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

I would like to thank all the investors for attending the Mitsubishi Chemical Group Corporation Earnings Conference Call despite a very busy schedule. It is now time. So allow us to begin the conference call. First, Manabu Chikumoto, Representative Executive Officer and President will give a presentation looking into the [indiscernible] Executive Officer and the Chief Financial Officer; Minoru Kida will explain the financial results briefing for the fiscal year ended March 2024. After the presentation, so we're going to have conversation. Actually, the entire program is going to be lasting 60 Minutes. Before we begin the conference, I would like to make a disclaimer to investors. In the explanation that follows, we may state the future forecasts based on the current expectations. But please note that all of these statements involve risks and uncertainties, and actual results may differ significantly from the forecast. In addition, please note that the audio of today's conference, included the Q&A session, will be posted on our website. Now let us begin the conference call. Mr. Chikumoto, please.

Yes. Hello, this is Chikumoto, CEO. I'd like to -- first of all, thank you for your presence for the business schedule to attend this conference call. And also, I would like to actually express our sincere appreciation to fully understand and support for our business operations. Thank you, indeed. That said, at 1:00 p.m., we have released the certification of the textile products today. Here, we need to offer our sincere apologies. We have discovered a certification of defect in triacetate fiber that all are manufactured and sold by our consolidated subsidiary, Mitsubishi Chemical Corporation. We deeply apologize to our shareholders, business partners and other related parties for the inconvenience and the concern that this may have caused. Based on the amount of the transaction we have confirmed, we believe that the impact on our performance will be minor at this time. But if future investigations are determined that it will have a significant impact on our performance, we will notify you properly. We'll do our utmost effort to prevent recurrence and we would like appreciate for your continued support and encouragement. That said, allow me now to make my presentation following the slides. I'd like to explain the purpose and also the future policies going forward. We, Mitsubishi Chemical Corporation has the purpose. Actually, in KAITEKI and [indiscernible] the world for the wellbeing of the people and the planet. Again, we are going to be stuck with the purpose going forward. That's actually when I was on the management plan. Actually, when I was on management, actually KAITEKI Vision 30, that was announced back in 2020. And after that, 4 years have passed, and we experienced a COVID-19 and also the geopolitical changes and also other sort the geopolitical situations have become a lot more complex, having agility and having the circular economy are some of the issues are faced with. That said, we have KAITEKI Vision 30 was reviewed. Again, moving into 2035. We are working on the new vision and our policies. The Mitsubishi Chemical Corporation, which will be truly united among all the employees actually so that we can truly -- be truly active working on our activities. And as for our future direction, we have management policy Forging the future. And we are utilizing our solid management foundation to further accelerate our businesses. We have new management division, KAITEKI Vision 35 and we will be highlighting it. And also, we are to clarify the Group's overall business portfolio policy and we will be promoting our business growth strategies. And we will be continuing with our structure reforms and rationalization and will accelerate our growth for green transformation. The Petrochemical business will be restructured and especially the Material Business will be our focus going forward. So we'll be concentrating our resources into the Specialty Materials. And we are to transform into green Specialty Chemical company that leads innovations to realize KAITEKI.

Thank you very much, Mr. Chikumoto. I'd like to have Mr. Kida, please?

