Source - RNS
RNS Number : 4339O
Mitsubishi Corporation
17 May 2018
 

The following amendments have been made to the PDF file attached to the 'Final Results' announcement released on 8th May, 2018 at 07:41 under RNS No 3159N.

Page 2. Business-related earnings forecast for the year ending March 2019 within the bar graph under “Forecasts for the year ending March 2019” has been amended from 369.0 to 396.0 (billion yen).

Page 6. “Forecast for the year ending March 2019” for “Foreign Exchange (YEN/US$)” has been amended from 111.00 to 110.00.

All other details remain unchanged.The full amended PDF is attached.

Click on, or paste the following link into your web browser, to view the associated PDF document. 

http://www.rns-pdf.londonstockexchange.com/rns/4339O_-2018-5-17.pdf

 

 

 

 

FINANCIAL RESULTS FOR
THE YEAR ENDED MARCH 2018

 

 

Mitsubishi Corporation

2-3-1 Marunouchi, Chiyoda-ku, Tokyo, JAPAN 100-8086

http://www.mitsubishicorp.com/

 

 

 

May 8, 2018

Mitsubishi Corporation

FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED MARCH 31, 2018

(Based on IFRS) (Consolidated)

1. Consolidated operating results for the year ended March 31, 2018

(1) Revenues and income

Note:

Figures less than one million yen are rounded.

%: change from the previous year

 

 

Revenues

Profit before tax

Profit for the year

Profit for the year

attributable to
owners of the Parent

Comprehensive income

For the year ended

Millions of Yen

%

Millions of Yen

%

Millions of Yen

%

Millions of Yen

%

Millions of Yen

%

March 31, 2018

7,567,394

17.8

812,722

35.1

610,416

27.2

560,173

27.2

604,346

21.5

March 31, 2017

6,425,761

(7.2)

601,440

480,074

440,293

497,323

 

 

 

Profit for the year

attributable to
owners of the Parent per share (basic)

Profit for the year

attributable to
 owners of the Parent per share (diluted)

Return on equity

attributable to owners

of the Parent

Pre-tax income to

total assets ratio

For the year ended

Yen

Yen

%

%

March 31, 2018

353.27

352.44

10.9

5.1

March 31, 2017

277.79

277.16

9.3

3.9

Share of profit of investments accounted for using the equity method for the years ended March 31, 2018 and 2017 were 211,432 million and 117,450 million respectively.

 

(2) Financial position

 

Total assets

Total equity

Equity attributable to

owners of the Parent

Ratio of equity attributable to

owners of the Parent to total assets

Equity per share

attributable to owners

of the Parent

As of

Millions of Yen

Millions of Yen

Millions of Yen

%

Yen

March 31, 2018

16,036,989

6,265,211

5,332,427

33.3

3,362.34

March 31, 2017

15,753,557

5,789,011

4,917,247

31.2

3,101.43

 

(3) Cash Flows

 

Operating activities

Investing activities

Financing activities

Cash and cash equivalents

at the end of the year

For the year ended

Millions of Yen

Millions of Yen

Millions of Yen

Millions of Yen

March 31, 2018

742,482

(317,583)

(554,328)

1,005,461

March 31, 2017

583,004

(179,585)

(752,162)

1,145,514

 

2. Dividends

 

Cash dividends per share (Yen)

Cash dividends

(annual)

Payout ratio

(consolidated)

Dividends on equity

attributable to owners

of the Parent

(consolidated)

(Record date)

1Q end

2Q end

3Q end

4Q end

Annual

Millions of Yen

%

%

March 31, 2017

30.00

50.00

80.00

126,831

28.8

2.7

March 31, 2018

47.00

63.00

110.00

174,446

31.1

3.4

March 31, 2019
(Forecast)

57.00

58.00

115.00

30.4

Scheduled dividends payment date: June 25, 2018.

 

3. Consolidated forecasts for the fiscal year ending March 31, 2019 (April 1, 2018 to March 31, 2019)

 

 

 

Note:

%: change from the previous year.

 

 

Profit attributable to

owners of the Parent

Profit attributable to

owners of the Parent per share

For the year ending

Millions of Yen

%

 

Yen

March 31, 2019

600,000

7.1

 

378.33

 

 

 

 

4. Notes

(1) Changes in significant subsidiaries during the period (changes in specified subsidiaries causing changes in scope of consolidation) : None

 

 

(2) Changes in accounting principles, and accounting estimate

-1- Changes in accounting principles required by IFRS: Yes

-2- Changes other than -1-: None

-3- Changes in accounting estimate:None

Please refer to page 19, "(1) Changes in Accounting Policies and Changes in Accounting Estimates" under "2. Notes Concerning Consolidated Financial Statements" of "Consolidated Financial Statements and Notes Concerning Consolidated Financial Statements".

 

(3) Number of shares issued (Common stock)

-1- Number of shares issued at year-end (including treasury stock)

(March 31, 2018)

1,590,076,851

(March 31, 2017)

1,590,076,851

-2- Number of treasury stock at year-end

(March 31, 2018)

4,147,602

(March 31, 2017)

4,597,223

-3- Average number of shares during each of the following fiscal years

(March 31, 2018)

1,585,658,390

(March 31, 2017)

1,584,995,082

Please refer to page 21, "(3) Earnings Per Share" under "2. Notes Concerning Consolidated Financial Statements" of "Consolidated Financial Statements and Notes Concerning Consolidated Financial Statements" regarding the number of shares that serve as the basis for calculating consolidated profit for the year attributable to Mitsubishi Corporation per share.

 

Disclosure Regarding Audit Procedures

This earnings release is not subject to audit procedures by certified public accountant or audit corporation.

