MITSUI & CO.,LTD. Q3 FY2026 earnings call

Macro Environment Overview

• Global economy saw a moderate recovery, but uncertainty remains around US tariff policy trends and geopolitical risks. Mitsui continues to implement integrated risk management and improve the quality of its diversified global business portfolio to strengthen its near-term earnings base.

Key Operational Milestones for Growth Investments

• Rhodes Ridge Iron Ore Project: Following completion of equity acquisition and positive initial feasibility study results, the project moved to full-scale feasibility study for development of the mineral deposit. The study targets an initial production system of 4 million to 5 million tons per year, with study completion targeted for 2029 and production start targeted by 2030.
• Mozambique LNG Project: Following improved security around the project site, the project lifted the contractual force majeure declaration in November 2025 and announced resumption of construction activities including all related works on January 29, 2026. The project continues to target production start by 2029.
• Blue Point US Low-Carbon Ammonia Project: Secured eligibility for Japan's METI price differential support program. Mitsui will proceed with building a low-carbon ammonia supply chain for the Japanese market based on the approved business plan.

Cash Flow Allocation

• Total cash inflow: 950 billion yen, consisting of 749 billion yen core operating cash flow and 201 billion yen from asset recycling.
• Total cash outflow: 1.442 trillion yen, consisting of 1.206 trillion yen for investments and lending (driven by completion of the Rhodes Ridge iron ore equity acquisition) and 236 billion yen for shareholder returns.

Shareholder Return Policy

• No change from the policy announced in the second quarter. The 200 billion yen share buyback announced in the second quarter is progressing on schedule, with full completion and cancellation targeted by the end of March 2026. Mitsui will continue to consider expansion of shareholder return while maintaining balance with growth investment.

3rd Quarter Cumulative Core Operating Cash Flow (Year-over-year change):

• Total: 748.8 billion yen, a decrease of 44.7 billion yen from the prior year period
  1. Metal Resources: 244.8 billion yen, a decrease of 40.0 billion yen. Driven by lower coking coal and iron ore prices, and lower dividends from affiliated companies
  2. Energy: 215.5 billion yen, a decrease of 62.3 billion yen. Driven by the reversal effect from a one-time timing of LNG dividend receipt in the prior year period, despite higher US gas prices
  3. Machinery & Infrastructure: 136.1 billion yen, an increase of 20.6 billion yen. Driven by higher dividends from affiliated companies, and the reversal effect from taxes related to prior year asset recycling
  4. Chemicals: 74.7 billion yen, an increase of 4.5 billion yen. Driven by reversal of provisions related to overseas businesses
  5. Steel Products: 17.7 billion yen, an increase of 13.3 billion yen. Driven by strong trading performance and higher dividends from affiliated companies
  6. Living Products: 10.0 billion yen, a decrease of 18.8 billion yen. Driven by cross-segment adjustment transactions and lower profits from coffee trading
  7. Next Generation & Function Promotion: 30.5 billion yen, an increase of 11.9 billion yen. Driven by the reversal effect from taxes related to prior year asset recycling
  8. Other: 19.5 billion yen, an increase of 26.1 billion yen. Driven primarily by cross-segment adjustment transactions with the Living Products segment

3rd Quarter Cumulative Net Profit (Year-over-year change):

• Total: 611.9 billion yen, a decrease of 40.3 billion yen from the prior year period
  1. Metal Resources: 199.7 billion yen, a decrease of 29.5 billion yen. Despite higher dividends from Vale, driven by lower coking coal and iron ore prices, higher copper costs and lower copper volumes
  2. Energy: 138.5 billion yen, an increase of 14.6 billion yen. Despite lower crude oil prices, driven by higher US gas prices and the reversal effect from prior year impairment losses
  3. Machinery & Infrastructure: 162.1 billion yen, a decrease of 23.9 billion yen. Despite FVTPL valuation gains from Firefly's IPO and higher auto segment profits, driven by the reversal effect from prior year asset recycling gains
  4. Chemicals: 55.5 billion yen, an increase of 15.2 billion yen. Driven by fair value gains on ITC Antwerp and the reversal effect from prior year impairment losses
  5. Steel Products: 16.5 billion yen, an increase of 7.6 billion yen. Driven by higher trading profits
  6. Living Products: 33.1 billion yen, an increase of 0.8 billion yen. Despite lower coffee trading profits, driven by asset recycling gains
  7. Next Generation & Function Promotion: 4.2 billion yen, a decrease of 62.9 billion yen. Driven by the reversal effect from prior year asset recycling gains and the one-time loss related to JA Mitsui Leasing
  8. Other: 2.3 billion yen, an increase of 37.8 billion yen. Driven by the reversal effect from prior year pension plan reform

