Earnings Transcript for 8058.T - Q3 Fiscal Year 2021

Tatsuhiko Terada: Ladies and gentlemen, my name is Tatsuhiko Terada, General Manager of IR Department. Thank you very much for taking time out of your busy schedule to join us today. We will now kick in Mitsubishi Corporation's Investor Call and the Results for the Nine Months Ended December 2021. First, let me introduce the attendees from the company; Mr. Kazuyuki Masu, Executive Vice President and CFO; Mr. Yuzo Nouchi, Senior Vice President, General Manager of Corporate Accounting Department; and myself, Tatsuhiko Terada, General Manager of IR Department. First, Mr. K. Masu, our CFO, will kick off this year our financial results using the presentation on the screen, the results for the nine months ended December 2021; followed by Mr. Nouchi's more detailed presentation using the same document. Now without further ado, we'd like to start. Mr. Masu, please start.

Kazuyuki Masu: This is Masu, the CFO. Thank you very much for taking time out of your busy schedule to attend our financial results briefing for the third quarter of FY 2021. I would like to start with a high level of every other results. And then it will be followed by a detailed explanation by Mr. Nouchi, General Manager of Corporate Accounting. On Page 1, I would like to highlight three key points. First, consolidated net income for the third quarter of FY '21 increased by JPY475.7 billion year-on-year to JPY644.8 billion. Second, we have further revised our portfolio earnings guidance from JPY740 billion, which is what we announced in November to JPY820 billion. Last but not least, in view of the upward revision, we will consider additional shareholder returns, and the details will be shared when we announce the full year results. I would now like to explain the year-on-year fluctuations, so please refer to the box on the lower left. In the same period last year, our financial results were heavily affected by COVID-19, such as holding resource prices and declining demand. However, with the subsequent resumption of global economic activities in areas including early lead business, salmon farming and steel products business, and we steadily converted profit opportunities into actual profit. We also benefited from solid resource prices such as metallurgical coal, copper and iron ore. As a result, consolidated net income for the third quarter increased by JPY475.7 billion year-on-year, surpassing the previous record high full year income just in the first nine months of the year. This was also the highest quarterly profit ever recorded by the company. Next, I'd like to explain the earnings forecast for the year and the shareholder returns. Please refer to the box at the bottom right. We have decided to revise our portfolio forecast again from JPY740 billion announced in November to JPY820 billion, an increase of JPY80 billion. The upward revision is based on the better-than-expected progress in each business segment, including salmon farming and auto-related business as well as recent trends in resource prices. The revised forecast of JPY820 billion incorporates all possible downside risks and is therefore considered to be a forecast with high conviction. In addition, based on the separate revision, we will consider additional returns to shareholders, and we'll share the details at the time of the full year results announcement. The specific method of shareholder returns will be determined comprehensively, including share buyback option. In summary, we have maintained strong performance in a wide range of fields as in the first half, and with a cumulative profit in each business, we have exceeded the past record high full year profit just in the first nine months of the year. We view the profit as strong results. On the other hand, we believe that the favorable business environment for the current fiscal year will not last forever and that ups and downs are bound to occur. For this reason, we will not be swayed by the good results of a single year but we'll continue to work steadily on the tasks at hand such as strengthening the functions of each business and reshuffling assets in order to enhance profitability and corporate value. This will conclude my presentation on the overview of the results. Now, Mr. Nouchi from Corporate Accounting will provide a detailed explanation focusing on the stages by segment.

