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FORM 6-K/A

 

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Private Issuer

Interim Business Report First half of the fiscal year ending March 31, 2007

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

For the month of December 26, 2006

Commission File Number 09929

 

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Mitsui & Co., Ltd.

(Translation of registrant’s name into English)

 

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2-1, Ohtemachi 1-chome Chiyoda-ku, Tokyo 100-0004 Japan

(Address of principal executive offices)

 

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Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F      X            Form 40-F              

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):             

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):             

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes                      No      X    

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-            

 

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: December 26, 2006

 

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Translated document

This message has been prepared in English solely for the convenience of foreign readers, based on “Kabunushi no minasamae”. The original message in Japanese is definitive.

Message to Shareholders

Mitsui & Co., Ltd. (Mitsui) has announced an amendment to its six-month operating results published in its 88th Interim Business Report previously delivered to shareholders, reflecting losses in relation to naphtha trading transactions at its subsidiary Mitsui Oil (Asia) Pte. Ltd. (MOAS, Headquarters: Singapore).

It was discovered in November 2006 that one of the traders at MOAS had incurred but hidden by deceptively reporting significant unrealized losses on physical and futures trading of naphtha. As of December 19 2006, accumulated losses realized through orderly liquidation of these transactions amounted to ¥9.6 billion (U.S. $81 million) before tax.

Based on the results of internal investigations, Mitsui has revised its six-month operating results in its 88th Interim Business Report which were previously delivered to shareholders (please refer to the amended Consolidated Balance Sheet and Statement of Consolidated Income as shown in Page 2 to 5). Net income of the first half of the fiscal year ending March 31, 2007 has been revised to ¥154.5 billion, down by ¥4.7 billion from ¥159.2 billion as previously reported. For the details of Mitsui’s financial statements following this revision please refer to Mitsui’s website at: http://www.mitsui.co.jp/en/ir/library/business/.

The annual forecast of Mitsui’s consolidated net profit of ¥300 billion for the year ending March 31, 2007, and the interim dividend of ¥17 per share, remain unchanged.

An internal investigation into this incident is ongoing, and based on the results of such investigation, Mitsui will implement measures necessary to prevent the recurrence of similar incidents in future. Mitsui recognizes the seriousness of the incident and will continue to make efforts to improve its group-wide internal controls.

December 2006

Mitsui & Co., Ltd.

President and Chief Executive Officer

Shoei Utsuda

Continued

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CONSOLIDATED BALANCE SHEETS (Unaudited)

(Revisions are shown by an underline.)

ASSETS

 

(Millions of Yen)		September 30, 2006				March 31, 2006
Current Assets:
Cash and cash equivalents		¥	706,464			¥	697,065
Time deposits			8,343				37,028
Marketable securities			167,945				26,860
Trade receivables:
Notes and loans, less unearned interest			487,647				439,187
Accounts			2,112,643				1,997,093
Associated companies			170,967				169,709
Allowance for doubtful receivables			(27,233	)			(26,703	)
Inventories			752,497				695,754
Advance payments to suppliers			96,296				92,150
Deferred tax assets—current			26,196				32,569
Derivative assets			337,749				320,134
Other current assets			310,272				265,985
Total current assets			5,149,786				4,746,831
Investments and Non-current Receivables:
Investments in and advances to associated companies			1,471,592				1,300,587
Other investments			964,794				935,675
Non-current receivables, less unearned interest			529,142				444,487
Allowance for doubtful receivables			(95,179	)			(84,513	)
Property leased to others—at cost, less accumulated depreciation			236,784				218,583
Total investments and non-current receivables			3,107,133				2,814,819
Property and Equipment—at Cost:
Land, land improvements and timberlands			197,256				203,170
Buildings, including leasehold improvements			354,725				349,904
Equipment and fixtures			466,658				472,069
Mineral rights			165,543				80,953
Vessels			22,339				22,376
Projects in progress			126,162				55,278
Total			1,332,683				1,183,750
Accumulated depreciation			(459,162	)			(437,581	)
Net property and equipment			873,521				746,169
Intangible Assets, less Accumulated Amortization			82,011				98,811
Deferred Tax Assets—Non-current			46,492				47,947
Other Assets			118,661				119,001
Total		¥	9,377,604			¥	8,573,578

 

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LIABILITIES AND SHAREHOLDERS’ EQUITY

 

(Millions of Yen)		September 30, 2006				March 31, 2006
Current Liabilities:
Short-term debt		¥	772,800			¥	540,797
Current maturities of long-term debt			359,413				353,185
Trade payables:
Notes and acceptances			118,715				100,402
Accounts			2,046,939				1,762,224
Associated companies			100,313				108,252
Accrued expenses:
Income taxes			44,704				63,739
Interest			22,015				22,485
Other			75,238				72,848
Advances from customers			118,105				104,500
Derivative liabilities			259,030				214,460
Other current liabilities			168,455				168,049
Total current liabilities			4,085,727				3,510,941
Long-Term Debt, less Current Maturities			2,699,250				2,658,735
Accrued Pension Costs and Liability for Severance Indemnities			37,822				36,769
Deferred Tax Liabilities—Non-current			334,321				318,911
Other Long-Term Liabilities			254,306				252,155
Minority Interests			136,720				118,160
Shareholders’ Equity:
Common stock			295,797				295,766
Capital surplus			390,545				390,488
Retained earnings:
Appropriated for legal reserve			38,860				38,508
Unappropriated			955,286				825,306
Accumulated other comprehensive income (loss):
Unrealized holding gains and losses on available-for-sale securities			205,376				216,099
Foreign currency translation adjustments			(56,536	)			(83,279	)
Minimum pension liability adjustment			(5,407	)			(5,417	)
Net unrealized gains and losses on derivatives			8,090				2,439
Total accumulated other comprehensive income (loss)			151,523				129,842
Treasury stock, at cost			(2,553	)			(2,003	)
Total shareholders’ equity			1,829,458				1,677,907
Total		¥	9,377,604			¥	8,573,578

 

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STATEMENTS OF CONSOLIDATED INCOME (Unaudited)

(Revisions are shown by an underline.)

 

(Millions of Yen)		Six-Month Period ended September 30, 2006				Six-Month Period ended September 30, 2005
Revenues:
Sales of products		¥	1,984,093			¥	1,597,353
Sales of services			270,894				234,550
Other sales			69,628				52,240
Total revenues			2,324,615				1,884,143
Total Trading Transactions:
Six-month period ended September 30, 2006: ¥7,622,220 million
Six-month period ended September 30, 2005: ¥7,048,604 million
Cost of Revenues:
Cost of products sold			1,797,340				1,440,016
Cost of services sold			68,112				45,510
Cost of other sales			38,268				23,416
Total cost of revenues			1,903,720				1,508,942
Gross Profit			420,895				375,201
Other Expenses (Income):
Selling, general and administrative			285,019				259,167
Provision for doubtful receivables			1,610				1,218
Interest expense, net of interest income			17,920				9,835
Dividend income			(28,119	)			(16,074	)
Gain on sales of securities—net			(26,545	)			(14,074	)
Loss on write-down of securities			3,207				3,499
Gain on disposal or sales of property and equipment—net			(1,236	)			(216	)
Impairment loss of long-lived assets			9,964				4,771
Compensation and other charges related to DPF incident			(3,864	)			9,000
Other expense—net			22,331				328
Total other expenses			280,287				257,454
Income from Continuing Operations before Income Taxes, Minority Interests and Equity in Earnings			140,608				117,747

[Continued on next page]

 

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[Continued from previous page]

 

Income Taxes:
Current			67,620				46,782
Deferred			(8,887	)			16,799
Total			58,733				63,581
Income from Continuing Operations before Minority Interests and Equity in Earnings			81,875				54,166
Minority Interests in Earnings of Subsidiaries			(5,203	)			(9,001	)
Equity in Earnings of Associated Companies—Net (After Income Tax Effect)			74,512				38,828
Income from Continuing Operations			151,184				83,993
Income from Discontinued Operations—Net (After Income Tax Effect)			3,271				(800	)
Net Income		¥	154,455			¥	83,193

 

Note:

In accordance with Statement of Financial Accounting Standards No.144, the figures for the six-month period ended September 30, 2005 relating to discontinued operations have been reclassified.

 

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From the President

We are pleased to bring you the Interim Business Report for our 88^th fiscal year, which ends on March 31, 2007.

The economic environment was strong during the interim period from April 1, 2006 to September 30, 2006, and we achieved consolidated net income of ¥154.5 billion and non-consolidated net income of ¥71.7 billion. Both these results are considerably higher than the previous interim period. Commensurate with this outcome, we have revised our full-year forecast for consolidated net income upwards to ¥300.0 billion.

The interim dividend for the interim period has been increased to ¥17 per share, ¥7 per share higher than for the previous interim period. Moreover, based on our dividend policy of targeting a consolidated payout ratio of 20% and assuming we achieve the above-mentioned consolidated net income target for the year of ¥300.0 billion, we plan to increase the total dividend for the full year to ¥34 per share, compared to the ¥24 per share paid for the year ended March 2006.

