Mitsui 20-F 2009
Documents found in this filing:
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
For the fiscal year ended March 31, 2009
For the transition period from to
Date of event requiring this shell company report
Commission file number 0-9929
MITSUI BUSSAN KABUSHIKI KAISHA
(Exact name of Registrant as specified in its charter)
MITSUI & CO., LTD.
(Translation of Registrants name into English)
(Jurisdiction of incorporation or organization)
2-1, OHTEMACHI 1-CHOME, CHIYODA-KU, TOKYO 100-0004, JAPAN
(Address of principal executive offices)
Katsurao Yoshimori, 81-3-3285-7533, K.Yoshimori@mitsui.com
(Name, Telephone, E-mail Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Securities registered or to be registered pursuant to Section 12(g) of the Act.
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report.
As of March 31, 2009, 1,821,158,020 shares of common stock were outstanding including
17,319,480 shares represented by an aggregate of 865,974 American Depositary Shares.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes x No ¨
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP x International Financial Reporting Standards as issued Other ¨
by the International Accounting Standards Board ¨
If Other has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 ¨ Item 18 ¨
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No x
Certain References and Information
As used in this report, Mitsui is used to refer to Mitsui & Co., Ltd. (Mitsui Bussan Kabushiki Kaisha), we, us, and our are used to indicate Mitsui & Co., Ltd. and subsidiaries, unless otherwise indicated. Share means one share of Mitsuis common stock, ADS means an American Depositary Share representing 20 shares, and ADR means an American Depositary Receipt evidencing one or more ADSs. Also, dollar or $ means the lawful currency of the United States of America, and yen or ¥ means the lawful currency of Japan.
All financial statements and information contained in this annual report have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, except where otherwise noted.
A Cautionary Note on Forward-Looking Statements
This annual report includes forward-looking statements based on our current expectations, assumptions, estimates and projections about our business, our industry and capital markets around the world. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as may, expect, anticipate, estimate, plan or similar words. The forward-looking statements in this annual report are subject to various risks, uncertainties and assumptions. These statements discuss future expectations, identify strategies, contain projections of results of operations or of our financial position, or state other forward-looking information. Known and unknown risks, uncertainties and other factors could cause our actual operating results to differ materially from those contained or implied in any forward-looking statement. Our expectations expressed in these forward-looking statements may not turn out to be correct, and our actual results could materially differ from and be worse than our expectations.
Important risks and factors that could cause our actual results to differ materially from our expectations are discussed in this Item 3.D. Risk Factors or elsewhere in this annual report and include, without limitation:
We do not assume, and specifically disclaim, any obligation to update any forward-looking statements which speak only as of the date made.
TABLE OF CONTENTS
Item 3. Key Information.
The selected consolidated income statement data and the selected consolidated cash flow statement data for the years ended March 31, 2009, 2008, and 2007 and the selected consolidated balance sheet data as of March 31, 2009 and 2008 below are derived from our audited consolidated financial statements prepared in accordance with U.S. GAAP, which are included elsewhere in this annual report. The selected consolidated income statement data and the selected consolidated cash flow statement data for the years ended March 31, 2006 and 2005 and the selected consolidated balance sheet data as of March 31, 2007, 2006 and 2005 are derived from our previously published audited consolidated financial statements prepared in accordance with U.S. GAAP, which are not included in this annual report. The consolidated financial statements as of March 31, 2009 and 2008 and for the years ended March 31, 2009, 2008 and 2007 have been audited by Deloitte Touche Tohmatsu(*), independent registered public accounting firm, whose report is filed as part of this annual report.
The selected financial data have been prepared in accordance with U.S. GAAP and should be read in conjunction with, and are qualified in their entirety by reference to Item 5. Operating and Financial Review and Prospects, and our consolidated financial statements and notes thereto included elsewhere in this annual report.
Exchange Rate Information
The information set forth below with respect to exchange rates is based on the official noon buying rates for Japanese yen of the Federal Reserve Bank of New York. These rates are provided solely for the convenience of the reader and are not the exchange rates used by us in the preparation of our consolidated financial statements included in this annual report.
The official exchange rate on July 10, 2009 was ¥92.33 = U.S.$1.00. The following table sets forth the high and low official noon buying rates for Japanese yen of the Federal Reserve Bank of New York in each month of the previous six months.
The following table sets forth the average exchange rate for each of the last five fiscal years. We have calculated these average rates by using the rate on the official noon buying rates for Japanese yen of the Federal Reserve Bank of New York on the last business day of each month during the relevant fiscal year.
Fluctuations in the exchange rate between the yen and the U.S. dollar will affect the U.S. dollar equivalent of the yen-denominated prices of Mitsuis shares and, as a result, will affect the market prices of Mitsuis ADSs in the United States.
You should carefully consider the risks and uncertainties described below and the other information in this annual report, including the discussion in Item 5. Operating and Financial Review and Prospects, as well as our consolidated financial statements and related notes included elsewhere in this annual report.
The decrease in the volume of trade and the flow of goods and materials resulting from the worldwide economic downturn may adversely impact our business, results of operations and financial condition.
Our global business activities are affected by economic conditions both globally and regionally. Among other locations, we are particularly vulnerable to downward economic trends in Japan, China and the United States. An economic downturn may cause a reduction in the flow of goods and materials, a decline in consumer spending and capital investment, and subsequently a decrease in demand from our customers for our products and services, which may have an adverse impact on our business, results of operations and financial condition.
Fluctuations in commodity prices, especially crude oil, iron ore, coal and copper, may adversely affect our business, results of operations and financial condition.
We are engaged in trades in and, as the case may be, production of a variety of commodities in the global commodities market including metal resources, energy, chemical and agricultural products. Among others, significance of operating results from our mineral resources and energy producing activities in our overall operating results has considerably intensified, reflecting the rising prices of such commodities as well as increased production in these operations. Unexpected movements in commodity prices may adversely affect our business, results of operations and financial condition.
For further information about the impact by commodity price fluctuations on our results of operations for the year ended March 31, 2009 and in the future, see Item 5.A. Operating Results.
Exchange rate fluctuations may adversely affect our results of operations, especially because a major part of our results of operations are generated at our overseas subsidiaries and associated companies.
Although our reporting currency is the Japanese yen, a significant portion of our business operations, consolidated revenues and operating expenses is denominated in currencies other than the Japanese yen. As a result, appreciation or depreciation in the value of other currencies as compared to the Japanese yen could result in material transactional gains or losses. As most of revenues, costs of revenues, and selling, general and administrative expenses incurred from regular business activities at overseas subsidiaries and associated companies are quoted in the U.S. dollar, the Australian dollar, the Brazilian real, or other currencies, our net income may be affected by the fluctuations of these currencies and we are exposed to translation risk in our assets and liabilities denominated in foreign currencies. In addition, exchange rate fluctuations may reduce the value of investment in overseas subsidiaries and associated companies and adversely affect our accumulated other comprehensive income. As a result, exchange rate fluctuations may negatively affect our results of operations.
See Item 3.A. Selected Financial DataExchange Rate Information, Item 5.A. Operating Results Impact of Foreign Currency Exchange Fluctuation on Operating Results and Item 5. B. Liquidity and Capital Resources.
We are subject to diverse counterparty credit risks which our management policy for credit exposure cannot eliminate entirely.
We are exposed to diverse counterparty credit risks reflecting a variety of businesses. For example:
Diverse types of credit losses may adversely affect our results of operations and business.
Changes in interest rates could have an adverse effect on our results of operations because of our significant short-term and long-term debt.
We are exposed to risks associated with interest rate fluctuations, which may affect our overall operational costs and the value of our financial assets and liabilities, particularly our significant debt obligations, including
¥454.1 billion short-term debt and ¥3,214.5 billion long-term debt as of March 31, 2009. An increase in interest rates, especially in Japan and the United States, may adversely affect our results of operations.
For information on our funding sources, see Item 5.B. Liquidity and Capital Resources.
If the value of assets for which we act as lessor, such as real property, rolling stock, ocean transport vessels and equipment declines, we may record significant impairment losses.
Assets for which we act as lessor, such as real property, rolling stock, ocean transport vessels and equipment are exposed to potential significant impairment losses due to the decline in the value of these assets. As of March 31, 2009, the value of these assets in which we act as lessor, presented on our Consolidated Balance Sheets as Property leased to othersat cost, less accumulated depreciation, was ¥199.2 billion. The carrying amounts of these assets in which we act as lessor are affected by certain factors which are beyond our control such as their global supply and demand, prevailing interest rates, prices of relevant products and services and regional and/or global cyclical trends. Any adjustments for impairment losses with respect to such assets may have an adverse effect on our results of operations and financial condition.
For information on our accounting policies and estimates with respect to impairment on long-lived assets, see Critical Accounting Policies and Estimates of Item 5.A. Operating Results.
Declines in the market value of equity and/or debt securities in Japan may decrease the value of our pension assets which in turn may increase the cost of satisfying our unfunded pension obligations.
Declines in the market value of Japanese government bonds, other debt securities and marketable equity securities in Japan would reduce the value of our pension plan assets. Decline in the value of our pension plan assets or increase in our unfunded pension obligations could adversely affect our results of operations and financial condition.
See Item 5.A. Operating Results and Note 14, PENSION COSTS AND SEVERANCE INDEMNITIES, to our consolidated financial statements.
Our liquidity could be adversely affected by a downgrade in our credit ratings, significant changes in the lending or investment policies of our creditors or investors.
A downgrade in our credit ratings or significant changes in the lending or investment policies of our creditors or investors could result in an increase in our interest expense and could adversely impact our ability to access the debt markets, and could have an adverse effect on our financial position and liquidity.
For information on our funding sources and credit ratings, see Item 5.B. Liquidity and Capital Resources.
Due to our significant investments in marketable equity securities of Japanese issuers, a substantial decline in the stock market could negatively affect our investment portfolio.
A significant portion of our investment portfolio consists of marketable equity securities of Japanese issuers. At March 31, 2009, our marketable equity securities were carried at a fair value of ¥398.7 billion. Among others, Mitsuis marketable equity securities of Japanese issuers amounted to ¥240.6 billion, representing 49.6% of the fair value of our total available-for-sale securities and 2.9% of our total assets. Volatility and decline in the Japanese equity securities market could negatively impact the value of our investment portfolio and our results of operations and financial condition.
For information on our accounting policies and estimates with respect to impairment on marketable securities, see Critical Accounting Policies and Estimates of Item 5.A. Operating Results.
Some of our operations are concentrated in a limited number of regions or countries, which could harm our business, results of operations and financial condition if activity levels in these regions or countries decline.
Various types of businesses worldwide sometimes expose us to risks associated with regional political and economic instabilities. Furthermore, some of our business activities may be exposed to concentration risk in particular industries located in specific regions or countries. For example:
As a result, declining levels of trading activities or asset volumes in specific sectors in certain regions or countries could have a disproportionately negative effect on our business, results of operations and financial condition.
For more information, see Energy Segment, Mineral & Metal Resources Segment and Machinery & Infrastructure Projects Segment of Item 4.B. Business Overview.
We may not be able to successfully restructure or eliminate unprofitable or underperforming subsidiaries or associated companies in a timely manner and any efforts to do so may not improve our results of operations and financial condition.
As of March 31, 2009, we had 326 consolidated subsidiaries and 207 associated companies. We have been continuously restructuring underperforming businesses of our consolidated subsidiaries and associated companies from the viewpoint of operational efficiency as well as profitability. If we fail to successfully restructure or eliminate our underperforming subsidiaries and associated companies in a timely manner or if these efforts fail to improve our business operations as contemplated, our business operations may become less efficient and our results of operations and financial condition may be adversely affected.
Our alliances by forming joint ventures with third parties and strategic investments in third parties may not result in successful operations.
We participate in various businesses directly or indirectly through joint ventures or by making strategic investments in other companies and business enterprises. The outcome of these joint ventures and strategic investments is unpredictable because:
Any occurrence of these events could have a material adverse effect on our results of operations and financial condition.
Our businesses in exploration, development and production of mineral resources and oil and gas may not develop in line with assumed costs and schedules, and are subject to the risks associated with estimating reserves and the operating performance of third party operators.
Reflecting the rising prices of mineral resources and oil and gas as well as increased production in recent years, exploration, development and production of mineral resources and oil and gas are gaining in importance to our results of operations and financial condition. Mining and oil and gas projects involve risks, for example:
We participate as a non-operator in many of these projects. Under these circumstances, we carefully consider the business potential and profitability of projects based on the information and data provided by operators, who substantially control operations of such projects, including decision-making in the course of development and production. In addition to the above-mentioned risks, operators failure in managing those projects may adversely affect our results of operations and financial condition.
For more information, see Mineral & Metal Resources Segment and Energy Segment of Item 4.B. Business Overview.
Intense competition from other Japanese general trading companies could have an adverse effect on our results of operations and financial condition.