 

Forward-looking Statements

Earnings forecasts and other forward-looking statements in this release are based on data currently available to management and certain assumptions that management believes are reasonable. The achievement of said forecasts cannot be promised. Actual results may therefore differ materially from these statements for various reasons.

 

Contents

 

Operating Results and Financial Position ………………………………………………………2

1. Operating Results and Financial Position of the Year Ended March 2018   ……………2

(1) Summary of the Year Ended March 2018 Results ……………………………………………2

(2) Segment Information ………………………………………………………………………… 2

(3) Changes in Assets, Liabilities and Equity …………………………………………………… 4

(4) Cash Flows ……………………………………………………………………………………4

2. Forecasts for the Year Ending March 2019 ……………………………………………………6

3. Business Risks …………………………………………………………………………………6

(1) Risks of Changes in Global Macroeconomic Conditions ……………………………………6

(2) Market Risks ………………………………………………………………………………… 6

(3) Credit Risk ……………………………………………………………………………………8

(4) Country Risk …………………………………………………………………………………9

(5) Business Investment Risk ……………………………………………………………………9

(6) Risks Related to Specific Investments ………………………………………………………9

(7) Risks Related to Compliance …………………………………………………………………10

(8) Risks from Natural and Other Types of Disasters ……………………………………………11

   

Basic Concept Regarding the Selection of Accounting Standards ……………………………12

 

Consolidated Financial Statements and Notes Concerning Consolidated Financial Statements …13

1. Consolidated Financial Statements…………………………………………………………………13

(1) Consolidated Statement of Financial Position ……………………………………………………13

(2) Consolidated Statement of Income ………………………………………………………………15

(3) Consolidated Statement of Comprehensive Income ……………………………………………16

(4) Consolidated Statement of Changes in Equity ………………………………………………17

(5) Consolidated Statement of Cash Flows ………………………………………………………18

2. Notes Concerning Consolidated Financial Statements …………………………………19

(1) Changes in Accounting Policies and Changes in Accounting Estimates ……………………19

(2) Segment Information ………………………………………………………………………20

(3) Earnings Per Share …………………………………………………………………………21

(4) Subsequent Events ……………………………………………………………………………21

3. Notes Concerning Going Concern Assumption …………………………………………………22

 

 

 

 

 

 

※   Mitsubishi Corporation will hold an earnings conference in Tokyo for the year ended March 2018 on May 10, 2018 (Thursday) from 15:30 to 17:00 (Japan Time), inviting institutional investors and analysts to join.

The conference material will be accessible in Japanese from the following URL:

https://www.mitsubishicorp.com/jp/ja/ir/index.html

 

(English interpretation of the conference call will be posted on our web site as soon as it becomes available.)

 

 

 

Operating Results and Financial Position

 

1. Operating Results and Financial Position of the Year Ended March 2018

(Profit for the year, as used hereinafter, refers to profit for the year attributable to owners of the Parent.)

 

(1) Summary of the Year Ended March 2018 Results

Revenues were ¥7,567.4 billion, an increase of ¥1,141.6, or 18% year over year, mainly due to increases attributed by Lawson, Inc. (hereinafter "Lawson") becoming a subsidiary and higher resource-related market prices.

Gross profit was ¥1,886.6 billion, an increase of ¥558.0 billion, or 42% year over year, mainly due to increases attributed by Lawson becoming a subsidiary and higher resource-related market prices.

Selling, general and administrative expenses rose ¥454.7 billion, or 49% year over year, to ¥1,387.3 billion, mainly due to increases attributed by Lawson becoming a subsidiary.

Gains on investments decreased ¥78.9 billion year over year, to ¥4.4 billion, mainly due to the rebound of one-off gains accompanied by business mergers and sales of associated companies in the previous year.

Gains on disposal and sale of property, plant and equipment increased ¥26.5 billion, or 184% year over year, to ¥40.9 billion, mainly due to sales of resource-related assets and swap profit on held real estate.

Impairment losses on property, plant and equipment and others amounted to ¥80.2 billion, a decreased loss of ¥23.0 billion year over year, mainly due to the rebound of impairments related to resource-related assets and the shipping business in the previous year.

Finance income increased ¥46.8 billion, or 35%, year over year, to ¥179.2 billion, due to increased dividend income from resource-related investments.

Share of profit of investments accounted for using the equity method increased ¥93.9 billion, or 80% year over year, to ¥211.4 billion, mainly due to higher resource-related market prices.

As a result, profit before tax increased ¥211.3 billion, or 35% year over year, to ¥812.7 billion.

Income taxes rose ¥80.9 billion, or 67% year over year, to ¥202.3 billion. Despite the reversal of deferred tax liabilities due to US tax reform, increased profit before tax and additional tax expenses through an exit from resource-related assets led to a rise in the total.

Accordingly, profit for the year grew ¥119.9 billion, or 27% year over year, to ¥560.2 billion.

 

 

(2) Segment Information

1) Global Environmental & Infrastructure Business Group

The Global Environmental & Infrastructure Business Group conducts environmental and infrastructure projects, related trading operations and other activities in power generation, water, transportation and other fields that serve as a foundation for industry.

The segment recorded profit for the year of ¥44.6 billion, an increase of ¥21.2 billion year over year.

The higher earnings mainly reflected improved equity income from Chiyoda Corporation and the reversal of deferred tax liabilities due to US tax reform.

 

2) Industrial Finance, Logistics & Development Group

The Industrial Finance, Logistics & Development Group conducts an investment and operation business. This business includes corporate investment, leasing, real estate/urban development, and logistics services.

The segment recorded profit for the year of ¥44.2 billion, an increase of ¥8.7 billion year over year.

The higher earnings mainly reflected the swap profit on held real estate and an increase in fund evaluation profit.

