Mitsui tells new shareholder Warren Buffett that healthcare is the future
TOKYO – The CEO of Mitsui & Co. outlined his plan to work with Warren Buffett following the US investor’s notable bet on Japanese trading houses, saying his company has a great opportunity to strengthen its healthcare business. health and reduce its dependence on resources.
Tatsuo Yasunaga told Nikkei Asia that Mitsui quickly began talks with Buffett’s Berkshire Hathaway investment vehicle and that the investment would bring “mutual benefits,” but warned there was no room for it. that his company is complacent about its performance.
“We shouldn’t be just happy with their investment,” Yasunaga said in the interview. “Berkshire would sell our shares if our financial performance did not reach the level they expect.”
Buffett, who is one of the world’s best-known investors and has a dedicated following, announced in August that Berkshire had acquired just over 5% of Mitsui and four other Japanese trading houses – Itochu, Mitsubishi Corp. , Sumitomo Corp. and Marubeni – over approximately 12 months. Berkshire said it could increase its stake in each company to 9.9%.
The investment sparked a great deal of interest in the potential for increasing value within Japanese trading houses, known as sogo shosha. While their origins lie in the trading of goods such as raw materials and textiles, their profits now come from a wide range of investments.
Buffett also said he sees opportunities for trading houses to partner with other Berkshire companies.
Yasunaga said Mitsui started talks with Berkshire by letter in early September, right after his announcement.
“We have had discussions to identify where we can collaborate on new business and where there are mutual benefits to using our global network,” Yasunaga said.
He stressed that the health sector could be a candidate for collaboration.
Mitsui owns an artificial dialysis business for patients with renal failure as part of a joint venture with the US company Davita in Singapore, Malaysia and China. Berkshire is Davita’s main shareholder.
Yasunaga revealed that Mitsui plans to expand its business into the Japanese market. “We could contribute to Berkshire through the good performance of our operations in Asia,” he said.
The investment in Berkshire comes as Mitsui tries to shift its profit structure significantly away from resources, giving more weight to businesses, including consumer sectors such as healthcare as well as chemicals, machinery and infrastructure.
Mitsui’s medium-term management plan sets a net profit target for the fiscal year ending March 2023 of about 400 billion yen ($ 3.8 billion) – the same level as the previous fiscal year, ended in March 2020. But Mitsui expects resource profits to decline. from 240 billion yen to 170 billion yen, when he wants the profits of other companies to go from 160 billion yen to 240 billion yen.
Mitsui plans to invest around 1,000 billion yen in non-resource sectors, compared to 600 billion yen in resources.
Mitsui’s profits depend on metallurgical and energy companies, including thermal coal for power plants, which has been criticized as a major source of carbon emissions. Recognizing that a transition to a low-carbon society is inevitable, Mitsui has scaled back its thermal coal business.
Besides its dialysis business, Mitsui also stresses the importance of its 32.9% stake in Malaysia-based IHH Healthcare, Asia’s leading hospital chain by market capitalization. Mitsui is the largest shareholder of IHH, which has 77 hospitals in 10 countries, including Malaysia, Singapore, India and China.
“We have the opportunity to find solutions to procure drugs and other medical equipment at reasonable costs, expand its hospital network and improve the menu of care for patients,” Yasunaga reiterated.
Yasunaga said the IHH could use its data from nearly 6 million annual outpatients, including online patients, and 600,000 inpatients to cut costs and grow its business.
“We can create value – not just in hospitals. I would love to build new business with insurance and pharmaceutical companies using our data,” added the CEO.
Yasunaga’s plan for Mitsui makes sense, but it will be difficult to meet the medium-term profit target in its timeframe, said Masayuki Nagano, senior analyst at Daiwa Securities Group.
“Overall, Mitsui’s management to pay more attention to its non-resource activities, including IHH, to primarily target middle-income people in Asia is acceptable and corresponds to the current global situation,” Nagano said.
However, “Mitsui has made profits mainly through large projects such as machinery, infrastructure, chemicals, metal and energy. Every business Mitsui is developing now, including healthcare, is closer to consumers and generally small, and it takes time. to increase the profits of these companies. “
Yasunaga said Mitsui was keeping an eye out for opportunities to increase his medical business in Japan. As the country’s aging society offers opportunities for growth, regulation is a barrier. At present, Japan does not allow the management of hospitals for profit.
He urged the new government of Prime Minister Yoshihide Suga to liberalize the sector. “The medical sector in Japan is huge, and I would like to import our experiences from Asia to Japan, but there are many challenges,” Yasunaga said.
“Japan needs deregulation in order to attract different types of players. The biggest task of the Suga administration should be deregulation.”