In May of this year we announced Medium-Term Management Outlook, our corporate vision 3 to 5 years ahead and key strategy to realize it. Based on the ideas outlined in this document, we will continue to pursue the sustainable development of Mitsui and make every effort to increase corporate value.

We look forward to your continued support.

Shoei Utsuda

President and Chief Executive Officer

December 2006

 

 

•      Operating Environment		2
The Global Economy		2
The Japanese Economy		2
•      Medium-Term Management Outlook and Business Results		3
Corporate Vision 3 – 5 Years Ahead—Quantitative Summary		3
Progress on Key Initiatives in the Medium-Term Management Outlook and Key Issues to Address		3
•      Outline of Operating Results		6
Operating Results of The Group		6
Results by Operating Segment		9
Forecasts for the Year ending March 31, 2007		10
Trends in Company Performance and Value of Assets		12
•      Corporate Outline		13
Principal Group Business		13
Principal Group Offices		13
Shares of Mitsui & Co., Ltd.		13
Group Employees		14
Principal Subsidiaries and Associated Companies		15
The Number of Subsidiaries and Associated Companies		16
Details of Senior Company Officers (and Auditors)		17
Directors and Corporate Auditors		17
Executive Officers		18
•      Consolidated Balance Sheets		19
•      Statements of Consolidated Income		21
•      Statements of Consolidated Shareholders’ Equity		23
•      Statements of Consolidated Cash Flows		25
•      Operating Segment Information		27
•      Balance Sheets		30
•      Statements of Income		33
•      Changes in Shareholders’ Equity		35

Note: In this translated report, the term “the Group” refers to “corporate organizations” as defined in Clause 2, Article 122 of the enforcement regulations of the Corporate Law of Japan.

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INTERIM BUSINESS REPORT

(April 1, 2006 to September 30, 2006)

OPERATING ENVIRONMENT

THE GLOBAL ECONOMY

An overview of our operating environment in the six-month period ended September 30, 2006 is as follows. The global economy continued its expansion, driven by the steady growth by the U.S. economy, the high growth rate of China and other emerging economies, the recovery of Europe, and the good performance of Japanese economy. In the United States, corporate profits remained robust and consumer spending continued to increase, and despite an easing in housing investment, which had been overheating, the economy performed steadily overall. China and other emerging economies continued to keep high growth, driven by further expansions in capital investment and increases in exports. The European economy demonstrated a clear recovery, supported by greater capital investment, particularly in Germany, and other factors.

The synchronized growth of the global economy made for an upward trend in international commodity markets such as crude oil, non-ferrous metals. Commodity prices reached record-high levels in the summer, and despite falling thereafter, remain at high levels. The global trend towards higher interest rates continued, and in the United States, the policy of raising interest rates that began in 2004 continued during the first half of this fiscal year, while Europe and Japan also raised interest rates.

THE JAPANESE ECONOMY

The Japanese economy continued its recovery. Exports continued to increase, driven by the global economic expansion and the weakening yen. Strong corporate sector profits led to increased capital investment particularly in the digital home appliance field, while improvements in employment and wages led to firmer consumer spending. Because of the economic recovery and the turn of the Consumer Price Index into positive territory, the Bank of Japan decided to terminate its quantitative easing policy this March, and subsequently ended its zero interest rate policy this July.

 

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MEDIUM-TERM MANAGEMENT OUTLOOK AND BUSINESS RESULTS

The key elements of Mitsui’s new Medium-Term Management Outlook, announced in May 2006, are as follows:

 

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Building a business portfolio that meets the needs of customers and of society.

 

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Leveraging business engineering capabilities across Mitsui and its group companies (subsidiaries and associated companies) and optimizing resource allocation.

 

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Prioritizing the development of human resources. In this respect we intend to build on our existing values of challenge and creativity and freedom and open-mindedness with additional emphasis on fairness, humility and compliance. We intend to form and foster a diverse pool of capable personnel.

 

1	CORPORATE VISION 3 – 5 YEARS AHEAD—QUANTITATIVE SUMMARY

Looking ahead three to five years, risks in the operating environment include political, economic and environmental risks. Notwithstanding these risks, we believe that the currently favorable operating environment—with simultaneous growth in different regions of the world, and strong upstream markets for mineral resources, energy and materials—is likely to continue. Based on this assumption, we envisage achieving the parameters over the next three to five years as illustrated in the chart on the right.

 

2	PROGRESS ON KEY INITIATIVES IN THE MEDIUM-TERM MANAGEMENT OUTLOOK AND KEY ISSUES TO ADDRESS

(1) DEVELOPMENT OF STRATEGIC BUSINESS PORTFOLIO

 

i	Investment plan

The Medium-Term Management Outlook intends to make investments around ¥800.0 billion over the two years to March 31, 2008. In the six-month period ended September 30, 2006, we have made investments of ¥230.0 billion.

 

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Our total investment in the Sakhalin II project was approximately ¥350.0 billion as of the end of September 2006, an increase of ¥47.0 billion* compared to the end of March 2006. The Sakhalin II Project continues to progress in accordance with the Production Sharing Agreement with the Russian Government, and the construction work is now more than 80% complete towards the scheduled start of LNG delivery in summer 2008. In the meantime, Sakhalin Energy Investment Company Ltd. (Bermuda) (in which we hold a 25% interest) is working closely with the relevant authorities to resolve the environmental issues raised by the Ministry of Natural Resources of the Russian Federation.		The Sakhalin II Project LNG plant (under construction)

We also acquired oil and gas interests valued at ¥53.2 billion in the offshore Gulf of Mexico, through an agreement with Pogo Producing Company of United States. Furthermore, in March 2007, we plan to make Mitsui Oil Exploration Co., Ltd. (Japan), currently one of our associated companies, into a subsidiary (in which we will increase our voting rights to 50.3%). In the Australian iron ore and coal business, we made investments of ¥26.7 billion, as part of our plan to increase production capacity.

 

*	Including effects from foreign exchange translation

 

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INFRASTRUCTURE PROJECTS BUSINESS

In the Infrastructure Projects Business we invested ¥27.5 billion in the acquisition of Brazilian gas distribution operations. We also invested ¥10.3 billion to acquire newly-issued shares of Toyo Engineering Corporation (Japan) with the aim of enhancing collaboration in the infrastructure projects, which are growing in size in all regions.

 

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GLOBAL TRADING NETWORKS BUSINESS

In the global trading networks area, in response to rising demand for salt for use as a raw material in the chlor-alkali industry, we acquired the Onslow salt field in Australia in June 2006. Furthermore, in September 2006, we launched an initiative in the automobile parts business, acquiring newly issued shares in the automobile parts manufacturer and dealer Asahi Tec Corporation (Japan), which increased its capital to fund expansion of overseas operations, particularly in the United States.

 

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CONSUMER PRODUCTS AND SERVICES BUSINESS

In the consumer products and services business, we invested ¥5.8 billion to acquire newly-issued shares of Brightstar Corp. of United States, a major U.S. distributor of mobile handsets, and aim to expand our mobile phone business in the Asia-Pacific region.

 

ii	Continuous review of our business portfolio based on Mitsui’s business strategy

 

Mitsui’s President sits down twice a year for face-to-face discussions with the Chief Operating Officers of each Business Unit to review the profitability and viability of subsidiaries and associated companies. From this fiscal year, the scope of these examinations has been widened to include the entire portfolio of each Business Unit. The examinations cover business domain prioritization, recycling of inefficient assets, and improvement in the quality of monitoring of subsidiaries and associated companies.		The President and the Chief Operating Officers at the portfolio and subsidiaries and associated companies review meeting

(2) EVOLUTION OF OUR BUSINESS MODELS LEVERAGING BUSINESS ENGINEERING CAPABILITIES

In April 2006 we reached an agreement with Petróleo Brasileiro S.A. of Brazil to jointly implement a feasibility study on producing bioethanol and related products in Brazil and exporting and selling them internationally. Mitsui aims to pursue, through comprehensive cross-divisional efforts, the commercialization of bioethanol.

(3) IMPLEMENTATION OF GLOBAL STRATEGY

 

In accordance with our policy of strengthening our business strategy in the broad economic regions of Asia, Europe and the Americas, we introduced the Regional Business Unit system in April 2006. The Asia Business Unit is working in partnership with the Iron & Steel Raw Materials and Non-Ferrous Metals Business Unit of Mitsui’s Head Office towards the acquisition of a 25% equity stake (equivalent to approximately ¥18 billion) in Erdos Electrical Power & Metallurgical Co., Ltd. (Inner Mongolia Autonomous Region, China) with the aim of expanding our business in China.		Facilities of Inner Mongolia Erdos EJM Manganese Alloys Co., Ltd. (Erdos EJM), a joint venture of Erdos Electric Power & Metallurgical Co., Ltd., JFE Steel Corporation and Mitsui

 

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(4) REINFORCEMENT OF MANAGEMENT FRAMEWORK TO SUPPORT GROWTH

Section 404 of the U.S. Sarbanes-Oxley Act (“SOX 404”) has become applicable to us from the fiscal year ending March 31, 2007. Mitsui and its subsidiaries subject to SOX 404 have, for the most part, completed self-evaluation on internal controls over financial reporting, and audits by the independent auditor are steadily commencing.

