Investor Day

In June 2024, we hosted the MCSV Creation Forum, which was attended by 67 institutional investors and analysts. We explained and discussed our MCSV creation track record, the management and operational capabilities that are the source of our value creation, as well as the growth strategies of the newly established Environmental Energy and Smart-Life Creation business segments. We also held discussions with our independent directors, in a frank exchange of our views on MCSV creation from a monitoring perspective.

The Eneco case is an example of value enhancement as a result of our collective capabilities, such as having wide industrial networks and intelligence, deep business insights, and flexible business models.

Eneco is an integrated energy company, mainly engaged in the production and supply of electricity, gas, and heat, with power generation, trading, and retail divisions. Prior to our acquisition of Eneco, it was formed by multiple local Dutch municipalities. Since our joint acquisition of Eneco with Chubu Electric Power in 2020, it has continued maximizing its strengths as a power generator, by local production and consumption, clean power, and on-site capabilities. We have deployed specialized teams with extensive business insights to work for Eneco on providing financial and corporate functions, transforming the corporate culture and business mindset, providing a diverse customer base, and creating sustainable value. As a result, Eneco's net income grew from €120 million at the time of acquisition to recently, €250-€350 million, growing EBITDA at a compound average growth rate of 10%, which was in line with the target we set at the time of acquisition.

For further possibilities in the medium term, we are considering expanding our B2C businesses by combining our mobility business insights with power supply for EVs, our virtual power plant (VPP) business, and our retail businesses. In the long term, we are looking at combining Eneco's power generation capabilities with our power-to-X businesses, such as green hydrogen and related products production businesses and a comprehensive approach targeting hydrogen consumers. We believe that these initiatives will lead not only to growth for Eneco, but also to growth acceleration and strengthening of our core competencies.

Our business segment makes the most of networks, business development business development, and marketing capabilities, and marketing capabilities cultivated through our LNG, crude oil / petroleum products, and LPG businesses, aiming for selective development of our next-generation energy businesses. Our segment mission is to provide optimal energy solutions that meets the energy and decarbonization needs of various industries. Also, because the raw materials for next-generation energy is a field where other business segments are deeply involved and have strengths in, we aim to create MCSV by multiplying the strengths among segments.

Smart-Life Creation (S.L.C.) covers a wide range of business areas including retail, apparel, food distribution and logistics, healthcare, finance, and digital solutions. Based on the concept of MCSV creation through addressing societal challenges under Midterm Corporate Strategy 2024, as the business segment handling the business areas closest to consumers, S.L.C. will launch multiple appealing businesses that meet societal challenges and consumer needs from a C2B* starting point, and coordinate closely with B2B businesses in other business areas where we have strengths, such as mobility solutions, natural gas, renewable energy, and urban development, to build a Smart-Life economic zone that leverages our core competencies.

Nakanishi: In terms of creating MCSV, I think that creating new businesses while making use of the existing business base is very important. For example, I believe that operating businesses that combine the growing lease demand for electric vehicles (EV) in Europe, the use of in-vehicle batteries, and the use of green power, while leveraging Eneco’s customer base as an integrated energy company, will lead to the creation of MCSV. Recently, with an increase in energy demand in the semiconductor and digital businesses, the Japanese government is reexamined its energy policies, but also, beyond Japan, in Europe and the United States as well, there is more attention given to energy, and so there are opportunities to make use of an integrated energy company like Eneco in a variety of regions. For future development, we do not want to immediately pursue a sense of scale, but to prepare projects so that we can attempt expansion of businesses while carrying out Proof of Concept (POC).

Saito: We are conducting studies in the United States on clean ammonia and e-methane production, and are exploring the possibility of providing them to Japanese customers in the future. The next-generation energy business is similar to the LNG business model, and we will promote next-generation energy projects by taking advantage of our strengths cultivated through our LNG business.

Kondo: The creation of MCSV means achieving sustainable growth while addressing societal issues with our core competencies, and societal issues do not have borders. Although 90% of the segment’s assets are located in Japan, MC as a whole has strong networks and relationships with local conglomerates in major ASEAN countries that it has built up over many years. We will use these to create businesses within these countries. The value we can provide, such as bringing LAWSON overseas, lets us aim for win-win solutions.

Sagiya: At the outset of formulating Midterm Corporate Strategy 2024, the discussion centered on leveraging synergies among the business segments to demonstrate MC’s core competencies and enhance profitability through large-scale projects unique to MC. Afterwards, specific measures were discussed and carried out at the frontline level, and as a result, there are currently many ideas around MCSV. From the perspective of DX, the speed of the cycle in carrying out POCs, gauging the market’s response, and deciding whether to execute these ideas, is accelerating. Within the decision-making framework as well, I feel collaboration that transcends organizational barriers has been strongly built through the establishment of task forces, and organizational restructuring.

Akiyama: For example, in the case of conglomerate manufacturers with strong IP, carrying the IP across to multiple business sectors shows in the balance sheet, and it is easy to see that value has been created. On the other hand, MC does not make products, and while we have followed the path of upgrading our value chains in line with current trends, this is hard to explain without something “tangible” like IP. However, I see MC as having the organizational strength to learn from its failures, and utilize what it has learned to increase the probability and reproducibility of our success. MC gathers highly accurate information from a variety of perspectives, determining where the world’s highest quality assets are and how best to access them, and tirelessly checks this information on a macro and quantitative level, and if the information is highly reliable, makes bold decisions. At the same time, there is an established methodology for making contextual decisions to determine if MC should continue with a project when the outlook is uncertain. I think MC’s structure to maintain a certain probability of success and increase reproducibility, in any initiative, is its strength.

Akiyama: Midterm Corporate Strategy 2024 was formulated together with the independent directors’ involvement, and for that reason I feel that we have been able to conduct thorough monitoring right from the start. With regards to current initiatives, I have a real sense that they are steadily progressing, including the parts for which results are hard to see. I think it is extremely important to think about how to show shareholders and the market the parts that are hard to see, for example, investments that MC is committed to but has not yet executed, and investments in the preparation phase.

Sagiya: The Value-Added Cyclical Growth Model was implemented before Midterm Corporate Strategy 2024, and the Board of Directors has been able to confirm its results with numbers. When I was first appointed as an independent director, I imagined that the withdrawal from legacy businesses or businesses with some emotional attachment would be met with some internal resistance, but after logical and objective debate within each business segment, cyclical growth reviews were conducted, and progress was reported to the Board of Directors, and monitoring effectively achieved. With regards to MCSV, my personal understanding has deepened with continuous and consistent discussion. In the course of continuing to explore MCSV, initiatives that are considered to be wrong are discontinued, and further studies of new ideas are progressing. Regarding the pros and cons, and timing of investments, we feel that preparation is always being made so that investments can be executed at the appropriate time.