Ajinomoto Co., Inc. (2802) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Thank you very much for coming to Ajinomoto's FY 2022 Financial Results Briefing Meeting in spite of your busy schedule. I am the MC. My name is [ Kaji ]. First of all, I would like to introduce the members for today. Representative Executive Officer, President, Fujie; representative Executive Officer and Executive Vice President, Shiragami; Executive Officer and Senior Vice President, General Manager, Corporate Division, Sasaki; Executive Officer and Senior Vice President, General Manager of Food Products Division, Masai; Executive Officer & Vice President, General Manager, AminoScience Division, Maeda; Executive Officer & Vice President, Supervision of Frozen Foods Kawano; Executive Officer and Vice President in charge of Finance and Investor Relations and Sustainability and Communications Executive Officer, Morishima; Executive Officer Finance and IR, Eiichi Mizutani. In addition to these members, there are two Executive Officers, Vice President. Executive Officer in charge of Quality Assurance, Smriga Miroslav; Executive Officer In charge of Diversity and HR, Ikuo Kira. [indiscernible] including these members, there will be a response to be given. We have 1 hour 30 minutes for today's meeting. The materials posted would be on the home page, our information site of Ajinomoto. Therefore, I hope you will refer to them. Today's content will be recorded and including the Q&A session. On subsequent days, it will be put on the IR site, so please understand. I would like to start forecast for FY 2023, ending March 31, 2024, and initiatives for enhancing corporate value explained from Mr. Fujie. The floor is yours, Mr. Fujie.

