Half-yearly Report

LONDON--()--

This announcement is for our U.S.$5,000,000,000 Euro Medium Term Note Programme.

Consolidated Financial Results for the Six-Month Period Ended September 30, 2014 [IFRS]

Tokyo, November 6, 2014 - Mitsui & Co., Ltd. announced its consolidated financial results for the six-month period ended September 30, 2014, based on International Financial Reporting Standards ("IFRS").

Mitsui & Co., Ltd. and subsidiaries

(Web Site : http://www.mitsui.com/jp/en/)

President and Chief Executive Officer : Masami Iijima

Investor Relations Contacts : Michihiro Nose, General Manager, Investor Relations Division TEL 81-3-3285-7533

1. Consolidated financial results (Unreviewed)

(1) Consolidated operating results information for the six-month period ended September 30, 2014

(from April 1, 2014 to September 30, 2014)

    Six-month period ended September 30,  
2014   2013
        %     %
Revenue Millions of yen 2,747,569 △ 4.1 2,864,467

 - 

Profit before income taxes Millions of yen 312,081 △ 1.1 315,653

 - 

Profit for the period Millions of yen 232,874 8.7 214,261

 - 

Profit for the period attributable to owners of the parent Millions of yen 222,660 9.3 203,690

 - 

Comprehensive income for the period Millions of yen 360,720 53.1 235,557

 - 

Earnings per share attributable to owners of the parent, basic Yen 124.22 111.60
Earnings per share attributable to owners of the parent, diluted Yen 124.20   111.60  
Note:
Percentage figures for Revenue, Profit before income taxes, Profit for the period, Profit for the period attributable to owners of the parent,

and Comprehensive income for the period represent changes from the previous year.

       
(2) Consolidated financial position information
    September 30, 2014 March 31, 2014
Total assets Millions of yen 12,254,323 11,491,319
Total equity Millions of yen 4,395,029 4,100,304
Total equity attributable to owners of the parent Millions of yen 4,093,681 3,815,767
Equity attributable to owners of the parent ratio % 33.4 33.2
 
2. Dividend information  
Year ended March 31,

Year ending
March 31, 2015 (Forecast)

    2015 2014
Interim dividend per share Yen 32 25  
Year-end dividend per share Yen 34 32
Annual dividend per share Yen   59 64
 

3. Forecast of consolidated operating results for the year ending March 31, 2015 (from April 1, 2014 to March 31, 2015)

        Year ending

March 31, 2015

Profit attributable to owners of the parent Millions of yen 380,000
Earnings per share attributable to owners of the parent, basic Yen 211.99
Note :

We maintain our forecast profit attributable to owners of the parent for the year ending March 31, 2015 of ¥380.0 billion announced together with the results of fiscal year ended March 2014. No updates have been made to this forecast.

 

4. Others

(1) Increase/decrease of important subsidiaries during the period : None

(2) Number of shares :

      September 30, 2014   March 31, 2014
Number of shares of common stock issued, including treasury stock 1,796,514,127 1,829,153,527
Number of shares of treasury stock 4,008,718 36,641,439
 
   

Six-month period ended September 30, 2014

Six-month period ended September 30, 2013
Average number of shares of common stock outstanding 1,792,509,235 1,825,144,542

Disclosure Regarding Quarterly Review Procedures:

As of the date of disclosure of this quarterly earnings report, a review of the quarterly financial statements is being carried out in accordance with the Financial Instruments and Exchange Act.

A Cautionary Note on Forward-Looking Statements:

This report contains forward-looking statements including those concerning future performance of Mitsui & Co., Ltd. ("Mitsui"), and those statements are based on Mitsui's current assumptions, expectations and beliefs in light of the information currently possessed by it. Various factors may cause Mitsui's actual results to be materially different from any future performance expressed or implied by these forward-looking statements.

Therefore, these statements do not constitute a guarantee by Mitsui that such future performance will be realized.

For key assumptions on which the statements concerning future performance are based, please refer to (2) "Forecasts for the Year Ending March 31, 2015" on p.16.

For cautionary notes with respect to forward-looking statements, please refer to the "Notice" section on p.19.

Supplementary materials and IR meeting on financial results:

Supplementary materials on financial results can be found on our web site.

We will hold an IR meeting on financial results for analysts and institutional investors on November 7, 2014.

Contents of the meeting (English and Japanese) will be posted on our web site immediately after the meeting.

     
 
Table of Contents
 
1. Qualitative Information
(1) Operating Environment 2
(2) Results of Operations 2
(3) Financial Condition and Cash Flows 11
 
2. Management Policies
(1) Result and Forecast for Investment and Loan Plan 15
(2) Forecasts for the Year Ending March 31, 2015 16
(3) Shareholder Return Policy 18
 
3. Other Information 19
 
4. Condensed Consolidated Financial Statements
(1) Condensed Consolidated Statements of Financial Position 20
(2) Condensed Consolidated Statements of Income and Comprehensive Income 22
(3) Condensed Consolidated Statements of Changes in Equity 23
(4) Condensed Consolidated Statements of Cash Flows 24
(5) Assumption for Going Concern 24
(6) Segment Information 25
 

1. Qualitative Information

As of the date of disclosure of this quarterly earnings report, the review procedures for quarterly financial statements in accordance with the Financial Instruments and Exchange Act are in progress.

(1) Operating Environment

The following is an overview of the operating environment for the six-month period ended September 30, 2014, and afterwards.

Looking at the global economy, although the U.S. continued to show firm growth, there was an overall slowdown in the global economy, with the pace of economic recovery slower than expected in Japan and Europe and the signs of stagnation in the emerging countries becoming more prominent. There were also rising concerns about uncertain factors that could impact the global economy such as the situation in Ukraine, the conflict in Syria and Iraq, and the spread of infection of the Ebola virus.

The U.S. economy has been smoothly recovering since the end of the cold-snap-induced negative growth of January to March owing to steadily improving employment, gradual recovery in the housing market, and strong corporate earnings, and it is expected to grow stably in the second half of the fiscal year. In the Japanese economy, the impact of the consumption tax hike has been prolonged and there has continued to be a slump in consumer spending and decline in industrial production. Nevertheless, the economy is expected to pick up gradually on the back of improvements in the employment environment and corporate earnings.

For the European economy, there are growing concerns about the future economic outlook due to the harsh employment environment amid a wide gap between supply and demand, more cautious stance on lending by the financial institutions, and a slowdown in exports to Russia in relation to the situation in Ukraine.

In the Chinese economy, the restraint of excess production capacity and a softer real estate market have led to a slowdown in the economic growth rate. Meanwhile, in other emerging economies, where there is a delay in improvements of weak economic fundamentals such as inflation and current account deficits, there are concerns of a capital outflow triggered by the end of the third round of quantitative easing (QE3) in the United States.

The spot reference price for iron ore CFR North China (Fe 62%) fell below the US$80-per-ton level in September, declining to the lowest price in 5 years. Amid a slowdown in global demand, the Dubai Crude spot price also sharpened its downward trend, and recently, it has been traded in a range of around US$80–US$90 per barrel.

(2) Results of Operations

1) Analysis of Consolidated Income Statements

Revenue

Mitsui & Co., Ltd. (“Mitsui”) and its subsidiaries (collectively “we”) recorded total revenue of ¥2,747.6 billion for the six-month period ended September 30, 2014 (“current period”), a decline of ¥116.9 billion from ¥2,864.5 billion for the corresponding six-month period of the previous year (“previous period”).

  • Revenue from sales of products for the current period was ¥2,472.8 billion, a decline of ¥135.5 billion from ¥2,608.3 billion for the previous period, as a result of the following:
    • The Energy Segment reported a decline of ¥214.7 billion. The sale of Mitsui Oil Co., Ltd. resulted in a decline of ¥150.4 billion and petroleum trading operations recorded a decline of ¥131.9 billion due to a decline in trading volume. Meanwhile, oil and gas producing operations recorded an increase of ¥24.8 billion reflecting higher production volume. MMGS Inc., a gas distribution subsidiary in the United States, also reported an increase of ¥16.0 billion due to an increase in sales volume.
    • The Iron & Steel Products Segment reported a decline of ¥20.0 billion. Transactions of line pipe to LNG projects had been almost shipped by the end of the previous year and trading volume of other steel products also declined.
    • The Americas Segment reported an increase of ¥83.9 billion due to an increase in trading volume of soybean.
  • Revenue from rendering of services for the current period was ¥207.8 billion, an increase of ¥5.8 billion from ¥202.0 billion for the previous period.
  • Other revenue for the current period was ¥66.9 billion, an increase of ¥12.7 billion from ¥54.2 billion for the previous period. The commodity derivatives trading business at Mitsui recorded an increase in other revenue corresponding to a deterioration of ¥5.1 billion in the foreign exchange gains and losses posted in other expense.

