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

[Interpreted] It's time to start. Please start, IR Day 2023 Mitsubishi Chemical Group. My name is Shimizu from Corporate Communications. Today's schedule is shown here. First, our CEO, Jean-Marc Gilson will give you an update of MCG's 2025 goals. Followed by Frank Randall Queen, Executive Vice President of Special Materials, growth strategy. Then Jean-Marc Gilson will give you wrap up. After the break, we will entertain your questions. Lastly, our CFO, Nakahira, will give you closing remarks. Let me remind you first that the presentation may include future-looking statement based on the current prediction and outlook, which may contain risks and uncertainties. Actual results may materially different from the -- what is stated here. [Operator Instructions]. And today's leader recording will be posted later at our website, including Q&A. Those who are here in this room, you can use the receiver channel 1 into Japanese. You can use it if you need. Let's start. CEO, Jean-Marc Gilson, will start his presentation. Jean-Marc Gilson, please.

[Foreign Language] And welcome to our October IR Day, and welcome to everyone in the room and then to everyone who is joining us online. And I know that there are many participants joining us today. So today, we're going to give you an update on our Mitsubishi Chemical Group ambition towards 2025. But more importantly, we're going to give you -- we will spend the bulk of the presentation on our Specialty Materials growth strategy. And after my relatively quick introduction, I'm going to hand it over to Randy to walk you through the updated Specialty Materials strategy. I really hope today that you're going to come -- you're going to leave the room with a really good view of the depth of the transformation that we are currently undertaking in our group and that we started several years ago. And I think that I really hope also that you will leave this room with an understanding on how necessary it is to transform our company as this has been pretty difficult year for the chemical industry. And frankly, I think there is no other way than for the chemical industry, in Japan and outside Japan, to go through a deep transformation if it wants to continue to attract investment in the future. So let me shift now and really spend the next 20 minutes on giving you updates on our ambitions and the progress we are making towards 2025. And I will spend time on reviewing every key initiatives that we put together in forging the future. So first and foremost, we are committed to the financial targets that we shared with you in February. It is really important for us. We remain committed to delivering JPY 6,000 oku of EBITDA in fiscal year 2025. When you look at that slide, I mean, we are really aiming and you see the strategy of the company, which is fixed to grow. Sometimes shrink to grow but that's an absolutely necessary step to build the company of the future. It is not possible to grow a company unless you fix it. That's where most of our attention has been focused on in the past, and this is where it will continue to stay in combination with a renewed growth strategy. On the right-hand side, and that's really for your reference, I mean, on the third one on the left, you see JPY 6,000 oku and the revenue and the EBITDA margin that we are aiming to achieve and the return on invested capital. And on the right-hand side, and that number is as if, as we shared in February, we were going to set up a 50-50 joint venture. The negotiations are proceeding really well. Just for your reference, on the right-hand side, we also put like if nothing happened. This is how it would look like. But our goal, please be reassured is for a consolidation of the petrochemical industry in the not-too-distant future. We are not only as a company -- and I shared that in February, we are not only focusing on financial targets. Delivering financial targets is the result of a lot of other work. We are living in an environment, especially for the chemical industry, where there is tremendous pressure on sustainability and others. We are making real good progress on our GHG reduction. We have established now a -- and I think it was announced on October 1st, we have now established a company-wide office of sustainability that is tracking, implementing all GHG-related projects in the company. And so far, we have seen a reduction of 14% versus 2019. So we are on track. And I think everything indicates that we will meet our goal of GHG reduction for Scope 1 and 2 of 30% by 2030. In terms of customer satisfaction, that is really at the core of who we are. We continue to improve and we have made really good progress on this one. So it's very important for us because as we transform the company, we cannot lose sight of continuing to focus and on serving our customers the right way. Likewise, for employee engagement, you cannot succeed in a company if your employees are not engaged, if your employees are not supporting. And so despite the transformation, our employee engagement is inching up, and we've seen an improvement of 3 points compared to 2020. The last point is about diversity among management. As you know, we are, at our leadership team, one of the most diverse management team in the chemical industry in Japan. We are continuing to focus and really implementing that at every level of the company. We truly believe that diversity is absolutely indispensable to change the way we operate and to bring value to our company and to our shareholders in the longer term. So before I cover the progress on our 5 key initiatives, let me remind you why our transformation is so important. I mean over the last 18 months, certainly, there has been tremendous headwinds in the economy and in the chemical industry. We have seen this complete separation between a service industry doing really well and a good industry not doing so well. So people are spending -- I mean you can go here in Tokyo anywhere you want, full restaurant, people taking vacation, taking holidays. So there is spending going on, but people buy actually very few goods. And there has been this real dichotomy happening in the marketplace, not only in Japan but all across the world. So the economy is tough. I mean, we have seen, I mean, slowing demand and as a global company selling all across the world, we see that. Demand has slowed in automotive construction and the rate of growth is predicted to be slower than anticipated. We are -- the industry has been destocking for many, many, many months. And we are starting to see maybe the end of it and are hopeful that the beginning of next year, we'll start seeing some restocking in what we think are very depleted supply chains. The decline in raw material price, certainly in the commodity industry has driven also price decrease. And when you put all of that together, you've seen a lot of chemical companies globally, issuing profit warnings and facing real challenges. And we have not issued a profit warning. It is important for all of us to understand that and I -- that the industry is starting to really realize what's happening. And I predict that there will be a very large wave of restructuring of the chemical industry with very large workforce reduction happening in many large chemical companies, certainly in Europe, and in the U.S. in the coming months. And you will see, I think, a lot of announcement supporting what I'm saying now. So we must prepare our industry and retool it for the future. Now hopefully, as a company, I mean, we started our own deep transformation a few years ago. And I think that was really good for us because we are coming into this transformation, I think, better prepared than others. We have put together a forging the future strategy about close to 2 years ago now. And since then, we've been working on all 5 pillars, very, very diligently, and I'm going to give you an update now on pillar-by-pillar, point-by-point, initiative-by-initiative and tell you where I think we are on each of them. Let me start with leaner, digital, empowered. We have really simplified the organization in our company. We have reorganized the businesses, the way we operate outside Japan. We are now really starting to change the way we're operating and all to facilitate and improve decision-making in order to react much faster to what's happening in the economy. We have made tremendous progress on our digital initiative. We are really aiming now for a common ERP system. We are laying the foundation, the pilots are ongoing, and we are starting to roll out that initiative. We have a new HR system also, global HR system being rolled out in January. A very new financial reporting -- business, finance reporting also that's providing a lot more intelligence to our business leaders to make appropriate decisions. So really a lot of progress on digital, too. And last, we have new HR policies that are focusing heavily on leadership development and on preparing leaders in this company to really face and react quickly to the realities of a changing environment. On this one, leaner, digital, empowered, I think we are 70% down the path, and we've made really tremendous progress. Let me address next strategic cost transformation. We initially announced about JPY 1,000 oku reduction, then we upgraded it to JPY 1,350 oku. Again, on this one, we will achieve our goal. The question is, should we go beyond? And we can go beyond delivering that goal. We are on track to delivering the cost that we announced for this year. And on this one also, at a minimum, we are 70% progress. Everyone understands that we absolutely need to improve the productivity in our company. And that our cost structure in the past was untenable in the light of the business conditions. The third one is business to exit. On this one, we are on track, and we are still aiming to seal a deal before the end of this calendar year. And we will announce it and a lot more details in due time when everything is set and done. And that's about the petrochemical industry. It's a complex deal, but everything indicates that the deal is on track. In terms of carbon chemicals, we are also hopeful that we'll be able to announce a deal before the end of this fiscal year. It's also something we've been working very diligently and in a very hard way for the last 18 months, probably. And it really got complicated by, I mean, the commodity nature of that business and the fluctuation in prices for coke over the last 18 months. But we are making really good progress now. On strategic capital allocation -- and so on the first one also, I think we are 70% where we need to be. On strategic capital allocation, there's been a lot of work internally. One to be a lot stricter into where we spend CapEx, on which project, what kind of return are we aiming, and being very conscious about the fact that CapEx is a very important tool in the business to support growth initiative and must be looked at and must be directed only to growth initiatives on behalf of normal maintenance. So we have also implemented a very strict cash flow management. And in difficult time, we look at this as one of the most important measure and initiative in the company is delivering positive cash flow even in difficult times. And so we have been working very hard and continue to do so on working capital management and specifically on inventory in order to liberate a significant amount of cash that has been trapped in the system for a long time. We have also been selling some businesses and Randy is going to talk about some of -- some we sold recently at very high multiples. Very, very good prices. And so that is also helping us to strengthen our financial position. We have announced and are standing by our increase in dividend for this year and will continue over time to review our dividend policy with a name to increasing it further above 35% payout of net income. And last but not least, this also is helping us to generate cash. In case we want to do some very targeted M&A and Randy will talk about that. So I'm very satisfied with what we are doing there. The discipline in the company is an order of magnitude higher in terms of capital management, and everyone across every business is participating in that effort. So leaner, I mean, I think we are well on track. Strategic cost transformation, we are well on track. Business to exit, we are well on track. Strategic capital allocation and all the discipline, we are well on track. Having all of these 4 initiatives well on track, makes it that now we are spending most of our efforts going forward on growth and performance of the businesses. As I said it many times before, you cannot grow a business if you don't fix it first. And so that's what we've done. The 4 pillars that I talked about before were about aiming to fixing the business, putting it in a better shape. And now as I explained before, once this is -- we are well on our way, we are now shifting really all of our attention on to growth. We find and we think that we have now built a good foundation on to which we can build. So if you look -- when I look at the targets that we set for ourselves and for 2025, I'm optimistic and the reasons are the following. I think, one, our fix-and-growth strategy is working. I am -- you will hear from Specialty Materials. And so I'm not going to go into too much detail about it because Randy is going to spend an hour with you on this one. But Industrial Gases is really strong. So there is -- I mean we are well on track to achieve that target. Our health care business is another one that's going to show you that our fix-and-grow is really working. And you're going to see strong growth and a very good turnaround in that business, driven by really good sales combined with cost reduction. And so our attention in that business now is focusing on fixing the pipeline through different measures, and probably also going beyond in terms of restructuring and eliminating further cost. But as far as health care is concerned, I'm very optimistic about hitting these goals. I think there is low doubt in my mind that we're going to achieve these goals. MMA has bottomed out now. I mean it was really a tough time. We are starting to see signs that our strategy, again, to fix, to grow is working. We are shutting down assets. We will continue to shut down unprofitable assets, eliminating a lot of cost, and we are now starting to see an uptick, slight uptick in prices, and I think we have passed the point of breakeven now and are on the upward also in MMA. So everything indicates that achieving the MMA goals are also in sight. So one more time, I mean, our attention has been fixing and -- has been focused on fixing first. growing after, and it's working. And in the businesses that I talked about, we are -- I am pretty confident that we're going to be able to achieve these goals, barring any incredible event in the economy that we could not control. Basic Materials there that you see highlighted on the right-hand side is the numbers that they've put together and the JPY 521 oku includes carbon chemical, the JPY 450 oku excludes carbon chemical because there is high probability that, that business will be sold. So overall, the transformation that we have started about 2 years ago, we are well on our way towards our goal of refocusing the company more on specialty products and solutions. Are we completely there yet? No. But there is no possible further -- as I explained before, there would be no possible further portfolio transformation and changes unless first, we fix every part of the portfolio. Because not doing so would basically be disadvantageous for our shareholders. So we are becoming -- and that might look a little bit strange to you, but we are becoming truly a global company, but with very strong local teams. Most of decision-making power and management has been now passed on to local teams and area responsibilities. Frankly, I think we are now well on our way to add value to customers everywhere and also as indicated, to society at large. And we are -- we have taken most of the right decision to create value for our shareholders in the long term. But key to attaining the goals for us is to apply the same approach to Specialty Materials. We need first to fix Specialty Materials in order to grow. The growth of Specialty Materials is very, very important for us. This is where we have most of our employees. This is where we generate a lot of IP. This is where we invested into acquiring businesses over the last several years. But this is also the place where we absolutely need to generate more value. Since taking over, Randy has been working night and day with his teams all around the world to come up with a strategy that is also a fix-and-grow strategy. We have a very strong position almost on all the major product lines that Randy is going to talk about. With #1, #2 position in many of the product lines where we operate, it's up to us now to implement the plan, and we will implement the plan that he will be talking about. And that's why when I look at the team in Specialty Materials, their focus on what they're doing now and the deep transformation, I am optimistic about also delivering the 2025 targets that we have set for ourselves, and that includes a significant EBITDA percent margin improvement and EBITDA in general, I mean, in terms of going from about JPY 1,100 oku to about double in terms of JPY 2,250 oku by 2025 horizon, and tremendously improving the return on invested capital. So I'm not going to say more on Specialty Materials, and I think it's time now for me to hand it over to Randy who's going to walk you through in a lot more details about what's in the plan in Specialty Materials. Randy?