Yuzo Nouchi: I am Nouchi speaking. So from my side, I would like to give you some follow-ups. So by segment for the third quarter results, so I would like to explain about that; so please turn to Page 2. So for the third quarter results, out of the 10 segments all of the segments has increased the income compared to previous year. For natural gas, year-over-year from JPY16.6 billion has increased by JPY68.5 billion to JPY85.1 billion. This is due to the LNG-related business; the dividend income has increased. And in terms of the LNG-related business and the North American shale gas business, there was an increase in earnings. In terms of the iron business and the North America plastics business has improved and the plastic building materials business in isn't just a materials, it was increased by JPY28.2 billion [ph], increased by JPY3.7 billion to JPY31.9 billion. For the Petroleum and Chemical Solutions, the LPG related business and the PS-Chemicals [ph] business has increased earnings in terms of equity holdings and increased income as well. In terms of the mineral resources, the Australian metallurgical coal business increased market prices has contributed, and the copper business, the dividend income has increased. And for the iron ore business, that has been increased earnings in terms of equity holdings. Compared to previous years, JPY54.8 billion, it has increased by JPY193.2 billion, ending at JPY248 billion. And going to the right-hand side of the presentation, for the automotive and mobility, there has been losses related to the Mitsubishi Motors in the previous year, there was have been one-off losses, and there has an increase from that. And Mitsubishi Motors and the Asian Automotive business, there has been an increase in EBITDA holdings. There was JPY8.7 billion deficit last year, but it has increased by JPY94.5 billion and the net income was at profit with JPY85.8 billion. So the salmon farming business has improved earnings for the food industry overall. Last year was JPY30.23 billion, but we saw an increase of profit by JPY39 billion and ended at JPY71.3 billion. For the consumer industry, compared to the previous year, the convenience store business and the tire-related business have seen increased earnings. Lastly, going to the urban development business, increased fund evaluation profit and the disposal gains process [ph] in the real estate development business contributed. Despite the impairment losses on the sales of the aircraft leasing company, so last year was JPY10.9 billion, but this year it has increased by JPY94 billion and ended at JPY30.3 billion. Next, going to Page 3. This is about the cash flow status. Going to the right-hand side of the bar graph at 2021 third quarter, looking -- please look at the cash flow situation. The gray underlying operating cash flow, JPY848.2 billion of cash in. The orange investing cash flows at JPY180.4 billion is cash out. As a result, the adjusted free cash flow is JPY667.8 billion of adjusted free cash flow. So the breakdown of the investing cash flow is on the over right; please look at the orange call the boxes. In terms of the cash out for the copper business, Australian metallurgical coal business, LNG-related business, we have conducted investments and loans. So this was JPY533.5 billion in terms of cash ends with the North American real estate business and the North American share business has collected investments of JPY353.1 billion, and investment cash flows on net basis, JPY180.4 billion of cash out was seen. Please go to Page 4. So as explained at the beginning of the presentation, the full year forecast in November against that revised forecast, we have further revised this upwards by JPY80 billion to JPY820 billion. By segment, out of 10 segment at 7 segments, we are conducting an appraisement [ph]; Natural Gas, Industrial Materials, Petroleum and Chemical Solutions, Mineral Resources, Automotive and Mobility, Food Industry, Urban Development into seven segments. So for us since 2018, it is going to have a record high level of the earnings since we have started to report in this segment. So, I would like to focus on the four segments where there has been more of a real [ph] business. With the natural gas, we have an increased annual transaction [ph] profits in the LNG-related business. We have write this upwards from the November numbers by JPY10 billion, a JPY102 billion would be the outlook. So going to the mineral resources in the copper business, increased dividend income is expected. And in the iron ore business, the earnings is going to increase. Based on this situation, JPY60 million of upward revision is been going to be conducted and [indiscernible] forecast. Going to the right-hand side of the presentation, on the very top we had automotive and mobility. In the Asian automotive business, we are going to see an increased earnings; this will be a JPY12 billion of operating vision and JPY100 billion will be the forecast for this segment. Lastly, going to the food industry; for the salmon farming business, increased earnings will be seen. So this will be JPY19 billion upward revision and JPY79 billion will be the revised forecast for this segment. Turn to Page 5, this will be the market conditions for our forecast. So please refer to this. That ends my presentation. Thank you very much.

Tatsuhiko Terada: So with this, this will end our presentation. So, we'd like to go into Q&A. Please ask one question, and then we will answer the question. And one person will be allowed to ask up to two questions. [Operator Instructions] If you turn comes, please state your company name and your name, and then ask your questions. [Operator Instructions] In terms of the questions related to the IR data, the IR division will be responding to that; so please refrain from asking the questions about the data. We are planning to end the system by 6

A - Tatsuhiko Terada: For the first question is [indiscernible]. Please ask your question one at a time.

Unidentified Analyst: Yes, this is Morimoto from SNB Nikko [ph]. Thank you for allowing me to ask questions. My first question is; looking at the results, I think the high interest is the additional shareholder return. And also, you mentioned that one of the options will be share buyback. And I think you have written that clearly in the presentation. And I believe that you had internal discussions to reach this way of communication. And I guess that you will come to a decision after closing of the year. But looking at the free cash flow after shareholder return, I think the current free cash flow is JPY460 billion as of Q3. So, I think you will have over JPY500 billion after the full year. So I think you have taken that into consideration regarding additional shareholder returns. So I think in view of the next NTP [ph], it might be difficult for you to answer this question; but what kind of discussions took place to reach a decision of additional share buyback? And I think I would also just like to learn the balance between shareholder return and the leverage ratio? And I guess the fiscal [indiscernible] besides the additional shareholder return, but can you share your thoughts on the shareholder return, please?