Hello, everybody. This is Kida speaking, the CFO. Allow me to explain the financial results for the fiscal year ended March 2024 as well as forecasting for the fiscal year 2025 ending March. First summary, during this fiscal year, actually, demand remained sluggish in the semiconductor related market and in the Industrial Materials in general. And the business environment surrounding the chemical industry was tough throughout the entire period. In this environment, the sales volume in the Specialty Materials and the Basic Materials decreased significantly compared to the previous fiscal year. On the other hand, North American Radicava and Industrial Gases and Health Care remained strong. And while sales revenue for the entire group decreased 5% compared to the previous fiscal year but the core operating income increased 4%, excluding the impact of the lump sum revenue recognition of the Gilenya royalties in the previous fiscal year. So we are faced with such a tough environment but we actively promoted price management and cost reduction activities, which led to an improvement in the difference between the sales and the purchase prices and cost reductions compared to the previous fiscal year. In addition, we made a steady progress in the sales of noncore businesses and activities to reduce working capital and the free cash flow improved JPY 111.5 billion year-on-year to JPY 219.1 billion. As we enter the fiscal year ending March 2025, the business environment remains uncertain but now we're seeing signs of demand recovery for some products. Demand for the Specialty Materials and Basic Materials, which was quite sluggish in the previous fiscal is expected to recover gradually in the second half of the year, although there is going to be certain differences depending on the regions and the products. We expect Industrial Gases and Health Care to remain strong. We'll continue to promote self-help efforts, so to speak, as such as business restructuring and price management and the cost reduction. Core operating income for the fiscal year ending March 2025 to be JPY 250 billion, up 20% from the previous fiscal year and the profit attributable to owners of parent to be JPY 52 billion, down 57% from the previous fiscal year when we recorded a large amount of nonrecurring profit. I will now explain the financial results for the fiscal year ended March 2024, consolidated basis. The average exchange rate to the U.S. dollar to the full year was JPY 145.3 to the U.S. dollar, 7% depreciation of the Yen compared to the previous fiscal year. The naphtha unit price was JPY 69,100, down 10% compared to the previous fiscal year. Sales revenue was JPY 4,387.2 billion, 5% down compared to the previous fiscal year. Core operating income was JPY 208.1 billion, down 36% year-on-year basis. Compared to the our latest earnings forecast announced in November last year, revenue were down by 2%, and core operating income down by 17%. Nonrecurring profit for the special items was JPY 53.7 billion, up JPY 196.6 billion compared to the previous fiscal year when we recorded a large loss related to the closure of the MMA Cassel plant and the liquidation of Medicago and Health Care. Operating income, JPY 261.8 billion, income before the tax was JPY 240.5 billion, and profit attributable to owners of parent was JPY 119.6 billion, up about approximately JPY 23.2 billion compared to the previous fiscal year. This represents an increase of 11% from the earnings forecast we made JPY 135 billion announced in November. Now this shows the sales revenue and the core operating income for each business segment. Specialty Materials saw 5% down in revenue and 90% down in profit compared to the previous fiscal year. Demand was sluggish throughout in the year and Films & Molding Materials, in particular saw a large drop in performance compared to the previous forecast due to the adjustment phase of the semiconductor and electronics related markets. Industrial Gases continued to perform well, with revenue up 6% and profit up 35% compared to the previous fiscal year. And the profit also increased dramatically compared to November forecast. Health care revenue was down 18% and the profit down 61% compared to the previous fiscal year, almost in line with the previous forecast due to the fact that royalty income from the previous fiscal year of JPY 125.9 billion, which was recognized in a lump sum following the result of the arbitration decision regarding to royalties and to the -- for the multiple sclerosis treatment Gilenya in the previous fiscal year. Excluding this, the Radicava, the increase in the U.S. and also the cost reduction actually had a major impact. Actually, it would give us the improvement of 28% in profit year-on-year. MMA down 8% in sales compared to the previous fiscal year, increase in profit of JPY 4.8 billion. Amid continued sluggish demand, the company achieved a profit for the full fiscal year partly due to the effect of the