Thank you, Jean-Marc. Again, my name is Randy Queen. I took over this job for the Specialty Materials Group in April of this year. It's I think my first time to be able to present to this group, and it's my pleasure to be able to share with you a bit about the transformation that we're undergoing within Specialty Materials. Let's see, so as Jean-Marc mentioned, and you saw from the graphs, Specialty Materials really is at the heart of what the transformation about. And as with other business groups and with -- as with other functions, all of these 5 pillars are forging the future, we have actually implemented or are in the process of going through a more specific transformation and initiatives in each of those areas. And because of the importance of Specialty Materials, we're kind of the tip of the spear or the piloting and driving many of these individual efforts within our group. We're doing a lot in the cost transformation area, driving operational excellence into many of the manufacturing operations that we have around the world. This whole area of leaner and digital empowerment, our teams are actively involved along with our digital team on almost every initiative that we have there, especially on initiatives that are around customer-centric touch points of the customer. Today, what I really want to focus on though is this blue box. Most of the presentation that we're going to be talking about today is how are we going to grow. And not only grow, how are we going to deliver more value out of the Specialty Materials business? And a big piece of that has to do with portfolio transformation. And we're going to talk extensively about what we're doing in each of our target markets, and we're going to talk a little more specifically about where we operate in the value chain today and where we think we need to be in the value chain of these markets going forward. We're also going to spend a good bit of time talking about M&A. We obviously can't get super specific about that, but we want to share with you our plans to the degree that we can. And then I want to also touch on globalization. Jean-Marc mentioned that we have done a lot of things organizationally within the company to kind of decentralize so that we can expand and grow outside of the Japan market in particular. So one of the things about our business, and I've been with the company for 30 years, and I've been part of the information electronics business. And having been here and have seen a lot, it goes without saying, we have a lot of products in the Specialty Materials business. It's extremely wide, extremely wide portfolio. And as Jean-Marc mentioned, for the last 6 months, we have been very intensely looking deeply at what products we have and what products we need to be able to address these markets that we have identified as core markets. And I think after a lot of time, energy and effort it really comes down to kind of 4 areas, 4, what I'll call product lines or product pillars. And these are the areas of our business that we think we will build upon for the future. And it's the polymer compounds area, what we call composite solutions. And within composite solutions, it also includes our shapes business. Our shapes business is a really important piece of our strategy going forward because it's a little bit further downstream than just being a polymer compounder or a composite solution provider. You'll see more about that as I get into the strategy. Specialty films is another area. We're extremely strong in this particular area around the world. And we feel like that's an area that touches many markets. It's one that we will build on. And this final area is called -- we call it custom solutions. And that's not just a catch-all area. This is a particular area where we design solutions for individual applications or individual markets. And as we get into custom solutions, there's really 2 areas there. It's around information and electronics, and it's around food. That's the 2 big markets that we cover there. So one of the things before I leave product lines, we are absolutely becoming much more market focused. We're organizing around markets. We are designing solutions around markets. But at the end of the day, we produce products. And products have to be aligned and aimed at these particular applications, growth applications, in particular, in individual markets. So we've spent a lot of time, and our intention in these product lines is to be able to go much deeper and add a lot more value and leverage what we're doing in each of these areas. Unlike what we have done in the past, we have been fairly fragmented in the past. Too many, too far and too wide, we want to narrow our focus from a product point of view and be much deeper in these particular areas. And we think we have a right to win in these particular areas. As has been presented in the past, the focus markets that we're pursuing are EV and mobility, also digital, digital is a fairly wide one. We're going to do a little bit more deeper dive on each of these markets. And new for this discussion in comparison to what was presented last time, medical has been raised as one of the core markets. This is a business that we are -- it's not new to us. We touched the medical market already in our polymer compounds area. I'm going to share some of those applications, especially in our composite solutions area where we produce a lot of materials that actually end up as implantable materials. So you're going to see this. So this medical area is not new, okay? It's not new. It's not a large business for us today. But as we talk about portfolio reform, and we talk about making our portfolio more resilient to swings in the market, an area like medical is super important. When I look especially at what's happening in the market today and I look at competitors, competitors that are not feeling as much pain in a downturn market have a substantially bigger space usually in things like medical and defense. So medical, because we're already there, we know how to operate in that space. And we think we can leverage these product lines that are mentioned here more substantially. This is an important spot for us. Food is also going to continue to be a target market, not only in the packaging area for food, but in water purification and also in food ingredients. So we'll talk a bit more about that. So as you can see, with these product lines, these kind of core product areas that we will build on, we touch each and every of these markets. And I'd also like to note, these markets not only have been chosen because we operate in them today and because we have a right to win in those markets, they are also high-growth areas. You can see each one of these growth numbers actually exceed GDP by a factor of 2 or 3. So again, high-growth areas and well aligned with the products that we have. And as we've gone through and start to look deeply at our portfolio, there has been some changes based on how we see we get to the to the target that we have before us in 2025. The total revenue has not changed. The EBITDA and COI numbers have not changed for 2025. We're still committed to those. Certainly, it's a big jump that we have to make, but I think that with the changes that we're talking about making in the portfolio, and also growth, both organically and through M&A, this is still a realistic target for 2025. In the EV mobility area, you can see we're expecting to grow from a revenue point of view, about 8% but substantially in EBITDA. And that's going to come from portfolio rationalization and adding back businesses that have higher value, and I'm going to give you a good example of this, okay? And when we talk about portfolio rationalization, this is not only going to be product lines and businesses that are outside of these markets, it will also be certain products and categories inside the core markets because even though it's a category that we're operating in today in a core market, it may not -- we may not necessarily -- it may not fit all of the criteria that we need for that product to stay. So EV mobility, we expect to grow, but certainly improving our margins. The digital area, again, high growth, both in terms of revenue and in terms of EBITDA and the medical business, as you can see, starts to become more substantial in our strategy going forward. The food business, I want to touch on. It looks like extremely low growth, both in terms of margin and also our EBITDA and in terms of revenue. But there's a couple of anomalies in the food area. Number one, food packaging is included in this area. And today, we have a whole gamut of food packaging-related materials. We plan to start to exit some of the consumer types of materials within food packaging. Also, there's an anomaly here in that one of the big sources of our -- one of our strongest products and a big part of our portfolio is our EVOH material that's used as a barrier resin in food packaging. We're running at close to full capacity on that one today. So it's difficult to grow in 2020 -- from 2022 to 2025. And but we have capacity expansions planned for that, and it will start to take hold in 2026. So if you look at -- in reality, if you look at the food industry, for us, it will continue to be a nice growth in high-value area going forward. We'll talk more about that as we get into each of these. So part of what we've been working on is what I'll say, progressing and also deepening what we need to do within the Specialty Materials portfolio. At IR Day this time last year, I think there was around JPY 1,000 oku of business that had been identified for exit within the Specialty Materials area. And quite honestly, as we have really dug into this in the course of the last 6 months, I think there's another JPY 1,000 oku to JPY 1,200 oku additional portfolio reform that we will be doing within Specialty Materials. And then of course, growing back both organically but also through M&A. M&A is going to be a pretty relevant piece. And if you look at what we've been doing to date, we've been progressing the exit of kind of noncore, nonstrategic businesses, things that are not fitting the profile of what we need to have in Specialty Materials. Some examples of those, we've exited the Qualicaps business. We've also announced exiting the agricultural film business. And we've also shut down our carbon fiber -- or I'm sorry, our acrylic fiber business as well. Those 3 alone are approaching the halfway mark of the first JPY 1,000 oku businesses that were originally identified. And as I said, of course, we can't give detail on the specifics, but we've got additional work to do in that particular space over the course of the next 18 to 24 months. On the add-back side, just this week, we announced the acquisition of the other half -- roughly half of the joint venture that we entered into in 2017. If you saw the press release, we became -- we will become -- subject to regulatory approval, we will become the owner of the CPC group. And I'm going to talk a lot more in detail in the automotive section