Our primary competition is with other Japanese general trading companies which engage in similar business activities in various fields. Our competitors may have:
Unless we can successfully continue to meet the changing needs of our customers by providing them with innovative and integrated services in a cost effective manner, we may lose our market share or relationships with our existing customers in certain of our operating segments. Failure to successfully compete with our competitors may have an adverse effect on our results of operations and financial condition.
We may lose opportunities for entry into new business areas because of the limitation of required human resources.
In response to the maturation of consumption in Japan and other developed countries, we have been focusing on entering new consumer oriented businesses. Additionally, we are undertaking a reorganization of our traditional businesses in industrial products and raw materials to better reflect the globalization of the economy and the rapid progress of information technology. However, in certain new business areas which we regard as important, we may have a shortage of required human resources for carrying out our business plans and managing other personnel, which can cause a loss of opportunities to start new businesses, which in turn may adversely affect our future business, results of operations and financial condition.
Restrictions under environmental laws and regulations and any accidents relating to our use of hazardous materials could negatively affect our business, results of operations and financial condition.
We are involved in various projects and business transactions worldwide that are subject to extensive environmental laws and regulations. In particular, our Mineral & Metal Resources Segment and Energy Segment may be adversely affected by present or future environmental regulations or enforcement in connection with our exploration, development and production activities. For example, we are subject to complex sets of environmental regulations in Australia, Brazil, Russia, and the Middle East. These laws and regulations may:
Newly enacted environmental laws and regulations or changes therein and protests by environmental groups may materially impact the progress of these projects.
Mitsui and its United States subsidiary, Mitsui & Co. (U.S.A.), Inc. are shareholders of Coronet Industries Inc. (Coronet), a former manufacturer of animal feed supplements, each with 18% and 12% share interest respectively. Coronet has been working with the U.S. Environmental Protection Agency (EPA) and the State of Florida on an investigation on environmental conditions related to its prior operations at its facility in the state of Florida. In addition, Coronet has been named as defendant in two civil actions initiated by residents residing in areas adjacent to the facility. Mitsui and Mitsui & Co. (U.S.A.), Inc., together with prior owners of Coronets assets, have been named as defendants in one of these actions.
We are subject to extensive laws and regulations in Japan and other countries throughout the world. Changes in these laws and regulations could adversely affect our results of operations and financial condition.
Our business operations are subject to extensive laws and regulations in Japan and other countries throughout the world. Our operations are subject to laws and regulations governing, among other things, commodities, consumption protection, business and investment approvals, environmental protection currency, exchange control, import and export (including restrictions from the viewpoint of national and international-security), taxation, and antitrust. Moreover, many of our infrastructure projects in developing countries are subject to less developed legal systems. As a result, our costs may increase due to factors such as the lack of a comprehensive set of laws and regulations, an unpredictable judicial system based on inconsistent application and interpretation of laws and regulations, and changing practices of regulatory and administrative bodies. For example, we are subject to sudden and unpredictable changes to:
Furthermore, while we are involved in the exploration, development and production activities through various contractual arrangements, the contracts may not be upheld or extended when they expire. Moreover, the regulatory bodies of these areas may unilaterally interfere and alter the contractual terms of our oil and gas operations involving production rates, pricing formulas, royalties, environmental protection cost, land tenure or otherwise. If these regulatory bodies unilaterally alter such contractual terms or if we are unable to comply with any new laws and regulations, our business, results of operations and financial condition could be adversely affected.
Furthermore, we could incur substantial additional costs to comply with any new laws and regulations. See Item 4.B. Business OverviewGovernment Regulations.
The actual amount of dividend payment our shareholders of record receive may differ from the forecasts announced prior to the record date.
The customary dividend payout practice of publicly listed companies in Japan may significantly differ from the practice widely followed in other markets. Our dividend payout practice is no exception.
We ordinarily announce a certain dividend payout policy at the beginning of each fiscal year and also provide guidance for annual dividends based on the forecast of our financial results including consolidated net income. Interim dividends are paid to shareholders on record of September 30 of each fiscal year after reviewing
our financial results during the first six months of each fiscal year as well as our forecast of our financial results during the last six months of the same fiscal year. The decision of declaration and payment is solely a matter of discretion of our Board of Directors, and such a decision may be made after the September 30 record date, and thus may differ from our guidance provided prior to such record date.
The amount and payment of year-end dividend are determined by our Board of Directors based on the actual financial results including consolidated net income. It also requires the approval of shareholders at the annual general meeting held in June of each year, if we propose to declare the year-end dividend. Our Board of Directors decides and submits a proposal for the year-end dividend declaration a few weeks before the annual general meeting. If the shareholders approval is given, dividend payments are made to shareholders of record.
The shareholders of record may sell shares after the March 31 record date with the anticipation of receiving a certain dividend payment. However, the declaration of year-end dividends is approved by our shareholders only in June, usually based upon a proposal submitted by our Board of Directors. As such, we may have announced dividend-related forecasts prior to the record date; but, in making a decision on the year-end dividend declaration, neither our shareholders nor our Board of Directors are legally bound by such forecast. Moreover, where our consolidated net income turns out to be lower than we originally forecast, we may not submit any year-end dividend proposal to the annual general meeting of shareholders.
Employee misconduct could adversely affect our results of operations and reputation.
Due to our size, as well as the operational and geographic breadth of our activities, our day-to-day operations are necessarily de-centralized. As a result, we cannot fully ensure that our employees comply with all applicable laws and regulations as well as our internal policies. For example, our employees may engage in unauthorized trading activities and exceed the allotted market risk exposure for various commodities or extend an unauthorized amount of credit to a client, which, in either case, may result in unknown losses or unmanageable risks. Moreover, our employees could engage in various unauthorized activities prohibited under the laws of Japan or other jurisdictions to which we are subject, including export regulations, anticorruption laws, antitrust laws and tax regulations. The efforts we undertake to ensure employees compliance with applicable laws and regulations as well as our internal policies may not succeed in preventing misconduct by our employees.
Depending on its nature, employees misconduct could have negative effects on our results of operations and reputation.
See Enhanced management system to enable sustainable growth of Item 4.A. History and Development of the Company for the details of the circular transactions of certain agriculture related materials conducted by the Kyushu Branch and the South-East Asian countries-bound overseas trading irregular transactions conducted by the Performance Chemical Business Unit.
Failure to maintain adequate internal controls over financial reporting could negatively affect our reputation.
We are engaged in business activities in a variety of products and services worldwide and thus our internal control over financial reporting needs to be established for numerous transaction patterns. We may be unable to maintain adequate internal control over financial reporting, and thus not be able to assert that our internal control over financial reporting is effective. This could adversely affect the capital markets perception of us and may cause negative market reactions.
Because of daily price range limitations under Japanese stock exchange rules, you may not be able to sell your shares of our common stock at a particular price on any particular trading day, or at all.
Stock prices on Japanese stock exchanges are determined on a real-time basis by the equilibrium between bids and offers. These exchanges are order-driven markets without specialists or market makers to guide price formation. To prevent excessive volatility, these exchanges set daily upward and downward price range limitations for each
stock, based on the previous days closing price. Although transactions may continue at the upward or downward limit price if the limit price is reached on a particular trading day, no transactions may take place outside these limits on these exchanges. Consequently, an investor wishing to sell at a price above or below the relevant daily limit on these exchanges may not be able to effect a sale at such price on a particular trading day, or at all.
See Item 10.B. Memorandum and Articles of AssociationDaily Price Fluctuation Limits under Japanese Stock Exchange Rules.
As holders of ADSs, you will have fewer rights than a direct shareholder and you will have to act through the depositary to exercise those rights.
The rights of shareholders under Japanese law to take actions, including exercising voting rights, receiving dividends and distributions, bringing derivative actions, examining our accounting books and records and exercising appraisal rights are available only to holders recorded on our register of shareholders. Because the depositary, through its custodian agents, is the recorded holder of the shares underlying the ADSs, only the depositary can exercise those rights in connection with the deposited shares. The depositary will make efforts to vote the shares underlying your ADSs as instructed by you and will pay to you the dividends and distributions collected from us. However, as ADS holders, you will not be able to bring a derivative action, examine our accounting books and records or exercise appraisal rights except through and with the consent of the depositary.
Item 4. Information on the Company.
Mitsui Bussan Kabushiki Kaisha (Mitsui & Co., Ltd. in English) was incorporated on July 25, 1947, as Daiichi Bussan Kabushiki Kaisha, a corporation (Kabushiki Kaisha) under the Commercial Code of Japan with common stock of ¥195,000. We were originally listed on the Tokyo Stock Exchange in May 1949.
Our registered office is located at 2-1, Ohtemachi 1-chome, Chiyoda-ku, Tokyo 100-0004, Japan. Mitsuis telephone number is +81-3-3285-1111.
Since our establishment, our business lines have involved trading in a variety of commodities, including the import of raw materials and the export of industrial products. As we grew in tandem with the Japanese postwar economic recovery, we expanded into overseas activities, such as the establishment of Mitsui & Co. (Australia) Ltd. in 1956. During the 1950s, Daiichi Bussan Kabushiki Kaisha was formed through the merger of various trading companies. On February 16, 1959, that entity took our present name, after having attained the status of being one of the largest general trading companies, and a history closely connected to the development of foreign trade in postwar Japan. An example of a business activity which introduced innovative industrial systems to Japan in our early days was the establishment of Nippon Remington Univac Kaisha Ltd. (currently Nihon Unisys Ltd.), a domestic computer related joint venture with Sperry Rand Corporation of the United States, in 1958.
During the 1960s, the Japanese government promoted trade with foreign countries and deregulated Japanese capital markets, which led to high growth of the Japanese economy. We played a pivotal role in promoting the growth of certain basic industries by supplying foods, industrial raw material and energy such as oil and coal from abroad. This included the development of mineral resources overseas, nurturing markets for Japanese exports and introducing various new technologies. We established Mitsui & Co. (U.S.A.), Inc. in April 1966, and Mitsui Knowledge Industry Co., Ltd. in October 1967. In May 1963, we issued American Depositary Shares which were subsequently listed on The NASDAQ National Market in February 1971.
In the 1970s, as the world economy weathered two oil crises, we began to diversify the supply source of natural resources including development of liquefied natural gas (LNG) resources. During this time, the export of industrial plant from Japan, mainly to oil producing countries, drastically increased and we organized and supported projects by arranging finance and on occasion establishing markets for products.
During this period, we suffered losses with respect to a joint venture project we entered into in connection with Iranian petrochemicals. These losses were a result of the petrochemical manufacturing complex being damaged by military attacks, causing the project to finally be dissolved in 1991.
Also during the 1970s, we entered into new industries. For example, in 1971 we established Mitsui Leasing & Development, Ltd. (currently JA Mitsui Leasing, Ltd.), our associated company in the leasing industry, and in 1972 we purchased an equity interest in Mikuni Coca-Cola Bottling Co., Ltd. in the beverage industry.
In the 1980s, Japans industrial structure moved increasingly towards the production of high-value-added products such as products related to information technology (IT) and new materials used for high tech products. Consequently, we began extending our business field to target these new markets. Most notable were the semiconductor materials and carbon fiber fields promoted mainly by our chemical related divisions.
In the late 1990s, the Asian economies experienced a financial crisis. Although the appreciation in real estate and stocks prior to the crisis created a temporary economic boom in Japan, their eventual collapse resulted in a wide-ranging economic slowdown. These conditions necessitated the reorganization of our profit structures and the development of new businesses.
At the same time, however, there was also a rapid development of information infrastructure worldwide, reflecting the deregulation of the communication sector proceeding from the 1980s in Japan and other countries, and the spread of new technology, such as Internet, accelerated communication among market participants in real time and at reduced costs. From the late 1980s, we made investments in IT and communication businesses, including in common carriers such as Tokyo Telecommunication Network Co., Inc (currently KDDI Corporation), JSAT Corporation, a communications satellites company, and broadcasting companies, such as SKY Perfect Communications Inc.
While having been participating in the development of natural resources since the 1960s such as oil, gas and iron and steel raw materials, we reinforced those activities in recent years. In the oil and gas area, we made final investment decision (FID) of Sakhalin II project phase 1 in 1997 and FID of the phase 2 in 2003. In 2004, we also acquired a 40% ownership interest in oil production license and exploration permit located in the North West Shelf area in Australia, including those of Enfield and Vincent oil fields. In the steel raw material area, we purchased an ownership interest in Valepar S.A., the controlling shareholder of Vale. S.A. (the former Companhia Vale do Rio Doce, which has been renamed legally effective May 22, 2009) in 2003.
Medium-Term Management Outlook Announced in May 2006
Mitsui established and announced a new Medium-Term Management Outlook in May 2006, based on a company-wide consideration of the business activities that we should develop over the next three-to-five years (namely, years ending March 31, 2009 to 2011) as below:
Development of strategic business portfolio
We developed key policies based on dividing our business into the four areas outlined below.