Good morning. Hello to all of you today. In spite of your busy schedule, thank you very much for attending this meeting. [indiscernible] very quickly. Last year in April, I was inaugurated as President. Already, 1 month -- 1 year and 1 month has passed. There are a lot of rapid changes occurring in the environment. But we had been able to start very successfully, and we would like to challenge into the higher area so that we will be able to really seek for success and go to higher levels. In 30 minutes, first of all, I would like to talk about FY '22 performance and also the forecast for 2023. What are the initiatives for that? And what do you think about the business performance? This will be explained to. After that Q&A will be solicited -- advice, et cetera will be solicited from all of you, so that our initiative acceleration and scale expansion will be settled. Next page, please. Today, this is the 2 points that I will remark on. Next, please. Today, in summary it has been concluded at this. Those are the 5 points here. So firstly, in FY '22, we increased revenue and profit, business profit, exceeding even the performance forecast that we had revised upward and also profit and revenue after IFRS in FY 2016, we have reached new highs since then. The second is the Seasonings and Foods and Frozen Foods [indiscernible], in which product -- profit had declined through Q3, came together to counter the environment. So in 2023, we will steadily grow the profits. The third point. Healthcare and Others drove the overall performance in double-digit percentage growth in both sales and profits. While electronic materials business will be affected by semiconductor market adjustments in the short term, we will confidently work to achieve our vision over the medium to long term. Fourth point. We will also increase shareholder returns with higher dividends and by buying back shares, as well as by introducing normalized EPS and a progressively dividend policy as indicated in our roadmap, with the aim of having 3x the EPS in FY2030. And the fifth and last point, we announced the Purpose-Driven Management by Medium-Term ASV Initiatives 2030 Roadmap and we are making efforts to instill it. Next please. FY '22. This is the digest. Sales and profits -- business profit had been the second consecutive year recognized and for the [ 2 ] consecutive years, business profit was raised profit attributable to the owners of the parent companies. For the second consecutive year, revenue grew in every segment. Sales increased, significantly boosted by currency translation, and further driven by efforts raised at prices in Seasoning and Foods, Frozen Foods business, every region as well as solid growth of businesses, including Healthcare and Others. As you see, business profits increased in every segment. Next page. The gross impact of raw materials and fuel costs. It was around JPY 55 billion that we expected at the beginning of this year. And we thought that it will become JPY 45 billion. In the beginning of the year, JPY 10 billion negative was what we forecasted. And in the year, the net impact is JPY 10, which became minus JPY 2 billion. Therefore, there was an acceleration of various initiatives, and capabilities have been published furthermore. Next page, please. In each of the segments, we had the increase in profit. Next page, is about costs in FY '22. From the beginning of the year and 1 year mainly had been significantly rising in prices. In the second half, the role of sugar tapioca and other main raw materials rose in the second half, and unable to being absorb them in 16 countries and 45 price hikes occurred in umami seasonings. So in 2023, we foresee further cost increases from the previous year, particularly in the first half. We think that the costs will be more increased throughout the year. JPY 10 billion and more of cost increases may be expected. And we would like to identify decisively carry out [indiscernible] responses. Next page, please. So this is the seasonings and quick nourishment combining into volume and unit prices. This is the first time we disclosed this. For FY '22, sales in Japan was, as you see against the previous year. So the volume is down to 96% in quantity and 104% by unit price and 103% and -- 108% overseas and 103% increase volume steadily [indiscernible] FY 2022. In all of the priority KPIs, we achieved the targets of Phase 1. ROIC specifically was where -- 8% was our target. But we reached 9.9% structural reform, that was the theme of the Phase 1 unit results in excess of the plan. Next please. This shows the priority KPIs by segment, as you can see on the slide. Next slide, please. Regarding the progress of structural reform, the denominator of the invested capital, we aim to reduce our asset to JPY 100 billion, but we actually achieved JPY 214 billion. So surpassing our target ROIC grew. And starting from the 2019, amounting to JPY 200 billion asset-light approach was planned as we conveyed earlier. But by the end of 2022, we were able to already accelerate that to more than JPY 200 billion. Therefore, we are significantly going over the plan. And in terms of the '23 forecast, we project a record high revenue and profit according to our plan. So in terms of the single year growth driver, as we conveyed earlier, overseas foods will drive the growth, especially in FY '22. After the third quarter of FY '22, the momentum started to emerge. And therefore, during the third quarter, profitability grew significantly. And we like to actually accelerate the momentum created last year. And Health care and Others will continue to grow to drive and achieve both revenue and profit increase in each segment. Next slide, please. Regarding the cost, how do we protect our costs? Well, this is actually factors behind changes in business profit, as you can see on the slide, please for your perusal. Next slide, please. This shows factors behind changes in BP by segment and the details are shown on the slide. Next slide, please. And this shows the sales breakdown as well as the factors behind BP changes for FY '23. And in Japan, we project a price increase as well as the global growth. We project revenue increase. And for overseas, we'd like to drive both the volume growth as well as unit price growth for a steady profit increase. Next slide, please. And this is on Japan Food business. How to recover our profitability? In FY '22, we were unable to absorb the impact of storing raw materials and fuels with the decline in volume. Therefore, GP margin declined. However, in FY '23, soup and other products will increase their price and GP margin will recover. And thanks to the enhanced marketing efforts, we'd like to drive volume. And the details will be mentioned about the establishment of marketing design center or MDC. We'd like to make sure that we meet the demands of consumers through our marketing design going forward. Next slide, please. This shows a high-level view of Japan and East Asia, especially with a focus on exports. And we'd like to activate -- through this initiative, we'd like to activate the Japan business. Inbound tourism is back. And we see this as a business opportunity for us. In the post-pandemic world, we have made previous preparations. And Hokkaido, as you can see, or as you are aware, is well rated by the East Asian consumers. Therefore, currently, already, the exports to overseas markets and DTC are expanding rapidly overseas. So we'd like to further accelerate these initiatives going forward. Next slide, please. This shows overseas seasonings and foods, especially with a focus on frontier markets. On top of the 5 major countries, there are neighboring emerging frontier markets whose sales are growing more rapidly than the major 5 countries, especially in Cambodia and Bangladesh, Lao and Singapore, Peru, and Bolivia, those are the frontier markets where volumes are not only growing, but profits are generated as well. So we'd like to create a template or satellite method in frontier markets for more expansion worldwide. And this side an example in Cambodia, a frontier market in ASEAN. And as an expansion from the neighboring Thailand, in 2009, we set up a local entity there. And in 2014, this turnaround the business to generate profit. And we already eliminated the cumulative deficits in that country. Therefore, by 2030, we are planning for a rapid expansion of the business. And as a result of expansion from the neighboring Peru, Bolivia achieved generating profit as well. And in Bangladesh, there is a small yet profitable business structure. This was achieved for the first time in FY '22. So even though the scale may be small yet, however, we are standardizing or achieving this asset-light management style. So there is a template emerging from frontier market, and this will be horizontally applied to other markets as well. Next is Frozen Foods, Asian category, and the progress of it. In FY '22, overseas Gyoza. Well, we guess, then Gyoza had actually generated 50% sales in Japan and 50% from overseas markets, which has been a book making. In addition to Japan and North America, which are mainly driven by home-use products, Europe is rapidly growing. It started out handling food service products and then expanded into home-use products. And overseas Gyoza is priced highly, 3x higher than those of Japan. Therefore, our profitability is growing. Gyoza production lines at a factory producing appetizers in France. Therefore, Gyoza is generating more and more revenue. And we'd like to deploy this French model to ASEAN markets so that we can actually replicate the success in other markets. And this shows the recent status of Frozen Foods in North America, which has been a source of concern. Starting from the second half of '21, Frozen Foods faced profit decline. However, we designated this business as a company to be closely monitored, whereby Executive Committee assess the current situation on a monthly basis and decided the agile measures. By executing price hike and prioritizing core categories and visualizing PDC margin, we managed the business as one team together. And we are stemming the cycle of profit deterioration. And then -- in the 4 consecutive months, profits was achieved in the past. Therefore, even after FY '23, with a focus on Asia as well as part of Mexican Foods, we'd like to focus on those core categories and further realign or consolidate our production structure and then provide support from Japanese headquarters by an increased number of secondary employees. We'd like to further address the structure of the business and achieve growth strategy entailing profit increase. And at the several rounds of IR sessions, we receive your very potent inputs. And thanks to your feedback, we were able to achieve this turnaround business. And for that, we are -- we'd like to express our gratitude. Thank you very much. Regarding Electronics Materials. For the time being, the production adjustment was -- had to be made for ABF, because of the supply chain issue with the same quarter. But we -- currently, there is an issue of excess inventory. And for the fourth quarter of '22, we had to control our production in order to minimize or the -- have a better control of inventory. And with ChatGPT and high computer -- high-performance computing, the growth potential remains the same. Therefore, we will shift to regrowth after the adjustment period. And to obtain mid-term ASV indicators, we'd like to drive a steady growth going forward. And after the demand and supply adjustment, there is robust demand to be met. JPY 25 billion will be spent on CapEx, as we've indicated earlier. Next slide, please. Bio-Pharma & Services continues. The CDMO, expanding business services for oligonucleotide, drugs business steadily growing. Pipeline is growing too. And within the business briefing in August of last year, we made an explanation about our perspectives towards FY 2030 and it will be awkward to revise. Next please. 2030 ASV indicators should be achieved. So we will have FY 2023 forecast to be solidly achieved ROE and ROIC will show the effects of write-down from temporary profit recorded in the previous year, but we plan to solely achieve as the indicated by generating returns in line with the investment. So the upward trend itself will not [indiscernible] Next is the ASV indicator for each segment are as shown here. Next page, please. I'm sorry that the sound seems rather distorted, but this shows the ASV indicator of each of the segments. As you see. Next page, please. This is about the assets and liabilities. In FY '23, we will have a reduction of the inventory. And in the key areas for intangible and tangible assets will be proactively handled. So we consider that the total asset is in line with the previous year, not just profit and reducing inventory. Sustainability and the business model transformation is where we will invest into net E/D ratio is 30% to 50%. Within that, the operating cash flow, if there are some excess, then we will have treasury stocks proactively bought back. Next page, please. In FY '23, temporarily, the operating cash flow declined. But in FY '23, we will generate cash in the high increase profit and inventory. We will have JPY 170 billion range of cash to be generated. Next page, please. Strategic investments, FY 2023, especially the intangible assets will be reinforced. Around 50% will be intangible asset investments. So to tangible assets, whatever necessary, we will make investments to. Next page, please. This is the important management indicator trend. As you see, each indicator is steadily going upwards, and it is growing. From FY '20 to '22 EPS has increased approximately fivefold and also 2023 EPS 3x towards which the profit generation, share buybacks and appropriate global tax management will be progressed. So that EPS increase will be gained. Next page, please. This shows the growth investments. So it should be in excess of FY '22 significant necessary investment and the ratio as necessary will be maintained. We will aggressively share buybacks by reducing cash and deposits. Next page, please. Shareholder returns. In FY '22, 40% is the payout ratio and total shareholder return of at least 50% have been committed. Accordingly, for the payout ratio as of the end of the year from the earlier forecast, we will increase the year-end dividend by JPY 6. Therefore, we plan to pay an annual dividend of JPY 68. Planned dividend is increase of JPY 16 from previous year. And in FY '22, we already bought back approximately 7.2 million shares valued at JPY 30 billion. And we will also have the normalized EPS-based dividend also to be maintained. JPY 60 annual dividend increase means JPY 74 by paying dividends. And as announced, we will buy that 12.5 million shares with a value of JPY 50 billion. Next, please. From here in, it's the initiative for enhancing the corporate. Next, please. Where we want to be. So we will unlock the power of amino acids to resolve for food and health issues contributes to well-being of all human beings, our society and our planet with the AminoScience. This is our philosophy. It is our philosophy, corporate slogan, "Eat Well, Live Well" will not be changed. So our philosophy has been progressing. It's wonderful ADW, simplify the evolution. And the next please. This shows the structural reform to shift to growth. As we mentioned up to now, there will be the value to be offered and Health care, Food & Wellness, ICT and Green are the four growth areas that existing businesses will be progressed and shifted into. FY '21 had the business profit basis where, as you see, Food to AminoScience business was 2:1. So Food was larger in portion. On the other hand, towards 2030, Food will be grown. And more than that, AminoScience businesses will also be grown. Therefore, 1:1 is not just Food or AminoScience only businesses. High profitability and unique and strong structure is what we would like to materialize. The basis for that is AminoScience. Therefore, AminoScience is where we will be very much particular to, and there will be various diversed materials, functions, marketing services to be pursued securely. When we announced the 2030 road map under the midterm ASV initiative in February, to align our purpose with the employees, we hold -- we have held discussions or dialogues with them to disseminate our message. And now we'd like to show you a brief video clip about -- for about 2 minutes. [Presentation]

