remains healthy enough to accommodate the plan, with the framework structure unchanged. (349 characters)

Q: What is the current status of Taiwan and Niigata offshore wind, and why is Mitsui continuing to pursue offshore wind investments given headwinds in renewable energy? / A: Taiwan offshore wind is progressing on schedule, with first zone commercial operation this year and earnings contribution starting FY2026. Niigata offshore wind still faces headwinds from higher construction costs and unfavorable exchange rates, and management will not sacrifice returns to proceed. Offshore wind investment is part of the irreversible long-term decarbonization trend, and the recent UK port acquisition builds experience across the supply chain, and also supports existing oil/gas activities to ensure business viability. (411 characters)