Gross Profit

Gross profit for the current period was ¥420.2 billion, a decline of ¥16.9 billion from ¥437.1 billion for the previous period.

  • The Mineral & Metal Resources Segment reported a decline of ¥20.5 billion. Iron ore mining operations in Australia reported a decline of ¥21.8 billion due to lower iron ore prices.
  • The Iron & Steel Products Segment reported a decline of ¥6.5 billion. Transactions of line pipe to LNG projects had been almost shipped by the end of the previous year and trading volume of other steel products also declined.
  • The Innovation & Corporate Development Segment reported an increase of ¥7.3 billion. The commodity derivatives trading business at Mitsui recorded an increase in gross profit corresponding to a deterioration of ¥5.1 billion in the foreign exchange gains and losses posted in other expense.
  • The Machinery & Infrastructure Segment reported an increase of ¥5.5 billion, attributable to an increase in trading volume of newly built ships and second-hand ships.

Other Income (Expenses)

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the current period were ¥281.4 billion, an increase of ¥1.2 billion from ¥280.2 billion for the previous period. The table below provides a breakdown of selling, general and administrative expenses used for our internal review.

[ diagram omitted ]

Gain on securities and other investments—net

Gain on securities and other investments for the current period was ¥9.3 billion, a decline of ¥3.2 billion from ¥12.5 billion for the previous period.

  • A ¥9.1 billion gain on the sale of the stake in Silver Bell Mining, LLC was recorded for the current period.
  • For the previous period, an ¥8.4 billion gain was recorded due to a reversal of impairment loss on shares in Penske Automotive Group, Inc., reflecting a rise in the share price. Meanwhile, an impairment loss of ¥2.6 billion was recorded on the investment in SCM Minera Lumina Copper Chile, a project company for the Caserones Copper Mine.

Impairment Loss of Fixed Assets

Impairment loss of fixed assets for the current period was ¥0.8 billion, the same amount as the previous period. There were miscellaneous small transactions in both periods.

Gain on Disposal or Sales of Fixed Assets—Net

Gain on disposal or sales of fixed assets for the current period was ¥0.4 billion, a decline of ¥1.3 billion from ¥1.7 billion for the previous period. There were miscellaneous small transactions in both periods.

Other Expense—Net

Other expense for the current period was ¥8.6 billion, a decline of ¥2.0 billion from ¥10.6 billion for the previous period.

  • For the current period, exploration expenses totaled ¥12.6 billion, including those recorded at oil and gas producing businesses.
  • For the previous period, exploration expenses totaled ¥11.5 billion, including those recorded at oil and gas producing businesses. Furthermore, Mitsui Raw Materials Development Pty. Ltd. recorded a ¥3.5 billion foreign exchange loss related to borrowings denominated in U.S. dollars. Meanwhile, the Innovation & Corporate Development Segment recorded foreign exchange gains of ¥7.5 billion in the commodity derivatives trading business at Mitsui, which corresponded to related gross profit in the same segment.

Finance Income (Costs)

Interest Income

Interest income for the current period was ¥16.7 billion, the same amount as the previous period.

Dividend Income

Dividend income for the current period was ¥76.9 billion, an increase of ¥11.8 billion from ¥65.1 billion for the previous period.

  • Dividends from six LNG projects (Sakhalin II, Qatargas 1, Abu Dhabi, Oman, Qatargas 3 and Equatorial Guinea) were ¥61.2 billion in total, an increase of ¥8.3 billion from ¥52.9 billion for the previous period, due to an increase in dividends received from the Sakhalin II project.
  • Dividends from preferred shares in JA Mitsui Leasing Ltd. increased by ¥4.0 billion.

Interest Expense

Interest expense for the current period was ¥24.6 billion, an increase of ¥0.4 billion from ¥24.2 billion for the previous period. The following table provides the month-end average of three-month Tibor for the Japanese yen and three-month Libor for the U.S. dollar for both periods.

    Current Period   Previous Period
Japanese yen   0.21%   0.23%
U.S. dollar   0.23%   0.27%
   

Share of Profit of Investments Accounted for Using the Equity Method

Share of profit of investments accounted for using the equity method for the current period was ¥103.8 billion, an increase of ¥5.4 billion from ¥98.4 billion for the previous period.

  • Valepar S.A. reported an increase of ¥4.6 billion, reflecting the positive impact of exchange rate fluctuations which was partially offset by lower iron ore prices.
  • IPP businesses reported an increase of ¥3.4 billion. Mark-to-market valuation gains and losses, such as those on power derivative and fuel purchase contracts, improved by ¥2.3 billion. Meanwhile, new businesses including Astoria I gas-fired IPP in the United States, in which Mitsui acquired stakes in the last year, contributed to the increase.
  • Inversiones Mineras Acrux SpA, a copper mining company in Chile, reported a decline of ¥15.8 billion due to additional recognition of a deferred tax liability reflecting the tax system revision in Chile.
  • Robe River Mining Co. Pty. Ltd., an iron ore mining company in Australia, reported a decline of ¥8.0 billion due to lower iron ore prices.
  • For the previous period, SCM Minera Lumina Copper Chile posted a ¥10.6 billion impairment loss on fixed assets. Meanwhile, Arch Pharmalabs Limited, a pharmaceutical contract manufacturer in India, posted a ¥4.2 billion impairment loss on fixed assets and other assets.

Income Taxes

Income taxes for the current period were ¥79.2 billion, a decline of ¥22.2 billion from ¥101.4 billion for the previous period.

  • Profit before income taxes for the current period was ¥312.1 billion, a decline of ¥3.6 billion from ¥315.7 billion for the previous period. In response, applicable income taxes also declined.
  • For the current period, a ¥13.4 billion deferred tax assets was recognized after evaluating the recoverability in relation to sales of financial assets measured at FVTOCI.
  • A ¥12.0 billion negative impact on deferred tax was caused by the repeal of the Australian Mineral Resource Rent Tax (“MRRT”) at the end of September 2014 which led to the reversal of deferred tax assets. Meanwhile, the current tax burden of MRRT declined reflecting the decline in iron ore prices.

The effective tax rate for the current period was 25.4%, a decline of 6.7% from 32.1% for the previous period. The major factors for the decrease were the aforementioned recognition of deferred tax assets in relation to sales of financial assets measured at FVTOCI and an increase in no-tax or low-tax income such as dividend income. Meanwhile, factors for the increase included the aforementioned reversal of deferred tax assets related to MRRT.

Profit for the Period

As a result of the above factors, profit for the period was ¥232.9 billion, an increase of ¥18.6 billion from ¥214.3 billion for the previous period.

Profit for the Period Attributable to Owners of the Parent

Profit for the period attributable to owners of the parent was ¥222.7 billion, an increase of ¥19.0 billion from ¥203.7 billion for the previous period.

[ diagram omitted ]

2) EBITDA

We use EBITDA as a measure of underlying earning power from the current period.

EBITDA is the total of “gross profit,” “selling, general and administrative expenses,” “dividend income” and “share of profit of investments accounted for using the equity method” from the consolidated statements of income and “depreciation and amortization” from the consolidated statements of cash flows.

(Billions of Yen)   Current Period   Previous Period   Change
EBITDA (a+b+c+d+e) (*1) 462.1 422.3 +39.8
      Gross profit   a 420.2 437.1 (16.9)
Selling, general and administrative expenses   b (281.4) (280.2) (1.2)
Dividend income   c 76.9 65.1 +11.8
Profit of equity method investments (*2)   d 103.8 98.4 +5.4
      Depreciation and amortization   e 142.4 102.0 +40.4

*1 M ay not match with the total of items due to rounding off. The same shall apply hereafter.

*2 “Profit of equity method investments” means “share of profit of investments accounted for using the equity method” in the consolidated statements of income. The same shall apply hereafter.

3) Operating Results by Operating Segment

Iron & Steel Products Segment

(Billions of Yen)   Current Period   Previous Period   Change
EBITDA 5.8 12.6 (6.8)
  Gross profit 20.3 26.8 (6.5)
Selling, general and administrative expenses (19.4) (18.8) (0.6)
Dividend Income 1.0 0.8 +0.2
Profit of equity method investments 3.3 3.1 +0.2
  Depreciation and amortization 0.6 0.7 (0.1)
Profit for the period attributable to owners of the parent 2.7 6.7 (4.0)

EBITDA declined by ¥6.8 billion, mainly due to the following factors:

Gross profit declined by ¥6.5 billion. Transactions of line pipe to LNG projects had been mostly shipped out by the end of the previous year and trading volume of other steel products also declined.

Profit of equity method investments increased by ¥0.2 billion.

