TOYOTA TSUSHO Aktie

I would like to walk you through the consolidated results for the previous fiscal year, fiscal year 2025 and the earnings forecast for the current fiscal year, fiscal year 2026. Page 2 shows a summary and the foreign exchange rates used are listed in the upper right. For fiscal year 2025, P&L translation was based on a U.S. dollar-Japanese yen rate of JPY 151, a JPY 2 appreciation of the yen and a euro-Japanese yen rate of JPY 175, an JPY 11 depreciation.

Operating profit for fiscal year 2025 reached JPY 545.2 billion and profit was JPY 370.5 billion. I'm pleased to report that we have achieved record high profits for the fifth consecutive year. As I will elaborate later, we recorded JPY 15 billion in one-off losses for fiscal year 2025. When considering that fiscal year 2025 had recorded one-off gains, we reached this JPY 370.5 billion profit despite a total negative swing of JPY 26 billion in nonrecurring items.

Operating cash flow stood at JPY 461.1 billion. This figure was heavily impacted by a substantial buildup of inventory, particularly in memory-related products, which increased by JPY 400 billion alone. Regarding investing cash flow, while the headline figure may be slightly misleading, our actual cash outflow for investments exceeded JPY 400 billion. This includes over JPY 300 billion for the purchase of shares in Toyota Industries, which is reflected in the negative figure shown here.

Our net DER has decreased to 0.3x, primarily because the funds allocated for the purchase of Toyota Industries shares are currently held as cash on hand. Conversely, ROE stands at 12.8%, which is a slightly underwhelming figure compared to our targets.

Regarding dividends, we had initially announced a payout of JPY 116 for fiscal year 2025. However, following our second upward revision, we have increased our dividend to JPY 120. For fiscal year 2026, we are planning JPY 663.6 billion in share repurchases. Regarding cash dividends, consistent with our progressive dividend policy, we have set the payout at JPY 125. Consequently, the total payout ratio is projected to reach 195.2%.

Next, this is the breakdown of our P&L by profit stage. Both revenue at JPY 11.5 trillion and gross profit at JPY 1.2 trillion show substantial growth. This includes an impact of over JPY 300 billion from the full acquisition of Radius Recycling. In addition, the circular economy division contributed a surplus of over JPY 400 billion. The Digital Solutions division added upwards of JPY 300 billion, driven by soaring memory prices and the Africa division saw a roughly JPY 250 billion increase due to the weaker yen. Combined, these 3 divisions boosted our revenue by approximately JPY 1 trillion.

Next, this waterfall chart illustrates the factors behind JPY 48.1 billion increase in operating profit. The primary drivers include a JPY 10 billion gain from foreign exchange, JPY 25.9 billion from demand and trading volume and JPY 21.5 billion from automobile sales-related factors. I will provide details for each division later.

Regarding others, please refer to Page 5. This category was significantly impacted by the reversal of the profit from the divestment of our gas-fired power generation business in the U.S., which was recorded in the previous fiscal year. As for taxes, we also saw a year-on-year impact due to the tax credits related to our solar power business in North America that were factored into the previous fiscal year. Consequently, while the bottom line figure remained relatively unchanged, the negative balance in the other category was increased by approximately JPY 40 billion.

I apologize for the level of detail, but here, we have listed one-off gains and losses of JPY 500 million or more. Starting from the top right, the Metal division recorded 0. In the circular economy division, the figures related to Radius Recycling. We recorded JPY 4 billion in acquisition-related expenses in the second quarter. As I will explain later, Radius has since moved into the black. So from a one-off perspective, this cost is the only item recorded. Additionally, this segment includes a small write-down of fixed assets related to our plastic recycling operations.

Turning to our operations in China. My apologies for jumping ahead to the Mobility division. We have withdrawn from the automobile dealership business in the coastal regions. While we recorded losses related to this exit, the overall impact of the business restructuring netted out to nearly 0. We have significantly streamlined our operations in that area.

Regarding Green Infrastructure division, we recorded an JPY 11 billion impact in the solar power business. This specifically concerns Eurus Energy. We decided to take an impairment loss for both its solar development unit and its belging power unit reflecting our updated future earnings projections and the impact of rising interest rates, that is JPY 11 billion.