about this acquisition and why we think it's part of our strategy going forward. But again, before we leave this slide, the last 3 points that I want to make, portfolio synergy as we look to -- at what we're going to reform and what we're going to try to bring in through M&A, it's all about a highly focused alignment within our portfolio of the product lines that we have. As we divest some of these businesses, and by the way, some of the businesses that we're talking about divesting are not necessarily bad businesses. As Jean-Marc mentioned, as we tighten up on what we do from a CapEx point of view, because we're so broad, we can't invest properly in all of the businesses that we're in today. So there's other owners that can do a better job of that. And I think we've demonstrated actually how we've exited these businesses already that we know how to do that in a good way, that's good for all of the stakeholders that's involved, inclusive of employees. And as I said before, we want to reinvest and we want to diversify our exposure to various markets. Medical being the big one in there that we would like to have a much higher exposure to as we deepen this portfolio transformation. As we move through this strategy, I think we're starting to see that a larger portion of our revenue and also our margin is coming from these core products or these core markets rather. EV mobility, digital, medical, food in 2022 represented 57%. And so far, at least through first quarter of this year, around 60%. And I think 70% personally is a fairly conservative number if we are successful in the M&A activity that we hope to achieve in the near term. And I think that number could actually go 75% or 80%, but we're showing 70% in here today. So fairly optimistic that we're -- that you will see us through transformation of the portfolio, starting to generate more and more of the value in the business coming from these core markets. And so let's dig in a little bit. This is how we segment those markets. And I think this is super important. We talk about growth in food or medical or automotive EV. But really what's important is what are the segments that we're operating in today. And you can look down, I won't go through each of these. What we are going to do is do a little bit of a drill in on each one of these markets and some of these more important segments to talk about where growth is coming from. But I think the important thing here is to look at the growth in some of these segments because it exceeds the broader category. And so we think alignment, not only in the broad category, but within the subsegments is super important. And this is, as an example, we're obviously active in the EV battery space. But structural carbon fiber materials with the new acquisition of CPC is also an extremely high growth area. We will be very active there. I want to dig in on semiconductor. I think our semiconductor business is something that we don't talk a lot about but quite frankly, we have a very strong portfolio and a high growth potential in this area as well. And then again, as mentioned, we don't talk a lot about medical in the past. But when you look at these areas that we already participate in, in these segments, it's pretty extensive. And then food, as I mentioned, is a combination of packaging, water and additives. So again, we'll look at that one in more detail as well. Before we do the drill in, I want to talk just a moment about one of the feedbacks that we get is we're always asked within Specialty Materials, what's your growth drivers? What are the big areas of your business that's going to grow? And to be honest, if we do our job extremely well, yes, there'll be some products or some categories that are higher growth than others. But quite frankly, as a Specialty Materials business, it's going to be a lot of part numbers, a lot of unique products that are designed for individual high-value applications. And it's going to be the total that actually drives our business. And so when we talk about growth drivers, we're going to drill in and talk about some specifics, but I really want to send the message that as we look at this business going forward, please let's think about the range of the portfolio, the focus areas that we're driving products in because we anticipate having a very wide portfolio and as -- and very specifically aimed at high-value applications going forward. So growth in our category is probably going to have a fairly long tail in terms of the distribution of products that we expect to see over time. Okay. So with that, what I want to do is spend a little bit of time on each of these core markets. And I want to give you an idea of breadth of range and the areas that we're participating in, in these markets today. So this is EV mobility. And again, just an overview slide talking about all of the products that were commercialized in today and the general applications. So we're extensive in the interior of not only EVs but automotive in general. We're actually moving into the engine area as we move into EV, which we haven't had a lot of business in the engine area before, that was not normally kind of a plastics or composites area. But we're getting more and more applications showing up in that space. This EV battery material, of course, everyone knows we're active in there. We're also doing a lot of work around fuel cells especially with our carbon fiber business, electrical components and a number of exterior areas as well. So again, all commercial products, broad portfolio, generally all pretty high-value areas. And when we look at this -- when we look at kind of the value chain, and I think this is really important -- is an important part of our strategy. Where have we been operating and where are we going to operate in the future to extract more value out of this market. And when we look at this, we have touch points or lots of areas within the value chain, mainly centered around Specialty Materials, what we call Specialty Materials for automotive. And then when you start to combine materials to actually create a material solution, we're active in that space as well. Our carbon fiber materials, battery materials, coating and adhesives, compounds, films. We have, again, a broad range, but all very, very targeted in that sense. But the area that I want to do a drill-in on that -- as one of these high-growth areas, is this area around carbon fiber composites and especially with the acquisition of CPC since that's relatively new news. It's part of our growth strategy going forward. I want to do a little bit of drill-in around what that will enable us to do going forward. So again, we are -- we have been active in this space in the past. It's not new, in terms of selling composite materials into this area. We've got a whole lineup of composite materials, one of the most complete lineups, I think, within the industry. And for sure, we're one of the few companies now in the world that starts with basic chemicals that go into making carbon fiber that translates all the way into composite solutions, and now having gone further down the value chain into the area of making complex high-value parts, mainly large parts. And going even one step beyond that with the acquisition of CPC, we actually have become kind of a solution provider because we not only make the large parts, we can attach them, we can assemble them and we can become a kind of a one-stop shop for many of these high-end automakers, okay? So we're extremely excited about this. The margins on this business are very good. We see this adding substantial EBITDA and also revenue from a growth point of view. And the other thing that I think is really exciting about this acquisition is it will move us into a new area, we'll call this the emerging mobility area. This is -- you've seen a lot of things coming through around mobility as a service and the use of EV for transporting people, taxi services, this type of thing. Most of these solutions want a very lightweight composite material infrastructure and also outside panels. And with the acquisition of CPC, one of the key value propositions there is they are one of the best in the world at making very large complex parts out of carbon fiber. So we think this is a natural integration that kind of helps us to monetize this carbon fiber business for us. So when asked about EV, if someone says, "What's our big growth driver?" If I had to pick one, this will be one of our big growth drivers. But again, we have many products that are active in that space. And I really want to send the message that it's not just one thing, but it's many. Let's switch gears and talk about digital. So we touch again a lot of the digital area. Starting with PCB manufacturing, display materials. I think everyone is aware that we're very active in the display area. We make many materials. We've just got one listed here that's a bio-based that find their way into the casings and some of the plastics that surround various materials, but semiconductor manufacturing is kind of a core for us. We do a lot of different products in semicon. And with that, I won't go through that on this slide, but I want to talk about the semicon supply chain. Because for us, again, very important area and an area that we're very familiar with and have operated in for years. Our main spot in the semicon space is in this area that I would call kind of Specialty Materials. Those highlighted in blue. Most of our business today is in that kind of Tier-2 material supplier into the semicon space. We also touched the semicon space in many other things, as I talked about having synergy within the product line, as an example, a number of our solutions that we have in the water area, around filtration find their way into the semicon space. We're actually a supplier into the equipment makers as a component or subsystem. A lot of people doesn't know that. And so when we look at this supply chain, we touch this spot in many areas. I think we're #1 or #2 in the world in precision cleaning as an example. So we touch the integrated device manufacturers in that area. So again, nice portfolio, extremely well targeted, well focused synergy within there in terms of how we go to market and actually sell into space. And so again, an area that we want to focus on for the future. And what I'd like to do is focus -- do a little drill in, talk about a couple of the real important parts of our strategy going forward. So we're already a leading producer of high-value semiconductor materials. Now anybody that's tracking that market today, it's not a good spot to be -- have a lot of exposure in semicon today. But I think as everyone knows, that's going to be a short-term blip. This thing is going to come back and probably come back at a much faster rate than any of the companies that are going to be prepared to respond to. But if you look at the Specialty Materials that we offer into that space today, we're -- they're very substantial for us. We are the #1 global supplier of silica that's used to make crucible linings. We're