Mitsubishi Chemical Group Corporation (4188) Earnings Call Transcript & Summary

[Interpreted] Good afternoon. This is Hidefumi Date, CFO. Let me start my presentation. Please turn to Page 4. Core operating income and loss on a quarterly basis. In Q4, we saw a steady recovery from the impact of COVID-19 to achieve JPY 61.1 billion in core operating income. As will be explained later, JPY 61.1 billion reflects recognition of impairment loss totaling JPY 6 billion, which was a factor specific to this term. So if we apply conditions for a normal period, core operating income would have been JPY 67.1 billion, which represents a remarkable recovery from the beginning of the fiscal year when we projected that the core operating income for the first half to be JPY 25 billion and for the second half, JPY 115 billion, even with the recovery from COVID-19. So our full year projection at that time a year ago was JPY 140 billion. We managed to end the year with JPY 174.7 billion. Please turn to Page 5, consolidated statements of operations. Sales revenue was JPY 3,257.5 billion, down JPY 323 billion year-on-year. A slight yen appreciation had an effect of lowering revenue by JPY 15 billion. Price variance pushed down revenue by approximately JPY 130 billion, including significant decline in market prices in the Chemicals segment and the impact of drug price revisions in the Healthcare segment totaling JPY 22 billion. Volume variance pushed down revenue by close to JPY 180 billion. Lower sales of materials for automotive applications, petrochemicals and carbon products in Chemicals as well as the impact of COVID-19 on industrial gas, particularly in Europe, these factors had major impact on the sales revenue compared to the previous fiscal year. As for core operating income, as we made focused efforts on business continuation and cost reductions under COVID-19, we managed to keep the year-on-year decline to JPY 20.1 billion at JPY 147.7 billion. More on this later. As for special items, we recorded a large amount up to the third quarter, resulting in JPY 127.2 billion in expenses on a full year basis. Financial expenses decreased on a full year basis by JPY 7.7 billion to JPY 14.6 billion, partly due to the yen depreciation towards the fiscal year-end. Income before taxes was JPY 32.9 billion. After income taxes of JPY 10.2 billion, net loss attributable to owners of the parent was JPY 7.6 billion. While we had projected net loss of over JPY 40 billion, we actually managed to keep the loss to JPY 7.6 billion. Page 6 is the summary, so I will skip it and move to Page 7. Variance analysis of core operating income and loss, down JPY 20.1 billion year-on-year. Drug price revisions in the Healthcare segment weighed in heavily. Overall, price variance impact totaled minus JPY 5 billion. Volume variance impact totaled minus JPY 39.3 billion, resulting from drops in volume across the board from automotive applications to petrochemicals and carbon products in industrial materials and industrial gas in Europe and thermos. Fixed cost savings totaled JPY 18.2 billion, meeting the target set at the beginning of the period. Others, plus JPY 6 billion. Page 8, Performance Products segment. In functional products, full year revenue and profit were down year-on-year even with strong results in Q4, mainly because automotive applications had a big impact. In Performance Chemicals, phenol and bisphenol A, saw market price spread widened to a historical level in Q4 at around $2,500, posting a very strong performance. So while up to Q3, operating profit was lower than the previous year, in Q4, a year-on-year increase was achieved. As a result, the segment ended the year with the same level of operating profit as in the previous fiscal year at JPY 61.3 billion. Page 9, Chemicals segment. MMA ICIS average price in FY '20 was $1,528 versus $1,631 in FY '19, a decline of a little over $100 which contributed to lower sales revenue. And asset prices of acetone and others sort, price spread worsened and profit decreased more seriously than the revenue decline. Core operating income was down JPY 9 billion at JPY 14.8 billion. In Petrochemicals, big decline in volume, largely due to greater impact of scheduled maintenance and repair at the ethylene center in Ibaraki Prefecture in FY '20. As for core operating income, as gain on inventory valuation resulted from the rising naphtha price toward the end of the fiscal year, the loss amount was slightly reduced year-on-year to JPY 1.5 billion. Carbon products also managed to turn to profitability in Q4, partly due to recovery trends in the steel industry. But on a full year basis, a decline in sales volume and narrowing of price spread weighed in heavily on the results. Page 10, Industrial Gases. The strongest impact of COVID-19 was felt in Q1 in Europe, and thermos products such as vacuum flasks and other house articles were also affected due to restricted outdoor activities, resulting in lower sales revenue. But both sales revenue and core operating income gradually improved toward Q4 and a year-on-year decline narrowed as a result. Slide 11, Healthcare segment. NHI drug prices were revised in FY '20. On the other hand, with the expansion of COVID-19 infection, clinical studies were all delayed, resulting in large amount of unspent