For further information, including the development of investing activities for the years ended March 31, 2009 and 2008, also see Item 5.B. Liquidity and Capital Resources.
Evolution of business models leveraging business engineering capabilities
We seek to leverage our strengths in marketing, finance and logistics, and actively promote joint operations between business units. Furthermore, we continue to make efforts to develop new business opportunities, for example:
Implementation of global strategies
We will focus the allocation of human resources on growth sectors in Asia, and align our strategy with our customers. We will employ and foster the development of a diverse group of personnel at overseas trading and other subsidiaries and associated companies around the world.
Enhanced management system to enable sustainable growth
Under our revised corporate staff organization we are pursuing an efficient risk management approach. We are strengthening our corporate governance system and internal controls framework, such as by increasing external directors and external corporate auditors, and working to ensure compliance with Section 404 of the U.S. Sarbanes-Oxley Act of 2002. We are developing as a business that meets the needs of customers and society, while engaging in CSR-oriented management worthy of Mitsui, such as through engaging in environmental issues and contributing to society.
For the year ended March 31, 2009, we identified that a business division of the Kyushu Branch had been involved in circular transactions of certain agriculture related materials in the local market. In addition, in April, 2009, we identified that a large part of Indonesia and other South East Asian countries-bound overseas trading transactions conducted by a business division of Performance Chemicals Business Unit were disguised as purchase and sales transactions while in fact they did not involve any physical distribution of the merchandise.
As mentioned above, we consider the enhancement of our management system as one of the core elements of the Medium-Term Management Outlook and have been striving to thoroughly implement a system as well as enhance compliance throughout the organization. However, we fully recognize the shortfall in our internal control system and compliance enhancing activities. Compliance will therefore be reemphasized and problem awareness created not only in the organizations where the problems actually occurred, but for all the Groups executives and employees through prompt notification conducted by the President & CEO. Furthermore, to prevent the recurrence of similar events, we will be immediately implementing more thorough on-site management, enhanced control of business-processes and plans to prevent future reoccurrence with respect to the promotion of the flexible use of human resources.
Major expenditures and divestitures
See Item 5.B. Liquidity and Capital ResourcesCash Flows for the information.
Major mineral resources and energy producing projects
The table below provides information about major mineral resources and energy producing projects which have involved or will involve significant capital expenditures for property and equipment. See Item 4.B. Business Overview, Item 4.D. Property, Plant and EquipmentMining Activities and Item 5.B. Liquidity and Capital Resources for further information.
Throughout this section B. Business Overview, we describe the domicile of our subsidiaries and associated companies, in parentheses following names of those companies. For example, Mitsui Iron Ore Development, Pty. Ltd. (Australia) means that the companys name is Mitsui Iron Ore Development, Pty. Ltd. and that it is domiciled in Australia.
Nature of Our Operations and Principal Activities
We are a general trading company engaged in a range of global business activities including worldwide trading of various commodities, arranging financing for customers and suppliers in connection with our trading activities, organizing and coordinating industrial projects, participating in financing and investing arrangements, assisting in the procurement of raw materials and equipment, providing new technologies and processes for manufacturing, and coordinating transportation and marketing of finished goods. Our trading activities as a general trading company include the sale, distribution, purchase, marketing, supply of and dealing in a wide variety of products and services, as a principal or an agent, including iron and steel, non-ferrous metals, machinery, electronics, chemicals, energy-related commodities and products, food products, textiles, general merchandise and real estate. We also participate in the development of natural resources such as oil, gas, iron and steel raw materials. Recently, we have been proactively making strategic business investments whereby we invest our own capital and provide management expertise in the development of joint ventures and new enterprises in certain industries such as information technology (IT), energy saving and environmental solutions business.
While we continue to diversify our activities, the provision of services remains one of our core activities. Specifically, we act as an intermediary between customers and suppliers engaged in import, export, and offshore and domestic trading activities. For example, we develop markets overseas for exporters and locate raw materials or product sources that meet the needs of importers. To facilitate smooth customer transactions between customers and suppliers, we draw upon our various capabilities such as market information analysis, credit supervision, financing and transportation logistics.
In addition to our Head Office, Mitsui had 12 branches and offices located in Japan and 142 branches, offices and overseas trading subsidiaries(1) located in other parts of the world as of April 1, 2009. They provide market information to each other and cooperate in developing various business opportunities.
The U.S. Department of State designates Iran, Sudan, Syria and Cuba as state sponsors of terrorism and subjects them to export controls. As a globally operating organization, we conduct business with customers in various countries including Iran, Sudan, Cuba and Syria. Our activities with customers in these states are insignificant when compared to our entire business (less than 1% of our consolidated revenues, gross profit and assets for the years ended March 31, 2009, 2008 and 2007) and do not, in our view, represent either individually or in aggregate, a material investment risk.
Our Iran-related operations primarily consist of business activities in which we have acted as an agent for Japanese companies such as Japanese engineering and heavy machinery companies, and assist them with various aspects of entering into and completing industrial projects in Iran. In addition, we have arranged financings provided by export credit agencies for the principals of industrial projects in Iran. Furthermore, under limited circumstances, we engaged in Iran-related business activities as a principal, where we purchased crude oil, oil products and petrochemical products from Iranian entities and sold them in Japan and elsewhere. Mitsui has only one asset located in Iran, a subsidiary which renders services to support Mitsuis implementing the above-mentioned activities.
Although there is a possibility that we may broaden our business activities in Iran in the future, we currently have no plans to significantly expand our Iran-related operations and would carefully consider the commercial and other risks inherent in such transactions before expanding our activities as principal in order to manage those risks as we seek to avoid transactions that may result in material losses to our company or risks to our shareholders.
Our Sudan-related operations consist of sales of chemical raw materials such as urethanes used for the production of polyurethane foams, in which we act as an agent, where our counterparties are neither Sudanese governmental bodies nor entities engaged in oil exploration and production in the country.
Our Syria-related operations consist of sales of chemical products such as urethanes and agrochemicals (insecticides) as well as sundry goods such as photographic film and ultrasound diagnostic scanner, neither of which are designed for any military use, to non-governmental entities.
We have no sales transaction with Cuba for the years ended March 31, 2009, 2008 and 2007.
We do not have any assets or employees in Sudan, Syria and Cuba due to extremely low activity. We do not expect to significantly expand our activities with either of these countries in the foreseeable future.
Seasonality of Our Business Activities
The trading of individual products such as heating oil, foods and textiles is influenced by seasonal factors. For example, heating oil is traded more frequently in winter than in summer months. Another example is our food wholesale business where the revenues of MITSUI FOODS CO., LTD. (Japan) increase from October to December and decrease from January to March, reflecting seasonal consumption habit in Japan. Nonetheless, the seasonality of any product either individually or in the aggregate has marginal impact on our annual operating results.
Dependence on Patents and Licenses and Industrial, Commercial or Financial Contracts
We have various patents and licenses as well as industrial, commercial and financial contracts (including contracts with customers or suppliers) to conduct our business. These patents, licenses or contracts either individually or in the aggregate are not material to our business operations or results of operations.
Marketing channels vary by commodity, customer and region. We have established subsidiaries and associated companies for promotion and distribution in response to specific business environments.
See Products and Services and Principal Activities by Reportable Operating Segments below. Special sales or purchase methods, including financial arrangements, provided by the Machinery & Infrastructure Projects Segment and the Energy Segment, and supply chain management (SCM) systems conducted by some operating segments are also described therein. SCM means a planning and management of successive and integrated activities which cover procurement of raw materials, inventory control, processing, and logistics management for materials and products, ordinarily maintained through collaboration among suppliers, intermediaries and/or third-party service providers, and customers.
Our main competitors are other Japanese general trading companies. Moreover, all of our potential business partners, for supply of products and services; or for establishment of joint venture operations, could also be competitors. To ensure our competitiveness, we strive to continue to successfully meet the changing needs of our
customers and suppliers worldwide. Analysis of competitive position by operating segment is provided in Products and Services and Principal Activities by Reportable Operating Segments below and also see Item 3.D. Risk Factors.
Our business activities are subject to various governmental regulations in the countries in which we operate. These regulations generally relate to obtaining business and investment approvals, and meeting the requirements of export regulations, including those related to national security considerations, tariffs, antitrust, consumer and business taxation, exchange controls and environmental laws and regulations. Certain of our business transactions such as our activities in the energy, mining, telecommunications, financing, food, consumer products, machinery, chemicals, etc. are regulated and subject to the relevant laws and regulations. See Item 3.D. Risk Factors.
Governmental Regulations with Respect to the Exploration and Production of Oil, Gas, and Mineral Resources
We are involved in various projects involving exploration for and production of crude oil, natural gas, iron raw materials and non-ferrous metals in many different countries in which we participate as a minority stakeholder and non-operator. These exploration and production activities are subject to a broad range of local laws and regulations, which affect virtually all aspects of these activities. Contractual arrangements in connection with our oil, gas and mining activities, such as leases, licenses and production agreements are generally entered into with a government entity or a government owned company. See Mineral & Metal Resources Segment and Energy Segment of Products and Services and Principal Activities by Reportable Operating Segments below.
To date, changes in governmental laws and regulations have not had a material adverse effect on our oil, gas and mining projects. Some of our oil, gas and mineral projects are located in politically and economically stable regions, such as Australia, where the legal systems are relatively developed. However, we also hold interests in oil, gas and mineral resources in regions where legal systems are less developed. These investments may be adversely impacted by factors such as a lack of comprehensive sets of laws and regulations, an unpredictable judicial system based on inconsistent application and interpretation of laws and regulations, and constantly changing practices of regulatory and administrative bodies.
Governmental Regulations with Respect to Infrastructure Projects
We are engaged in various infrastructure projects worldwide. These include construction of power plants, oil and gas pipelines, telecommunications and broadcasting systems, cargo transportation systems, and public transit systems in developing countries. In these projects, we are subject to extensive laws and regulations with respect to technical specifications, environmental protection, pricing, labor, taxation, foreign exchange and other matters. We commonly enter into contractual arrangements with government owned companies that are subject to their own sets of laws and regulations. Changes in laws and regulations after the commencement of projects may result in lengthy delays which can negatively impact our cash flows and hinder the repatriation of capital from such projects.
Governmental Regulations with Respect to Human Health and Environment
We are subject to extensive laws and regulations worldwide with respect to human health and the environment. Regulations governing food products for human consumption are complex, detailed and stringent. For instance, in Japan, our food related operations are under the supervision of the Ministry of Agriculture, Forestry and Fisheries, and the Ministry of Health, Labor and Welfare. We are subject to the Food Safety Basic Law, which codifies the safety standard for food products. For example, it determines the threshold amount at which harmful substances such as pesticide residues are considered to be unacceptable. We must expend significant resources to comply with these regulations not only in Japan but in all jurisdictions where we engage in food-related operations.
We are also subject to complex environmental laws and regulations worldwide. For example, in Japan, when trading, storing or transporting chemical products or disposing of wastes and by-products from our industrial plants, we are required to notify the local regulators and/or obtain approvals or licenses. Any violation of laws and regulations may not only result in severe fines and penalties, but the regulators may require us to curtail or even cease operations, install expensive pollution control systems, and comply with enhanced notification obligations.
Products and Services and Principal Activities by Reportable Operating Segments
For the year ended March 31, 2009, we had eleven reportable operating segments which consisted of eight products and services focused reportable operating segments and three region-focused reportable operating segments listed as below:
Our eight products and services focused operating segments were:
Our three region-focused operating segments were:
For information on the composition of our products and services focused reportable segments and region-focused reportable operating segments, also see Item 5.A. Operating ResultsOperating Results by Operating Segment. Gross Profit, Operating Income (Loss) and Net Income (Loss) by reportable operating segment for the years ended March 31, 2009, 2008 and 2007 were as follows(1)(2)(3)(4):
Operating Income (Loss)
Net Income (Loss)
Iron & Steel Products Segment
The Iron & Steel Products Segment consists of one business unit, the Iron & Steel Products Business Unit, which has:
Gross profit and net loss for this segment for the year ended March 31, 2009 were ¥52.2 billion or 5.1% and minus ¥4.8 billion or minus 2.7% of our consolidated total, respectively.