one of the leading material makers for -- I'm sorry, I missed -- for the antistatic. Also a very strong supplier of epoxy resin and in this whole area of photosensitive polymer, this is a core technology of Mitsubishi Chemicals. So these are all areas, and we -- when this market recovers, these are high-growth areas. And I know we will be growing in these areas because we're at capacity on many of these products, and we are working on capacity expansions for them. So that alone is going to drive growth in this space. But I think the thing that's most exciting about this space for us is, again, moving down the value chain one step. And today, we don't supply as a Tier 1 into the fabs but with the recent announcement for our dry photoresist for EUV lithography, we have partnered with Lam Research, and that by default, is going to push us into kind of a Tier 1 position going forward. In that position within the value chain, it opens a lot of doors to be able to sell many other precursors or other types of products in a direct mode. And that's a very substantial part of our growth going forward. Also new innovations. We've got still working on commercializing our GaN wafer and again, puts us in a strong position as we move down the value chain in this space. Okay. On Medical, again, already doing business in medical. We do a lot of business in the implant area. Also specialty polymers, we do single-use types of products with -- through our polymer business and then a number of medical packaging applications. And again, in the value chain, you can kind of see where we fit, mainly as a material solutions provider and some component production that we do, especially in the shapes business. And also, a little bit of service that we do as well. We do some assembly and some packaging, but the main business is, again, in Materials Solutions and in components. And these are, again, a couple that I'll do a drill in on. This is a business that has grown for us this year. Even in a tough market, it's -- we've generated nice growth and nice margin out of this particular business. So again, kind of a leading implantable resin and shapes supplier into medical. Long-term implantable resins, we do some customized resins that's used in catheters and other types of devices. We do long-term implantable shapes, both in the area of knee and hip replacements as well as in spinal cage materials as well. And then again, we want to leverage our ability in each of these markets. And one of the new innovations that we think we should be a lot more proactive in is in this area of single-use culture bags. This is an area that requires multi-layer film. It requires unique coatings to be put on it. It's a high-value segment. And it's an easy place for us to kind of move from food packaging into medical to be able to leverage assets that we have into a much higher value space. So when we talk about moving into higher-value applications, this is the type of thing that we can find synergy with the medical business and the contacts that we have and also leverage assets in a much better way going forward. All right. And then in the food area, as I mentioned, we segment the food area into a few areas, but you can kind of see where we're active today from a commercial point of view. It's in food additives, it's in films related to packaging, it's in materials related to packaging, primarily from the compounded polymers area. And then in this food solutions area, this is where our water business falls. This is primarily business around filtration of potable water. And again, we think that this is a nice growth area for us. In the special -- in the food additives area, the one area -- as we've really dug into that. We have a fairly, I would say, semi broad portfolio of food additives. But as we start to really focus our business going forward, one of the main areas that we're very strong in globally is in this specialized emulsifier area, sugar ester business. We've got capacity expansion coming there. And if you look over to the right, one of the areas that we're really focusing on is the know-how that we have on how to formulate sugar ester. And as we utilize that know-how, it opens new markets for us on things like nondairy milk or plant-based meats, those types of things. Sugar ester is a perfect fit. A lot of people don't understand how to formulate sugar ester all that well. And that's a core competency that we have. So using that know-how we think, will open new markets for us in the future. Again, high-performance films, and we're really strong in the coatings area, as I mentioned already, especially our SoarnoL EVOH business. We have capacity expansion coming that's beyond 2025, in the 2026 range. So again, we see good synergy and a nice opportunity as it relates to the food business. And so that's the 4 markets. I did want to also just touch on from a sustainability point of view. Many -- we kind of look at sustainability in 3 areas. We have products that enable a more sustainable solution, things like semiconductor or lightweighting vehicles, those are all enabling technologies that are -- that all of our core products kind of fit toward. But in addition to that, we have a fairly-broad offering of both recyclable and bio-based products. And as Jean-Marc mentioned, we have a new organization that's being put in place that will help to drive and knit together the sustainable solutions that we have across all categories going forward. But this is just kind of highlight a few of the key areas that we have already that's in the -- either bio-based, recyclable areas in particular. And as we talk about -- we've talked a little bit about growth drivers, about markets, about the product areas, there are structural things that we're doing also within the organization and within the business processes that's happening within Specialty Materials. You may know, our business historically has been made up of a lot of small, fragmented businesses. And as we have started to consolidate, centralize and organize in a different way, a lot of the purpose in doing that is so that we can start to drive best practices from a commercial point of view into the organization. You can imagine how difficult that has been in the past where things have been highly fragmented. As we have changed the organization, we had started to drive methodology, especially on things like pricing and how do we improve margins and starting to see some of the results of that already. This is just an example of margin uplift, around JPY 50 oku that we've already realized through some of these efforts. And it really is kind of improvements in how we equip our salespeople with a much more data-driven approach and also how to value some of the things that we are doing within that space. So we've got really -- deeply understanding how our products impact the manufacturing operation of those that we're selling to and understanding how we -- just understanding the value proposition of what we're actually selling. I think in many of our smaller businesses, they didn't have that methodology or that know-how. And as we start to educate we can do that in a much more efficient way based on how we're organized today. Also things like service. Service, many of our competitors, they charge or they get paid for the services that they provide from a logistics point of view, inventory point of view, technical service point of view, and they segment customer base based on these types of things. And we just have not done a good job of that in the past. And the exciting thing for me is there's upside in this area, right? There's absolute upside for us to be able to generate more value in that space. So again, that's all lining up. We're starting to see results coming from that. And those things are all enablement for making our salespeople more efficient and more effective as they walk into the marketplace and try to compete. I said I would mention a little bit on growth outside of Japan. Not only growth but value delivery outside of Japan. If you were to look back a few years ago, even before 2021, I think these numbers were even higher. As I said, I've been around for a long time. And I can remember when our Japan business represented an extremely large part of the total sales. But we're making progress here. If you look at Japan's contribution in 2021, it was 47%, it's dropped to 42% in 2022. And by 2025, we think it's going to be down around 37%. That's not to say that we're not focusing on the Japan market, but a lot of the growth in many of these segments are happening outside of Japan. And I think we've had an unhealthy regional mix, I think Jean-Marc mentioned that in previous presentations as well. And again, a lot of the refocus that we're doing is to empower and to better organize outside of Japan through many of the subsidiaries that have operated kind of independently. And with our new organization, we have disseminated a lot of the decision-making within Specialty Materials down into the regions and trying to support them in a much stronger way from a strategy and a product line point of view coming out of Japan. So that's starting to pay dividend, and I think we will continue to see that, and it's a big part of our growth strategy going forward as well. And so this is the same slide that I started with. Again, we sell products into these markets. We are trying our best to align those products in a much better way where we have synergy, becoming much more focused in terms of the portfolio that we're supplying into those markets. We're changing our organization structure to be able to grow in all parts of the world. And again, as I mentioned, we have not changed the projections. They're aggressive. But again, we think this is doable with the reform that we're trying to bring and also, again, with targeted M&A for the future. So with that, I'll use this last slide just to kind of summarize in this growth area. So I think you've seen kind of a deep focus on core markets. We talked about growing outside of Japan. We talked about market-facing. We've been in the middle of the strategic cost transformation that the overall company is going through. We spent a lot of time, over the last 45 minutes or so, talking about portfolio transformation and this whole digital enablement. We didn't talk as much about that specifically but there are a number of things that we're doing in this space, again, aimed primarily at growth and equipping our sales people with information on the spot, and helping us to manage the pipeline of opportunities that they're bringing in. So lots of work going on there. We have flattened our structure pretty substantially over the last year that we have within Specialty Materials. And again, a lot more rigor in the total company around where we invest going forward. And those -- that same rigor will certainly be applied to any new M&A that we're looking at going forward, just as it was applied from a CPC point of view recently. So with that, that's my presentation for today. So thank you very much.