cost reductions resulting from the closure of the factory in the U.K. Basic materials, again, a loss of JPY 19.3 billion. Year-on-year basis, actually sales were down 10%. Profit went down JPY 31.4 billion, which was lower than the previous forecast. All the factors behind the decrease in profits compared to the previous fiscal year, the impact of inventory valuation of gains and losses was negative JPY 11.9 billion. Petrochemicals was also affected by the recording of the impairment losses and the derivatives business in our fourth quarter but awarded a loss for the full year basis. Carbon products posted a loss of JPY 19.3 billion for the full fiscal year as there was no improvement in the coke market throughout the period. Now the breakdown of the JPY 117.5 billion, down in the core operating income compared to the previous fiscal year. Of the JPY 117.5 billion decline, excluding the impact of Gilenya and the Health Care of JPY 125.9 billion, in the previous fiscal year, the increase would be JPY 8.4 billion. The volume differences was negative, mainly for Specialty Materials and the Basic Materials but the positive difference between the buying and selling due to the promotion of our price management exceeded this. Cost reduction was positive at JPY 100.6 billion, 26% higher than the annual reduction target of JPY 80 billion for the fiscal year. The contribution in the fourth quarter was about JPY 18.6 billion. On the other hand, the difference in other items was negative at JPY 103.8 billion. Additional to the deterioration of the inventory valuation the profit loss of JPY 30 billion. This includes onetime factors related to Health Care. Other factors included the decrease in equity method profit loss and increase in fixed cost due to the inflation and other factors. Now I would like to explain the details by segment. First, Specialty Materials. Here now, we had a decline of JPY 46.2 billion year-on-year. The difference between sales and purchase was JPY 24.3 billion. Cost reduction was a positive JPY 16 billion. Amid a weak demand, as I stated in the outset, its subsegment and work to maintain and improve sales prices, improving the differences between sales and purchases. We also promoted cost reduction activities. On the other hand, the impact of sluggish demand resulted in a large negative volume difference. In Polymers & Compounds, the automotive obligation market recovered and there was an expansion in new adoption and increased sales of bio-polycarbonate but demand for the barrier packaging materials, paints and inks adhesive were weak. In Films & Molding Materials, demand recovered from the third quarter to the fourth quarter. For particularly the high-performance engineering plastics for the semiconductor applications and the carbon fibers for the wind power generation applications but the volume decreased significantly compared to the previous quarter. In Advanced Solutions, the semiconductor market continued to be in adjustment phase. Some products for cutting-edge processes showed a recovery trend. And some products such as photolithography materials performed well but overall demand was sluggish and sales decreased compared to the previous quarter for the high-performance chemicals and precision cleaning services. Next, on Industrial Gases. This performed rather well up JPY 42 billion year-on-year basis. While the volume was not strong but price of petro and the productivity improvement efforts implemented in all regions were quite successful, and these activities made good contributions to the profit. In Health Care, core operating profit decreased by JPY 87.9 billion due to the impact of revenue recognition of Gilenya in the previous fiscal. Relation to the significant growth in the sales of Radicava, all formulations in North America, sales of domestic pharmaceutical priority products and the new products were also strong. In addition, the effect of cost reduction such as a reduction in research and development expenses due to the additional results from the Medicago's business in the previous scale contributed quite greatly. MMA increased profit by JPY 4.8 billion year-on-year businesses. The difference between sales and purchase was affected by the decline in the MMA monomer market compared to the previous fiscal year. The difference in the volume improved due to the reduction in the scale of regular maintenance and increase operation compared of the previous. In addition, the cost reduction effect was accumulated due to addition to close the Cassel plant in the U.K. in the previous fiscal year. Basic Materials was down JPY 31.4 billion in profit. The difference between the buying and the selling was a positive factor due to the timing difference of the price revision of the polyolefin at petrochemicals. But the overall difference was negative. The difference in the volume, again, was another factor, negative factor. Difference in others, actually, the impact of the inventory