Kazuyuki Masu: This is Masu. I think later Mr. Nouchi will make some additional comments but what I can say to answer your question is that given the current situation it was difficult for us to reach one decision. A lot of discussion took place, as you pointed out; and we knew that it would have been better for us to state some kind of figure, but we did not want to offer something that's abstract, and we have not closed the year yet. So based on the circumstances, we wanted to offer you something more clear after closing the bid for the full year. But we could not refrain from saying nothing; so to the market we wanted to say that we are considering some options but we would like to ask for your patience. That's what we wanted to communicate this time. And regarding the cash flow, if I may clear up the mechanism of how we think about the cash flow; six years ago, we said that the cash flow after dividend should be zero, and I think that's what we communicated six years ago and we still maintain that idea. So you may say that you have extra cash flow after six years but we have given the consideration to our cash flow position. And so if you just look at the cash flow, after dividend we will have some extra cash, but when we do M&A or when we acquire company with debt which is Lawson and Eneco [ph], and in those two cases, the acquired company had debt, we did not use the cash flow but it will hit our leverage ratio. But it will not be reflected in the cash flow but we did see an increase in the debt; so that had an impact on our financial position. We have not been able to share that to the external audience but we manage that internally. So if we manage our cash flow strictly, throughout the past six years, including the scheduled repayment of the debt. And also we did a share buyback three years ago; so if you put that all together, then we will hit the equilibrium for cash flow. So that's one thing that I hope you will understand. And as for what we are going to do going forward; I guess it's not appropriate for me to comment about that. And Mr. Nouchi will succeed my position can make some comment on actions for the future.

Yuzo Nouchi: Hello, this is Nouchi, the General Manager for Corporate Accounting. And as Mr. Masu explained, if I were to make some additional comments in the discussions; we discussed about the progressive dividend which has been appreciated by the market. And so based on that, we would like to consider our future returns and the business performance. Compared to what we had expected in the past, the volatility has risen; so I think we need to pay due attention to the volatility of the business. So that's also included in our consideration in the discussion. And in view of that, our shareholder return policy to date was that we wanted to maintain the soundness of the financial position, and that will be in place. But compared to the past, we now feel that we can incorporate some more flexible thinking towards the shareholder return but at this point, this is all I can say in a concrete way. But we understand that there are expectations from our shareholders, and we would like to respond to those expectations from a medium to longer-term view. So that will be my answer. Thank you.

Unidentified Analyst: Thank you for those answers. My second question is, it may be difficult for you to answer this. I think you are in the process of putting together the NTP from next fiscal year and the internal discussion is taking place. And if you could share some insight, what kind of agenda and challenges you are discussing about in view of putting together the next mid-term business plan, if you can share anything with us?

Yuzo Nouchi: This is Nouchi from Corporate Accounting. Regarding the mid-term business plan, we may not be able to say that we started the discussion with kind of one last point. And looking at the direction, now looking at the current NTP over the last six months, and when we reflect on that, we are -- understand analyzing what went as expected and what deviated from the expectations, and also the challenges that we need to address are being identified from various perspectives. So we did a upward revision of JPY120 billion, and it is still short of the original NTP target of JPY900 billion. However, I think we can be quite satisfied with the numbers but we did benefit from the strong resource prices and commodity prices are going up and the market-related business has been quite good. So under the circumstances, we can identify the agendas that we need to work on. Also apologies, but frankly speaking, we are still in the midst of just starting the conversation. So at this point, there is not much that I can share with you.

Unidentified Analyst: Thank you very much.

Tatsuhiko Terada: So going to the next question from Dow Securities, Mr. Nagano san [ph], please. Please ask one question at a time.

Unidentified Analyst: I'm Nagano from Dow Securities [ph]. Can you hear me?

Tatsuhiko Terada: Yes, we can.