• Full-year Core Operating Cash Flow Guidance: Upwardly revised by 50 billion yen to 950 billion yen. The revision reflects strong progress across the Metal Resources, Energy, Machinery & Infrastructure, and Steel Products segments, all of which have exceeded 80% progress against prior forecasts as of the third quarter.
• Full-year Net Profit Guidance: Maintained at 820 billion yen. Despite the recognition of the one-time loss related to JA Mitsui Leasing in the Next Generation & Function Promotion segment, strong performance across core segments offset the loss, and asset recycling gains are expected in the fourth quarter to meet the full-year forecast.
• Element-by-element breakdown of the revised full-year net profit forecast versus prior forecast:
  • Core earning power: Expected a net decrease of 21 billion yen, driven by lower earnings from chemicals and coffee trading that offset gains from Vale dividends and FVTPL valuation gains.
  • Resource cost and volume: Expected a net decrease of 1 billion yen.
  • Market conditions and foreign exchange: Expected a net increase of 28 billion yen, driven by higher iron ore, copper and US gas prices, and the impact of a weaker yen.
  • Asset recycling: Expected a net increase of 30 billion yen, driven by multiple planned asset sales scheduled for the fourth quarter.
  • Valuation and one-time factors: Expected a net decrease of 36 billion yen, driven primarily by the one-time JA Mitsui Leasing loss.

• Ongoing macro uncertainty: Persistent uncertainty around US tariff policy trends and global geopolitical risks remains a key risk factor.
• JA Mitsui Leasing credit issue: The 34.1 billion yen one-time loss recognized in the third quarter relates to potential fraudulent activities including inflated billing, fictitious invoicing and multiple transfers of accounts receivable at a client of Katsumi Global, LLC, a JA Mitsui Leasing group company. The full details of the issue are not yet finalized, and additional impacts cannot be ruled out as the situation evolves.
• Coffee trading weakness: Coffee trading continues to face persistent headwinds from ongoing backwardation in coffee futures, which creates accumulating hedge costs. Improvement requires both a market price decline and resolution of the backwardation market structure.
• Chemicals trading headwinds: Persistent overcapacity in China and weak demand across China, Europe and the US have created a challenging operating environment for most commodity chemicals and functional chemicals segments, though high-growth niche segments (such as electronic materials for AI servers) remain strong.
• US macro risk: Persistent embedded inflation in the US could lead to a bad inflation cycle if political factors prevent fiscal sustainability, which would trigger stock market declines and a deterioration of the investment environment, creating a negative feedback loop.
• Mozambique LNG cost uncertainty: Final total project costs are still under review after a 4-year construction halt, though existing contracts remain in place and cost control measures have been implemented during the force majeure period.

Q: Based on third quarter trends, coffee trading remains weak and chemicals trading is underperforming plan. What is your current outlook for these businesses heading into next year, in terms of improvement potential and ongoing risks?

A: There has been no major change from the trend seen in the second quarter: chemicals trading remains low and coffee trading continues to face headwinds. The company is implementing all possible measures to turn these businesses around as soon as possible, and is focused on completing the current mid-term plan to deliver a strong starting point for the new mid-term plan.

Q: Has there been any change in the asset recycling market environment since you noted that buyers were more cautious during the half-year earnings call?

A: There has been no major change in the overall market environment. For assets that the company has already identified for exit or that are judged to be at the appropriate time to sell, the company has already done extended evaluation and does not plan to unnecessarily delay decisions. Management believes the current environment supports appropriate execution of planned asset recycling.

Q: To achieve ROE improvement in the next mid-term plan, do you plan to announce stronger shareholder return given visible future cash flow growth from projects like Rhodes Ridge and Mozambique LNG? Or will you continue to gradually allocate incremental cash to additional return based on investment progress?