 

3) Energy Business Group

The Energy Business Group conducts a number of activities including natural gas/oil exploration, production and development business; liquefied natural gas (LNG) business; trading of crude oil/petroleum products/carbon materials and products/liquefied petroleum gas (LPG); and planning and development of new energy business.

The segment recorded profit for the year of ¥20.3 billion, a decrease of ¥35.2 billion year over year.

The lower earnings mainly reflected one-off losses on resource-related assets due to replacements, increased decommissioning costs, and additional tax expenses, despite the increase in earnings and dividends received in the LNG-related business.

 

4) Metals Group

The Metals Group conducts "managing" businesses through trade, development, and investment in a range of fields. These include steel products such as steel sheets and thick plates, steel raw materials such as coking coal and iron ore, and non-ferrous metals such as copper and aluminum.

The segment recorded profit for the year of  ¥261.0 billion, an increase of ¥113.1 billion year over year.

The higher earnings mainly reflected increased earnings resulting from partial mitigation of reduction of production and shipments caused by Cyclone Debbie, and higher realized prices and dividend income for the Australian coal and other mineral resource business.

 

5) Machinery Group

The Machinery Group conducts trading, finance and logistics, and investments in a range of fields. These fields include machine tools, agricultural machinery, construction machinery, mining machinery, elevators, escalators, ships, aerospace-related equipment and motor vehicles.

The segment recorded profit for the year of ¥85.2 billion, an increase of ¥55.8 billion year over year.

The higher earnings mainly reflected a rebound from one-off losses as well as one-off gains in the shipping business and increased earnings in the Asia automotive business.

 

6) Chemicals Group

The Chemicals Group conducts trading, business development, and investments related to chemical products in a broad range of fields. These fields extend from basic materials such as ethylene, methanol, and salt produced from crude oil, natural gas, minerals, plants, marine resources and so forth, to midstream and downstream products such as plastics, electronic materials, food ingredients, fertilizer, and fine chemicals.

The segment recorded profit for the year of ¥30.6 billion, an increase of ¥3.9 billion year over year.

The higher earnings mainly reflected increased trading profit and earnings due to stronger markets, despite one-off losses due to recording of deferred tax liabilities etc. in the basic chemicals business.

 

7) Living Essentials Group

The Living Essentials Group provides products and services and develops businesses in various fields closely linked with people's lives, including food products and food, apparel, everyday products, healthcare, and items central to consumer lifestyles. These fields extend from the procurement of raw materials to distribution and retail.

The segment recorded profit for the year of ¥74.7 billion, a decrease of ¥46.6 billion year over year.

The lower earnings mainly reflected the rebound of one-off gains from the acquisition of Lawson as a subsidiary and meat business restructuring in the previous year, and one-off losses in the food materials business this year, despite the increased earnings from the salmon farming business.

 

 

(3) Changes in Assets, Liabilities and Equity

Total assets as of March 31, 2018 was ¥16,037.0 billion, an increase of ¥283.4 billion from March 31, 2017. The increase was mainly due to a rise in trade and other receivables caused by the fact that the end of the period fell on a holiday and that transaction prices and transaction volume got higher.

Total liabilities was ¥9,771.8 billion, a decrease of ¥192.7 billion from March 31, 2017.  This decline was attributable to the repayment of bonds and borrowings, although trade and other payables expanded as a result of the fact that the end of the period fell on a holiday and that transaction prices and transaction volume got higher.

Net interest-bearing liabilities, which is gross interest-bearing liabilities minus cash, cash equivalents and time deposits, decreased ¥277.3 billion from March 31, 2017 to ¥3,714.2 billion.

Equity attributable to owners of the Parent was ¥5,332.4 billion, an increase of ¥415.2 billion from March 31, 2017. This increase was mainly due to the accumulation of profit for the period.

 

 

(4) Cash Flows

Cash and cash equivalents as of March 31, 2018 was ¥1,005.5 billion, down ¥140.0 billion from March 31, 2017.

 

(Operating activities)

Net cash provided by operating activities was ¥742.5 billion, mainly due to cash flows from operating transactions and dividend income, despite the payment of income taxes.

 

(Investing activities)

Net cash used in investing activities was ¥317.6 billion. The main use of cash was for investments in affiliated companies, including the acquisition of shares in Mitsubishi Motors Corporation, and for capital expenditures, despite cash provided by the sale of property, plant and equipment and listed stocks.

 

As a result, free cash flow, the sum of operating and investing cash flows, was positive ¥424.9 billion.

 

(Financing activities)

Net cash used in financing activities was ¥554.3 billion, mainly due to the repayment of borrowings, redemption of bonds, and the payment of dividends at the Parent.

 

 

 

 

2. Forecasts for the Year Ending March 2019

For the year ending March 2019, profit for the year is expected to be ¥600.0 billion. For the segment-specific forecasts and market condition assumptions, please refer to MC's financial results for the year ended March 2018 (Results for the Year Ended March 2018 and Forecasts for the Year Ending March 2019). Please see the "Business Risks" section for principal risks that have the potential to affect the operating performance.

 

 

3. Business Risks

(1) Risks of Changes in Global Macroeconomic Conditions

As we conduct businesses on a global scale, our operating results are impacted by economic trends in overseas countries as well as those in Japan.

 

For instance, a decline in prices of energy and metal resources could have a large impact on our resource-related import trading and earnings from business investments. Furthermore, the worldwide economic slowdown could affect our entire export-related business, including plants, construction machinery parts, automobiles, steel products, ferrous raw materials, chemical products, and other products.

 

In Thailand and Indonesia, we have various automobile businesses, including automobile assembly plants, distribution/sales companies and financial services companies jointly established with Japanese automakers. Since automobile sales volume reflects internal demand in each of these countries, economic trends in both Thailand and Indonesia may have a significant impact on earnings from our automobile operations.