R&D expenses. As a result, profit increased year-on-year, albeit slightly. Page 12, consolidated special items. Impairment losses up to the end of Q3 included JPY 84.5 billion in relation to impairment of intangible assets at NeuroDerm and JPY 19.4 billion in relation to the closure of the Beaumont plant. Various costs associated with the closure itself were recorded in others. In Q4, JPY 11.1 billion was recognized as impairment loss, mainly in relation to structural reform of the [ Gosinal ] and impairment loss for intangible assets of Stelic Institute in Healthcare. Loss on liquidation of subsidiaries and affiliates totaled JPY 7 billion in Q4 due to the devaluation of a joint venture with Sinopec, producing polycarbonate bisphenol A in preparation for the transfer. Page 13, consolidated cash flows. We managed to improve adjusted operating cash flows from the previous year, albeit slightly at JPY 467.1 billion. Among investing cash flows, capital and -- expenditures increased slightly and so did investment and loans receivables, including the acquisition of Gelest. Free cash flow was JPY 180.1 billion. Page 14, consolidated statements of financial positions. Total assets were JPY 5,287.2 billion, up JPY 155.1 billion. We increased borrowing to increase cash and cash equivalents on hand to address the COVID impact. But basically, assets increased due to the impact of foreign exchange totaling about JPY 146 billion due to the yen depreciation. Moving on to lower right. Net interest-bearing debt totaled JPY 2,132.8 billion, an increase of JPY 42.9 billion, but this included the foreign exchange impact of JPY 47.6 billion. So on a constant currency, the interest-bearing debt decreased slightly. In addition, please note that the interest-bearing debt included lease liabilities. We renewed rent contract for our head office building which pushed up interest-bearing debt by about JPY 33 billion. Looking back, we now question whether it was advisable to include that item in interest-bearing debt, but, at least, in that we are committed to payment and it is interest-bearing. That was how we classified it. For net debt-to-equity ratio was 1.73, representing a move towards our target of achieving less than 1 in 3 years' time in fiscal year ending March 2024. ROE was negative. Next, I would like to discuss the forecast for fiscal 2021. On April 1, Mitsubishi Chemical went through an organizational change and is now structured into 5 domains. On Page 16, as you can see on the right, the business subsegments from polymers and compounds, all the way to MMA, are 4 domains, and petrochemicals and carbon products constitute the other domain to make 5 domains. But in order to ensure the disclosure will not be undermined, we have left petrochemicals and carbon products as they are, and the other business subsegments are now aligned to the other 4 domains of Mitsubishi Chemical. Now these changes to segmentation have not been well received in general by analysts, therefore, we have put together a table on Page 26 which describes the core operating income dating back to fiscal year ended March 2018 under the new segmentation, albeit on a pro forma basis. So you, as analysts, can use it for your own forecast of our financial results going forward. Now if you can go back to Page 17, you can see how the former business segments have transitioned to new ones from fiscal 2020, which I will not dwell on for now. Page 18 is the business segment information. Page 19 shows our forecast for fiscal 2021. Sales revenue is expected to total JPY 3.660 trillion, up 12% year-on-year, and the core operating income, JPY 230 billion, up 32% year-on-year. The bottom line or the net income attributable to owners of the parent is expected to post JPY 97 billion. Moving on to Page 20, where I will explain sales revenue and core operating income by new business segment. Let me first discuss the changes in the core operating income from fiscal 2020 to fiscal 2021. Polymers and compounds is forecasted to increase JPY 1 billion from JPY 15 billion to JPY 16 billion. Shares that the Mitsubishi Chemical holds in S&P, Sinopec, Mitsubishi Polycarbonate Beijing Company, a joint venture with Sinopec, will be transferred to Sinopec. S&P contributed a profit of JPY 2.3 billion in fiscal 2020. And therefore, if we exclude the impact of its absence in fiscal 2021, the core operating income would increase by JPY 3.3 billion, which would reflect expected increase in sales of performance polymers for automobiles and coating materials. Films and molding materials is expected to rise by JPY 7.4 billion to JPY 35 billion. Polyester films and food packaging films are expected to see a rise in the cost of raw materials, which would push down the profit. On the other hand, however, the forecast also incorporates expected increases in sales of high-performance engineering plastics for automobiles and materials for semiconductor production equipment as well as sales of aluminum and fiber for automobiles. Advanced solutions expects to post JPY 18 billion, up JPY 1 billion. As for MMA, the average market price was assumed to be $1,527 in fiscal 2020, but in fiscal '21, we assume about $1,900. As for Petrochemicals, due to the difference in the scale of scheduled maintenance and repairs, the core operating