Profit for the period attributable to owners of the parent declined by ¥4.0 billion. In addition to the factors mentioned above, foreign exchange gains and losses corresponding to transactions of line pipe improved by ¥1.9 billion.

Mineral & Metal Resources Segment

(Billions of Yen)   Current Period   Previous Period   Change
EBITDA 111.9 123.1 (11.2)
  Gross profit 76.5 97.0 (20.5)
Selling, general and administrative expenses (21.0) (21.6) +0.6
Dividend Income 0.8 0.7 +0.1
Profit of equity method investments 24.7 27.9 (3.2)
  Depreciation and amortization 31.0 19.1 +11.9
Profit for the period attributable to owners of the parent 42.6 50.5 (7.9)

EBITDA declined by ¥11.2 billion, mainly due to the following factors:

Gross profit declined by ¥20.5 billion reflecting the impact from lower iron ore prices on iron ore mining operations in Australia.

As for iron ore pricing, the majority of contract prices applied to products sold during the current period were based on pricing that more closely reflects current spot reference prices, the same pricing as applied in the previous year, such as a daily average of spot reference prices for the current quarter of shipments and a daily average of spot reference prices for the shipment month. Mitsui Iron Ore Development Pty. Ltd. reported a decline of ¥21.7 billion in gross profit reflecting lower iron ore prices.

[ diagram omitted ]

Profit of equity method investments declined by ¥3.2 billion.

  • Inversiones Mineras Acrux SpA, a copper mining company in Chile, recorded a decline of ¥15.8 billion to a loss of ¥13.9 billion from a profit of ¥1.9 billion for the previous period, due to additional recognition of a deferred tax liability reflecting the tax system revision in Chile.
  • Profit from Robe River Mining Co. Pty. Ltd. were ¥14.9 billion, a decline of ¥8.0 billion from ¥22.9 billion due to lower iron ore prices.
  • SCM Minera Lumina Copper Chile, a project company for the Caserones Copper Mine, reported an improvement of ¥10.7 billion from a ¥10.7 billion loss for the previous period, due to a reversal effect of a ¥10.6 billion impairment loss on fixed assets posted in the previous period.
  • Valepar S.A. posted ¥16.0 billion of profit, an increase of ¥4.6 billion from ¥11.4 billion due to the positive impact of exchange rate fluctuations which was partially offset by lower iron ore prices. Reflecting the exchange rate fluctuations on Brazilian real against U.S. dollar, there was a reversal effect of foreign exchange losses on debt denominated in U.S. dollars recorded in the previous period.

Depreciation and amortization increased by ¥11.9 billion.

Profit for the period attributable to owners of the parent declined by ¥7.9 billion. In addition to the above, the following factors also affected results:

  • A ¥12.0 billion negative impact on deferred tax was caused by the repeal of the Australian Mineral Resource Rent Tax (“MRRT”) at the end of September 2014 which led to the reversal of deferred tax assets. Meanwhile, the current tax burden of MRRT declined reflecting the decline in iron ore prices.
  • A ¥4.5 billion gain on the sale of the stake in Silver Bell Mining, LLC was recorded for the current period.
  • For the previous period, Mitsui Raw Materials Development Pty. Ltd. recorded a ¥3.5 billion foreign exchange loss related to borrowings denominated in U.S. dollars.
  • For the previous period, an impairment loss of ¥2.6 billion was recorded on the investment in SCM Minera Lumina Copper Chile.

Machinery & Infrastructure Segment

(Billions of Yen)   Current Period   Previous Period   Change
EBITDA 32.7 21.6 +11.1
  Gross profit 59.4 53.9 +5.5
Selling, general and administrative expenses (64.6) (61.1) (3.5)
Dividend Income 2.5 1.9 +0.6
Profit of equity method investments 26.1 18.3 +7.8
  Depreciation and amortization 9.3 8.6 +0.7
Profit for the period attributable to owners of the parent 21.6 14.4 +7.2

EBITDA increased by ¥11.1 billion, mainly due to the following factors:

Gross profit increased by ¥5.5 billion.

  • The Infrastructure Projects Business Unit reported an increase of ¥1.4 billion.
  • The Integrated Transportation Systems Business Unit reported an increase of ¥4.1 billion. The main factor behind the increase was an increase in trading volume of newly built ships and second-hand ships.

Profit of equity method investments increased by ¥7.8 billion.

  • The Infrastructure Projects Business Unit reported an increase of ¥5.9 billion. IPP businesses posted profit of ¥12.4 billion in total, an increase of ¥3.3 billion from ¥9.1 billion for the previous period. Mark-to-market valuation gains and losses, such as those on long-term power derivative contracts and long-term fuel purchase contracts, improved by ¥2.1 billion to a gain of ¥2.6 billion from ¥0.5 billion for the previous period. Meanwhile, new businesses including Astoria I gas-fired IPP in the United States, in which Mitsui acquired stakes in the last year, contributed to the increase.
  • The Integrated Transportation Systems Business Unit reported an increase of ¥1.9 billion. Automotive-related business in North America achieved a solid performance.

Profit for the period attributable to owners of the parent increased by ¥7.2 billion. In addition to the factors mentioned above, in the previous period, this segment recorded a ¥6.7 billion gain due to a reversal of impairment loss on shares in Penske Automotive Group, Inc., reflecting a rise in the share price.

Chemicals Segment

(Billions of Yen)   Current Period   Previous Period   Change
EBITDA 11.8 14.3 (2.5)
  Gross profit 37.0 40.1 (3.1)
Selling, general and administrative expenses (34.5) (33.8) (0.7)
Dividend Income 0.6 0.8 (0.2)
Profit of equity method investments 3.5 3.2 +0.3
  Depreciation and amortization 5.1 4.1 +1.0
Profit for the period attributable to owners of the parent 3.8 6.2 (2.4)

EBITDA declined by ¥2.5 billion, mainly due to the following factors:

Gross profit declined by ¥3.1 billion.

  • The Basic Chemicals Business Unit reported a decline of ¥0.2 billion.
  • The Performance Chemicals Business Unit reported a decline of ¥2.8 billion. P.T. Kaltim Pasifik Amoniak, an ammonia producer in Indonesia, reported a decline of ¥6.2 billion due to a shutdown at the end of the previous year as a result of an asset transfer under the build-operate-transfer (BOT) contract. Meanwhile, sales of agricultural chemicals increased.

Profit of equity method investments increased by ¥0.3 billion.

Profit for the period attributable to owners of the parent declined by ¥2.4 billion.

Energy Segment

(Billions of Yen)   Current Period   Previous Period   Change
EBITDA 246.8 212.7 +34.1
  Gross profit 109.4 108.9 +0.5
Selling, general and administrative expenses (28.7) (30.1) +1.4
Dividend Income 63.2 54.5 +8.7
Profit of equity method investments 26.8 28.4 (1.6)
  Depreciation and amortization 76.2 51.0 +25.2
Profit for the period attributable to owners of the parent 112.4 98.9 +13.5

EBITDA increased by ¥34.1 billion, mainly due to the following factors:

The weighted average crude oil prices applied to our operating results for the current period and the previous period were estimated to be US$110 and US$111 per barrel, respectively.

[ diagram omitted ]

Gross profit increased by ¥0.5 billion, primarily due to the following factors:

  • Mitsui E&P Australia Pty Limited reported an improvement of ¥13.3 billion due to a reversal of declined production during the previous period associated with the refurbishment of its oil production facility.
  • Mitsui E&P USA LLC reported an improvement of ¥4.8 billion from higher production and lower costs.
  • A decline of ¥6.6 billion was recorded due to the sale of Mitsui Oil Co., Ltd in the previous year.
  • Mitsui E&P Middle East B.V. reported a decline of ¥5.4 billion due to an increase in production cost as well as the sales of interests in oil fields in Egypt in the previous year.
  • A ¥3.5 billion decline was recorded from LNG transactions.

Dividend income increased by ¥8.7 billion mainly due to an increase in dividends received from the Sakhalin II project. Dividends from six LNG projects (Sakhalin II, Qatargas 1, Abu Dhabi, Oman, Qatargas 3 and Equatorial Guinea) were ¥61.2 billion in total, an increase of ¥8.3 billion from ¥52.9 billion for the previous period.

Profit of equity method investments declined by ¥1.6 billion.

Depreciation and amortization increased by ¥25.2 billion. Oil and gas producing operations recorded an increase of ¥26.5 billion, including an increase of ¥10.1 billion at Marcellus and Eagle Ford shale gas and oil operations in the United States.

Profit for the period attributable to owners of the parent increased by ¥13.5 billion. In addition to the above, exploration expenses of ¥11.8 billion in total and ¥10.6 billion in total were recorded for the current period and the previous period, respectively.