 

In the year ended March 2018, the global economy was characterized by rising geopolitical risks in North Korea and the Middle East. Nevertheless, world economic growth continued, sustained by rising levels of consumption and investment in advanced countries, as well as stable economic growth in emerging markets such as China.

 

 

(2) Market Risks

(Unless otherwise stated, calculations of effects on future profit for the year are based on profit for the year ended March 2018.)

 

1) Commodity Market Risk

In the course of our business activities, we are exposed to various risks relating to fluctuations of commodity prices as a trader, an owner of rights to natural and energy resources, and a producer and seller of industrial products of our investees. Product categories that may have a large impact on our operating results are as follows:

 

 

(Energy Resources)

We engage in the natural gas and oil production, business development, and the liquefied natural gas (LNG) business, in North America, Southeast Asia, Australia, and other regions. Accordingly, fluctuations in oil and gas prices could have a significant impact on our operating results.

 

Crude oil (Brent) is traded at around US$60 due primarily to solid demand, especially Asia, as well as the agreement among major oil-producing countries to extend their accord on lowering production volumes, despite the rise in US shale oil production. Going forward, we expect the price environment to remain uncertain, due to ongoing geopolitical risk, the production level of major oil-producing countries and US shale oil production, and inventory trends among the major countries.

 

Fundamentally, LNG prices are linked to crude oil prices. It is estimated that a US$1/BBL fluctuation in the price of crude oil would have an approximate ¥2.0 billion effect on profit for the year for LNG and crude oil combined in a year, mainly through equity method earnings. However, fluctuations in the price of LNG and crude oil might not be immediately reflected in our operating results because of the time lag of the fluctuations to provide impact to our operation.

 

 

(Metal Resources)

Through a wholly owned subsidiary, Mitsubishi Development Pty Ltd (MDP), in Brisbane, Australia, we sell coking coal, which is used for steel manufacturing, and thermal coal used for electricity generation. Fluctuations in the price of coking coal may affect our operating results through MDP's earnings. MDP's operating results cannot be determined by the coal price alone since MDP's results are also significantly affected by fluctuations in exchange rates among the Australian dollar, U.S. dollar and yen, as well as adverse weather and labor disputes etc.

 

In addition, as a producer, we are exposed to the risk of price fluctuations in copper. A US$100 fluctuation in the price per MT of copper would have a ¥1.4 billion effect on our profit for the year (a US¢10 price fluctuation per lbs. of copper would have a ¥3.2 billion effect on our profit for the year). However, variables beside price fluctuations can also have an impact. These include the grade of mined ore, the status of production operations, and reinvestment plans (capital expenditures). Therefore, the impact on earnings may not be determined by the copper price alone.

 

 

(Petrochemical Products)

We engage in the production and sale of petrochemical products manufactured from raw materials such as naphtha and natural gas in such countries as Saudi Arabia, Malaysia, and Venezuela. We also engage in global trading activities, centered on Asia. Market prices on petrochemical products are determined individually based on product characteristics, according to such factors as raw material prices and the supply-demand balance. Such changes could affect this business and the earnings the Company generates from related transactions.

 

 

2) Foreign Currency Risk

We bear the risk of fluctuations in foreign currency rates against yen in the course of our trading activities, such as export, import, and offshore trading. While we use forward contracts and other hedging strategies, there is no assurance that we can completely avoid foreign currency risk.

 

In addition, dividends received from overseas businesses and equity in earnings of overseas consolidated subsidiaries and affiliates are relatively high in proportion to our profit for the year. Because most of these earnings are denominated in foreign currencies, which are converted to yen solely for reporting purposes, an appreciation in the yen relative to foreign currencies has a negative impact on profit for the year. In terms of sensitivity, a ¥1 change relative to the U.S. dollar would have an approximate ¥2.5 billion effect on profit for the year.

 

Regarding our investments in overseas businesses, an appreciation in the yen poses the risk of lowering shareholders' equity through a negative effect on exchange differences on translating foreign operations. Consequently, we implement various measures to prevent increased exposure to foreign currency risk on investments, such as by hedging foreign currency risks with respect to new large investments. However, there is no assurance that we can completely avoid these risks.

 

 

3) Stock Price Risk

As of March 31, 2018, we owned approximately ¥1,490.0 billion (market value) of marketable securities, mostly equity issues of customers, suppliers and affiliates. These investments expose us to the risk of fluctuations in stock prices. The valuation above represented net unrealized gains of approximately ¥580.0 billion based on market prices, a figure that could change depending on future trends in stock prices. In our corporate pension fund, some of the pension assets are managed by marketable stocks. Accordingly, a fall in stock prices could reduce pension assets.

 

 

4) Interest Rate Risk

As of March 31, 2018, we had gross interest-bearing liabilities of ¥4,954.4 billion. Because almost all of these liabilities bear floating interest rates, there is a risk of an increase in interest expenses caused by a rise in interest rates.

 

The vast majority of these interest-bearing liabilities correspond to trade receivables, loans receivable and other operating assets that are positively affected by changes in interest rates. Because a rise in interest rates produces an increase in income from these assets, while there is a timing difference, interest rate risk is offset. For the remaining interest-bearing liabilities exposed to interest rate risk without such offsets, commensurate asset holdings such as investment securities, property and equipment generate trading income as well as other income streams such as dividends that are strongly correlated with economic cycles. Accordingly, even if interest rates increase as the economy improves, leading to higher interest expenses, we believe that these expenses would be offset by an increase in income from the corresponding assets held. However, our operating results may be negatively affected temporarily if there is a rapid rise in interest rates because increased income from commensurate assets held would fail to offset immediately the effects of a preceding increase in interest expenses.

