FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Consolidated Financial Results for the Six-Month
Period ended September 30, 2010
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of November 2, 2010
Commission File Number 09929
Mitsui & Co., Ltd.
(Translation of registrant’s name into English)
2-1, Ohtemachi
1-chome Chiyoda-ku, Tokyo 100-0004 Japan
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F
X
Form
40-F
Indicate by check mark if the registrant is
submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: November 2, 2010
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MITSUI & CO., LTD.
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By:
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/s/ Junichi Matsumoto
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Name:
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Junichi Matsumoto
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Title:
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Executive Vice President
Chief Financial Officer
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Consolidated
Financial Results for the Six-Month Period Ended September 30, 2010
[Based on accounting principles generally accepted in the
United States of America (“U.S. GAAP”)]
Tokyo, November 2, 2010 — Mitsui & Co., Ltd. announced its consolidated
financial results for the six-month period ended September 30, 2010.
Mitsui & Co., Ltd. and subsidiaries
(Web Site:
http://www.mitsui.co.jp
)
President and Chief Executive Officer: Masami Iijima
Investor Relations Contacts: Kenichi Hori, General Manager, Investor Relations Division TEL 81-3-3285-7533
1. Consolidated financial results (Unreviewed)
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(1)
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Consolidated operating results information for the three-month period ended September 30, 2010 (from July 1, 2010 to September 30, 2010)
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(Millions of yen)
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Three-month period ended September 30,
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2010
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%
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2009
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%
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Revenues
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1,106,730
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8.1
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1,023,716
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43.0
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Income before Income Taxes and Equity in Earnings
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83,705
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333.1
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19,326
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D
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89.3
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Net income attributable to Mitsui & Co., Ltd.
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80,699
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420.2
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15,513
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88.7
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(2)
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Consolidated operating results information for the six-month period ended September 30, 2010 (from April 1, 2010 to September 30, 2010)
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(Millions of yen)
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Six-month period ended September 30,
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2010
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%
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2009
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%
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Revenues
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2,204,327
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10.2
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2,001,159
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39.6
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Income before Income Taxes and Equity in Earnings
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189,124
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231.9
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56,982
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81.6
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Net income attributable to Mitsui & Co., Ltd.
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183,234
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151.6
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72,835
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69.7
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Net income attributable to Mitsui & Co., Ltd. per share, basic
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100.42
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39.98
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Net income attributable to Mitsui & Co., Ltd. per share, diluted
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100.42
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39.91
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Notes:
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1.
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Percentage figures for Revenues, Income before Income Taxes and Equity in Earnings, and Net income attributable to Mitsui & Co., Ltd. represent changes from
the previous year.
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2.
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In accordance with Accounting Standards Codification (“ASC”) 205-20, “Presentation of Financial Statements-Discontinued Operations,” the figures for
the six-month period ended September 30, 2009 relating to discontinued operations have been reclassified.
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(3)
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Consolidated financial position information
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September 30, 2010
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March 31, 2010
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Total assets
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Millions of yen
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8,210,594
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8,368,984
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Total equity (net worth)
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Millions of yen
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2,424,173
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2,429,806
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Mitsui & Co., Ltd. shareholders’ equity
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Millions of yen
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2,215,665
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2,230,128
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Mitsui & Co., Ltd. shareholders’ equity ratio
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%
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27.0
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26.6
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Mitsui & Co., Ltd. shareholders’ equity per share
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Yen
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1,214.28
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1,222.11
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2. Dividend information
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Year ended
March 31,
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Year ending
March 31, 2011
(Forecast)
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2011
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2010
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Interim dividend per share
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Yen
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20
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7
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20
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Year-end dividend per share
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Yen
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11
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20
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Annual dividend per share
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Yen
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18
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40
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3. Forecast of consolidated operating
results for the year ending March 31, 2011 (from April 1, 2010 to March 31, 2011)
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Year ending
March 31, 2011
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Net income attributable to Mitsui & Co., Ltd.
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Millions of yen
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320,000
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Net income attributable to Mitsui & Co., Ltd. per share, basic
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Yen
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175.36
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Note:
We maintain our forecast net income
attributable to Mitsui & Co., Ltd. for the year ending March 31, 2011 of ¥320.0 billion announced together with the results of fiscal year ended March 2010.
4. Others
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(1)
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Increase/decrease of important subsidiaries during the period: None
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September 30, 2010
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March 31, 2010
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Number of shares of common stock issued, including treasury stock
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1,829,153,527
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1,829,153,527
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Number of shares of treasury stock
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4,475,818
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4,331,644
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Six-month period ended
September 30, 2010
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Six-month period ended
September 30, 2009
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Average number of shares of common stock outstanding
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1,824,737,540
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1,821,650,377
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A Cautionary Note on
Forward-Looking Statements:
This report contains statements (including figures) regarding Mitsui & Co., Ltd.
(“Mitsui”)’s corporate strategies, objectives, and views of future developments that are forward-looking in nature and are not simply reiterations of historical facts. These statements are presented to inform stakeholders of the views
of Mitsui’s management but should not be relied on solely in making investment and other decisions. You should be aware that a number of important risk factors could lead to outcomes that differ materially from those presented in such
forward-looking statements. These include, but are not limited to, (i) changes in economic conditions that may lead to unforeseen developments in markets for products handled by Mitsui, (ii) fluctuations in currency exchange rates that may
cause unexpected deterioration in the value of transactions, (iii) adverse political developments that may create unavoidable delays or postponement of transactions and projects, (iv) changes in laws, regulations, or policies in any of the
countries where Mitsui conducts its operations that may affect Mitsui’s ability to fulfill its commitments, and (v) significant changes in the competitive environment. In the course of its operations, Mitsui adopts measures to control
these and other types of risks, but this does not constitute a guarantee that such measures will be effective. Please refer to Page41 “3. Other Information” for the details.
Table of Contents
-1-
I. Qualitative Information
The consolidated financial statements for the three-month period and six-month period ended September 30, 2010 and the corresponding three-month period and six-month period of the previous year
have not been reviewed by auditors.
1. Summary of Consolidated Financial Results for the Three-Month
Period and the Six-Month Period Ended September 30, 2010
(1)
Operating Environment
Overall the global economy in the first and second quarters has shown some degree of rebound as anticipated, but a downside risk in the rate of the
recovery still persists. The majority of advanced economies are demonstrating a slow paced recovery with high unemployment rates and sluggish housing markets. The emerging economies, in contrast, with only minimal impairment to their financial
capital markets to begin with during the recent recession, have been experiencing robust growth as the beneficiaries of world-wide economic stimulus policies.
In the U.S., the economy has slowly improved due to inventory build-up and capital investments under its stimulus plans. On the other hand, a recovery in employment is lagging and consumption is limited
by decreases in personal income and assets so overall spending remains low. Deflation concerns are spreading and uncertainty is increasing.
In the European Union, the rate of recovery has slowed with uneven conditions prevailing among its member countries. The German economy has benefited
from increased exports owing to the weak euro, while in countries such as Greece and Spain, fiscal problems have negatively affected their markets and unemployment remains high. These factors have restricted growth of European economies.
In Asia, China has continued to be the driving force behind growth of the world economy with its sustained high growth rate. However, the pace of
investment in infrastructure and other areas has moderated somewhat as the country implements policies intended to avoid over-heating the economy, such as measures to curtail real estate transactions. Other Asian countries, including India and the
ASEAN countries, have demonstrated steady recoveries with strong exports and personal consumption.
The Japanese economy has been improving
with increasing exports to the U.S. and European countries, and higher personal consumption particularly in home appliances and automobiles. Recently, however, the rate of recovery has stalled with weak overseas demand and concerns for the strong
yen having a negative impact on the level of corporate activity.
Commodity markets for oil and mineral resources have remained strong during
the period, although a temporary drop was precipitated by prospects of a slower economic recovery among advanced countries and concerns over easing of the high growth rates in emerging economies. Oil prices (WTI future) market recovered to 80
dollars per barrel at the end of September. In the foreign exchange markets, the euro has weakened because of serious fiscal problems in parts of the region; the U.S. dollar has weakened with the market anticipating a prolonged low interest rate
policy in the U.S. due to slow pace of its economic recovery; and in tandem with this, the Japanese yen appreciated to 83 yen to the dollar in September and to 81 yen in October, despite intervention by the Bank of Japan. Mounting pressure over
foreign exchange policy continues and the currency market is expected to demonstrate high levels of volatility. The Nikkei stock average declined from a starting point of 11,000 yen at the beginning of the fiscal year to levels as low as 8,800 yen
at one point amid pessimistic views on the strong yen and economic slowdown in Japan at the time. Yet, subsequently, it has recovered to 9,369 yen as of the end of September with somewhat decreasing concern over potential moderation of the high
growth rates in the emerging economies. In October, although the index had risen to 9,600 yen following announcement of a comprehensive monetary easing policy by the Bank of Japan and new stimulus policy by the Japanese government, the outlook
remains unstable.
The global economy is expected to continue its moderate rate of recovery, sustained by solid growth in the emerging
economies and resource rich countries. However, the global economy faces an increased level of downside risk in the short term, given various matters of concern: e.g. the waning effect of stimulus packages in many economies; the fiscal and monetary
problems seen in Europe; the tightening of monetary policies and their effect on the principal emerging economies, particularly on China; and the effect of the strong yen on the Japanese economy and corporate activity. Therefore, close monitoring of
the dynamics of the commodity markets and economic conditions, as well as navigating through those risks, has become increasingly critical.
-2-
(2)
Operating Results (Comparison between the six-month periods ended September 30, 2010 and 2009)
Mitsui & Co., Ltd. (“Mitsui”) and its subsidiaries (collectively “we”) posted net income attributable to Mitsui & Co., Ltd. of ¥183.2 billion, an increase of
¥110.4 billion from ¥72.8 billion for the corresponding six-month period of the previous year. Major developments during the periods were as follows:
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Despite the fact that recovery of the real economy was uneven depending on region and industry, the global economy continued to recover supported by
strong economic growth in developing countries, including Asian countries. In such an economic environment, the Mineral & Metal Resources and the Energy segments reported sharp increases in gross profit reflecting a run-up in iron ore and
oil prices. Some of the non-commodity segments, such as the Foods & Retail, which recorded mark-to-market valuation losses on commodity derivative contracts, as well as Logistics & Financial Markets, which reported a reversal
effect of gain on sales of a leased office building and experienced slack derivatives trading under less volatile market conditions, posted decline in gross profit from the corresponding six-month of the previous year.
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In addition to the increase in gross profit, equity in earnings of associated companies increased sharply reflecting a run-up in commodity prices as
well as increases in sales volume. On the other hand, reversal of deferred tax liabilities for undistributed retained earnings declined by approximately ¥5.0 billion compared to the corresponding six-month period of the previous year reflecting
a decline in dividends received from associated companies.
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The Energy and Mineral & Metal Resources again led the way thanks to a further run-up in prices of oil, iron ore and energy as well as
additional production. All other segments excluding the Machinery & Infrastructure Projects, which recorded mark-to-market valuation losses on long-term power derivative contracts, and the Chemical, the trading activities for petrochemical
products of which underperformed, posted increases in net income attributable to Mitsui & Co., Ltd. This reflected the recovery in prices and trade volume, as well as reversal effect of impairment losses on securities recorded in the
corresponding six-month period of the previous year.
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(3)
Operating Results (Comparison between the
three-month periods ended September 30, 2010 and 2009)
We posted net income attributable to Mitsui &
Co., Ltd. of ¥80.7 billion, an increase of ¥65.2 billion from ¥15.5 billion for the corresponding three-month period of the previous year. Major developments during the periods were as follows:
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Despite the fact that recovery of the real economy was uneven depending on region and industry, the global economy continued to recover supported by
strong economic growth in developing countries including Asian countries. Against the backdrop of such rising demand in those developing countries, gross profit increased mainly thanks to the contribution of the Mineral & Metal Resources
and the Energy segments with sharp increases in gross profit reflecting a run-up in iron ore and oil prices. Some of the non-commodity segments, such as the Logistics & Financial Markets, which reported a reversal effect of gain on sales of
a leased office building and experienced slack derivatives trading in less volatile market conditions, the Consumer Service & IT, which endured dampened consumer spending and weak demand for investments in information system, and the
Foods & Retail, which recorded mark-to-market valuation losses on commodity derivative contracts, posted declines in gross profit from the corresponding three-month of the previous year.
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In addition to the increase in gross profit, equity in earnings of associated companies increased sharply. While the Machinery &
Infrastructure Projects recorded mark-to-market valuation gains and losses, such as those on long-term power derivative contracts, the Mineral & Metal Resources and the Energy posted sharp increases in earnings reflecting a run-up in iron
ore prices and energy prices.
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The Energy and Mineral & Metal Resources again led the way thanks to a further run-up in prices of oil, iron ore and energy. All other
segments excluding the Machinery & Infrastructure Projects, which recorded mark-to-market valuation losses on long-term power derivative contracts, posted increases in net income attributable to Mitsui & Co., Ltd. This reflected
the recovery in prices and trade volume, as well as reversal effects of impairment losses on securities recorded in the corresponding three-month period of the previous year.
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(4)
Financial
Condition
Total assets as of September 30, 2010 were ¥8.2 trillion, a decline of ¥0.2 trillion from ¥8.4
trillion as of March 31, 2010.
Investments and plant, property and equipment (“PPE”) decreased by ¥0.1 trillion with a
drop in global equity prices, as well as a decline in overseas investments and in PPE held by foreign subsidiaries due to appreciation of the Japanese yen against the Australian dollar and the U.S. dollar. Current assets declined by ¥0.1
trillion due to a decrease in cash and cash equivalents, trade receivables and inventory. Total Mitsui & Co., Ltd. shareholders’ equity as of September 30, 2010 was ¥2.2 trillion, equivalent to the level of March 31,
2010. This reflects the aforementioned appreciation of the Japanese yen against foreign currencies as well as lower equity prices despite an increase in retained earnings. Net Debt-to-Equity Ratio (“Net DER”) (*1) as of September 30,
2010 was 0.92 times, equivalent to the level of March 31, 2010.
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(1*)
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See “4. Financial Condition and Cash Flows” regarding “Net DER”.
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(5)
Cash Flow Statement
Net cash provided by operating
activities for the six-month period ended September 30, 2010 was ¥270.8 billion. Net cash provided by operating activities was comprised of operating income of ¥169.8 billion and dividends received of ¥95.5 billion, including those
from associated companies. Net cash used in investing activities for the six-month period ended September 30, 2010 was ¥280.5 billion due mainly to other expansion-related expenditures for natural resources in the Mineral &
Metal Resources and the Energy segments and investment in natural-gas-fired power stations in Mexico. Accordingly, free cash flow (*1) for the six-month period ended September 30, 2010 represented in a net outflow of ¥9.7 billion.
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(*1)
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Sum of net cash flow for operating activities and cash flow for investing activities
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2. Results of Operations for the Six-Month Period Ended September 30, 2010
(1)
Analysis of Consolidated Income Statements (Comparison between the six-month period ended September 30, 2010 and 2009)
Revenues
Total revenues for the
six-month period ended September 30, 2010 were ¥2,204.3 billion, an increase of ¥203.1 billion from ¥2001.2 billion for the corresponding six-month period of the previous year.
Revenues from sales of products for the six-month period ended September 30, 2010 were ¥1,948.6 billion, an increase of ¥207.5 billion from
¥1,741.1 billion for the corresponding six-month period of the previous year, as a result of the following:
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The Mineral & Metal Resources Segment reported an increase of ¥92.5 billion in revenues. Reflecting higher iron ore prices, Mitsui Iron
Ore Development Pty. Ltd. (Australia) and Mitsui-Itochu Iron Pty. Ltd. (Australia) reported increases of ¥48.3 billion and ¥13.0 billion, respectively.
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The Energy Segment reported an increase of ¥75.2 billion. Oil and gas production businesses, Mitsui and Mitsui Oil Co., Ltd. (Japan) reported
increases in revenues mainly due to higher oil prices.
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The Iron & Steel Products Segment reported an increase of ¥28.6 billion primarily attributable to an increase in steel products export
business for emerging countries.
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The Europe, the Middle East and Africa Segment and the Asia Pacific Segment reported increases of ¥2.1 billion and ¥16.2 billion,
respectively, reflecting the recovery in chemical as well as iron and steel products markets.
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The Americas Segment reported a decline of ¥29.8 billion mainly due to the reclassification of Steel Technologies Inc. (United States) from
subsidiary to associated company.
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Revenues from sales of services and other sales for the six-month period ended
September 30, 2010 were ¥181.1 billion and ¥74.7 billion, respectively, almost at the same level as those for the corresponding six-month period of the previous year.
-4-
Gross Profit
Gross profit for the six-month period ended September 30, 2010 was ¥437.8 billion, an increase of ¥93.3 billion from ¥344.5 billion for
the corresponding six-month period of the previous year as a result of the following:
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The Mineral & Metal Resources Segment reported an increase of ¥58.3 billion in gross profit. Reflecting higher iron ore prices, Mitsui
Iron Ore Development Pty. Ltd. and Mitsui-Itochu Iron Pty. Ltd. reported increases of ¥43.9 billion and ¥10.6 billion, respectively.
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The Energy Segment reported an increase of ¥37.1 billion in gross profit. Due to an increase in both oil prices and equity production, Mitsui Oil
Exploration Co., Ltd. (Japan) reported an increase of ¥11.4 billion. Other oil and gas production businesses, including but not limited to Mitsui E&P Middle East B.V. (Netherlands) and Mitsui E&P Australia Pty Limited (Australia), also
reported increases in gross profit due to higher oil prices.
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The Iron & Steel Products Segment also reported an increase of ¥3.0 billion in gross profit reflecting steady demand in Asia and a
recovery of demand for automotive and home appliance sectors in Japan.
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The Foods & Retail Segment reported a decline of ¥5.4 billion in gross profit due to mark-to-market valuation losses on commodity
derivative contracts. The Consumer Service & IT Segment reported a decline mainly attributable to low consumer spending. The Logistics & Financial Markets and Chemical segments also reported a decline due to underperforming trading
activities in commodity derivatives and petrochemicals, respectively.
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•
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The Americas Segment, the Europe, the Middle East and Africa Segment and Asia Pacific Segment reported increases of ¥2.6 billion, ¥2.9 billion
and ¥1.7 billion, respectively, mainly in chemical as well as iron and steel products areas, reflecting economic recovery to varying degrees in each area. In the Americas segment, Champions Pipe & Supply, Inc. (United States) reported a
¥5.3 billion increase due to higher sales volume of tubular pipes for shale gas projects in addition to a reversal effect of the revaluation loss on inventory recorded in the corresponding six-month period of the previous year.
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Selling, General and Administrative Expenses
Selling, general and administrative expenses for the six-month period ended September 30, 2010 were ¥264.5 billion, an increase of ¥0.4 billion from ¥264.1 billion for the corresponding
six-month period of the previous year.
The table below provides a breakdown of selling, general and administrative expenses used for our
internal review.
Billions of Yen
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Personnel
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Welfare
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Travel
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Entertainment
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Communication
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Six-month period ended September 30, 2010
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132.5
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5.8
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14.5
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4.1
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24.3
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Six-month period ended September 30, 2009
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133.7
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5.7
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12.2
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4.0
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24.6
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Change(*)
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p
1.2
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0.1
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2.3
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0.1
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p
0.3
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Rent
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Depreciation
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Tax
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Others
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Total
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Six-month period ended September 30, 2010
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9.6
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8.8
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3.9
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61.0
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264.5
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Six-month period ended September 30, 2009
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10.1
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7.2
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4.8
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61.8
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264.1
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Change(*)
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p
0.5
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|
|
|
1.6
|
|
|
|
p
0.9
|
|
|
|
p
0.8
|
|
|
|
0.4
|
|
|
(*)
p
:
|
Decrease in selling, general and administrative expenses
|
|
|
•
|
|
Personnel expenses were ¥132.5 billion, a decline of ¥1.2 billion from ¥133.7 billion for the corresponding six-month period of the
previous year. This decline is mainly attributable to a decline in net periodic pension costs reflecting amortization of actuarial losses related to plan assets.
|
|
|
•
|
|
Travel expenses were ¥14.5 billion, an increase of ¥2.3 billion from ¥12.2 billion for the corresponding six-month period of the previous
year. This was due to a reversal effect of limitations on overseas business trips triggered by the H1N1 influenza pandemic for the corresponding six-month period of the previous year.
|
|
|
•
|
|
Other expenses were ¥61.0 billion, a slight decline of ¥0.8 billion from ¥61.8 billion for the corresponding six-month period of the
previous year.
|
-5-
The table below provides selling,
general and administrative expenses broken down by operating segment.
Billions of Yen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Segment
|
|
Iron &
Steel
Products
|
|
|
Mineral
&
Metal
Resources
|
|
|
Machinery &
Infrastructure
Projects
|
|
|
Chemical
|
|
|
Energy
|
|
|
Foods &
Retail
|
|
|
Consumer
Service
& IT
|
|
|
Logistics &
Financial
Markets
|
|
|
Six-month period ended September 30, 2010
|
|
|
15.5
|
|
|
|
8.9
|
|
|
|
38.2
|
|
|
|
24.0
|
|
|
|
29.8
|
|
|
|
32.1
|
|
|
|
29.2
|
|
|
|
15.0
|
|
|
Six-month period ended September 30, 2009
|
|
|
16.4
|
|
|
|
7.6
|
|
|
|
37.0
|
|
|
|
25.2
|
|
|
|
28.0
|
|
|
|
30.9
|
|
|
|
32.7
|
|
|
|
14.2
|
|
|
Change(*)
|
|
|
p
0.9
|
|
|
|
1.3
|
|
|
|
1.2
|
|
|
|
p
1.2
|
|
|
|
1.8
|
|
|
|
1.2
|
|
|
|
p
3.5
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Segment
|
|
Americas
|
|
|
Europe,
the Middle East
and
Africa
|
|
|
Asia
Pacific
|
|
|
Total
|
|
|
All other
|
|
|
Adjustments
and
Eliminations
|
|
|
Consolidated
Total
|
|
|
Six-month period ended September 30, 2010
|
|
|
22.7
|
|
|
|
9.0
|
|
|
|
12.3
|
|
|
|
236.7
|
|
|
|
3.1
|
|
|
|
24.7
|
|
|
|
264.5
|
|
|
Six-month period ended September 30, 2009
|
|
|
27.8
|
|
|
|
9.8
|
|
|
|
11.7
|
|
|
|
241.3
|
|
|
|
2.8
|
|
|
|
20.0
|
|
|
|
264.1
|
|
|
Change(*)
|
|
|
p
5.1
|
|
|
|
p
0.8
|
|
|
|
0.6
|
|
|
|
p
4.6
|
|
|
|
0.3
|
|
|
|
4.7
|
|
|
|
0.4
|
|
|
(*)
p
:
|
Decrease in selling, general and administrative expenses
|
|
|
•
|
|
The Energy Segment and the Mineral & Metal Resources Segment reported increases, while the reclassification of Steel Technologies Inc. from
subsidiary to associated company resulted in a decline for the Americas Segment. The Consumer Service & IT Segment also reported a decline mainly due to the reclassification of IT subsidiaries.
|
Provision for Doubtful Receivables
Provision for doubtful receivables for the six-month period ended September 30, 2010 was ¥3.5 billion, a decline of ¥1.0 billion from
¥4.5 billion for the corresponding six-month period of the previous year. Provisions for both periods represented increases in aggregate reserves for individually small receivables.
Interest Expense, Net of Interest Income
Interest expense, net of interest income, for the
six-month period ended September 30, 2010 was ¥1.2 billion, a decline of ¥8.2 billion from ¥9.4 billion for the corresponding six-month period of the previous year. This was due mainly to lower U.S. dollar and Japanese yen interest
rates. The following table provides the periodic average of 3 month Libor of the Japanese yen and the U.S. dollar for the six-month period ended September 30, 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
Periodic average of
3 month Libor
(%p.a.)
|
|
|
|
|
Six-month period ended
September 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Japanese yen
|
|
|
0.24
|
|
|
|
0.45
|
|
|
U.S. dollar
|
|
|
0.41
|
|
|
|
0.56
|
|
-6-
Dividend Income
Dividend income for the six-month period ended September 30, 2010 was ¥24.8 billion, an increase of ¥6.8 billion from ¥18.0 billion for
the corresponding six-month period of the previous year.
Reflecting an increase in oil-linked LNG prices due to a run-up in oil prices,
dividend income from LNG projects in Abu Dhabi, Qatar, Oman and Equatorial Guinea was ¥13.2 billion, an increase of ¥4.1 billion from the corresponding six-month period of the previous year.