Lifestyle Segment

(Billions of Yen)   Current Period   Previous Period   Change
EBITDA 6.3 6.4 (0.1)
  Gross profit 56.9 55.3 +1.6
Selling, general and administrative expenses (70.3) (64.0) (6.3)
Dividend Income 2.9 3.2 (0.3)
Profit of equity method investments 10.4 6.3 +4.1
  Depreciation and amortization 6.3 5.6 +0.7
Profit for the period attributable to owners of the parent (3.9) 1.8 (5.7)

EBITDA declined by ¥0.1 billion, mainly due to the following factors:

Gross profit increased by ¥1.6 billion.

  • The Food Resources Business Unit reported an increase of ¥1.3 billion.
  • The Food Products & Services Business Unit recorded an increase of ¥2.2 billion.
  • The Consumer Service Business Unit reported a decline of ¥1.9 billion.

Selling, general and administrative expenses increased by ¥6.3 billion due to an increase in provision for doubtful receivables at Multigrain Trading AG and increases from new subsidiaries acquired in the previous year.

Profit of equity method investments increased by ¥4.1 billion.

  • The Food Resources Business Unit reported an increase of ¥0.4 billion .
  • The Food Products & Services Business Unit reported a decline of ¥0.1 billion.
  • The Consumer Service Business Unit reported an increase of ¥3.9 billion. Arch Pharmalabs Limited, a pharmaceutical contract manufacturer in India, posted a ¥4.2 billion impairment loss on fixed assets and other assets for the previous period.

Profit for the period attributable to owners of the parent declined by ¥5.7 billion. In addition to the above, the following factors also affected results:

  • Gains and losses on equity method investments deteriorated by ¥4.8 billion; an impairment loss and gains on sales were recorded for the current period and previous period, respectively.
  • Foreign exchange losses for the current period were ¥3.6 billion, a deterioration of ¥3.4 billion from the previous period, mainly attributable to those related to coffee trading at Mitsui.

Innovation & Corporate Development Segment

(Billions of Yen)   Current Period   Previous Period   Change
EBITDA (5.4) (12.0) +6.6
  Gross profit 16.5 9.2 +7.3
Selling, general and administrative expenses (30.4) (30.6) +0.2
Dividend Income 4.5 0.9 +3.6
Profit of equity method investments 1.6 6.0 (4.4)
  Depreciation and amortization 2.5 2.5 0.0
Loss for the period attributable to owners of the parent (4.2) (4.4) +0.2

EBITDA increased by ¥6.6 billion, mainly due to the following factors:

Gross profit increased by ¥7.3 billion.

  • There was an increase in gross profit corresponding to a ¥5.1 billion deterioration of foreign exchange gains and losses related to the commodity derivatives trading business at Mitsui posted in other expense for the current period and for the previous period.
  • Mitsui & Co. Commodity Risk Management Ltd. reported an increase of ¥3.2 billion due to the recovery of underperforming trading of derivatives for the previous period.

Dividend income increased by ¥3.6 billion. Dividends from preferred shares in JA Mitsui Leasing Ltd. increased by ¥4.0 billion.

Profit of equity method investments declined by ¥4.4 billion due to a decline in profit of JA Mitsui Leasing Ltd.

Loss for the period attributable to owners of the parent improved by ¥0.2 billion. In addition to the factors mentioned above, for the current period and for the previous period, foreign exchange gains of ¥2.4 billion and ¥7.5 billion, respectively, were posted in other expense in relation to the commodity derivatives trading business at Mitsui.

Americas Segment

(Billions of Yen)   Current Period   Previous Period   Change
EBITDA 15.5 14.2 +1.3
  Gross profit 38.4 38.3 +0.1
Selling, general and administrative expenses (31.0) (30.9) (0.1)
Dividend Income 0.0 0.0 0.0
Profit of equity method investments 3.9 2.9 +1.0
  Depreciation and amortization 4.2 3.9 +0.3
Profit for the period attributable to owners of the parent 12.6 9.8 +2.8

EBITDA increased by ¥1.3 billion, mainly due to the following factors:

Gross profit increased by ¥0.1 billion.

Profit of equity method investments increased by ¥1.0 billion.

Profit for the period attributable to owners of the parent increased by ¥2.8 billion. In addition to the factors mentioned above, this segment recorded a ¥4.5 billion gain on the sale of the stake in Silver Bell Mining, LLC for the current period.

Europe, the Middle East and Africa Segment

(Billions of Yen)   Current Period   Previous Period   Change
EBITDA 0 (0.3) +0.3
  Gross profit 9.4 8.8 +0.6
Selling, general and administrative expenses (10.5) (10.0) (0.5)
Dividend Income 0.1 0.1 0.0
Profit of equity method investments 0.9 0.5 +0.4
  Depreciation and amortization 0.2 0.3 (0.1)
Profit for the period attributable to owners of the parent 3.2 1.1 +2.1

EBITDA increased by ¥0.3 billion, mainly due to the following factors:

Gross profit increased by ¥0.6 billion.

Profit of equity method investments increased by ¥0.4 billion.

Profit for the period attributable to owners of the parent increased by ¥2.1 billion.

Asia Pacific Segment

(Billions of Yen)   Current Period   Previous Period   Change
EBITDA 0.3 0.7 (0.4)
  Gross profit 6.3 6.4 (0.1)
Selling, general and administrative expenses (10.0) (8.9) (1.1)
Dividend Income 0.6 0.9 (0.3)
Profit of equity method investments 3.0 2.1 +0.9
  Depreciation and amortization 0.3 0.2 +0.1
Profit for the period attributable to owners of the parent 15.2 19.6 (4.4)

EBITDA declined by ¥0.4 billion, mainly due to the following factors:

Gross profit declined by ¥0.1 billion.

Profit of equity method investments increased by ¥0.9 billion.

Profit for the period attributable to owners of the parent declined by ¥4.4 billion. In addition to the above, this segment recorded profit from the segment’s minority interest in iron ore mining and coal mining operations in Australia, which declined due to fall in prices of iron ore and coal.

(3) Financial Condition and Cash Flows

1) Financial Condition

Total assets as of September 30, 2014 were ¥12,254.3 billion, an increase of ¥763.0 billion from ¥11,491.3 billion as of March 31, 2014.

Total current assets as of September 30, 2014 were ¥4,877.4 billion, an increase of ¥412.0 billion from ¥4,465.4 billion as of March 31, 2014. Inventories increased by ¥91.4 billion, mainly due to seasonal factors at Multigrain Trading AG. As of September 30, 2014, assets of ¥111.4 billion and liabilities of ¥58.2 billion were transferred to the assets held for sale and liabilities directly associated with assets held for sale accounts, respectively, due to the merger of domestic construction steel and metal scrap businesses of Mitsui & Co., Steel Ltd. with Metal One Structural Steel & Resource Corporation as of November 1, 2014.

Total current liabilities as of September 30, 2014 were ¥3,115.0 billion, an increase of ¥130.3 billion from ¥2,984.7 billion as of March 31, 2014. Short-term debt increased by ¥48.4 billion.

As a result, working capital, or current assets less current liabilities, as of September 30, 2014, totaled ¥1,762.4 billion, an increase of ¥281.7 billion from ¥1,480.7 billion as of March 31, 2014.

[ diagram omitted ]

Total non-current assets as of September 30, 2014 totaled ¥7,377.0 billion, an increase of ¥351.1 billion from ¥7,025.9 billion as of March 31, 2014, mainly due to the following factors:

  • Investments accounted for using the equity method as of September 30, 2014 was ¥2,600.8 billion, an increase of ¥152.0 billion from ¥2,448.8 billion as of March 31, 2014. Major factors included an increase of ¥70.1 billion due to an acquisition of a 20% stake in VLI S.A., which is engaged in integrated freight transportation in Brazil, as well as an increase of ¥59.0 billion resulting from foreign currency exchange fluctuations. Meanwhile, there was a decline of ¥104.3 billion due to dividends received from equity accounted investees, despite an increase of ¥103.8 billion corresponding to the profit of equity method for the current period.
  • Other investments as of September 30, 2014 were ¥1,639.2 billion, an increase of ¥84.5 billion from ¥1,554.7 billion as of March 31, 2014, mainly due to the following factors:
    • A ¥52.1 billion net increase due to valuation on financial assets measured at FVTOCI; and
    • A ¥43.1 billion net increase due to foreign currency exchange fluctuations.
  • Property, plant and equipment as of September 30, 2014 totaled ¥2,129.7 billion, an increase of ¥122.2 billion from ¥2,007.5 billion as of March 31, 2014, mainly due to the following factors:
    • An increase of ¥37.1 billion (including a foreign exchange translation gain of ¥18.0 billion) at the Marcellus and Eagle Ford shale gas and oil producing operations in the United States;
    • An increase of ¥26.0 billion (including a foreign exchange translation gain of ¥18.3 billion) at oil and gas operations other than U.S. shale gas and oil producing operations;
    • An increase of ¥12.2 billion (including a foreign exchange translation gain of ¥1.1 billion) at the methanol manufacturing joint venture in United States; and
    • An increase of ¥10.5 billion (including a foreign exchange translation loss of ¥0.1 billion) at the wind power generation business in Australia.
  • Trade and other receivables as of September 30, 2014 totaled ¥457.7 billion, a decline of ¥13.2 billion from ¥470.9 billion as of March 31, 2014, mainly due to the following factors:
    • A decline of ¥11.7 billion due to collection of long-term loan receivables at a private equity-sponsored loans business with GE Capital; and
    • An increase of ¥11.6 billion due to a loan to the FPSO leasing business for oil and gas production in Brazil and Ghana.