 

To monitor market movements in interest rates and respond flexibly to market risks, we have established the ALM (Asset Liability Management) Committee. This committee establishes fund procurement strategy and manages the risk of interest rate fluctuations.

 

 

(3) Credit Risk

We extend credit to customers in the form of trade credit, including accounts receivables and advance payments, finance, guarantees and investments due to our various operating transactions. We are therefore exposed to credit risks in the form of losses arising from deterioration in the credit of or bankruptcy of customers. Furthermore, we utilize derivative instruments, primarily swaps, options and futures, for the purpose of hedging these risks. In this case, we are exposed to the credit risk of the counterparties regarding these derivative contracts.

 

To manage this risk, we have established credit and transaction limits for each customer as well as introduced an internal rating system. Based on internal rules determined by internal ratings and the amount of credit, we also require collateral or a guarantee depending on the credit profile of the counterparty. There is no guarantee that we will be able to completely avoid credit risk with these risk hedging strategies. We reduce transactions and take measures to protect our receivables when there is deterioration in the credit condition of customers. We also have a policy for dealing bankrupt customers and work to collect receivables. However, failure to collect receivables and other credit could affect our operating results.

 

 

(4) Country Risk

We bear country risks in relation to transactions and investments with overseas companies in the form of delays or inability to collect cash or conduct business activities due to political and socioeconomic conditions in the countries where they are domiciled.

 

We take appropriate risk hedging measures that involve, in principle, hedges via third parties through such means as taking out insurance, depending on the nature of the project. Furthermore, we have established a Country Risk Committee, in which country risks are managed through a country risk countermeasure system. The country risk countermeasure system classifies countries with which we conduct business into eight categories based on creditworthiness by country. Country risk is controlled through the establishment of risk limits for each category.

 

However, even with these risk hedging measures, it is difficult to completely avoid risks caused by deterioration in the political, economic, or social conditions in the countries or regions where our customers, portfolio companies or ongoing projects. Such eventualities may have an impact on our operating results.

 

 

(5) Business Investment Risk

We participate in the management of various companies by acquiring equity and other types of interests. These business investment activities are carried out with the aim of increasing our commercial rights and deriving capital gains. However, we bear various risks related to business investments, such as the possible inability to recover our investments and exit losses, or being unable to earn the planned profits. Regarding the management of business investment risk, in the case of new business investments, we clarify the meaning and purpose of the investment, quantitatively grasp the downside risk of investments, and evaluate whether the return on our investments based on the characteristics of a business exceeds the minimum expected rate of return. After investing, we manage risks individually with respect to business investments to achieve the investment goals through the Business Plan formulated every year. Furthermore, we clarify retention policies, including the sale of our equity interest or the liquidation of the investee in order to efficiently replace assets in our portfolio, in the event that the investments are generating lower earnings than indicated in the plan.

 

Notwithstanding these initiatives, although we follow strict standards for the selection and management of investments, it is difficult to completely avoid the risk of investments not delivering the expected profits. Therefore, our operating results could be affected by changes in the business environment and withdrawals from an investment etc.

 

 

(6) Risks Related to Specific Investments

 

(Investments in Australian Coking Coal and Other Metal Resource Interests)

In November 1968, we established a wholly owned subsidiary, Mitsubishi Development Pty Ltd (MDP), headquartered in Brisbane, Australia, to engage in the development of coal (coking coal, which is used for steel manufacturing, and thermal coal, which is used for electricity generation). In 2001, we acquired through MDP the 50% interest in the BMA coking coal business (BMA) in Queensland, Australia, for approximately ¥100.0 billion, and have been engaging in this business with the partner, BHP Billiton Limited, headquartered in Melbourne, Australia. BMA has grown into one of the world's largest coking coal businesses, currently producing 60 million tons per year. As of March 31, 2018, the book value of MDP's fixed assets is approximately ¥810.0 billion.

 

MDP's commodity market risks have the potential to affect our operating performance. For details, please refer to the section entitled "(2) 1) Commodity Market Risk (Metal Resources)."

 

 

(Investments in Interests in Chilean Copper Assets and Other Resource Interests)

We hold shares in Anglo American Sur S.A. (AAS), which holds Chilean copper resource interests, with Anglo American Plc (AAC), headquartered in London, United Kingdom, and a joint venture between Corporación Nacional del Cobre de Chile, a nationally operated copper production company headquartered in Santiago, and Mitsui & Co., Ltd. Ownership interests in AAS are 50.1% by AAC, 29.5% by the Joint Venture and 20.4% by us, which we acquired for US$4.51 billion.

 

AAS holds a significant portfolio of copper assets in Chile, including the Los Bronces mine, the El
Soldado mine, the Chagres copper smelter and large-scale prospective exploration properties. (AAS' total copper production was approximately 350,000 tons in 2017.)

 

We apply the equity method to the investment in AAS. As an investment accounted for using the equity method, during the year we conducted an impairment test on our investment in AAS. As AAS' production and development plans are long-term, we judged that an evaluation was necessary from a medium- to long-term perspective, including revisions in copper price forecasts. In relation to copper prices, we formulated a forecast, taking into account fundamentals such as the future supply/demand environment and the data provided by external financial institutions and other organizations. Because AAS' production and development plans are long-term, medium- to long-term price forecasts have a more significant impact on the valuation of our investment in AAS than price fluctuations in the short term. Taking into overall consideration sluggish copper market prices and the extended timeframe for the development of mining projects, on March 31, 2016, we recorded an impairment loss of ¥271.2 billion, leading to a book value of approximately ¥160.0 billion as of March 31, 2018.

 

In addition to the items mentioned above, we are evaluating our other investments in copper asset interests, as well as investments related to crude oil, gas, and LNG in order to recognize key risks. As production and development plans are long-term, we judge that evaluation according to medium- to long-term price forecasts has a greater impact on the value of investments than short-term price fluctuations.