Unidentified Analyst: Thank you very much for your presentation. I would like to ask two questions. The first one is, you said that in the first quarter the share buybacks or the return to shareholders, you will be announcing about that. I would like to ask more about that. In the first quarter, you will discuss or execute those initiatives? So in terms of your decision to do so, who actually gather to make that decision? Is it the [indiscernible] will be the next top management? How was the discussion conducted giving consideration to the successors? So when you were engaged in that discussions, why did you decided to do in the fourth quarter because we have the profit level is quite high. Of course, you don't know about the commodity prices until the year closes but you do have some assumptions. And in terms of the capital policies of the NTP in terms of the investment outlook, so I think basically taking that into account, you started to do in the fourth quarter into the next NTP in the investment amount; is it the case that you're discussing to invest more in the next NTP so that you decided to announce in the fourth quarter? So I would like to know the details, the background, why have we decided to make these announcements in the fourth quarter?

Tatsuhiko Terada: So Masu will answer the question first. Yes, please.

Kazuyuki Masu: So the framework of the idea is that myself, and -- so we call this a kind of a division who will take care of this -- the handover and transition teams, as we call it, and of course, Mr. Nouchi is engaged in those type of discussions. And then we discussed or maybe this will be the way to go. So of course, it wouldn't do for us to not announce anything; so we don't know whether it's going to be share buyback but including our options such as share buybacks, we will commit to returning to the shareholders. So for the next President, Mr. Nakanishi [ph], you -- I told them that the we should take the actuals to Nakanishi [ph] to get the permission. So for the current President and the current CEO and the current Chairman, I get this permission. So basically, we just went through these procedures as a company; I think this is normal. So maybe you can say that we can decide it right now. But that said -- so we don't know how the numbers will go, and we don't know how next fiscal year is going to go. Compared to three months ago, yes, we have some visibility, but compared to it now in May after we close the fiscal year, we have more visibility. So rather than saying something and then leave it as is, I think it is best for us to give you the return that fits your expectations. So rather than doing it in the hectic way, we thought that making that announcement, the decision in the fourth quarter will be good. So of course, never say never is what I want to say. We are not committing fully, maybe with only dividend, maybe we will combine that with the share buybacks. So in terms of the decision, the best timing of making the decision was not now; that was what we thought.

Unidentified Analyst: Masu, thank you very much for making that decision. My second question is what I want to hear is about the metallurgical coal. So, in the third quarter, in terms of the price, the rise of the price of metallurgical coal; so the MDPs profit in the third quarter maybe that is not according to your calculation. Within your company, in terms of the upswing of your price, is that basically reflected to your price or there was a lack of volume as there were some lagging in terms of the -- of how the numbers are booked? So can you enlighten me about that in terms of how this happened in the fourth quarter? And how about the price outlook in the fourth quarter in terms of volume? So you are doing business with BHP [ph], so I think basically, you have a lot of spot contracts. So in terms of the -- maybe more of the re-sales [ph] increasing from those type of contracts, I would like to know about what type of situation is impacting this business in terms of the current business [ph] situation.

Yuzo Nouchi: I'm Nouchi from the Corporate Accounting Division, General Manager. From the up until the third quarter in terms of the results, as we have pointed out -- and I think basically there has been an impact on from price. Compared to the previous year, about JPY108 billion improvement has been seen in terms of the breakdown, so I'd like to give you an idea. In terms of price or the royalty [ph], about JPY140 billion of upside. So, I talked about JPY108 billion improvement, but even more improvement we're seeing from -- coming from the price. In terms of volume cost compared to the previous year, about JPY14 billion impact in terms of currency, the Australian dollars and the U.S. dollars and yen, well, the liberation of these currencies, about JPY16 billion of reduction of profit and about JPY3 billion of other negative factors. And all in all, we have seen this JPY108 billion improvement. In terms of price, the biggest impact -- well, after price, basically volume and the ForEx has had an impact on this business. And in terms of price per se, I think I mentioned this before, but -- when the price is rising -- there is a lag when we would be able to see that contribution coming. So rather than going to at the index prices, there will be a lag that is reflected to performance; that's one factor. So in terms of the MDP that they sell metallurgical coal, so all the metallurgical coal is not the first grade metallurgical coal, that is affected [ph] in the index; so depending on the mixture of the type of coal that is sold there will be some differences or gaps. So because of the situation, so I think the investors will look at the price and then maybe you assume that we'll be able to get this level of profit but I think this is the reason why we were short of that expectations. In terms of the future outlook, it's very difficult to say, but in terms of volume, the reason why we didn't have enough volume is that I think it's the impact of weather in Australia; the product -- the output has declined. And due to the Omicron virus, there was a decrease in the production. But I think basically compared to the third quarter, we will see some improvement or that is our expectations at least. So yes, that is my answer. Thank you.

Unidentified Analyst: Thank you very much. So in terms of metallurgical coal, I would like to ask a follow-up question. So the price is very high right now, so what is the reason behind this? What is your analysis behind this?