Next slide, please. So we are making efforts to make sure that our road map and message is penetrating the organization, not only me but also the executive members, including managers are having direct dialogues with our employees on many occasions. So in order for us to pursue ASV thoroughly, we are holding discussions with our employees with full earnest. And this is part of the feedbacks given from our employees. And we always made sure that we provide psychological safety in our discussions. And honest opinions are given from our employees through these discussions, providing akin to further improve ourselves. So we'd like to further promote our dialogues with our employees. Next slide, please. And this shows the evolution of our governance structure. Starting from April, these are the 5 new implementations given starting from April. One is the Management Risk Committee. We'd like to enhance our defense activity in terms of management risk. And the second is the second term, SAC, Sustainability Advisory Council, consisting of the following members. And number three is Internal Director, newly appointed. Value creation advisory member in the past 1 year and an expert of going through a lot of predicaments before, Saito-san was appointed as an Internal Director to assume the CXO, or Chief Transformation Officer, to drive the transformation. And number four, Professor Scott Davis, who has chaired this SAC will be appointed as an outside director. And then number five, Value Creation Advisory Board now welcomes Mr. Baba as a new member, who was an Executive Officer at Panasonic before. Based on U. S. Silicon Valley innovation as well as sustainability will be driven by his new -- by him coming on board. And the profile is attached in the appendix for your perusal. Next slide, please. We established Marketing Design Center on April 1. By reflecting consumers' opinions and collecting information, we'd like to create ideas for -- to generate promising new progress -- new products. And by disseminating that methods or internally share those product ideas, we'd like to create -- keep generating new products as well as connect to local sales channels. And this was the intent behind the setup of MDC. And members -- there are 95 members of them. And the other day, we held the gathering discussion to unite these members of one team, and they brought together their bento boxes to deliver a message of co-creation and going beyond the past. So I would like to show you a video clip. [Presentation]

