Investing.com -- Mitsubishi Corp (TSE:8058) reported a mixed performance in its third-quarter results. The company’s net profit of ¥209 billion exceeded Bloomberg consensus estimates of ¥159 billion, primarily driven by stronger-than-expected earnings in its Resources business. However, the Mobility segment underperformed, and the Power Solution segment reported a loss due to one-off charges.
Mitsubishi’s third-quarter earnings were bolstered by its Environmental Energy and Mineral Resources divisions, with LNG and coking coal revenues surpassing bearish expectations. Despite these gains, the Mobility segment’s core net profit of ¥15 billion was below the estimated ¥24 billion once one-off gains were excluded.
Additionally, the company faced a significant impairment charge related to an offshore wind project in Japan, contributing to a loss in the Power Solution segment.
The company has indicated that it will not roll over its remaining free cash flow into the next three-year plan, suggesting potential additional shareholder returns. The CEO has stated that a final decision on the use of the estimated ¥400 billion year-end balance will be made around April, following a comprehensive review of business plans.
Analysts have noted that only two of Mitsubishi’s eight business divisions managed to grow core earnings during the first nine months of the fiscal year.
The outlook for LNG prices is not favorable, with expectations of downward pressure and a forecast of Brent oil prices dropping to US$68/bbl by the next fiscal year, compared to the current US$75/bbl, according to Macquarie.
The Mobility segment is also under scrutiny due to its significant exposure to the challenging ASEAN market.
"The current DPS of ¥100 suggests a dividend yield of 4.0%, and an additional ¥400bn buyback (~4% of outstanding shares, ~8% of ADTV assuming a six-month horizon) could provide a temporary uptick to the shares when it starts.
However, we believe the ongoing downturns for the resources and auto businesses will be significant risk factors, dragging firm-wide earnings. In the past year, earnings prospect moved share prices for the trading houses, while the impact of sizable buybacks lasted only temporarily," Macquarie analysts said.
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