income is expected to increase by JPY 5.3 billion to JPY 7 billion. As for Carbon Products, recoveries in export spread for cokes and in market prices for needle cokes are behind the forecast of JPY 9 billion. Industrial Gases is expected to have a positive growth due to the disappearance of negative factors since seen in fiscal 2020. The Healthcare is also forecasted to see its profit rise. With regard to the changes in core operating income from the first half to second half of fiscal 2021, on the left, polymers and compounds will increase JPY 1 billion from JPY 7.5 billion to JPY 8.5 billion due to increase in sales of Bio PBS in the second half. Films and molding materials is expected to slightly drop in the second half, impacted by Chinese New Year and a sluggish performance expected in food packaging materials in January to March period. Advanced solutions anticipates a rise in the second half due to strength in construction materials as well as the food where Polycaps, a company which produces capsules, usually sees the recognition of sales of pharmaceutical equipment for capsules it also sells concentrated in January to March. MMA expects to drop in the second half as we plan to have more scheduled maintenance and repairs in the second half. Petrochemicals will be affected by the scheduled maintenance and repair in Okayama in the first half. Carbon Products is forecasted to remain almost flat. Industrial Gases, we'll have more products to be posted for sales in the second half. In Healthcare, we expect to supply COVID-19 vaccine to the government of Canada in the second half. Page 21. The resolution on dividends will be made in the Board of Directors meeting on May 19, but we explained to the Board of Directors meeting on May 12 that the year-end dividend per share will be JPY 12. We also expect to pay JPY 12 at the end of the second quarter and the fiscal year, respectively, in fiscal 2021. Let me go over another 2 pages. Please turn to Page 25. I would like to explain what happened in the fourth quarter on this page. Functional products saw its core operating income dropped from third to fourth quarter. Earlier, I mentioned the impairment losses of JPY 6 billion, of which JPY 4.2 billion was recognized at the core operating income level of functional products. Despite another negative impact of Chinese New Year, its strong performance in automobiles have helped partially offset the drop that would have been posted if solely impacted by the impairment loss. Performance chemicals increased its core operating income from third to fourth quarter due to the soaring prices of phenol and bisphenol A. In MMA, the market prices increased in January to March period. Unfortunately, however, the price of acetone also rose, which resulted in a rise in profit smaller than the one that you would expect from the rise in sales. Petrochemicals recorded about JPY 5 billion in inventory valuation gains in the fourth quarter. It also posted JPY 1.8 billion impairment loss in the fourth quarter, which would add up to a total of JPY 6 billion for the company. Carbon Products is on the recovery track. Industrial Gases increased in the fourth quarter due to the strong performance in electronics and medical device-related gases as well as the nature of the business where sales tend to be recorded in the fourth quarter. In Healthcare, progress in recognition of R&D expenses made in the fourth quarter resulted in a quarter-on-quarter drop. Now in our forecast announced on February 3, we said the core operating income would be JPY 39.4 billion, which turned out to be JPY 61.1 billion in the end. Functional products landed JPY 7.7 billion instead of JPY 6.5 billion forecasted. Despite the JPY 4.2 billion impairment loss, automobile application performed better than expected, and sales of polyester film for industrial use and of aqua solutions were stronger than expected. Performance Chemicals was JPY 2 billion ahead of the forecast of JPY 7.6 billion due to a rise in profit of phenol and Bisphenol A as well as strong results for automobiles. MMA saw its selling price go up more than assumed and posted JPY 8.2 billion instead of the forecast of JPY 6.4 billion. Due to the cold waves and larger-than-expected rise in price of acetone, the increase in the core operating income that could have been posted was squeezed slightly. Petrochemicals was forecasted to post JPY 3.4 billion, and the difference in the actual result can be accounted for almost entirely by the inventory valuation gains as the increased sales were offset by the impairment loss of JPY 1.8 billion recognized. As for Carbon Products, the price of coking coal produced in Australia dropped, which resulted in its core operating income JPY 3.5 billion instead of the forecast of JPY 2.1 billion. Industrial gases are expected to see JPY 22.1 billion, but turned out to reach JPY 26.2 billion due to the strong performance in the U.S. and Asia. In Healthcare, we had expected to see more recognition of R&D expenses and to post loss of JPY 9.4 billion, but the expenses turned out to be smaller than expected. Page 26 shows the core operating income and loss by new business segment, so you can see the past trends under the new segmentation. That concludes my presentation. Thank you for your attention.