Gain on Sales of Securities
Gain on
sales of securities for the six-month period ended September 30, 2010 was ¥1.2 billion, a decline of ¥2.6 billion from ¥3.8 billion for the corresponding six-month period of the previous year. There were miscellaneous small
transactions in both periods.
Loss on Write-Downs of Securities
Loss on write-downs of securities for the six-month period ended September 30, 2010 was ¥6.8 billion, a decline of ¥11.9 billion from ¥18.7 billion for the corresponding six-month period
of the previous year.
There were miscellaneous small write-downs in the six-month period ended September 30, 2010. Reflecting a decline
in the stock price, a ¥15.1 billion loss was recorded on the write-down of Seven & i Holdings Co., Ltd. at the Foods & Retail Segment for the corresponding six-month period of the previous year.
Gain on Disposal or Sales of Property and Equipment—Net
Gain on disposal or sales of property and equipment
—
net for the six-month period ended September 30, 2010 was a loss of ¥0.1 billion, a decline of ¥0.9 billion from a gain of
¥0.8 billion for the corresponding six-month period of the previous year. There were miscellaneous small transactions in both periods.
Impairment Loss of Long-Lived Assets
Impairment loss of long-lived assets for the six-month period ended September 30, 2010 was ¥2.5 billion, an increase of ¥1.5 billion from
¥1.0 billion for the corresponding six-month period of the previous year. MOEX offshore 2007 LLC (United States) in the Energy Segment, a subsidiary of Mitsui Oil Exploration Co., Ltd., recorded an impairment loss of mineral rights related to
the Mississippi Canyon 252 lease in the Gulf of Mexico for the six-month period ended September 30, 2010. There were miscellaneous small impairments for the corresponding six-month period of the previous year.
Impairment Loss of Goodwill
There was
no impairment loss of goodwill for the six-month period ended September 30, 2010.
Impairment loss of goodwill for the corresponding
six-month period of the previous year was ¥3.1 billion.
Due to slack demand for automotives, an impairment loss was posted at AFC HoldCo,
LLC (United States), which is an automotive retail finance subsidiary at the Americas Segment.
-7-
Other Expenses—Net
Other expenses
—
net for the six-month period ended September 30, 2010 were an income of ¥4.0 billion, an increase of
¥13.4 billion from a loss of ¥9.4 billion for the corresponding six-month period of the previous year.
|
|
•
|
|
For the six-month period ended September 30, 2010, in the Mineral & Metal Resources Segment, Mitsui recorded a ¥3.9 billion profit on
foreign exchange derivative contracts, intended to reduce exposure to the fluctuating foreign exchange rate at the iron ore mining operation. Mitsui Raw Materials Development Pty. Limited (Australia) in the same segment and Mitsui Oil Exploration
Co., Ltd. in the Energy Segment reported foreign exchange fluctuation profits, respectively. A loss allowance for office development business in Japan was recorded by Mitsui in the Consumer Service & IT Segment and an exploration expense
related to the Mississippi Canyon 252 lease in the Gulf of Mexico was recorded by MOEX offshore 2007 LLC in the Energy Segment. The Logistics & Financial Markets Segment recorded a foreign exchange loss of ¥8.3 billion on commodity
trading activities, which corresponded to a related gross profit in the same segment.
|
|
|
•
|
|
For the corresponding six-month period of the previous year, Mitsui recorded foreign exchange losses of ¥8.9 billion including a loss of ¥9.7
billion on commodity trading activities in the Logistics & Financial Markets Segment, which corresponded to a related gross profit in the same segment. In addition, in the Energy Segment, Mitsui Oil Exploration Co., Ltd. and Mitsui E&P
Australia Pty Limited respectively recorded exploration expenses of ¥8.5 billion and ¥3.1 billion. In the Mineral & Metal Resources Segment, Mitsui Raw Material Development Pty. Ltd. reported a foreign exchange fluctuation profit of
¥5.7 billion on a borrowing denominated in U.S. dollars.
|
Income Taxes
Income taxes for the six-month period ended September 30, 2010 were ¥90.6 billion, an increase of ¥55.8 billion from ¥34.8 billion for
the corresponding six-month period of the previous year. This change was mainly attributable to an increase in “income from continuing operations before income taxes and equity in earnings” and “equity earnings of associated
companies,” as well as a decline in reversal of deferred tax liabilities related to dividends received from associated companies that amounted to approximately ¥15.0 billion for the six-month period ended September 30, 2010, a decline
of approximately ¥5.0 billion from the corresponding six-month period of the previous year (*).
The effective tax rate on “income
from continuing operations before income taxes and equity in earnings” for the six-month period ended September 30, 2010 was 47.9%, a decline of 13.3 percentage points from 61.2% for the corresponding six-month period of the previous year.
The decline in effective tax rate is primarily attributable to a decline in the ratio of income tax effect recorded for equity in earnings and establishment of valuation allowances for deferred tax assets against “income from continuing
operations before income taxes and equity in earnings.”
|
(*)
|
We record deferred tax liabilities on undistributed retained earnings of associated companies based on the assumption that we would sell investments in associated
companies in the future. At the time of profit distribution from associated companies, we reverse the deferred tax liabilities while recording a tax expense on the dividends received. In a case where a major portion of dividends received is treated
as non-taxable, such as the tax treatment under Japanese tax law, tax expenses on dividends received are smaller than the reversal amount of the deferred tax liabilities, and the balance is credited to tax expenses.
|
Equity in Earnings of Associated Companies
Equity in earnings of associated companies for the six-month period ended September 30, 2010 was ¥100.0 billion, an increase of ¥44.0 billion from ¥56.0 billion for the corresponding
six-month period of the previous year as a result of the following:
|
|
•
|
|
Increases were recorded of ¥13.8 billion at Robe River Mining Company (Australia), an investment vehicle company for our Australian iron ore mining
business, reflecting higher iron ore prices, of ¥11.7 billion at Valepar S.A. (Brazil) reflecting a boost in earnings at its investee, Vale S.A. (“Vale”), mainly due to rises in prices and shipments of iron ore, and also of ¥3.5
billion at Compania Minera Dona Ines de Collahuasi SCM (Chile) due to higher copper prices. JA Mitsui Leasing, Ltd. (Japan) reported an increase of ¥3.5 billion in earnings due to a decrease in provision for doubtful receivables and reversal of
reserves for doubtful receivables.
|
|
|
•
|
|
Overseas power production businesses reported a decline of ¥7.9 billion in earnings. Mainly due to the steep rise in power prices, mark-to-market
valuation gains and losses such as those on long-term power derivative contracts declined by ¥8.5 billion from the corresponding six-month period of the previous year.
|
|
|
•
|
|
Impairment loss on investment in the Nibancho Center Building Project, a real estate business, was reported for the six-month period ended September,
2010. Due to a decline in stock price, a ¥7.3 billion impairment loss on investment in Moshi Moshi Hotline, Inc. was recorded in the corresponding six-month period of the previous year.
|
-8-
Income (Loss) from Discontinued
Operations
Income (loss) from discontinued operations for the six-month period ended September 30, 2010 was nil, an improvement from
a loss of ¥0.8 billion for the corresponding six-month period of the previous year. MitEnergy Upsteam LLC (United States) was the major discontinued operation for the corresponding six-month period of the previous year.
Net Income before attribution of Noncontrolling Interests
As a result of the above factors, net income before attribution of noncontrolling interests for the six-month period ended September 30, 2010 was ¥198.4 billion, an increase of ¥121.0 billion
from ¥77.4 billion for the corresponding six-month period of the previous year.
Net Income attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests for the six-month period ended September 30, 2010 was ¥15.2 billion, an
increase of ¥10.6 billion from ¥4.6 billion for the corresponding six-month period of the previous year. Mitsui Oil Exploration Co., Ltd., Mitsui-Itochu Iron Pty. Ltd. and Japan Collahuasi Resources B.V. (Netherlands) reported increases in
net income attributable to noncontrolling interests.
Net Income attributable to Mitsui & Co., Ltd.
As a result, net income attributable to Mitsui & Co., Ltd for the six-month period ended September 30, 2010 was ¥183.2 billion, an
increase of ¥110.4 billion from ¥72.8 billion for the corresponding six-month period of the previous year.
(2)
Operating Results by Operating Segment
Westport Petroleum, Inc. (United States) was previously
included in the Americas Segment, but was transferred to the Energy Segment in the six-month period ended September 30, 2010. The operating segment information for the corresponding six-month period ended September 30, 2009 has been
restated to conform to the current year presentation.
Iron & Steel Products Segment
Gross profit for the six-month period ended September 30, 2010 was ¥19.9 billion, an increase of ¥3.0 billion from ¥16.9 billion for the
corresponding six-month period of the previous year.
|
|
|
|
|
Supported by steady demand in Asia, Regency Steel Asia Pte Ltd. (Singapore) recorded a solid performance. A recovery in demand for
automotive and home appliances, supported by Eco-car tax reduction and Eco points, contributed to the increase in gross profit at Mitsui & Co. Steel Ltd. (Japan) although overall domestic sales remained sluggish, especially for
construction.
Operating income for the six-month period ended
September 30, 2010 was ¥4.2 billion, an increase of ¥4.8 billion from a net loss of ¥0.6 billion for the corresponding six-month period of the previous year, reflecting the increase in gross profit and the decline in selling,
general and administration and provision for doubtful receivables.
Equity
in earnings of associated companies for the six-month period ended September 30, 2010 was ¥2.0 billion, an increase of ¥0.3 billion from ¥1.7 billion for the corresponding six-month period of the previous year.
Net income attributable to Mitsui & Co., Ltd. for the six-month period
ended September 30,2010 was ¥3.9 billion, an increase of ¥2.4 billion from ¥1.5 billion for the corresponding six-month period of the previous year.
|
|
|
-9-
Mineral & Metal
Resources Segment
|
|
|
|
|
Gross profit for the six-month period ended September 30, 2010 was ¥90.5 billion, a substantial increase of ¥58.3 billion
from ¥32.2 billion for the corresponding six-month period of the previous year.
The main factor contributing to the increase was higher prices for iron ore. Starting from this year, the pricing system between mining companies and steelmakers shifted from a four-decade-old pricing
system based on annual fixed-price contracts to prices based on the spot market on a shorter term basis such as on a quarterly basis.
Anticipating that global demand for iron ore would pick up with the global economy showing signs of recovery, led by consistent increases in demand in
China, spot prices continued to increase from October 2009 until they peaked in April 2010. After slipping back to levels that were seen at the beginning of this year, spot prices again crept up in July 2010.
|
|
|
Accordingly, representative contract prices for products sold during the six-month period ended
September 30, 2010 based on a daily average of short-term references during December 1, 2009 through May 31, 2010 were settled at levels substantially higher than the prevailing annual fixed contract prices as well as short-term
market references during the corresponding six-month period of the previous year. Consequently, the increases in gross profit recorded by Mitsui Iron Ore Development Pty. Ltd. and Mitsui Itochu Iron Pty. Ltd. were ¥43.9 billion and ¥10.6
billion, respectively. Furthermore, increases in prices of non-ferrous metals also contributed to the increase in gross profit.
Operating
income for the six-month period ended September 30, 2010 was ¥81.6 billion, an increase of ¥57.1 billion from ¥24.5 billion for the corresponding six-month period of the previous year, reflecting the increase in gross profit.
Equity in earnings of associated companies for the six-month period ended September 30, 2010 was ¥46.2 billion, an increase of
¥31.7 billion from ¥14.5 billion for the corresponding six-month period of the previous year. Major factors were as follows:
|
|
•
|
|
Earnings at Robe River Mining Company were ¥20.9 billion, an increase of ¥13.8 billion from ¥7.1 billion for the corresponding six-month
period of the previous year, reflecting increases in iron ore prices.
|
|
|
•
|
|
Compania Minera Dona Ines de Collahuasi SCM recorded earnings of ¥8.7 billion, an increase of ¥3.5 billion from ¥5.2 billion for the
corresponding six-month period of the previous year. This improvement is mainly attributable to substantial increases in copper prices as well as increases in sales volume, which were partially offset by a revaluation loss on provisionally priced
copper sales that remained subject to final pricing as well as a reversal effect of revaluation gains recorded in the six-month period of the previous year (*1). Compania Minera Dona Ines de Collahuasi SCM has a different fiscal year end than that
of Mitsui.
|
|
|
•
|
|
Valepar S.A. posted earnings of ¥15.3 billion, an increase of ¥11.7 billion from ¥3.6 billion for the corresponding six-month period of the
previous year, reflecting an increase in earnings at Vale mainly due to an increase in prices and shipped volume of iron ore. As the fiscal year of Valepar S.A. commences on January 1 and ends on December 31 of each year, we recognize
their profit and loss with a three month time lag.
|
-10-
Net income attributable to
Mitsui & Co., Ltd. for the six month period ended September 30, 2010 was ¥77.1 billion, a substantial increase of ¥45.3 billion from ¥31.8 billion for the corresponding six-month period of the previous year. In addition to
the above factors, the following contributed to the earnings for the period:
|
|
•
|
|
Reflecting an other-than-temporary decline related to the foreign exchange translation loss in the investment value of the current portion of preferred
shares of Valepar S.A., this segment recorded an impairment loss of ¥1.5 billion.
|
|
|
•
|
|
Other expenses—net included a foreign exchange profit of ¥1.0 billion related to borrowings denominated in U.S. dollars at Mitsui Raw Material
Development Pty. Limited, a ¥3.9 billion profit on foreign exchange derivative contracts intended to reduce exposure to the fluctuating foreign exchange rate at the iron ore mining operation by Mitsui and a foreign exchange loss of
¥1.1 billion at iron ore producing businesses. A foreign exchange profit of ¥5.7 billion at Mitsui Raw Materials Development Pty. Limited and a foreign exchange loss of ¥2.6 billion at iron ore producing businesses were recorded for
the corresponding six-month period of the previous year.
|
|
|
•
|
|
Reversal of deferred tax liabilities on undistributed retained earnings of associated companies, including Robe River Mining Company, at the time of
profit distribution from them declined by approximately ¥4.0 billion from the corresponding six-month period of the previous year.
|
|
(*1)
|
Collahuasi’s copper concentrate and cathode sales are provisionally priced at the time of shipment and the provisional prices are finalized in a contractually
specified future period (generally one to four months from the shipment date) primarily based on quoted London Metal Exchange (LME) prices. The provisionally priced sales in any quarterly period, which remain subject to final pricing, are revaluated
at the quarter-end forward prices at the end of each quarter and final adjustments are made in the following quarter when the final prices are fixed.
|
Machinery & Infrastructure Projects Segment
Gross profit for the six-month
period ended September 30, 2010 was ¥44.3 billion, an increase of ¥0.2 billion from ¥44.1 billion for the corresponding six-month period of the previous year.
|
|
•
|
|
While there was a contribution from newly acquired MT Falcon Holdings Company, S.A.P.I. de C.V. (Mexico), a natural-gas-fired power company in Mexico,
the Infrastructure Projects Business Unit reported a decline of ¥0.8 billion in gross profit. This is mainly attributable to a decline in execution of plant business at Mitsui as well as reversal effect of volume sales performed for the
corresponding six-month period of the previous year at Mitsui & Co. Plant Systems, Ltd. (Japan).
|
|
|
•
|
|
The Motor Vehicles Business Unit reported an increase of ¥2.0 billion in gross profit, due to solid performance at automotive-related subsidiaries
overseas, especially in emerging economies.
|
|
|
•
|
|
The Marine & Aerospace Business Unit reported a decline of ¥1.0 billion in gross profit, mainly due to reversal effect of gain on sales of
vessels recorded in the corresponding six-month period of the previous year. While demand for bulk freighters fluctuated reflecting demand for iron ore in China, difficult market conditions influenced by possible over supply of vessels to be built
in coming years affected the operation and chartering of vessels and the trading of used vessels.
|
-11-
Operating income for the six-month
period ended September 30, 2010 was ¥2.6 billion, a decline of ¥2.3 billion from ¥4.9 billion for the corresponding six-month period of the previous year. Mt Falcon Holdings, S.A.P.I. reported an increase in selling, general and
administrative expenses and P.T. Bussan Auto Finance (Indonesia) reported an increase in provision for doubtful receivables.
Equity in
earnings of associated companies for the six-month period ended September 30, 2010 was ¥13.5 billion, a decline of ¥4.9 billion from ¥18.4 billion for the corresponding six-month period of the previous year.
|
|
•
|
|
Overseas power producers, such as IPM (UK) Power Holdings Limited (Gibraltar), IPM Eagle LLP (United Kingdom) and P.T. Paiton Energy (Indonesia),
reported equity in earnings of ¥3.9 billion in total, a decline of ¥7.3 billion from ¥11.2 billion for the corresponding six-month period of the previous year. Mainly due to the steep rise in power prices, mark-to-market valuation gains
and losses, such as those on long-term power derivative contracts, declined by ¥8.0 billion from the corresponding six-month period of the previous year.
|
|
|
•
|
|
The Motor Vehicles Business Unit reported an increase of ¥1.3 billion compared to the corresponding six-month period of the previous year due to
solid performance at automotive manufacturing and distributing businesses mainly in emerging economies.
|
|
|
•
|
|
The Marine & Aerospace Business Unit reported an equity in earnings of ¥0.5 billion, same amount for the corresponding six-month period of
the previous year.
|
Net income attributable to Mitsui & Co., Ltd. for the six-month period ended September 30,
2010 was ¥9.6 billion, a decline of ¥10.2 billion from ¥19.8 billion for the corresponding six-month period of the previous year. In addition to the above-mentioned factors, reversal of deferred tax liabilities on undistributed retained
earnings of associated companies at the time of profit distribution from them declined by approximately ¥4.0 billion from the corresponding six-month period of the previous year.
Chemicals Segment
Gross profit for the six-month period ended September 30,
2010 was ¥31.8 billion, a decline of ¥1.9 billion from ¥33.7 billion for the corresponding six-month period of the previous year. The principal developments in this segment were as follows:
|
|
•
|
|
The Basic Chemicals Business Unit reported a decline of ¥2.6 billion in gross profit. This was mainly due to underperforming trading activities for
basic petrochemicals of upstream products and polyvinyl chloride (PVC), both being affected by a decline in volume preliminary attributable to curtailment of production volume by suppliers and their production troubles. On the other hand, Shark Bay
Salt Pty. Ltd. (Australia), a salt manufacturing company, recorded an increase of ¥1.0 billion in gross profit due to increases in sales volume mainly bound for Asia.
|
|
|
•
|
|
The Performance Chemicals Business Unit reported an increase of ¥0.7 billion in gross profit. While P.T. Kaltim Pasifik Amoniak (Indonesia), an
ammonia manufacturing and marketing joint venture, recorded an increase in gross profit due to an increase in the price of ammonia compared to the corresponding six-month period of the previous year, Mitsui Bussan Plastics Trade Co., Ltd. (Japan), a
domestic trading company for plastics and chemicals showed a solid performance due to an increase in demand for automotive parts and electronics mainly from China.
|
Operating income for the six-month period ended September 30, 2010 was ¥8.1 billion, a decline of ¥0.4 billion from ¥8.5 billion for the corresponding six-month period of the previous
year. The decline in gross profit was partly offset with a decline in selling, general and administrative expenses.
Equity in earnings of
associated companies for the six-month period ended September 30, 2010 was ¥1.9 billion, an increase of ¥1.8 billion from ¥0.1 billion for the corresponding six-month period of the previous year. This was mainly due to an increase
of ¥1.2 billion in earnings at International Methanol Company (Saudi Arabia), a methanol manufacturing joint venture reflecting improvement in the pricing of methanol.
Net income attributable to Mitsui & Co., Ltd. for the six-month period ended September 30, 2010 was ¥4.8 billion, an increase of ¥0.4 billion from ¥5.2 billion for the
corresponding six-month period of the previous year. In addition to the above-mentioned factors, reversal of deferred tax liabilities on undistributed earnings of associated companies at the time of profit distribution from them declined from the
corresponding six-month period of the previous year.
-12-
Energy Segment
|
|
|
|
|
Anticipating that global demand for oil would pick up with the global economy showing signs of recovery driven by emerging countries,
and a gradual resurgence of speculative funds flowing into energy markets, oil prices (WTI) recovered to US$86 per barrel in April 2010. WTI dropped back to US$60 per barrel due to prospects of slower economic recovery in the advanced countries and
concerns over easing of the high growth rates in emerging economies. In an adjustment to this pessimistic trend, the WTI future market recovered to US$80 per barrel in August.
Accordingly, Japan Crude Cocktail (JCC) recorded US$80 per barrel in April 2010 to
US$76 per barrel in September 2010.
The JCC price trend is generally
reflected in the net income of our overseas oil and gas producing subsidiaries and associated companies in this segment with a zero to six-month time lag.
|
|
|
Considering these time lags, Mitsui periodically calculates the weighted average JCC price applied to the
operating results of those oil and gas producing subsidiaries and associated companies for internal review purposes. Such weighted average JCC prices for the six-month period ended September 30, 2010 and 2009 were US$79 per barrel and US$52 per
barrel, respectively.
Gross profit for the six-month period ended September 30, 2010 was ¥103.6 billion, an increase of ¥37.1
billion from ¥66.5 billion for the corresponding six-month period of the previous year primarily due to the following:
|
|
•
|
|
Due to higher oil prices and increase of production, Mitsui Oil Exploration Co., Ltd. and Mitsui E&P Middle East B.V. reported increases of
¥11.4 billion and ¥8.7 billion, respectively. Due to higher oil prices, Mitsui E&P Australia Pty Limited reported an increase of ¥7.4 billion.
|
|
|
•
|
|
The price on sales of typical Australian premium hard coking coal for the six-month period ended September 30, 2010 was quoted as US$128 per ton
FOB, which is approximately 65% higher than the price for the corresponding six-month period of the previous year. At the same time thermal coal prices declined by around 40%. For the six-month period ended September 30, 2010, gross profit at
Mitsui Coal Holdings Pty. Ltd. (Australia) increased by ¥3.8 billion, reflecting higher coal prices, which were partly offset by higher Australian dollar against the U.S. dollar. Meantime, coal production (preliminary figure) for the six-month
period ended September 30, 2010 increased slightly compared to the corresponding six-month period of the previous year.
|
|
|
•
|
|
Mitsui Oil Co., Ltd. recorded an increase of ¥6.8 billion in gross profit due to ideal conditions.
|
Operating income for the six month period ended September 30, 2010 was ¥73.3 billion, an increase of ¥34.8 billion from ¥38.5 billion
for the corresponding six-month period of the previous year.
Equity in earnings of associated companies for the six-month period ended
September 30, 2010 was ¥22.1 billion, an increase of ¥7.2 billion from ¥14.9 billion for the corresponding six-month period of the previous year. An increase at Japan Australia LNG (MIMI) PTY. Ltd. (Australia) was due to a net
effect of higher LNG prices linked to oil prices and an increase in production.
-13-
Net income attributable to
Mitsui & Co., Ltd. for the six-month period ended September 30, 2010 was ¥64.9 billion, an increase of ¥33.9 billion from ¥31.0 billion for the corresponding six-month period of the previous year. In addition to the
above-mentioned developments, there were also the following factors:
|
|
•
|
|
Dividends from LNG projects in Abu Dhabi, Qatar, Oman and Equatorial Guinea were ¥13.2 billion, an increase of ¥4.1 billion from the
corresponding six-month period of the previous year.
|
|
|
•
|
|
Other expenses-net improved by ¥7.6 billion due to ¥2.9 billion foreign exchange profit reported at Mitsui Oil Exploration Co., Ltd. for the
six-month period ended September 30, 2010 and a reversal effect of exploration expenses reported in the corresponding six-month period of the previous year. Major exploration expenses for the six-month period ended September 30, 2010 were
recorded at Mitsui Oil Exploration Co., Ltd. and Mitsui E&P Mozambique Area 1 (United Kingdom) of ¥1.9 billion. The expense item includes an exploration expense related to the Mississippi Canyon 252 lease in the Gulf of Mexico, recorded by
MOEX offshore 2007 LLC.
|
|
|
•
|
|
Reversal of deferred tax liabilities on undistributed retained earnings of associated companies at the time of profit distribution from them increased
by approximately ¥3.0 billion from the corresponding six-month period of the previous year.
|
|
|
•
|
|
Net income attributable to noncontrolling interests increased by ¥7.2 billion due to an increase in net income before attribution of noncontrolling
interests at many subsidiaries. The principal reason was the increase in gross profit and decline in exploration expenses at Mitsui Oil Exploration Co., Ltd.
|
|
|
•
|
|
This segment recorded an impairment loss on property and equipment and mineral rights at MOEX offshore 2007 LLC, a wholly owned subsidiary of MOEX USA
Corporation, which in turn is wholly owned by Mitsui Oil Exploration Co., Ltd., due to the oil spill incident at Mississippi Canyon 252 lease in the Gulf of Mexico for the six-month period ended September 30, 2010.
|
Please refer to the description on “7. The Oil Spill Incident of a Drilling Rig in the Gulf of Mexico” on “IV. Consolidated Financial
Statements” in regards to the oil spill incident of a drilling rig in the Gulf of Mexico.