On April 1, 2023, Marketing Design Center was established with 95 colleagues. Thank you very much for the clip. So we are working as 1 team, to create promising new products by soliciting consumers voices. And this is reflected to our R&D activities. In the past, who has been an architect in producing and delivering big hits, Mr. Okamoto, Executive Officer is presiding over this initiative. And with Masai-san, who heads the Food business, together, they are leading this initiative. So please have -- look forward to the outcomes. Next slide, please. This is our cash generation initiative. And this is the structure of it. Next slide, please. Regarding the cash flow -- cash generation initiative, the performance is progressing or improving. However, we have many rooms to improve in terms of consistency and wastefulness. But this is actually a treasure that we can cultivate into or tap into. So we'd like to create a leaner structure throughout -- out of this initiative. Supply chain management transformation is another initiative that is underway. Next slide, please. And this is how to reduce our lower breakeven point. And we have set up a procurement strategy department to make sure that procurement is conducted in a strategic manner. And so we set the goals to be lean in terms of our procurement as well. Next slide, please. This shows the HR assets. And we introduced the employee stock ownership and where we provide special incentives for those participating in the program. And there is a total of 19 group companies who are participating in this employee stock ownership. So 1 unit of stock, 100 stocks will be provided to each one of the participants. Therefore, employees are shareholders in a sense. And together with the employees and consumers and customers, we'd like to actually meet their demands and then create the cycle of this corporate culture of value. Before this adoption, there was only 3% who participated in the program. However, now the participants -- participation ratio stands beyond 60%, and the deadline is scheduled to be at the end of May. And we'd like to further solicit more participants in this program. So that we, together, can enhance our corporate value. Next slide, please. This is my last slide. To encapsulate, in fiscal -- in FY '22, we shifted from the structural reform phase to a regrowth phase on a -- 1 year ahead of the schedule. And then in the 4 BMX areas, we'd like to continue enhancing our product portfolio as well as corporate portfolio. In FY '23, which marks the initial step towards the 2030 road map, we'd like to make sure that necessary investments are made to realize a steady growth. Number three, although things are rapidly changing, but this is where our chances may emerge. So we'd like to be more agile in terms of decision-making and achieve scale ups to a bigger extent. Through dialogues with the employees and investors, we received many insightful feedbacks. And among harsh opinions, we find opportunities rising. And there are rooms for improvement, of course. However, by listening to your feedback on its opinions, today, we'd like to solicit your honest opinions and forthcoming opinions. With that, I'd like to conclude my presentation. Thank you very much.