[Interpreted] First, from Morgan Stanley MUFG Securities, Mr. Watabe, please.

[Interpreted] Watabe from Morgan Stanley. Mr. Jean-Marc Gilson has been your new President and CEO since April 1. What has been his message regarding the budget formulation? And also, you are projecting this year's core operating income to be JPY 230 billion, which gets you closer to your medium-term management plan target of JPY 250 billion. What's his view on that?

[Interpreted] Under his initiative, the budget formulation and the guidance have been put together. Turnaround is his main message, mainly around cost reduction and the investment reduction based on selection and concentration process. That should be the drivers for the turnaround. That's the message. And that message has been translated into the forecast that we shared with you today. Of course, we are not announcing unrealistic forecast. We are putting together plans that are achievable. So assuming that the current economic situation would not change much, we are confident that what we are announcing is feasible.

[Interpreted] I see. My next question is on MMA. Earlier, you mentioned around $1,900. So you are expecting a decline from the current level. Including the impact of the cold wave in Southern U.S. last winter, what is your supply and demand projection going forward?

[Interpreted] In China, new and expanded capacities are being built, but demand remains strong. The impact of the cold wave last winter in the U.S. and the impact of higher price of feedstock acetone have lowered the rate of utilization on the ACH process. And added with the maintenance turnaround in China in May and June, we are expecting a pretty tight supply for the time being. And as mentioned earlier, from October to December, a number of our facilities will go into scheduled maintenance and repairs, so that's another factor that would reduce the supply. And in Q4, our customers will be impacted by the Chinese New Year's, so they naturally are seasonality. But basically, we believe that the acetone price would moderate sooner or later. And with that projection, we believe that the average in Asia would be around $1,900 on a full year basis. So it's based on a more normalized longer-term view.

[Interpreted] I see. Regarding Healthcare, you said that the vaccine impact is factored in for the second half, what are the assumptions? And also, can you talk a little bit more about the rolling submission? While phase 3 is still not clear, what will be the significance of that? And are you expecting increase in the number of supply agreements?