This segment handles various iron and steel products used in a wide range of industries including the automobile, electronics, transportation, construction and energy sectors. They serve customers in these industries worldwide and provide support services for steel manufacturers. The Iron & Steel Products Segment conducts, trading, marketing, processing and distribution of:
This segment has made investments in subsidiaries and associated companies including coil centers as bases for processing and distribution; electric furnace steel makers as manufacturing bases; and steel products distribution companies. Recently, this business segment has also focused on businesses in emerging countries as below:
In the iron and steel products business, both manufacturers and users are large-scale and sophisticated organizations. As low value added intermediation between these entities is no longer sufficient to serve their needs, this segment has developed its services based on the proprietary supply-chain network by making use of accumulated IT and logistics expertise. By working closely with manufacturers and users, we optimize distribution and inventory control, thus sharing with customers and suppliers the benefit of associated cost reductions. For example:
Some competitors of this segment, other Japanese trading companies, have reorganized their businesses and established new joint ventures, such as Marubeni-Itochu Steel Inc. (Japan) and Metal One Corporation (Japan) in their efforts to achieve low-cost operations through economy of scale. In contrast, this segment puts priority in efficiently leveraging business resources of other operating segments through group-wide collaborations. In order to increase competitiveness as well as pursuing strategic business opportunities, the Investment & Planning Division within this business segment, specializes in investments in steel-related enterprises, particularly joint investments in response to the needs from steel users and steel manufacturers in Japan and overseas, strengthening ties with Japanese steel makers and wholesalers through collaboration in sales of products,
procurement of raw materials and equity investments. Furthermore, in the domestic market which has been already mature, this business segment concentrates on reorganizations of subsidiaries to improve their sales force and operational efficiency. For example, this business segment established Mitsui & Co. Steel Ltd. (Japan) by consolidating 4 subsidiaries for steel products in April 2008.
In July 2006, as a result of the merger between the worlds largest integrated steel manufacturers, Mittal Steel Company N.V. and Arcelor S.A., ArcelorMittal was organized. This segment has been carefully watching reorganizations in the global steel industry. An increase in steel production in newly developing countries such as China and India, as well as a decrease in demand in developed countries stemming from slow down of the economies triggered by financial crisis in the United States are ongoing in tandem, providing a definite forecast on the global supply-demand balance in the future becomes extremely difficult. Continuously offering efficient SCM services is still a key for this business segment to survive in such worldwide reorganization of steel industry.
Mineral & Metal Resources Segment
The Mineral & Metal Resources Segment consists of one business unit, the Mineral & Metal Resources Business Unit. Effective April 1, 2007, the former Iron & Steel Raw Materials and Non-Ferrous Metals Segment was renamed as the Mineral & Metal Resources Segment, and the businesses of coal, nuclear fuels, carbon credits, and hydrogen and fuel cell were transferred to the Energy Segment.
This segment has:
Gross profit and net income for this segment for the year ended March 31, 2009 were ¥119.2 billion or 11.7% and ¥90.0 billion or 50.7% of our consolidated totals, respectively.
This segment is engaged in various business activities including:
In the field of iron and steel raw materials, in 1960s this segment started investments in raw materials sourcing projects based on concept of develop-and-import, aiming at stable procurement of those raw materials to Japan through diversified channels. Those projects are supplying raw materials to major iron and steel manufacturing countries including Japan.
The following tables provide information on investments of this segment in iron ore resource projects. For more information on its mining activities including production and reserves, See Item 4.D. Property, Plants and EquipmentMining Activities.
Iron Ore Mining Activities
In addition, this segment has a 15% ownership interest (or 18.2% in terms of voting shares as of March 31, 2009), of Valepar S.A. (Brazil), the controlling shareholder of Vale S.A. (the former Companhia Vale do Rio Doce, which has been renamed legally effective May 22, 2009) in Brazil. Vale S.A. is a mining enterprise with operations that include mining of iron ore and other raw non-ferrous metals. This segment purchased the ownership interest in Valepar S.A. in September 2003. In July 2008, Vale S.A. made a public offering of its shares. Valepar S.A. maintained the current controlling ownership at Vale S.A. by exercising its priority subscription rights, and Mitsui contributed to Valepar S.A. on a pro rata basis. Mitsuis investment amount was ¥78.4 billion.
In April 2007, this segment sold its entire stake in Sesa Goa Limited, Indian iron ore producer.
Iron ore mining businesses remain our core business, and continue to focus on investments for the enhancement of production capacity and operational efficiency in existing mining operations. Our equity production tonnage is expected to be increasing in accordance with an increase in demand of the newly developing countries in a mid- and long-term despite the fact that iron ore demand temporarily stagnates worldwide, including China, the world largest crude steel producer, due to the current economic slow down triggered by the financial crisis in the United States. Regarding further information and discussion on development of this segments iron ore mining projects, see Item 4.A. History and Development of the Company Capital Expenditure, Item 5.A. Operating ResultsOperating Results by Operating SegmentMineral & Metal Resources Segment and Item 5.B. Liquidity and Capital ResourcesInvestment Plans and Financial policies of the Medium Term Management Outlook.
Revenues from iron ore producing activities account for a significant portion of this segment. The table below sets forth the break down of revenues of the Mineral & Metal Resources Segment.
This segment recognizes metal recycling as industrial solutions to environmental problems, and has set recycling business as one of its key businesses. In Japan, Mitsui Bussan Raw Materials Development Corporation (Japan), which had operated a metal recycling business, was merged in April 2008 with a former non-ferrous metal trading subsidiary Mitsui Bussan Metals Sales Co., Ltd. (Japan), to form Mitsui Bussan Metals Co., Ltd., which engages in wide range of products and services in metal resources, recycling and non-ferrous metal products.
In addition, in June 2007, this segment acquired 19.9% of the issued ordinary shares of Sims Group Limited (Australia), a metal scrap recycler with worldwide operating bases in Australia and Europe as well as in North America, its main operating zone. In March 2008, Sims Group Limited merged with Metal Management, Inc, a United States recycler and changed its name to Sims Metal Management Ltd. in November 2008. This segments ownership interest was diluted due to the merger, and subsequently the segment acquired additional shares, having a 19.9% ownership interest in Sims Metal Management, Inc. as of March 31, 2009. Mitsui and Sims Metal Management Ltd. seek opportunities for a joint recycling solutions business in Japan and abroad.
This segment participates in a joint venture which produces Silico-Manganese in the Inner Mongolia Autonomous Region, China, with 24.5% ownership, together with Erdos Electrical Power and Metallurgical Co., Ltd. (Erdos EPMC) and JFE Steel Corporation, a major Japanese integrated steel manufacturer. This project started production of Silico-Manganese in July 2006 with an annual production capacity of 75,000 tons at its initial stage, and an expansion plan to double the capacity to 150,000 tons was completed in December 2008. Erdos EPMC operates four major businesses in the Inner Mongolia Autonomous Region: power generation, coal mining, ferrous alloy production and water pumping from the Yellow River. In April 2007, this segment completed the acquisition of 25% share ownership in Erdos EPMC.
This segment has been operating joint venture projects to meet the increasing demand for iron and steel raw materials in Japan and abroad. POSCO Terminal Co., Ltd. (Korea) is the representative case established in January 2003 with POSCO, an integrated steel manufacturer in Republic of Korea. It provides logistics services including bulk material transportation, storage and transshipment involving iron and steel raw materials for various customers in Asia.
In non-ferrous metals field, this segment has been engaged in trading raw materials and ingots such as copper, nickel, cobalt, aluminium, alumina and other non-ferrous metals, and also expanding our investments and participations in various non-ferrous metals mining and smelting projects to secure stable supply sources of the raw materials and ingots. For example:
Machinery & Infrastructure Projects Segment
The Machinery & Infrastructure Projects Segment consists of three business units, the Infrastructure Projects Business Unit, the Motor Vehicles Business Unit and the Marine & Aerospace Business Unit.
Gross profit and net income for this segment for the year ended March 31, 2009 were ¥106.3 billion or 10.5% and ¥21.8 billion or 12.3% of our consolidated totals, respectively.
The Machinery & Infrastructure Projects Segment holds 69 subsidiaries, including:
Additionally it has 69 associated companies such as:
Infrastructure Projects Business Unit
The business activities of the Infrastructure Projects Business Unit together with 30 subsidiaries and 19 associated companies cover a wide range of involvement in project development, construction, business operations and management, implementation and related services, including:
This business unit is undertaking various projects that may stimulate economic growth in developing countries and countries rich in natural resources. In response to their needs, they apply their project engineering capabilities including expert knowledge in financing, logistics, taxation and legal affairs. This business unit often arranges financing for projects by international financial institutions and export credit agencies worldwide.
The following are examples of the types of projects and the activities in which this business unit renders services, mainly as an agent in securing the contract, arranging financing and executing the contract:
In addition to the conventional EPC approach of acting as an intermediary between project owners and sub-contractors, this business unit is increasing activities which often involve arrangement of sophisticated financing schemes, business operations and management through equity participation, and operation and
maintenance of plant and facilities after their construction completion. Based on this concept, the unit has been proactively investing in several types of infrastructure projects. In particular, independent power producer (IPP) business overseas lies as a core domain. Most of these IPP projects operate under long term power sales contracts with users such as state-owned electricity companies, which enable them to forecast stable returns.
Reflecting these developments, the combined power generation capacities for the units equity share in various power projects as of the end of March 2009 in operation and under construction were 3,735 megawatt and 322 megawatt, respectively. As well as the above-mentioned projects, these power generation capacities included those under the operation of Umm Al Nar in the United Arab Emirates, Tarong North Power Station in Australia, Valladolid III in Mexico and Amman East in Jordan and those under construction such as Ras Laffan C in Qatar.
This business unit is also engaged in following projects:
This business unit runs rolling stock leasing businesses providing relevant maintenance and management services.
Also, this business unit is engaged in the construction of wind power and photovoltaic power facilities and other environment-related projects such as greenhouse gas emission reduction project.
Our major competitors include other Japanese general trading companies, international financial institutions, global engineering companies, general contractors, multi-national IPPs and investment funds. Those competitors, however, can be important partners in some cases.
Motor Vehicle Business Unit
The Motor vehicle Business Unit, together with 26 subsidiaries and 20 associated companies, is engaged in the following business activities:
This business unit has a long track record of exporting and marketing Japanese automobiles and has developed networks of our subsidiaries and associated companies as import wholesalers, dealers and assembler for Japanese vehicles in many regions of the world. For example, we have been exporting Toyota and motor vehicles of other Japanese manufacturers to various countries worldwide including Canada (Toyota), Chile (Toyota), Peru (Toyota), Italy (Subaru), Germany (Subaru), Thailand (Hino) and Malaysia (Daihatsu).
In recent years, the relocation of Japans automobile production sites from domestic locations to overseas has been accelerating, and we have diversified our activities to cope with such trend by allocating our financial and human resources strategically to prioritized areas of our motor vehicles business worldwide, such as logistics services for manufacturing components, retail operations and retail finance. For example:
In this business units construction machinery and industrial system businesses, it has been acquiring and establishing distributors and dealers in major overseas markets, in order to respond growing worldwide demand to these products. In Australia, Komatsu Australia Pty Ltd. (Australia), an associated company, is engaged in distribution of construction machinery and mining equipment such as off-road mining dump trucks and hydraulic excavators, while another associated company, Komatsu Australia Corporate Finance Pty Ltd. is engaged in leasing of these equipments. This business unit has also extended these businesses in other regions, through Road Machinery, LLC (United States) acquired in 2005 and KOMEK Machinery LLC (Russia) acquired in 2006. They are also engaged in trading and distribution of high-precision machine tools, manufacturing equipment and control systems supplied by Japanese manufacturers. Jointly with Mori Seiki Co., Ltd, they acquired Ellison Technologies, Inc. (United States) in 2007. Both of Road Machinery, LLC and Ellison Technologies, Inc. were acquired jointly with the Americas Segment and this business unit was mainly controlling the companies. Effective April 2008, such control was transferred to the Americas Segment in order to put more importance on the regional business strategy than on merchandise oriented strategy keeping this business units ownership interests in both companies.
Marine & Aerospace Business Unit
The Marine & Aerospace Business Unit, together with 13 subsidiaries and 30 associated companies, is engaged in the following business activities:
The vessel and marine project related activities include marketing newly built vessels (mainly commercial vessels) to ship owners and shipping firms in Japan and overseas, ship management services, acting as broker for chartering vessels and for the sale and purchase of second hand vessels, and marketing equipment for vessels to shipbuilding companies.
This business unit is engaged in energy-related marine projects, including joint ownership and operation of LNG vessels, and joint ownership and operations management of FSO and FPSO facilities. In addition, this business unit arranges various types of financing for our customers and/or those projects, such as syndicated loans involving international financial institutions for large scale transactions. We also provide direct loans to some of our clients.
The following are recent developments in energy-related marine projects businesses:
In addition, this business unit owns and operates various vessels, by itself or jointly with trusted partners.