Thank you very much, Mr. Fujie. From now, we will entertain the questions. [Operator Instructions] The first question, Mizuho Securities, Mr. Saji.

I am submitted overseas sales in Seasonings, Food and there were information about that given. And as we talked about it yesterday on Page 9 and 16, Page 16 on the slide is the comment that I would like some elaboration from. I am especially interested in the overseas sales on Page 16. It was 1% grown last year. This is 5%. The volume is 3% last year, and this is 1% this year, and unit prices have gone up 8% this year, it's 12%. Looking at this last year, it was quite good. Maybe it's a rebound from that. But it seems as though there are a lot of slowdowns. It seems to be the case. So maybe some conservative perspective is taken as explained yesterday. Within the numbers, I would like some backgrounds to be explained furthermore, please. That's the only question I have.

Thank you very much. I would like to give you the overview, and if there is something to supplement, Masai-san will respond. First of all, for overseas Food, in the past 2 years, we had raised prices. Excuse me, let me start from the beginning. In the past 2 years, overseas Food cost inflation countermeasures were taken for that. In each of the countries, there are a lot of price increases occurring. From that perspective, in FY '23, as of the planning stage, the volume had been very much conservatively forecasted. That is one point. Having said that, growth should be materialized. So challenge should be securely worked on -- performed. Masai-san, if there is anything to add, please.

Yes. I, Masai, would like to give some supplement to information. As Mr. Fujie mentioned, in the future, further price increases should be proactively considered. In overseas, particularly, up to -- a lot of price increases occurred. Going forward, a lot of product cost increases have been occurring. For price increases, we should look at the situation of the competitors so that we conducted very carefully. It's not in line with the past activities. Therefore, we are looking rather conservatively at this in that sense. Another -- especially in 2022. Overseas, there were eating out segment also included in Food. It was very much increasing, but the pace is rather settled now. Therefore, it may be looked at as conservative, but that is what we apply at this moment. Thank you very much.

So I'm sure your expectation is to grow the overseas Food business furthermore, and we will understand it as so and tackle it securely. Thank you very much for your question.

Just one point to confirm. For price increases, I think it has become more larger and we have to look at the competitive situation, too. As of now, the competitive environment area where we need to watch or the product area, if they exist, then I would like to confirm on that, please.

Obviously, in all areas, we look -- a lot of information should be secured, and it is being secured presently. Therefore, we would like to act very strongly globally for the Seasonings in ASEAN, especially Indonesia, Vietnam, et cetera. The competitors are very strong in those areas, so we need to securely look at the conditions there. And for Frozen Foods, in the U.S., we should look at the activity and trends properly. Is there anything to add on to this? None? Okay. Thank you very much.

Next question, SMBC Nikko, Takagi-san.

This is Takagi speaking. I'd like to ask a question about the Seasonings and Foods. This year, this fiscal year, [ JPY 92.9 ] billion, a record-high profit. But you've been around -- trading around JPY 80 billion in the past. So structure-wise, what improves you? What drove this significant improvement? Could you please elaborate on this matter? That is my first question. And second, under the current MTP, this will be a crux. But going forward and next year as well as 2 years ahead from now, 10% growth. In order for you to achieve this 10% growth, what are the remaining issues to be addressed? And if the raw material costs or prices are down, then you can improve your performance. But you're assuming that they will remain high. So what are the remaining issues to be addressed? Especially in Japan, I understand, but for overseas markets, are there any remaining issues to be tackled?