[Interpreted] I would like to defer that question to Mitsubishi Tanabe Pharma, MTPC.

[Interpreted] Thank you. Yoshihiro Kobayashi from MTPC. Thank you for your question. I may not be answering in the order that you asked, but I'd like to first talk about the rolling submission rule. Conventionally, the nonclinical data and manufacturing portion of the data, the CMC, the chemistry manufacturing and control portion and the clinical data, these 3 parts are submitted altogether and reviewed altogether. But the clinical data become available only at the last stage. And in the rolling submission, noncritical or clinical data, or CMC data, are submitted in advance and reviewed accordingly, and that would expedite the process for the final approval, and this is applied to the breakthrough drugs that need to be approved early. And Canadian government decided to adopt this method so as to expedite the process of approval. So that's it for the rolling submission. And from the spring, we are in Phase III, and it involves healthy subjects to see the efficacy. So we should see the results quicker than enrolling patients. So we are hoping that in the second half of fiscal '21, we can complete submissions for approval and purchase by the Canadian government. That's the schedule that we have in mind.

[Interpreted] I see. Can I assume that you are expecting a quarter of the 76 million doses for January, March quarter?

[Interpreted] I cannot give you the breakdown of the supply timing, but in total, maximum 76 million doses. That's what the supply agreement says.

[Interpreted] How about other supply agreements? Do you have additional agreements in addition to Canada?

[Interpreted] Currently, there are no other governments to speak of other than the agreement with the Canadian government.

[Interpreted] From SMBC Nikko Securities, Mr. Miyamoto, please.

[Interpreted] Miyamoto from SMBC Nikko Securities. My first question is on your guidance for this new fiscal year. You are forecasting a big increase in profit for films and molding materials. And earlier, you suggested that engineering plastics for automotive applications would be the main driver. Your projected profit level is rather high compared to fiscal '19 as well, so can you elaborate on what areas you expect to see growth over FY '19?

[Interpreted] Hold on. We weren't expecting that question.

[Interpreted] Or you can simply compare to FY '20. So what is going to be the difference? I don't think it's just the recovery of the automotive industry, can you elaborate?

[Interpreted] I see. Regarding engineering plastics, there was a time earlier around the fiscal year ending March 2018 when semiconductor manufacturing equipment and automotive applications were driving our profit. But then in FY '18 and FY '19, the situation became rather unstable, and profit declined. As for FY '20, recovery was observed, but not yet to reach the semiconductor equipment industry, and we are expecting gradual recovery on those markets. Basically, capacity-wise, we have capacity or capability to satisfy the JPY 44 billion level that we saw in the year ending March 2018, so the point is to drive profit to that level. And there's another factor. What happened in FY '20, for example, was that in textile, within the apparel industry, we supply to the high-end segment which suffered in FY '20. But with more people vaccinated for COVID-19, we are expecting a recovery for this fiscal year over FY '20. So right now, we feel that we are seeing the beginning of a phase getting back to where we were 4 years ago.

[Interpreted] So you're saying that textile for apparel is included in the segment, and you expect recovery there?

[Interpreted] Yes. Textile for apparel is included here. And it's not really the recovery we're talking about for that segment, FY '20 was unusually difficult. And even before that, many things were happening, including anti-dumping duty imposed on acrylic fiber in China. So a textile and fiber faced a difficult time in recent years, so we're expecting last year to be the bottom.

[Interpreted] How about carbon fibers?

[Interpreted] Carbon fibers are also expected to grow with the recovery in the automotive industry.

[Interpreted] I see. My next question is on MMA. What was the plant utilization rate in January, March quarter? You were expecting around 80%? What was the actual utilization rate? And what is your projection for this fiscal year? And what is your demand projection? You briefly commented on that earlier, but what about the acrylic sheets, is the demand still strong in relation to COVID-19 prevention?