In aerospace systems related activities, the business unit provides and arranges operating leases and finance leases of passenger aircraft and cargo aircraft and aircraft engines to airlines in Japan and overseas. This business unit is also engaged in the import and sale of passenger aircraft, cargo aircraft, aircraft engines, helicopters and defense-related equipment, including passenger aircraft of Airbus S.A.S. of France and helicopters of Bell Helicopter Textron, Inc. of the United States. In March 2008, Mitsui acquired non-voting preferred shares in Japan Airline Corporation (JAL), convertible into common shares, for ¥20.0 billion. Mitsui believes this acquisition will contribute to the reinforcement of JALs business infrastructure such as renovation of its aircraft fleet and through this transaction, Mitsui envisages developing new business with JAL in future.
The Chemical Segment consists of the First Chemicals Business Unit and the Second Chemicals Business Unit. In April 2009, in order to efficiently cope with the restructuring of the chemical industry globally, Mitsui has re-grouped its Chemical Segment and formed Basic Chemicals Business Unit and Performance Chemicals Business Unit.
Gross profit and net loss for this segment for the year ended March 31, 2009 were ¥80 billion or 7.9% and minus ¥10.2 billion or minus 5.7% of our consolidated totals, respectively.
The Chemical Segment has 21 subsidiaries, including:
It also has 28 associated companies.
First Chemicals Business Unit
Together with 10 subsidiaries and 11 associated companies, the First Chemicals Business Unit is engaged in trade, sales, distribution and production of the following commodities and related activities:
In petrochemical products areas, the units main activities is trading of the above-mentioned products in Japan and worldwide through extensive business relationships with customers and suppliers such as Mitsui Chemicals, Inc., Toray Industries, Inc., Tosoh Corporation, Dow Chemical Company, BP p.l.c., and Bayer Aktiengesellschaft.
This business unit has invested in manufacturing operations and logistic facilities such as:
This business unit has been successful in earning revenues by increasing market share in basic petrochemicals such as olefins and aromatics. Moreover, the latent steady growth of demand for petrochemicals in the world, particularly in China and other Asian countries, would be earnings driver for this unit despite the deceleration in demand caused by recent economic slow down.
During the past several years, most worldwide petrochemical companies have been struggling to survive through drastic restructurings of their sales structures as well as mergers and acquisitions in order to cope with the changes in the market structure of petrochemical products including increasing demand from China and other Asian countries, rising material costs reflecting higher crude oil prices and shifting in olefin production to the Middle East using cost-effective natural gas. In these operating environments, they believe that they remain competitive with other competitors and plan to strengthen our market position by expanding our trade volume and market share. This business units sales channels to various customers in diverse geographic areas enable them to make geographical and/or time swap arrangements. Its global logistics services network functions as a competitive advantage over other competitors in gaining more business transactions.
In Japan, MITSUI BUSSAN SOLVENT & COATING CO., LTD. (Japan) and Bussan Chemicals Co., Ltd. merged to form Mitsui Bussan Chemicals Co., Ltd. in April 2009, for the purpose of sales enhancement and efficient business operations.
In agri science business, this business unit has extended the distribution of agricultural chemical products worldwide through subsidiaries such as Mitsui AgriScience International SA/NV (Belgium).
In fertilizer business, this business unit is engaged in import, export and offshore transactions involving various types of fertilizers, fertilizer raw materials and phosphoric acid derivatives.
Second Chemicals Business Unit
The Second Chemicals Business Unit has 11 subsidiaries and 17 associated companies and is engaged in sales, trade, distribution and production of the following commodities and related activities:
In the inorganic raw materials field, this business unit operates logistics systems for various industries in Japan and overseas. For example, this business unit exports sulfur, a byproduct of petroleum refining, to Asian countries, by operating specialized tankers.
In order to overcome various unfavorable economic conditions such as depletion in the supply of mineral resources or an increase in acquisition cost of raw materials from our existing suppliers, this business unit has been seeking opportunities to participate in new supply sources. They reallocated resources by restructuring logistics operations, and built up our capabilities in sulfur, soda ash, and fiberglass materials in Asia, primarily in China.
While this business unit has been expanding the logistics network of their salt business in China which complements their existing sea salt joint venture business in Shark Bay, Australia, Mitsui acquired a major share in the Onslow salt field in Australia in August 2006. As a result, this business units annual salt production capacity increased to 3.8 million tons, which enable them to secure a stable supply for the chlor-alkali industry in Japan and other Asian countries.
This business unit established Renewable Energy Division in June 2008 to expand the solar power related business looking down at the entire value chain of the business. We transferred solar related business of the IT Business Unit into this business unit which has been dealing with photovoltaic materials and modules. This business unit aims to collaborate with the Infrastructure Projects Business Unit which is in charge of IPP and other business units in the photovoltaic power generation related areas.
In the plastics field, this business unit has traditionally handled various kinds of raw plastic materials and plastic products in domestic and overseas markets. This business unit has also handled newly developed electronic materials and products as well as SCM services.
With the focus of economic activity shifting to Asia, this business unit enhanced its business in China. Mitsui Plastics Trading (Shanghai) Co., Ltd., an engineering plastics and related manufacturing materials sales company established in 2003, is a representative case.
In Japan, three sales subsidiaries merged to form Mitsui Bussan Plastics Trade Co., Ltd. in April 2008, for the purpose of sales enhancement and efficient business operations.
The Energy Segment consists of two business units, Energy Business Units I and II. Effective from April 2007, the former Energy Business Unit was divided into Energy Business Units I and II, to build structure for comprehensive strategy based on the view for worldwide energy resources, combined with the transfer of businesses of coal, nuclear energy, carbon credits, and hydrogen and fuel cell from the former Iron & Steel Raw Materials and Non-Ferrous Metals Segment.
Gross profit and net income for this segment for the year ended March 31, 2009 were ¥272.0 billion or 26.8% and ¥153.3 billion or 86.3% of our consolidated totals, respectively.
This segment has:
Energy Business Unit I is engaged in:
Energy Business Unit II is engaged in:
The Energy Segment is engaged in various LNG, natural gas and oil development projects which require long lead time for their development and implementation. We are involved in the following six LNG projects currently in operation:
Under long term contracts, the NWS JV supplies most of its LNG output to Japanese electricity and gas utility companies. In addition, in May 2006, the JV started LNG supply to China, via Guangdong LNG terminal. Also, the JV started the production at the fifth LNG processing train in September 2008 following the production start-up of the fourth LNG processing train in 2004. The capacity of the fifth train is 4.4 million tons per annum. An LNG processing train is a set of facilities in a liquefaction plant to produce LNG from natural gas.
As for Sakhalin II project, Sakhalin Energy Investment Company Ltd. (SEIC) had started half-year oil production since 1999 at the Molikpaq offshore platform installed in the Astokhskoye field, off the Sakhalin Island since 1999 as the first stage of the project. In May 2003, as the second stage of the project, the full-field development of Piltun-Astokhskoye oil field, aimed for year-round crude oil production, and the Lunskoye gas field aimed for LNG production commenced. In April 2007, Mitsui, Royal Dutch Shell plc (Shell) and Mitsubishi Corporation (Mitsubishi) signed a Sale and Purchase Agreement with OAO Gazprom (Gazprom) to transfer their shares in SEIC to Gazprom. After the share transfer, shareholders of SEIC are consist of Gazprom (50% plus 1 share), Shell (27.5% minus 1 share), Mitsui (12.5%) and Mitsubishi (10%). The total sale price was US$7.45 billion, and Mitsuis proportionate share was US$1,862.5 million. In December 2008, the year-round crude oil production started and, based on the long term sale and purchase agreements, LNG shipment commenced in March 2009. The peak crude oil production is expected to reach 150 thousand barrels per day and annual LNG production capacity is about 9.6 million tons. Virtually most of the LNG production capacity was sold under the long term sale and purchase agreements with customers in Japan, Korea and US West Coast, including buyers optional volume. Mitsui, as the shareholder of SEIC, will make every effort to achieve and maintain the stable production and to further develop the project together with other shareholders, Gazprom, Shell and Mitsubishi.
This segment holds interests in other LNG projects which are under construction. Through our subsidiary, Overseas Petroleum Corporation (Japan), we own 2.3% interest in the Tangguh LNG project in Indonesia, which is expected to start production in 2009 with production capacity being 7.6 million tons per annum.
With respect to our LNG related operations, this segment has entered into various long term sales contracts, based on take or pay conditions, with customers such as Japanese utility companies. This segment believes the worldwide LNG business has been undergoing gradual structural changes since the late 1990s as follows:
Identifying, exploring and developing oil and gas reserve prospects are key factors to success for the Energy Segment. The principal strategic regions for this business are Oceania, Southeast Asia, the Middle East and North America.
The development and production projects of offshore oil fields of Enfield and the Vincent in which Mitsui E&P Australia Pty Limited (Australia) has participating interests are the core projects of this segment in terms of capital expenditures including cost of mineral right, exploration, and development next to the Sakhalin II project.
In March 2004, Mitsui E&P Australia Pty Limited acquired a 40% interest in each of WA-28-L and exploration block WA-271-P located in the North West Shelf area in Australia, which together contained three undeveloped oil fields, Enfield, Vincent, and Laverda. Commercial production from Enfield oil field started in July 2006. Subsequently, some of the major production wells were shut-in due to unexpected sand production and water breakthrough on two occasions, and the joint venture conducted work-over of those wells. The average production rate during January to March 2009 period was approximately 42,000 barrels per day. At the same time, Mitsui E&P Australia Pty Limited reached final investment decision for Vincent oil field, adjacent to Enfield oil field, in March 2006 with total development cost of approximately US$720 million. Vincent started commercial production in August 2008 and the average production rate during January to March 2009 period was approximately 30,000 barrels per day.
Mitsui E&P Australia Pty Limited owns 35% interest in Tui area oil field offshore North Island of New Zealand. Commercial production of Tui area oil project started in July 2007. It also owns interest in Casino gas & condensate field offshore South Australia which started commercial production in February 2006.
In June 2007, Wandoo Petroleum Pty. Ltd. sold its entire Australian upstream oil and gas producing assets, including Cliff Head oil field offshore Western Australia and Yolla gas & condensate field, offshore Victoria.
Mitsui Oil Exploration Co., Ltd. (Japan) has been actively engaged in oil and natural gas exploration, development and production projects in Thailand and neighboring Southeast Asian countries as well as in the Middle East. In June 2005, Mitsui Oil Exploration Co., Ltd. acquired assets in offshore Thailand, 46.3% interest in the B8/32 Concession and the adjacent Block 9A Concession, jointly with a partner in Thailand. The purchase price was US$820 million, and Mitsui Oil Exploration Co., Ltd. acquired approximately 40% share. In October 2007, Mitsui Oil Exploration Co., Ltd. and its co-concessionaires agreed with the Thai Ministry of Energy to
extend the production period of four offshore blocks (Block No. 1013) in the Gulf of Thailand to 2022. Together with Mitsui Oil Exploration Co., Ltd., Energy Segment continues putting a high priority on expanding our oil and gas equity reserves. In March 2006, Mitsui agreed with Mitsui Engineering & Shipping Co., Ltd. to purchase 6% of the total issued shares of Mitsui Oil Exploration Co., Ltd. of which Mitsui held a 44.4% share prior to concluding the agreement. As a result of the transactions, Mitsui Oil Exploration Co., Ltd. became a subsidiary of Mitsui with a 50.3% voting share. As of March 31, 2009, Mitsuis ownership interest is 53.0%, reflecting additional share purchase transactions.
In Oman, Mitsui E&P Middle East B.V. (Netherlands) has 35% participating interests in the Block 27 oil fields which started commercial production in June 2006 and the Block 9 oil fields in production.
In April 2006, MitEnergy Upstream LLC (United States) was established by Mitsui, Mitsui & Co. (U.S.A.) Inc. and Mitsui Oil Exploration Co., Ltd., to acquire 50% share of an undivided interest in oil and gas leasehold assets of Pogo Producing Company located offshore in the Gulf of Mexico. The purchase price was approximately US$500 million. More than half of the total 50 blocks had been producing oil and gas until a hurricane hit the Gulf of Mexico in September 2008. The hurricane caused damage to part of the facilities. MitEnergy produced an approximate daily production of 7,000 barrels of oil equivalent in March 2009, which is equivalent to 70% of the production level before the hurricane hit.
In addition, seeking to replenish and enhance our oil and gas reserves, we are engaged in exploration activities in the above-mentioned regions as well as Mozambique, Namibia and Ghana. We also are currently seeking unconventional development of oil and gas resources, such as oil sands in Canada and oil shale in the US.
As a result of the above-mentioned developing activities, our oil and gas reserves decreased from 427 million BOE at the end of March 2008 (according to SFAS No. 69; including 71 million barrels for Mitsui Oil Exploration Co., Ltd.s minority interest) to 403 million BOE at the end of March 2009 (according to SFAS No. 69; including 62 million barrels for Mitsui Oil Exploration Co., Ltd.s minority interest). See Item 4.D. Property, Plants and EquipmentOil and Gas Producing Activities and Supplemental Information on Oil and Gas Producing Activities to the consolidated financial statements included elsewhere in this annual report on Form 20-F.