Thank you very much for the questions. Well, to address the first question, regarding the visualization of the current state of affairs and how we are taking measures, we are becoming more capable and agile in executing those measures. There is room for improvement, of course, but we have been increasing our capacity of execution through this visualization, which enable this agile implementation of measures. That is one thing. And going forward, for future growth, especially in neighboring countries as well as frontier countries, their top line will grow significantly. They started to grow. And in a few years' time, we project that the profitability or profits will grow. That is the template we have in mind or that is the previous example that we have established. So we are quite confident. And another is the integration of the Foods and amino acids or AminoScience. We are making various initiatives. And Ajinomoto has both B2B as well as B2C. So we'd like to leverage this strength. To maximize this, we'd like to evolve ourselves further. And regarding the raw materials and fuel prices that remain very high, as I mentioned earlier, for the entire group, more than JPY 10 billion. There will be a net impact of JPY 10 billion. And to offset that impact, JPY 150 billion is the projection or forecast. And that includes price increase in Japan, but for overseas markets, we have significantly increased our prices, but we'd like to remain -- maintain our agility in terms of increasing price. Masai-san, could you please expound on this matter?

This is Masai speaking. I'd like to expand on the matter. Obviously, as I mentioned just now and in addition, the mainstay in ASEAN categories, in the past, there have been sluggish market, including Vietnam. But this year, it returned to steady growth, and that makes a significant contribution. In neighboring countries, this is -- may overlap with Fujie-san's presentation, but Myanmar, Cambodia and Laos as well as Bangladesh, those neighboring countries or frontier markets are leading this robust growth. Another factor is that within the ASEAN countries, those products produced in Malaysia, which are qualified as [ Halal ] products, and we enhance the capability. And exported products outside ASEAN markets, and that will be a positive factor.

So in terms of integration of Foods and AminoScience, this is a repetitive item, and that always comes up in these IR presentations. But what are the specific initiatives that you are currently driving? And is it creating any positive outcomes? I just wonder. And also, regarding the examples in Vietnam, which returned to growth, but is it because of the improved outside or external environment? Or was it due to internal initiatives that were conducted within Ajinomoto?

Thank you very much for the question. This is Masai speaking. Regarding Vietnam, I think both, externally and internally. One is external environment. But also internally, we made a steady basic parameters of implementation, with [indiscernible] methods. And various initiatives are underway. It's not just about launching products that contain amino acids. B2B is our strength with AminoScience division. And then Foods as well as AminoScience business divisions are launching this joint project so that both teams come together to create a momentum. And there are specific projects going on. In addition, I've been in charge of AminoScience before, and there are keywords that have not been applied to Foods, that is the exports. If you are an AminoScience division, and you may not have been thinking about exports. But from Japan to East Asian markets, there is a lot of exports. And from Malaysia, Halal products are exported elsewhere. So those are unprecedented because food items tend to address those local market needs. But we may not have been necessarily tapped into this export potential, but there are significant room for improvement or room for growth in terms of exports going forward.

I have another question. Just one more about the Frozen Foods business in U.S. At last low growth reform has been very much changing matters. Why in the fourth quarter, such profit improvement has occurred? Can you give us some background information furthermore? And in the future, or this fiscal year, the fourth quarter has recovered significantly, but what about this quarter? It's rather than conservatively looked at it. What about this year? I would like to know more about that, including the market environment.

Yes. We have done our best in order to succeed in this. And Mr. Kawano, who has been very much involved in this will be explaining.

Thank you. For North America, there are 3 points. The first is by price increases. Actually, the raw material prices may come up, and then we raise the prices. So there are differences by 2 to 3 months, but at last the price increases has caught up, and that's one reason. The second reason is that the cost overall and the value chain where TDC, total delivery cost project is acted on so that costs overall can be driven down. There was COVID. Therefore, the factories lacked personnel and production was delayed, the technical support from Japan had more or less stopped. Improvements didn't progress much, but at last, after COVID, there has been improvement in the country. And the first cost improvement fruit has been surfacing. And the third point, as mentioned previously, is about some advanced investments that occurred in gyoza or the Frozen Foods sales and Mexican food with added value involve various investments. But as you know, FRB raised the rates, and they restrained the rates. Therefore, there was some recession somewhat occurring. So that is one of the causes. And that, at last, has started to mobilize. And more utilization can be expected, and profits can be expected too accordingly. For your last question, for FY '23, how we read it is that, I'm sorry to say, rather conservative. The reason is the raw materials in the America at this moment has stabilized, but there are some portions that we cannot read fully. Therefore, there is the Russian condition, and the inflation may accelerate furthermore. And reading that is what is happening here.