Additionally, regarding Eurus Energy and its wind power operations, we have begun our replacement program. This process inevitably leads to a loss on retirement of fixed assets as we are decommissioning facilities that still have 1 or 2 years of depreciation remaining, although the negative impact is front-loaded to secure the new feed-in tariff and upgrade our assets, we have recorded approximately JPY 2 billion in losses for this period.

Regarding Digital Solutions division, we recorded a one-off loss as we were impacted by a sharp spike in communication costs in the Middle East triggered by the blockade of Strait of Hormuz. We're currently in negotiations with our clients regarding these costs. The final extent to which we will bear this burden remains subject to the outcome of these discussions.

In the Lifestyle division, we divested 9 condominium buildings we held in the Nagoya area, resulting in a gain on sale.

Regarding the Africa division, the worsening situation in the Middle East and the blockade of the Strait of Hormuz impacted our March results since our inventory is centralized in Dubai, we were unable to ship goods out, meaning sales in the Northern and Eastern regions of Africa failed to materialize as planned. This resulted in a timing difference or a shift in sales recognition, while the inventory remains intact and there's no direct impact on the value of the stock itself, we've recorded this here due to the absence of realized sales for the period.

Next, this shows the year-on-year comparison by division. In the Metal division, while we saw an increase in production volume in North America, this was offset by weak steel market conditions, resulting in a slight year-on-year decline. Regarding the circular economy division, we had initially anticipated a loss of around JPY 10 billion from Radius. However, the overall impact was contained to a JPY 5 billion loss. So while this still represents a year-on-year decline, the outcome is an improvement of approximately JPY 5 billion compared to our initial guidance.

Regarding the Supply Chain division, our logistics flow remains very strong. We have successfully secured a significant amount of nonautomotive business, which has contributed to the positive results. In the Mobility division, the Asia/Oceania region performed exceptionally well. We saw a strong comeback in markets such as Sri Lanka, Cambodia and Laos, while Papua New Guinea also maintained steady growth, leading to a substantial profit in this region. Conversely, while the purposes was strong in fiscal year 2024, it saw a decline in fiscal year 2025 as we were outcompeted by Chinese rivals over the full year. After offsetting these factors, the division ended with a JPY 6.6 billion surplus.

As for Green Infrastructure division, after accounting for the previously mentioned one-off losses, such as the impairment at Eurus Energy, the result was an JPY 18.6 billion decrease compared to the one-off gains recorded in fiscal year 2024. In the Digital Solutions division, we achieved a positive result driven by an increase in memory-related transaction volume. In addition to the tailwind from rising prices, our system-related software business also showed significant growth. Regarding our Lifestyle division, we believe that performance was primarily driven by one-off factors.

The food business itself is performing steadily, and the insurance business is also showing consistent growth centered on the Indian market. The Africa division performed strongly overall, although the failure to realize sales in March had a profit impact of approximately JPY 2 billion. The segment recorded a robust profit of JPY 94 billion, this performance is primarily driven by the West Africa region. Notably, Nigeria has made a strong comeback and is performing well.

Next, the balance sheet. You will notice it has expanded. As shown in the upper right, this growth is largely due to the significant depreciation of the yen, with the dollar at JPY 160 and the euro at JPY 183. Additionally, the acquisition of Radius has contributed about JPY 300 billion to this expansion. The balance sheet has expanded quite significantly and feels a bit large at this stage. The inventory grew by JPY 444 billion. Even when excluding the impact of foreign exchange, the increase remains close to JPY 400 billion with memory-related products accounting for about JPY 200 billion of the total.

Regarding net worth, our figures expanded significantly and showed market improvement primarily because the sale of Toyota Industries shares was recorded directly in equity. So while it had no impact on the P&L, it bolstered our balance sheet. Net interest-bearing debt has fallen below the JPY 1 trillion threshold. Our net DR currently stands at 0.3x. We have just announced a share repurchase program of over JPY 600 billion, which will be entirely debt funded. Even after accounting for this, our forecast for the June Q1 balance sheet suggests that the net DR will remain at a healthy level of less than 0.7x. Overall, I believe we are successfully maintaining our financial discipline.