So thank you, Randy. For the extensive review. So as I said, I mean, the industry has headwinds, but there are also lots of opportunities. And we are slowly transforming this company also as far as also sustainably driving to an enabler, into being more of a Specialty Materials, I mean, solution provider. But very importantly, we have been focusing our efforts to placing and transforming the company to be one of the winner in the long term, a company that can face headwinds because it has the appropriate cost structure but also a company that has the right focus to grow and the right discipline to grow in the future. We are, frankly, on track with pretty much every initiative that we have started. The 5 key initiatives are progressing well. And again, we are committed to our financial and nonfinancial performance by 2025. The carve-out of Petrochemical carbon and the sale of Carbon Product is progressing and is planned as per schedule. And as Randy said, and the focus of this presentation was really on Specialty Materials, but I mean, in February, we're going to talk more about the rest and the whole company. But Specialty Materials is at the core. There is a lot of value in it. But the way to extract the value and make that business grow is to transform it. So we are a lot more focused. We are focused on 4 key product lines. For each and every one of them, we have tremendous competitive advantage. We are well positioned as one of the key players in the world in each and every one of these 4 product lines. We are attacking 4 key markets where these product lines are ideally suited. We don't have time to really dig deep into our innovation, but we have realigned completely our R&D to support that innovation. The R&D is now completely embedded into Specialty Materials business group and align with all of the initiatives that Randy talked about. And last but not least, and we only talked a little bit about it, this is about mindset change into how we do business and how we create value in Specialty Materials. Commercial excellence, the way you approach customers, the way you do pricing, we needed really to update our practices, and this is ongoing. And we haven't had too much time to talk about it, but needless to say that everything around supply chain management and operational excellence is receiving exactly the same attention. So overall, this is a long-term transformation of the company. We knew that it wasn't going to happen overnight. But what I promise you is that we would be steady, focused and we would be delivering all along the way. And I think what you -- what I shared with you is that we're pretty confident business by business, that they will achieve their goal. And so when you put everything together, that provides me comfort to say that we are committed to have financial performance for fiscal year 2025. So [Foreign Language] and looking forward to your questions. Thank you very much.