Yuzo Nouchi: So this is Nouchi speaking. I will answer your question. Well, if the price -- current price, I think maybe it's overheated, it is too high. So in terms of the trend of the prices of the metallurgical coal, I think basically, you are following that from the year-end, it has got to go up. The reason behind this is that rather than demand, I think it's on the supply side. So I talked about the weather issues; so there was the lack of coal [ph] from Australia and Canada, there has been a delay in production as well. So I think these were the reasons that has impacted on the supply side. So, if -- despite this method of situation softness, of course, we do not think that this level of price will continue; so that's all for me.

Unidentified Analyst: Thank you. Thank you for this explanation.

Tatsuhiko Terada: The next question is from Mr. Narita [ph] from Nomura Securities.

Unidentified Analyst: This is Narita [ph] from Nomura. I have two questions. My first question is; going back to the shareholder return, so I guess you have not decided on the specific details and the methodology of shareholder return. But you have indicated an option of share buyback in the document. And I think you have always been saying that you will consider sale of the return in view of the leverage ratio. I think you're seeing the appropriate leverage ratio will be between 40% to 50%. And as of Q3, what is the level of your leverage ratio right now? And if we go below 50%, it will be within the range of a comfortable leverage ratio; would that mean that you can still do share buybacks? I think you said that if it's below 25%, you will -- or you have done a share buyback; so you can give us some very rough idea of what you think about leverage ratio and the potential execution of share buyback? And I think the way you communicate may not be so transparent because looking at the other trading houses, they look at the market expectations, and they reflect those expectations including dividend hikes and also share buybacks, and I think that was the case for the other trading houses. But how do you want to communicate your thinking about the shareholder return? And your mentioning of share buyback option in an explicit wordings.

Kazuyuki Masu: Okay, this is Masu speaking. Regarding the leverage ratio; I guess we can say that we have changed the way we think. Previously, if our leverage ratio is within a certain range, we will not do share buyback. And if we go above the threshold and if the capital perceived to be excessive, we would share buyback, that was the previous policy. But this time if we stick to the policy, then there could be volatility from year-to-year for a good year and a bad year. And with the business being so volatile, and if we just lie on the dividend for a shareholder return that's going to put us in a complicated situation. So if the capital is above the leverage ratio, and if we have excess capital, that's when we want to execute additional shareholder return. But on top of that, with the volatility of the business observed in reality, so at this point dividend plus share buyback is something that we may need to reflect in traditional shareholder return policy; so that was the message within a communication. That's the first of your question.

Unidentified Analyst: So in that sense your communication regarding the additional shareholder return is agnostic of the leverage ratio. So if you believe that the right way to return the profit is something that you will consider agnostic of leverage ratio for this current fiscal year, that is correct, and next year will be different; I see. So my second question is, so now you are projecting for JPY820 billion with upward revision. And looking at Q4 from Q3, I think you're implying that the prospect is going to come off by JPY100 billion versus Q3. In other [indiscernible] business, you will increase some costs for Lawson. But given the current circumstances, are you expecting to get some big loss? Because looking at the current business trend, it seems like you will not see that decline in Q4 from Q3. But what are you reflecting in the projection for Q4; are you expecting a big decline?

Yuzo Nouchi: This is Nouchi from Corporate Accounting. Let me address that question. In Q3, the JPY180 billion for the three months -- in Q4 will be down JPY100 billion from this level. In Q4, the LNG-related dividend timing and also the asset sales of real estate, they don't happen regularly. And for auto and food business, there was the year-end demand; so those were some Q3 special factors, a few tens of billions of yen. And looking at Q4, we're not expecting any special loss or impairment. But with asset ratio [ph], there will be a certain level of loss and that's really reflected into our projection. And furthermore, I guess if you look at the segments, you will see that on the corporate level -- we'll be looking at the resource prices and also the other [ph] environment. And we are reflecting JPY20 billion of potential downside; so if you aggregate that, we're looking at JPY820 billion of the new full year guidance. Whilst we're not being overly conservative, we saw some downside risks that we are expecting. If they do not realize, we may be able to see some upside from the current guidance.

Unidentified Analyst: Thank you very much.

Tatsuhiko Terada: Thank you very much. Next, [indiscernible]. So please ask your question one at a time.