Foods & Retail Segment
Gross profit for the six-month period ended September 30, 2010 was ¥37.1 billion, a decline of ¥5.4 billion from
¥42.5 billion for the corresponding six-month period of the previous year.
|
|
•
|
|
In the food resources and materials area, this segment recorded a mark-to-market loss on commodity derivative contracts related to the coffee business
(*1) and a decline in gross profit in the businesses of maize, fruit juice and dairy products.
|
|
|
•
|
|
Mitsui Foods Co., Ltd. (Japan) recorded an increase in gross profit due to an increase in sales volume. MCM Foods Holdings Limited (United Kingdom),
vendor of canned food products and groceries in the European market, recorded a decline in gross profit reflecting the poor performance of the canned food products business.
|
Operating income for the six-month period ended September 30, 2010 was ¥5.0 billion, a decline of ¥6.6 billion from ¥11.6 billion for the corresponding six-month period of the previous
year, reflecting the decline in gross profit.
Equity in earnings of associated companies for the six-month period ended September 30,
2010 was ¥1.5 billion, a decline of ¥3.4 billion from ¥4.9 billion for the corresponding six-month period of the previous year. This segment recorded an impairment loss on listed shares in Mikuni Coca-Cola Bottling Co., Ltd. (Japan) for
the six-month period ended September 30, 2010, reflecting a decline in share price (*2). Ventura Foods, LLC (United States), an edible oil and foods company, in which this segment invested through Wilsey Foods, Inc. (United States), recorded a
decline in earnings due to contraction in profit margins reflecting strong competition, in comparison to the earnings for the corresponding six-month period of the previous year.
-14-
Net income attributable to
Mitsui & Co., Ltd. for the six-month period ended September 30, 2010 was ¥2.9 billion, an increase of ¥9.4 billion from net loss of ¥6.5 billion for the corresponding six-month period of the previous year. In addition to
the above mentioned factors, this segment recorded a ¥15.1 billion impairment loss on its holdings in Seven & i Holdings Co., Ltd., reflecting a decline in the share price, and a valuation allowance against deferred tax assets
established for the impairment of Seven & i Holdings Co., Ltd. (*3) for the corresponding six-month period of the previous year.
|
(*1)
|
Besides mark-to-market valuation losses on derivative contracts, Mitsui maintained inventories that involved unrealized holding gains.
|
|
(*2)
|
Mitsui records an impairment loss on a marketable security of an associated company if a decline in the value of the security is other-than-temporary. For example, a
market decline for a period of nine or more consecutive months leads to the conclusion that the security has an other-than-temporary decline. This impairment loss was recognized since the fair value decline was observed for more than nine
consecutive months.
|
|
(*3)
|
Mitsui records an impairment loss on a marketable security if a decline in the value of security price is other-than-temporary. For example, a decline of 30% or more in
the fair value of a security leads to the conclusion that the security has an other-than-temporary impairment. Among those securities determined to have an other-than-temporary impairment, a decline of less than 50% in the fair value of a security
is a nondeductible impairment loss based on Japanese tax laws and regulations. Mitsui evaluates the realizability of the deferred tax assets for currently nondeductible impairment losses and sets up valuation allowances unless they are considered
recoverable on reasonable grounds.
|
Consumer Service & IT Segment
Gross profit for the six-month period ended September 30, 2010 was ¥24.4 billion, a decline of ¥2.1 billion from ¥26.5 billion for the
corresponding six-month period of the previous year. This segment showed solid performances in the electronics-related business and the liquid crystal display-related business due to resilient demand mainly in China. The Japanese economy showed a
gradual recovery, however, this segment recorded declines in gross profit in the IT outsourcing business, the media business and the fashion business, reflecting dampened consumer spending and weak demand for investments in information systems. This
segment also recorded a decline in gross profit due to divestiture of several businesses.
Operating loss for the six-month period ended
September 30, 2010 was a ¥4.7 billion, an improvement of ¥1.7 billion from the operating loss of ¥6.4 billion for the corresponding six-month period of the previous year. The decline in selling, general and administrative expenses
including personnel expenses partially offset the decline in gross profit.
Equity in earnings of associated companies for the six-month
period ended September 30, 2010 was ¥1.7 billion, an increase of ¥5.6 billion from equity in losses of ¥3.9 billion for the corresponding six-month period of the previous year. This segment recorded an impairment loss on investment
in the Nibancho Center Building Project, a real estate business, for the six-month period ended September 30, 2010 while a ¥7.3 billion impairment loss on listed shares in Moshi Moshi Hotline, Inc., reflecting the decline in share price,
for the corresponding six-month period of the previous year.
Net income attributable to Mitsui & Co., Ltd. for the six-month period
ended September 30, 2010 was ¥1.5 billion, an improvement of ¥6.9 billion from net loss of ¥5.4 billion for the corresponding six-month period of the previous year. Other than the above mentioned factors, this segment reported a
loss allowance for the office development business in Japan in other expenses—net.
Logistics & Financial Markets Segment
Gross profit was ¥21.6 billion, a decline of ¥3.1 billion from ¥24.7 billion for the corresponding six-month period of the
previous year. Due to economic growth in emerging economies mainly in Asia, commodity prices continue their solid performance. However, volatility abated from last summer, and derivatives trading continued to face a tough environment. Due to a
reversal effect of gain on sales of a leased office building for the corresponding six-month period of the previous year, this segment recorded decline in gross profit in spite of moderate recovery of the global economy, which reflected an increase
of sales volumes at the Transportation Logistics Business Unit.
-15-
Profits corresponding to foreign
exchange losses of ¥8.3 billion and of ¥9.7 billion related to the commodity trading business posted in other expenses-net were included in gross profit for the six-month period ended September 30, 2010 and for the corresponding
six-month period of the previous year, respectively.
Operating income for the six-month period ended September 30, 2010 was ¥6.6
billion, a decline of ¥4.1 billion from ¥10.7 billion for the corresponding six-month period of the previous year. An increase in selling, general and administrative expenses was related to subsidiaries at Financial Markets Segment.
Equity in earnings of associated companies for the six-month period ended September 30, 2010 was ¥6.2 billion, a ¥3.5 billion
improvement from ¥2.7 billion for the corresponding six-month period of the previous year. JA Mitsui Leasing, Ltd. (Japan) reported an increase of ¥3.5 billion in earnings due to a decrease in provisions for doubtful receivables and reversal
of reserves for doubtful receivables. Accordingly, net income attributable to Mitsui & Co., Ltd. for the six-month period ended September 30, 2010 was ¥3.3 billion, a ¥2.2 billion improvement from ¥1.1 billion for the
corresponding six-month period of the previous year. Besides the above-mentioned factors, foreign exchange losses of ¥8.3 billion and of ¥9.7 billion related to the commodity trading business were posted in other expense-net for the
six-month period ended September 30, 2010 and for the corresponding six-month period of the previous year, respectively.
Americas
Segment
Gross profit for the six-month period ended September 30, 2010 was ¥38.2 billion, an increase of ¥2.6 billion
from ¥35.6 billion for the corresponding six-month period of the previous year.
|
|
•
|
|
Champions Pipe & Supply, Inc. increased gross profit by ¥5.3 billion due to increases in volume and prices resulting from robust demand
for tubular products for active shale gas developments in addition to a reversal effect of the revaluation loss on inventory recorded in the corresponding six-month period of the previous year.
|
|
|
•
|
|
Novus International, Inc. (United States) recorded a decline in gross profit due to a slight decline in selling prices, reflecting an increase in
supply from competitors that have recovered from operational troubles, despite an increase in sale volume.
|
|
|
•
|
|
Mitsui Real Estate LLC. (United States) recorded an increase in gross profit due to an increase in home sales volume, reflecting consumers’ strong
incentive to buy houses before expiration of the federal tax credit for first homebuyers in June 2010, but under the circumstances there are many uncertainties, such as the high unemployment rate and inflow of houses for foreclosure sale in the
market.
|
|
|
•
|
|
Gross profit declined due to deconsolidation of Steel Technologies Inc. as a result of a transaction in which Mitsui & Co., (U.S.A.), Inc.
contributed Steel Technologies Inc. to a newly established holding company, NuMit LLC (United States), a 50% interest of which was subsequently sold to Nucor Corporation, a major electronic furnace steel maker in the United States.
|
Operating income for the six-month period ended September 30, 2010 was ¥15.0 billion, an increase of ¥8.9
billion from ¥6.1 billion for the corresponding six-month period of the previous year. Selling, general and administrative expenses declined due to the aforementioned deconsolidation of Steel Technologies, Inc.
Equity in earnings of associated companies for the six-month period ended September 30, 2010 was ¥2.9 billion, an increase of ¥2.8 billion
from ¥0.1 billion for the corresponding six-month period of the previous year. The deconsolidation of Steel Technologies, Inc. contributed to the increase.
Net income attributable to Mitsui & Co., Ltd. for the six-month period ended September 30, 2010 was ¥9.8 billion, an increase of ¥15.4 billion from net loss of ¥5.6 billion for
the corresponding six-month period of the previous year. In addition to the above factors, there are the following factors.
|
|
•
|
|
There was a reversal effect of a ¥3.1 billion impairment loss of goodwill recorded at AFC HoldCo, LLC, an automotive retail finance company, for
the corresponding six-month period of the previous year.
|
|
|
•
|
|
Losses attributable to this segment’s interest in Westport Petroleum, Inc. increased due to a decline in margin resulting from low demand for
petroleum products as well as loss allowances for charter contracts for tankers and rental costs for oil tanks.
|
-16-
Europe, the Middle East and
Africa Segment
Gross profit for the six-month period ended September 30, 2010 was ¥10.6 billion, an increase of ¥2.9
billion from ¥7.7 billion for the corresponding six-month period of the previous year, reflecting steady demand in the chemical and steel products businesses.
This segment recorded a ¥1.9 billion operating income for the six-month period ended September 30,2010, an increase of ¥5.1 billion from a operating loss of ¥3.2 billion for the
corresponding six-month period of the previous year, reflecting an increase in gross profit and the decrease in selling, general and administration and provision for doubtful receivables.
Equity in earnings for the six-month period ended September 30, 2010 was less than ¥0.0 billion, a decrease of ¥0.6 billion from ¥0.6 billion for the corresponding six-month period of the
previous year.
Net income attributable to Mitsui & Co., Ltd. for the six-month period ended September 30, 2010 was ¥0.6
billion, an increase of ¥1.6 billion from a net loss of ¥1.0 billion for the corresponding six-month period of the previous year.
Asia Pacific Segment
Gross
profit for the six-month period ended September 30, 2010 was ¥15.2 billion, an increase of ¥1.7 billion from ¥13.5 billion for the corresponding six-month period of the previous year. Markets for chemicals, iron and steel products
gradually recovered in the six-month period ended September 30, 2010.
Reflecting an increase in gross profit, operating income for the
six-month period ended September 30, 2010 was ¥2.6 billion, an increase of ¥0.6 billion from a ¥2.0 billion for the corresponding six-month period of the previous year.
Equity in earnings for the six-month period ended September 30, 2010 was ¥1.4 billion, a decline of ¥0.6 billion from ¥2.0 billion for the corresponding six-month period of the previous
year.
Net income attributable to Mitsui & Co., Ltd. for the six-month period ended September 30, 2010 was ¥22.0 billion, an
increase of ¥8.5 billion from ¥13.5 billion for the corresponding six-month period of the previous year. The main cause of the increase in net income was attributable to an increase in earnings from the segment’s minority interest in
Mitsui Iron Ore Development Pty. Ltd., Mitsui-Itochu Iron Pty Ltd. and Mitsui Coal Holdings Pty. Ltd.
3.
Results of Operations for the Three-Month Period Ended September 30, 2010
(1)
Analysis of Consolidated
Income Statements (Comparison between the three-month period ended September 30, 2010 and 2009)
Revenues
Total revenues for the three-month period ended September 30, 2010 were ¥1,106.7 billion, an increase of ¥83.0 billion from
¥1,023.7 billion for the corresponding three-month period of the previous year.
Revenues from sales of products for the three-month
period ended September 30, 2010 were ¥979.2 billion, an increase of ¥91.7 billion from ¥887.5 billion for the corresponding three-month period of the previous year, as a result of the following:
|
|
•
|
|
The Energy Segment reported an increase of ¥44.4 billion. Oil and gas production businesses, Mitsui and Mitsui Oil Co., Ltd. (Japan) reported
increases in revenues mainly due to higher oil prices.
|
|
|
•
|
|
The Mineral & Metal Resources Segment also reported an increase of ¥40.0 billion in revenues. Reflecting higher iron ore prices, Mitsui
Iron Ore Development Pty. Ltd. (Australia) and Mitsui-Itochu Iron Pty. Ltd. (Australia) reported increases of ¥21.3 billion and ¥6.6 billion, respectively.
|
|
|
•
|
|
The Iron & Steel Products Segment reported an increase of ¥25.1 billion primarily attributable to an increase in steel products export
business for emerging countries.
|
|
|
•
|
|
The Chemical Segment reported a decline of ¥20.9 billion due to a decline in price of petrochemicals.
|
|
|
•
|
|
The Americas Segment reported a decline of ¥19.6 billion mainly due to the reclassification of Steel Technologies Inc. (United States) from
subsidiary to associated company.
|
Revenues from sales of services and other sales for the three-month period ended
September 30, 2010 were ¥90.4 billion and ¥37.2 billion, respectively, declines of ¥3.0 billion and ¥5.6 billion, respectively, from the corresponding three-month period of the previous year.
-17-
Gross Profit
Gross profit for the three-month period ended September 30, 2010 was ¥214.4 billion, an increase of ¥36.6 billion from ¥177.8 billion for
the corresponding three-month period of the previous year as a result of the following:
|
|
•
|
|
The Mineral & Metal Resources Segment reported an increase of ¥24.6 billion in gross profit. Reflecting higher iron ore prices, Mitsui
Iron Ore Development Pty. Ltd. (Australia) and Mitsui-Itochu Iron Pty. Ltd. (Australia) reported increases of ¥19.8 billion and ¥5.5 billion, respectively.
|
|
|
•
|
|
The Energy Segment also reported an increase of ¥15.5 billion in gross profit. Due mainly to an increase in oil prices, Mitsui Oil Exploration Co.,
Ltd. (Japan), Mitsui E&P Australia Pty Limited and Mitsui E&P Middle East B.V. reported increases of ¥6.0 billion, ¥4.8 billion and ¥4.0 billion, respectively. In addition, Mitsui oil Co., Ltd. reported an increase of ¥5.5
billion due to favorable market conditions and Mitsui Coal Holdings Pty. Limited (Australia) reported an increase of ¥4.8 billion due to an increase in coal prices. On the other hand, Westport Petroleum, Inc. (United States) reported a decline
of ¥4.7 billion due to a decline in margin resulting from low demand for petroleum products as well as loss allowances for charter contracts for tankers and rental costs for oil tanks.
|
|
|
•
|
|
The Logistics & Financial Markets Segment reported a decrease of ¥3.8 billion due to the fact that commodity derivatives trading continued
to face a tough environment and there was a reversal effect of gain on sales of a leased office building recorded in the corresponding three-month period of the previous year.
|
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three-month period ended September 30, 2010 were ¥132.4 billion, a decline of ¥0.8 billion from ¥131.6 billion for the corresponding
three-month period of the previous year. The table below provides a breakdown of selling, general and administrative expenses used for our internal review.
Billions of Yen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel
|
|
|
Welfare
|
|
|
Travel
|
|
|
Entertainment
|
|
|
Communication
|
|
|
Three-month period ended September 30, 2010
|
|
|
66.9
|
|
|
|
2.7
|
|
|
|
7.1
|
|
|
|
2.0
|
|
|
|
12.0
|
|
|
Three-month period ended September 30, 2009
|
|
|
66.2
|
|
|
|
2.6
|
|
|
|
6.5
|
|
|
|
2.0
|
|
|
|
12.3
|
|
|
Change(*)
|
|
|
0.7
|
|
|
|
0.1
|
|
|
|
0.6
|
|
|
|
0.0
|
|
|
|
p
0.3
|
|
|
|
|
|
|
|
|
|
|
|
Rent
|
|
|
Depreciation
|
|
|
Tax
|
|
|
Others
|
|
|
Total
|
|
|
Three-month period ended September 30, 2010
|
|
|
4.8
|
|
|
|
5.1
|
|
|
|
1.9
|
|
|
|
29.9
|
|
|
|
132.4
|
|
|
Three-month period ended September 30, 2009
|
|
|
5.1
|
|
|
|
3.6
|
|
|
|
2.3
|
|
|
|
31.0
|
|
|
|
131.6
|
|
|
Change(*)
|
|
|
p
0.3
|
|
|
|
1.5
|
|
|
|
p
0.4
|
|
|
|
p
1.1
|
|
|
|
0.8
|
|
|
(*)
p
|
: Decrease in selling, general and administrative expenses
|
-18-
There is no significant variance in
each of expense categories between the three-month period ended September 30, 2010 and the corresponding three-month period of the previous year.
The table below provides selling, general and administrative expenses broken down by operating segment.
Billions of Yen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Segment
|
|
Iron &
Steel
Products
|
|
|
Mineral &
Metal
Resources
|
|
|
Machinery &
Infrastructure
Projects
|
|
|
Chemical
|
|
|
Energy
|
|
|
Foods &
Retail
|
|
|
Consumer
Service & IT
|
|
|
Logistics &
Financial
Markets
|
|
|
Three-month period ended September 30, 2010
|
|
|
7.8
|
|
|
|
4.5
|
|
|
|
18.8
|
|
|
|
12.2
|
|
|
|
15.1
|
|
|
|
16.3
|
|
|
|
14.6
|
|
|
|
7.8
|
|
|
Three-month period ended September 30, 2009
|
|
|
8.2
|
|
|
|
4.0
|
|
|
|
19.1
|
|
|
|
12.8
|
|
|
|
14.2
|
|
|
|
15.6
|
|
|
|
16.4
|
|
|
|
7.3
|
|
|
Change(*)
|
|
|
p
0.4
|
|
|
|
0.5
|
|
|
|
p
0.3
|
|
|
|
p
0.6
|
|
|
|
0.6
|
|
|
|
0.7
|
|
|
|
p
1.8
|
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Segment
|
|
Americas
|
|
|
Europe,
the Middle East
and Africa
|
|
|
Asia Pacfic
|
|
|
Total
|
|
|
All other
|
|
|
Adjustments
and
Eliminations
|
|
|
Consolidated
Total
|
|
|
Three-month period ended September 30, 2010
|
|
|
10.4
|
|
|
|
4.9
|
|
|
|
6.3
|
|
|
|
118.7
|
|
|
|
1.5
|
|
|
|
12.2
|
|
|
|
132.4
|
|
|
Three-month period ended September 30, 2010
|
|
|
13.2
|
|
|
|
5.0
|
|
|
|
5.8
|
|
|
|
121.6
|
|
|
|
1.1
|
|
|
|
8.9
|
|
|
|
131.6
|
|
|
Change(*)
|
|
|
p
2.8
|
|
|
|
p
0.1
|
|
|
|
0.5
|
|
|
|
p
2.9
|
|
|
|
0.4
|
|
|
|
3.3
|
|
|
|
0.8
|
|
|
(*)
p
:
|
Decrease in selling, general and administrative expenses
|
The reclassification of Steel Technologies Inc. from subsidiary to associated company resulted in a decline at the Americas Segment. The Consumer Service and IT Segment also decreased while Adjustment and
Eliminations increased.
Provision for Doubtful Receivables
Provision for doubtful receivables for the three-month period ended September 30, 2010 was ¥2.3 billion, a decline of ¥1.4 billion from ¥3.7 billion for the corresponding three-month
period of the previous year. Provisions for both periods represented increases in aggregate reserves for individually small receivables.
Interest Expense, Net of Interest Income
Interest expense, net of interest income, for the three-month period ended September 30, 2010 was ¥0.5 billion, a decline of ¥2.4 billion
from ¥2.9 billion for the corresponding three-month period of the previous year. This was due to lower U.S. dollar and Japanese yen interest rates. The following table provides the periodic average of 3 month Libor of the Japanese yen and U.S.
dollar for the three-month period ended September 30, 2010 and 2009.
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Periodic average of
3 month Libor
(%p.a.)
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Three-month period ended
September 30,
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2010
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2009
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Japanese yen
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0.23
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0.39
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U.S. dollar
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0.35
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0.37
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Dividend Income
Dividend income for the three-month period ended September 30, 2010 was ¥10.3 billion, an increase of ¥2.6 billion from ¥7.7 billion for
the corresponding three-month period of the previous year.
Dividend income from LNG projects in Abu Dhabi, Qatar, Oman and Equatorial Guinea
was ¥6.2 billion, a decline of ¥0.1 billion from the corresponding three-month period of the previous year.
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Loss on Sales of Securities
Loss on sales of securities for the three-month period ended September 30, 2010 was ¥3.0 billion, a deterioration of ¥4.5
billion from a gain of ¥1.5 billion for the corresponding three-month period of the previous year. The Consumer Service & IT Segment reported a loss on sale of our shareholding in Sport Co., Ltd., which engages in the bowling business,
for the three-month period ended September 30, 2010. There were miscellaneous small transactions for the corresponding three-month period of the previous year.
Loss on Write-Downs of Securities
Loss on write-downs of securities for the three-month
period ended September 30, 2010 was ¥2.3 billion, an improvement of ¥13.6 billion from ¥15.9 billion for the corresponding three-month period of the previous year.
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There were miscellaneous small write-downs for the three-month period ended September 30, 2010.
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The Food & Retail Segment recorded a loss of ¥15.1 billion on the write-down of shares in Seven & i Holdings Co., Ltd. for the
corresponding three-month period of the previous year.
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Gain on Disposal or Sales of Property and Equipment—Net
Loss on disposal or sales of property and equipment
—
net for the three-month period ended September 30, 2010 was ¥0.4
billion, a deterioration of ¥0.9 billion from a gain of ¥0.5 billion for the corresponding three-month period of the previous year. There were miscellaneous small transactions in both periods.
Impairment Loss of Long-Lived Assets
Impairment loss of long-lived assets for the three-month period ended September 30, 2010 was ¥0.4 billion, an improvement of ¥0.6 billion
from a loss of ¥1.0 billion for the corresponding three-month period of the previous year. There were miscellaneous small transactions in both periods.
Impairment Loss of Goodwill
There was no impairment loss on goodwill for the three-month
period ended September 30, 2010. Impairment loss of goodwill for the corresponding three-month period of the previous year was ¥3.1 billion. Due to slack demand for automotives, an impairment loss was posted at AFC HoldCo, LLC (United
States), which is an automotive retail finance subsidiary at the Americas.
Other Expenses—Net
Other expenses
—
net for the three-month period ended September 30, 2010 were an income of ¥0.3 billion, an improvement of ¥10.4
billion from a loss of ¥10.1 billion for the corresponding three-month period of the previous year.
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For the three-month period ended September 30, 2010, Mitsui recorded foreign exchange gains of ¥0.2 billion including a loss of ¥4.6
billion on commodity trading activities in the Logistics & Financial Markets Segment and a gain of ¥2.4 billion on foreign exchange derivative contracts, intended to reduce exposure to the fluctuating foreign exchange rate at the iron
ore mining operations at the Mineral & Metal Resources Segment.
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For the corresponding three-month period of the previous year, Mitsui recorded foreign exchange losses of ¥5.3 billion including a loss of ¥6.5
billion on commodity trading activities in the Logistics & Financial Markets, which corresponded to a related gross profit in the same segment. In addition, Mitsui Oil Exploration Co., Ltd. in the Energy segment recorded an exploration
expense of ¥8.8 billion.
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Income Taxes
Income taxes for the three-month period ended September 30, 2010 were ¥46.3 billion, an increase of ¥15.5 billion from ¥30.8 billion for the corresponding three-month period of the
previous year. This increase was attributable to increases in “income from continuing operations before income taxes and equity in earnings” and “equity earnings of associated companies”, despite a reversal of deferred tax
liabilities related to dividends received from associated companies (*1), an increase of approximately ¥5.0 billion, as well as establishment of valuation allowances for deferred tax assets recorded for temporally differences such as those on an
impairment loss of ¥15.1 billion for Seven & i Holdings Co., Ltd. for the corresponding three-month period of the previous year declined.