A: The direction of shareholder return for the next mid-term plan is still under discussion. ROE maintenance and improvement will remain a core priority for corporate value growth in the new mid-term plan, and improving returns remains the most important goal. Management believes that return improvement can be achieved through repeated cycles of strict investment selection, improving the value of existing businesses, and recycling capital from mature assets to unlock accumulated value. The balance between growth investment and shareholder return will be evaluated on an ongoing basis in the new mid-term plan, and the company is developing the new mid-term plan with a focus on ensuring sufficient management allocation to allocate significant capital to both growth investment and shareholder return.

Q: What will be the key earnings drivers for next year, including new energy projects like Tatonka and Waitsia, and the potential turnaround of underperforming businesses like coffee trading?

A: Management sees solid progress from the three core growth pillars of the current mid-term plan, and is confident in their contribution to improving core earning power. The company is currently discussing how to further evolve these pillars in the new mid-term plan. Mobility, healthcare, protein, iron ore, and materials will remain key earnings drivers, and natural gas, LNG, and LNG trading will remain core businesses. The company will further extend the digital infrastructure value chain, and develop evolved growth priorities through combination with power and adjacent areas. Given ongoing concerns about supply chain fragmentation across many regions, Mitsui is positioned to provide solutions to meet customer needs, which will translate into new earnings opportunities.

Q: What impact does the current rise in long-term interest rates have on your long-term funding and earnings?

A: The company primarily uses floating rate long-term borrowing. Under Mitsui's business model, inflation and higher interest costs can be passed through to pricing, which suppresses medium- and long-term earnings impact. The company is proceeding cautiously amid large current market volatility. The company also matches the currency of funding to the currency of the underlying business: foreign currency-denominated businesses are funded with foreign currency, so higher yen interest rates do not have material impact.

Q: Is the current mid-term plan on track to hit the 170 billion yen cumulative core earning power improvement target? Will you continue to pursue additional core earning power improvement in the next mid-term plan?

A: Core earning power improvement is the central policy of the current 3-year mid-term plan, and the 170 billion yen target remains on track to be achieved by the end of the plan period. While there are mixed results across business segments, there is no change to the overall achievement outlook. While some new businesses have not delivered profit progress as expected as of the third quarter of FY2026 and require further review, existing businesses and new businesses that have already delivered core earning power improvement in the current plan will continue to pursue earnings growth in the next mid-term plan. While there is a pipeline of projects that will begin contributing earnings from the next mid-term plan or around 2030, management acknowledges the need for near-term earnings accretive projects to spread out the contribution timeline. While no specific cumulative amount is available to share now, the company is discussing additional core earning power improvement targets for the new mid-term plan.

Q: After lifting force majeure and resuming construction on Mozambique LNG, will total construction costs be meaningfully higher than the original forecast after 4 years of halted work? Have you secured sufficient LNG off-take agreements?

A: Total project costs are currently under review. The original lump-sum turnkey contract remains in effect, and the company continued procurement of key equipment and materials as much as possible during the force majeure period to contain cost increases. Final cost and contract terms will be finalized in coming periods. While detailed marketing information cannot be shared, all contracts required to support financing are already in place.

Q: What is your outlook for US businesses heading into next year, given ongoing macro uncertainty and the JA Mitsui Leasing loss that is tied to US auto-related activity?

A: The US remains Mitsui's most important strategic region. The company will continue to grow its US businesses, centered on the auto and truck sector, plus natural gas, LNG, and derivative methanol and ammonia businesses. The company also aims to steadily expand existing high-margin long-term businesses including tank terminals and grains. The strategy is to expand the existing value chain both horizontally and vertically, adapt the business model to local conditions, and strengthen partnerships with existing partners. Regarding JA Mitsui Leasing, the full details of the issue are not yet finalized so we cannot rush to conclusions, but we view the loss as one-time. As a shareholder, Mitsui will support JA Mitsui Leasing to implement strong preventive measures to avoid recurrence.

Q: Is there ongoing discussion about changing the balance between dividends and share buybacks in the next mid-term plan, given lower dividend yields after recent share price gains and reduced relative attractiveness of dividends amid higher interest rates?

A: The company's priority remains raising ROE, and will continue to secure sufficient management allocation while ensuring returns, and evaluate the balance between growth investment and shareholder return on an ongoing basis. How to present and clearly communicate the new mid-term plan with a focus on ROE maintenance and expansion is still under discussion. Under the current plan, the company has used share buybacks flexibly to capture upside from market conditions and realize capital gains, while steadily raising dividends progressively alongside improvements in core earning power. There is no conclusion at this stage on whether the current approach needs to be revised, and the framework will be explained in detail when the new mid-term plan is announced. Management takes investor requests very seriously, and will continue to engage in dialogue with shareholders while evaluating the policy, and will share the final policy in the new mid-term plan.