Page 9 covers cash flow. The reason the figures are lower than initially projected is mainly due to the inventory buildup. But if you exclude the inventory factor, I believe we have actually generated a surprisingly healthy level of cash flow. Free cash flow after dividend payments is a robust figure at plus JPY 310 billion. Our total investment amount, it reached JPY 405.5 billion, which is distributed across 3 key areas. The figure for the middle category is relatively large because it includes Radius Recycling since we had an initial investment plan of JPY 400 billion, we're progressing exactly as scheduled.

Page 11, Metal Division. As I mentioned earlier, despite the growth in demand in North America, unfavorable market conditions resulted in an operating loss of JPY 0.8 billion. The circular economy division posted an operating profit of JPY 5.9 billion. We're seeing a recovery in market conditions. We believe the overall market environment was favorable across the board, including for PGMs, rare earths, lithiums and iodine.

The Supply Chain division delivered very robust results, posting a JPY 4.1 billion surplus. This was primarily driven by the expansion of our products business in region outside of North America. We view this growth not as a one-off spike, but as a steady and sustainable expansion that is progressing as planned.

Regarding the Mobility division, the Asia/Oceania region saw a significant increase of JPY 17.8 billion, while the figure for Europe, which specifically refers to the caucuses, shows a JPY 6.2 billion decline. I'd like to clarify that this does not mean the region is in the red. It appears as a negative simply because we're comparing it against the exceptionally strong performance of the previous fiscal year.

Next, Green Infrastructure division. On the operating profit basis, the division saw a JPY 6.9 billion decline. As indicated in the bottom left section, much of this was driven by one-off items. More than machinery business performed well, the renewable energy sector, particularly our wind power business struggled in both Japan and Europe due to softening demand. In addition to the goodwill impairment, the positive impact recorded in Europe stems from a past legal matter. Years ago, the Spanish government retroactively altered the feed-in tariff scheme, leading to a breach of contract and a subsequent lawsuit. We prevailed in this litigation and the figures shown here represents the settlement proceeds we received as a result -- the item in the lower section have also been categorized as one-off factors.

Page 16, Digital Solutions division. The segment saw an operating profit of JPY 8.3 billion, largely driven by a substantial increase in memory-related transaction volume, which contributed JPY 6.7 billion. Additionally, our system and software-related business expanded by JPY 2.1 billion. Next, Lifestyle division. Our core business operations continue to perform steadily, even excluding the JPY 9.3 billion pretax gain from the real estate divestments. The division generated an operating profit surplus of over JPY 3 billion. Our Brazilian grain and logistics subsidiary, NovaAgri is progressing well. And manu, our oils and fats company is also trending positively. The Africa division has delivered exceptionally robust results with an operating profit of JPY 25.6 billion, while the infrastructure business, still in its early stage, appears to show a year-on-year decline. This is simply a reflection of the strong prior year performance, which included a significant gain from the Angolan port project. The absence of that one-off gain makes last fiscal year's figure looks smaller by comparison. In reality, you can consider all subsegments within the Africa division to be performing profitably.

Regarding our forecast and targets, we've set our profit goal at JPY 400 billion. This figure reflects an anticipated JPY 10 billion negative impact due to the situation in the Middle East. Our foreign exchange assumption is JPY 150 to the dollar. Considering the current market environment, we believe it's a conservative estimate. Our ForEx sensitivity remains unchanged at JPY 1.5 billion per 1 yen move while the Lifestyle division shows a negative year-on-year trend, it is actually positive if we exclude one-off factors.

Consequently, our outlook is for all divisions to achieve positive results on an underlying basis. We factored in the estimated impact of the Middle East situation. This primarily accounts for the rising logistics costs resulting from supply chain disruption. Specifically, shipments originally departed from Dubai are being reverted, leading to increased expenses. We factored in a substantial negative impact for the time being.

Regarding the circular economy division, the negative outlook is primarily driven by the surge in naphtha prices. Our domestic procurement prices in Japan have soared about 2.5x their previous levels. While we do not expect any supply disruptions as we are successfully securing supply from the U.S. and other regions, we anticipate that passing these higher costs on to customers may be challenging. So we've taken a considered view and factored in this negative impact.