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The effective tax rate on “income
from continuing operations before income taxes and equity in earnings” for the three-month period ended September 30, 2010 was 55.3%, a decline of 104.3 percentage points from 159.6% for the corresponding three-month period of the previous
year. The decline in effective tax rate is primarily attributable to a decline in the ratio of establishment of valuation allowances for deferred tax assets and income tax effect recorded for equity in earnings against “income from continuing
operations before income taxes and equity in earnings.”
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(*1)
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We record deferred tax liabilities on undistributed retained earnings of associated companies based on the assumption that we would sell investments in associated
companies in the future. At the time of profit distribution from associated companies, we reverse the deferred tax liabilities while recording a tax expense on the dividends received. In a case where a major portion of dividends received is treated
as non-taxable, such as the tax treatment under Japanese tax law, tax expenses on dividends received are smaller than the reversal amount of the deferred tax liabilities, and the balance is credited to tax expenses.
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Equity in Earnings of Associated Companies
Equity in earnings of associated companies for the three-month period ended September 30, 2010 was ¥50.0 billion, an increase of ¥24.8 billion from ¥25.2 billion for the corresponding
three-month period of the previous year as a result of the following:
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An increase of ¥4.0 billion was recorded at Robe River Mining Company (Australia), an investment vehicle company for our Australian iron ore mining
business, reflecting an increase in iron ore prices, and an increase of ¥10.9 billion was recorded at Valepar S.A. (Brazil) reflecting a boost in earnings at its investee, Vale S.A. (“Vale”), mainly due to increases in prices and
shipments of iron ore.
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An increase was recorded at Japan Australia LNG (MIMI) Pty. Ltd. (Australia) mainly due to higher LNG prices linked to oil prices.
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Overseas power production businesses reported a decline of ¥6.6 billion in earnings due mainly to a decline in mark-to-market valuation gains and
losses, such as those on long-term power derivative contracts from the corresponding three-month period of the previous year.
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Due to a decline in stock price, a ¥7.3 billion impairment loss on investment in Moshi Moshi Hotline, Inc. (Japan) was recorded in the
corresponding three-month period of the previous year.
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Income (Loss) from Discontinued Operations
Income (loss) from discontinued operations for the three-month period ended September 30, 2010 was nil. A loss of ¥0.2 billion was recorded in
the corresponding three-month period of the previous year. MitEnergy Upsteam LLC (United States) was the major discontinued operation for the corresponding three month period of the previous year.
Net Income before attribution of Noncontrolling Interests
As a result of the above factors, net income before attribution of noncontrolling interests for the three-month period ended September 30, 2010 was ¥87.5 billion, an increase of ¥74.0 billion
from ¥13.5 billion for the corresponding three-month period of the previous year.
Net Income attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests for the three-month period ended September 30, 2010 was a loss of ¥6.8
billion, a deterioration of ¥8.8 billion from an income of ¥2.0 billion for the corresponding three-month period of the previous year. Mitsui Oil Exploration Co., Ltd. reported an increase in losses of ¥8.0 billion. The main factors were
an increase in net income attributable to noncontrolling interests due to an increase in net income attributable to noncontrolling interests of that company resulting from an increase in net income before attribution of noncontrolling interests, and
a reversal effect of third party share of exploration expense posted in other expenses-net in the corresponding three-month period of the previous year.
Net Income attributable to Mitsui & Co., Ltd.
As a result, net income
attributable to Mitsui & Co., Ltd for the three-month period ended September 30, 2010 was ¥80.7 billion, an increase of ¥65.2 billion from ¥15.5 billion for the corresponding three-month period of the previous year.
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(2)
Operating Results by Operating Segment
Westport Petroleum, Inc. was previously included in the Americas Segment, but was
transferred to the Energy Segment in the three-month period ended September 30, 2010. The operating segment information for the corresponding three-month period ended September 30, 2009 has been restated to conform to the current year
presentation.
Iron & Steel Products Segment
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Gross profit for the three-month period ended September 30, 2010 was ¥9.7 billion, an increase of ¥1.6 billion from
¥8.1 billion for the corresponding three-month period of the previous year. Supported by steady demand in Asia, Regency Steel Asia Pte Ltd. (Singapore) recorded a solid performance. A recovery in demand for automotive and home appliance,
supported by the Eco-car tax reduction and Eco points, contributed to an increase in gross profit at Mitsui & Co. Steel Ltd. (Japan) although overall domestic sales remained sluggish, especially for the construction sector.
Operating income for the three-month period ended September 30, 2010 was
¥1.8 billion, an increase of ¥3.1 billion from a net loss of ¥1.3 billion for the corresponding three-month period of the previous year, reflecting an increase in gross profit and decline in provision for doubtful receivables.
Equity in earnings of associated companies for the three-month period ended
September 30, 2010 was ¥1.2 billion, an increase of ¥0.8 billion from ¥0.4 billion for the corresponding three-month period of the previous year.
Net income attributable to Mitsui & Co., Ltd. for the three-month period ended September 30, 2010 was ¥1.6 billion, an increase of
¥1.5 billion from ¥0.1 billion for the corresponding three-month period of the previous year.
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Mineral & Metal Resources Segment
Gross profit for the three-month period ended September 30, 2010 was ¥42.7 billion, a substantial increase of ¥24.6 billion from ¥18.1
billion for the corresponding three-month period of the previous year. The main factor contributing to the increase was higher prices for iron ore. Starting from this year, the pricing system between mining companies and steelmakers shifted from a
four-decade-old pricing system based on the annual fixed-price contracts to prices based on the spot market on a shorter term basis, such as on a quarterly basis.
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Anticipating that global demand for
iron ore would pick up with the global economy showing signs of recovery, led by consistent increases in demand in China, spot prices continued to increase from October 2009 until they peaked in April 2010.
After slipping back to levels seen at the beginning of this year, spot prices crept up again in July 2010. Accordingly, representative contract prices
for products sold during the three-month period ended September 30, 2010, based on daily average of short-term references during March 1, 2010 through May 31, 2010, were settled at levels substantially higher than the prevailing
annual fixed contract prices as well as short-term market references during the corresponding three-month period of the previous year.
Consequently, the increases in gross profit recorded by Mitsui Iron Ore Development Pty. Ltd. and Mitsui Itochu Iron Pty. Ltd. were ¥19.8 billion and
¥5.5 billion, respectively.
Operating income for the three-month period ended September 30, 2010 was ¥38.1 billion, an increase
of ¥24.0 billion from ¥14.1 billion for the corresponding three-month period of the previous year, reflecting the increase in gross profit.
Equity in earnings of associated companies for the three-month period ended September 30, 2010 was ¥22.7 billion, an increase of ¥15.7 billion from ¥7.0 billion for the corresponding
three-month period of the previous year. Major factors were as follows:
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Earnings at Robe River Mining Company were ¥8.1 billion, an increase of ¥4.0 billion from ¥4.1 billion for the corresponding three-month
period of the previous year, reflecting increases in iron ore prices.
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Compania Minera Dona Ines de Collahuasi SCM (Chile) recorded earnings of ¥2.5 billion, a decrease of ¥0.5 billion from ¥3.0 billion for the
corresponding three-month period of the previous year, mainly due to a revaluation loss on provisionally priced copper sales that remained subject to final pricing as well as a reversal effect of revaluation gains recorded in the three-month period
of the previous year (*1), which was partially offset by increases in copper prices as well as increases in sales volume. Compania Minera Dona Ines de Collahuasi SCM has a different fiscal year end than that of Mitsui.
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Valepar S.A. (Brazil) posted earnings of ¥11.5 billion, an increase of ¥10.9 billion from ¥0.6 billion for the corresponding three-month
period of the previous year, reflecting an increase in earnings at Vale mainly due to increases in prices and the shipped volume of iron ore. As the fiscal year of Valepar S.A. commences on January 1 and ends on December 31 of each year,
we recognize their profit and loss with a three month time lag.
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Net income attributable to Mitsui & Co., Ltd. for
the three-month period ended September 30, 2010 was ¥37.4 billion, a substantial increase of ¥25.3 billion from ¥12.1 billion for the corresponding three-month period of the previous year. In addition to the above factors, there
were the following factors:
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Other expenses—Net included a foreign exchange profit of ¥2.3 billion related to borrowings denominated in U.S. dollars at Mitsui Raw Material
Development Pty. Limited, a ¥2.4 billion profit on foreign exchange derivative contracts, intended to reduce exposure to the fluctuating foreign exchange rate at the iron ore mining operation by Mitsui and a foreign exchange loss of ¥2.3
billion at iron ore producing businesses. A foreign exchange profit of ¥1.9 billion at Mitsui Raw Materials Development Pty. Limited and a foreign exchange loss of ¥0.9 billion at iron ore producing businesses were recorded for the
corresponding three-month period of the previous year.
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(*1)
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Collahuasi’s copper concentrate and cathode sales are provisionally priced at the time of shipment and the provisional prices are finalized in a contractually
specified future period (generally one to four months from the shipment date) primarily based on quoted London Metal Exchange (LME) prices. The provisionally priced sales in any quarterly period, which remain subject to final pricing, are revaluated
at the quarter-end forward prices at the end of each quarter and final adjustments are made in the following quarter when the final prices are fixed.
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-23-
Machinery &
Infrastructure Projects Segment
Gross profit for the three-month period ended September 30, 2010 was ¥20.7 billion, a decline
of ¥1.4 billion from ¥22.1 billion for the corresponding three-month period of the previous year.
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The Infrastructure Projects Business Unit reported a decline of ¥0.2 billion in gross profit due mainly to a reversal effect of volume sales for
the corresponding three-month period of the previous year at Mitsui & Co. Plant Systems, Ltd. (Japan), while there was a contribution from a newly acquired natural-gas-fired power company in Mexico, named MT Falcon Holdings Company,
S.A.P.I. de C.V.
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The Motor Vehicles Business Unit reported a decline of ¥0.6 billion in gross profit, due mainly to a decline in gross profit at the motorcycle
retail finance company P.T. Bussan Auto Finance (Indonesia) due to decline in recognition amount of booking administrative fees paid by customers, while automotive-related subsidiaries in emerging economies, including its core business of P.T.
Bussan Auto Finance, continued to show solid performances.
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The Marine & Aerospace Business Unit reported a decline of ¥0.6 billion in gross profit, partially due to a decline in revenue from
chartering vessels resulting from sales of vessels in the previous year. While demand for bulk freighters fluctuated reflecting demand for iron ore in China, difficult market conditions influenced by a possible over supply of vessels to be built in
coming years affected the operation and chartering of vessels and the trading of used vessels.
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Operating income for the
three-month period ended September 30, 2010 was a loss of ¥0.1 billion, a decline of ¥1.2 billion from an income of ¥1.1 billion for the corresponding three-month period of the previous year. In addition to the decline in gross
profit, Mt Falcon Holdings, S.A.P.I. reported an increase in selling, general and administrative expenses and P.T. Bussan Auto Finance reported an increase in provision for doubtful receivables as well as a decline in selling, general and
administrative expenses decline in incentive expenses corresponding to above mentioned decline in booking administrative fees.
Equity in
earnings of associated companies for the three-month period ended March 31, 2010 was ¥4.8 billion, a decline of ¥5.3 billion from ¥10.1 billion for the corresponding three-month period of the previous year.
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Overseas power producers, such as IPM (UK) Power Holdings Limited (Gibraltar), IPM Eagle LLP (United Kingdom) and P.T. Paiton Energy (Indonesia),
reported equity in losses of ¥0.3 billion in total, a decline of ¥6.4 billion from equity in earnings of ¥6.1 billion for the corresponding three-month period of the previous year. Mainly due to a steep rise in power price,
mark-to-market valuation gains and losses, such as those on long-term power derivative contracts, declined by ¥6.7 billion from the corresponding three-month period of the previous year.
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The Motor Vehicles Business Unit reported an increase of ¥0.5 billion compared to the corresponding three-month period of the previous year.
Performance at both automotive and construction machinery-related associated companies, especially in emerging economies, continue to recover.
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Net income attributable to Mitsui & Co., Ltd. for the three-month period ended September 31, 2010 was ¥3.0 billion, a decline of ¥3.8 billion from ¥6.8 billion for the
corresponding three-month period of the previous year.
Chemical Segment
Gross profit for the three-month period ended September 30, 2010 was ¥14.9 billion, a decline of ¥0.1 billion from ¥15.0 billion for the
corresponding three-month period of the previous year. The principal developments in this segment were as follows:
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The Basic Chemicals Business Unit reported a decline of ¥1.4 billion in gross profit. This was mainly due to underperforming trading activities for
basic petrochemicals of upstream products and polyvinyl chloride (PVC), both being affected by a decline in volume mainly caused by curtailment of production volume by suppliers and their production troubles. On the other hand, Shark Bay Salt Pty.
Ltd. (Australia), a salt manufacturing company, recorded an increase in gross profit due to increases in sales volume mainly bound to Asia.
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The Performance Chemicals Business Unit reported an increase of ¥1.3 billion in gross profit. While P.T. Kaltim Pasifik Amoniak (Indonesia), an
ammonia manufacturing and marketing joint venture, recorded an increase of ¥0.8 billion in gross profit due to an increase in the price of ammonia compared to the corresponding three-month period of the previous year. Mitsui Bussan Plastics
Trade Co., Ltd. (Japan), a domestic trading company for plastics and chemicals, showed a solid performance due to an increase in demand for automotive parts and electronics mainly from China.
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Operating income for the three-month
period ended September 30, 2010 was ¥2.8 billion, an increase of ¥0.9 billion from ¥1.9 billion for the three-month period of the previous year. The decline in gross profit was partly offset by a decline in selling, general and
administrative expenses.
Equity in earnings of associated companies for the three-month period ended September 30, 2010 was ¥1.1
billion, an increase of ¥0.8 billion from ¥0.3 billion for the three-month period of the previous year. This was mainly due to an increase in earnings at International Methanol Company (Saudi Arabia), a methanol manufacturing joint venture,
reflecting improvement in the pricing of methanol.
Net income attributable to Mitsui & Co., Ltd. for the three-month period ended
September 30, 2010 was ¥1.7 billion, an increase of ¥1.1 billion from ¥0.6 billion for the corresponding three-month period of the previous year.
Energy Segment
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Anticipating that global demand for oil would pick up with the global economy showing signs of recovery driven by emerging countries,
and a gradual resurgence of speculative funds flowing into energy markets, oil prices (WTI) recovered to US$86 per barrel in April 2010. WTI dropped back to US$60 per barrel due to prospects of a slower economic recovery in the advanced countries
and concerns over easing of the high growth rates in emerging economies. Adjusting to this pessimistic trend, the WTI future market recovered to US$80 per barrel in August. And thereafter traded firmly.
Accordingly, Japan Crude Cocktail (JCC) recorded US$76, US$75 (preliminary figure)
and US$76 (preliminary figure) per barrel in July, August and September of this year, respectively. The JCC price trend is generally reflected in the net income of our overseas oil and gas producing subsidiaries and associated companies in this
segment with a zero to six-month time lag.
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Considering the time lag, Mitsui periodically calculates the weighted average JCC price applied to the
operating results of those oil and gas producing subsidiaries and associated companies for internal review purposes. Such weighted average JCC prices for the three-month period ended September 30, 2010 and 2009 were US$76 per barrel and US$53
per barrel, respectively.
Gross profit for the three-month period ended September 30, 2010 was ¥51.9 billion, an increase of
¥15.5 billion from ¥36.4 billion for the corresponding three-month period of the previous year primarily due to the following:
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In the oil and gas exploration and production business, mainly due to higher oil prices, Mitsui Oil Exploration Co., Ltd., Mitsui E&P Middle East
B.V. and Mitsui E&P Australia Pty Limited reported increases of ¥6.0 billion, ¥4.8 billion and ¥4.0 billion, respectively.
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In the coal mining business, the price applied for sales of typical Australian premium hard coking coal for the three-month period ended
September 30, 2010 was approximately 75% higher than the annual contract price for the year ended March 31, 2010, which was quoted at US$128 per ton FOB. At the same time the thermal coal price was around 40% higher than the annual
contract price for the year ended March 31, 2010, which was quoted at US$71 per ton FOB. For the three-month period ended September 30, 2010, gross profit at Mitsui Coal Holdings Pty. Ltd. increased by ¥4.8 billion, reflecting higher
coal prices, which were partly offset by a higher Australian dollar against the U.S. dollar. Meantime, coal production (preliminary figure) for the three month period ended September 30, 2010 slightly increased compared to the corresponding
three-month period of the previous year.
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Mitsui Oil Co., Ltd. reported an increase of ¥5.5 billion due to favorable market conditions.
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Westport Petroleum, Inc. reported a decrease of ¥4.7 billion due to decline of demand and margins, with loss allowances for charter contracts for
tankers and rental costs for oil tanks.
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-25-
Operating income for the three-month
period ended September 30, 2010 was ¥36.3 billion, an increase of ¥14.1 billion from ¥22.2 billion for the three-month period of the previous year.
Equity in earnings of associated companies for the three-month period ended September 30, 2010 was ¥12.6 billion, an increase of ¥5.8 billion from ¥6.8 billion for the three-month period
of the previous year. An increase at Japan Australia LNG (MIMI) PTY. Ltd. was recorded due to higher LNG prices linked to oil prices, the effect of which was partly offset by higher Australian dollar against the U.S. dollar.
Net income attributable to Mitsui & Co., Ltd. for the three-month period ended September 30, 2010 was ¥32.3 billion, an increase of
¥17.1 billion from ¥15.2 billion for the three-month period of the previous year. In addition to the above-mentioned developments, there were also the following factors:
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Dividends from LNG projects in Abu Dhabi, Qatar, Oman and Equatorial Guinea were ¥6.2 billion, which is almost the same level as the corresponding
three-month period of the previous year.
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Other expenses-net improved by ¥6.5 billion due to foreign exchange profit for the three-month period ended September 30, 2010 and reversal
effect of exploration expenses for the corresponding three-month period of the previous year, both of which were recorded at Mitsui Oil Exploration Co., Ltd.
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Net income attributable to noncontrolling interests increased by ¥5.2 billion. Mitsui Oil Exploration Co., Ltd. reported an increase of ¥8.0
billion in net income attributable to noncontrolling interests due to an increase in net income attributable to noncontrolling interests resulting from an increase in net income before attribution of noncontrolling interests and a reversal effect of
third party share of exploration expenses posted in other expenses-net in the corresponding three-month period of the previous year.
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Please refer to the description on “7. The Oil Spill Incident of a Drilling Rig in the Gulf of Mexico” on “IV. Consolidated Financial Statements” in regards to the oil spill incident
of a drilling rig in the Gulf of Mexico.
Foods & Retail Segment
Gross profit for the three-month period ended September 30, 2010 was ¥18.4 billion, a decline of ¥1.9 billion from ¥20.3 billion for the
corresponding three-month period of the previous year.
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In the food resources and materials area, this segment reported a decline in gross profit in the businesses of maize, fruit juice and dairy products.
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Mitsui Foods Co., Ltd. (Japan) recorded an increase in gross profit due to an increase in sales volume. MCM Foods Holdings Limited (United Kingdom),
vendor of canned food products and groceries in the European market, recorded a decline in gross profit reflecting the poor performance of the canned food products business.
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Operating income for the three-month period ended September 30, 2010 was ¥2.0 billion, a decline of ¥2.8 billion from ¥4.8 billion for the corresponding three-month period of the previous
year, reflecting the decline in gross profit.
Equity in earnings of associated companies for the three-month period ended September 30,
2010 was ¥1.7 billion, a decline of ¥0.7 billion from ¥2.4 billion earnings for the corresponding three-month period of the previous year. Ventura Foods, LLC (United States), an edible oil and foods company, in which this segment
invested through Wilsey Foods, Inc. (United States), recorded a decline in earnings, due to contraction in profit margins reflecting strong competition, in comparison to the corresponding three-month period of the previous year.
Net income attributable to Mitsui & Co., Ltd. for the three-month period ended September 30, 2010 was ¥1.2 billion, an increase of
¥12.6 billion from net loss of ¥11.4 billion for the corresponding three-month period of the previous year. In addition to the above mentioned factors, this segment recorded a ¥15.1 billion impairment loss on its holdings in
Seven & i Holdings Co., Ltd., reflecting a decline in share price, and a valuation allowance against deferred tax assets established for the impairment loss (*1) for the three-month period of the previous year.
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(*1)
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Mitsui records an impairment loss on a marketable security if a decline in the value of the security price is other-than-temporary. For example, a decline of 30% or
more in the fair value of a security leads to the conclusion that the security has an other-than-temporary impairment. Among those securities determined to have an other-than-temporary impairment, a decline of less than 50% in the fair value of a
security is a nondeductible impairment loss based on Japanese tax laws and regulations. Mitsui evaluates the realizability of the deferred tax assets for currently nondeductible impairment losses and sets up valuation allowances unless they are
considered recoverable on reasonable grounds.
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Consumer Service & IT
Segment
Gross profit for the three-month period ended September 30, 2010 was ¥12.3 billion, a decline of ¥2.4 billion
from ¥14.7 billion for the corresponding three-month period of the previous year. The Japanese economy showed a gradual recovery, however, this segment recorded a decline in gross profit in the IT outsourcing business, the media business and the
fashion business, reflecting dampened consumer spending and weak demand for investments in information systems. This segment also recorded a decline in gross profit due to divestiture of several businesses.
Operating loss for the three-month period ended September 30, 2010 was ¥2.3 billion, a decline of ¥0.3 billion from a loss of ¥2.0
billion for the corresponding three-month period of the previous year. The decline in selling, general and administrative expenses partially offset the decline in gross profit.
Equity in losses of associated companies for the three-month period ended September 30, 2010 was ¥0.3 billion, an improvement of ¥4.6 billion from ¥4.9 billion in losses for the
corresponding three-month period of the previous year. This segment recorded an impairment loss on investment in the Nibancho Center Building Project, a real estate business, for the three-month period ended September 30, 2010, while a ¥7.3
billion impairment loss on listed shares in Moshi Moshi Hotline, Inc., reflecting the decline in share price, was recorded for the three-month period of the previous year.
Net loss attributable to Mitsui & Co., Ltd. for the three-month period ended September 30, 2010 was ¥2.7 billion, an improvement of ¥2.8 billion from a loss of ¥5.5 billion for
the corresponding three-month period of the previous year. Other than the above, this segment reported a loss of ¥3.2 billion on the sale of securities due to divestiture of several businesses including Sport Co., Ltd., which engages in the
bowling business, in order to further develop its business portfolio.
Logistics & Financial Markets Segment
Gross profit was ¥11.1 billion, a decline of ¥3.8 billion from ¥14.9 billion for the corresponding three-month period of
the previous year. Though commodity prices continued to be at high levels, derivatives trading continued to face a tough environment due to abated volatility. In addition, due to a reversal effect of gain on sale of a leased office building for the
corresponding three-month period of the previous year, this segment recorded a decline in gross profit in spite of an increase in sales volume at the Transportation Logistics Business Unit, against the backdrop of global economic recovery.
Profits corresponding to foreign exchange losses of ¥4.6 billion and ¥6.6 billion, related to the commodity trading business, posted
in other expenses-net were included in gross profit for the three-month period ended September 30, 2010 and for the corresponding three-month period of the previous year, respectively.
Reflecting decreases in gloss profit, operating income for the three-month period ended September 30, 2010 was ¥3.4 billion, a decline of ¥4.5 billion from ¥7.9 billion for the
corresponding three-month period of the previous year.
Equity in earnings of associated companies for the three-month period ended
September 30, 2010 was ¥3.6 billion, an increase of ¥1.9 billion from ¥1.7 billion for the three-month period of the previous year. JA Mitsui Leasing, Ltd. (Japan) reported an increase in earnings from the corresponding three-month
period of the previous year, due to a decline in provision for doubtful receivables and reversal of reserves for doubtful receivables.
Accordingly, net income attributable to Mitsui & Co., Ltd. for the three-month period ended September 30, 2010 was ¥2.2 billion, an
increase of ¥1.2 billion from ¥1.0 billion for the corresponding three-month period of the previous year. Besides the above-mentioned factors, foreign exchange losses of ¥4.6 billion and ¥6.6 billion related to the commodity trading
business were posted in other expense-net for the three-month period ended September 30, 2010 and for the corresponding three-month period of the previous year, respectively.