Now we would like to take your questions. This is a hybrid meeting, face-to-face and online. First, we take questions who are here face-to-face. Then after that, we take questions who are connected online. We will bring you a microphone when you want to ask a question. For the online participants, you can ask a question already or you can enter your question in Q&A box. Please mention your company name and your own name, please. We will answer to your question one by one. [Operator Instructions]

Before I ask you a question, the stock price today is 3% lower. That is unfortunate. But the Petrochemical business details will be disclosed. That was our expectation, which was absent and 2025 goals, and you said is very positive and there are some question marks with regards to that viewpoint. I think that may be a factor. And first, about Petrochemical and Carbon, especially carve-out of Petrochemical, I understand you can't disclose details about JV of 50-50 within this calendar year that was mentioned. And then exit and option includes an IPO in Petrochemical -- pure petrochemical company, how do you attract investors for IPO for the midterm? Can you state that, please?

Chikumoto from Petrochemical & Carbon business. As for Petrochemical and in the reorganization, we are working on it. As Jean-Marc mentioned, we contract close to our plan that as of today -- as for details, the exact schedule we can't tell you because there are partners involved and also discussion is now at the very core and each company has their respective situations. Therefore, it's not easy to reach an agreement and conclusion. And to our shareholders and to our employees, we need to maintain our accountability. We need to have agreement based on that with the joint venture and IPO to be supported by those stakeholders. And that is really deeply recorded before we reach an agreement and what we have here is including the cracker business, we consider consolidation of business and also the products and recycle and others. And we need to have rationalization before we can actually achieve divestiture. And also a big purpose for the consolidation, people, money and time. We want to have a favorable condition for that, especially in R&D, carbon neutral or circular economy. In those areas, there's lack of manpower resources that this situation, we need to accelerate the process quickly. And this is an issue for the chemical industry in Japan. In Korea and Middle East, there are investment and conventional petrochemical products, some of them are trying to expand. But in order to protect the industry in Japan, including national security, we need to address circular economy and carbon neutral, we need to accelerate our effort there and make investments actively there for that purpose. And in that background, we are trying to achieve what we wanted to achieve.

I have expectation. Regarding Specialty Materials, I have a question. There are various factors that I want to consider. Lithium battery for battery materials, you are focusing, but it is red portion in my understanding, what is your view on this? And as for carbon fiber business, CPC is acquired, and it's working well in Italy. But some of the companies are not really doing -- showing good results in this category and how do you expect good business? How do you develop carbon fiber business without having airline business -- aerospace business and also PET business and molding materials, what are your viewpoints?