With regard to the DPF incident, where Mitsui sold diesel particulate filters (“DPFs”) for diesel cars for which false data had been produced and submitted to the authorities, we have completed the redemption of the DPFs in question. To ensure that we never forget the lessons learned from this incident, which caused major concern to all stakeholders, including our customers and the related authorities, and seriously damaged our social trust, we continue to work vigorously to ensure that our compliance systems are thorough and robust.

OUTLINE OF OPERATING RESULTS

(April 1, 2006 to September 30, 2006)

 

1	OPERATING RESULTS OF THE GROUP

 

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Total Trading Transactions increased by ¥573.6 billion over the previous comparable period to ¥7,622.2 billion, and gross profit increased by ¥45.7 billion to ¥420.9 billion, reflecting increased trading in energy and chemical products. Higher profits were generated at oil and gas producing subsidiaries in Australia and the Middle East and iron ore subsidiaries in Australia, driven by rising prices of crude oil and iron ore. Profits also grew from trade in energy and precious metal products, while iron and steel products, machinery and chemicals continued to perform strongly, backed by active worldwide demand.

 

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Operating income* increased by ¥19.5 billion over the previous comparable period to ¥134.3 billion. While gross profit increased, as mentioned above, selling, general and administrative expenses increased ¥25.8 billion, due to higher expenses in areas such as personnel.

 

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Operating income = gross profit – selling, general and administrative expenses – provision for doubtful receivables

 

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Income from continuing operations before income taxes, minority interests and equity in earnings increased by ¥22.9 billion to ¥140.6 billion. In addition to the increase in operating income, the major factors were as follows:

 

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Interest expenses increased ¥8.1 billion in line with increased investment in the Sakhalin II Project and other projects, while dividend income increased ¥12.0 billion, with a major contribution from the LNG Projects in the Middle East.

 

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In the previous comparable period, compensation and other charges related to the DPF incident came to ¥9.0 billion.

 

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Impairment losses on goodwill and intangible assets were recorded at Mitsui Norin Co., Ltd. (Japan).

 

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Equity in earnings of associated companies increased ¥35.7 billion to ¥74.5 billion.

 

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In mineral resources related business, Valepar S.A. (Brazil) and Compania Minera Dona Ines de Collahuasi SCM (Chile) recorded major increases in profit, supported by rising prices of iron ore and copper.

 

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In energy business, as a result of rising oil prices, profits were higher at Japan Australia LNG (MIMI) Pty. Ltd. (Australia) which conducts LNG business in Australia and Mitsui Oil Exploration Co., Ltd. (Japan).

 

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In overseas power producing business, IPM Eagle LLP (United Kingdom) recorded an increase due to expanding its business scale.

As a result of these developments, for the six-month period ended September 30, 2006, the Group recorded net income of ¥154.5 billion, ¥71.3 billion higher than the ¥83.2 billion recorded in the previous comparable period.

 

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2	RESULTS BY OPERATING SEGMENT

 

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Iron & Steel Products: Net income for the six-month period ended September 30, 2006 was ¥9.4 billion, an increase of ¥0.1 billion. High-end products such as steel tubular products and steel plates for shipbuilding and automobiles continued to perform well.

 

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Iron & Steel Raw Materials and Non-Ferrous Metals: Net income for the six-month period was ¥62.2 billion, a major increase of ¥36.2 billion. Gross profit increased slightly as iron ore prices increased and coal prices fell. Supported by across-the-board rises in mineral resource prices, associated companies Valepar S.A. (Brazil), and Compania Minera Dona Ines de Collahuasi SCM (Chile), engaged in copper business, benefited particularly from rising copper prices, recorded major increases in profit.

 

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Machinery & Infrastructure Projects: Net income for the six-month period was ¥18.0 billion, an increase of ¥5.2 billion. Profits increased at overseas power producing business IPM Eagle LLP (United Kingdom), as a result of business expansion and success in operations. Furthermore, net income rose at automotive related subsidiaries and associated companies in all regions.

 

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Chemical: Net income for the six-month period was ¥10.4 billion, an increase of ¥8.1 billion. In upstream business, gross profit increased due to improved market conditions in ammonia, methanol and others, as well as good performance in IT–related business, plastics and inorganic raw materials resulting from increased demand, particularly in Asia. The increase also reflects the absence of the burden from compensation and other charges related to the DPF incident that were recorded in the previous comparable period.

 

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Energy: Net income for the six-month period was ¥27.8 billion, an increase of ¥13.6 billion. Despite higher interest expenses due to increased investment in the Sakhalin II Project, rising oil prices resulted in a major increase in net income. There were also increases at associated companies engaged in crude oil and natural gas exploration, development and marketing (such as Japan Australia LNG (MIMI) Pty. Ltd. (Australia) and Mitsui Oil Exploration Co., Ltd. (Japan), as well as increased dividend income from LNG Projects in the Middle East.

 

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Foods & Retail: Net loss for the six-month period was ¥4.2 billion, compared to net income of ¥3.6 billion recorded in the previous comparable period. Gross profit declined at Mitsui Norin Co., Ltd. (Japan) due to increased competition and a decrease in demand for beverage ingredients and restaurant and home-use products, and the Company recorded impairment losses on goodwill and intangible assets.

 

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Lifestyle, Consumer Service, Information, Electronics and Telecommunication: Net income for the six-month period was ¥3.3 billion, a decrease of ¥2.3 billion. As well as a decrease in textiles and increased costs in the Information, Electronics & Telecommunication business, Mitsui Bussan House-Techno Inc. (Japan) withdrew from the houses built for sale business, booking future maintenance-related expenses in the period under review as a result. Associated companies such as QVC JAPAN INC. (Japan), operating in television shopping, recorded an increase in profit.

 

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Logistics & Financial Markets: Net income for the six-month period was ¥6.4 billion, an increase of ¥1.2 billion, due to strong performance in energy derivative and other trading.

 

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Americas: Net income for the six-month period for the Americas was ¥9.1 billion, an increase of ¥5.1 billion. Income from petroleum trading increased at the subsidiary Westport Petroleum Inc. (United States), and iron and steel products performed well. Rising U.S. dollar interest rates resulted in higher interest expenses.

 

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Europe, Asia and Other Overseas: Net income for the six-month period for Europe was ¥2.0 billion, a decline of ¥0.7 billion. Net income for Asia was ¥3.6 billion, a decrease of ¥1.0 billion. Both declines were due to factors such as increased costs. Net income in Other Overseas was ¥6.7 billion, the same as the previous comparable period.

For further details please refer to pages 27 – 29 of this document, “Operating Segment Information”.

On a non-consolidated basis, sales for the six-month period ended September 30, 2006 were ¥5,625.4 billion. Gross profit was ¥112.7 billion, and net income was ¥71.7 billion. For details, please refer to pages 30 – 34 of this document, ‘Balance Sheets’ and ‘Statements of Income’.

 

3	FORECASTS FOR THE YEAR ENDING MARCH 31, 2007

Our initial forecast for net income for the fiscal year ending March 31, 2007 was ¥240.0 billion. However, as a result of good performance in metal resources and energy we have revised this to ¥300.0 billion. Full-year net income forecasts by operating segment are shown below.

 

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Iron & Steel Raw Materials and Non-Ferrous Metals: Full-year net income forecasts for this segment have been revised to ¥100.0 billion, an increase of ¥45.3 billion over the previous comparable period. Reasons for this include rising prices of copper and iron ore, as well as one-time factors such as the sale of shares in Toho Titanium Co., Ltd. (Japan) and stake in aluminum smelters at Mitalco Inc. (United States), as part of business recycling.

 

•

Energy: Full-year net income forecasts in this segment have been revised to ¥77.0 billion, an increase of ¥36.1 billion. The principal factors for this are increased oil prices and increased oil and natural gas production following the start of oil production at the Enfield oil field in Australia.

 

•

Iron & Steel Products, First and Second Chemicals: Reflecting continued improvements in the business environment, full-year net income forecasts in these segment have been revised to ¥20.0 billion, an increase of ¥0.6 billion and ¥20.0 billion, an increase of ¥7.9 billion respectively. Pre-tax expenses of ¥9.0 billion relating to the DPF incident were recorded in the Chemical segment in the previous year, which are absent in the period under review.

 

•

Machinery & Infrastructure Projects: Full-year net income forecasts in this segment have been revised to ¥34.0 billion, an increase of ¥3.4 billion. This is a result of good performance in automotive business and shipping, as well as contributions from overseas power generator business IPM Eagle LLP (United Kingdom) following business expansion.

 

•

Foods & Retail: Full-year net income forecasts in this segment have been revised to ¥0.0 billion, an increase of ¥3.2 billion. In the previous fiscal year this segment recorded a net loss of ¥3.2 billion, as a result of impairment losses on fixed assets at MITSUI FOODS CO., LTD. (Japan) and other factors. We expect a net loss of ¥9.0 billion at Mitsui Norin Co., Ltd. (Japan) as a result of an impairment loss on goodwill and other factors, but we believe that this segment will begin a gentle recovery.