[Interpreted] It's not extremely strong, but strong demand is still continuing for acrylic sheets. As for MMA, 80% is the utilization rate. As maintenance turnarounds or our scheduled maintenance and repairs are scheduled in many plants in the October-December quarter, it goes down to around 60%. Not that we are deliberately lowering to 60%, it's just that there are scheduled maintenance. So basically, on a full year basis, we project 80%.

[Interpreted] So you are assuming 80% for this new fiscal year?

[Interpreted] Yes, that's projection. As for the previous fiscal year, a little less than 80% for January-March quarter. And October-December quarter, 60% to 70%. So not full capacity, but rather high level of utilization rate. And that is expected to continue.

[Interpreted] I see. And you expect the demand related to COVID-19 prevention will continue for some time?

[Interpreted] Yes. Not as strong as it used to be, but it is still continuing.

[Interpreted] I see. My last question is on Healthcare. Regarding Gilenya litigation, of other current liability of JPY 77.5 billion, how much of that is in relation to Gilenya litigation?

[Interpreted] Sorry, we can't disclose that because it is related to our legal strategy.

[Interpreted] Next is from Mizuho Securities, Mr. Yamada.

[Interpreted] Yamada from Mizuho. My first question is in relation to the impairment loss that you recognized in the last fiscal year, functional products, JPY 4.2 billion and petrochemical, JPY 1.8 billion recorded in fiscal '20. What were the factors involved? And because JPY 4.8 billion impairment loss would not recur in FY '21, is that the reason why you expect a significant increase in profit in films and molding material?

[Interpreted] That is not the factor for profit growth. Basically, the useful life is about 10 years, so we are talking about JPY 400 million, so it does not contribute to profit increase. So what are the factors involved, well, I can't mention specific product names. But among what were mentioned earlier, some are seeing decline in volume. And as for Performance Products, the former Mitsubishi Plastics and the Mitsubishi Rayon are the main players engaged in conventional typical Japanese style business in rather many areas. So we've decided to address that, taking this opportunity of disruptions caused by COVID-19. We looked at businesses where market is not likely to grow or, in fact, expected to shrink and therefore, difficult to recover the book value of fixed assets, so impairment loss was recognized accordingly. And there also were some misguided investments. We made investments expecting growth, but things didn't turn out as we expected. Also in petrochemicals, we have some weakness in some of the derivative products with products emitting lots of volatile organic compounds, VOC. And the markets are expected to shrink over medium to long term and therefore, deemed unrecoverable.

[Interpreted] However, the impairment loss was recognized in fiscal 2020, but not in fiscal 2021. And therefore, will it not be a factor to increase profit?

[Interpreted] Yes, it will. It will in fiscal 2021.

[Interpreted] Then isn't it the case that the impairment loss was mostly posted under films and molding materials in fiscal 2020?

[Interpreted] What you said is quite to the point, and you're exactly right.

[Interpreted] Then can I understand that in fiscal 2020, films and molding materials would have posted about JPY 30 billion in core operating income if that factor was excluded?

[Interpreted] Yes, it would have been a little more than JPY 30 billion.

[Interpreted] I see.

[Interpreted] That was a good question as I actually was able to deepen my understanding. Thank you. Okay, then the forecast should be compared to slightly more than JPY 30 billion that would have been posted the year before.

[Interpreted] My second question is about Carbon Products where you said things are improving. Because the steel industry is booming, it does make sense to me. If you look at the forecast, it seems that Carbon Products will start recovering from the beginning of the fiscal year to some extent. Are prices and volumes of both cokes and needle cokes showing strong performance from the beginning of the fiscal year?

They were strong already in the fourth quarter of the fiscal 2020 when Carbon Products posted JPY 3.5 billion in the core operating income, as shown on Page 25. Compared to that, on a quarter-on-quarter basis, it may appear to fall, but in the fourth quarter, the price of coking coal dropped significantly from which we are able to benefit from a lot, and we have not assumed to remain that lucky in fiscal 2021.