If that is the case, from this year on, the profit will be solidified basically to cost rises, price increases work. And we don't know what will happen to the raw material prices. But on the other hand, there may be new gyoza or the rice products that will be solidifying the business, and they will lead to more growth. And then profits will be further improved. Is that how it flows?

It's rather complicated here. We acquired a certain company, we use it. And there are a lot of unprofitable businesses that it has, too. Obviously, funds would cut them off continuously. But in our case, gyoza and rice products that has high added value and also growing businesses are also existing. So these segments are utilized. For gyoza and rice products and Mexican, they will be growing. At the same time, the existing unprofitable businesses will be reduced so as sales. Added value business sales will go up. Unprofitable nonvalue-added profiting divisions will be reduced. So it doesn't connect to the increases directly. But basically, unprofitable areas go down and growing areas go up. Therefore, we become more profitable in the end.

Yoshida-san from JPMorgan Stanley.

JPMorgan Securities, this is Yoshida speaking. I'd like to ask questions about nonfood businesses. Regarding Functional Materials, according to your materials, SBT market is advancing. And when you announced the ASV vision, CAGR 18%, it was further revised to or increased to 25% this time around. What is the factor behind this increase? And also regarding Bio-Pharma Services & Ingredients, I mean, mid- to long term, you revised upward your long-term forecast. And what are the factors behind this revised -- upward revision? Also, regarding Functional Materials, previously, you spoke with the media or media reported earlier that new production capacity may be examined even though the location and timing were not determined. But when you announced the ASV initiative last time, according to the CapEx, outside this JPY 15 billion of CapEx, is it included in the CapEx budgeted under the ASV initiative or not?

Thank you very much for the questions. Let us first address the CAGR-related question. When we made the announcement in November, we were talking about ABF shipment volume. That was announced as 18%. That was our initial projection. But this time, HTC market is projected. So the table is a little bit different even though our message may be misleading, but that speaks the difference. Maeda-san, could you please expand on the other items as well?

Thank you very much for the question, Yoshida-san. This is Maeda speaking, and I'd like to address your other questions as well. Well, first of all, regarding the CAGR, 22%. This pertains to high-performance computing. So the high-end server networks applications, which is growing higher than expected. So it is expected to grow at 22% in CAGR. As the left-hand side shows, compared to the substrates used for PCs, it uses ABF 10x greater than the amount used in PCs. So towards 2030, this will drive us very robust market growth. And to address your second question regarding Functional Materials. In terms of JPY 25 billion that is for the existing 2 factories for ABF. That is the production capacity increase for the existing facilities. But during the media interview that you mentioned, there is another project going forward which is not included in the existing facility. And then regarding the midterm biopharma projection on Page 24, regarding the nucleotide medicine in AJIPHASE, we are driving growth in AJIPHASE. And the customer base is growing as well, and our sales is growing steadily with the expansion of our pipeline. That is why we revised our sales projection upward.

So let me ask a follow-up question regarding Bio-Pharma Services & Ingredients. Yesterday, during the media announcements, there were questions relating to this. And I have a follow-up question. This year, in -- by 2030, CAGR compared to 2016, 9% is the expected CAGR. That is the calculation. And then this year's growth is projected to be around 8%. So I understand the CDMO business will grow a CAGR of different percent. But what is the expectation for this year's Amino -- apart from this AminoScience, what is the projection for this Bio-Pharma & Ingredients for this particular year? And also by 2030 is when you made the announcement for ASV 2030 Roadmap. On Page 27, AST, the same graph was indicated. And it said 18%, but the number is different. And is there any factor behind that slight modification?

May I answer the question? This is Maeda speaking. I'd like to address those follow-up questions. Regarding the Bio-Pharma Services, this is within Healthcare and Others, which was reported. And then on Page 24 here, nucleotide medicine, CDMO and other frontier advanced health care, this is highly profitable. And for -- this includes the low-molecule CDMO as well as other items. And then regarding this nucleotide CDMO, which is growing strongly, but biopharma amino acids as well as cell culture and low-molecule products, part of them compared to '21 and '22, because of the pandemic, there were incremental orders given to those product lines. And starting from the second half of '22 after the subsides -- pandemic was eased, so we are actually driving the steady growth for regular bio medicines. But compared to that, there's this oligonucleotide business that is driving -- that is trading strongly. So compared to the previous year, 8% may seem unimpressive. I understand that. But because that's well, with the elimination of this pandemic surge, 8% is still high for oligonucleotide. And regarding the HPC for -- that includes servers and high-performance computing. Therefore, we revised the forecast upward.