Unidentified Analyst: So this is [indiscernible]. So my first question is about the domestic offshore wind power generation. So in the three areas you have been able to win the tenders; so basically I think the price was lower than the consensus, I think we have send a shock wave in the market. So why were you able to do so? What was the difference to your competitors? And what is the strategy going forward? I think there's a lot of things that you cannot mention but within what you can talk, I hope that you can comment about that. That's my first question.

Kazuyuki Masu: So this is Masu speaking. I would like to respond. So there is a lot of media reporting surrounding this issue, and I want to thank you for asking that question straightforwardly. So what -- basically, what the major media doesn't write about or report about is that in terms of the offshore wind power generation projects, so it's a kind of a sea-bed missile [ph] type, it's not the thing that we have started from 10 years. For Eneco, basically, we acquired the company. So we started this relationship with Eneco 10 years ago; so the North Sea -- so we conducted this sea-bed type of wind power generation -- offshore wind power generation. And we have a lot of know-how, and we have the best people to Eneco, and I think we have good human resources, and we have been able to accumulate the cutting-edge know-how from Europe. So based on that, we calculated the cost. So basically, I responded to the tender based on this most cutting-edge European cost level. So I think we made the best proposal from the goal of respect maybe. So we didn't actually set ourselves just to get this tender, and I think we have offered the optimal proposal. So this will be a tender situation; I won't be able to talk about that strategy. So I won't be able to talk more about this. Thank you.

Unidentified Analyst: So the second question is that in the consumer industry, in the fourth quarter, I think basically you are planning to this to be loss-making in the first quarter. Could you elaborate more upon that?

Yuzo Nouchi: So, I am Nouchi, the Corporate Accounting Department. So in the consumer business; so I think this happens every year, so this specifically is about loss in a subsidiary. In terms of the equity income that we see from them, that has a huge impact. In terms of Lawson, they have their own reporting. In the fourth quarter, there would be some impairments relating to stores. So basically, every year in the fourth quarter they conduct their impairment about the stores in the fourth quarter. So for this fiscal year, again, similarly, Lawson is planning to book some impairment. So reflecting this, that is the fourth quarter results. So this is not something special that has happened only for this year. Thank you.

Unidentified Analyst: The season hasn't been a little finding [ph]. Thank you. Thank you for your answer.

Tatsuhiko Terada: Our next question is from Mr. Owada [ph] from Nomura Asset Management.

Unidentified Analyst: Thank you for this opportunity. My name is Owada [ph] from Nomura Asset. I have two questions. My first question is regarding offshore wind project. You took all of the three projects, and I think the gross investment is going to be quite big. And looking -- it is a FITE [ph] project but I think you will have a certain level of leverage using project finance. So looking at next year onward, under your next MTP, what is the impact going to be on your cash and investment from the offshore wind business? That's my first question.

Kazuyuki Masu: This is Masu. I will address that question. I don't have the detailed presentation on hand but as you pointed out, we will not fully fund this project by ourselves, we will use some leverage and the leverage portion is also going to be quite big. And we're not really worried about the project finance because for the renewable energy business, in the finance industry, it's a popular project. So I believe that there will be ample capital that will come to our project, we may have more than we need. And the financing for this offshore wind renewable energy will not be a huge binding [ph] for us in the future.

Unidentified Analyst: Thank you. I am comforted by your answer. My second question is regarding the oil price, the assumption for the oil price and as the direction of your LNG-related business. So I know that there is a time lag to the oil price, and I think our assumption for the oil price for the fiscal year is $60. Right now, the oil prices are at $80, and looking at the sensitivity, I think there will be an impact of about a few tens of billions of yen. Is that the right understanding? Or are there going to be somewhat positive or negatives? Also regarding the LNG business for this fiscal year, JPY102 billion, what is the projection for next fiscal year?

Yuzo Nouchi: Yes. This is Nouchi. I will take that question. First, leading up to Q3 for this fiscal year, the United Gas business was very strong. From last year, the profit increased by JPY68.5 billion; so based on our internal analysis, roughly speaking, the impact from oil price rising was about JPY36 billion out of JPY68.5 billion. On top of that, the LNG spot prices erode [ph], and the benefit of that was about JPY27 billion on our profit. Also on our disclosure, we show the oil price assumption and also the sensitivity to the oil price. But as roughly speaking, there is a time lag of about six months. So that's the basic framework. But if you look closely, there are some businesses with a time lag of three months; so that's one factor to consider. And also the LNG spot price; recently the LNG spot price has been spiking up. So the benefit of that on the profit was quite big for this fiscal year. On the other hand, as you pointed out or as you understand, roughly speaking, the time lag is six months, so that's the time lag of the oil price being reflected on our numbers. So from end of last year, leading up to now, the high oil price is going to benefit our performance as for the first half of next fiscal year. So I think that's fair to say. And on top of that, the LNG spot price and also there are some impact which will not equate to a time lag of six months.