Q: Given entrenched US inflation, is there any specific risk to next year's performance that you are currently focused on?

A: US authorities are appropriately balancing rate cuts and inflation control, in management's view. However, if political factors lead to a loss of fiscal sustainability, bad inflation could take hold, leading to stock price declines that worsen the investment environment and create a negative cycle. This risk must be kept top of mind. That said, based on current policy actions, management believes it is appropriate to maintain an active approach to business development despite this risk.

Q: Why has coffee and chemicals trading underperformed prior full-year forecasts, and what is the outlook for these businesses to contribute to next year earnings growth?

A: For coffee trading: Production in Brazil, the main producing region, is expected to be strong, so prices have stabilized. However, the market remains in backwardation, which continues to create high hedge operation costs. The core solution is to fulfill long-term contracts as early as possible, and the company is focused on this priority to eliminate the drag on overall earnings as soon as possible. For coffee trading to improve, not only a price decline but also an end to the backwardation market structure is needed, because the current structure leads to accumulating hedge costs.

For chemicals trading: China has expanded production capacity leading to ongoing oversupply, and weak demand in China and Europe has created headwinds for basic chemicals (methanol, ammonia) and functional chemicals (construction materials, general-purpose resins). That said, trading of electronic materials for AI servers, sulfur, sulfuric acid, and phosphate rock has been strong on higher volumes. While cumulative third quarter earnings are higher year-over-year, full-year results are still expected to miss the original plan. Looking forward, while the current oversupply and weak demand backdrop remains, there are growing pockets of demand growth in niche segments. The company will capture these opportunities to return chemicals trading to a growth trajectory.

Q: What is driving the strong performance of steel products in the third quarter?

A: Some transactions originally planned for the fourth quarter were pulled forward into the third quarter, so full-year results will not see this level of upside. However, cumulative third quarter earnings are up year-over-year, driven by solid trading profits across Asia, the Americas, and Japan centered on Mitsui & Co. Steel. The overall business environment for steel products has improved, with no change to trading strategies. In the Americas, solid steel market conditions driven in part by tariff effects contributed to the strong results.

Q: Has the approach to steel products trading changed recently to deliver stronger results?

A: No, there has been no change to the trading approach. The strong performance is driven by favorable market conditions, particularly in the Americas where tariffs have supported solid market prices.

Q: What is the full-year asset recycling outlook for this year, given slower than expected progress through the third quarter? What is your target for asset recycling volume after this year?

A: The company expects to hit the revised full-year asset recycling profit target of 79.0 billion yen, because there are already asset recycling deals lined up in the Next Generation & Function Promotion segment for the fourth quarter. Going forward, ROIC discipline and strict investment selection have become embedded across all business units, so asset recycling will continue as a core part of improving the quality of the asset portfolio. The company evaluates all investments based on profitability, strategic fit, unique value contribution from Mitsui, effective use of human resources, and growth potential. Repeating this evaluation process will deliver consistent asset recycling results going forward. Asset recycling also includes rotating business models like real estate and shipping that are already counted as core earning power, plus the use of third-party capital, so the activity will remain sustainable and repeatable.

Q: Energy Solution segment posted a cumulative 9.7 billion yen deficit in the third quarter, a modest improvement from the 8.5 billion yen deficit through the second quarter. What is the full-year outlook and how will the segment be positioned for the next mid-term plan?

A: The third quarter results include a gain from solar power project sale, so the deficit has improved, and the company expects a fair value gain from remaining solar power assets in the fourth quarter. Ahead of the next mid-term plan, the company will implement a reorganization: the power business division of the Energy Solution headquarters will merge with the project headquarters to form a new Digital & Power Solution headquarters, and the next-generation energy division of Energy Solution will merge with Energy Headquarters I to form a new Integrated Energy Solution headquarters. After building the Energy Solution headquarters in the prior mid-term plan and developing it through the current mid-term plan, the company has now clarified the core growth priorities and winning strategies for the segment. The reorganization will create a unified structure to enable scaled growth for the business.