This segment participates in oil and gas related joint venture operations, typically as a non-operator equity holder, relying on our project partner, the operator, which is responsible for operation management including exploration, development and production of oil and gas resources. In these projects, Energy Segment collaborates with partners that has sufficient technical knowledge and expertise to reduce operational risks, and also contributes as a non-operator on management of time schedules, capital expenditures, production plans, and safety and environmental standards related to the projects. Also see discussion on our exploration, development and production of mineral resources and oil and gas in Item 3.D. Risk Factors.
With respect to oil and gas exploration, development and production (E&P) business, it is important to maintain or increase oil and gas reserves as is the case for major oil and gas companies, and Mitsuis Energy Segment is also aiming for increasing its reserves by expanding current projects and investing to new opportunities. Although our reserve is less than those of major oil and gas companies in the world, its volume can be ranked as a top level company among the Japanese oil and gas companies.
The following tables provide information on our investments in coal resource projects undertaken by the Energy Segment.
Currently the above mentioned joint ventures are forced to experience production adjustments due to recession of the world economy as well as reductions in crude steel production by steel manufacturers. On the other hand, in the medium and long term, demands of both thermal coal and metallurgical coal are expected to increase along with economic growth of Asian countries including India and China. In response to such increasing global demand, we continue to make proactive capital investments to expand the capacities of the existing projects, and our equity production tonnage is expected to be increasing after this fiscal year onward. Regarding further information and discussion on development of our coal mining projects, see Item 4.A. History and Development of the CompanyCapital Expenditure, Item 5.A. Operating ResultsOperating Results by Operating SegmentEnergy Segment and Item 5.B. Liquidity and Capital ResourcesInvestment Plans and Financial Policies of the Medium Term Management Outlook.
Revenues from oil and gas producing activities and coal mining activities (based on US GAAP) account for a critical portion of this segment. The table below sets forth the break down of revenues of the Energy Segment.
The Energy Segment is also participating in uranium development to contribute to its stable supply for nuclear power facilities. In October 2008, Mitsui acquired a 49% interest in six uranium blocks including
Honeymoon mine in South Australia, from Uranium One Inc. (Canada). Honeymoon mine is in its development stage and aiming for production commencement from 2010. Annual production is planned to reach 400 tons on a uranium concentrate basis. Blocks other than Honeymoon are planned to execute exploration activities and seek for commercialization.
The Energy Segment is engaged in oil trading operations conducted by Mitsui and Mitsui Oil (Asia) Hong Kong Limited (Hong Kong, China). This segment has a 20% minority share in Westport Petroleum, Inc. (United States). The international markets for crude oil and petroleum products are highly competitive and volatile. These commodities are listed and traded on various markets such as NYMEX in New York, ICE in London, SIMEX in Singapore and TOCOM in Tokyo, and our competitors in these markets are major oil and gas companies, the national oil companies of oil producing countries, oil traders including Japanese trading companies. In maintaining our competitive edge under these circumstances, it is critical for this segment to maintain good relationships with customers and suppliers as well as to mitigate price risks by utilizing hedging tools such as the futures markets. This segment is active in seeking to secure long-term offtake contracts of petroleum products such as fuel oil and condensate to be sold to worldwide companies including Japanese utility and refining companies. Long-term offtake contracts are sales and purchase contracts for various commodities, such as crude oil and petroleum products, entered into by suppliers and buyers, or offtakers, of such commodities for more than one year. Concurrent with the offtake contracts, the sellers of such commodities usually enter into financing arrangements whereby the sales proceeds from such commodities are used for repayment.
Within Japan, this segment is also engaged in refining and sales of oil and gas related products through Mitsui Oil Co., Ltd. (Japan), our oil sales subsidiary, and Kyokuto Petroleum Industries, Ltd. (Japan). Kyokuto Petroleum Industries, Ltd. is a refinery jointly owned (50:50) by the ExxonMobil Corp. Group and Mitsui Oil Co., Ltd.
In the domestic refining and marketing business for oil and gas related products, this segment has faced severe competition from domestic oil refining and distributing companies due to the structural surplus situation for refining capacity in Japan. Kyokuto Petroleum Industries, Ltd. and Mitsui Oil Co., Ltd. are in relatively sound financial situations owing to the extensive restructuring of inefficient assets and work force, and are pursuing efficient and competitive operations. In the LPG gas business, Mitsui Liquefied Gas Co., Ltd. (Japan) merged with Marubeni Liquefied Gas, Inc. in April 2008 to form Mitsui Marubeni Liquefied Gas Co., Ltd. Mitsuis ownership interest in the new company is 60%. It concentrates on improvement in operational efficiency and selling capacity by consolidating whole procedures of domestic LPG distribution from importing to retail.
This segment is also exploring various new business opportunities in the emerging new energy area. Mitsui expects bio-ethanol to be a significant renewable fuel in the future, and world demand to rise. In view of this, Mitsui are jointly working with Petróleo Brasileiro SA (Petrobras) for production of bio-ethanol and related products in Brazil, and marketing such products in the international market.
Foods & Retail Segment
The Foods & Retail Segment consists of one business unit, the Foods & Retail Business Unit, which has 25 subsidiaries including Mitsui Norin Co., Ltd. (Japan), PRI Foods Co., Ltd. (Japan), San-ei Sucrochemical Co., Ltd. (Japan), MITSUI FOODS CO., LTD. (Japan), Toho Bussan Kaisha, Ltd. (Japan), VENDOR SERVICE CO., LTD. (Japan), WILSEY FOODS, INC. (United States), Mitsui Alimentos Ltda. (Brazil) and MCM FOODS B.V. (Netherlands) ; and 17 associated companies including MIKUNI COCA-COLA BOTTLING CO., LTD. (Japan), Mitsui Sugar Co., Ltd. (Japan), The Kumphawapi Sugar Co., Ltd. (Thailand) and Multigrain AG (Switzerland).
Gross profit and net income for this segment for the year ended March 31, 2009 were ¥82.4 billion or 8.1% and ¥1.5 billion or 0.8% of our consolidated totals, respectively.
The Foods & Retail Segment engages in:
The Foods & Retail Segment is involved in a wide range of fields in a value chain of foods, from the global procurement of food material and production of foodstuffs to the traffic and wholesale of foods, packaging materials and sundry goods.
To secure a stable supply source, this segment purchases grain, oilseeds, and raw sugar from the United States, Canada, Brazil, Australia, Thailand and China and sell them in Japan and other Asian countries. This segment sells coffee to Japan and United States, mainly from Brazil. This segment purchases raw materials for beverages, such as tea leaves and juice, marine products, stock farm products, and dairy products from major supply sources around the world and deliver them primarily to Japan. This segment is also engaged in domestic broiler chicken raising, processing, and sales through the subsidiary PRIFOODS CO., LTD. (Japan),
This segment has positioned the Americas as their main base of operations and the core of their global food supply strategy. In collaboration with the Americas Segment, this segment has developed and maintained the following businesses:
In the period from 2007 through 2009, this segment made several investments in food production abroad, such as the above-mentioned agricultural business in Brazil and canola oil processing facilities in Canada, a dairy farming business in New Zealand and a shrimp farming business and broiler chicken raising and egg producing businesses in China. This segment aims to secure safe and stable supply sources of food, considering rapidly increasing food demand from emerging countries and conflict in supply capacity for bio-fuel purpose production. This segment intends to expand market channels to Japan and Asia, starting from the above-mentioned joint operations with the most reliable partners in major food material producing countries.
In food-manufacturing operations, Mitsui Norin Co., Ltd. (Japan) is engaged in beverage business as one of the major manufacturers of tea leaves in Japan. This segment put Mitsui Norin Co., Ltd. as a core of beverage business. In overseas wholesale operations, MCM Foods B.V. (Netherlands) engages in the import and sales of canned food products and groceries in England and other European market.
Competition varies depending on raw materials and products in the upstream areas of grain, feed, raw sugar and food materials, but is primarily based on price and quality of products. Many Japanese trading companies, international producers and others are competitors to varying degrees with respect to food raw materials this segment handles.
MITSUI FOODS CO., LTD. (Japan) plays a vital role in this segments wholesale operations. Its wide-range business activities and customers include general merchandise stores, supermarkets, convenience stores, and catering and restaurant chains throughout Japan, focusing on processed food and liquor transactions. MITSUI FOODS CO., LTD. meets the sophisticated and diversified needs for reduced distribution costs, secure temperature-controlled supply, and faster delivery. In April 2006, MITSUI FOODS CO., LTD. and Mitsui agreed with KOKUBU CO., LTD. (KOKUBU), a major Japanese food wholesaler, to form a business alliance, which includes cooperation in product categories to be reinforced by both companies. MITSUI FOODS CO., LTD has been planning and implementing the management improvement plan centering on restructuring of unprofitable businesses and streamlining of distribution. In October 2007, this segment transferred 70% of the shares of Hokushuren Co., Ltd. (Japan), formerly a foods and liquor wholesale subsidiary, to KOKUBU, following transfer of MITSUI FOODS CO., LTD.s business in the Hokkaido area (excluding Seven & i Holdings Co., Ltd.-related businesses) to Hokushuren Co., Ltd. In January 2009, Hokushuren Co., Ltd. and HOKKAIDO KOKUBU CO., LTD., KOKUBUs wholly owned subsidiary, merged to form SHUREN KOKUBU CO., LTD., in which this segment holds a 26.3% ownership interest as a result of the merger.
Mitsui maintains a comprehensive alliance with Seven & i Holdings Co., Ltd., Japans nationwide diversified retailer, which mainly engages in convenience stores, general supermarkets, department stores, food supermarkets, food services, financial services and IT services. Seven & i Holdings Co., Ltd. maintains operation through Seven-Eleven Beijing Co., Ltd. in China and 7-Eleven, Inc. in the United States.
Mitsui offers the following supply services to Seven & i Holdings Co., Ltd. through the domestic subsidiaries, such as MITSUI FOODS CO., LTD., Retail System Service Co., Ltd. (Japan) and VENDOR SERVICE CO., LTD. (Japan), Bussan Logistics Solutions Co., Ltd. (Japan).
As of the end of February 2009, Mitsui owned 1.8% of Seven & i Holdings Co., Ltd.s outstanding shares. Mitsui purchased the shares for a total cost of ¥50 billion in 2005, seeking to strengthen business ties with them.
Competitors in the wholesale and retail businesses are mainly general trading companies and wholesalers in Japan. In the traffic area, competitors are also traffic companies that operate third party logistics providing customized and integrated warehousing and transportation services. Domestic wholesalers are facing fierce competition with others, and from time to time they conduct mergers and acquisitions to increase revenues and reduce logistics costs.
Consumer Service & IT Segment
This segment is comprised of the First Consumer Service Business Unit; the Second Consumer Service Business Unit; and the IT Business Unit. Effective April 2009, the Consumer Service Business Unit was established through reorganizing the First and the Second Consumer Service Business Units. Media-related business was transferred from the First Consumer Service Business Unit to the IT Business Unit.
Gross profit and net loss for this segment for the year ended March 31, 2009 were ¥73.7 billion or 7.3% and minus ¥31.4 billion or minus 17.7% of our consolidated totals, respectively.
This segment owns 29 subsidiaries including:
And it has 33 associated companies including:
First Consumer Service Business Unit
Together with 11 subsidiaries and 17 associated companies, the First Consumer Service Business Unit is engaged in the followings:
In the media-related business, as a consumer service and content provider, this business unit provides television shopping services operated by an associated company, QVC Japan, Inc. (Japan), which was established jointly with QVC Inc. of the United States. In March 2009, this business unit acquired Taiwans third largest provider of 24-hour television shopping. BS digital high definition free television channel subsidiary, World Hi-Vision Channel, Inc. started broadcasting service under the name of BS channel 12 TwellV in Japan in December 2007. This business unit is engaged in development of business opportunities by accessing from broadcasting business to Internet and mobile-related businesses.
In the service and outsourcing businesses, as joint businesses with ARAMARK Corporation in the United States, AIM SERVICES CO., LTD. (Japan) provides a variety of services, such as contract food service, refreshment service and related support services for companies, schools, hospitals and social welfare facilities, while ARAMARK Uniform Japan Co., Ltd. (Japan) provides uniform rental services. This business unit acquired 5% of the outstanding shares in Recruit Co., Ltd. for ¥27 billion in February 2007 and entered into a business collaboration agreement with Recruit Co., Ltd. under the agreement both have developed new business opportunities such as senior-care, and other medical related information services.
This business unit positions medical and healthcare business as a business domain subject to company wide intensification, and integrated the whole medical and pharmaceutical businesses within this business unit in 2008. This business unit handles support for operation and management of medical facilities in healthcare service area, support for manufacturing and transportation in pharmaceutical area, planning of senior housing and related services in senior area, and healthcare related information service in the preventive care area.