Total non-current liabilities as of September 30, 2014 totaled ¥4,744.2 billion, an increase of ¥337.8 billion from ¥4,406.4 billion as of March 31, 2014. Long-term debt, less current portion as of September 30, 2014 was ¥3,778.5 billion, an increase of ¥310.2 billion from ¥3,468.3 billion as of March 31, 2014, mainly due to an increase in long-term borrowings at the Marcellus and Eagle Ford shale gas and oil producing operations in the United States.

Total equity attributable to owners of the parent as of September 30, 2014 was ¥4,093.7 billion, an increase of ¥277.9 billion from ¥3,815.8 billion as of March 31, 2014. Major components included:

  • Retained earnings increased by ¥128.7 billion which was partially offset by a dividend payment and a cancellation of treasury stock;
  • Other components of equity as of September 30, 2014 increased by ¥104.7 billion to ¥871.3 billion from ¥766.6 billion as of March 31, 2014, mainly due to the following factors:
    • Foreign currency translation adjustments increased by ¥82.0 billion, reflecting the appreciation of the U.S. dollar against the Japanese yen; and
    • Financial assets measured at FVTOCI increased by ¥31.8 billion reflecting the higher stock prices; and
  • Treasury stock declined by ¥50.2 billion, due to a cancellation.

Net interest-bearing debt, or interest-bearing debt less cash and cash equivalents and time deposits as of September 30, 2014 was ¥3,191.6 billion, an increase of ¥12.8 billion from ¥3,178.8 billion as of March 31, 2014. The net debt-to-equity ratio (DER) as of September 30, 2014 was 0.78 times, 0.05 points lower compared to 0.83 times as March 31, 2014.

[ diagram omitted ]

2) Cash Flows

Cash Flows from Operating Activities

(Billions of Yen)   Current Period   Previous Period   Change
Cash flows from operating activities   a 373.7 239.3 +134.4
Cash flows from change in working capital   b (27.5) (91.5) +64.0
Core operating cash flow   a-b 401.2 330.8 +70.4

Net cash provided by operating activities for the current period was ¥373.7 billion, an increase of ¥134.4 billion from ¥239.3 billion for the previous period.

Net cash outflow from an increase in working capital, or changes in operating assets and liabilities for the current period, was ¥27.5 billion, a decline of ¥64.0 billion from ¥91.5 billion for the previous period.

Core operating cash flow, cash flows from operating activities without the net cash outflow from an increase in working capital, for the current period amounted to ¥401.2 billion, an increase of ¥70.4 billion from ¥330.8 billion for the previous period.

  • Depreciation and amortization for the current period was ¥142.4 billion, an increase of ¥40.4 billion from ¥102.0 billion for the previous period.
  • Net cash inflow from dividend income, including dividends received from equity accounted investees, for the current period totaled ¥184.4 billion, an increase of ¥32.5 billion from ¥151.9 billion for the previous period.

The following table shows core operating cash flow by operating segment.

(Billions of Yen)   Current Period   Previous Period   Change
Iron & Steel Products 2.0 6.7 (4.7)
Mineral & Metal Resources 85.4 87.8 (2.4)
Machinery & Infrastructure 39.8 18.7 +21.1
Chemicals 9.9 13.1 (3.2)
Energy 210.4 176.3 +34.1
Lifestyle 3.3 2.7 +0.6
Innovation & Corporate Development 0.7 (2.7) +3.4
Americas 11.4 11.0 +0.4
Europe, the Middle East and Africa 1.5 0.3 +1.2
Asia Pacific 4.2 2.9 +1.3
All Other and Adjustments and Eliminations 32.6 14.0 +18.6
Consolidated Total 401.2 330.8 +70.4

Cash Flows from Investing Activities

Net cash used in investing activities for the current period was ¥190.0 billion, a decline of ¥236.8 billion from ¥426.8 billion for the previous period. The net cash used in investing activities consisted of:

  • Net cash outflows that corresponded to investments in and advances to equity accounted investees (net of sales of investments and collection of advances) were ¥66.2 billion. The major cash outflows were an acquisition of a 20% stake in VLI S.A. for ¥70.1 billion as well as a loan to the FPSO leasing business for oil and gas production in Brazil and Ghana for ¥11.6 billion. The major cash inflows included the sale of the stake in Silver Bell Mining, LLC and redemption of preferred shares in Valepar S.A. for ¥10.0 billion.
  • Net cash inflows that corresponded to other investments (net of sales and maturities of other investments) were ¥25.6 billion. The major cash inflows were a sale of shares in Burberry Group plc for ¥11.8 billion and capital redemption from a private equity-sponsored loans business with GE Capital  for ¥11.4 billion.
  • Net cash inflows that corresponded to long-term loan receivables (net of collection) were ¥22.4 billion.
  • Net cash outflows that corresponded to purchases of property, plant, equipment and investment property (net of sales of those assets) were ¥170.8 billion. Major expenditures included:
    • Oil and gas projects other than the U.S. shale gas and oil projects for a total of ¥63.7 billion;
    • Iron ore mining projects in Australia for ¥32.5 billion;
    • Marcellus and Eagle Ford shale gas and oil projects in the United States for ¥25.0 billion;
    • A wind power generation business in Australia for ¥10.5 billion; and
    • A methanol manufacturing joint venture in the United States for ¥10.0 billion.

The major cash inflows included the sale of an ammonia plant by P.T. Kaltim Pasifik Amoniak for ¥9.9 billion.

Free cash flow, or the sum of net cash provided by operating activities and net cash used in investing activities, for the current period was a net inflow of ¥183.7 billion.

Cash Flows from Financing Activities

For the current period, net cash provided by financing activities was ¥142.2 billion, an increase of ¥60.4 billion from ¥81.8 billion for the previous period. The net cash inflow from the borrowing of long-term debt was ¥175.9 billion and short-term debt was ¥35.6 billion. Meanwhile, the cash outflow from payments of cash dividends was ¥61.0 billion.

In addition to the changes discussed above, there was an increase in cash and cash equivalents of ¥19.1 billion due to foreign exchange translation and a decline of ¥0.7 billion due to the reclassification to assets held for sale; as a result, cash and cash equivalents as of September 30, 2014 totaled ¥1,570.7 billion, an increase of ¥344.4 billion from ¥1,226.3 billion as of March 31, 2014.

2. Management Policy

(1) Result and Forecast for Investment and Loan Plan

Our progress with the investment and loan plan in each operating segment for the six-month period ended September 30, 2014 (current period) was as follows:

[ diagram omitted ]

We implemented investments and loans of approximately ¥285 billion to existing businesses and projects in the pipeline (*), which is planned at ¥1.5 trillion for the three-year period of the New Medium-term Management Plan announced in May 2014. In addition, we made new investments and loans of approximately ¥20 billion for further growth. The resulting sum of investments and loans for the current period was ¥305 billion.

On the other hand, we collected approximately ¥120 billion through disposal of assets and investments, which is planned in the range from ¥700 to ¥900 billion during the New Medium-term Management Plan.

To realize “Evolution of portfolio strategy”, which is one of the key initiatives of the New Medium-term Management Plan, we will continue with improvement and modification of our portfolio adjustment and achieve positive free cash flow during the New Medium-term Management Plan by ensuring discipline in investments.

* Projects in which our participation has been decided and announced as of May 2014 and profit contributions from such projects are expected within several years.

(2) Forecasts for the Year Ending March 31, 2015

1) Revised forecasts for the year ending March 31, 2015

[ diagram omitted ]

We assume foreign exchange rates for the six-month period ending March 31, 2015 (2nd half) will be ¥110/US$, ¥95/AU$ and ¥45/BRL, while average foreign exchange rates for the six-month period ended September 30, 2015 (1st half) were ¥103.61/US$, ¥95.61/AU$ and ¥45.76/BRL. Also, we assume the annual average crude oil price applicable to our financial results for the year ending March 31, 2015 will be US$103/barrel, down US$1 from the original assumption, based on the assumption that the crude oil price (JCC) will average US$87/barrel throughout the six-month period ending March 31, 2015.