-27-
Americas Segment
Gross profit for the three-month period ended September 30, 2010 was ¥18.2 billion, an increase of ¥0.7 billion from
¥17.5 billion for the corresponding three-month period of the previous year.
|
|
•
|
|
Champions Pipe & Supply, Inc. (United States) increased gross profit by ¥3.9 billion due to increases in volume and prices, resulting from
robust demand for tubular products for active shale gas developments in addition to a reversal effect of the revaluation loss on inventory recorded in the corresponding three-month period of the previous year.
|
|
|
•
|
|
Novus International, Inc. (United States) recorded a decline in gross profit due to a slight decline in sale price reflecting an increase in supply
from competitors, which recovered from operational troubles despite an increase in sale volume.
|
|
|
•
|
|
Gross profit declined due to deconsolidation of Steel Technologies Inc. as a result of a transaction in which Mitsui & Co., (U.S.A.), Inc.
contributed Steel Technologies Inc. to a newly established holding company, NuMit LLC (United States), a 50% interest of which was subsequently sold to Nucor Corporation, a major electronic furnace steel maker in the United States.
|
Operating income for the three-month period ended September 30, 2010 was ¥7.6 billion, an increase of ¥4.8
billion from ¥2.8 billion for the corresponding three-month period of the previous year. Selling, general and administrative expenses declined due to deconsolidation of Steel Technologies Inc.
Equity in earnings of associated companies for the three-month period ended September 30, 2010 was ¥2.0 billion, an increase of ¥1.8 billion
from ¥0.2 billion for the corresponding three-month period of the previous year.
Net income attributable to Mitsui & Co., Ltd.
for the three-month period ended September 30, 2010 was ¥4.7 billion, an improvement of ¥7.7 billion from net loss of ¥3.0 billion for the corresponding three-month period of the previous year. In addition to the above factors,
there are the following factors:
|
|
•
|
|
There was a reversal effect of a ¥3.1 billion impairment loss of goodwill recorded at AFC HoldCo, LLC, an automotive retail finance company, for
the corresponding three-month of the previous year.
|
|
|
•
|
|
Losses attributable to this segment’s interest in Westport Petroleum, Inc. deteriorated by ¥3.2 billion from an income for the corresponding
three-month period of the previous year due to a decline in margin resulting from low demand for petroleum products as well as loss allowances for charter contracts for tankers and rental costs for oil tanks.
|
Europe, the Middle East and Africa Segment
Gross profit for the three-month period ended September 30, 2010 was ¥5.9 billion, an increase of ¥1.6 billion from ¥4.3 billion for the corresponding three-month period of the previous
year, reflecting steady demand in the chemical and steel products business.
Operating income for the three-month period ended
September 30, 2010 was ¥1.3 billion, an improvement of ¥3.1 billion from a loss of ¥1.8 billion for the corresponding three-month period of the previous year, reflecting an increase in gross profit and a decrease in provision for
doubtful receivables.
Equity in earnings for the three-month period ended September 30, 2010 was a loss of ¥0.2 billion, a
deterioration of ¥0.3 billion from an income of ¥0.1 billion for the corresponding three-month period of the previous year.
Net
income attributable to Mitsui & Co., Ltd. for the three-month period ended September 30, 2010 was ¥0.3 billion, an improvement of ¥1.3 billion from a loss of ¥1.0 billion for the corresponding three-month period of the
previous year.
-28-
Asia Pacific Segment
Gross profit for the three-month period ended September 30, 2010 was ¥7.7 billion, an increase of ¥0.9 billion from
¥6.8 billion for the corresponding three-month period of the previous year. Markets for chemicals, iron and steel products continued to recover in the three-month period ended September 30, 2010, and contributed to the increase.
Operating income for the three-month period ended September 30, 2010 was ¥1.4 billion, an increase of ¥0.3 billion from a ¥1.1 billion
for the corresponding three-month period of the previous year.
Equity in earnings for the three-month period ended September 30, 2010
was ¥0.5 billion, a decline of ¥0.6 billion from ¥1.1 billion for the corresponding three-month period of the previous year.
Net
income attributable to Mitsui & Co., Ltd. for the three-month period ended September 30, 2010 was ¥10.3 billion, an increase of ¥4.2 billion from ¥6.1 billion for the corresponding three-month period of the previous year.
The main cause of the increase in net income was attributable to an increase in earnings from the segment’s minority interest in Mitsui Iron Ore Development Pty. Ltd., Mitsui-Itochu Iron Pty Ltd. and Mitsui Coal Holdings Pty. Ltd.
4. Financial Condition and Cash Flows
(1)
Assets, Liabilities and Shareholders’ Equity
Total assets as of September 30, 2010 were ¥8,210.6 billion, a decline of ¥158.4 billion from ¥8,369.0 billion as of March 31, 2010.
Total current assets as of September 30, 2010 were ¥4,157.5 billion, a decline of ¥103.6 billion from
¥4,261.1 billion as of March 31, 2010.
Trade receivables and inventories declined by ¥62.0 billion in total due mainly to
collection of trade receivables for plant construction businesses, as well as a decline in transaction volume at the Chemical Segment. Cash and cash equivalents declined by ¥56.6 billion as a result of an increase in investments and other
assets.
-29-
Reflecting the decline in total
current assets, total current liabilities as of September 30, 2010 declined by ¥128.0 billion to ¥2,252.8 billion from ¥2,380.8 billion as of March 31, 2010. The decline in total current liabilities is primarily attributable to
a decline of ¥130.3 billion in current maturities of long-term debt, as well as a decline of ¥54.3 billion in trade payables.
As a
result, working capital, or current assets less current liabilities, as of September 30, 2010 totaled ¥1,904.7 billion, an increase of ¥24.4 billion from ¥1,880.3 billion as of March 31, 2010.
The sum of “total investments and non-current receivables,” “net property and equipment,” “intangible assets, less accumulated
amortization,” “deferred tax assets-non-current,” and “other assets” as of September 30, 2010 totaled ¥4,053.0 billion, a decline of ¥54.9 billion from ¥4,107.9 billion as of March 31, 2010, mainly due
to the following factors:
Total of investments and non-current receivables as of September 30, 2010 was ¥2,924.0 billion, a decline
of ¥73.8 billion from ¥2,997.8 billion as of March 31, 2010. Within this category, investments in and advances to associated companies as of September 30, 2010 were ¥1,397.1 billion, a decline of ¥0.6 billion from
¥1,403.1 billion as of March 31, 2010.
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|
•
|
|
A ¥19.8 billion increase in investment in NuMit LLC as a result of a transaction in which Mitsui & Co., (U.S.A.), Inc. contributed Steel
Technologies Inc. to a newly established holding company, NuMit LLC, a 50% interest of which was subsequently sold to Nucor Corporation.
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•
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Expenditures of cash included a 25% investment in the project company for the Caserones Copper Mining Project in Chile for ¥13.4 billion.
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|
|
•
|
|
Factors that do not involve cash flows include a decline of ¥86.0 billion resulting from a foreign exchange translation adjustment of foreign
investments due to the appreciation of the Japanese yen vis-à-vis the Australian dollar and Brazilian real as well as net increases in equity earnings of ¥29.4 billion (net of ¥70.5 billion in dividends received from associated
companies).
|
Other investments as of September 30, 2010 were ¥826.3 billion, a decline of ¥139.6 billion from
¥965.9 billion as of March 31, 2010, mainly due to the following:
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•
|
|
An increase in investments such as ¥7.8 billion in MODEC Inc. and ¥7.6 billion of additional shares in TPV Technology Limited.
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|
|
•
|
|
A ¥24.9 billion decline in investment in Sakhalin Energy Investment Company Ltd. due to capital redemption (in addition, a ¥13.4 billion
decline due to a foreign exchange translation loss).
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|
|
•
|
|
A ¥107.3 billion net decrease in unrealized holding gains on available-for-sale securities, such as those of INPEX Corporation, reflecting a slide
in global stock markets.
|
Property leased to others increased by ¥80.0 billion to ¥304.0 billion from ¥224.0
billion as of March 31, 2010 due to acquisition of natural-gas-fired power stations in Mexico by MT Falcon Holdings Company, S.A.P.I. de C.V.
Net property and equipment as of September 30, 2010 totaled ¥981.3 billion, a slight increase of ¥2.7 billion from ¥978.6 billion as of March 31, 2010. Major components were as
follows:
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•
|
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A ¥24.8 billion increase (including a foreign exchange translation loss of ¥1.5 billion) for participation in shale gas projects in the
United States;
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|
|
•
|
|
An increase of ¥10.0 billion (including a foreign exchange translation loss of ¥6.5 billion) at iron ore mining projects in Australia;
|
|
|
•
|
|
A ¥18.2 billion decline by reclassification of Steel Technologies Inc. from subsidiary to associated company;
|
|
|
•
|
|
Effects of foreign exchange translation loss and depreciation more than offset expenditures for investments. Coal mining projects in Australia
declined by ¥6.9 billion (including a foreign exchange translation loss of ¥6.0 billion) and energy-related projects other than shale gas declined for ¥2.2 billion (including a foreign exchange translation loss of ¥11.3 billion).
|
-30-
Long-term debt less current maturities
as of September 30, 2010 was ¥2,927.0 billion, an increase of ¥17.2 billion from ¥2,909.8 billion as of March 31, 2010. This increase is attributable to an increase in long-term borrowings at Mitsui.
Total Mitsui & Co., Ltd. shareholders’ equity as of September 30, 2010 was ¥2,215.7 billion, a decline of ¥14.4 billion from
¥2,230.1 billion as of March 31, 2010. Major components of the decline were a net decline of ¥108.7 billion in foreign currency translation adjustments due to depreciation of the Australian dollar and the U.S. dollar against the
Japanese yen, and a net decline of ¥63.6 billion in unrealized holding gains on available-for-sale securities, while an increase component was ¥163.2 billion in retained earnings.
As a result, the equity-to asset ratio (*1) as of September 30, 2010 was 27.0%, up 0.4 percentage point from 26.6% as of March 31, 2010. Net interest-bearing debt, or interest-bearing debt less
cash and cash equivalents and time deposits as of September 30, 2010 was ¥2,031.2 billion, a decline of ¥24.5 billion from ¥2,055.7 billion as of March 31, 2010. The net debt-to-equity ratio (*2) as of September 30, 2010
was 0.92 times, at the same point as of March 31, 2010.
(*1) Equity-to-Asset Ratio
Taking into consideration comparability with other trading companies in Japan, in this flash report we define the equity-to-asset ratio as the ratio of
total Mitsui & Co., Ltd. shareholders’ equity to total assets.
(*2) Net Debt-to-Equity Ratio
We refer to Net Debt-to-Equity Ratio (“Net DER”) in this flash report. Net DER is comprised of “net interest-bearing debt” divided by
Total Mitsui & Co., Ltd. shareholders’ equity.
“Net interest-bearing debt” is defined as interest-bearing debt less
cash and cash equivalents and time deposits. Our interest-bearing debt consists primarily of long-term debt less current maturities, which are not readily repayable. In order to flexibly meet capital requirements and to prepare for future
debt-service requirements in case of unforeseen deterioration in the financial markets, we currently hold a relatively high level of cash and cash equivalents reflecting current financial market conditions and future capital requirements.
Under this policy, Net DER is a useful internal measure for our management to review the balance between:
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•
|
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our capacity to meet debt repayment; and
|
|
|
•
|
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leverage to improve return on equity in our capital structure.
|
This measure does not recognize the fact that cash and cash equivalents and time deposits may not be completely available for debt repayment, but cash and cash equivalents and time deposits may be
required for operational needs including certain contractual obligations or capital expenditures.
|
|
|
|
|
|
|
|
|
|
|
|
|
Billions of Yen
|
|
|
|
|
End of Mar. 2010
|
|
|
End of Sep. 2010
|
|
|
Short-term debt
|
|
¥
|
241.4
|
|
|
¥
|
268.5
|
|
|
Long-term debt
|
|
¥
|
3,230.3
|
|
|
¥
|
3,117.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing debt
|
|
¥
|
3,471.7
|
|
|
¥
|
3,385.6
|
|
|
Less cash and cash equivalents and time deposits
|
|
¥
|
(1,416.0
|
)
|
|
¥
|
(1,354.4
|
)
|
|
|
|
|
|
|
|
|
|
|
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Net interest bearing debt
|
|
¥
|
2,055.7
|
|
|
¥
|
2,031.2
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Mitsui&Co., Ltd. Shareholders’ equity
|
|
¥
|
2,230.1
|
|
|
¥
|
2,215.7
|
|
|
|
|
|
|
|
|
|
|
|
|
Net DER (times)
|
|
|
0.92
|
|
|
|
0.92
|
|
-31-
(2)
Cash
Flows during the six-month period ended September 30, 2010
Cash Flows from Operating Activities
Net cash provided by operating activities for the six-month period ended September 30, 2010 was ¥270.8 billion, a decline of
¥58.0 billion from ¥328.8 billion for the corresponding six-month period of the previous year. Major components of net cash provided by operating activities were our operating income of ¥169.8 billion and dividend income of ¥95.5
billion, including dividends received from associated companies.
Compared with the corresponding six-month period of the previous year, while
operating income increased by ¥93.8 billion, net cash outflow from an increase in working capital, or changes in operating assets and liabilities, increased by ¥160.4 billion, resulting in cash outflow of ¥9.1 billion for the six-month
period ended September 30, 2010; the corresponding six-month period of the previous year showed net cash inflow of ¥169.5 billion.
Cash Flows from Investing Activities
Net cash used in investing activities for the
six-month period ended September 30, 2010 was ¥280.5 billion, an increase of ¥240.8 billion from ¥39.7 billion for the corresponding six-month period of the previous year. The net cash used in investing activities consisted of:
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|
•
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Net outflows of cash that corresponded to investments in and advances to associated companies (net of sales of investments in and collection of
advances to associated companies) were ¥25.7 billion, which included an acquisition of 25% share in the project company for the Caserones Copper Mining Project in Chile for ¥13.4 billion and a subscription of newly issued shares in Inner
Mongolia Erdos Electrical Power & Metallurgical Co, Ltd. (China) for ¥4.6 billion.
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|
|
•
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Net outflows of cash that corresponded to other investments (net of sales and redemption of other investments) were ¥93.5 billion. Expenditures
included investment in natural-gas-fired power stations in Mexico by MT Falcon Holdings Company, S.A.P.I. de C.V. for ¥106.8 billion, a subscription of newly issued shares in MODEC Inc. for ¥7.8 billion and additional investment in TPV
Technology Limited for ¥7.6 billion. Proceeds from sales of investments mainly consisted of a ¥24.9 billion capital redemption from Sakhalin Energy Investment Company Ltd. and divestiture of a 50% share in NuMit LLC, to which
Mitsui & Co. (U.S.A.), Inc. had contributed Steel Technologies, Inc., for ¥18.7 billion.
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|
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•
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Net outflows of cash relating to purchases of property leased to others and property and equipment (net of sales of those assets) were ¥149.5
billion. Major expenditures for equipment included:
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•
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The Enfield and Vincent oil fields in Australia, the Tui oil field in New Zealand, oil and gas projects in Oman, and oil projects in Mozambique, as
well as oil and gas projects by Mitsui Oil Exploration Co., Ltd. for a total of ¥40.2 billion;
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•
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Shale gas projects in the United States for ¥25.3 billion;
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•
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Iron ore mining projects in Australia for ¥21.4 billion;
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|
•
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Coal mining projects in Australia for ¥7.0 billion; and
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|
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•
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Leased rolling stock for ¥14.8 billion.
|
Free cash flow, or sum of net cash provided by operating activities and net cash used in investing activities, for the six-month period ended September 30, 2010 was a net outflow of ¥9.7 billion.
-32-
Cash Flows from
Financing Activities
For the six-month period ended September 30, 2010, net cash used in financing activities was
¥23.4 billion, a decline of ¥34.4 billion from ¥57.8 billion for the corresponding six-month period of the previous year. The net cash outflow from the borrowing of long-term debt, mainly at Mitsui, was ¥64.5 billion, while the
net cash inflow from the borrowing of short-term debt was ¥52.3 billion mainly by Mitsui and MT Falcon Holdings Company, S.A.P.I. de C.V., a holding company for investment in natural-gas-fired power stations in Mexico.
In addition to the changes discussed above, there was a decline of ¥23.5 billion due to foreign exchange translation; as a result, cash and cash
equivalents as of September 30, 2010 totaled ¥1,344.8 billion, a ¥56.6 billion decline from ¥1,401.4 billion as of March 31, 2010.
-33-
II. Information concerning net income forecast for the year ending March 31, 2011
1. Management strategy and progress report
1) Medium-Term Management Plan through March 31, 2012
|
Note:
|
The following describes the contents of the Medium-Term Management Plan through March 31, 2012 announced in May 2010.
Descriptions may be included that
may differ from our current understanding of the economic environment.
|
We formulated and announced our
new Medium-Term Management Plan covering the period through March 31, 2012, “Challenge & Innovation 2012”—Stronger Mitsui & Co., more distinctive and respected Mitsui & Co.—as we aim to realize the
vision outlined in our Long-Term Management Vision “Dynamic Evolution as a 21
st
Century Global Business Enabler”, released in March 2009. Based on these initiatives, we intend to concentrate our efforts on further reinforcing our revenue base and business engineering
capabilities.
(1) The Business Plan for the period ending March 31, 2012
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The global economy appears to be recovering, led by strong economic growth in emerging countries. Anticipating such recovery in advance, commodity prices have staged a sharp
rebound, and further upward price pressures due to a further strengthening of demand are expected to continue as global growth accelerates. Increases in sales volumes and commodity prices in non-resource business areas are also expected to be seen,
reflecting gradual but steady expansion of demand in those areas. Based on such assumptions, we forecasted earnings for the year ending March 31, 2011 of ¥320.0 billion. Thanks to an increase in equity production in the mineral resources
and energy businesses, as well as further growth in non-resource business segments, we have forecasted the earnings for the year ending March 31, 2012 of ¥370.0 billion. Furthermore, through achievement of the key initiatives described
below, we envisage achieving net income attributable to Mitsui & Co., Ltd. of ¥500.0 billion over the subsequent three to five years, namely the period from 2013 to 2015.
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|
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(2) Four key initiatives of the Medium-Term Management Plan
The four key initiatives of the Medium-Term Management Plan are: (a) Buildup revenue base and demonstration of business engineering capabilities,
(b) Acceleration of globalization and strategic redeployment of resources, (c) Further evolution of the portfolio strategy, and (d) Reinforcement of the management structure to achieve sustainable growth. We discuss each in greater
detail below.
-34-
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(a)
|
Buildup revenue base and demonstration of business engineering capabilities
|
We intend to build up our revenue base and demonstrate business engineering capabilities through the following efforts:
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|
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Mineral Resource & Energy areas—Increase the equity production and maintain/expand reserves
|
|
• Optimize existing projects through expansion and
maintenance as well as acquire new high quality assets
• Strengthen global trading and marketing functions
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Non-resources business areas—reinforcement of revenue base
|
|
• Expand trading activities and investments in
emerging markets, in particular, Asia
• Accelerate investment
activities by leveraging global marketing network
• Pursue the
globally growing opportunities in infrastructure areas through enhancement of investment activities (power generation, water supply and transportations) and related raw materials supply business
• Focus on upstream (resources and raw materials) in each value
chain
• Develop company-wide cross sectional projects by
leveraging our business engineering capabilities (Automotive Strategy, Medical Healthcare and Agri-Food business)
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|
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Strategy for Environment and Energy
|
|
• Further strengthen gas value chain (Resource ->
Supply infrastructure -> power generation)
• Focus on
renewable energy (solar, wind power, etc.)
• Develop new
businesses to provide industrial solutions to environmental issues
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|
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|
Reinforcement of our foothold in domestic business
|
|
• Further strengthen domestic customer base as
leverage for acceleration of global initiatives
• Take
proactive approach in reorganizing industries and consolidating business
|
|
|
|
Our key strategies in the four business areas (*)
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|
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Mineral Resources & Energy
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|
(1) Maintain and improve the revenue base by acquiring high quality
assets and recycle our existing assets
(2) Enhance competitiveness and value of
existing large-scale projects through further expansion of the project scale
(3) Strengthen global marketing function to address the increase in demand from emerging
economies
(4) Employ industrial solutions to environmental issues and develop
new businesses with sights set on the future
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|
|
|
|
Global Marketing Networks (steel products, machinery and chemical products)
|
|
(1) Build business platforms in the emerging countries with a focus
on Asia
(2) Create new businesses by strengthening relationships with key
customers and partners
(3) Accelerate investments by leveraging our global
marketing network and focus on the upstream in the value chain
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|
|
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|
Lifestyle Business
|
|
(1) Develop the global business portfolio (especially to Asia) and
strengthen marketing function
(2) Reinforce initiatives in the area of food
resources and materials
(3) Further strengthen initiatives in the key business
areas (electronics distribution, TV shopping, environmental IT, medical and healthcare and outsourcing business, etc.)
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|
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Infrastructure
|
|
(1) Expand the electric power business as an IPP player and take on
the challenge of developing the centralized renewable energy business
(2) Expand and strengthen our business engineering capabilities in the marine energy
business, transportation and gas distribution business in the energy value chain
(3) Expand regional water business using existing overseas business platforms
(4) Take initiatives to develop urban transportation projects and infrastructure for a
low-carbon-emission society
|
|
Note:
|
From this Medium-Term Management Plan, the Consumer Services area changed its name to the Lifestyle Business area, and the Marine & Aerospace Business Unit and
the Transportation Logistics Business Unit, both of which were previously included in Global Marketing Networks area, will be transferred to the Infrastructure area.
|
-35-
|
(b)
|
Acceleration of globalization and strategic redeployment of resources
|
We will implement a global commodity-based business strategy of each business unit in the headquarters and provide local based origination function of the regional business unit which best serves the
needs of our customers and society with a strategic focus on BRICs, Mexico and Indonesia. We shall also solidify our global marketing capability which serves not only within a region but also between regions in order to capture the growing demand of
the Asian economies. We will formulate comprehensive strategic alliances across the industries with quality partners. In support of these initiatives, we will continue our efforts to promote globalization of our human resource base by, among other
measures, shifting human resources to Asia and placing more emphasis on hiring employees in Asian countries.
|
(c)
|
Further evolution of the portfolio strategy
|
We will continue to dynamically allocate funds, personnel, and other corporate resources to the strategic business domains, setting clear policy through including system centered around the Portfolio
Management Committee. We will also continue initiatives for strategic divestiture and recycling of assets. In addition, we will continue cross-divisional redeployment of personnel and personnel exchanges, work to transplant capabilities across
business units, and focus on fostering managerial talent.
|
(d)
|
Reinforcement of the management structure to achieve sustainable growth
|
To prevent a recurrence of the inappropriate transactions which took place in the Medium-Term management outlook period, we decided to implement more thorough on-site management, enhanced internal control
of business processes, and promotion of mobilization of personnel. In conjunction with these efforts, we will commence a company-wide initiative to improve business processes. Given that information strategy is an essential part of our group
management base, we will also move ahead with global implementation of information system programs and structures, and a change in employee awareness of these issues, while working to optimize investments in information systems as a part of
company-wide strategy.
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(3) Medium-Term Management Plan Investment plan
|
|
|
|
During the Medium-Term Management Plan, we plan a total sum of ¥1,200.0 billion in capital expenditures for investments and loans. Of this amount, ¥700.0 billion
(*) will be executed in the year ending March 31, 2011. We also plan to recycle assets totaling approximately ¥300.0 billion for the two-year period ending March 31, 2012, out of which ¥160.0 billion is expected to be executed
in the year ending March 31, 2011. As a result, net cash outflow for investment activities for the year ending March 31, 2011 is expected to be approximately ¥540.0 billion. While cash flow from operating activities is expected to be
solid, the free cash flow for the year ending March 31, 2012 is expected to be negative.
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|
|
Note: This amount includes expenditures of ¥200.0 billion for which decisions were made in the year ended March 31, 2011 but execution of which was deferred to the year
ending March 31, 2011.
|
|
-36-
2) Progress with Medium-Term
Management Plan
(1) Progress with four key initiatives and Medium-Term Management Plan Investment Plan
(a) Buildup revenue base and demonstration of business engineering capabilities
Progress with investment plans and key policies in each business area
During the six-month
period ended September 30, 2010, we executed new investments and loans of approximately ¥360 billion, while we collected approximately ¥75 billion through disposal of assets and investments.
We consider this progress is in line with the annual plan, in which we forecast total investment cash outflow of ¥700 billion and inflow of ¥160
billion during the period.