Unidentified Analyst: Thank you very much. If I may ask a follow-up question for the LNG spot price, you said the benefit was JPY27 billion. Is that for Q3 from October to December? Because I think there was a big deviation from the spot price and the long-term contract price. So the JPY27 billion is for Q3?

Yuzo Nouchi: So, this is Nouchi again. The JPY27 billion benefit that I mentioned is for the first nine months of the year. And I don't have the breakdown by quarter of this JPY27 billion but in Q1 and Q2, the LNG spot price was relatively high, it was plateauing at a high level. So I will not say that the big chunk of JPY27 billion derived from Q3.

Unidentified Analyst: Thank you very much. That's very clear.

Yuzo Nouchi: Thank you. And we will be able to offer you more details on your question later from the IR department.

Tatsuhiko Terada: So from UBS Securities, Godosa [ph], please. So please ask your question one at a time.

Unidentified Analyst: Godosa [ph] from UBS Securities. Thank you for taking my question. So my first question is about the minimum resources. So the copper next year or this year, the [indiscernible] is going to start up. So you can see that your planned numbers here, so 2022 -- how will this contribute to fiscal 2022 in terms of profit, in terms of volume? At this point, if you can talk about this, I would like to ask about that.

Yuzo Nouchi: So Nouchi from the Corporate Accounting. I would like to answer for [indiscernible]. So in the first half of 2022, production is going to start. And this -- they will start to contribute to our profit, that is our estimation. Specifically, how much of contribution is going to come at this point, we will not be able to respond. But going forward, so going to 2023, fiscal 2024, the upward will continue -- the contribution will continue to grow, that is our expectation.

Unidentified Analyst: So in terms of the production contribution and the income contribution, if these prices are at that level, this will be immediately [ph] connected?

Yuzo Nouchi: Yes. Yes, I think that's the correct understanding. So in terms of the sensitivity is shown here, so next fiscal year for Kesebeko [ph], basically the contribution will be at that level from Kesebeko [ph] as well.

Unidentified Analyst: So the second question is about the sensus [ph] quantity, automotive has gone made upward revision, I think you'll be able to maintain a higher profit level. But due to the lack of semiconductors of the automotive industry, there's a lot of downward pressure, and I think basically, that's the reason -- that's the performance every year. So in terms of your business, how much was there in terms of negative pressure, meaning that next year, do you think that there is still lot of room for recovery for the automotive business? For the automotive and mobility business, I would like to confirm the impact of this type of negative factors?

Tatsuhiko Terada: Excuse me, we were not able to hear the first part of your question. You talked about the semiconductor shortage, how much did we receive a downgrade revision [ph]? How much are we going to recover for next fiscal year?

Unidentified Analyst: Yes, I'm asking whether your -- my understanding is that you have been able to have upward revision, including those factors. But in terms of -- and going to next fiscal year for the automotive mobility, are there any further room to have a further better performance for next fiscal year?

Yuzo Nouchi: Yes, I am Nouchi. I would like -- this is Nouchi speaking. I would like to take that question. In terms of the impact of semiconductors; so there has been some concern about this will put it on [indiscernible] is still concerned about the downward pressure in some businesses but we had tried to minimalize that impact. So the direct impact would be the company's -- actually the OEMs that are actually producing the automobile. So in terms of our business, Mitsubishi and Isuzu, and how much impact will that they have. From our point of view, from our side, I would like to refrain from responding to specific numbers of the impact. But in terms of the impact of the semiconductor service, sales volume is going -- that will be impacted by the semiconductor shortage; for instance, our main sales market, which is Indonesia. So actually, the sales volume has increased compared to the previous year. On the other hand, Thailand -- and for those markets, the sales volume in itself is not growing but the share is increasing. So through these efforts this fiscal year's forecast; automotive mobility segment, JPY100 billion of forecast. Well, last year, MMSC [ph] has conducted an impairment -- so that was a one-off; so this -- the hurdle was lower but even though if you consider this, I think basically, we are at a good level. So for the next fiscal year, for the automotive mobility business as a core segment, we hope that it will contribute to the profit. So it's not the case that this year is bad, so next year we're going to see a rebound; we are not thinking in that manner. So, this -- thank you -- thank you.