valuations, again, including negative JPY 11.9 billion, which was a major factor. Special Items totaled positive JPY 53.7 billion. Last year, there was an exit of Medicago and also we had to -- big losses from the Cassel. But this year, for '24 -- from March '24, there are some gains and also CPC, our phased recognition as a subsidiary. That has been positive for us. Here is Cash flow statement. Operating cash flow was JPY 465.1 billion, this is a positive. We continue to strengthen cash management activities throughout the company. And despite weak demand we controlled inventory volumes and improved inventory cash flow for JPY 45.2 billion from outflow side last year to the inflow side was JPY 30.3 billion. Investment cash flow was JPY 246.1 billion. CapEx for future growth were made mostly in Industrial Gases and Specialty Materials. In addition, we recorded cash flow of JPY 72.3 billion positive from asset sales mainly from sale of [indiscernible] and sale of strategic shareholding. As a result, free cash flow was JPY 219.1 billion, a significant increase from previous year. Financing cash flow where the outflow was JPY 241.7 billion. And here are the consolidated statements or [ RPS. ] Total assets amounted to JPY 6,104.5 billion, up JPY 330.2 billion from the end of the previous period. The main factor was the impact of FX contributed to JPY 324 billion increase. Net interest-bearing debt decreased by JPY 35.3 billion from the end of the previous fiscal year. The net D/E ratio was 1.16 compared to 1.33 at the end of the previous fiscal year, this is an improvement of 0.17. We will now add some explanation to the trend of the core operating income from the third to the fourth quarter. Core operating income for the fourth quarter was to JPY 24.2 billion, a decrease of JPY 40.1 billion from the third quarter. Specialty Materials posted a loss of JPY 12 billion for the fourth quarter. Compared to the third quarter, there was a recovery in demand for various products, including barrier packaging applications, high-performance engineering plastics, carbon hypers and polyester films, but profits colinear due to onetime factors such as capacity for adjustments for inventory and optimization in some businesses and the impact of year-end closing adjustments. Industrial Gases continued to perform well in the fourth quarter following the third quarter. So for the health care, the sales of Radicava in North America remained strong in the fourth quarter. The segment saw a decrease in the profit compared to the third quarter due to negative rebrand from Q3 sales of prescription drugs in Japan and the concentration with G&A and R&D expenses at the end of the quarter. In MMA, there was no significant recovery in demand in Q4 since Q3. The supply demand in Asia remained tight due to the supply side factors. And trading Gap for the sales and purchase improved due to the higher market prices. In addition, I MMA returned to profitability in the fourth quarter due to the better utilization with the [indiscernible]. Basic Materials posted a loss of JPY 8.9 million in the fourth quarter. Petrochemicals trading margin improved due to the delay in timing of the polyolefin revisions. However, inventory valuation decreased and some derivative businesses booked incremental losses on a fixed asset. Therefore, in Q4, we posted a loss of JPY 2 billion. The carbon business posted loss as well. And it's a loss of JPY 6.9 billion due to [indiscernible] margins and shrink inventory valuation gains and continued softer market conditions. Next, we will explain our forecast for the fiscal year ending March 2025. Before I get into the details, I would like to talk about the change in the reporting segments. With a change in organization since April 1, our reportable segments for the fiscal year ending March '25, and thereafter will change as in the slide. The Specialty Materials segment will be disclosed in 3 sub-segments: Advanced Films & Polymers; Advanced Solutions; and Advanced Composites & Shapes. Advanced Films & Polymers is classified mainly as businesses that were previously part of polymers and films. Advanced solutions, it will be similar to the existing Advanced Solutions subsegment. Advanced Composites & Shapes used to be Molding Materials businesses. In addition, the Coating & Additives business will be disclosed separately as one subsegment under the MMA segment. In the Materials & Polymers business, the sustainable polymers and engineering plastics businesses were added from the former polymers to the existing Petrochemicals business. In those business, a better affinity are now in the same segment is that we can further strengthen cooperation among businesses to accelerate the growth. We apologize for any inconvenience as this may cause the investors and analysts and appreciate your understanding. Next, I will explain main topic for today, our forecast for the fiscal year ending March '25. The forecast assumes an exchange