[Interpreted] I thought sales did not change much, but the operating income increased in the fourth quarter, mostly because of the drop in prices of coking coal. But would it be correct that the effect of the recovery in prices have also been reflected in the result?

[Interpreted] Yes, it has been already reflected in the fourth quarter result.

[Interpreted] If that is the case, the fact that increase in sales has outpaced by that of core operating income from third to fourth quarter can be explained quite a bit by the effect of a recovery in market prices in addition to the drop in prices of coking coal, is that correct?

[Interpreted] Yes, we have seen the effect of the recovery in market prices. Chinese coke manufacturers are struggling to catch up, which has made the market to tighten significantly because the Chinese government has prohibited them from buying coal produced in Australia. It was because Chinese players couldn't buy coking coal.

[Interpreted] Another question is about Mitsubishi Tanabe Pharma. I understand that Tenelia OD tablets will be launched in fiscal 2021. I'm also aware that generics for DPP4 inhibitor are expected to be launched in 2025. However, do you expect the oral disintegration formulation to allow Tenelia to differentiate itself and have a fairly long life?

[Interpreted] Kobayashi speaking. Tenelia OD tablets was approved. And once it obtains NHI drug price listing, it will be launched. However, as you know, diabetes treatment drugs are faced with an extremely intense competition and have to undergo NHI drug price revisions, and therefore, we assume sales value to remain unchanged.

[Interpreted] I see. In terms of formulation, OD does respond to the unmet medical needs. But your assumption in the forecast, is that it will not make a large contribution, isn't it?

[Interpreted] If you look at Page 39 of the reference materials for Mitsubishi Tanabe Pharma, the item, Tenelia, includes sales of its OD tablets as well. In fiscal 2021, the volume of sales of Tenelia, including those for OD tablets, are expected to grow year-on-year. However, in terms of sales value, given the expected impact of NHI drug price revisions, we assume it to drop slightly or remain unchanged year-on-year, which is our goal.

[Interpreted] Then am I correct to say that you are not expecting the drug to grow that much even for a mid- to long term?

[Interpreted] That is correct. We hope that tablets currently on sale and OD tablets together will cancel out the negative impact of NHI drug price revisions. In other words, the number of prescriptions is expected to grow, which will probably offset the decline expected for sales value.

[Interpreted] What do you expect the share of OD tablets to be in the total sales of Tenelia?

[Interpreted] We have not estimated exact share. But as it steadily penetrates into the market, it is likely to account for 20% to 30%.

[Interpreted] Next question is from Mr. Okazaki from Nomura Securities.

[Interpreted] Okazaki from Nomura Securities. I have 2 questions in addition to one specifically for Mitsubishi Tanabe Pharma. The first question is about volume growth achieved in fiscal 2020 and to be expected in the fiscal 2021 for the 4 main products in Performance Products, OPL films, Clearfit for touch panels, Soarnol and lithium-ion battery materials. Are you talking about volume growth?

[Interpreted] Well, the answer could be qualitative. Well, polyester films for optical applications were flat.

[Interpreted] Are you saying that they're flat in fiscal 2021?

[Interpreted] No, I'm sorry. I was referring to the year-on-year comparison. With regard to the forecast for fiscal 2021, I don't have the exact figure for polyester films for optical applications. I'm sorry.

[Interpreted] But do you expect each of the 4 products to grow?

[Interpreted] Yes. OPL films are expected to increase for use in 8K, and Clearfit is hoped to grow from fiscal 2020, which we should regard as its bottom. And polyester films will be grown, especially for MLCC, or multilayer ceramic chip capacitors. Soarnol is performing well due to a strong demand for use in food. However, while demand is strong, partly due to our supply capacity, we expect the volume to remain unchanged from fiscal 2020.

[Interpreted] I see. My second question is the phrases that you quoted as President Gilson's, such as cost reduction, investment reduction, selection and concentration and turnaround. Could you be more specific as to what kind of discussions that you are having internally?