 

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4	TRENDS IN COMPANY PERFORMANCE AND VALUE OF ASSETS

 

(1)	TRENDS IN COMPANY PERFORMANCE AND VALUE OF ASSETS (CONSOLIDATED) (UNAUDITED)

(Millions of Yen, Except Net Income per Share)

 

		Six-month period ended September 30, 2003			Six-month period ended September 30, 2004			Six-month period ended September 30, 2005			Six-month period ended September 30, 2006
Total Trading Transactions		¥	5,943,673		¥	6,712,625		¥	7,048,604		¥	7,622,220
Gross Profit			293,623			347,343			375,201			420,895
Net Income			25,822			62,101			83,193			154,455
Net Income per Share (Yen)			16.33			39.24			52.58			89.65
Net Assets			915,218			1,034,734			1,288,158			1,829,458
Total Assets			6,470,993			7,024,720			8,207,037			9,377,604

Notes:

 

1.

The figures shown in this table have been prepared on the basis of accounting principles generally accepted in the United States of America (“U.S. GAAP”). Total Trading Transactions is a voluntary disclosure and represents the gross transaction volume of the nominal aggregate value of the sales contracts in which Mitsui & Co., Ltd. and its subsidiaries (collectively “the companies”) act as principal and transactions in which the companies serve as agent. Total Trading Transactions is not meant to represent sales or revenues in accordance with US GAAP. The companies have included the information concerning Total Trading Transactions because it is used by similar Japanese trading companies as an industry benchmark, and the companies believe it is a useful supplement to results of operations data as a measure of the companies’ performance compared to other similar Japanese trading companies.

 

2.	In accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the prior year figures relating to discontinued operations have been reclassified.

 

3.	Figures less than ¥1 million and figures less than ¥1/100 (in the case of Net Income per Share) are rounded.

 

(2)	TRENDS IN COMPANY PERFORMANCE AND VALUE OF ASSETS (NON-CONSOLIDATED) (UNAUDITED)

(Millions of Yen, Except Net Income per Share)

 

		Six-month period ended September 30, 2003			Six-month period ended September 30, 2004			Six-month period ended September 30, 2005			Six-month period ended September 30, 2006
Sales		¥	4,908,778		¥	5,123,768		¥	5,434,172		¥	5,625,429
Net Income			6,397			40,646			36,305			71,685
Net Income per Share (Yen)			4.04			25.68			22.94			41.60
Net Assets			686,482			736,511			806,122			1,129,445
Total Assets			4,143,579			4,339,022			4,690,168			5,297,985

Notes:

 

1.	The figures shown in this table have been prepared on the basis of accounting principles generally accepted in Japan.

 

2.	Net Income per Share was computed based on the average number of shares outstanding during the period.

 

3.	Figures less than ¥1 million and figures less than ¥1/100 (in the case of Net Income per Share) are rounded down.

 

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Corporate Outline

PRINCIPAL GROUP BUSINESS (AS OF SEPTEMBER 30, 2006)

The Group operates in the following segments: Iron & Steel Products; Iron & Steel Raw Materials and Non-Ferrous Metals; Machinery & Infrastructure Projects; Chemicals; Energy; Foods & Retail; and Lifestyle, Consumer Service, Information, Electronics and Telecommunication. We carry out a variety of activities in each segment, including sales, import and export, international trading and production, as well as operating a diverse range of service businesses such as transportation and finance. In addition, we engage in natural resource development, strategic business investment and a broad range of other business initiatives.

PRINCIPAL GROUP OFFICES (AS OF SEPTEMBER 30, 2006)

 

•      Domestic:		Head Office		Chiyoda-ku, Tokyo
		Offices and Branches		Sapporo Office, Tohoku Office (Sendai), Nagoya
				Office, Osaka Office, Hiroshima Office, Fukuoka
				Office, Niigata Branch, Hokuriku Branch (Toyama),
				Takamatsu Branch
•      Overseas:		Branches		Singapore Branch, Kuala Lumpur Branch,
				Manila Branch
		Trading Subsidiaries		Mitsui & Co. (U.S.A.), Inc.
				Mitsui & Co. Europe PLC (United Kingdom)
				Mitsui & Co. (Australia) Ltd.
				Mitsui & Co., Middle East Ltd. (U.A.E.)

Note: Other than those listed above, there are 8 offices in Japan and 144 offices overseas.

SHARES OF MITSUI & CO., LTD. (AS OF SEPTEMBER 30, 2006)

 

•     Number of shares authorized		2,500,000,000 shares
•     Number of shares outstanding		1,725,089,234 shares
•     Number of shareholders		111,749 shareholders

 

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GROUP EMPLOYEES

 

Operating segment		Number of Employees as of September 30, 2006		Number of Employees as of March 31, 2006		Change in Number of Employees
Iron & Steel Products		2,110		2,044		+66
Iron & Steel Raw Materials and Non-Ferrous Metals		2,573		2,504		+69
Machinery & Infrastructure Projects		10,221		9,338		+883
Chemicals		3,798		3,735		+63
Energy		1,460		1,384		+76
Foods & Retail		6,807		6,555		+252
Lifestyle, Consumer Service, Information, Electronics and Telecommunication		5,816		5,607		+209
Logistics & Financial Markets		1,281		1,239		+42
Americas		2,463		2,888		(425	)
Europe		1,084		1,078		+6
Asia		2,147		2,102		+45
Other Overseas Areas		525		535		(10	)
All Other		1,733		1,984		(251	)
Total		42,018		40,993		+1,025

Notes:

 

1.	The above employee figures do not include temporary staff, seconded or part-time staff.

 

2.	Of the 42,018 employees at the end of September 30, 2006, 5,874 were employed by the Company (1 more than at the end of the previous fiscal period).

 

3.	Following corporate restructuring in April 2006, the figures of ‘All Other’ as of September 30, 2006 is the number of employees in the Corporate Staff Division.

 

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PRINCIPAL SUBSIDIARIES AND ASSOCIATED COMPANIES

 

1	PRINCIPAL SUBSIDIARIES AND ASSOCIATED COMPANIES (As of September 30, 2006)

 

Subsidiary		Operating Segment		Capital		Percentage owned by Mitsui & Co., Ltd.		Main Business
Mitsui & Co. (U.S.A.), Inc.		Americas		US$350,000 thousand		100		Trading
Mitsui Iron Ore Development Pty. Ltd. (Australia)		Iron & Steel Raw Materials and Non-Ferrous Metals		A$20,000 thousand		100 (20)		Production and marketing of iron ore
Mitsui E&P Middle East B.V. (Netherlands)		Energy		€18 thousand		60 (60)		Exploration, development and production of oil and natural gas in Oman
Mitsui Coal Holdings Pty. Ltd. (Australia)		Iron & Steel Raw Materials and Non-Ferrous Metals		A$196,593 thousand		100 (30)		Investment in Australian coal businesses
MITSUI FOODS CO., LTD. (Japan)		Foods & Retail		¥12,031 million		99.87		General foods wholesaling
Associated Company		Operating Segment		Capital		Percentage owned by Mitsui & Co., Ltd.		Main Business
Japan Australia LNG (MIMI) Pty. Ltd. (Australia)		Energy		A$369,050 thousand		50 (50)		Exploration, development and marketing of oil and natural gas
Valepar S.A. (Brazil)		Iron & Steel Raw Materials and Non-Ferrous Metals		R$7,083,206 thousand		18.24		Investment in Companhia Vale do Rio Doce, a mineral resources company in Brazil
Sakhalin Energy Investment Company Ltd. (Bermuda)		Energy		US$11,394,612 thousand		25 (25)		Exploration, development and marketing of oil and natural gas

Notes:

 

1.	The figures in brackets represent indirect ownership through other subsidiaries.

 

2.	The figures for capital have been rounded.

 

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2	THE NUMBER OF SUBSIDIARIES AND ASSOCIATED COMPANIES

The number of subsidiaries and associated companies as of September 30, 2006, along with the interim periods of the last three years, is as follows:

(Unit: companies)

 

		Six-month period ended September 30, 2003		Six-month period ended September 30, 2004		Six-month period ended September 30, 2005		Six-month period ended September 30, 2006
Subsidiaries		358		355		317		318
Associated Companies Accounted for under the Equity Method		295		289		197		173

 

Note:

The number of companies listed above excludes those affiliated companies of certain subsidiaries (other than overseas trading subsidiaries), which are consolidated or accounted for under the equity method by those subsidiaries and companies that are managed by overseas trading subsidiaries.

Furthermore, as from the interim period under review those companies that are managed by overseas trading companies have been included with their managing company, and the data for the interim periods of the last three years has been updated and presented in the same way.