rate of JPY 150 per dollar and naphtha unit price of JPY 75,000. Full year revenue is projected to be JPY 4,623 billion. It's a 5% increase over the fiscal year ending March '24. Core operating income is projected to be JPY 250 billion, it's up 20% from the previous year. Operating income is JPY 210 billion. It is a 20% decrease from FY '24. Net income attributable to owners of the parent company is projected at JPY 52 billion. This is down 57%. Here, our forecast by business segment. In accordance to the change in disclosure segment we explained earlier, the result for the fiscal year March '24, have been reclassified for comparison purposes. Specialty Materials is expected to increase by JPY 16.6 billion from March '24. Of this, Advanced Films & Polymers expect a recovery in demand for polyester films and other products. Advanced Solutions expects a recovery in demand for its semiconductor-related business through the second half of the year. Advanced Composites & Shapes is expected to see a recovery in demand for high-performance engineering plastics for semiconductor and other industrial applications as well as carbon fibers for various applications as such as the wind power generation and the sports, and automobile based on the recent recovery trend. In light of the recent recovery trend, we expect recovery in demand for high-performance engineering plastics for semiconductors and other industry applications. And we assume further profit growth in Industrial Gases, it's up JPY 11 billion in March -- from March '24. And in the fiscal year, March '25, we would expect strength demand to continue globally and the productivity increase mainly as cost reductions impact is also affecting in and Pharma expect see a decrease of JPY 14.3 billion from March '24. And although we expect sales of Radicava, Mounjaro remain strong, we have included the impact of NHI price revision for prescription drugs in Japan and increase G&A and our expenses with launch of new products. MMA and derivatives is expected to increase by JPY 14.1 billion from the fiscal year ending March '24. Of this on mind, JPY 13.3 billion is to come from MMA business. Based on the current trend in Asia, we have factored in an improved trading margins compared to the previous year, improved capacity utilization and cost reductions due to structural reforms in Hiroshima. Basic Materials and Polymers is expected to increase by JPY 17.7 billion from March '24. Other inventory valuation gains will shrink for both petrochemicals and carbon. We anticipate an improvement in the coke trading margin due to lower coking coal prices and improvement in the volume margin from petrochemicals, including elimination of the impact of last year's troubles and positive effect of cost reductions, respectively. We expect profit to increase in the second half over the first due to a reduction in the scale of scheduled maintenance in petrochemicals and an improvement in inventory valuation gains and losses in carbon. The following is a core operating income analysis by factors. We forecast a core profit to increase by JPY 41.9 billion from March '24 to March '25. And the trading margins for the sales and purchases that will be negative in pharma due to the impact of the NHI price revisions for prescription drugs in Japan and the impact of cost increase in Europe and U.S. in Industrial Gases. On the other hand, trading margins are expected to improve in MMA and Derivatives, and Basic Materials, Polymers. As for the volume differences, we expect a recovery in demand in each market, including semiconductors, mainly in Specialty Materials. On cost reduction, we continue our plans in each business segment throughout the year. Although the management team has changed, we will continue to streamline our operations to improve profitability. The other variance includes the impact of a reduction in inventory valuation gains in basic materials and polymers as well as increase in fixed cost due to inflation and other factors in each business, and an increase in selling and R&D expenses for the launch of new products in pharma. And we consider our forecast of JPY 250 billion in corporate income as a must-achieve target. We will accelerate business portfolio reforms and growth strategies to further increase profit. Finally, I would like to discuss dividends. The year-end dividend per share for the fiscal year, March '24 is as announced JPY 16. It will be resolved at the Board of Directors meeting on May 20. For the fiscal year ending March '25, we forecast second quarter end and year-end dividends to be the same as the year-end March '24 that means JPY 16 per share. As a result, the annual dividend forecast for the fiscal year ending March '25 is JPY 32 per share. We plan to announce our future dividend policy based on our new growth strategy and capital allocation policy in business presentation that is scheduled to take place in the fall. This concludes my explanation.