  • Gross profit for the year ending March 31, 2015 is expected to be ¥820.0 billion, a decline of ¥30.0 billion from the original forecast, due to a decline in iron prices and underperforming origination and merchandising operations at Multigrain Trading AG.
  • Increase of ¥10.0 billion is expected in gain on sale from asset recycling. Another ¥10.0 billion increase is expected in dividend income mainly attributable to those from LNG projects.
  • Profit of equity method investments is expected to be ¥210.0 billion, a decline of ¥20.0 billion from the original forecast, reflecting the additional recognition of deferred tax liability reflecting the tax system revision in Chile.
  • Income taxes are forecasted to improve by ¥30.0 billion, due to the recognition of deferred tax assets related to sales of financial assets measured at FVTOCI as well as the decline in profit before income taxes.

As a result, profit for the year attributable to owners of the parent is expected to be ¥380.0 billion, the same level as the original forecast.

In addition to the above, depreciation and amortization is forecasted to increase; projected EBITDA is ¥850.0 billion, the same level as the original forecast.

The revised forecast for profit for the year attributable to owners of the parent by operating segment compared to the original forecast is described as follows:

(Billions of Yen)   Year ending

March 31, 2015

Revised Forecast

  Year ending

March 31, 2015

Original Forecast

  Change
Iron & Steel Products 8.0 8.0 0.0
Mineral & Metal Resources 80.0 118.0 (38.0)
Machinery & Infrastructure 45.0 38.0 +7.0
Chemicals 6.0 8.0 (2.0)
Energy 180.0 140.0 +40.0
Lifestyle 0.0 14.0 (14.0)
Innovation & Corporate Development (4.0) (2.0) (2.0)
Americas 21.0 16.0 +5.0
Europe, the Middle East and Africa 3.0 1.0 +2.0
Asia Pacific 29.0 33.0 (4.0)
All Other and Adjustments and Eliminations 12.0 6.0 +6.0
Consolidated Total 380.0 380.0 0.0
  • Revised forecast for the Iron & Steel Products Segment is ¥8.0 billion, the same level as the original forecast, taking into consideration its progress, which is in line with the original forecast.
  • Revised forecast for the Mineral & Metal Resources Segment is ¥80.0 billion, a decline of ¥38.0 billion from the original forecast. The primary reasons for the decline are the decline in prices of iron ore and coal as well as the additional recognition of deferred tax liability reflecting the tax system revision in Chile. Meanwhile, we count the positive impact attributable to higher sales volume of iron ore and depreciation of the Japanese yen.
  • Revised forecast for the Machinery & Infrastructure Segment is ¥45.0 billion, an increase of ¥7.0 billion from the original forecast. We anticipate solid performance on IPP business and the recovery of trading volume in commercial ships. Logistic infrastructure business and gas distribution business in Brazil are also expected to contribute to the increase.
  • Revised forecast for the Chemicals Segment is ¥6.0 billion, a decline of ¥2.0 billion from the original forecast. We took into consideration unfavorable market conditions in the chlor-alkali producing business in the United States.
  • Revised forecast for the Energy Segment is ¥180.0 billion, an increase of ¥40.0 billion from the original forecast. The main causes of the increase are an increase in dividend income from LNG projects; the positive effect from depreciation of the Japanese yen; and an increase in production volume at oil and gas producing operations.
  • Revised forecast for the Lifestyle Segment is ¥0.0 billion, a decline of ¥14.0 billion from the original forecast, reflecting the underperforming origination and merchandising operations at Multigrain Trading AG and one-time losses including the impairment loss on investment recorded in the six-month period ended September 30, 2014.
  • Revised forecast for the Innovation & Corporate Development Segment is ¥4.0 billion of loss, a deterioration of ¥2.0 billion from the original forecast. We predict profit declines in the venture capital business as well as precious metals trading at Mitsui & Co. Precious Metals, Inc.
  • Revised forecast for the Americas Segment is ¥21.0 billion, an increase of ¥5.0 billion from the original forecast, reflecting an increase in one-time profits as well as solid performance on food trading. Revised forecast for the Europe, the Middle East and Africa Segment is ¥3.0 billion, an increase of ¥2.0 billion from the original forecast, reflecting the one-time tax-related profit. Revised forecast for the Asia Pacific Segment is ¥29.0 billion, a decline of ¥4.0 billion from the original forecast, due to lower profit from the segment’s minority interest in iron ore mining operations in Australia.
  • Revised forecast for the All Other/Adjustments and Eliminations Segment is ¥12.0 billion, an increase of ¥6.0 billion from the original forecast, due to the recognition of deferred tax assets related to sales of financial assets measured at FVTOCI in the six-month period ended September 30, 2014.

2) Key commodity prices and other parameters for the year ending March 31, 2015

The table below shows assumptions for key commodity prices and foreign exchange rates for the forecast for the year ending March 31, 2015. Effects of movements on each commodity price and foreign exchange rates on profit for the year attributable to owners of the parent are included in the table.

Impact on profit for the year attributable to owners of the parent for the Year ending March 31, 2015

(Announced in May 2014)

  Original Forecast

(Announced in May 2014)

  March 2015   Revised Forecast

(Announced in November 2014)

1st Half

(Result)

  2nd Half

(Assumption)

Commodity   Crude Oil/JCC   ¥1.8 bn (US$1/bbl) 102 109.50 87 98
Consolidated Oil Price(*1) 104 109.77 95 103
U.S. Natural Gas(*2) ¥0.3 bn (US$0.1/mmBtu) 4.25(*3) 4.62 4.14 4.38
Iron Ore ¥2.5 bn (US$1/ton) (*5)

 

96.18 (*5)

 

(*5)
Copper ¥0.7 bn (US$100/ton) 7,000 6,913(*6) 7,000 6,957
Forex (*7) USD ¥2.7 bn (¥1/USD) 100 103.61 110 106.81
AUD ¥1.5 bn (¥1/AUD) 95 95.61 95 95.30
BRL ¥0.5 bn (¥1/BRL) 45 45.76 45 45.38

(*1) The oil price trend is reflected in profit for the year attributable to owners of the parent with a 0-6 month time lag. For the year ending March31, 2015, we assume the annual average price applicable to our financial results as the Consolidated Oil Price based on the estimation: 4-6 month time lag, 35%; 1-3 month time lag, 41%; no time lag, 24%.

(*2) US shale gas are not all sold at Henry Hub (HH) linked prices. Therefore the sensitivity does not represent the direct impact of HH movement, but rather the impact from the movement of weighted average gas sales price.

(*3) For natural gas sold in the US on HH linked prices, the assumed price used is US$4.25/mmBtu.

(*4) Daily average of representative reference prices (Fine, Fe 62% CFR North China) during April 2014 to September 2014

(*5) We refrain from disclosing the iron ore price assumptions.

(*6) Average of LME cash settlement price during January 2014 to June 2014

(*7) Impact of currency fluctuation on profit for the year attributable to owners of the parent of overseas subsidiaries and equity accounted investees (denomination in functional currency) against the Japanese yen

Impact of currency fluctuation between their functional currencies against revenue currencies and exchange rate hedging are not included.

(3) Shareholder Return Policy

In order to increase corporate value and maximize shareholder value, we have sought to maintain an optimal balance between (a) meeting investment demand in our core and growth areas through re-investments of our retained earnings, and (b) directly providing returns to shareholders by paying out cash dividends based on a target consolidated dividend payout ratio.

For the period of the new Medium-term Management Plan announced in May 2014, we set our target dividend payout ratio at 30% of profit attributable to owners of the parent.

For the six-month period ended September 30, 2014, we have decided to pay an interim dividend of ¥32 per share, a ¥7 per share increase from the corresponding six-month period of the previous year. Pursuant to our policy, for the year ending March 31, 2015, we currently envisage an annual dividend of ¥64 per share (including the interim dividend of ¥32 per share), an ¥5 increase from the year ended March 31, 2014, on the assumption that profit for the year attributable to owners of the parent will be ¥380 billion, as mentioned in our forecast profit attributable to owners of the parent for the year ending March 31, 2015.

In relation to share buyback for the period of the new Medium-tern Management Plan, we will continue to take measures accordingly in a prompt and flexible manner as needed, taking into consideration the business environment, future investment activity trends, free cash flow, interest-bearing debt levels, and return on equity.