 

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DETAILS OF SENIOR COMPANY OFFICERS (AND AUDITORS)

(AS OF NOVEMBER 1, 2006)

 

1	Directors and Corporate Auditors

 

Name		Title		Principal position/Area of operation
Nobuo Ohashi		Chairman and Director
Shoei Utsuda*		President and Chief Executive Officer		Chief Executive Officer
Tetsuya Matsuoka*		Director		Infrastructure Projects Business Unit; Machinery Business Unit; Financial Markets Business Unit; Transportation Logistics Business Unit
Masataka Suzuki*		Director		First Chemicals Business Unit; Second Chemicals Business Unit; Foods & Retail Business Unit; Director, Mitsui & Co. Europe PLC; Director, Mitsui & Co., Middle East Ltd.
Hiroshi Tada*		Director		Iron & Steel Products Business Unit; Iron & Steel Raw Materials and Non-Ferrous Metals Business Unit; Energy Business Unit
Yasunori Yokote*		Director		Chief Compliance Officer; Chief Privacy Officer; Corporate Staff Division (Secretariat, Corporate Planning & Strategy Division, Human Resources & General Affairs Division, Information Strategic Planning Division, Corporate Communications Division, CSR Promotion Division, Legal Division, Logistics Management Division, Domestic Offices and Branches); New Business Promotion; Environmental Matters; Business Continuity Plan Management; DPF Matters; Chief Operating Officer, Business Process Re-Engineering Project Headquarters
Kazuya Imai*		Director		Chief Financial Officer; Corporate Staff Division (Investor Relations Division, Investment Administration Division, Business Process Control Division, Accounting Division, Finance Division, Credit Risk Management Division, Market Risk Management Division, Financial Planning Division); Deputy Chief Operating Officer, Business Process Re-Engineering Project Headquarters; Director, Mitsui & Co. (U.S.A), Inc.
Hiroshi Ito*		Director		Lifestyle Business Unit; Consumer Service Business Unit; Information, Electronics and Telecommunication Business Unit
Akishige Okada		Director		Advisor, Sumitomo Mitsui Banking Corporation
Akira Chihaya		Director		Representative Director and Chairman of the Board of Directors of Nippon Steel Corporation
Nobuko Matsubara		Director		Chairman, Japan Institute of Workers’ Evolution
Tasuku Kondo		Corporate Auditor
Hiroshi Matsuura		Corporate Auditor
Ko Matsukata		Corporate Auditor		Standing Advisor, Mitsui Sumitomo Marine and Fire Insurance Co., Ltd.
Yasutaka Okamura		Corporate Auditor		Attorney at Law
Hideharu Kadowaki		Corporate Auditor		Chairman, the Institute of The Japan Research Institute, Limited
Naoto Nakamura		Corporate Auditor		Attorney at Law

Notes:

 

1.	Akishige Okada, Akira Chihaya and Nobuko Matsubara are external Directors.

 

2.	Ko Matsukata, Yasutaka Okamura, Hideharu Kadowaki and Naoto Nakamura are external Corporate Auditors. Tasuku Kondo and Hiroshi Matsuura are full-time Corporate Auditors.

 

3.	Representative Directors are marked with an asterisk.

 

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2	Executive Officers

 

Name		Title		Principal position/Area of operation
Shoei Utsuda*		President and Chief Executive Officer		Chief Executive Officer
Tetsuya Matsuoka*		Executive Vice President		Infrastructure Projects Business Unit; Machinery Business Unit; Financial Markets Business Unit; Transportation Logistics Business Unit
Masataka Suzuki*		Executive Vice President		First Chemicals Business Unit; Second Chemicals Business Unit; Foods & Retail Business Unit; Director, Mitsui & Co. Europe PLC; Director, Mitsui & Co., Middle East Ltd.
Gempachiro Aihara		Executive Vice President		Chief Operating Officer, Asia Business Unit
Hiroshi Tada*		Executive Vice President		Iron & Steel Products Business Unit; Iron & Steel Raw Materials and Non-Ferrous Metals Business Unit; Energy Business Unit
Yasunori Yokote*		Senior Executive Managing Officer		Chief Compliance Officer; Chief Privacy Officer; Corporate Staff Division (Secretariat, Corporate Planning & Strategy Division, Human Resources & General Affairs Division, Information Strategic Planning Division, Corporate Communications Division, CSR Promotion Division, Legal Division, Logistics Management Division, Domestic Offices and Branches); New Business Promotion; Environmental Matters; Business Continuity Plan Management; DPF Matters; Chief Operating Officer; Business Process Re-Engineering Project Headquarters
Kazuya Imai*		Senior Executive Managing Officer		Chief Financial Officer; Corporate Staff Division (Investor Relations Division, Investment Administration Division, Business Process Control Division, Accounting Division, Finance Division, Credit Risk Management Division, Market Risk Management Division, Financial Planning Division); Deputy Chief Operating Officer, Business Process Re-Engineering Project Headquarters; Director, Mitsui & Co. (U.S.A), Inc.
Toshihiro Soejima		Senior Executive Managing Officer		Chief Representative of Mitsui & Co., Ltd. in China
Motokazu Yoshida		Senior Executive Managing Officer		Chief Operating Officer, Americas Business Unit
Ken Abe		Senior Executive Managing Officer		Chief Operating Officer, Europe Business Unit
Hiroshi Ito*		Senior Executive Managing Officer		Lifestyle Business Unit; Consumer Service Business Unit; Information, Electronics and Telecommunication Business Unit
Yoshiyuki Izawa		Executive Managing Officer		General Manager, Osaka Office
Osamu Mori		Executive Managing Officer		Chief Operating Officer, Financial Markets Business Unit
Satoru Miura		Executive Managing Officer		General Manager, Nagoya Office
Takao Sunami		Executive Managing Officer		Chief Operating Officer, Machinery Business Unit
Junichi Matsumoto		Executive Managing Officer		Chief Operating Officer, Transportation Logistics Business Unit
Shunichi Miyazaki		Executive Managing Officer		General Manager, Internal Auditing Division
Shinjiro Ogawa		Executive Managing Officer		Chief Operating Officer, Information, Electronics and Telecommunication Business Unit
Toshimasa Furukawa		Executive Managing Officer		Chief Operating Officer, Infrastructure Projects Business Unit
Jitsuro Terashima		Executive Managing Officer		President & CEO, Mitsui Global Strategic Studies Institute
Motonori Murakami		Executive Managing Officer		Assistant to Senior Executive Managing Officer (Corporate Staff Division), Assistant to Chief Financial Officer
Koji Nakamura		Executive Managing Officer		Chief Operating Officer, Second Chemicals Business Unit
Kenichi Yamamoto		Executive Managing Officer		Chief Operating Officer, Lifestyle Business Unit
Toshio Awata		Managing Officer		General Manager, Information Strategic Planning Division; Chief Information Officer
Masaaki Murakami		Managing Officer		President, Mitsui & Co. (Canada) Ltd.
Kiyotaka Watanabe		Managing Officer		Chief Operating Officer, Iron & Steel Products Business Unit
Masaaki Fujita		Managing Officer		Chief Operating Officer, Foods & Retail Business Unit
Junichi Mizonoue		Managing Officer		Chief Operating Officer, First Chemicals Business Unit
Takao Omae		Managing Officer		President, Mitsui Brasileira Importação e Exportação S.A.
Norinao Iio		Managing Officer		Chief Operating Officer, Energy Business Unit
Osamu Koyama		Managing Officer		Executive Vice President, Mitsui & Co. (U.S.A.), Inc.
Terukazu Okahashi		Managing Officer		Deputy General Manager, Osaka Office
Osamu Takahashi		Managing Officer		Chief Operating Officer, Consumer Service Business Unit
Hideyo Hayakawa		Managing Officer		General Manager, Legal Division
Hiraku Shimomaki		Managing Officer		President, Mitsui & Co. Deutschland GmbH
Shigeru Hanagata		Managing Officer		Deputy Chief Operating Officer, Machinery Business Unit
Masami Iijima		Managing Officer		Chief Operating Officer, Iron & Steel Raw Materials and Non-Ferrous Metals Business Unit
Seiichi Tanaka		Managing Officer		General Manager, Human Resources & General Affairs Division

Note: Directors are marked with an asterisk.