 

 

(7) Risks Related to Compliance

We are engaged in businesses in all industries through many offices around the world. These activities subject us to a wide variety of laws and regulations. Specifically, we must comply with the Companies Act, tax laws, Financial Instruments and Exchange Act, anti-monopoly laws, international trade-related laws, environmental laws and various business laws in Japan. In addition, in the course of conducting business overseas, we must abide by the laws and regulations in the countries and regions where we operate.

 

We have established a Compliance Committee, which is headed by a chief compliance officer, who is at the forefront of our efforts to raise awareness of compliance. Under his/her direction and supervision, in the individual business groups and corporate departments, the compliance officers of individual groups and departments plan and implement specific compliance initiatives and strive to enhance awareness toward compliance.

 

Notwithstanding these initiatives, compliance risks cannot be completely avoided. Failure to fulfill our obligations under related laws and regulations could affect our businesses and operating results.

 

 

(8) Risks from Natural and Other Types of Disasters

An unforeseeable event, such as a natural disaster like an earthquake, heavy rain or flood, abnormal climatic conditions, or infectious diseases such as a new strain of influenza, or a large-scale accident, acts of terrorism or riots that affect our employees and damage our offices, facilities or systems could hinder sales and production activities.

 

We have established adequate countermeasures, having implemented an employee safety check system; formulated a disaster contingency manual and a business contingency plan (BCP); implemented earthquake-proof measures for buildings, facilities or systems (including backup of data); introduced a program of disaster prevention drills; prepared stocks of necessary goods; and collaborated and shared information with offices, subsidiaries and related companies both in Japan and overseas. However, no amount of preparation of this sort can completely avoid the risk of damage caused by a natural disaster. Accordingly, damage from a natural disaster could affect our businesses and operating results.

 

 

Note:

Earnings forecast and other forward-looking statements in this release are based on data available, as of the end of the current year, to management and certain assumptions that management believes are reasonable. The achievement of said forecasts cannot be promised, and actual results may therefore differ materially from these statements for various reasons.

 

 

 

 

 

Basic Concept Regarding the Selection of Accounting Standards

 

Mitsubishi Corporation has applied IFRS to enhance its financial reporting's international comparability and availability.

 

 

 

Consolidated Financial Statements and Notes Concerning Consolidated Financial Statements

 

1. Consolidated Financial Statements

 

(1) Consolidated Statement of Financial Position

March 31, 2017 and 2018

 

ASSETS

Millions of Yen

March 31,

2017

March 31,

2018

Current assets

 

 

Cash and cash equivalents

1,145,514

1,005,461

Time deposits

246,922

234,758

Short-term investments

22,867

9,319

Trade and other receivables

3,125,504

3,523,341

Other financial assets

115,734

99,804

Inventories

1,110,138

1,204,402

Biological assets

67,241

68,431

Advance payments to suppliers

229,819

164,909

Assets classified as held for sale

39,330

91,431

Other current assets

364,196

376,905

Total current assets

6,467,265

6,778,761

Non-current assets

 

 

Investments accounted for using the equity method

2,651,317

3,050,371

Other investments

2,291,465

2,203,242

Trade and other receivables

500,853

526,986

Other financial assets

109,443

93,849

Property, plant and equipment

2,484,714

2,106,195

Investment property

47,959

72,192

Intangible assets and goodwill

1,010,310

1,003,335

Deferred tax assets

37,883

35,847

Other non-current assets

152,348

166,211

Total non-current assets

9,286,292

9,258,228

Total

15,753,557

16,036,989

 

 

 

 

 

LIABILITIES AND EQUITY

Millions of Yen

March 31,

2017

March 31,

2018

Current liabilities

 

 

Bonds and borrowings

1,248,231

1,269,535

Trade and other payables

2,542,191

2,765,215

Other financial liabilities

106,456

81,574

Advances from customers

222,373

167,143

Income tax payables

106,612

101,671

Provisions

50,689

48,631

Liabilities directly associated with assets classified as held for sale

6,094

22,958

Other current liabilities

395,196

460,211

Total current liabilities

4,677,842

4,916,938

Non-current liabilities

 

 

Bonds and borrowings

4,135,680

3,684,860

Trade and other payables

204,657

222,474

Other financial liabilities

18,936

23,349

Retirement benefit obligation

79,261

80,532

Provisions

239,259

228,483

Deferred tax liabilities

576,941

598,244

Other non-current liabilities

31,970

16,898

Total non-current liabilities

5,286,704

4,854,840

Total liabilities

9,964,546

9,771,778

Equity

 

 

Common stock

204,447

204,447

Additional paid-in capital

220,761

229,423

Treasury stock

(12,154)

(10,970)

Other components of equity

 

 

Other investments designated as FVTOCI

451,086

509,887

Cash flow hedges

(17,953)

(10,920)

Exchange differences on translating foreign operations

445,816

426,644

Total other components of equity

878,949

925,611

Retained earnings

3,625,244

3,983,916

Equity attributable to owners of the Parent

4,917,247

5,332,427

Non-controlling interests

871,764

932,784

Total equity

5,789,011

6,265,211

Total

15,753,557

16,036,989

 

 

 

(2) Consolidated Statement of Income

Years ended March 31, 2017 and 2018

 

 

Millions of Yen

Year ended

March 31, 2017

Year ended

March 31, 2018

Revenues

6,425,761

7,567,394

Cost of revenues

(5,097,123)

(5,680,754)

Gross profit

1,328,638

1,886,640

Selling, general and administrative expenses

(932,607)

(1,387,266)

Gains on investments

83,288

4,365

Gains on disposal and sale of property, plant and equipment

14,419

40,929

Impairment losses on property, plant and equipment and others

(103,181)