Unidentified Analyst: So Nouchi, understood. Thank you.

Tatsuhiko Terada: So we still have some time. Are there any further questions from the audience? You can ask your second question, if you wish. [Operator Instructions] Are there any further questions from the audience? Mr. Morimoto from SMBC Nikko, please.

Unidentified Analyst: Thank you for allowing me to ask the second round of questions. I want to confirm two points. The first point is, for the investment of a new investment and maintenance investments; and I think for Q3 it was a cash out of JPY533.5 billion. And looking back to fiscal year in terms of our new investment, you did not spend a lot of money. And going forward, you think there is opportunity for offshore wind that you may enjoy project financing; so you may not need a lot of internal cash but I guess for the investment, there is opportunity for offshore wind. But what is your thinking of investment; can you give us some insight? And my second question is…

Tatsuhiko Terada: We will take one question at a time.

Unidentified Analyst: Okay.

Yuzo Nouchi: So this is Nouchi from Corporate Accounting. Let me take the question. I was looking at the investment for this fiscal year, as we have disclosed, it is what it is. And for next fiscal year onward, for maintenance CapEx, and also things that are under development for resource business; we have already made some commitment to investment, so they will be incurred on a regular basis and so that's something that we can communicate with visibility. And also new investment, we are considering different opportunities. And at this point, we cannot give you a specific amount of how much we are going to invest into X business. But I can say that we do not have an immediate plan to spend a huge money. So that is the answer to your first question.

Unidentified Analyst: Thank you very much. My second question is regarding Thermac [ph]. As Q3 - your uptick [ph] Q3 was JPY23.7 billion. And I think you have acquired this business a few years back and I think this fiscal year, you will be achieving a record high profit. The sales volume has been increasing since the acquisition, and also the market price was also favorable as indicated in your supplementary data book. And looking at the impact to the business performance, I think as one business is quite big, generating a few tens of billions of yen. And [indiscernible] in Chile, I think the market prices are quite high; so what is the supply-demand situation for Thermac [ph] business? And what is your projection for the market price? And what is your outlook for the growth of the sales volume?

Yuzo Nouchi: Thank you for the question. This is Nouchi, I will take that question. And as you pointed out, for the Thermac [ph] business, we have benefited from the recovery in our market price, so the business is good. And the current performance already today is achieving record high, and also in Q4, we believe the business will also be quite upbeat. And as for the impact from a marketplace, there is a huge impact. And what I want to say and emphasize is that in Chile, where we struggled before we have seen a huge cost improvement; so that was one achievement. And compared to when we acquired the business, the production cost has improved by 17% at this point; so that's the progress we've made. And the debt ratio -- mortality ratio of the balance [ph] and also the feedstock cost has been improved. And in Chile, the position was certainly weaker compared to the competitor. But at this point, I think we are competing on the same stage. So market price is something that's beyond our control but to counter measure the prices, we want to consider things like augmenting our Frozen [ph] business, and also improving the selling price by selling the processed goods. Also on the sales front, we can make further improvement and we can also make further improvement on the cost side so that we can mitigate the volatility of the market prices. I think I can at least say that the fundamental strength of the business has been augmented.

Unidentified Analyst: Thank you very much.

Tatsuhiko Terada: Thank you very much, Mr. Morimoto [ph]. So I think our time is up. I'd like to end the Q&A session at this point. Lastly, from Masu, the CFO; in March 2022, he will leave the post of the CFO. So Mr. Masu would like to say a word to all of you.

Kazuyuki Masu: This is Masu speaking. So, I think this will be the last opportunity to talk to you after your earnings muting [ph]. So I have been working for 40 years in this company; in the last 6 years I have been taking the process as CFO, and this type of attention or responsibility, I felt keenly that I am working at a listed company, a public company; so it was a very precious opportunity. On the other hand, maybe, I think in Japan, for the listed companies, the issue is that we have to be in this position to be feel the type of tension or a sense of prices. I think now with all your reports -- support, we have been able to serve the CFO of this company. So taking this opportunity, I would like to thank all of you. So for the next earnings report, Mr. Nouchi is going to serve as CFO and make the presentation. So I will ask for your fellow support for Mr. Nouchi as well. Thank you very much.

Tatsuhiko Terada: So, thank you very much despite your busy schedule for attending for the fiscal year 2021 third quarter results announcement. Thank you very much. With this we would like to end the conference. Thank you. Please make sure you turn off your telephone.