 

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CONSOLIDATED BALANCE SHEETS (Unaudited)

ASSETS

 

(Millions of Yen)		September 30, 2006				March 31, 2006
Current Assets:
Cash and cash equivalents		¥	706,464			¥	697,065
Time deposits			8,343				37,028
Marketable securities			167,945				26,860
Trade receivables:
Notes and loans, less unearned interest			487,647				439,187
Accounts			2,112,643				1,997,093
Associated companies			170,967				169,709
Allowance for doubtful receivables			(27,233	)			(26,703	)
Inventories			752,497				695,754
Advance payments to suppliers			96,296				92,150
Deferred tax assets—current			26,196				32,569
Derivative assets			337,749				320,134
Other current assets			310,272				265,985
Total current assets			5,149,786				4,746,831
Investments and Non-current Receivables:
Investments in and advances to associated companies			1,471,592				1,300,587
Other investments			964,794				935,675
Non-current receivables, less unearned interest			529,142				444,487
Allowance for doubtful receivables			(95,179	)			(84,513	)
Property leased to others—at cost, less accumulated depreciation			236,784				218,583
Total investments and non-current receivables			3,107,133				2,814,819
Property and Equipment—at Cost:
Land, land improvements and timberlands			197,256				203,170
Buildings, including leasehold improvements			354,725				349,904
Equipment and fixtures			466,658				472,069
Mineral rights			165,543				80,953
Vessels			22,339				22,376
Projects in progress			126,162				55,278
Total			1,332,683				1,183,750
Accumulated depreciation			(459,162	)			(437,581	)
Net property and equipment			873,521				746,169
Intangible Assets, less Accumulated Amortization			82,011				98,811
Deferred Tax Assets—Non-current			46,492				47,947
Other Assets			118,661				119,001
Total		¥	9,377,604			¥	8,573,578

 

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LIABILITIES AND SHAREHOLDERS’ EQUITY

 

(Millions of Yen)		September 30, 2006				March 31, 2006
Current Liabilities:
Short-term debt		¥	772,800			¥	540,797
Current maturities of long-term debt			359,413				353,185
Trade payables:
Notes and acceptances			118,715				100,402
Accounts			2,046,939				1,762,224
Associated companies			100,313				108,252
Accrued expenses:
Income taxes			44,704				63,739
Interest			22,015				22,485
Other			75,238				72,848
Advances from customers			118,105				104,500
Derivative liabilities			259,030				214,460
Other current liabilities			168,455				168,049
Total current liabilities			4,085,727				3,510,941
Long-Term Debt, less Current Maturities			2,699,250				2,658,735
Accrued Pension Costs and Liability for Severance Indemnities			37,822				36,769
Deferred Tax Liabilities—Non-current			334,321				318,911
Other Long-Term Liabilities			254,306				252,155
Minority Interests			136,720				118,160
Shareholders’ Equity:
Common stock			295,797				295,766
Capital surplus			390,545				390,488
Retained earnings:
Appropriated for legal reserve			38,860				38,508
Unappropriated			955,286				825,306
Accumulated other comprehensive income (loss):
Unrealized holding gains and losses on available-for-sale securities			205,376				216,099
Foreign currency translation adjustments			(56,536	)			(83,279	)
Minimum pension liability adjustment			(5,407	)			(5,417	)
Net unrealized gains and losses on derivatives			8,090				2,439
Total accumulated other comprehensive income (loss)			151,523				129,842
Treasury stock, at cost			(2,553	)			(2,003	)
Total shareholders’ equity			1,829,458				1,677,907
Total		¥	9,377,604			¥	8,573,578

 

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STATEMENTS OF CONSOLIDATED INCOME

Unaudited

 

(Millions of Yen)		Six-Month Period ended September 30, 2006				Six-Month Period ended September 30, 2006
Revenues:
Sales of products		¥	1,984,093			¥	1,597,353
Sales of services			270,894				234,550
Other sales			69,628				52,240
Total revenues			2,324,615				1,884,143
Total Trading Transactions:
Six-month period ended September 30, 2006: ¥7,622,220 million
Six-month period ended September 30, 2005: ¥7,048,604 million
Cost of Revenues:
Cost of products sold			1,797,340				1,440,016
Cost of services sold			68,112				45,510
Cost of other sales			38,268				23,416
Total cost of revenues			1,903,720				1,508,942
Gross Profit			420,895				375,201
Other Expenses (Income):
Selling, general and administrative			285,019				259,167
Provision for doubtful receivables			1,610				1,218
Interest expense, net of interest income			17,920				9,835
Dividend income			(28,119	)			(16,074	)
Gain on sales of securities—net			(26,545	)			(14,074	)
Loss on write-down of securities			3,207				3,499
Gain on disposal or sales of property and equipment—net			(1,236	)			(216	)
Impairment loss of long-lived assets			9,964				4,771
Compensation and other charges related to DPF incident			(3,864	)			9,000
Other expense—net			22,331				328
Total other expenses			280,287				257,454
Income from Continuing Operations before Income Taxes, Minority Interests and Equity in Earnings			140,608				117,747

[Continued on next page]

 

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[Continued from previous page]

 

Income Taxes:
Current			67,620				46,782
Deferred			(8,887	)			16,799
Total			58,733				63,581
Income from Continuing Operations before Minority Interests and Equity in Earnings			81,875				54,166
Minority Interests in Earnings of Subsidiaries			(5,203	)			(9,001	)
Equity in Earnings of Associated Companies—Net (After Income Tax Effect)			74,512				38,828
Income from Continuing Operations			151,184				83,993
Income from Discontinued Operations—Net (After Income Tax Effect)			3,271				(800	)
Net Income		¥	154,455			¥	83,193

 

Note:

In accordance with SFAS No.144, the figures for the six-month period ended September 30, 2005 relating to discontinued operations have been reclassified.

 

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STATEMENTS OF CONSOLIDATED SHAREHOLDERS’ EQUITY (Unaudited)

 

(Millions of Yen)		Six-Month Period ended September 30, 2006				Year ended March 31, 2006
Common Stock:
Balance at beginning of period		¥	295,766			¥	192,493
Issuance of common stock			—				102,576
Common stock listed upon conversion of bonds			31				697
Balance at end of period			295,797				295,766
Capital Surplus:
Balance at beginning of period			390,488				288,048
Issuance of common stock			—				101,733
Conversion of bonds			31				695
Gain on sales of treasury stock			26				12
Balance at end of period			390,545				390,488
Retained Earnings:
Appropriated for legal reserve:
Balance at beginning of period			38,508				37,018
Transfer from unappropriated retained earnings			352				1,490
Balance at end of period			38,860				38,508
Unappropriated:
Balance at beginning of period			825,306				656,032
Net income			154,455				202,409
Cash dividends paid			(24,123	)			(31,645	)
Dividends paid per share
Six-month period ended September 30, 2006, ¥14.0
Year ended March 31, 2006, ¥20.0
Transfer to retained earnings appropriated for legal reserve			(352	)			(1,490	)
Balance at end of period			955,286				825,306
Accumulated Other Comprehensive Income (Loss)
(After Income Tax Effect)
Balance at beginning of period			129,842				(49,551	)
Unrealized holding gains and losses on available-for-sale securities			(10,723	)			115,920
Foreign currency translation adjustments			26,743				59,508
Minimum pension liability adjustments			10				274
Net unrealized gains and losses on derivatives			5,651				3,691
Balance at end of period			151,523				129,842

[Continued on next page]

 

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[Continued from previous page]

 

Treasury stock, at cost:
Balance at beginning of period			(2,003	)			(1,212	)
Purchases of treasury stock			(647	)			(862	)
Sales of treasury stock			97				71
Balance at end of period			(2,553	)			(2,003	)
Summary of Changes in Equity from Nonowner Sources Comprehensive income:
Net income			154,455				202,409
Other comprehensive income
(After income tax effect):
Unrealized holding gains and losses on available-for-sale securities			(10,723	)			115,920
Foreign currency translation adjustments			26,743				59,508
Minimum pension liability adjustment			10				274
Net unrealized gains and losses on derivative			5,651				3,691
Changes in equity from nonowner sources		¥	176,136			¥	381,802

 

Note:

Appropriations of retained earnings are reflected in the consolidated financial statements upon shareholders’ approval.

 

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STATEMENTS OF CONSOLIDATED CASH FLOWS

(Supplementary Information) (Unaudited)

 

(Millions of Yen)		Six-Month Period ended September 30, 2006				Six-Month Period ended September 30, 2005
Operating Activities:
Net Income		¥	154,455			¥	83,193
Adjustments to reconcile net income to net cash provided by operating activities:
(Income) loss from discontinued operations—net (after income tax effect)			(3,271	)			800
Depreciation and amortization			38,909				36,030
Pension and severance costs, less payments			(751	)			3,213
Provision for doubtful receivables			1,610				1,218
Gain on sales of securities—net			(26,545	)			(14,074	)
Loss on write-down of securities			3,207				3,499
Gain on disposal or sales of property and equipment—net			(1,236	)			(216	)
Impairment loss of long-lived assets			9,964				4,771
Deferred income taxes			(8,887	)			16,799
Minority interests of earnings of subsidiaries			5,203				9,001
Equity in earnings of associated companies, less dividends received			(20,256	)			(11,108	)
Changes in operating assets and liabilities:
Increase in trade receivables			(186,372	)			(51,660	)
Increase in inventories			(51,785	)			(37,159	)
Increase in trade payables			131,931				40,666
Other—net			(7,675	)			(47,508	)
Net cash used in operating activities of discontinued operations			(2,541	)			(3,431	)
Net cash provided by operating activities			35,960				34,034
Investing Activities:
Net (increase) decrease in time deposits			28,491				(1,651	)
Net increase in investments in and advances to associated companies			(68,313	)			(53,318	)
Net increase in other investments			(64,472	)			(72,949	)
Net decrease in long-term loan receivables			11,598				23,240
Net increase in property leased to others and property and equipment			(139,316	)			(79,917	)
Net cash used in investing activities			(232,012	)			(184,595	)

[Continued on next page]

 

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[Continued from previous page]

 

Financing Activities:
Net increase in short-term debt			210,089				81,594
Net increase in long-term debt			50				114,607
Capital contribution from minority interests			17,095				—
Purchases of treasury stock—net			(440	)			(346	)
Payments of cash dividends			(24,123	)			(15,824	)
Net cash provided by financing activities			202,671				180,031
Effect of Exchange Rate Changes on Cash and Cash Equivalents			2,780				8,755
Net Increase (Decrease) in Cash and Cash Equivalents			9,399				38,225
Cash and Cash Equivalents at Beginning of Period			697,065				791,810
Cash and Cash Equivalents at End of Period		¥	706,464			¥	830,035

 

Note:

In accordance with SFAS No. 144, the figures for the six-month period ended September 30, 2005 relating to discontinued operations have been reclassified.