We made progress on our key strategies toward buildup of the revenue base and business engineering capabilities as
well as investments and loans in each of the four business areas as follows:
|
|
•
|
|
In the Mineral Resources & Energy business area, we continued to focus on aggressive investment to execute plan for expanding large-scale
projects. In Australian iron ore and coal mining activities, we invested a total of ¥21.4 billion and ¥7.0 billion, respectively, as part of our plan to maintain and increase production capacity. To increase our equity tonnage of oil and
natural gas steadily we executed capital investments of ¥65.5 billion in total for the oil and gas producing activities including those at the Enfield oil field and the Vincent oil field in Australia, the Tui oil field in New Zealand, Thailand
project by Mitsui Oil Exploration Co., Ltd. and the Marcellus shale gas project in the United States, a large scale unconventional energy resource project, in which capital investment reached ¥25.3 billion during the period. We also made efforts
to acquire new non-ferrous metal assets. During the period, while we purchased a 25% interest in the Caserones copper and molybdenum mining project in Chile for ¥13.4 billion in May 2010, we also decided to participate in the Taganito nickel
project in Philippines with a 15% interest in September 2010. At the same time, we received redemption of ¥24.9 billion from Sakhalin Energy Investment Company Ltd.
|
|
|
•
|
|
In the Global Marketing Networks business area, we are taking on challenges to create new businesses by strengthening relationships with key customers
and partners with a focus on upstream in the value chain. In iron and steel products area, we contributed Steel Technologies Inc. into a newly established holding company, NuMit LLC, after which 50% of the interest in NuMit LLC was sold to Nucor
Corporation, the largest electric furnace steel mill in the world, for ¥18.7 billion. This creates a platform to serve both Nucor Corporation and Mitsui in expanding their steel processing operations, and other joint steel-related projects
worldwide. In the chemicals area, we acquired a 25% interest in Compania Minera Miski Mayo S.A.C., a company for phosphorus ore development project in Peru which Vale S.A. had been developing, and began cooperation with Vale S.A. in the fertilizer
business in July 2010. Also in July 2010, we entered into an agreement with The Dow Chemical Company, one of the largest chemical manufacturers in the U.S., to form a 50:50 joint venture company for a chlor-alkali project in Texas, the U.S.
|
-37-
|
|
•
|
|
In the Lifestyle business area, we are reinforcing the electronics distribution and food businesses, focusing on Asian markets, particularly China. In
April 2010, as the result of a joint cash offer with China Electronics Corporation group, the largest IT group in China, for shares in TPV Technology Limited, the largest EMS manufacturer of liquid crystal display (“LCD”) products, our
cumulative investment amount and share in TPV Technology Limited increased to ¥21.9 billion and 15.1%, respectively. With this investment, we enhance our business relationship with TPV Technology, which we had established through supplying them
with LCD modules and related components, with an aim to further expand our LCD-related business, the market for which is expected to expand further. In September 2010, we reached agreement with Bright Food (Group) Co., Ltd., one of China’s
largest food conglomerates, on the formation of a strategic partnership encompassing a wide range of food-related business activities. We will contribute to the expansion of Bright Food’s existing food business in China, and cooperate in its
globalization strategy, by utilizing our international business experience and global network. At the same time, we will pursue expansions and diversifications of our own business operations in China by drawing on the resources of Bright Food
(Group) Co., Ltd., including its business experience, infrastructure and networks across a wide spectrum of the food business in China.
|
|
|
•
|
|
In the Infrastructure business area, we acquired natural gas-fired power stations in Mexico for ¥106.8 billion, and are expanding the electric
power business as an independent power producer. As a result of this acquisition completed in June 2010, our net generating capacity worldwide rose to 5.9 gigawatt with an increase of 1.6 gigawatt as of September 2010. In August 2010, we reached
agreement with Hyflux Ltd., a major water firm in Singapore, to establish a 50:50 joint venture company, Galaxy NewSpring Pte. Ltd., which will aim to acquire 22 water treatment plant operation assets located in rapidly developing provinces in China
for approximately ¥20.0 billion, including tap water treatment plants and wastewater treatment plants. Galaxy NewSpring Pte. Ltd. has already acquired 4 assets, and is in the process of acquiring the remaining 18 assets. Galaxy NewSpring Pte.
Ltd. plans to further expand its water business, capturing growing demand for water infrastructure in China.
|
(b)
Acceleration of globalization and strategic redeployment of resources
We are reinforcing our global marketing functions with a special
focus on rapidly growing Asian markets, including those in India, China and Indonesia, and as a consequence, gross profit in the Global Marketing Networks business area, especially iron and steel products and chemicals in the Asia Pacific Segment is
increasing. In addition, we achieved several cross-industry strategic alliances with strong partners, including our participation in the phosphorus ore development project in Peru being developed by Vale S.A., and additional investment in Inner
Mongolia Erdos Electricic Power & Metallurgical Co., Ltd., which is making inroads in chemical businesses such as polycrystalline silicon and polyvinyl chloride. To accelerate these initiatives, we increased our efforts in promoting the
globalization of our human resource base by, among other measures, shifting more than 130 employees from our domestic offices to Asian offices, as well as by expanding group-wide common training programs on a global basis.
-38-
(c) Evolution of the portfolio
strategies
Working primarily through the Portfolio Management Committee, we continue to examine the portfolio strategy of each business
unit, referring to key performance indicators on subsidiaries and associated companies every year; and other investments as well according to Mitsui’s guideline for investment in and withdrawal from business operations. As mentioned above, we
are also shifting human resources to the growing Asian region as part of company-wide initiative. In addition, we continue to transfer expertise across business units and focus on fostering managerial talent by implementing staff exchange programs
company-wide.
(d) Reinforcement of the management structure to achieve sustainable growth
As part of company-wide initiative to improve business processes, we thoroughly reviewed such business processes as contract administration, delivery and
posting, as well as collection and payment. We gathered and organized all the problems in light of internal control and efficiency issues, and revised business process-related regulations to deal with such problems. In addition, we are introducing a
new next-generation core system, which serves as a common group-wide information platform, use of which will streamline business processes and reduce system costs. The new system will go live in November 2010 for Mitsui and successively for each of
the other principal domestic subsidiaries. The new system will have flexibility to enable us to modify it in accordance with changes in business environment, and to add unique functions to meet each business unit’s needs, including links with
customers/vendors, logistics companies and customs, so that we can differentiate ourselves from competitors.
-39-
(2) Progress toward quantitative
targets
(a) Forecast net income for the year ending March 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[Assumption]
|
|
Sep-10
Actual
|
|
|
2nd Half of
Mar-11
Revised
Forecast
|
|
|
Mar-11
Revised
Forecast
|
|
|
Mar-11
Original
Forecast
|
|
|
Exchange rate (JPY/USD)
|
|
|
88.16
|
|
|
|
80.00
|
|
|
|
84.08
|
|
|
|
90.00
|
|
|
Crude oil (JCC)
|
|
|
$79/bbl
|
|
|
|
$76/bbl
|
|
|
|
$78/bbl
|
|
|
|
$76/bbl
|
|
(Billions of yen)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mar-11
Revised
|
|
|
Mar-11
Original
|
|
|
Increase
|
|
|
Description of Increase/Decrease
|
|
Total trading transactions
|
|
|
10,500.0
|
|
|
|
11,500.0
|
|
|
|
-1,000.0
|
|
|
Appreciation of Japanese Yen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
840.0
|
|
|
|
850.0
|
|
|
|
-10.0
|
|
|
Increase in prices of iron ore, oil and gas offset with appreciation of the Japanese Yen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG & A expenses
|
|
|
-545.0
|
|
|
|
-560.0
|
|
|
|
15.0
|
|
|
Appreciation of Japanese Yen
|
|
Provision for doubtful receivables
|
|
|
-10.0
|
|
|
|
-10.0
|
|
|
|
0.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
285.0
|
|
|
|
280.0
|
|
|
|
5.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Other expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expenses
|
|
|
-3.0
|
|
|
|
-25.0
|
|
|
|
22.0
|
|
|
Decline in interest rates against increase in interest rate in our original outlook
|
|
Dividend income
|
|
|
50.0
|
|
|
|
45.0
|
|
|
|
5.0
|
|
|
Increase in oil and gas prices
|
|
Gain on sales of securities, PPE and other gains-net
|
|
|
-20.0
|
|
|
|
-10.0
|
|
|
|
-10.0
|
|
|
Impairment losses on listed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and equity in earnings
|
|
|
312.0
|
|
|
|
290.0
|
|
|
|
22.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
-180.0
|
|
|
|
-160.0
|
|
|
|
-20.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before equity in earnings
|
|
|
132.0
|
|
|
|
130.0
|
|
|
|
2.0
|
|
|
|
|
Equity in earnings of associated companies
|
|
|
215.0
|
|
|
|
210.0
|
|
|
|
5.0
|
|
|
Increase in prices of iron, oil and gas partially offset with impairment loss on real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before attribution of noncontrolling interests
|
|
|
347.0
|
|
|
|
340.0
|
|
|
|
7.0
|
|
|
|
|
Net income attributable to noncontrolling interests
|
|
|
-27.0
|
|
|
|
-20.0
|
|
|
|
-7.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Mitsui & Co., Ltd.
|
|
|
320.0
|
|
|
|
320.0
|
|
|
|
0.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Mitsui & Co., Ltd. for the six-month period ended September 30, 2010 was
¥183.2 billion. See “I. Highlights of Consolidated Financial Results for the Six-Month Period Ended September 30, 2010” for detailed information.
We forecast our net income attributable to Mitsui & Co., Ltd. for the year ending March 31, 2011 to be ¥320 billion, same level of earnings as the original forecast, considering an
increase of ¥20.0 billion from Mineral Resources & Energy area due to firm commodity prices offset by a decline of ¥20.0 billion from non-resources area such as Machinery & Infrastructure Projects, Chemicals,
Foods & Retail and Consumer Service & IT due to the deceleration of the economy.
Assumed foreign exchange rates for the
six-month period ending March 31, 2011 are ¥80/US$, ¥80/AU$ and ¥50/BRL, while average foreign exchange rates for the six-month period ended September 30, 2010 were ¥88.16/US$, ¥79.14/AU$ and ¥50.05/BRL. Also, we
assume the oil price will continue to be US$76/Barrel through March 31, 2011, resulting in an average oil price of US$78/Barrel applicable to our financial results for the year ending March 31, 2011.
-40-
Gross profit for the year ending
March 31, 2011 is expected to be ¥840.0 billion, a decline of ¥10.0 billion from ¥850.0 billion in the original forecast, reflecting appreciation of the Japanese yen despite the higher commodity prices in the Mineral
Resources & Energy area. Selling, general & administrative expenses are expected to be ¥545.0 billion, down ¥15.0 billion from the original forecast due to appreciation of the Japanese yen. Interest expense (net) is
expected to be ¥3.0 billion, a ¥22.0 billion improvement from the original forecast, considering that interest rates for both the Japanese yen and U.S. dollar remain low while we forecasted increases in interest rates for the both currencies
against a backdrop of economic recovery in the original forecast. We anticipate a loss of ¥20.0 billion in gains from the sales of securities; property, plants and equipment and other assets, a deterioration of ¥10.0 billion from the
original plan, due to impairment losses on listed securities and fixed assets recorded in the six-month period ended September 30, 2010, and a loss on listed securities forecasted in the six-month period ending March 31, 2011, which we
estimated based on an assumption that security prices continue at the same level as those as of September 30, 2010 through the period. Equity in earnings of associated companies is expected to be ¥215.0 billion, an increase of ¥5.0
billion from the original forecast, taking into consideration a run-up in commodity prices in the Mineral Resources & Energy area despite impairment loss on real estate.
As a result, net income attributable to Mitsui & Co., Ltd. for the year ending March 31, 2011 is expected to be ¥320.0 billion, the same level as originally forecasted.
Forecast of annual operating results by operating segment compared to the original forecast is as shown below:
(Billions of yen)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ending
March 31,
2011
Revised Forecast
|
|
|
Year ending
March 31,
2011
Original Forecast
|
|
|
Change
|
|
|
Iron & Steel Products
|
|
|
6.0
|
|
|
|
6.0
|
|
|
|
—
|
|
|
Mineral & Metal Resources
|
|
|
154.0
|
|
|
|
140.0
|
|
|
|
14.0
|
|
|
Machinery & Infrastructure Projects
|
|
|
19.0
|
|
|
|
25.0
|
|
|
|
(6.0
|
)
|
|
Chemical
|
|
|
8.0
|
|
|
|
12.0
|
|
|
|
(4.0
|
)
|
|
Energy
|
|
|
106.0
|
|
|
|
100.0
|
|
|
|
6.0
|
|
|
Foods & Retail
|
|
|
8.0
|
|
|
|
16.0
|
|
|
|
(8.0
|
)
|
|
Consumer Service & IT
|
|
|
4.0
|
|
|
|
8.0
|
|
|
|
(4.0
|
)
|
|
Logistics & Financial Markets
|
|
|
3.0
|
|
|
|
0.0
|
|
|
|
3.0
|
|
|
Americas
|
|
|
12.0
|
|
|
|
10.0
|
|
|
|
2.0
|
|
|
Europe, the Middle East and Africa
|
|
|
1.0
|
|
|
|
1.0
|
|
|
|
—
|
|
|
Asia Pacific
|
|
|
39.0
|
|
|
|
38.0
|
|
|
|
1.0
|
|
|
All Other/Adjustments and Eliminations
|
|
|
(40.0
|
)
|
|
|
(36.0
|
)
|
|
|
(0.4
|
)
|
|
Consolidated total
|
|
|
320.0
|
|
|
|
320.0
|
|
|
|
—
|
|
|
|
•
|
|
The projected net income attributable to Mitsui & Co., Ltd. from the Mineral & Metal Resources Segment for the year ending
March 31, 2009 is ¥154.0 billion, an increase of ¥14.0 billion from the original forecast. The primary reason for the increase is a run-up in iron ore prices against a backdrop of growing demand for iron ore in China. We have assumed a
certain level of iron ore price through March 31, 2011 in our revised forecast, taking into account the forecasted demand and supply balance for iron ore, spot market prices of iron ore, etc., but would like to refrain from disclosing price
assumptions.
|
|
|
•
|
|
The projected net income attributable to Mitsui & Co., Ltd. from the Energy Segment is ¥106.0 billion, an increase of ¥6.0 billion
from the original forecast. We assume the annual average crude oil price to be US$78/barrel, US$2/barrel higher than the original forecast. We have taken into consideration the positive impact of the increase in oil prices. We also expect same level
of annual equity coal sales volume for the year ending March 31, 2011 as originally forecasted.
|
We have
not incorporated any impact related to the oil spill incident in the Gulf of Mexico in this revised forecast. Please refer to the description found in “7. The Oil Spill Incident of a Drilling Rig in the Gulf of Mexico” on “IV.
Consolidated Financial Statements” with regards to the drilling rig oil spill incident in the Gulf of Mexico.
-41-
|
|
•
|
|
The projected net income attributable to Mitsui & Co., Ltd. from the Steel Products Segment is ¥6.0 billion, same as the original
forecast. We anticipate a decline in earnings reflecting the slowdown of economy compared to the solid performance this segment reported in the six-month period ended September 30, 2010. The projected net income attributable to
Mitsui & Co., Ltd. of the Chemical Segment is ¥8.0 billion, a ¥4.0 billion decline from the original forecast due mainly to underperforming trading activities for basic petrochemicals of upstream products and polyvinyl chloride. The
projected net income attributable to Mitsui & Co., Ltd. of the Machinery & Infrastructure Projects Segment is ¥19.0 billion, a decline of ¥6.0 billion from the original forecast, anticipating an increase in mark-to-market
valuation losses, such as those on long-term power derivative contracts the oversea power producer business entered into, and a decline in earnings of the marine related business affected by the sluggish market.
|
|
|
•
|
|
The projected net income attributable to Mitsui & Co., Ltd. from the Consumer Services & IT Segment is ¥4.0 billion, a decline of
¥4.0 billion from the original forecast reflecting valuation losses related to real estate this segment reported in the six-month period ended September 30, 2010 as well as deceleration of the economy. The projected net income attributable
to Mitsui & Co., Ltd. from the Logistics & Financial Markets Segment is ¥3.0 billion, a ¥3.0 billion increase from the original forecast due mainly to an improvement in earnings at JA Mitsui Leasing, Ltd. The projected net
income attributable to Mitsui & Co., Ltd. from the Foods & Retail Segment is ¥8.0 billion a decline of ¥8.0 billion from the original forecast due to impairment losses on securities.
|
|
|
•
|
|
The projected net income attributable to Mitsui & Co., Ltd. from the Americas Segment is ¥12.0 billion, an increase of ¥2.0 billion
from the original forecast. Despite the fact that this segment reported a solid performance in the six-month period ended September 30, 2010, we forecasted a moderate increase, taking into account growing uncertainties, particularly in the U.S.
economy. The projected net income attributable to Mitsui & Co., Ltd. from the Europe, the Middle East and Africa Segment is ¥1.0 billion, an increase of ¥1.0 billion from the original forecast reflecting the solid performance of
steel products and chemical trading businesses, partially offset by the depreciation of the euro. The projected net income attributable to Mitsui & Co., Ltd. from the Asia Pacific Segment is ¥39.0 billion, an increase of ¥1.0
billion from the original forecast, due to increases in this segment’s portion of net incomes of subsidiaries of the Mineral & Metal Resources and Energy segments, reflecting an increase in commodity prices.
|
(b) Key commodity prices and other assumptions for the year ending March 31, 2011
The table below shows the assumptions of the key commodity prices and other parameters for the projected net income attributable to Mitsui & Co.,
Ltd. for the year ending March 31, 2011. Impacts of the price movements for each commodity on annual net income attributable to Mitsui & Co., Ltd. are included in the table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/3
(Original Plan)
|
|
Impact on Net
Income attributable to Mitsui & Co., Ltd.
for the Year ending March 31, 2011
|
|
11/3
(Estimated)
|
|
|
|
10/3
1-2Q
(Result)
|
|
10/3
3-4Q
(Est.)
|
|
76
|
|
|
|
|
|
Crude Oil/JCC(*1)
|
|
¥1.5 bn (US$1/bbl)
|
|
78
|
|
|
|
79
|
|
76
|
|
(*2)
|
|
|
Commodity
|
|
|
Iron Ore
|
|
¥2.1 bn (US$1/ton)
|
|
(*2)
|
|
|
137.4(*3)
|
|
(*2)
|
|
8.3 (US$/lb)
|
|
|
|
|
|
Nickel(*4)
|
|
¥1.5 bn (US$1/lb)
|
|
8.8
|
|
|
9.6
|
|
8.0
|
|
90
|
|
|
|
|
|
USD
|
|
¥0.9 bn (¥1/USD)
|
|
84
|
|
|
88
|
|
80
|
|
85
|
|
|
Forex(*5)
|
|
|
AUD
|
|
¥2.1 bn (¥1/AUD)
|
|
80
|
|
|
79
|
|
80
|
|
50
|
|
|
|
|
|
BRL
|
|
¥0.7 bn (¥1/BRL)
|
|
50
|
|
|
50
|
|
50
|
|
(*1)
|
Oil price trend is reflected in net income with a 0-6 month time lag. Currently:
|
|
|
- 6 month time lag: about 15%
|
|
|
- 3 month time lag: about 60%
|
|
|
- no time lag : about 25%
|
|
(*2)
|
we refrain from disclosing the iron ore prices used for 2011/3 forecast.
|
|
(*3)
|
Average of representative reference prices (Fine 62% Fe CFR North China) during Dec’09 – May’10
|
|
(*4)
|
Jan-Jun LME cash average price.
|
|
(*5)
|
Impact of currency fluctuation on net income of overseas subsidiaries and associated companies (denominated in functional currency) against JPY. Impact of currency
fluctuation between their functional currencies against contract currencies, mainly US$, is not included.
|
-42-
2. Dividend policy
In order to increase corporate value and maximize shareholder value, we have sought to maintain an optimal balance between
(1) achieving sustainable growth through strategic investments in areas of our core strength and growth and (2) paying out cash dividends as direct compensation to shareholders with the target dividend payout ratio of 20% of consolidated
net income.
When formulating the Medium-term Management Plan and vision for the next three to five years, we reviewed our shareholder return
policy. In light of current business circumstances, we forecasted an improvement in earnings reflecting higher prices in commodity prices, against a backdrop of high growth in emerging economies and a gradual but steady recovery of the world
economy. To achieve stable supplies among global tightening in mineral resources and energy, we believe that additional investment in expansion of existing projects, acquisition of new, competitive interests, and investment in building a stable
revenue base for the future are all essential, and determined that there is great demand for such investment. We also recognized that maintaining a robust financial base is important, one that can stand up to large-scale investments in the face of
weakened capital markets. However, with a high level of uncertainty still surrounding both the financial markets and the global economy, we also believe that it would also be to the benefit of shareholders in the medium- to long-term if we strive to
maintain a strong balance sheet. At the same time, we recognized our shareholders are expecting a stable but high level of shareholder compensation. Accordingly, we would like to maintain the target dividend payout ratio of 20% of consolidated net
income as a minimum. While we aim to steadily increase dividends from their current levels through improvements in the performance of the company, we will also consider whether shareholders should be compensated in a more flexible manner, provided
that we secure sufficient retained earnings for future business development.
Based on the above fundamental policy, we have concluded the
dividend payout ratio shall be 23% for the year ending March 31, 2011 reviewing our operating results, balance sheet and cash flow for the six-month period ended September 30, 2010, our revised earnings forecast for the year ending
March 31, 2011 and our future investment plan. Accordingly, we will pay an interim dividend of ¥20 for the six-month period ended September 30, 2010, ¥13 per share higher than for the corresponding six-month period of the previous
year. For the year ending March 31, 2011, we currently envisage an annual dividend of ¥40 (including the interim dividend), ¥22 per share higher than for the year ended March 31, 2010, on the assumption that our annual consolidated
net income attributable to Mitsui & Co., Ltd. will be ¥320 billion, and a dividend payout ratio of 23% of consolidated net income attributable to Mitsui & Co., Ltd.
We will continue to review the shareholder return policy taking into consideration the business environment, future investing activity trends, free cash flow and interest-bearing debt levels, and return
on equity.
-43-
III. Other Information
Notice:
This report contains forward-looking statements about Mitsui and its consolidated
subsidiaries within the meaning of Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based on Mitsui’s current assumptions, expectations and beliefs in light of the information currently available to
it and involve known and unknown risks, uncertainties and other factors, including, but not limited to, the outcome of other events in the Gulf of Mexico relating to the Deepwater Horizon incident. Such risks, uncertainties and other factors may
cause Mitsui’s actual results, financial position or cash flows to be materially different from any future results, financial position or cash flows expressed or implied by these forward-looking statements. These risks, uncertainties and other
factors involve the nature and scope of Mitsui’s liability with respect to the events in the Gulf of Mexico relating to the incident, including, but not limited to:
(a) It is not clear whether MOEX Offshore 2007 LLC (MOEX Offshore) will have any liability for expenses concerning the Deepwater Horizon incident that have been and will be paid by BP Exploration and
Production Inc. (BP) and if MOEX Offshore does, it is not clear what the amount of the liability is likely to be.
(b) Should BP stop payment
for the clean-up of the Deepwater Horizon incident and refuses to make payment in full for the other costs associated with the incident, MOEX Offshore may be required to make payment. Mitsui believes that BP will continue to pay clean-up costs, but
does not know to what extent BP will pay other costs associated with the incident. MOEX Offshore does not know to what extent it will pay costs under the Oil Pollution Act of 1990 (OPA) if BP does not pay.
(c) Whether legal proceedings will be brought against MOEX Offshore and its affiliates by governmental entities and the outcome of such proceedings if
they are brought cannot be predicted. It is possible that MOEX Offshore and its affiliates could be assessed substantial civil or criminal penalties and fines and that injunctive relief could be granted under various laws. To date, no such penalty,
fine or injunctive order has been imposed on MOEX Offshore.
(d) Under the OPA, each Responsible Parties (RPs) is presumed to be jointly and
severally liable for the Natural Resource Damage costs. The clean-up is not complete and these costs have not been assessed. It is unclear to MOEX Offshore at this time how these costs will be divided among those identified as RPs and MOEX Offshore
can not reasonably estimate at this time the amount of these costs.
(e) Many state and federal lawsuits have been filed by, among others, rig
workers and their family members, resort owners, restaurant owners, real estate owners, real estate agents, seafood suppliers, fisheries, fishermen, charter boat owners, boat sales/service shop owners, marina owners, shareholders of businesses
involved in the Deepwater Horizon incident, states, employees of businesses affected by the Deepwater Horizon incident, and pension funds. These lawsuits are based on a variety of different legal theories. These lawsuits are at a very early
stage and so Mitsui is unable reasonably to estimate at this time what liability if any MOEX Offshore and its affiliates may have.