3. Other Information

Notice:

This flash report contains forward-looking statements about Mitsui and its consolidated subsidiaries. These forward-looking statements are based on Mitsui’s current assumptions, expectations and beliefs in light of the information currently possessed by it and involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and other factors may cause Mitsui’s actual consolidated financial position, consolidated operating results or consolidated cash flows to be materially different from any future consolidated financial position, consolidated operating results or consolidated cash flows expressed or implied by these forward-looking statements.

These risks, uncertainties and other factors include, among others, (1) economic downturns worldwide or at specific regions, (2) fluctuations in commodity prices, (3) fluctuations in exchange rates, (4) credit risks from clients with which Mitsui and its consolidated subsidiaries have business transactions or financial dealings and/or from various projects, (5) declines in the values of non-current assets, (6) changes in the financing environment, (7) declines in market value of equity and/or debt securities, (8) changes in the assessment for recoverability of deferred tax assets, (9) inability to successfully restructure or eliminate subsidiaries or associated companies as planned, (10) unsuccessful joint ventures and strategic investments, (11) risks of resource related businesses not developing in line with assumed costs and schedules and uncertainty in reserves and performance of third party operators, (12) loss of opportunities to enter new business areas due to limitations on business resources, (13) environmental laws and regulations, (14) changes in laws and regulations or unilateral changes in contractual terms by governmental entities, (15) employee misconduct, (16) failure to maintain adequate internal control over financial reporting, and (17) climate change and natural disaster. For further information on the above, please refer to Mitsui’s Annual Securities Report.

Forward-looking statements may be included in Mitsui’s Annual Securities Report and Quarterly Securities Reports or in its other disclosure documents, press releases or website disclosures. Mitsui undertakes no obligation to publicly update or revise any forward-looking statements.

4. Condensed Consolidated Financial Statements

(1) Condensed Consolidated Statements of Financial Position

Assets
            March 31,

2014

  September 30,

2014

Current Assets:      
    Cash and cash equivalents ¥ 1,226,317 ¥ 1,570,672
Trade and other receivables 2,040,855 1,906,951
Other financial assets 271,288 280,842
Inventories 625,328 716,725
Advance payments to suppliers 183,576 156,852
Assets held for sale 111,373
    Other current assets       118,049   133,955
    Total current assets   4,465,413   4,877,370
Non-current Assets:
Investments accounted for using the equity method 2,448,848 2,600,834
Other investments 1,554,673 1,639,221
Trade and other receivables 470,880 457,664
Other financial assets 116,298 123,744
Property, plant and equipment 2,007,452 2,129,694
Investment property 139,334 143,502
Intangible assets 144,153 151,872
Deferred tax assets 74,419 72,462
    Other non-current assets       69,849   57,960
    Total non-current assets   7,025,906   7,376,953
    Total   ¥ 11,491,319   ¥ 12,254,323
Liabilities and Equity
            March 31,

2014

  September 30,

2014

Current Liabilities:    
    Short-term debt   ¥ 436,869 ¥ 485,278
Current portion of long-term debt 505,946 505,614
Trade and other payables 1,473,834 1,420,022
Other financial liabilities 301,047 371,421
Income tax payables 42,857 57,833
Advances from customers 165,124 155,357
Provisions 17,491 24,217
Liabilities directly associated with assets held for sale 58,167
    Other current liabilities       41,486   37,138
    Total current liabilities   2,984,654   3,115,047
Non-current Liabilities:
Long-term debt, less current portion 3,468,301 3,778,537
Other financial liabilities 95,541 96,025
Retirement benefit liabilities 69,558 70,773
Provisions 174,855 188,451
Deferred tax liabilities 567,281 578,528
    Other non-current liabilities       30,825   31,933
    Total non-current liabilities   4,406,361   4,744,247
    Total liabilities   7,391,015   7,859,294
Equity:
Common stock 341,482 341,482
Capital surplus 418,004 412,349
Retained earnings 2,345,790 2,474,476
Other components of equity 766,631 871,334
    Treasury stock       -56,140   -5,960
    Total equity attributable to owners of the parent   3,815,767   4,093,681
    Non-controlling interests       284,537   301,348
    Total equity   4,100,304   4,395,029
    Total   ¥ 11,491,319   ¥ 12,254,323

(2) Condensed Consolidated Statements of Income and Comprehensive Income

Condensed Consolidated Statements of Income

       

Six-month

period ended

September 30,

2013

  Six-month

period ended

September 30,

2014

Revenue:      
Sale of products ¥ 2,608,332 ¥ 2,472,813
Rendering of services 201,981 207,815
Other revenue 54,154 66,941
Total revenue 2,864,467 2,747,569
Cost:
Cost of products sold -2,316,937 -2,206,933
Cost of services rendered -80,239 -88,872
Cost of other revenue -30,225 -31,522
Total cost -2,427,401 -2,327,327
Gross Profit 437,066 420,242
Other Income (Expenses):
Selling, general and administrative expenses -280,170 -281,361
Gain (loss) on securities and other investments—net 12,459 9,305
Impairment loss of fixed assets -838 -812
Gain (loss) on disposal or sales of fixed assets—net 1,710 439
Other income (expense)—net -10,588 -8,574
Total other income (expenses) -277,427 -281,003
Finance Income (Costs):

 

Interest income 16,746 16,735
Dividend income 65,064 76,932
Interest expense -24,177 -24,634
Total finance income (costs) 57,633 69,033
Share of Profit of Investments Accounted for Using the Equity Method 98,381 103,809
Profit before Income Taxes 315,653 312,081
Income Taxes -101,392 -79,207
Profit for the Period ¥ 214,261 ¥ 232,874
 
Profit for the Period Attributable to:
Owners of the parent ¥ 203,690 ¥ 222,660
Non-controlling interests 10,571 10,214
             
 
Condensed Consolidated Statements of Comprehensive Income
       

(Millions of Yen)

Six-month

period ended

September 30,

2013

Six-month

period ended

September 30,

2014

 
             
Profit for the Period ¥ 214,261 ¥ 232,874
Other Comprehensive Income:
Items that will not be reclassified to profit or loss:
Financial assets measured at FVTOCI 45,543 68,110
Remeasurements of defined benefit pension plans -199 -2,569
Share of other comprehensive income of investments accounted for using the equity method -199 2,585
Income tax relating to items not reclassified -7,456 -17,389
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation adjustments -32,324 19,384
Cash flow hedges 3,402 -3,534
Share of other comprehensive income of investments accounted for using the equity method 6,170 54,637
Income tax relating to items that may be reclassified 6,359 6,622
Total other comprehensive income 21,296 127,846
Comprehensive Income for the Period ¥ 235,557 ¥ 360,720
 
Comprehensive Income for the Period Attributable to:
Owners of the parent ¥ 225,366 ¥ 343,404
    Non-controlling interests   10,191   17,316

Notes:

  1.   The Statements of Consolidated Income above are not reviewed by the auditors.
2. The Statements of Consolidated Income above have been adjusted due to the adoption of ASC 810-10-65.
3. "Net Income attributable to Noncontrolling Interests" and "Comprehensive Loss (Income) attributable to Noncontrolling Interests" show the amounts deducted to calculate "Net Income attributable to Mitsui & Co., Ltd." and "Comprehensive (Loss) Income attributable to Mitsui & Co., Ltd.", respectively.
4. Tax effects on investments in associated companies which were formerly included in "Equity in Earnings of Associated Companies - Net (After Income Tax Effect)" are included in "Income Taxes" for the three-month period ended December 31, 2009. At the same time, "Equity in Earnings of Associated Companies - Net (After Income Tax Effect)" are changed to "Equity in Earnings of Associated Companies - Net." Amounts for three-month period ended December 31, 2008 have been reclassified to conform to the current period presentation.
 