 

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OPERATING SEGMENT INFORMATION

(Unaudited)

The companies allocate their resources and review their performance by operating segments comprised of the business units of the Head Office, overseas branches and offices, and overseas trading subsidiaries. The companies’ operating segments have been aggregated based on the nature of the products and other criteria into six product-focused reportable operating segments and four region-focused reportable operating segments.

Six-month period ended September 30, 2006 (from April 1, 2006 to September 30, 2006)

(Millions of Yen)

 

		Iron & Steel Products		Iron & Steel Raw Materials and Non-Ferrous Metals		Machinery & Infrastructure Projects		Chemical			Energy		Foods & Retail			Lifestyle, Consumer Service, Information, Electronics and Telecommunication			Logistics & Financial Markets
Total Trading Transactions		676,584		846,549		1,029,226		1,153,972			1,038,187		941,603			725,425			90,191
Gross Profit		27,820		57,758		46,976		51,431			38,355		40,600			61,911			30,590
Operating Income (Loss)		12,256		45,734		7,161		16,934			22,231		7,145			6,961			12,841
Equity in Earnings of Associated Companies		1,443		31,738		13,056		2,576			17,866		1,512			3,464			900
Net Income (Loss)		9,442		62,162		18,012		10,405			27,785		(4,152	)		3,281			6,370
Total Assets at September 30, 2006		610,718		969,767		1,458,086		917,917			1,319,464		723,136			801,978			774,065
		Americas		Europe		Asia		Other Overseas Areas			Total		All Other			Adjustments and Eliminations			Consolidated Total
Total Trading Transactions		591,791		230,265		258,611		34,893			7,617,297		3,879			1,044			7,622,220
Gross Profit		31,890		10,821		13,096		2,390			413,638		4,180			3,077			420,895
Operating Income (Loss)		11,738		1,698		4,426		(109	)		149,016		(1,512	)		(13,238	)		134,266
Equity in Earnings of Associated Companies		1,696		166		102		273			74,792		58			(338	)		74,512
Net Income (Loss)		9,123		1,979		3,584		6,734			154,725		4,212			(4,482	)		154,455
Total Assets at September 30, 2006		464,618		152,412		189,328		89,459			8,470,948		2,958,306			(2,051,650	)		9,377,604

 

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Six-month period ended September 30, 2005 (from April 1, 2005 to September 30, 2005) (Restated)

(Millions of Yen)

 

		Iron & Steel Products		Iron & Steel Raw Materials and Non-Ferrous Metals		Machinery & Infrastructure Projects		Chemical		Energy		Foods & Retail			Lifestyle, Consumer Service, Information, Electronics and Telecommunication			Logistics & Financial Markets
Total Trading Transactions		699,381		862,791		1,057,463		1,001,076		779,793		920,665			687,695			43,608
Gross Profit		27,635		55,420		41,576		46,052		33,299		42,454			60,752			20,131
Operating Income (Loss)		12,928		44,782		9,692		14,790		15,519		6,031			10,006			6,107
Equity in Earnings of Associated Companies		1,576		9,487		6,489		2,129		14,121		1,722			807			1,803
Net Income (Loss)		9,296		26,005		12,803		2,332		14,200		3,568			5,616			5,229
Total Assets at September 30, 2005		551,025		795,334		1,149,442		787,339		1,143,621		714,139			757,024			518,894
		Americas		Europe		Asia		Other Overseas Areas		Total		All Other			Adjustments and Eliminations			Consolidated Total
Total Trading Transactions		523,975		194,074		242,423		34,833		7,047,777		4,442			(3,615	)		7,048,604
Gross Profit		24,081		10,520		12,365		2,274		376,559		3,842			(5,200	)		375,201
Operating Income (Loss)		5,286		2,694		5,170		368		133,373		(1,777	)		(16,780	)		114,816
Equity in Earnings of Associated Companies		1,011		134		56		281		39,616		94			(882	)		38,828
Net Income		3,977		2,692		4,550		6,668		96,936		5,333			(19,076	)		83,193
Total Assets at September 30, 2005		463,062		146,515		177,014		76,274		7,279,683		2,753,193			(1,825,839	)		8,207,037

 

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Notes:

 

1.	In accordance with SFAS No.144, the figures of “Consolidated Total” for the six-month period ended September 30, 2005 have been reclassified. The reclassifications to “Income (Loss) from Discontinued Operations—Net (After Income Tax Effect)” are included in “Adjustments and Eliminations.”

 

2.

“All Other” includes business activities which primarily provide services, such as financing service and operation services to external customers and/or to the companies and associated companies. Total assets of “All Other” at September 30, 2006 and 2005 consisted primarily of cash and cash equivalents and time deposits related to financing activities, and assets of certain subsidiaries related to the above services.

 

3.	Net loss of “Adjustments and Eliminations” includes income and expense items that are not allocated to specific reportable operating segments, such as certain expenses of the corporate departments, and eliminations of intersegment transactions.

 

4.	Transfers between operating segments are made at cost plus a markup.

 

5.	Operating Income (Loss) reflects the companies’ a) Gross Profit, b) Selling, general and administrative expenses, and c) Provision for doubtful receivables.

 

6.

Starting from the year ended March 31, 2006, Iron & Steel Products and Iron & Steel Raw Materials and Non-Ferrous Metals which formally composed the “Metal Products & Minerals,” and Foods & Retail, which was formally included in “Consumer Products & Services” are disclosed as a separate product-focused reportable operating segment, and Electronics & Information, which was formally included in the “Machinery, Electronics & Information” is aggregated to Life Style and Consumer Service, which were formally included in “Consumer Products & Services” and disclosed as “Life Style, Consumer Service, Information, Electronics and Telecommunication.” Machinery and Infrastracture Projects, which were formally included in “Machinery, Electronics & Information,” are disclosed as “Machinery & Infrastracture Projects.” Also, starting from the six-month period ended September 30, 2006, Mitsui & Co., Financial Services (Europe) which was formerly included in “Europe,” is transferred to “All Other,” in order to centralize the operation of financing services to the companies and associated companies. The operating segment information for the six-month period ended September 30, 2005 has been restated to conform to the current period presentation.

 

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BALANCE SHEETS (Unaudited)

ASSETS

 

(Millions of Yen)		Six-Month Period ended September 30, 2006				Year ended March 31, 2006
Current Assets
Cash and Time Deposits		¥	329,818			¥	420,540
Notes Receivable, Trade			267,934				241,929
Accounts Receivable, Trade			1,473,768				1,368,569
Securities			261,053				21,449
Inventories			199,898				223,949
Advance Payments to Suppliers			42,600				44,291
Short-Term Loans Receivable			147,161				188,343
Deferred Tax Assets—Current			14,977				19,200
Other			222,448				239,140
Allowance for Doubtful Receivables			(15,549	)			(15,801	)
Total Current Assets			2,944,111				2,751,614
Non-Current Assets
Tangible Assets (Net)			93,570				95,598
Intangible Assets			24,331				23,116
Investments and Other Assets:
Investments in Securities and Subsidiaries and Associated Companies			1,633,937				1,560,592
Ownership in Subsidiaries and Associated Companies			317,483				264,670
Long-Term Loans Receivable			192,519				180,374
Other			185,907				179,616
Allowance for Doubtful Receivables			(93,874	)			(93,072	)
Total Investments and other Assets			2,235,972				2,092,181
Total Non-Current Assets			2,353,874				2,210,896
Total Assets			5,297,985				4,962,510

 

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LIABILITIES, NET ASSETS AND SHAREHOLDERS’ EQUITY

 

(Millions of Yen)		Six-Month Period ended September 30, 2006				Year ended March 31, 2006
Current Liabilities
Notes Payable, Trade		¥	62,371			¥	55,561
Accounts Payable, Trade			1,133,243				1,072,438
Short-Term Borrowings			334,224				215,602
Commercial Paper			48,000				50,000
Accounts Payable, Other			201,940				87,838
Advances from Customers			43,398				44,719
Reserve for Directors’ Bonuses			121				—
Other			128,318				126,622
Total Current Liabilities			1,951,619				1,652,782
Long-Term Liabilities
Bonds			508,400				518,400
Convertible Bonds			91,320				91,382
Long-Term Borrowings			1,474,267				1,476,864
Liability for Retirement Benefits			6,823				5,842
Allowance for the obligation for guarantees and commitments			4,872
Deferred Tax Liabilities—Non-Current			74,257				68,192
Other			56,979				58,040
Total Long-Term Liabilities			2,216,920				2,218,720
Total Liabilities			4,168,539				3,871,502
Net Assets
Shareholders’ Equity
Common Stock			295,797				—
Capital Surplus:
Capital Reserve			322,219				—
Other Capital Surplus			45				—
Total Capital Surplus			322,265				—
Retained Earnings
Legal Reserve			27,745				—
Other Retained Earnings:
General Reserve			176,851				—
Special Reserve			1,619				—
Reserve for Loss on Overseas Investments			4,211				—
Reserve for Tax-Deductible Write-down of Tangible Assets			1,482				—
Retained Earnings Brought Forward			123,502				—
Total Retained Earnings			335,413				—
Treasury Stock			(2,366	)			—
Total Shareholders’ Equity			951,109				—
Difference of Appreciation and Conversion
Net Unrealized Gain on Available-for-Sale Securities			181,808				—