-44-
(f) Mitsui is unable to reasonably
estimate at this time the amount of insurance coverage that will be available to MOEX Offshore. Mitsui is unable reasonably to estimate at this time whether and to what extent Mitsui and its consolidated subsidiaries will be able to obtain
contribution from others for any liability that is imposed on them. In addition, Mitsui is unable reasonably to estimate at this time whether and to what extent Mitsui and its consolidated subsidiaries will be required to pay contribution to others
for their liability under the OPA or other laws.
These risks, uncertainties and other factors also involve the other factors contained in
Mitsui’s most recent Annual Report on Form 20-F and other Reports on Form 6-K filed with the SEC or in its other public filings or press releases, and Mitsui undertakes no obligation to publicly update or revise any forward-looking statements.
As a result, given these factors and the magnitude of the Deepwater Horizon incident and the ongoing clean-up efforts, any such liability could have a material adverse effect on Mitsui’s consolidated results of operations and financial
condition.
-45-
IV. Consolidated Financial Statements
1. Consolidated Balance Sheets
(Millions of Yen)
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2010
|
|
|
March 31,
2010
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
¥
|
1,344,847
|
|
|
¥
|
1,401,399
|
|
|
Time deposits
|
|
|
9,562
|
|
|
|
14,563
|
|
|
Marketable securities
|
|
|
4,390
|
|
|
|
4,361
|
|
|
Trade receivables:
|
|
|
|
|
|
|
|
|
|
Notes and loans, less unearned interest
|
|
|
281,050
|
|
|
|
293,034
|
|
|
Accounts
|
|
|
1,366,540
|
|
|
|
1,382,259
|
|
|
Associated companies
|
|
|
142,725
|
|
|
|
162,166
|
|
|
Allowance for doubtful receivables
|
|
|
(18,423
|
)
|
|
|
(18,423
|
)
|
|
Inventories
|
|
|
489,960
|
|
|
|
504,847
|
|
|
Advance payments to suppliers
|
|
|
135,914
|
|
|
|
96,482
|
|
|
Deferred tax assets—current
|
|
|
40,149
|
|
|
|
39,809
|
|
|
Derivative assets
|
|
|
114,668
|
|
|
|
114,463
|
|
|
Other current assets
|
|
|
246,165
|
|
|
|
266,130
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
4,157,547
|
|
|
|
4,261,090
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments and Non-current Receivables:
|
|
|
|
|
|
|
|
|
|
Investments in and advances to associated companies
|
|
|
1,397,121
|
|
|
|
1,403,056
|
|
|
Other investments
|
|
|
826,332
|
|
|
|
965,947
|
|
|
Non-current receivables, less unearned interest
|
|
|
441,063
|
|
|
|
453,299
|
|
|
Allowance for doubtful receivables
|
|
|
(44,461
|
)
|
|
|
(48,472
|
)
|
|
Property leased to others—at cost, less accumulated depreciation
|
|
|
303,956
|
|
|
|
224,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments and non-current receivables
|
|
|
2,924,011
|
|
|
|
2,997,830
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and Equipment—at Cost:
|
|
|
|
|
|
|
|
|
|
Land, land improvements and timberlands
|
|
|
156,830
|
|
|
|
158,528
|
|
|
Buildings, including leasehold improvements
|
|
|
381,880
|
|
|
|
381,029
|
|
|
Equipment and fixtures
|
|
|
985,713
|
|
|
|
979,957
|
|
|
Mineral rights
|
|
|
144,861
|
|
|
|
132,510
|
|
|
Vessels
|
|
|
34,941
|
|
|
|
29,709
|
|
|
Projects in progress
|
|
|
155,480
|
|
|
|
170,218
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,859,705
|
|
|
|
1,851,951
|
|
|
Accumulated depreciation
|
|
|
(878,430
|
)
|
|
|
(873,391
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net property and equipment
|
|
|
981,275
|
|
|
|
978,560
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible Assets, less Accumulated Amortization
|
|
|
103,307
|
|
|
|
84,741
|
|
|
Deferred Tax Assets—Non-current
|
|
|
13,957
|
|
|
|
13,376
|
|
|
Other Assets
|
|
|
30,497
|
|
|
|
33,387
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
8,210,594
|
|
|
¥
|
8,368,984
|
|
|
|
|
|
|
|
|
|
|
|
-46-
(Millions of Yen)
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2010
|
|
|
March 31,
2010
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
Short-term debt
|
|
¥
|
268,474
|
|
|
¥
|
241,380
|
|
|
Current maturities of long-term debt
|
|
|
190,152
|
|
|
|
320,480
|
|
|
Trade payables:
|
|
|
|
|
|
|
|
|
|
Notes and acceptances
|
|
|
37,103
|
|
|
|
36,831
|
|
|
Accounts
|
|
|
1,252,023
|
|
|
|
1,307,980
|
|
|
Associated companies
|
|
|
65,124
|
|
|
|
63,760
|
|
|
Accrued expenses:
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
61,468
|
|
|
|
37,604
|
|
|
Interest
|
|
|
19,009
|
|
|
|
19,177
|
|
|
Other
|
|
|
67,085
|
|
|
|
71,582
|
|
|
Advances from customers
|
|
|
133,512
|
|
|
|
110,712
|
|
|
Derivative liabilities
|
|
|
73,072
|
|
|
|
83,972
|
|
|
Other current liabilities
|
|
|
85,789
|
|
|
|
87,289
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
2,252,811
|
|
|
|
2,380,767
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term Debt, less Current Maturities
|
|
|
2,926,952
|
|
|
|
2,909,794
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued Pension Costs and Liability for Severance Indemnities
|
|
|
33,076
|
|
|
|
33,927
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Tax Liabilities—Non-current
|
|
|
262,035
|
|
|
|
305,096
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Long-Term Liabilities
|
|
|
311,547
|
|
|
|
309,594
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
341,482
|
|
|
|
341,482
|
|
|
Capital surplus
|
|
|
428,807
|
|
|
|
428,848
|
|
|
Retained earnings:
|
|
|
|
|
|
|
|
|
|
Appropriated for legal reserve
|
|
|
59,432
|
|
|
|
53,844
|
|
|
Unappropriated
|
|
|
1,775,663
|
|
|
|
1,618,101
|
|
|
Accumulated other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains and losses on available-for-sale securities
|
|
|
60,330
|
|
|
|
123,891
|
|
|
Foreign currency translation adjustments
|
|
|
(381,435
|
)
|
|
|
(272,665
|
)
|
|
Defined benefit pension plans
|
|
|
(46,831
|
)
|
|
|
(49,132
|
)
|
|
Net unrealized gains and losses on derivatives
|
|
|
(15,269
|
)
|
|
|
(7,920
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total accumulated other comprehensive loss
|
|
|
(383,205
|
)
|
|
|
(205,826
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Treasury stock, at cost
|
|
|
(6,514
|
)
|
|
|
(6,321
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total Mitsui & Co., Ltd. shareholders’ equity
|
|
|
2,215,665
|
|
|
|
2,230,128
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interests
|
|
|
208,508
|
|
|
|
199,678
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
2,424,173
|
|
|
|
2,429,806
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
8,210,594
|
|
|
¥
|
8,368,984
|
|
|
|
|
|
|
|
|
|
|
|
Note:
The Consolidated Balance Sheets above are not reviewed by the auditors.
-47-
2. Statements
of Consolidated Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Millions of Yen)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six-month
period ended
September 30,
2009
|
|
|
Six-month
period ended
September 30,
2010
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Sales of products
|
|
|
|
¥
|
1,741,113
|
|
|
¥
|
1,948,550
|
|
|
Sales of services
|
|
|
|
|
183,797
|
|
|
|
181,088
|
|
|
Other sales
|
|
|
|
|
76,249
|
|
|
|
74,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
|
|
2,001,159
|
|
|
|
2,204,327
|
|
|
[
|
|
Total Trading Transactions:
Six-month period ended September 30, 2009, ¥4,587,732 million
Six-month period ended September 30, 2010, ¥4,866,537 million
|
|
]
|
|
|
|
|
|
|
|
|
|
Cost of Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products sold
|
|
|
|
|
(1,560,133
|
)
|
|
|
(1,666,025
|
)
|
|
Cost of services sold
|
|
|
|
|
(63,632
|
)
|
|
|
(65,451
|
)
|
|
Cost of other sales
|
|
|
|
|
(32,866
|
)
|
|
|
(35,029
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
|
|
(1,656,631
|
)
|
|
|
(1,766,505
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
|
|
344,528
|
|
|
|
437,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Expenses (Income):
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
|
|
264,060
|
|
|
|
264,514
|
|
|
Provision for doubtful receivables
|
|
|
|
|
4,475
|
|
|
|
3,483
|
|
|
Interest expense, net of interest income
|
|
|
|
|
9,362
|
|
|
|
1,214
|
|
|
Dividend income
|
|
|
|
|
(17,956
|
)
|
|
|
(24,777
|
)
|
|
Gain on sales of securities—net
|
|
|
|
|
(3,766
|
)
|
|
|
(1,214
|
)
|
|
Loss on write-down of securities
|
|
|
|
|
18,651
|
|
|
|
6,848
|
|
|
(Gain) Loss on disposal or sales of property and equipment—net
|
|
|
|
|
(755
|
)
|
|
|
111
|
|
|
Impairment loss of long-lived assets
|
|
|
|
|
999
|
|
|
|
2,527
|
|
|
Impairment loss of goodwill
|
|
|
|
|
3,108
|
|
|
|
—
|
|
|
Other expenses (income)—net
|
|
|
|
|
9,368
|
|
|
|
(4,008
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses
|
|
|
|
|
287,546
|
|
|
|
248,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations before Income Taxes and Equity in Earnings
|
|
|
|
|
56,982
|
|
|
|
189,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Taxes
|
|
|
|
|
34,848
|
|
|
|
90,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations before Equity in Earnings
|
|
|
|
|
22,134
|
|
|
|
98,495
|
|
|
Equity in Earnings of Associated Companies—Net
|
|
|
|
|
56,014
|
|
|
|
99,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations before attribution of Noncontrolling Interests
|
|
|
|
|
78,148
|
|
|
|
198,448
|
|
|
Loss from Discontinued Operations—Net (After Income Tax Effect)
|
|
|
|
|
(759
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income before attribution of Noncontrolling Interests
|
|
|
|
|
77,389
|
|
|
|
198,448
|
|
|
Net Income attributable to Noncontrolling Interests
|
|
|
|
|
(4,554
|
)
|
|
|
(15,214
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income attributable to Mitsui & Co., Ltd.
|
|
|
|
¥
|
72,835
|
|
|
¥
|
183,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
Net Income before attribution of Noncontrolling Interests
|
|
|
|
¥
|
77,389
|
|
|
¥
|
198,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) (after income tax effect):
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) on available-for-sale securities
|
|
|
|
|
61,376
|
|
|
|
(73,384
|
)
|
|
Foreign currency translation adjustments
|
|
|
|
|
48,902
|
|
|
|
(116,645
|
)
|
|
Defined benefit pension plans
|
|
|
|
|
3,879
|
|
|
|
2,302
|
|
|
Net unrealized gains (losses) on derivatives
|
|
|
|
|
8,211
|
|
|
|
(7,472
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income before attribution of Noncontrolling Interests
|
|
|
|
|
199,757
|
|
|
|
3,249
|
|
|
Comprehensive (Income) Loss attributable to Noncontrolling Interests
|
|
|
|
|
(7,127
|
)
|
|
|
2,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income attributable to Mitsui & Co., Ltd.
|
|
|
|
¥
|
192,630
|
|
|
¥
|
5,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
|
1.
|
|
The Statements of Consolidated Income above are not reviewed by the auditors.
|
|
|
|
2.
|
|
In accordance with ASC205-20, the figures for the six-month period ended September 30, 2009 relating to discontinued operations have been
reclassified.
|
-48-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Millions of Yen)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-month
period ended
September 30,
2009
|
|
|
Three-month
period ended
September 30,
2010
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of products
|
|
|
|
¥
|
887,487
|
|
|
¥
|
979,222
|
|
|
|
|
Sales of services
|
|
|
|
|
93,447
|
|
|
|
90,352
|
|
|
|
|
Other sales
|
|
|
|
|
42,782
|
|
|
|
37,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
|
|
1,023,716
|
|
|
|
1,106,730
|
|
|
[
|
|
Total Trading Transactions:
Three-month period ended September 30, 2009, ¥2,357,049 million
Three-month period ended September 30, 2010, ¥2,436,847 million
|
|
]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products sold
|
|
|
|
|
(796,163
|
)
|
|
|
(839,837
|
)
|
|
|
|
Cost of services sold
|
|
|
|
|
(33,213
|
)
|
|
|
(32,694
|
)
|
|
|
|
Cost of other sales
|
|
|
|
|
(16,569
|
)
|
|
|
(19,816
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
|
|
(845,945
|
)
|
|
|
(892,347
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
|
|
177,771
|
|
|
|
214,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Expenses (Income):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
|
|
131,602
|
|
|
|
132,405
|
|
|
|
|
Provision for doubtful receivables
|
|
|
|
|
3,660
|
|
|
|
2,303
|
|
|
|
|
Interest expense, net of interest income
|
|
|
|
|
2,915
|
|
|
|
454
|
|
|
|
|
Dividend income
|
|
|
|
|
(7,717
|
)
|
|
|
(10,268
|
)
|
|
|
|
(Gain) Loss on sales of securities—net
|
|
|
|
|
(1,546
|
)
|
|
|
2,960
|
|
|
|
|
Loss on write-down of securities
|
|
|
|
|
15,863
|
|
|
|
2,271
|
|
|
|
|
(Gain) Loss on disposal or sales of property and equipment—net
|
|
|
|
|
(494
|
)
|
|
|
414
|
|
|
|
|
Impairment loss of long-lived assets
|
|
|
|
|
999
|
|
|
|
437
|
|
|
|
|
Impairment loss of goodwill
|
|
|
|
|
3,108
|
|
|
|
—
|
|
|
|
|
Other expenses (income)—net
|
|
|
|
|
10,055
|
|
|
|
(298
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses
|
|
|
|
|
158,445
|
|
|
|
130,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations before Income Taxes and Equity in Earnings
|
|
|
|
|
19,326
|
|
|
|
83,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Taxes
|
|
|
|
|
30,784
|
|
|
|
46,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Income from Continuing Operations before Equity in Earnings
|
|
|
|
|
(11,458
|
)
|
|
|
37,424
|
|
|
Equity in Earnings of Associated Companies—Net
|
|
|
|
|
25,192
|
|
|
|
50,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations before attribution of Noncontrolling Interests
|
|
|
|
|
13,734
|
|
|
|
87,466
|
|
|
Loss from Discontinued Operations—Net (After Income Tax Effect)
|
|
|
|
|
(191
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income before attribution of Noncontrolling Interests
|
|
|
|
|
13,543
|
|
|
|
87,466
|
|
|
Net Loss (Income) attributable to Noncontrolling Interests
|
|
|
|
|
1,970
|
|
|
|
(6,767
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income attributable to Mitsui & Co., Ltd.
|
|
|
|
¥
|
15,513
|
|
|
¥
|
80,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (Loss) Income:
|
|
|
|
|
|
|
|
|
|
|
|
Net Income before attribution of Noncontrolling Interests
|
|
|
|
¥
|
13,543
|
|
|
¥
|
87,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income (after income tax effect):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) on available-for-sale securities
|
|
|
|
|
3,422
|
|
|
|
(10,231
|
)
|
|
|
|
Foreign currency translation adjustments
|
|
|
|
|
(37,085
|
)
|
|
|
9,568
|
|
|
|
|
Defined benefit pension plans
|
|
|
|
|
2,289
|
|
|
|
732
|
|
|
|
|
Net unrealized gains on derivatives
|
|
|
|
|
1,150
|
|
|
|
1,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (Loss) Income before attribution of Noncontrolling Interests
|
|
|
|
|
(16,681
|
)
|
|
|
89,440
|
|
|
Comprehensive Loss (Income) attributable to Noncontrolling Interests
|
|
|
|
|
5,315
|
|
|
|
(1,301
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (Loss) Income attributable to Mitsui & Co., Ltd.
|
|
|
|
¥
|
(11,366
|
)
|
|
¥
|
88,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
|
1.
|
|
The Statements of Consolidated Income above are not reviewed by the auditors.
|
|
|
|
2.
|
|
In accordance with ASC205-20, the figures for the three-month period ended September 30, 2009 relating to discontinued operations have been reclassified.
|
-49-
3. Statements
of Consolidated Cash Flows
(Millions of Yen)
|
|
|
|
|
|
|
|
|
|
|
|
|
Six-month
period ended
September 30,
2009
|
|
|
Six-month
period ended
September 30,
2010
|
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
|
Net income before attribution of noncontrolling interests
|
|
¥
|
77,389
|
|
|
¥
|
198,448
|
|
|
Adjustments to reconcile net income before attribution of noncontrolling interests to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations—net (after income tax effect)
|
|
|
759
|
|
|
|
—
|
|
|
Depreciation and amortization
|
|
|
67,684
|
|
|
|
69,815
|
|
|
Pension and severance costs, less payments
|
|
|
6,181
|
|
|
|
6,521
|
|
|
Provision for doubtful receivables
|
|
|
4,475
|
|
|
|
3,483
|
|
|
Gain on sales of securities—net
|
|
|
(3,766
|
)
|
|
|
(1,214
|
)
|
|
Loss on write-down of securities
|
|
|
18,651
|
|
|
|
6,848
|
|
|
Gain on disposal or sales of property and equipment—net
|
|
|
(755
|
)
|
|
|
111
|
|
|
Impairment loss of long-lived assets
|
|
|
999
|
|
|
|
2,527
|
|
|
Impairment loss of goodwill
|
|
|
3,108
|
|
|
|
—
|
|
|
Deferred income taxes
|
|
|
(10,923
|
)
|
|
|
4,470
|
|
|
Equity in earnings of associated companies, less dividends received
|
|
|
(4,441
|
)
|
|
|
(29,255
|
)
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Decrease in trade receivables
|
|
|
105,454
|
|
|
|
25,563
|
|
|
Decrease (increase) in inventories
|
|
|
53,033
|
|
|
|
(28,117
|
)
|
|
Decrease in trade payables
|
|
|
(62,302
|
)
|
|
|
(25,607
|
)
|
|
Other—net
|
|
|
73,334
|
|
|
|
37,252
|
|
|
Net cash provided by operating activities of discontinued operations
|
|
|
(91
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
328,789
|
|
|
|
270,845
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
Net decrease in time deposits
|
|
|
1,217
|
|
|
|
11,300
|
|
|
Net increase in investments in and advances to associated companies
|
|
|
(2,111
|
)
|
|
|
(25,676
|
)
|
|
Net decrease (increase) in other investments
|
|
|
32,780
|
|
|
|
(93,539
|
)
|
|
Net decrease (increase) in long-term loan receivables
|
|
|
3,436
|
|
|
|
(23,070
|
)
|
|
Net increase in property leased to others and property and equipment
|
|
|
(75,035
|
)
|
|
|
(149,494
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(39,713
|
)
|
|
|
(280,479
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in short-term debt
|
|
|
(139,653
|
)
|
|
|
52,303
|
|
|
Net increase (decrease) in long-term debt
|
|
|
90,086
|
|
|
|
(64,459
|
)
|
|
Transactions with noncontrolling interest shareholders
|
|
|
(8,189
|
)
|
|
|
9,012
|
|
|
Purchases of treasury stock—net
|
|
|
(16
|
)
|
|
|
(208
|
)
|
|
Payments of cash dividends
|
|
|
—
|
|
|
|
(20,081
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(57,772
|
)
|
|
|
(23,433
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
|
|
6,258
|
|
|
|
(23,485
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in Cash and Cash Equivalents
|
|
|
237,562
|
|
|
|
(56,552
|
)
|
|
Cash and Cash Equivalents at Beginning of Period
|
|
|
1,147,809
|
|
|
|
1,401,399
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Period
|
|
¥
|
1,385,371
|
|
|
¥
|
1,344,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
|
1.
|
|
The Statements of Consolidated Cash Flows above are not reviewed by the auditors.
|
|
|
|
2.
|
|
In accordance with ASC205-20, the figures for the six-month period ended September 30, 2009 relating to discontinued operations have been
reclassified.
|
-50-
4. Assumption
for Going Concern: N/A
5. Operating Segment Information
Six-month period ended September 30, 2009 (from April 1, 2009 to September 30, 2009) (As restated)
(Millions of Yen)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Iron
&
Steel
Products
|
|
|
Mineral
&
Metal
Resources
|
|
|
Machinery &
Infrastructure
Projects
|
|
|
Chemical
|
|
|
Energy
|
|
|
Foods &
Retail
|
|
|
Consumer
Service & IT
|
|
|
Logistics
&
Financial
Markets
|
|
|
Revenues
|
|
|
53,868
|
|
|
|
131,546
|
|
|
|
112,101
|
|
|
|
403,485
|
|
|
|
597,705
|
|
|
|
270,480
|
|
|
|
82,525
|
|
|
|
41,815
|
|
|
Gross Profit
|
|
|
16,855
|
|
|
|
32,243
|
|
|
|
44,093
|
|
|
|
33,746
|
|
|
|
66,489
|
|
|
|
42,460
|
|
|
|
26,457
|
|
|
|
24,739
|
|
|
Operating Income (Loss)
|
|
|
(561
|
)
|
|
|
24,475
|
|
|
|
4,883
|
|
|
|
8,454
|
|
|
|
38,476
|
|
|
|
11,627
|
|
|
|
(6,434
|
)
|
|
|
10,652
|
|
|
Equity in Earnings of Associated Companies—Net
|
|
|
1,732
|
|
|
|
14,458
|
|
|
|
18,407
|
|
|
|
84
|
|
|
|
14,884
|
|
|
|
4,869
|
|
|
|
(3,911
|
)
|
|
|
2,659
|
|
|
Net Income (Loss) attributable to Mitsui & Co., Ltd.
|
|
|
1,542
|
|
|
|
31,798
|
|
|
|
19,813
|
|
|
|
5,189
|
|
|
|
30,984
|
|
|
|
(6,496
|
)
|
|
|
(5,420
|
)
|
|
|
1,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets at September 30, 2009
|
|
|
432,845
|
|
|
|
820,607
|
|
|
|
1,336,337
|
|
|
|
552,667
|
|
|
|
1,527,551
|
|
|
|
609,792
|
|
|
|
534,433
|
|
|
|
401,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Trading Transactions
|
|
|
465,309
|
|
|
|
257,038
|
|
|
|
493,425
|
|
|
|
804,825
|
|
|
|
733,181
|
|
|
|
909,344
|
|
|
|
202,226
|
|
|
|
74,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
Europe,
the Middle East
and
Africa
|
|
|
Asia Pacific
|
|
|
Total
|
|
|
All Other
|
|
|
Adjustments
and
Eliminations
|
|
|
Consolidated
Total
|
|
|
Revenues
|
|
|
221,179
|
|
|
|
48,725
|
|
|
|
42,300
|
|
|
|
2,005,729
|
|
|
|
1,241
|
|
|
|
(5,811
|
)
|
|
|
2,001,159
|
|
|
Gross Profit
|
|
|
35,571
|
|
|
|
7,729
|
|
|
|
13,494
|
|
|
|
343,876
|
|
|
|
351
|
|
|
|
301
|
|
|
|
344,528
|
|
|
Operating Income (Loss)
|
|
|
6,108
|
|
|
|
(3,163
|
)
|
|
|
1,953
|
|
|
|
96,470
|
|
|
|
(2,432
|
)
|
|
|
(18,045
|
)
|
|
|
75,993
|
|
|
Equity in Earnings of Associated Companies—Net
|
|
|
84
|
|
|
|
625
|
|
|
|
1,980
|
|
|
|
55,871
|
|
|
|
—
|
|
|
|
143
|
|
|
|
56,014
|
|
|
Net Income (Loss) attributable to Mitsui & Co., Ltd.