In the fashion business domain, this business unit provides services to accommodate developments in the markets in:
In the field of apparel and OEM, this business unit plays roles at various stages in the value chain, including the design, planning and procurement of materials as well as sewing and processing. OEM business is transferred to the subsidiary company Mitsui Bussan Inter-Fashion Ltd. (Japan) which is engaged in planning and production of apparel and accessories, aiming to strengthen specialty and cost efficiency.
With respect to brand marketing businesses in Japan, this business unit is engaged in both license and import business involving international brands such as Burberry, Paul Stuart and Max Mara, while some trademark rights such as Pierre Cardin and Hanae Mori are hold by this business unit. This business unit enters into license agreements to retain their exclusive marketing manufacturing rights and establishes joint ventures with the brand holders, which control licensing or distributing imported products establishing nationwide sales network.
Responding to the changes in lifestyles, this business unit supplies a variety of consumer goods such as beauty and health-related products, interior and living items.
Second Consumer Service Business Unit
Major business areas of this business unit, including 10 subsidiaries and 10 associated companies, consist of the followings:
In the field of real estate business, this business unit is engaged in development, management and lease of condominiums, office buildings and other commercial properties mainly in the Tokyo metropolitan area. This business unit also develops houses and office buildings overseas. Moreover, it owns, operates and leases senior housing properties abroad. This business unit is also engaged in self-storage business and service office business as business development activities in Japan.
In the field of the industrial materials, Sumisho & Mitsuibussan Kenzai Co., Ltd. (Japan) supplies housing materials in the Japanese market. Mitsui Bussan Woodchip Oceania Pty. Ltd. operates afforestation projects with Japanese and the local partners in Australia. It also produces and exports woodchips to Japan. As for the pulp & paper business field, Mitsui Bussan Packaging Co., Ltd. (Japan) imports, exports and sells in the domestic market various paper products and packaging materials. This business unit also provides mines with off-the-road tires and related services in South America, Russia and Southeast Asia.
IT Business Unit
IT Business Unit provides a variety of services, which are delivered through the units 8 subsidiaries and 6 associated companies established in the following five major fields:
In the field of NI/SI businesses, a subsidiary, Mitsui Knowledge Industry Co., Ltd. (Japan), and an associated company, Nihon Unisys, Ltd. (Japan), both listed on the Tokyo Stock Exchange, provide integrated solutions to a wide range of customers.
This business unit has developed business process outsourcing businesses through a subsidiary, J-SCube Inc. (Japan), and an associated company, Moshi Moshi Hotline, Inc. (Japan). J-SCube Inc., which has been engaged in distribution of information processing devices and information input devices, has recently focused on enterprise information management such as customer information input, management and operation. Moshi Moshi Hotline, Inc. (Japan) is one of the Japanese major providers of call centers and related outsourcing services. Moshi Moshi Hotline, Inc. is now listed on the Tokyo Stock Exchange, with this business units current voting interest at 34.4% as of March 2009.
This business unit is engaged in various mobile communication businesses through alliances with domestic cell phone service providers and manufacturers. Telepark Corp. (Japan), which was a core subsidiary in this field, merged with MS Communications Co., Ltd., a domestic large scale agency and distributor engaged in the same business line, and changed its name to T-GAIA Corporation (Japan) and continued to be listed on the Tokyo Stock Exchange. The merger is to establish its leading position in domestic mobile handset sales and distribution market, by reinforcing cost-efficiency. As a result of the merger, this business units voting interest was diluted to 22.8%, and T-GAIA Corporation became an associated company of this business unit. T-GAIA Corporation is the biggest agencies for cell phone subscription as well as a retailer and distributor of cell phone handsets in Japan, engaged in agent for subscription of fixed telecommunications lines, including broadband connections. This business unit is engaged in mobile distribution with Brightstar Inc., a U.S.-based worldwide distributor of mobile handsets.
In the field of electronics products, this business unit is engaged in import and domestic trade of semiconductor devices and equipment/materials for semiconductor and liquid crystal displays mainly through Mitsui Electronics Inc. (Japan). In recent years, this business unit provides semiconductor and liquid crystal displays related products and services in China, principal production base, mainly through our affiliated companies in China.
This business unit is also engaged in export and offshore trade of liquid crystal displays and related parts. In July 2007, it established a subsidiary, MBK Distribuidora de Produtos Eletronicos Ltda. in Brazil for the sales and distribution of Japanese manufacturer Sharp Corporations electric household appliances including liquid crystal television, and business machines.
This business unit is dependent on the business of our subsidiaries and associated companies, most of which are located in Japan, where technological innovation is rapid and competition is fierce. Our important function involves business incubation of IT related products and services, as seen in the case with T-GAIA Corporation and Moshi Moshi Hotline, Inc.
Logistics & Financial Markets Segment
The Logistics & Financial Markets Segment is engaged in transportation and logistics services, insurance and financial business in Japan and abroad.
Gross profit and net loss for this segment for the year ended March 31, 2009 were ¥62.1 billion or 6.1% and minus ¥14.5 billion or minus 8.2% of our consolidated totals, respectively.
This segment is composed of the Financial Markets Business Unit and the Transportation Logistics Business Unit, and has 32 subsidiaries including:
This segment has 6 associated companies including JA Mitsui Leasing, Ltd. (Japan) in the Financial Markets Business Unit and Mitsui Direct General Insurance Company, Limited (Japan) in the Transportation Logistics Business Unit.
Financial Markets Business Unit
This business unit has 19 subsidiaries and 3 associated company and is engaged in the following business activities:
Mitsui and its subsidiaries such as Mitsui & Co., Energy Risk Management (United Kingdom), Mitsui & Co. Precious Metals, Inc. (United States), Mitsui Bussan Commodities Ltd. (United Kingdom), and Mitsui Bussan Precious Metals HK Ltd. (Hong Kong, China) are engaged in trading and brokerage in various commodity derivatives such as precious metals, non-ferrous metals listed on the LME, energy, grain and soft commodities. We are also engaged in sales and marketing of various derivatives and financial instruments of our own development to investors and market participants. Japan Alternative Investment Co., Ltd. (Japan) acts as placement agent for alternative investment products such as infrastructure fund and funds of hedge funds.
In the financial equity investments field, subsidiaries such as MVC Corporation (Japan) have made investments in the start-up to early phase of promising ventures mainly in IT and medical care businesses with the aim of garnering capital gains from the public offering of investee stock or M&A after incubating them with proactive management support. Mitsui & Co., Principal Investments Ltd. (Japan) is engaged in investing in domestic mature companies and growing companies pursuing capital gains through initial public offering and trade sales after improving the corporate value of the invested companies by providing them with human and other resources of the unit. As of March 31, 2009, this business unit has a 9.3% stake as a limited partner in a limited partnership which was established for investment in Skylark Co., Ltd., a Japanese restaurant chain.
In REIT related businesses, Mitsui & Co., Logistics Partners Ltd. (Japan) provides asset management service to Japan Logistics Fund Inc, a listed REIT on the Tokyo Stock Exchange that is only Japanese REIT specializes in logistics properties such as warehouses and distribution centers. In June 2008, this business unit launched an emerging market infrastructure fund with Challenger Financial Service Group, an Australian-based financial services organization. This fund, while meeting the growing demands of global investors to invest in infrastructure assets, is intended to contribute to the development of emerging market economies by providing the needed capital to the infrastructure space, enabling the rapid growth in the regions.
As of the end of March 2009, this business unit has a 34.2% voting interest in JA Mitsui Leasing, Ltd. (Japan), a general leasing company with its strengths in leasing of information-processing equipment and large scale equipment, as well as industrial machinery, aircraft and ocean vessels. JA Mitsui Leasing, Ltd. was created as a joint holding company in April 2008 to integrate smoothly the operations of Mitsui Leasing & Development, Ltd. (Japan), an associated company of the unit, and Kyodo Leasing Co., Ltd. (Japan), another major leasing company, to reinforce operating bases. In October 2008, JA Mitsui Leasing, Ltd. merged its wholly-owned two subsidiaries, Mitsui Leasing & Development, Ltd. and Kyodo Leasing Co., Ltd.
As of March 31, 2009, this business unit has an 8.8% share of outstanding common stock in Central Finance Co., Ltd., a consumer credit and credit card company in Japan. (From April 1, 2009 this business unit has an 2.2% share of outstanding common stock in Cedyna Financial Corporation (Japan) which OMC Card, Inc. underwent a merger with Central Finance Co., Ltd. and QUOQ, Inc., and changed its trading name to Cedyna Financial Corporation.)
Transportation Logistics Business Unit
The Transportation Logistics Business Unit provides sophisticated, high value added logistics services to customers, leveraging its longstanding experience in offering such services group-wide. This business unit also seeks the development of new business domains through integrating logistics, financial and information technology.
Together with 13 subsidiaries and 3 associated companies, this business unit is engaged in the following business activities:
In the international logistics business, this business unit has established TRI-NET (JAPAN) INC. and other core subsidiaries, which are located in Japan, the Americas, Europe, South East Asia, and China. Each of those subsidiaries collaborates with the Head Office and overseas trading subsidiaries worldwide to provide customers with solutions to logistics needs through international combined multimodal transportation services using various modes of land, sea and air transportation. And through its tramp shipping services, the Transportation Logistics Business Unit provides transportation for bulk cargoes, such as coal, grain and fertilizers, as well as project transportation services for power generation plants, chemical plants and other facilities. In the development of its warehousing business, Tri-net Logistics Co., Ltd. (Japan) has focused in particular in transportation services for bulk chemicals. Tri-net Logistics Co., Ltd. (Japan) is a subsidiary of Mitsui Bussan Logistics Holdings Ltd. (Japan). It was established in April 2007 through the merger of three existing logistics and warehousing subsidiaries. In the logistics solutions field, Mitsui Bussan Logistics Management Co., Ltd. uses its logistics engineering capabilities to produce advanced logistics design solutions.
This Business Unit is also developing logistics infrastructure and transportation systems with the aim of expanding its business activities in emerging economies including the BRICs and Middle Eastern countries. In Russia, this business unit established large scale warehousing facilities in Moscow for Japanese manufacturers of electrical appliances, construction machinery, motor vehicles and other products. In 2007, it signed an operational partnership agreement with Russian Railways (Russia). In India, this Business Unit plans to develop a special free trade warehouse zone on the outskirts of Delhi in partnership with local capital. Additionally, in the Middle East, this business unit has set up a logistics base in Dubai in partnership with AW Rostamani Group(UAE).
In the insurance and risk management field, this business unit provides insurance agency services through Mitsuibussan Insurance Co., Ltd. Several subsidiaries, including Insurance Company of Trinet (USA) Inc., operate as captive insurance companies and also uses its experience and knowledge of risk management to provide direct insurance writing services. In addition, this business unit has a 25% share interest in an associated company, Mitsui Direct General Insurance Company, Limited, a direct marketing non-life insurance company specializing in Internet-based sales.
In collaboration with the Financial Markets Business Unit, this business unit also develops REITs based on logistics-related real estate. This unit intends to increase the assets for such REIT programs, seeking opportunities for the development of facilities, brokerage in properties and tenants.
In June 2008, the Agri-Food Business Strategic Planning Dept. was established in this business unit. The aim of this new organization is to contribute to the maintenance and advancement of domestic agriculture through supporting for agricultural management and production as well as the development of advanced logistical services for agricultural products, utilizing knowledge regarding agriculture and agricultural logistics.
The Americas Segment is engaged in sales, intermediary service and manufacturing of various commodities and conducts related business led by overseas trading subsidiaries in North, Central and South America. Mitsui & Co. (U.S.A.), Inc., or Mitsui U.S.A., manages the business of the segment as the center of the regional strategy.
Gross profit for this segment for the year ended March 31, 2009 was ¥116.0 billion or 11.4% of our consolidated total. This segment recorded a net loss of ¥7.1 billion or minus 4.0% of our consolidated total.
This segment consists of 9 trading subsidiaries including Mitsui & Co. (U.S.A), Inc. (United States), Mitsui & Co. (Canada) Ltd. (Canada) and Mitsui Brasileira Importacao e Exportacao S.A. (Brazil), 34 other subsidiaries owned mainly by Mitsui U.S.A. including Steel Technologies Inc. (United States), Champions Pipe & Supply, Inc. (United States), Mit Wind Power Inc. (United States), Mitsui Automotriz S.A. (Peru), Road Machinery, LLC (United States), Ellison Technologies Inc. (United States), Intercontinental Terminals Company LLC (United States), Novus International, Inc. (United States), CornerStone Research & Development Inc. (United States), SunWize Technologies, Inc. (United States), Fertilizantes Mitsui S.A. Industria e Comercio (Brazil), Westport Petroleum, Inc. (United States), United Grain Corp. (United States), Mitsui Foods, Inc. (United States), MBK Real Estate LLC (United States) and AFC HoldCo, LLC (United States) and 6 associated companies including MED3000 Group. Inc. (United States).