[Interpreted] Basically, he had obtained and reviewed the documents that we disclosed externally before March and put together his hypothesis about what he believes to be challenges facing our company and wrote a paper. Then in March, myself and my subordinates compared the figures in the paper to the internally developed ones to verify his hypothesis and concluded that they are probably correct. Then by working with each of the operating companies to discuss how turnaround can be performed by reviewing his data and internally developed data, we put them together. But would it be all right if I do not go into any further details?

[Interpreted] Yes. Does the forecast for fiscal 2021 reflect what you just said in terms of profit as far as you can grasp for now?

[Interpreted] Well, it is difficult to answer that question. Let me put it this way. For instance, until last year, if some team wanted to spend, let's say, 100, then I would say, that will be a bit too much and ask them to manage with only 90, which they followed. Whereas now, if the CEO says it should be 90 or less. That would carry a totally different weight. Does that make sense?

[Interpreted] You're talking about costs when you mentioned 100 or 90, weren't you?

[Interpreted] I was talking about costs as well as volumes for which he would say a certain number should be achieved. But you need to note that it has been only 1 month since he took office. But basically, it is about cost.

[Interpreted] Last question is about Mitsubishi Tanabe Pharma on Page 35. STELARA seems to be expected to grow significantly in fiscal 2021. What is the reason behind this?

[Interpreted] Kobayashi speaking. STELARA was granted approval for its third indication, ulcerative colitis, at the beginning of fiscal 2020 and is expected to show a steady increase for that indication.

[Interpreted] Do you mean that it grew steadily in fiscal 2020 and is expected to do so in fiscal 2021 as well?

[Interpreted] Yes, it is expected to achieve a substantial growth, especially for ulcerative colitis.

[Interpreted] The next question is from Mr. Umebayashi from Daiwa Securities.

[Interpreted] Umebayashi from Daiwa Securities. I have 2 questions, including clarifications as well. The first question is about phenol-polycarbonate chain. Is it included in polymers and compounds under the new segmentation?

[Interpreted] The phenol and bisphenol A have been transferred to petrochemicals, and so polycarbonate is the only one that has been grouped in polymers and compounds.

[Interpreted] Okay. Then based on that answer, I understand that in fiscal 2020, BPA was highly profitable. What kind of assumptions did you make in budgeting for fiscal 2021?

[Interpreted] The market, which has heated up between January and March, is expected to gradually settle down from April to June. And in fact, the price of BPA has been going down. However, the forecast assumes that the spread will not return to the normal level of $800 until the end of June.

[Interpreted] I see. My second question is also for clarification. For MMA, you said the capacity utilization rate will be maintained around 80% in fiscal 2021, excluding the impact of scheduled maintenance and repairs. Are you excluding Beaumont plant from the denominator when you calculated the rate?

[Interpreted] Yes, you're right, as we included all the plants.

[Interpreted] If that is the case, rather than increasing the operating rate, the denominator has been reduced to reach that level. And therefore, in terms of the volume, you're cautious in your approach in operating the plants. Is that correct?

[Interpreted] Since about 1 year ago, we have been running the system of optimum production and optimum sales on a global basis. We used to bring products produced at SAMAC to China and other Asian countries to sell them. While at present, we're taking various measures such as selling them in the U.S. We're pursuing the optimum production while considering the costs, including the prices of raw materials. At present, the plants using ACH process are having their capacity utilization rates go down. Does that answer your question?

[Interpreted] Yes. I see. That's all the questions I have.

[Interpreted] That's all the time we have for questions, so we would like to conclude the Q&A session at this time. We'd now like to invite CFO, Date, to give us closing remarks.

[Interpreted] For the past year, under the very challenging environment with COVID-19, you have continued to be interested in our business, and I thank you for that. We have focused on the business continuity and cost reductions and managed to survive for the past year. By revamping ourselves, we'd like to work even harder under the leadership of our new president moving forward. So I'd like to ask for your kind support. Thank you for your attendance today.