So I'll address the battery business first. So yes, battery business is a difficult business. The good news about battery business for us is that we have been one of the leading electrolyte suppliers in the world for many years. So our technology is solid in that way. The question becomes, over time, can we continue to operate at a fairly high level in that space? And I think as of right now, there's lots of things changing from a regulatory point of view in Europe and in the U.S. as it relates to battery materials. Also a positive thing that we have going on is we have a global footprint. And as of last year and also this year, we have made investment in the battery business to be able to expand capacity, both in Europe and in the U.S. but it's a tough spot. It's a tough spot. And much like every other part of our portfolio, we've not made any final decision yet on battery. But like other parts of our portfolio, if it becomes an area where we can't add value and it's in a better position for someone else to do that, we will consider it. It's no different than any of the rest of the portfolio. But as of right now, we haven't made any announcements about battery business. We have invested to add capacity, and we continue to have a strong kind of top-tier position. I'll say another area for us around battery, we're not competing at the low end of that spot. We are looking and working with people that have -- that are looking for the best they can get, and I think our product is still one of the top ones in the market in that space. So that's our comment on battery. The other thing that you mentioned was carbon fiber. A lot of the companies, a lot of the competitors, if you look at where they're competing, the types of parts that they're making, they're kind of commodity-type parts on carbon fiber. The unique thing about CPC is their ability to do complex structures and to do extremely large parts, and the area of the automotive space that we operate within CPC is not the broad market. It's the high end of that space again. I think you will never see us in Specialty Material wanting to compete on high volume, high -- non-high-value applications. That's not our intention with that strategy. You also mentioned about aerospace. We think that there is a nice adjacent business related to that. And with the technology that they have, we think it positions us in the future to be able to expand into other markets, aerospace being one of those. So I think we didn't buy this to become a Tier-2 part-maker for the masses. This is about technology, about know-how, about integration and about doing things that other people can't do from a complexity point of view. And that's our take on why we think this is an important acquisition. And I think with our knowledge on the material side, coupled with that knowledge that they have on the part production side, it's a really nice combination and we can go after high-end applications in that way. And what was your final question? I apologize. You had a third one, something related to...

PET film asset is abundant. And this is a mature market. And what is your outlook? PET film.

So as you know, we're one of the top producers of PET film in the world. That industry, I think you'll see some consolidation in that space over time. We think we have a right to win in that spot because of our ability to produce high optical grades, also to handle thin versions of the film. We still see growth in the display market. I think the display market is projected to still grow at about 4% per year, over the next several years. So we don't see that backing off. The good thing about polyester film, many different types of applications that you can do. It's a super versatile film. One part of our strategy is to start and we're already looking at, what types of other functional things can we do to that film that will open up new applications for us in the future. So that's a big component of our pipeline and things that we're working on. So if you look back at the polyester film, years ago, and I was in this industry, they were -- polyester film, one of the big applications was making floppy disk, right? And it evolved into many different things. I think you'll see that same thing happen with polyester film as new applications are opened up. But I think it involves functionalizing the film with coatings or surface treatment, and those are important parts of our strategy going forward.

The first question is about Petrochemical and Carbon exit. The outlook on the exit, in Q2 presentation, you mentioned the timing. Is there any delay from that timing? Have you changed? And also in the invitation for this meeting, there were 2 things, agenda items. The first is the exit update of the Petrochemical and Carbon but on the other hand, in your presentation, you didn't mention it so much. What is the reason you didn't mention it so much in this presentation, although it was one of the agenda items? On Page 4, regarding Petrochemical EBITDA. It seems that it is still remaining. That's how the material is shown but in the previous material -- previous meeting, Carbon and Petrochemical EBITDA, it was NA. So this time, are you keeping this business? Maybe on Page 8, it's easier. Basic material, it says 450. But in the previous meeting, it was NA, but you indicated the number here today. For the exit of Carbon business in the August briefing, you said within Q3, that means within this calendar year, you can announce this buyer but you said within this fiscal year, you said today, that's what I heard. So was there any change? So for the exit of Petrochemical and Carbon business, please give us the details.

As you can imagine, the Petrochemical as Chikumoto-san said, it's a long negotiation. And you can imagine that when we announced it, we're going to get all sorts of details about, exactly in detail everything. And we're making a lot of progress. There is a lot of agreement on many things. We have not yet sorted out all the details that would allow us to make announcement with people, with everything and all that. So that's the only reason. We're making a lot of progress. But as Chikumoto-san said, this is -- I mean, the day we announced it, we're going to have a question about everything in detail. And some of these details, including exactly percentage of ownership, things like that, we have not yet completely finalize some of these. So that's all. And that's what I said, there is a lot of work ongoing right now. Still December, I mean, this is our target, and we will see. But it's more important to do the work, to come to this into an agreement, to set up a JV that is a long-term future and that will generate value. So there was a question at the beginning about what are you trying to do? When you -- the goal is still create that JV, start that JV. From the moment you start that JV, the clock starts ticking, and you have 3 years before you can do an IPO. You don't really have a choice because you need to generate 3 years' data before you can do an IPO. So over the next 3 years, from whenever we start, which we really hope is fiscal year 2024, they will be somehow a transition period where it's not going to be IPO-ed. Our goal in that period is to reduce our share until the time where we deconsolidate. That's what we shared. This is still our goal and our goal is still by the horizon of whenever we start [ plus 3 ] to do an IPO. In that time period, I mean, the team -- and we'll have one responsibility, is to rationalize assets, is to put it back on to a path where it can make money, is to attract additional investors, is to work with the government to find subsidies because it's a matter of Japan needs a profitable petrochemical industry that is probably smaller than it is now. And so all the steps are taking place, and we're doing this very seriously, and we are really committed. And to answer your question, Watabe-san, I mean, stock went down 3%, okay. I mean, it pains me that it went down 3%. It doesn't mean to me because people are expecting a name and everything. We are absolutely doing the work. We're confident with what we're doing, and the right information will come at the right time. And we are fully dedicated to achieving our goal. So that is for -- in terms of Carbon Chemical, you are correct. We said -- we had said like more like Q3, we would probably find -- it takes time because there are JVs involved. There are things involved. I mean, there are long-term agreements. There are -- and we have the same thing. And we're going very meticulously true everything, and we are fully dedicated to achieving it the fastest possible. But there are steps that we cannot bypass because there are customers involved, there are people involved, there are a long-term agreement that we need to sell out there. These are -- I mean, a myriad of things. We're talking here about -- I mean, between these 2 businesses of divesting or creating a JV for more than 10,000 oku yen, this is not a afternoon work. It takes a lot of time and a lot of precision and that's what we're doing, and we're fully committing to do both.