|
|
|
(5,588
|
)
|
|
|
(1,038
|
)
|
|
|
13,494
|
|
|
|
85,351
|
|
|
|
1,144
|
|
|
|
(13,660
|
)
|
|
|
72,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets at September 30, 2009
|
|
|
438,034
|
|
|
|
156,884
|
|
|
|
264,453
|
|
|
|
7,075,401
|
|
|
|
2,838,098
|
|
|
|
(1,618,525
|
)
|
|
|
8,294,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Trading Transactions
|
|
|
247,295
|
|
|
|
213,589
|
|
|
|
191,615
|
|
|
|
4,592,584
|
|
|
|
1,241
|
|
|
|
(6,093
|
)
|
|
|
4,587,732
|
|
Six-month period ended
September 30, 2010 (from April 1, 2010 to September 30, 2010)
(Millions of Yen)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Iron
&
Steel
Products
|
|
|
Mineral
&
Metal
Resources
|
|
|
Machinery &
Infrastructure
Projects
|
|
|
Chemical
|
|
|
Energy
|
|
|
Foods &
Retail
|
|
|
Consumer
Service & IT
|
|
|
Logistics
&
Financial
Markets
|
|
|
Revenues
|
|
|
81,718
|
|
|
|
224,488
|
|
|
|
124,187
|
|
|
|
386,606
|
|
|
|
667,775
|
|
|
|
283,262
|
|
|
|
73,552
|
|
|
|
37,497
|
|
|
Gross Profit
|
|
|
19,910
|
|
|
|
90,516
|
|
|
|
44,260
|
|
|
|
31,827
|
|
|
|
103,570
|
|
|
|
37,112
|
|
|
|
24,383
|
|
|
|
21,563
|
|
|
Operating Income (Loss)
|
|
|
4,209
|
|
|
|
81,573
|
|
|
|
2,592
|
|
|
|
8,090
|
|
|
|
73,298
|
|
|
|
4,994
|
|
|
|
(4,742
|
)
|
|
|
6,591
|
|
|
Equity in Earnings of Associated Companies—Net
|
|
|
1,966
|
|
|
|
46,156
|
|
|
|
13,527
|
|
|
|
1,908
|
|
|
|
22,115
|
|
|
|
1,546
|
|
|
|
1,711
|
|
|
|
6,212
|
|
|
Net Income attributable to Mitsui & Co., Ltd.
|
|
|
3,929
|
|
|
|
77,133
|
|
|
|
9,600
|
|
|
|
4,826
|
|
|
|
64,856
|
|
|
|
2,908
|
|
|
|
1,483
|
|
|
|
3,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets at September 30, 2010
|
|
|
465,222
|
|
|
|
956,712
|
|
|
|
1,460,741
|
|
|
|
573,641
|
|
|
|
1,438,633
|
|
|
|
603,618
|
|
|
|
517,248
|
|
|
|
372,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
Europe,
the Middle East
and Africa
|
|
|
Asia Pacific
|
|
|
Total
|
|
|
All Other
|
|
|
Adjustments
and
Eliminations
|
|
|
Consolidated
Total
|
|
|
Revenues
|
|
|
190,482
|
|
|
|
73,388
|
|
|
|
60,470
|
|
|
|
2,203,425
|
|
|
|
902
|
|
|
|
—
|
|
|
|
2,204,327
|
|
|
Gross Profit
|
|
|
38,206
|
|
|
|
10,616
|
|
|
|
15,163
|
|
|
|
437,126
|
|
|
|
398
|
|
|
|
298
|
|
|
|
437,822
|
|
|
Operating Income (Loss)
|
|
|
15,012
|
|
|
|
1,891
|
|
|
|
2,616
|
|
|
|
196,124
|
|
|
|
(2,728
|
)
|
|
|
(23,571
|
)
|
|
|
169,825
|
|
|
Equity in Earnings of Associated Companies—Net
|
|
|
2,866
|
|
|
|
46
|
|
|
|
1,414
|
|
|
|
99,467
|
|
|
|
—
|
|
|
|
486
|
|
|
|
99,953
|
|
|
Net Income attributable to Mitsui & Co., Ltd.
|
|
|
9,793
|
|
|
|
647
|
|
|
|
21,997
|
|
|
|
200,504
|
|
|
|
2,097
|
|
|
|
(19,367
|
)
|
|
|
183,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets at September 30, 2010
|
|
|
388,953
|
|
|
|
113,545
|
|
|
|
331,458
|
|
|
|
7,222,744
|
|
|
|
2,708,216
|
|
|
|
(1,720,366
|
)
|
|
|
8,210,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
|
|
1.
|
|
|
Operating segment information above is not reviewed by the auditors.
|
|
|
|
|
2.
|
|
|
In accordance with ASC205-20, the figures for the six-month period ended September 30, 2009 relating to discontinued operations have been reclassified. The reclassification
to “Loss from Discontinued Operations—Net (After Income Tax Effect)” is included in “Adjustments and Eliminations.”
|
|
|
|
|
3.
|
|
|
“All Other” includes business activities which primarily provide services, such as financing services and operations services to external customers and/or to the
companies and associated companies. Total assets of “All Other” at September 30, 2009 and 2010 consisted primarily of cash and cash equivalents and time deposits related to financing activities, and assets of certain subsidiaries
related to the above services.
|
|
|
|
|
4.
|
|
|
Net Income attributable to Mitsui & Co., Ltd. of “Adjustments and Eliminations” includes income and expense items that are not allocated to specific reportable
operating segments, such as certain expenses of the corporate departments, and eliminations of intersegment transactions.
|
|
|
|
|
5.
|
|
|
Transfers between operating segments are made at cost plus a markup.
|
|
|
|
|
6.
|
|
|
During the three-month period ended September 30, 2010, Westport Petroleum, Inc. which was formerly operating under “Americas” segment, was transferred to
“Energy” segment with the aim to optimize global oil trading/marketing strategy. In accordance with this change, the operating segment information for the six-month period ended September 30, 2009 has been restated to conform to the
current period presentation.
|
|
|
|
|
7.
|
|
|
During the three-month period ended June 30, 2010, revenues were newly included in the measure of segments’ performance reviewed by the chief operating decision maker.
Therefore revenues of the operating segments are disclosed in the operating segment information instead of total trading transactions. In accordance with this change, revenues are added to the operating segment information for the six-month period
ended September 30, 2009 to ensure comparability.
|
|
|
|
|
8.
|
|
|
Operating Income (Loss) reflects the companies’ a) Gross Profit, b) Selling, general and administrative expenses, and c) Provision for doubtful receivables as presented
in the Statements of Consolidated Income.
|
|
|
|
|
9.
|
|
|
During the three-month period ended March 31, 2010, the companies changed the reporting of total trading transactions for transactions where the Company and certain
subsidiaries serve as an agent, and not as a contracting party, from gross amounts, which included transaction volume exchanged between the contracting parties and commissions earned as an agent; to net amounts, which include only commissions. In
accordance with this change, the operating segment information for the six-month period ended September 30, 2009 has been reclassified.
|
-51-
Three-month period ended
September 30, 2009 (from July 1, 2009 to September 30, 2009) (As restated)
(Millions of Yen)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Iron
&
Steel
Products
|
|
|
Mineral
&
Metal
Resources
|
|
|
Machinery &
Infrastructure
Projects
|
|
|
Chemical
|
|
|
Energy
|
|
|
Foods
&
Retail
|
|
|
Consumer
Service & IT
|
|
|
Logistics
&
Financial
Markets
|
|
|
Revenues
|
|
|
27,591
|
|
|
|
68,866
|
|
|
|
56,540
|
|
|
|
202,980
|
|
|
|
300,324
|
|
|
|
141,552
|
|
|
|
43,359
|
|
|
|
24,433
|
|
|
Gross Profit
|
|
|
8,083
|
|
|
|
18,066
|
|
|
|
22,123
|
|
|
|
14,952
|
|
|
|
36,400
|
|
|
|
20,312
|
|
|
|
14,657
|
|
|
|
14,860
|
|
|
Operating Income (Loss)
|
|
|
(1,313
|
)
|
|
|
14,088
|
|
|
|
1,087
|
|
|
|
1,934
|
|
|
|
22,161
|
|
|
|
4,753
|
|
|
|
(2,024
|
)
|
|
|
7,888
|
|
|
Equity in Earnings of Associated Companies—Net
|
|
|
359
|
|
|
|
7,007
|
|
|
|
10,096
|
|
|
|
340
|
|
|
|
6,830
|
|
|
|
2,422
|
|
|
|
(4,882
|
)
|
|
|
1,671
|
|
|
Net Income (Loss) attributable to Mitsui & Co., Ltd.
|
|
|
127
|
|
|
|
12,125
|
|
|
|
6,769
|
|
|
|
610
|
|
|
|
15,154
|
|
|
|
(11,408
|
)
|
|
|
(5,499
|
)
|
|
|
1,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets at September 30, 2009
|
|
|
432,845
|
|
|
|
820,607
|
|
|
|
1,336,337
|
|
|
|
552,667
|
|
|
|
1,527,551
|
|
|
|
609,792
|
|
|
|
534,433
|
|
|
|
401,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Trading Transactions
|
|
|
240,340
|
|
|
|
138,571
|
|
|
|
257,103
|
|
|
|
411,968
|
|
|
|
367,320
|
|
|
|
456,359
|
|
|
|
109,727
|
|
|
|
43,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
Europe,
the Middle East
and Africa
|
|
|
Asia Pacific
|
|
|
Total
|
|
|
All Other
|
|
|
Adjustments
and
Eliminations
|
|
|
Consolidated
Total
|
|
|
Revenues
|
|
|
112,385
|
|
|
|
26,921
|
|
|
|
21,155
|
|
|
|
1,026,106
|
|
|
|
667
|
|
|
|
(3,057
|
)
|
|
|
1,023,716
|
|
|
Gross Profit
|
|
|
17,496
|
|
|
|
4,270
|
|
|
|
6,771
|
|
|
|
177,990
|
|
|
|
(235
|
)
|
|
|
16
|
|
|
|
177,771
|
|
|
Operating Income (Loss)
|
|
|
2,834
|
|
|
|
(1,818
|
)
|
|
|
1,065
|
|
|
|
50,655
|
|
|
|
(1,383
|
)
|
|
|
(6,763
|
)
|
|
|
42,509
|
|
|
Equity in Earnings of Associated Companies—Net
|
|
|
160
|
|
|
|
148
|
|
|
|
1,070
|
|
|
|
25,221
|
|
|
|
—
|
|
|
|
(29
|
)
|
|
|
25,192
|
|
|
Net Income (Loss) attributable to Mitsui & Co., Ltd.
|
|
|
(3,013
|
)
|
|
|
(1,001
|
)
|
|
|
6,062
|
|
|
|
20,964
|
|
|
|
1,387
|
|
|
|
(6,838
|
)
|
|
|
15,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets at September 30, 2009
|
|
|
438,034
|
|
|
|
156,884
|
|
|
|
264,453
|
|
|
|
7,075,401
|
|
|
|
2,838,098
|
|
|
|
(1,618,525
|
)
|
|
|
8,294,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Trading Transactions
|
|
|
125,847
|
|
|
|
114,280
|
|
|
|
94,292
|
|
|
|
2,359,438
|
|
|
|
667
|
|
|
|
(3,056
|
)
|
|
|
2,357,049
|
|
Three-month period ended
September 30, 2010 (from July 1, 2010 to September 30, 2010)
(Millions of Yen)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Iron
&
Steel
Products
|
|
|
Mineral
&
Metal
Resources
|
|
|
Machinery &
Infrastructure
Projects
|
|
|
Chemical
|
|
|
Energy
|
|
|
Foods &
Retail
|
|
|
Consumer
Service & IT
|
|
|
Logistics
&
Financial
Markets
|
|
|
Revenues
|
|
|
51,887
|
|
|
|
109,890
|
|
|
|
64,063
|
|
|
|
179,662
|
|
|
|
337,408
|
|
|
|
141,774
|
|
|
|
39,472
|
|
|
|
19,511
|
|
|
Gross Profit
|
|
|
9,748
|
|
|
|
42,662
|
|
|
|
20,742
|
|
|
|
14,908
|
|
|
|
51,884
|
|
|
|
18,417
|
|
|
|
12,275
|
|
|
|
11,149
|
|
|
Operating Income (Loss)
|
|
|
1,793
|
|
|
|
38,137
|
|
|
|
(55
|
)
|
|
|
2,826
|
|
|
|
36,320
|
|
|
|
1,977
|
|
|
|
(2,334
|
)
|
|
|
3,370
|
|
|
Equity in Earnings of Associated Companies—Net
|
|
|
1,227
|
|
|
|
22,736
|
|
|
|
4,789
|
|
|
|
1,149
|
|
|
|
12,634
|
|
|
|
1,735
|
|
|
|
(297
|
)
|
|
|
3,553
|
|
|
Net Income (Loss) attributable to Mitsui & Co., Ltd.
|
|
|
1,594
|
|
|
|
37,438
|
|
|
|
3,033
|
|
|
|
1,670
|
|
|
|
32,292
|
|
|
|
1,243
|
|
|
|
(2,745
|
)
|
|
|
2,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets at September 30, 2010
|
|
|
465,222
|
|
|
|
956,712
|
|
|
|
1,460,741
|
|
|
|
573,641
|
|
|
|
1,438,633
|
|
|
|
603,618
|
|
|
|
517,248
|
|
|
|
372,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
Europe,
the Middle East
and Africa
|
|
|
Asia Pacific
|
|
|
Total
|
|
|
All Other
|
|
|
Adjustments
and
Eliminations
|
|
|
Consolidated
Total
|
|
|
Revenues
|
|
|
92,274
|
|
|
|
40,437
|
|
|
|
29,926
|
|
|
|
1,106,304
|
|
|
|
430
|
|
|
|
(4
|
)
|
|
|
1,106,730
|
|
|
Gross Profit
|
|
|
18,214
|
|
|
|
5,884
|
|
|
|
7,711
|
|
|
|
213,594
|
|
|
|
181
|
|
|
|
608
|
|
|
|
214,383
|
|
|
Operating Income (Loss)
|
|
|
7,558
|
|
|
|
1,281
|
|
|
|
1,416
|
|
|
|
92,289
|
|
|
|
(1,364
|
)
|
|
|
(11,250
|
)
|
|
|
79,675
|
|
|
Equity in Earnings of Associated Companies—Net
|
|
|
2,034
|
|
|
|
(240
|
)
|
|
|
466
|
|
|
|
49,786
|
|
|
|
—
|
|
|
|
256
|
|
|
|
50,042
|
|
|
Net Income (Loss) attributable to Mitsui & Co., Ltd.
|
|
|
4,734
|
|
|
|
264
|
|
|
|
10,252
|
|
|
|
91,932
|
|
|
|
928
|
|
|
|
(12,161
|
)
|
|
|
80,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets at September 30, 2010
|
|
|
388,953
|
|
|
|
113,545
|
|
|
|
331,458
|
|
|
|
7,222,744
|
|
|
|
2,708,216
|
|
|
|
(1,720,366
|
)
|
|
|
8,210,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
|
|
1.
|
|
|
Operating segment information above is not reviewed by the auditors.
|
|
|
|
|
2.
|
|
|
In accordance with ASC205-20, the figures for the three-month period ended September 30, 2009 relating to discontinued operations have been reclassified. The
reclassification to “Loss from Discontinued Operations—Net (After Income Tax Effect)” is included in “Adjustments and Eliminations.”
|
|
|
|
|
3.
|
|
|
“All Other” includes business activities which primarily provide services, such as financing services and operations services to external customers and/or to the
companies and associated companies. Total assets of “All Other” at September 30, 2009 and 2010 consisted primarily of cash and cash equivalents and time deposits related to financing activities, and assets of certain subsidiaries
related to the above services.
|
|
|
|
|
4.
|
|
|
Net Income attributable to Mitsui & Co., Ltd. of “Adjustments and Eliminations” includes income and expense items that are not allocated to specific reportable
operating segments, such as certain expenses of the corporate departments, and eliminations of intersegment transactions.
|
|
|
|
|
5.
|
|
|
Transfers between operating segments are made at cost plus a markup.
|
|
|
|
|
6.
|
|
|
During the three-month period ended September 30, 2010, Westport Petroleum, Inc. which was formerly operating under “Americas” segment, was transferred to
“Energy” with the aim to optimize global oil trading/marketing strategy. In accordance with this change, the operating segment information for the three-month period ended September 30, 2009 has been restated to conform to the current
period presentation.
|
|
|
|
|
7.
|
|
|
During the three-month period ended June 30, 2010, revenues were newly included in the measure of segments’ performance reviewed by the chief operating decision maker.
Therefore revenues of the operating segments are disclosed in the operating segment information instead of total trading transactions. In accordance with this change, revenues are added to the operating segment information for the three-month period
ended September 30, 2009 to ensure comparability.
|
|
|
|
|
8.
|
|
|
Operating Income (Loss) reflects the companies’ a) Gross Profit, b) Selling, general and administrative expenses, and c) Provision for doubtful receivables as presented in
the Statements of Consolidated Income.
|
|
|
|
|
9.
|
|
|
During the three-month period ended March 31, 2010, the companies changed the reporting of total trading transactions for transactions where the Company and certain
subsidiaries serve as an agent, and not as a contracting party, from gross amounts, which included transaction volume exchanged between the contracting parties and commissions earned as an agent; to net amounts, which include only commissions. In
accordance with this change, the operating segment information for the three-month period ended September 30, 2009 has been reclassified.
|
6. Significant Changes in Shareholders’ Equity: None
-52-
7. The Oil
Spill Incident of a Drilling Rig in the Gulf of Mexico
On April 20, 2010, a third party semi-submersible drilling rig, Deepwater Horizon,
which was conducting exploration work on the Mississippi Canyon 252 block in the Gulf of Mexico, experienced a fire incident, which sank the drilling rig and resulted in leakage of hydrocarbons from the well (Well). MOEX Offshore 2007 LLC (MOEX
Offshore), a 100% subsidiary of MOEX USA Corporation (MOEX USA), has a 10% working interest in the block as a non-operator. MOEX USA is a 100% subsidiary of Mitsui Oil Exploration Co., Ltd. (MOECO) in which Mitsui & Co., Ltd. (Mitsui) has a
69.91% equity interest. BP Exploration and Production Inc. (BP), the operator of the project in the block, has been working with U.S. government agencies to drill relief wells for the plugging of the Well permanently. On September 19, 2010, BP
publicly announced that the operations to plug the Well were successfully completed and that it would now proceed to complete the abandonment of the Well and plug and abandon the relief wells.
According to BP’s second quarterly financial report (the second quarterly financial period ends on June 30, 2010), BP posted approximately US$
32.2 billion of costs related to the Deepwater Horizon incident.
As of September 30, 2010, Mitsui is not able to estimate the total
amount of liabilities that it and its consolidated subsidiaries may incur as a result of the Deepwater Horizon incident, and therefore, Mitsui has not posted any financial liabilities during its second quarterly consolidated financial period. Based
on the Joint Operating Agreement (JOA) concerning the Well to which MOEX Offshore and BP are parties, various liabilities associated with the Deepwater Horizon incident are to be paid by BP. Subject to the outcome of the investigation regarding the
root cause of the incident and the degree of responsibilities ultimately afforded to the parties concerned, the liability assigned to MOEX Offshore would be zero as of September 30, 2010 at the minimum level where certain conditions are met in
the JOA. The zero accrual is not intended to represent an opinion of Mitsui that it and its consolidated subsidiaries will not incur any future liability related to the Deepwater Horizon incident. Rather, the zero accrual is based on the application
of accounting rules to the currently available set of facts where the relevant accounting rules do not require loss recognition in situations where a loss is not considered probable or cannot be reasonably estimated.
Mitsui considered the following factors in determining if, as of September 30, 2010, Mitsui should accrue financial liabilities as a result of the
Deepwater Horizon incident.
As of November 2, 2010, MOEX Offshore has received invoices for reimbursement totaling US$1,898 million in
total from BP. BP has stated that these invoices were issued pursuant to the JOA and that it considers the invoiced amounts as MOEX Offshore’s 10% proportionate share of costs related to the Deepwater Horizon incident. However, MOEX Offshore is
uncertain how properly to aggregate the invoices, and therefore, MOEX Offshore has asked BP for clarification, but BP has not yet responded as of the end of October 2010. MOEX Offshore estimates that the portion of the costs for the incident paid by
BP through the end of September 2010 that corresponds to MOEX Offshore’s 10% interest would be approximately US$1,000 million. In addition, MOEX Offshore is now reviewing the details of these costs. MOEX Offshore expects that it will continue
to receive invoices from BP, but is unable reasonably to estimate what the amount of those future invoices will be. It is not certain at this point if MOEX Offshore will have to make payment or not, and it cannot reasonably estimate the size of any
payment.
In light of the numerous investigations that are currently taking place to determine the facts and circumstances surrounding the
Deepwater Horizon incident and the existence of uncertainty with respect to application of the provisions in the JOA, MOEX Offshore has withheld payment of invoices BP has issued to it seeking reimbursement of costs incurred by BP related to
BP’s response to the incident. MOEX Offshore expects to continue to withhold payment while it continues to examine the situation.
Under
the Oil Pollution Act of 1990 (OPA), Responsible Parties (RPs), as defined by OPA, may have joint and several liability. The United States Coast Guard (USCG) has sent invoices to parties it has identified as RPs, which consist of the parties to the
JOA, including BP and MOEX Offshore, and other parties that had a role in the Deepwater Horizon incident and to parties that have been identified as guarantors of RPs.
-53-
Mitsui understands that these invoices
from the USCG, which are a part of the claims under the OPA, total US$581 million as of November 2, 2010. Mitsui believes that BP has paid all of the USCG invoices. Mitsui expects that BP will continue to pay the USCG invoices in full because
BP’s ultimate parent company, BP p.l.c., has stated that it will pay all the reasonable clean-up costs for the incident and has established a fund that totals $20 billion, among other things, to compensate those injured as a result of the
incident. As described above, BP has stated that it considers the amounts invoiced to MOEX Offshore for reimbursement as MOEX Offshores’s 10% proportionate share of the costs it has incurred in responding to the Deepwater Horizon incident,
including the OPA related liabilities mentioned above, purportedly under the terms of the JOA, and MOEX Offshore, for now, has withheld payment of the invoices and has not posted any related contingent liabilities. Should BP stop payment for the
clean-up of the Deepwater Horizon incident and refuse to make payment in full for the other costs associated with the incident, MOEX Offshore may be required to make payment.
MOEX Offshore may be subject to fines under the Clean Water Act (CWA) and other state and federal statutes. MOEX Offshore may also be subject to Natural Resource Damage (NRD) costs under the OPA as an RP,
and for similar damages under similar state laws. The United States and the states of Louisiana, Mississippi, Alabama, Florida, and Texas have begun an NRD assessment. The USCG and the Bureau of Ocean Energy Management, Regulation and Enforcement
(“BOEM”) are conducting a joint investigation into the cause of the incident and will be issuing a final investigative report with conclusions and recommendations. In addition, the United States Department of Justice is conducting an
investigation to determine if any civil or criminal laws have been broken, and a United States Presidential Commission, the United States Congress and various United States federal and state agencies, including the United States Chemical Safety and
Hazard Investigation Board, are conducting investigations. In light of the ongoing investigations relating to the fines and costs mentioned above, MOEX Offshore does not know if any such fines will be imposed or costs assessed upon MOEX Offshore
which is a non-operator and is unable reasonably to estimate the size of any such possible losses.
Moreover, MOECO, MOEX USA, MOEX Offshore
and Mitsui & Co. (U.S.A.), Inc. have been named as defendants in a number of civil lawsuits seeking recovery for damages purportedly caused by the Deepwater Horizon incident. In addition, plaintiffs have also named as a defendant a company
identified as “Mitsui & Co.” in some of these lawsuits. It is unclear to Mitsui as to which entity the plaintiffs are referring. Those lawsuits have been brought under a large number of different legal theories. In May and June
2010, BP and plaintiffs filed motions seeking to have certain of the federal cases transferred to a single judge for pretrial proceedings. Those motions were granted by the Judicial Panel on Multidistrict Litigation on August 10, 2010 and
certain of the federal lawsuits were sent for pretrial proceedings to a federal district court judge in the Eastern District of Louisiana. As a result, each defendant mentioned above will be engaged in the pretrial proceeding before this judge. If
these cases are not resolved during the pretrial process, they may be returned for trial to the courts where they were originally filed. The civil lawsuits are at an early stage and so Mitsui is unable reasonably to estimate what MOEX
Offshore’s and its affiliates’ possible loss, if any, will be.
MOEX Offshore has insurance, but the amount of that insurance is
substantially less than the amount of the claims it has received to date. In addition, MOEX Offshore may also have coverage as an additional insured under the insurance policies of third parties that are involved in the Deepwater Horizon incident.
Mitsui believes that the potential coverage under those policies also is substantially less than the amount of the claims MOEX Offshore has received to date.
Mitsui recognized an impairment loss for the amounts invested to acquire the interest of this lease that were booked as Property and Equipment (Mineral rights) in Impairment loss of long-lived assets, and
also recognized certain expenses relating to the well in Other expense-net for the three-month period ended June 30, 2010. Other than that, Mitsui is unable, at this time, to determine the impact, if any, the incident will have on its future
consolidated financial position, consolidated operating results or consolidated cash flows.
-54-
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