Regarding Mobility division, many Asia/Oceanic countries heavily dependent on Middle Eastern crude oil, such as Sri Lanka, Vietnam and Thailand, Cambodia and Indonesia. We anticipate that vehicle sales across Southeast Asia may slow down due to these energy-related risks; Consequently, we factored in a slight negative impact in our forecast for this region.

Now shareholder returns. Our track record shows that total returns have now exceeded JPY 1 trillion. We recorded JPY 126.7 billion in fiscal year 2025 and JPY 780.9 billion in 2026. For 2027, applying a 40% payout ratio to our JPY 450 billion profit target gives us JPY 180 billion. The sum of these 3 years reaches JPY 1,087.6 trillion ((sic) [billion]), shy of JPY 1.1 trillion mark.

Thank you very much for your attention. Next, our President, Imai, will present to the next Dimension 2028 and provide an overview of the second year of the medium-term management plan fiscal year 2027.

Now I'd like to explain the progress we have made in the second year of our medium-term management plan. In the past, our company revised our rolling medium-term plan on an annual basis. However, starting this time, we have fixed the medium-term plan announced last year as a 3-year plan, and we will report our progress in a format commonly used by other companies.

Today's presentation focuses on our second year progress. While we announced a new medium-term management plan last year, without assigning it a formal name, we felt it would be better to give it a name and have now named it to the next dimension 2028. Traditionally, the cover of our medium-term plan has featured dark navy or deep blue tons, which may have conveyed a sense of stagnation. Under the theme to the next dimension, we collaborated internally to develop a new cover design that visually conveys an upward trajectory.

Now let me walk you through the details. First, regarding our quantitative targets for FY 2027, we are targeting net profit after tax of JPY 450 billion, an ROE of 15%, cumulative investment of JPY 1.2 trillion and a total payout ratio of 40%, after the first year, we announced our second year plan. As Mr. Iwamoto explained, the total payout ratio for this year will reach 195% due to share buybacks. All other metrics are progressing on track.

As we explained at the time of last year's medium-term plan announcement, over these 3 years, we will remain firmly committed to enhancing corporate value. Specifically, we will focus on improving our PBR. To achieve this, we will focus on 4 key components shown on the left. First, our growth strategy for business operations; second, our financial capital strategy, which addresses our approach to shareholders; third, our human capital and organizational strategy; and fourth, our sustainability strategy, which reflects our responsibilities to society. By advancing these 4 components to the next level, we will take a multi-stakeholder approach. And through their combined impact, we will enhance corporate value.

We have clearly defined the KPI targets for each of these components. For the first and second items, these are financial KPIs; for the third and fourth, they are nonfinancial KPIs. For example, we have set targets for metrics such as employee engagement, and we will continue to disclose them.

I will explain the progress of our strategies for each of the 4 components for the next dimension. First, our growth strategy. As I always say, we aim to establish ourselves as a uniquely competitive sogo shosha. In our focus areas, we aim to achieve at least a #1 position in Japan and ideally to become #1 globally. We are focusing on 4 key areas: First, Africa, where we aim to triple our business and the Gondwana economic zone, which means that we will focus on the global south. Second, the circular economy, where we aim to become #1 globally; third, next-generation mobility; and fourth, renewable energy.

We will invest JPY 1.2 trillion in growth over the next 3 years, mainly for these 4 areas. Of the JPY 1.2 trillion investments, we plan to allocate JPY 300 billion to our fundamental businesses, including our automotive-related operations such as steel centers and dealership businesses. We will allocate the remaining JPY 900 billion to the 4 uniquely competitive areas. In particular, we plan to invest the majority of this amount in 2 areas: the Gondwana economic zone, including Africa and the circular economy, where we aim to achieve a #1 global position.

I will now walk you through the progress and future plans for each of these 4 uniquely competitive areas. First, Africa. Last year, we presented the diagram shown at the bottom right. We have a proven track record of tripling our revenue over the 7 years from 2017 to 2024, growing from JPY 500 billion to JPY 1.5 trillion. We have set a target to achieve another threefold increase over the 10-year period from 2025 to 2035. One year into the plan, revenue reached nearly JPY 2 trillion, an increase of over JPY 400 billion year-on-year. While this year's plan is conservative due to factors such as foreign exchange, our underlying business and profits continue to grow. We will maintain this momentum toward our goal of tripling the size of our business by 2035.

