CSO Interview

We will aim for stable, sustainable profit growth by accelerating growth investments in areas where we can leverage ITOCHU’s strengths, without being limited to any specific field, while swiftly and thoroughly assessing changes in the global business environment.

Member of the Board, Executive Officer, CSO

Kenji Seto

I was recently appointed Chief Strategy Officer (CSO).

Since joining the Company around four decades ago, I have worked in metal and resource-related businesses in the current Metals & Minerals Company, mainly iron ore, coal, non-ferrous metals, and steel products. In cyclical, long-lived resource businesses, we need to be attentive to what is taking place on the front lines, while assessing international conditions and economic trends from a macro perspective. I have engaged in trade and business investments with a constant focus on staying one step ahead. Leveraging the insights I have cultivated, I intend to steadily formulate and execute strategies while scrutinizing changes in the external environment and responding both swiftly and flexibly.

Please tell us about the current business environment surrounding ITOCHU and the management plan for FYE 2025.

We will maintain a high growth rate by growing existing businesses and gaining profit contributions from new investments, while carefully assessing changes in the external environment.

In April 2024, the International Monetary Fund revised the global economic growth forecast for the year upwards to 3.2%, and the July outlook maintained this same level. We also anticipate the resilience of the U.S. economy and the Chinese government’s fiscal support underpinning the Chinese economy. However, concerns remain, including persistent inflationary pressures and the effects of prolonged monetary tightening, particularly in Europe and the United States, as well as rising tensions in the Middle East. In Japan, high costs for raw materials and other items eased, but concerns remain for a further rise in prices due to rising crude oil prices and effects from yen depreciation. However, we expect a modest recovery in consumer sentiment as the effects of higher wages gradually emerge. Although yen depreciation is beneficial in the short term for general trading companies as profits from overseas businesses are expected to increase, we believe that in the medium to long term, it will lead to cost-push inflation due to the rising prices of energy and food, given Japan’s low self-sufficiency rates, resulting in negative impacts on Japan overall.

Regarding China, the real GDP growth target for 2024 was set at around 5% during the National People’s Congress held in March 2024. That’s on par with 2023, but there are concerns about uncertainty for employment and income amid the collapse in the real estate market, the cooling consumer sentiment, and stagnation of domestic demand. The Chinese government has implemented economic stimulation measures through the expansion of infrastructure investment, and the economic impact of these measures is anticipated.(→ PEST Analysis (Macroenvironmental Factors))[PDF]

Amid such a business environment, we set a record-high consolidated net profit of ¥880.0 billion in the FYE 2025 management plan, up around 10% from ¥801.8 billion in FYE 2024. We are assuming the continuation of a strong dollar and a weak yen, and realistic resource prices based on the conditions at the time the plan was formulated. We also expect core profit excluding extraordinary gains and losses to reach a record high of ¥860.0 billion, and we will steadily achieve our plan through growth in existing businesses and profit contributions from new investments. Regarding growth investments, we plan to invest up to ¥1.0 trillion in FYE 2025, and to show that we are serious about aiming for high profit growth centered on investment.(→ Business Results for FYE 2024 / FYE 2025 Management Plan)[PDF]

In accelerating growth investments, are there any particular sectors or regions ITOCHU is focusing on?

We will continue promoting high-quality growth investments where we can leverage our strengths, without limiting ourselves to specific sectors and with a broad focus on various regions.

ITOCHU’s strategy is to not concentrate its investments in specific sectors. Every business in upstream, midstream, and downstream has its own strengths, and we believe there is still room to grow by leveraging these strengths to add value to our businesses through a market-oriented perspective. Regarding regions, there are many growth opportunities not only in Japan, where we have strength in the consumer-related business, but also overseas, particularly in North America and Asia. For example, even if the investment target is a Japanese company such as Hitachi Construction Machinery Co., Ltd., we can capture higher growth rates abroad that surpass those in Japan by jointly advancing new overseas expansions. While competition over Japanese domestic projects is heating up due to increasing interest from overseas and the depreciation of the yen leads to higher investment amounts for overseas projects, we will carefully assess each project, understand the various trends in the external environment, and actively pursue investments that contribute to our Company’s growth.

Please tell us about your Clean-Tech Business.

We will build up businesses that contribute to reducing GHG emissions as part of our primary operations.

When we announced the previous medium-term management plan, we also disclosed targets aiming to achieve offset zero by 2040, and net zero by 2050 for GHG emissions from Scope 1, 2, and 3 sources and all fossil fuel businesses and interests. We will continue to pursue these initiatives with a medium- to long-term perspective, believing that it is important to steadily work on reducing GHG emissions while also gradually accumulating avoided emissions.(→ Approach to Climate Change and Related Initiatives)[PDF]

Our initiatives toward accumulating avoided emissions include participation in the green hydrogen value chain; carbon dioxide capture, utilization, and storage (CCUS) efforts; developing and owning ammonia-fueled ships; renewable energy businesses (including wind and solar power); and businesses related to energy storage systems. However, none of these can be achieved by ITOCHU alone and we need to work together with many partners. For example, the steel industry is facing the issue of reducing GHG emissions from steel production. However, they can achieve significant reductions by using high-grade iron ore produced from iron ore projects in which we have invested and are employing the direct reduction method with natural gas or hydrogen. We identified these kinds of customer needs and in collaboration with JFE Steel Corporation and the largest steel manufacturer in the United Arab Emirates, Emirates Steel Arkan, we are working to build a supply chain for low-carbon direct reduced iron, promoting decarbonization in the steel industry. Furthermore, in Europe, which is leading the hydrogen society, we have, together with a subsidiary of Osaka Gas Co., Ltd., invested in Everfuel A/S, a Danish company engaged in the production and distribution of green hydrogen, and have thus fully embarked on the hydrogen business. These initiatives are in line with the concept of “Profit opportunities are shifting downstream,” as outlined in the Management Policy. Going forward, we will continue to expand business while meeting social demands from ITOCHU’s unique market-oriented perspective.(→ Clean-Tech Business with Swift and Steady Execution)