(80,173)

Other income (expense)-net

10,581

9,894

Finance income

132,389

179,160

Finance costs

(49,537)

(52,259)

Share of profit of investments accounted for using the equity method

117,450

211,432

Profit before tax

601,440

812,722

Income taxes

(121,366)

(202,306)

Profit for the year

480,074

610,416

 

 

 

Profit for the year attributable to:

 

 

Owners of the Parent

440,293

560,173

Non-controlling interests

39,781

50,243

 

480,074

610,416

 

 

 

 

 

 

(3) Consolidated Statement of Comprehensive Income

Years ended March 31, 2017 and 2018

 

 

Millions of Yen

Year ended

March 31,2017

Year ended

March 31,2018

Profit for the year

480,074

610,416

Other comprehensive income (loss), net of tax

 

 

Items that will not be reclassified to profit or loss for the year:

 

 

Gains on other investments designated as FVTOCI

111,869

10,086

Remeasurement of defined benefit pension plans

26,832

1,928

Share of other comprehensive income (loss) of investments accounted for using
the equity method

5,471

(3,736)

Total

144,172

8,278

 

 

 

Items that may be reclassified to profit or loss for the year:

 

 

Cash flow hedges

1,359

(2,011)

Exchange differences on translating foreign operations

(62,975)

(16,825)

Share of other comprehensive (loss) income of investments accounted for using
the equity method

(65,307)

4,488

Total

(126,923)

(14,348)

Total other comprehensive income (loss)

17,249

(6,070)

Total comprehensive income

497,323

604,346

 

 

 

Comprehensive income attributable to:

 

 

Owners of the Parent

452,465

559,636

Non-controlling interests

44,858

44,710

 

497,323

604,346

 

 

 

(4) Consolidated Statement of Changes in Equity

Years ended March 31, 2017 and 2018

 

 

Millions of Yen

Year ended

March 31,2017

Year ended

March 31,2018

Common stock:

 

 

Balance at the beginning of the year

204,447

204,447

Balance at the end of the year

204,447

204,447

Additional paid-in capital:

 

 

Balance at the beginning of the year

262,738

220,761

Compensation costs related to stock options

1,621

1,368

Sales of treasury stock upon exercise of stock options

(1,420)

(712)

Equity transactions with non-controlling interests and others

(42,178)

8,006

Balance at the end of the year

220,761

229,423

Treasury stock:

 

 

Balance at the beginning of the year

(14,509)

(12,154)

Sales of treasury stock upon exercise of stock options

2,364

1,208

Purchases and sales-net

(9)

(24)

Balance at the end of the year

(12,154)

(10,970)

Other components of equity:

 

 

Balance at the beginning of the year

913,939

878,949

Other comprehensive income (loss) attributable to owners of the Parent

12,172

(537)

Transfer to retained earnings

(47,162)

47,199

Balance at the end of the year

878,949

925,611

Retained earnings:

 

 

Balance at the beginning of the year

3,225,901

3,625,244

Profit for the year attributable to owners of the Parent

440,293

560,173

Cash dividends paid to owners of the Parent

(87,170)

(153,806)

Sales of treasury stock upon exercise of stock options

(942)

(496)

Transfer from other components of equity

47,162

(47,199)

Balance at the end of the year

3,625,244

3,983,916

Equity attributable to owners of the Parent

4,917,247

5,332,427

Non-controlling interests:

 

 

Balance at the beginning of the year

425,006

871,764

Cash dividends paid to non-controlling interests

(19,722)

(39,834)

Equity transactions with non-controlling interests and others

421,622

56,144

Profit for the year attributable to non-controlling interests

39,781

50,243

Other comprehensive income (loss) attributable to non-controlling interests

5,077

(5,533)

Balance at the end of the year

871,764

932,784

Total equity

5,789,011

6,265,211

 

 

 

(5) Consolidated Statement of Cash Flows

Years ended March 31, 2017 and 2018

 

 

Millions of Yen

Year ended

March 31,2017

Year ended

March 31,2018

Operating activities:

 

 

Profit for the year

480,074

610,416

Adjustments to reconcile profit for the year to net cash provided by (used in) operating activities:

 

 

Depreciation and amortization

201,117

254,038

(Gains) on investments

(83,288)

(4,365)

Losses on property, plant and equipment

88,762

39,244

Finance (income) ―net of finance costs

(82,852)

(126,901)

Share of (profit) of investments accounted for using the equity method

(117,450)

(211,432)

Income taxes

121,366

202,306

Changes in trade receivables

(226,319)

(366,807)

Changes in inventories

(115,595)

(60,265)

Changes in trade payables

194,692

224,839

Other―net

(55,342)

49,121

Dividends received

218,960

305,010

Interest received

85,010

89,258

Interest paid

(64,797)

(65,212)

Income taxes paid

(61,334)

(196,768)

Net cash provided by (used in) operating activities

583,004

742,482

Investing activities:

 

 

Payments for property, plant and equipment

(160,055)

(277,456)

Proceeds from disposal of property, plant and equipment

26,924

178,882

Payments for investment property

(8,696)

(7,624)

Proceeds from disposal of investments property

26,893

9,252

Purchases of investments accounted for using the equity method

(139,747)

(359,511)

Proceeds from disposal of investments accounted for using the equity method

98,475

77,627

Acquisitions of businesses―net of cash acquired

(74,694)

(32,264)

Proceeds from disposal of businesses―net of cash divested

1,365

25,201

Purchases of other investments

(117,283)

(46,090)

Proceeds from disposal of other investments

135,994

127,883

Increase in loans receivable

(43,331)

(73,017)

Collection of loans receivable

100,307

49,137

Net (increase) decrease in time deposits

(25,737)

10,397

Net cash provided by (used in) investing activities

(179,585)