(3) Condensed Consolidated Statements of Changes in Equity

           

(Millions of Yen)

      Attributable to owners of the parent   Non-controlling Interests   Total

Equity

        Common Stock   Capital Surplus   Retained Earnings   Other Components of Equity   Treasury Stock   Total    
Balance as at April 1, 2013   ¥ 341,482   ¥ 428,552   ¥ 2,060,298   ¥ 614,783   ¥ (5,974)   ¥ 3,439,141 ¥ 245,848 ¥ 3,684,989
Profit for the period 203,690 203,690 10,571 214,261
Other comprehensive income for the period 21,676 21,676 (380) 21,296
Comprehensive income for the period 225,366 10,191 235,557
Transaction with owners:
Dividends paid to the owners of the parent

(per share: ¥21)

(38,327) (38,327) (38,327)
Dividends paid to non-controlling interest shareholders (10,794) (10,794)
Acquisition of treasury stock (10) (10) (10)
Sales of treasury stock (0) 51 51 51
Equity transactions with non-controlling interest shareholders (2,583) 242 (2,341) 11,688 9,347
Transfer to retained earnings 17,070 (17,070)
Balance as at September 30, 2013   ¥ 341,482   ¥ 425,969   ¥ 2,242,731   ¥ 619,631   ¥ (5,933)   ¥ 3,623,880   ¥ 256,933   ¥ 3,880,813
 
                               

(Millions of Yen)

  Attributable to owners of the parent Non-controlling Interests Total

Equity

        Common Stock   Capital Surplus   Retained Earnings   Other Components of Equity   Treasury Stock   Total    
Balance as at April 1, 2014 ¥ 341,482 ¥ 418,004 ¥ 2,345,790 ¥ 766,631 ¥ (56,140) ¥ 3,815,767 ¥ 284,537 ¥ 4,100,304
Profit for the period 222,660 222,660 10,214 232,874
Other comprehensive income for the period 120,744 120,744 7,102 127,846
Comprehensive income for the period 343,404 17,316 360,720
Transaction with owners:
Dividends paid to the owners of the parent

(per share: ¥34)

(60,946) (60,946) (60,946)
Dividends paid to non-controlling interest shareholders (7,384) (7,384)
Acquisition of treasury stock (11) (11) (11)
Sales of treasury stock 0 0 0 0
Cancellation of treasury stock (50,191) 50,191
Compensation costs related to stock options 215 215 215
Equity transactions with non-controlling interest shareholders (5,870) 1,122 (4,748) 6,879 2,131
Transfer to retained earnings 17,163 (17,163)
Balance as at September 30, 2014   ¥ 341,482   ¥ 412,349   ¥ 2,474,476   ¥ 871,334   ¥ (5,960)   ¥ 4,093,681   ¥ 301,348   ¥ 4,395,029

(4) Condensed Consolidated Statements of Cash Flows

         

Six-month period ended
September 30, 2013

 

Six-month period ended
September 30, 2014

Operating Activities:    
Profit for the Period ¥ 214,261 ¥ 232,874
Adjustments to reconcile profit for the period to cash flows from operating activities:
Depreciation and amortization 101,988 142,443
Change in retirement benefit liabilities 4,096 -1,725
Provision for doubtful receivables 5,444 6,359
(Gain)/loss on securities and other investments—net -12,459 -9,305
Impairment loss of fixed assets 838 812
(Gain)/loss on disposal or sales of fixed assets—net -1,710 -439
Finance (income)/costs—net -54,302 -65,273
Income taxes 101,392 79,207

Share of profit of investments accounted for using equity method

-98,381 -103,809
Changes in operating assets and liabilities:

Change in trade and other receivables

161,854 52,498

Change in inventories

-39,493 -73,886

Change in trade and other payables

-138,352 8,435

Other—net

-75,567 -14,563
Interest received 14,442 17,515
Interest paid -27,708 -23,977
Dividends received 151,933 184,380
Income taxes paid   -68,995   -57,858

Cash flows from operating activities

  239,281   373,688
Investing Activities:

Net change in time deposits

-4,699 -976

Net change in investments in and advances to equity accounted investees

-74,489 -66,191

Net change in other investments

-153,642 25,583

Net change in long-term loan receivables

-13,398 22,384

Net change in property, plant, equipment and investment property

  -180,621   -170,766

Cash flows from investing activities

  -426,849   -189,966
Financing Activities:

Net change in short-term debt

42,986 35,646

Net change in long-term debt

77,874 175,857

Purchases and sales of treasury stock

-9 -11

Dividends paid

-38,334 -60,955
Transactions with non-controlling interest shareholders   -681   -8,314

Cash flows from financing activities

  81,836   142,223
Effect of Exchange Rate Changes on Cash and Cash Equivalents -3,469 19,083
Cash and Cash Equivalents Included in Assets Held for Sale   -   -673
Change in Cash and Cash Equivalents -109,201 344,355
Cash and Cash Equivalents at Beginning of Period   1,432,534   1,226,317
Cash and Cash Equivalents at End of Period   ¥ 1,323,333   ¥ 1,570,672
 

(5) Assumption for Going Concern: None

(6) Segment Information

Six-month period ended September 30, 2013 (from April 1, 2013 to September 30, 2013)
                            (Millions of Yen)  
    Iron & Steel Products   Mineral & Metal Resources   Machinery & Infrastructure   Chemicals   Energy   Lifestyle   Innovation & Corporate Development  
             
Revenue 117,484 383,454 185,713 452,426 759,162 474,998 45,243
Gross Profit 26,798 96,978 53,880 40,063 108,885 55,307 9,199
Share of Profit of Investments Accounted for Using the Equity Method 3,115 27,886 18,332 3,167 28,418 6,311 5,965
Profit (Loss) for the Period Attributable to Owners of the parent   6,671   50,492   14,420   6,182   98,945   1,847   -4,427  
EBITDA   12,551   123,135   21,575   14,315   212,678   6,439   -11,961  
Total Assets at March 31, 2014   567,741   1,970,858   1,872,585   765,751   2,478,158   1,495,387   496,533  
 
                               
    Americas   Europe,

the Middle East and Africa

  Asia Pacific   Total   All Other   Adjustments

and Eliminations

  Consolidated Total  
 
Revenue 341,522 52,024 51,505 2,863,531 933 3 2,864,467
Gross Profit 38,331 8,751 6,435 444,627 492 -8,053 437,066
Share of Profit of Investments Accounted for Using the Equity Method 2,855 462 2,056 98,567 10 -196 98,381
Profit (Loss) for the Period Attributable to Owners of the parent   9,769   1,127   19,642   204,668   4,345   -5,323   203,690  
EBITDA   14,166   -340   669   393,227   1,781   27,321   422,329  
Total Assets at March 31, 2014   568,772   105,907   345,074   10,666,766   5,037,172   -4,212,619   11,491,319  
 
 
Six-month period ended September 30, 2014 (from April 1, 2014 to September 30, 2014)
                            (Millions of Yen)  
    Iron & Steel Products   Mineral & Metal Resources   Machinery & Infrastructure   Chemicals   Energy   Lifestyle   Innovation & Corporate Development  
 
Revenue 90,739 390,155 204,081 470,243 542,889 462,527 54,425
Gross Profit 20,283 76,471 59,449 36,966 109,401 56,938 16,460
Share of Profit of Investments Accounted for Using the Equity Method 3,300 24,673 26,092 3,521 26,798 10,441 1,568
Profit (Loss) for the Period Attributable to Owners of the parent   2,710   42,601   21,591   3,815   112,369   -3,880   -4,199  
EBITDA   5,804   111,889   32,702   11,754   246,843   6,286   -5,361  
Total Assets at September 30, 2014   579,386   2,016,856   1,997,726   816,906   2,533,782   1,629,599   490,120  
 
 
    Americas   Europe,

the Middle East and Africa

  Asia Pacific   Total   All Other   Adjustments

and Eliminations

  Consolidated Total  
 
Revenue 427,718 51,616 52,271 2,746,664 907 -2 2,747,569
Gross Profit 38,415 9,407 6,250 430,040 394 -10,192 420,242
Share of Profit of Investments Accounted for Using the Equity Method 3,900 910 3,005 104,208 - -399 103,809
Profit (Loss) for the Period Attributable to Owners of the parent   12,558   3,248   15,215   206,028   4,460   12,172   222,660  
EBITDA   15,497   38   252   425,704   383   35,978   462,065  
Total Assets at September 30, 2014   592,378   106,789   357,855   11,121,397   5,086,285   -3,953,359   12,254,323  

Notes:

  1.   “All Other” principally consisted of the Corporate Staff Unit which provides financing services and operations services to external customers and/or to the companies and affiliated companies. Total assets of “All Other” at March 31, 2014 and September 30, 2014 consisted primarily of cash and cash equivalents and time deposits related to financing activities, and assets of the Corporate Staff Unit and certain subsidiaries related to the above services.
2. Transfers between repotable segments are made at cost plus a markup.
3. Profit (Loss) for the Period Attributable to Owners of the parent of “Adjustments and Eliminations” includes income and expense items that are not allocated to specific reportable segments, and eliminations of intersegment transactions.
4. Since the three-month period ended June 30, 2014, EBITDA has been disclosed by reportable segments as the information of the operating segments periodically reviewed by the management. EBITDA is comprised of the companies' (a) gross profit, (b) selling, general and administrative expenses, (c) dividend income and (d) share of profit of investments accounted for using the equity method as presented in the Condensed Consolidated Statements of Income and (e) depreciation and amortization as presented in the Condensed Consolidated Statements of Cash Flows.
 

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Short Name: Mitsui & Co., Ltd.
Category Code: IR
Sequence Number: 439819
Time of Receipt (offset from UTC): 20141106T083715+0000

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Mitsui & Co Ltd