I understand. So for 8% this year, the revenue increase, amino acids as well as Bio-Pharma Services, there is no significant difference. Is that right? And then within Bio-Pharma Services, nucleotide CDMO will be higher than 8%? Is my understanding correct?

Yes, for the entire business, yes. They are making steady progress in each area.

Daiwa Securities, Morita-san, please.

I'm Morita from Daiwa Securities. There are 2 questions for food. On Page 18 and 19 of the material, there will be exports from Japan and Frontier will be focused on. And once more, with this timing, these 2 scenarios seem to be emphasized. And what are the reasons for that? I think from the past, you have already worked on this as I understand. Why is it that now this becomes a more interesting topic? Is there some environmental change? Or is there some kind of preparation finalized within your company? What is the reason you have started to explain once more about this?

Thank you very much, Mr. Morita. For this especially, we are having an enthusiast, Masai-san, to elaborate on this. Masai will explain about this.

For exports, as mentioned, up to now, it's not that we didn't act on it at all. Internally, B2C food business in each of the countries have respective customers to which to the food culture, we were very much emphasizing our businesses. And I say that in addition, we didn't have the word exports, but we have started to consider about that. Having said that, another important factor is in export as on the material, it may pass the border into other countries. Recently, it is very much growing as business, especially Ajinomoto AGF coffee-related products are securing the trends. Up to now, we had thought about this, but there wasn't a dual role here. But it was a good initiative for us to launch into the exports. And for the Frontier, obviously, we had been working on it up to now. But as mentioned, Cambodia, Bangladesh, Myanmar and Myanmar may have some political issues and Laos included. The growth are securely being visualized. Therefore, in the future, 5-star core areas with the economic growth may be stagnating somewhat. But these companies still will be growing. So with this timing, we really want to emphasize and focus into them. Does that answer the question?

For export, for the recent currency trends, are there some external factors or DX included? Is there something that leads to technical innovation and also currency support materials?

As you say, in ForEx, there are some reasons to this. But then cross-border EC is not necessarily just in foreign currency denomination. It may be in yen. But generally speaking, yen depreciation will be a tailwind for us. So we would like to definitely target to this business.

My second question is about food, too. On Page 18 or rather 16, I see especially in Japan where last year, cost inflation led to severities. And in the new year, it was to be recovered. We said most to be recovered, but maybe it hasn't happened at all. Last year, JPY 9.9 billion profit reduction, and new year is JPY 3.5 billion through price increases will be recovered. But prior to cost inflation, the profit level hasn't been reached to that level at all. So for this, how will you regain the profitability of the past, and you are to grow volume. In food, share seems to be coming down gradually. Once more in the Japanese food business, how will you be winning as a company? Can you comment on this?

I would like to give the overview, and Masai will give some additions if necessary. Japan food, first of all, in FY '21 and '22 had significant eat-in5 -- or rather, in FY '21 eat-in had grown and sales also had, including profits, increased significantly. In FY '22, that was relaxed somewhat. And as reported early on, there was profit reduction occurring. From the past, as I mentioned, FY '19 levels should be recovered. And obviously, we set targets in order to work on it. And out of that, the forecast for the performance has been set as this. But if we suddenly pursue too strongly then share may come down furthermore or the share once more and also sales may be dropping. Such competitive environment and also the economic environments considered, we really considered about our forecast as being this. If there is any to add on to this, Masai-san, please.

I, Masai, would like to give some information additions. One point is, as mentioned today, the marketing design center to be established, and that's the important point. It had been prepared for that and started up in April. And from this year on, it became operational many times. And within today's document, it has to be mentioned that whereas up to now, we in marketing division was dispersed into various divisions. But this has become one organization so that efficient marketing activities can be conducted. And keyword is the insight of the consumers to be caught and appropriate products to be created. So that kind of marketing design center establishment and the details will not be mentioned here, but that's one point. And other is as provided in the presentation overall, the supply chain should be reinforced. And we will be -- we have been tackling this. It's not just about sales increases. Connecting to cost reduction, efficient activities have been continuing as mentioned. For example, in exports in Japan or as sales and profit, it will be related to Japan. Put together, it's difficult as a business in Japan, but we really want to rejuvenate the Japan business.

Operation overseas is very successful. But why is it so difficult in Japan? Is there any thought you have?