(317,583)

Financing activities:

 

 

Net increase (decrease) in short-term debts

(111,480)

53,562

Proceeds from long-term debts―net of issuance costs

671,204

300,556

Repayment of long-term debts

(1,190,052)

(770,267)

Dividends paid to owners of the Parent

(87,170)

(153,806)

Dividends paid to the non-controlling interests

(19,722)

(39,834)

Payments for acquisition of subsidiary's interests from the non-controlling interests

(31,469)

(13,545)

Proceeds from disposal of subsidiary's interests to the non-controlling interests

16,535

69,021

Net (increase) decrease in treasury stock

(8)

(15)

Net cash provided by (used in) financing activities

(752,162)

(554,328)

Effect of exchange rate changes on cash and cash equivalents

(6,703)

(10,624)

Net increase (decrease) in cash and cash equivalents

(355,446)

(140,053)

Cash and cash equivalents at the beginning of the year

1,500,960

1,145,514

Cash and cash equivalents at the end of the year

1,145,514

1,005,461

 

 

2. Notes Concerning Consolidated Financial Statements

 

(1) Changes in Accounting Policies and Changes in Accounting Estimates

 

The important accounting policies applied to the consolidated financial statements for the year ended March 2018 are identical to the accounting policies applied to the consolidated financial statements for the previous fiscal year, except for the following:
 

New standards and interpretations applied

Standards and interpretations

Outline

IAS 7 Statement of Cash Flows (Amended)

Additional disclosure requirements for reconciliation of liabilities arising from financing activities

 

The adoption of new standards including above and interpretations had no significant impact on the consolidated financial statements for the year ended March 2018.

 

 

 

 

(2) Segment Information

 

Year ended March 31, 2017

 

Millions of Yen

Global

Environmental

& Infrastructure

Business

Industrial

Finance,

Logistics &

Development

Energy

Business

Metals

Machinery

Chemicals

Living

Essentials

Total

Other

Adjustments

and

Eliminations

Consolidated

Gross profit

38,013

60,195

37,663

414,766

182,061

112,976

473,224

1,318,898

7,850

1,890

1,328,638

Share of profit of

investments accounted for

using the equity method

23,229

13,733

25,278

2,690

5,252

12,059

34,851

117,092

1,191

(833)

117,450

Profit (loss) for the year

attributable to owners of the Parent

23,420

35,531

55,477

147,901

29,437

26,732

121,344

439,842

(1,233)

1,684

440,293

Total assets

1,005,671

841,567

2,118,028

3,704,234

1,739,554

943,884

4,343,006

14,695,944

2,631,382

(1,573,769)

15,753,557

 

 

Year ended March 31, 2018

 

Millions of Yen

Global

Environmental

& Infrastructure

Business

Industrial

Finance,

Logistics &

Development

Energy

Business

Metals

Machinery

Chemicals

Living

Essentials

Total

Other

Adjustments

and

Eliminations

Consolidated

Gross profit

38,140

49,949

55,711

452,804

195,593

116,154

971,796

1,880,147

7,081

(588)

1,886,640

Share of profit of

investments accounted for

using the equity method

37,345

28,250

44,076

33,521

28,768

16,170

23,644

211,774

1,166

(1,508)

211,432

Profit (loss) for the year

attributable to owners of the Parent

44,594

44,185

20,273

261,028

85,176

30,585

74,742

560,583

(1,100)

690

560,173

Total assets

1,045,645

814,767

2,074,072

3,777,340

1,921,082

993,650

4,599,842

15,226,398

2,460,406

(1,649,815)

16,036,989

 

Notes:

*1. "Other" represents the corporate departments which primarily provide services and operational support to the Company and Affiliated companies.

This column also includes certain revenues and expenses from business activities related to financing and human resource services that are not allocated to reportable operating segments.

Unallocated corporate assets categorized in "Other" consist primarily of cash, time deposits and securities for financial and investment activities.

*2. "Adjustments and Eliminations" includes certain income and expense items that are not allocated to reportable operating segments and intersegment eliminations.

 

 

(3) Earnings Per Share

 

Reconciliations of the basic and diluted profit for the year attributable to owners of the Parent per share are as follows:

 

Year ended

March 31,2017

Year ended

March 31,2018

Profit for the year attributable to owners of the Parent per share (Yen)

 

 

Basic

277.79

353.27

Diluted

277.16

352.44

 

 

 

Numerator (Millions of Yen):

 

 

Profit for the year attributable to owners of the Parent

440,293

560,173

 

 

 

Denominator (Thousands of shares):

 

 

Basic weighted average common shares outstanding

1,584,995

1,585,658

Effect of dilutive securities:

 

 

Stock options

3,575

3,736

Diluted outstanding shares

1,588,570

1,589,394

 

 

(4) Subsequent Events

 

There are no material subsequent events to be disclosed.

 

 

 

 

 

3. Notes Concerning Going Concern Assumption

 

None

 

 

 

May 8, 2018

 

Responsibility Statement

 

The following responsibility statement is made solely to comply with the requirements of DTR 4.1.12 of the United Kingdom Financial Conduct Authority's Disclosure Rules and Transparency Rules, in relation to Mitsubishi Corporation as an issuer whose financial instruments are admitted to trading on the London Stock Exchange.

 

Kazuyuki Masu, Chief Financial Officer, confirms that:

 

·        to the best of his knowledge, the financial statements, prepared in accordance with International Financial Reporting Standards (IFRSs), give a true and fair view of the assets, liabilities, financial position and profit or loss of Mitsubishi Corporation and the undertakings included in the consolidation taken as a whole; and

 

·        to the best of his knowledge, the management report includes a fair review of the development and performance of the business and the position of Mitsubishi Corporation and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

 

 

 


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