Mitsui U.S.A. is our largest overseas subsidiary, and it carries out many diversified business activities together with subsidiaries and associated companies, in collaboration with the operating segments of the Head Office in Japan. Mitsui U.S.A. has been leading our entry in the U.S. market, and we believe that Mitsui U.S.A. is one of the major exporters of American products.
Business activities of Mitsui U.S.A.s major operating divisions are as follows:
This division, together with the Energy Segment, has MitEnergy Upstream LLC, a subsidiary for the development and production of oil and gas in Gulf of Mexico.
Europe, the Middle East and Africa Segment
The Europe, the Middle East and Africa Segment is engaged in sales and intermediary service of various commodities and conducts related businesses led by overseas trading subsidiaries in Europe, the Middle East, Africa and CIS countries. Effective April 2007, the Europe, the Middle East and Africa Business Unit was formed by reorganizing the former Europe Business Unit in order to cover the businesses in these regions.
Gross profit and net loss for this segment for the year ended March 31, 2009 were ¥22.2 billion or 2.2% and minus ¥11.5 billion or minus 6.5% of our consolidated totals, respectively.
As of March 31, 2009, this segment consisted of 13 trading subsidiaries, including Mitsui & Co. Europe Holdings PLC (United Kingdom), Mitsui & Co. Europe PLC (United Kingdom), Mitsui & Co. Deutschland GmbH (Germany), Mitsui & Co. Benelux S.A./N.V. (Belgium), Mitsui & Co. France S.A.S. (France), Mitsui & Co. Italia S.p.A. (Italy), Mitsui & Co., Middle East Ltd. (United Arab Emirates), 7 subsidiaries including MBK Real Estate Europe Limited (United Kingdom) and 7 associated companies.
Mitsui & Co. Europe PLC, our wholly-owned subsidiary with its head office in London, manages the overall business activities in Europe, the Middle East, Africa and CIS countries through 12 overseas trading subsidiaries and other branch offices and liaison offices. Mitsui & Co. Europe PLC collaborates with our subsidiaries and associated companies of other operating segments.
Recently, the major parts of business in this segment have been sales and intermediary service of steel products, chemicals and machinery. For example, this segment provided assistance services for SCM of steel
products procured by Norsk Hydro ASA. In the chemical business, this segment has been engaged in sales and intermediary service of various chemical products and materials supported by our global network and relationship with large scale manufacturers including Bayer Aktiengesellschaft.
Over the years, in Central and Eastern Europe, Mitsui has established trading subsidiaries and representative offices to expand business opportunities in the region, and have continuously participated in joint ventures, mainly with Japanese manufacturers. In connection with the enlargement of European Union, Japanese automobile, electric and chemical manufacturers are rushing to set up operations in the region. This segment is collaborating with them by taking advantage of our existing business bases.
In April 2008, MBK Real Estate Europe Limited (United Kingdom) was transferred to this segment from the Second Consumer Service Business Unit. This segment also has a 40% voting share in Mitsui Automotive Europe B.V. (Netherlands), a subsidiary of the Motor Vehicle Business Unit.
In the Middle East we have established trading subsidiaries Mitsui & Co., Middle East Ltd. (United Arab Emirates), Mitsui and Co. (Middle East) B.S.C.(c) (Bahrain), Mitsui and Co., Iran Ltd. (Iran) and Mitsui and Co. Kuwait W.L.L. (Kuwait). Mitsui & Co., Middle East Ltd. owns offices in United Arab Emirates, Qatar and Oman. Mitsui has several representative offices in the Middle East countries including Saudi Arabia. These trading subsidiaries and offices in the Middle East collaborate with the Head Office primarily in the field energy development and production and projects of petrochemical plants and power plants.
Asia Pacific Segment
Effective April 2006, following the introduction of our regional business unit system, the Asia Business Unit was formed and consists of the trading subsidiaries, branches and liaison offices in this region. The Chief Operating Officer of this business unit has been delegated authority of operation within this region. The Asia Pacific Segment is engaged in sales and intermediary service of various commodities and conducts related businesses led by overseas trading subsidiaries in Asia and Oceania countries. Effective April 2007, the Asia Pacific Business Unit was formed by reorganizing the former Asia Business Unit and consolidating subsidiaries in Oceania region.
Gross profit and net income for this segment for the year ended March 31, 2009 were ¥26.6 billion or 2.6% and ¥30.6 billion or 17.2% of our consolidated totals, respectively.
As of March 31, 2009, this segment consisted of 20 trading subsidiaries, including Mitsui & Co. (Asia Pacific) Pte. Ltd. (Singapore), Mitsui & Co. (Hong Kong) Ltd. (Hong Kong, China), Mitsui & Co. (China) Ltd. (China), Mitsui & Co. (Shanghai) Ltd. (China), Mitsui & Co. (Taiwan) Ltd. (Taiwan), Mitsui & Co. Korea Ltd. (Republic of Korea), Mitsui & Co. (Thailand) Ltd. (Thailand), Mitsiam International Ltd. (Thailand), Mitsui & Co. (Australia) Ltd. (Australia), 6 subsidiaries and 5 associated companies including HannSpree Inc. (Cayman Islands).
China joined the WTO in 2001 and enjoyed double-digit growth in gross domestic product from 2003 to 2007. Chinese economy has gaining greater influence on the world economy, though the growth rate in 2008 declined to 9.0% due to the financial turmoil.
We have been increasing our operations in, and shifting corporate resources to, Greater China, which includes mainland China and Hong Kong, in order to expand and strengthen our business operations in key industries in China such as steel products, chemicals, mineral and metal resources, foods and retail, IT, and transportation and logistics.
Our presence in China is comprised of nine local trading subsidiaries, all of which have been permitted to conduct import and export and wholesale trade domestically within China. Those trading subsidiaries include Mitsui & Co., (China) Ltd., an investing company in Beijing, Mitsui & Co. (Shanghai) Ltd., which is located in Chinas bonded area, and Mitsui & Co. (Hong Kong) Ltd. In addition, we have established representative offices in seven cities in China.
Mitsui & Co., (China) Ltd. has made investments jointly with the business units of the Head Office in critical joint ventures in key industries in China such as steel products, mineral and metal resources, and foods.
In the ASEAN region, trading subsidiaries including Mitsui & Co. (Asia Pacific) Pte. Ltd., Mitsui & Co., (Thailand) Ltd., Mitsiam International Ltd. (Thailand) and PT Mitsui Indonesia (Indonesia), and associated companies jointly collaborate with the Head Office and engage in various business activities involving, among other things, chemical and metal products and industrial type projects. With the Head Office, trading subsidiaries jointly establish various subsidiaries and participate in joint ventures formed with the third parties.
In December 2006, we obtained a special approval from the Vietnamese government to establish trading subsidiaries, and Mitsui & Co. Vietnam Ltd. started operations in April 2007. Mitsui & Co. (Asia Pacific) Pte. Ltd. started operations undertaking all the businesses with the relevant assets, liabilities, contracts and employees from the Singapore branch of Mitsui & Co., Ltd in April 2007.
Our operations in India were traditionally handled by branch offices in New Delhi, Calcutta, Madras and Bombay and were concentrated primarily in exporting commodities, such as iron ore, finished iron and steel products, textiles, and marine products, to Japan and other areas of the world. However, with the increasing deregulation of the Indian economy, in March 2003 we established Mitsui & Co., India Pvt. Ltd. Through Mitsui & Co., India Pvt. Ltd., we expect not only to engage in import and export-related transactions but also to pursue investment opportunities in domestic distribution channels.
In Australia, Mitsui & Co. (Australia) Ltd. is active in the development of minerals such as iron ore and coal, energy and agricultural exports in collaboration with corresponding operating segments, mainly in the Head Office. As described in the Mineral & Metal Resources Segment and the Energy Segment above, Australia is a critical geographic area in our corporate strategy. Mitsui & Co. (Australia) Ltd. participates in Mitsui Iron Ore Development Pty. Ltd. (Australia) and Mitsui Coal Holdings Pty. Ltd. (Australia) with equity shares of 20% and 30%, respectively.
All Other Segment
The operations of the All Other Segment include financing services, office services and other services to external customers, and/or to us and associated companies.
Gross profit and net income for this segment for the year ended March 31, 2009 were ¥2.9 billion or 0.3% and ¥6.5 billion or 3.7% of our consolidated totals, respectively.
The All Other Segment has 11 subsidiaries, including Mitsui & Co. Financial Services Ltd. (Japan), Mitsui Bussan Trade Services Ltd. (Japan), Mitsui & Co. Financial Services (Asia) Ltd. (Singapore), Mitsui & Co. Financial Services (Europe) B.V. (Netherlands) and Mitsui & Co. Financial Service (U.S.A.) Inc. (United States), and 1 associated company. The activities of major subsidiaries in this segment are as follows:
We are involved in the worldwide trading of various commodities. See Item 5. A. Operating ResultsRevenues for further details of our revenues by commodity type for the years ended March 31, 2009, 2008 and 2007.
The following table shows our total trading transactions in each of our major markets for the years ended March 31, 2009, 2008 and 2007.(1)(2)(3)
We are a global general trading company and we conduct our business with our subsidiaries and associated companies. As of March 31, 2009, we had 326 subsidiaries and 207 associated companies that are accounted for by the equity method.
The table below provides information on our significant subsidiaries as of March 31, 2009. We have supplementarily provided voting power where it differs from ownership interest.
The following table provides a list of our principal property, plants and equipment as of March 31, 2009.
(Sft: Square feet, MT: Metric Ton)
In addition to the above, our major assets leased to others as of March 31, 2009 were as below:
For information on oil and gas producing activities, see Supplementary Information on Oil and Gas Producing Activities (Unaudited) to the consolidated financial statements included elsewhere in this annual report.
A portion of the land, buildings and equipment owned by us is subject to mortgages or other liens. As of March 31, 2009, the aggregate amount of such mortgages or other liens was ¥63 billion. We know of no material defect in our title to any of the properties or of no material adverse claim with respect to them, either pending or contemplated.
We consider our offices and other facilities to be well maintained and believe that our plant capacity is adequate for our current requirements. For the information on plans to construct, expand or improve facilities, in particular those related to mineral resource projects and oil and gas projects, see relevant descriptions in Item 4.A. History and Development of the CompanyCapital Expenditures, Mineral & Metal Resources Segment and Energy Segment of Item 4.B. Business Overview and Mining Activities below in this section.
We do not believe there are any material environmental issues that would affect the utilization of our assets.
Information regarding our mining activities is provided below.
Name of Joint Venture
Entity by which Mitsui Participates in the Mining Activity and its Ownership Interest
Area of Mining Operation (Region, State, Country)
Name of Joint Venture or Investee
Entity by which Mitsui Participates in the Mining Activity and its Ownership Interest(2)
Area of Mining Operation (Region, State, Country)
A brief history and the present condition of each of the above-mentioned mines, including the current state of development, if applicable, are provided below.
Name of Joint Venture
Entity by which Mitsui Participates in the Mining Activity and its Ownership Interest
Area of Mining Operation (Region, State, Country)
Robe River Iron Associates
Mitsui Iron Ore Development Pty. Ltd. (33%)
Pilbara Region, Western Australia, Australia
Mt. Newman Joint Venture
Mitsui Itochu Iron Pty. Ltd. (10%) (Mitsui share of Mitsui Itochu Iron Pty. Ltd. is 70%)
Pilbara Region, Western Australia, Australia
Yandi Joint Venture
Mitsui Iron Ore Development Pty. Ltd. (7%)
Pilbara Region, Western Australia, Australia
Mt. Goldsworthy Joint Venture
Mitsui Iron Ore Development Pty. Ltd. (7%)
Pilbara Region, Western Australia, Australia
Name of Joint Venture or Investee
Entity by which Mitsui Participates in the Mining Activity and its Ownership Interest
Area of Mining Operation (Region, State, Country)
BHP Mitsui Coal Pty. Ltd.
BHP Mitsui Coal Pty. Ltd. (20%)
Production tonnage figures in the table below represent those of marketable products as tonnage after accounting for extraction and beneficiation losses.
Production tonnage figures in the table below represent those of marketable products as tonnage after accounting for extraction and beneficiation losses.
Reserves of iron ore classified according to operator are presented in the tables below.
Operator: Rio Tinto Ltd.( 1)(2)(3)
Reserves as disclosed by Rio Tinto Ltd. consist of proved and probable reserves.
Operator: BHP Billiton Ltd.(1)(2)(3)( 4)(9)(10)(11)
Reserve amounts of Mt. Newman, Yandi and Mt. Goldsworthy consist of proved and probable reserves.