(continued on next page)

 

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(continued from previous page)

 

Deferred Gains or Losses on Hedges		(3,472	)		—
Total Difference of Appreciation and Conversion		178,336			—
Total Net Assets		1,129,445			—
Total Liabilities and Net Assets		5,297,985			—
Shareholders’ Equity
Common Stock		—			295,766
Capital Surplus
Capital Reserve		—			322,189
Other Capital Surplus		—			32
Total Capital Surplus		—			322,221
Retained Earnings
Legal Reserve		—			27,745
Voluntary Reserves		—			185,144
Unappropriated Retained Earnings		—			75,191
Total Retained Earnings		—			288,081
Net Unrealized Gain on Available-for-Sale Securities		—			186,853
Treasury Stock		—			(1,914	)
Total Shareholders’ Equity		—			1,091,007
Total Liabilities and Shareholders’ Equity		—			4,962,510

Notes:

 

1.	Figures less than ¥1 million are rounded down.

 

2.	For the six-month period ended September 30, 2006, the amounts of items listed below were as follows:

 

(1)    Accumulated Depreciation of tangible assets:		¥	86,955 million
(2)    Assets pledged as security:		¥	93,349 million
(3)    Guarantees and contingent liabilities:
•     Guarantees:		¥	1,336,808 million
Commitments and other letters similar to guarantees amounting to ¥74,867 million are included in guarantees.
•     Notes receivable discounted:		¥	53,902 million

 

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STATEMENTS OF INCOME (Unaudited)

 

(Millions of Yen)		Six-Month Period ended September 30, 2006			Six-Month Period ended September 30, 2005(*)
Sales		¥	5,625,429		¥	5,434,172
Cost of Sales			5,512,747			5,328,740
Gross Profit			112,682			105,431
Selling, General and Administrative Expenses			100,900			98,785
Operating Profit			11,781			6,646
Non-Operating Income
Interest Income			8,250			8,603
Dividend Income			81,797			69,309
Other			6,207			6,433
Total Non-Operating Income			96,255			84,346
Non-Operating Expenses
Interest Expense			16,290			11,192
Other			7,149			6,376
Total Non-Operating Expenses			23,440			17,568
Ordinary Profit			84,596			73,423
Extraordinary Gains
Gain on Sales of Tangible Assets			34			120
Gain on Sales of Investments in Securities and Subsidiaries and Associated Companies			25,502			9,008
Gain on Reversal of Provision for Doubtful Receivables			947			1,076
Gain on Reversal of Compensation and Other Charges Related to DPF Incident			3,864			—
Total Extraordinary Gains			30,348			10,204
Extraordinary Losses
Loss on Sales of Tangible Assets			238			249
Impairment Losses			201			2,455
Loss on Sale of Investments in Securities and Subsidiaries and Associated Companies			212			296
Loss on Write-Down of Investments in Securities and Subsidiaries and Associated Companies			6,789			5,920
Provision for Doubtful Receivables from Securities and Subsidiaries and Associated Companies			3,665			1,956
Provision for the obligation for guarantees and commitments			4,872
Compensation and Other Charges Related to DPF Incident			—			9,000
Total Extraordinary Losses			15,980			19,878

 

(*)    Supplementary information		[Continued on next page]

 

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[Continued from previous page]

 

Income before Income Taxes			98,964			63,750
Income Taxes—Current			11,072			6,845
Income Taxes—Deferred			16,207			20,599
Net Income			71,685			36,305
Unappropriated Retained Earnings at Beginning of Period			—			16,507
Unappropriated Retained Earnings at end of period		¥	—		¥	52,813

Notes:

 

1.	Figures less than ¥1 million are rounded down.

 

2.	Net income per share for the six-month period ended September 30, 2006: ¥41.60.

 

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CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

(April 1, 2006 to September 30, 2006)

(Unit: Millions of Yen)

 

		Shareholders’ Equity
		Common Stock		Capital Surplus						Retained Earnings
				Capital Reserve		Other Capital Surplus		Total Capital Surplus		Legal Reserve		Other Retained Earnings
												General Reserve		Special Reserve		Reserve for Loss on Overseas Investments
Balance as of March 31, 2006		295,766		322,189		32		322,221		27,745		176,851		1,619		5,075
Changes during Interim Period
New Share Issuance		31		30				30
Reversal of Reserve for Loss on Overseas Investments																(863	)
Reversal of Reserve for Tax-Deductible Write-down of Tangible Assets
Dividend from Surplus
Bonuses to Directors
Net Income
Acquisition of Treasury Stock
Disposal of Treasury Stock						13		13
Changes to Items other than Shareholders’ Equity (net)
Total Changes during Interim Period		31		30		13		43		—		—		—		(863	)
Balance as of September 30, 2006		295,797		322,219		45		322,265		27,745		176,851		1,619		4,211

 

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		Shareholders’ Equity															Difference of Appreciation and Conversion									Total Net Assets
		Retained Earnings									Treasury Stock			Total Shareholders’ Equity			Net Unrealized Gain on Avairable -for-Sale Securities			Deferred Gains or Losses on Hedges			Total Difference of Appreciation and Conversion
		Other Retained Earnings						Total Retained Earnings
		Reserve for Tax-Deductible Write-down of Tangible Assets			Retained Earnings Brought Forward
Balance as of March 31, 2006		1,597			75,191			288,081			(1,914	)		904,154			186,853			—			186,853			1,091,007
Changes during Interim Period
New Share Issuance														61												61
Reversal of Reserve for Loss on Overseas Investments					863			—						—												—
Reversal of Reserve for Tax-Deductible Write-down of Tangible Assets		(114	)		114			—						—												—
Dividend from Surplus					(24,123	)		(24,123	)					(24,123	)											(24,123	)
Bonuses to Directors					(230	)		(230	)					(230	)											(230	)
Net Income					71,685			71,685						71,685												71,685
Acquisition of Treasury Stock											(475	)		(475	)											(475	)
Disposal of Treasury Stock											23			36												36
Changes to Items other than Shareholders’ Equity (net)																	(5,044	)		(3,472	)		(8,516	)		(8,516	)
Total Changes during Interim Period		(114	)		48,310			47,331			(452	)		46,954			(5,044	)		(3,472	)		(8,516	)		38,438
Balance as of September 30, 2006		1,482			123,502			335,413			(2,366	)		951,109			181,808			(3,472	)		178,336			1,129,445

These financial statements, which are on a non-consolidated basis, have been

prepared in accordance with accounting principles generally accepted in Japan.

 

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Management Philosophy (MVV)

Mission

We will contribute to the creation of a future where the dreams of the inhabitants of our irreplaceable Earth can be fulfilled.

Vision

We aim to become a global business enabler that can meet the needs of our customers throughout the world.

Values

 

•

Making it a principle to be fair and humble, we, with sincerity and in good faith, will strive to be worthy of the trust society places in us.

 

•

With lofty aspirations and from an honest perspective, we will pursue business that benefits society.

 

•

Always taking on the challenge of new fields, we will dynamically create business that can lead the times.

 

•

Making the most of our corporate culture that fosters “Freedom and Open-mindedness,” we will fully demonstrate our abilities as a corporation as well as individuals.

 

•

In order to nurture human resources full of creativity and a superior sense of balance, we will provide our people with a workplace for self-development as well as self-realization.

 

Shareholders’ information

 

Fiscal year end		March 31
Record date		March 31
Interim dividend record date		September 30
General Shareholders’ Meeting		June
Manager of the Register of Shareholders		The Chuo Mitsui Trust & Banking Company Limited
(head office)		33-1 Shiba, 3-chome
		Minato-ku, Tokyo
Contact information for above		The Chuo Mitsui Trust & Banking Company Limited, Stock
		Transfer Agency Division
		8-4 Izumi, 2-chome
		Suginami-ku, Tokyo
		168-0063
		Tel: 0120-78-2031 (free dial)
Representative branches for transfer agent		The Chuo Mitsui Trust & Banking Company Limited (various
		locations around the country)
		Japan Securities Agents, Ltd. (main office, various locations
		around the country)
Stock exchange listings		Tokyo, Osaka, Nagoya, Sapporo, Fukuoka
Mitsui & Co., Ltd.		2-1, Ohtemachi 1-chome
		Chiyoda-ku, Tokyo
		100-0004
		Tel: 03-3285-1111 (general)
		Website: www.mitsui.co.jp

 

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