Regarding carbon, you said by Q3, you said you were going to announce the buyer, but are you modifying that announcement?

Did it a little bit because I cannot -- I don't want to stand up here 3 months from now. Maybe yes, maybe no. We are really doing everything we can to at least before the end of the year to have -- the fiscal year, that's one of the semester -- trimester -- quarter to make sure we have everything correct. Again, we are aiming for that. We are doing everything. We've been working a lot on this with the same people. So it just takes time.

The second question is about EVOH. This is, I think, a potential growth area. And in the previous briefing about the functional materials, 5% CAGR was announced. But have you changed that outlook? And there was a capacity shortage for a while, you said. And because of the tight demand supply, I think that the margin has been expanding, but is there a chance for you to further expand the margin? And also the new plant in Europe, they will be put into operation. The original plan was 2025 July, I think there is some delay. Maybe today, you said '25 or '26. So when exactly are you planning to put it into operation? There is a high precision and food package material market is tough, but you have a good performance. So what is the growth potential outlook on EVOH once again?

Yes. So good question. The -- if you look back at the data from EVOH in that business, we came out of 2020 with a lot of pent-up demand in 2021, 2022, very tight market and prices were extremely high, right, extremely high. And in the presentation I showed today, it looks like minimal growth, and I mentioned EVOH being a big contributor because it's a large business for us. What's happening in that market today with everything that's happening from an economic point of view, the overall food business, much like many other parts of the market today is down. So we actually have -- we're seeing some price erosion on the EVOH material, but I would say not substantial. What's in the 2025 forecast is pretty conservative, okay? And so that also is contributing to our -- to what looks like not a lot of growth. I think it's probably more conservative than reality, but our business team has been pretty conservative in that response. I don't have the specific dates, we can get those for you on the new plant start-up but certainly, from a relevant contribution point of view, more of the relevant contribution from that capacity expansion would happen in 2026. And so that's why I mentioned that in the slide. So we're very -- we still think we have a really nice position in EVOH. It's a core part of our strategy going forward. I think we don't see the bottom dropping out of the pricing. We're probably a bit conservative in the 2025 forecast. We hope that it's actually better than that but still a very good business for us going forward.

I have 2 questions regarding the strategies. Number one, the Page 8, I have some difficulty to reconcile those numbers, and I'd like to have some confirmation, elaborations regarding the separate things. Number one, fast, in Specialty Materials. According to this graph, there is approximately JPY 113 billion improvement in the EBITDA, whereas if we add up those 4 areas, that's only JPY 90 billion. So are we expecting some other growth areas which is basically quite diverse within Specialty areas? And also within the Basic Materials, the -- this is basically the stand-alone basis. Yet if you take a look at the earlier number, which basically has a gap of 450 oku yen or JPY 45 billion between the as-is stand-alone number and the divestiture number which means that number does not include the equity income, which should be a part of EBITDA according to the IFRS regulations. The -- how do you treat the Petrochemical operation's sales revenue and equity income in those both cases? And also, I'd like to confirm about the divestiture as well. The -- according to our conversation back in December '21, Mr. Gilson clearly said that you account them to divest those businesses without recognition of any major extraordinary items or losses. Is this position to remain the same? Or are you changing something? Could you please elaborate those things? I think you said that the -- through the divestiture of the Petrochemical operations and carbon operations, you do not expect any major extraordinary loss recognitions. So that's first question.

Let me -- on that one, I mean, I -- we haven't -- we are not communicating anything. The market condition in 2020 versus 2021, I think it's fundamentally different, especially for carbon chemicals, which was a very fast -- I mean, the value that we were seeing at that time was really high. Time has changed, and that's why we didn't do any fire sale either. We will -- when we have the data, we will communicate it. But it's -- we are, I mean, dedicated to selling the carbon chemical business.

So the -- for extraordinary loss recognition as well as cash inflow as of today, no comment?

No comments, no.

It's basically [ over-write ], our conversation back in December '21.

It's -- the market conditions are different. If the market had been different, we're dealing with the current situation right now, and we will communicate with current situation. So when we are ready to communicate.

Other questions for you, Jean-Marc-san. Regarding Specialty Materials, 4 of them together and that doesn't amount to this total. And the [ Easter ] there is others. What they are, that is general industrial, construction materials, and can you explain product line today? And we have more sales through distributors and all that is included into this number here. Therefore, the gap, the difference is coming from others. As for Basic Materials, 450. Our operation and our earnings from the joint venture and our portion of 100 is included here. Carbon is excluded on Page 4. EBITDA, 6,000, revenue, JPY 3 trillion -- the JPY 3.375 trillion. This is the same as the number in February. At that time, the assumption was Petrochemical is equity earnings, and that is JPY 3.375 trillion. Well, you follow IFRS, therefore, equity earnings should be included, but there is a gap of 450, so it's not included here. As a stand-alone EBITDA, 6,000 includes equity, and that is the only portion. On the right-hand side -- on the right, joint venture, our portion supporting it's in consolidation, 100% owned. That's the assumption. So in the end, we will finish as some in between those. So with 100%, that's 450 EBITDA and high equity earnings and you have lower numbers. Why is that?

Two different things. There is 450 in EBITDA. What you see is that it's the COI line is where you really need to look into. So at the COI line, what it says is that in the line with -- you see 6,000 going down to 3,006, there is about 100 in COI included. On the right-hand side, there is about 200 that's included. So I mean there is no -- it's treated the right way. We are mixing up 2 things between EBITDA and earnings. So the EBITDA doesn't need to -- it's not -- I mean, the depreciation is not part of the rest of the reconciliation. So it's done correctly. So what it means is that we are looking at a business that's about 200 COI right now, the way we are looking at it right now and generate about 450 in EBITDA, you are correct on this one.

Okay. So I mean I understand that the -- on an after-tax basis, the petrochemical operations profit is ignorable in 2025 in your assumption?

What is ignorable?

The petrochemical operations net income after tax.

It's included in both.

Not both.

Okay. Yes. Let's talk about it.

I'd like to ask you one more question regarding the Specialty Chemical. I'm sorry for taking time. The -- I think the full growth area has each decent risk. For example, in digital, the -- according to your number, you're aiming approximately 50% growth from '22 to '25. However, according to semi wafer segment number forecast, S-E-M-I, they are expecting approximately 3% to 4% volume growth in the wafer during the same period. Means you are aiming much faster growth than semi's wafer growth -- area growth expectations. The -- are you expecting any major share gains during those period? And what the risk associated with that? And on top of that, I would like to ask you 2 more things. In Medical, you are saying that you're expanding in implants, which is hated by [indiscernible] chemical and some other companies because of the risk of litigations and -- what's your game plan to manage the litigation risk? And also geographical expansions. From '21 to '22, the ex Japan portion has increased simply because of the Japanese yen depreciation against U.S. dollars as well as euro and the -- how are you confident to expand those overseas operations?