Key growth drivers are automotive sales and pharmaceuticals, which we will expand through organic growth and acquisitions. Renewable energy is another key area. We have already built 1 gigawatt in Africa and have 3 gigawatts in the pipeline, targeting a total of 3 gigawatt by 2030.

This time, we are introducing a new global South strategy. Given the broad scope of the Global South, we will focus on India and South America and aim to drive growth in these regions alongside Africa. In ancient times, Africa, India and South America were once part of the same land mass known as the Gondwana continent. While they are now geographically separate, we see strong commonalities across these key global south regions. We will grow both shared and unique business opportunities across these regions. Across these 3 regions, we expect significant growth in mobility, which is one of our core strengths. For example, in India, our partners, Suzuki and Toyota have announced targets to double both production and sales volumes. Through related and collaborative businesses, we will grow alongside our partners and aim to double our business. In South America, we will also expand in line with the strong growth plans of our partner, Toyota Motor Corporation.

In addition, in India, for example, our insurance and health care businesses shown in the upper right, have grown to generate post-tax profit in the billions of yen, and we are now scaling them further. In rare earth, we operate separation and refining facilities in India. And as already partially announced, we are also exploring upstream opportunities in Namibia as well as in South America. We aim to expand our critical minerals business across the global South.

In Brazil, we have been engaged in our agri business for many years, and the business environment has improved significantly. As a result, we will make additional investments this year to enhance capacity and expand our trading volumes. By 2030, Brazil, South America and India are expected to reach around JPY 1.5 trillion. As Africa is already exceeding JPY 2 trillion in 2026, we aim to make it JPY 3 trillion. Together, we aim to build a JPY 4.5 trillion Gondwana economic zone.

Next to our second uniquely competitive area is the circular economy, where we aim to become the global leader. Within the resource closed loop shown on the left, we focus on collection and recycling. In collection, we have historically handled in-plant collection, mainly from Toyota plants across 45 sites in 14 countries. Last year, we also acquired Radius Recycling, the largest post-consumer scrap collector in North America. Combined with our end-of-life vehicle recycling business, we have built a highly extensive collection network. We will continue to further expand this network going forward. In addition to steel, we are also advancing recycling initiatives in plastics, batteries, catalysts and aluminum as shown below.

We have set numerical targets. Currently, in base metals, primarily steel, we handle over 10 million tonnes, representing just over a 2% global market share, which we believe places us among the leading players worldwide. We aim to increase this share to 5% by 2035. Geographically, we will continue to expand this business across Japan, North America, India, Europe and the Asia/Oceania region. In terms of materials, as shown here, in addition to plastics, batteries, catalysts and aluminum, we will also advance recycling initiatives in rare earth.

Our third uniquely competitive area is Next Mobility. In this area, we are mainly focusing on electrification and intelligentization. For electrification, we are working to establish a stable battery supply chain, which is a key device through collaboration with global partners. In lithium resources, we partner with Rio Tinto. For cathode materials, which represent the highest value-added component, we collaborate with LG Chemical in South Korea. We also partner with SK Group in South Korea on copper foil and aluminum foil. As for recycling, we are working with LG as part of our Japan South Korea alliance. While Chinese players currently lead the global market, we will continue to advance the development of a battery ecosystem through this Japan South Korea collaboration to close the gap. This is about intelligentization.

The value of semiconductors installed in vehicles is expected to increase by 2 to 3x between 2020 and 2030. We have a strong track record in semiconductor supply. And in addition, we are expanding into software development and cloud-related businesses. Our transaction value grew from JPY 1 trillion in 2019 to JPY 1.7 trillion in 2025, and we aim to reach at least JPY 2 trillion. In addition to electrification, including batteries, vehicles are increasingly incorporating autonomous driving and AI technologies. We aim to expand our involvement in these areas.

Finally, our fourth uniquely competitive area is renewable energy. We currently have approximately 5 gigawatts of growth generation capacity, and we aim to expand this to 10 gigawatts by 2030, primarily in Africa. We have also participated in offshore wind tenders. While we have not yet secured any projects, we will continue to pursue opportunities with the systems. In this area, we are not only focused on generation, but also on aggregating, optimizing and delivering energy. To support this, we have launched our proprietary energy management system, ReEra, and we will expand our energy management business.

In addition to our JPY 1.2 trillion growth investments, we will also rigorously review our business portfolio to generate additional cash flow. As shown on the left, we are also advancing the unwinding of cross shareholdings within the group. As for low-profit businesses, as explained last year, we have been withdrawing from companies that are unable to generate post-tax profits of at least JPY 100 million. We will now raise this threshold to JPY 300 million and further accelerate these initiatives.

In addition, as Mr. Iwamoto mentioned earlier, we will continue to exit businesses where growth has peaked. For example, we have withdrawn from our domestic condominium leasing business. We will also divest businesses that do not fit our strategy. In energy, our strategy is to move away from fuels extracted from the earth and instead harness natural sources such as solar and wind. In line with this, we exited fossil fuel-based power generation over the past 2 to 3 years, and we continue withdrawing from nonstrategic businesses.

Next, I will explain the second component of the Yanagi model, capital allocation of the financial and capital strategy. As Mr. Iwamoto explained, we expect total cash inflows of approximately JPY 2.2 trillion over the 3-year period, including proceeds from the sales of shares in Toyota Industries Corporation. Of this amount, we will allocate JPY 1.2 trillion to growth investments and approximately JPY 1 trillion to shareholder returns. At the same time, we will maintain our policy of ensuring financial soundness and keep our net DER below 0.8 at all times. This page was covered earlier by Mr. Iwamoto, so I will skip this.

Now moving on to the third of our 4 components, our people and organization medium-term vision. Under our new CHRO, we formulated our medium-term vision last year. As a company, we are aiming to achieve a dimensional sanction of [average] of 70,000 people. On the people side, we are implementing initiatives to awaken DNA of each individual across our group. On the organizational side, we are driving a transformation from a traditional pyramid-type structure to a more dynamic living organism.

This slide outlines our various initiatives and the results achieved. We have also received a number of external recognitions and certifications such as White 500 and the Health and Productivity Management Outstanding Organization designation as shown in the bottom left. We also disclosed internal metrics such as employee engagement and organizational environment. These scores improved significantly over the past year, which I'm very pleased to see as it reflects rising motivation across Toyota Tsusho Corporation. We believe our competitiveness lies in our people and organization, and we will continue to focus on this area. As this slide contains detailed information, I will skip this page.

Finally, regarding sustainability management, the last of the 4 components, we positioned Toyota Tsusho as a decarbonization-focused trading company. In particular, we approach environmental initiatives, not as social contributions, but as a core part of our business. As a result, we ranked the second among all listed companies in Japan in the GX500. We also achieved a CDP AAA rating for 2 consecutive years, an honor held by only a few companies globally and just 3 in Japan. These recognitions place us among the leaders in this field, and we will continue to strengthen this as our core strength.

As explained earlier by Mr. Iwamoto, we have extended our medium-term plan by 1 year and have outlined the path to achieving JPY 450 billion. Our core growth drivers will be Africa and the circular economy, which we position as our key focus areas. Other segments are also expected to grow steadily across the board. Green infrastructure is the only segment showing the decline in the first year due to the impairment, as we explained earlier. However, considering the impact of the situation surrounding the Strait of Hormuz, oil prices are rising, which in turn is supporting renewable energy prices. This creates a favorable environment for this segment. Based on a conservative outlook, all segments are expected to grow led by Africa and the circular economy.

This is the final slide. In order to enhance corporate value, we are promoting management with a clear focus on capital costs and setting different ROIC targets based on the stage and characteristics of each business. For nature value businesses centered on renewable energy, we have set a relatively modest target of around 5%. In contrast, for core value businesses centered on mobility, we aim to achieve an ROIC of 15% or higher. Overall, performance is largely in line with these targets. ROIC for the Nature Value segment remains low due to the impairment loss recorded in green infrastructure. However, we now have a clear path towards an improvement and expect to excess our 5% target in the near future. ROE for the company as a whole is 15%, and we aim to achieve an overall ROIC in the range of 11% to 12%, consistently exceeding our cost of capital. This is the information used to create the waterfall chart on the previous page.

That concludes my presentation. Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]