Thank you, Mr. Kida. Now I would like to have the Q&A session. Now again, let me introduce Corporate Analyst, Morgan Stanley MUFG Securities, Watabe-san, please?

Morgan Stanley, This is Watabe. 2 plus 1, please. And first, the first question goes to Mr. Chikumoto, the new CEO. In fall, the strategies will be worked on. But during the press conference, I thought you talked and you're going to actually make the further advancement in terms of timing. Well, it's one month, since you became the CEO. Again, how you are going to naturally go through the improvement again on trying to unite workplace and also working on this new organization? And Specialty chemicals actually have dropped, how you're going to improve this business performance in this particular segment?

Thank you indeed for your question. Mr. Chikumoto, please.

Yes. Thank you again for your questions. Well, actually the fall is going to be too late. I think that's a vision I am sharing for many of you. Of course, the sooner or better. Yes, I would agree to that. But of course, I would like to go for whatever now we can do, again, with this new organization in place starting from February. Actually, we started working on many hidden activities behind the scene. So actually, the new members and actually are truly fully appreciating what we're supposed to do. And so going forward, actually, almost in every week -- weekly, we are spending about half a day and a full day. We are actually working on many important agenda issues we have to make. As the vision is going to be officially announced in the fall, vision and strategy will be announced officially in full time. But again, we're not going to be just waiting for the fall time. We would like to actually go for whatever activities actually and how we can work on. And also announcements will be the following those activities one after another. So when we get back in a fall time, maybe -- you may be giving us a response that, wow, you seem to be ahead of the original plan announcement. As for the employee's motivation question, well, I think this has come the serious the crisis matter, so to speak. And actually, the petrochemical and also the carbon, which I made refer further to last year. Of course, we have to make further efforts actually in those areas. Yes, there has been some concerns actually among the operators and employees actually decided to leave us, start working for the other businesses. But starting from the January and February, churn actually [ red ] and actually has been stopped. And our employees actually have become a lot more active on positive. Actually, they are actually having higher motivation, so to speak, if I'm not wrong. Another point, if I may, all our purpose. Yes. So actually, the concentration is going to be the game, we had to go for why we engage in such business operations, why we are coming to an office every day. I think all these things can plan by this purpose. So this KAITEKI is going to be, again, an important driving force. As for our efforts to make money profit, of course, there had to be some of the patients. Again, we need to come up with most of profit in our pricing policies, and we have to actually work on whatever the activities we have to go for based upon the most appropriate pricing. Yes, that's what we have to do. So I think this is going to be clearly defined. Of course, rationalization. As Kida-san mentioned this, of course, there is not the stopping point working on the rationalization. Also this will become an important global activity, I think you can expect us a lot.

Yes, I have a big distraction. My second question, the fourth quarter just ended, then a onetime loss on the impairment and also the specialties business actually showed quite a tough situation. I wonder if you could expand on those situation again by referring to the specific numbers. And actually, what kind of impact you may have in the new fiscal year? Yes, the fourth quarter, SMBs actually a onetime factor and also moving into the third quarter, what would be -- what kind of improvement would be possible?

Here, I'd like to have Kida-san respond to.

Well, in regard to the SMBs, I think there are several factors. First, on impairment and about JPY 4 billion were impairment paid and also an inventory adjustment. As I mentioned this point earlier, actually, this year, actually, we need to work on compressing the inventory and the working capital is to actually improve, that's what we have done. So for that, actually, we had to actually stop plant operations to work on the inventory adjustment as much as JPY 2.5 billion and nonprofit. And also on the -- again on onetime factors, whether or not there are truly more factors. For example, actually, the depreciation value on the inventory size or actually some of the losses, and we simply cannot make a recovery. Yes, we had those 3 major issues, impairment of JPY 4 billion and inventory adjustment of JPY 2.5 billion. And also the financial adjustment of JPY 2 billion plus, I think they are the major factors. Two segments put together. Am I right? Specialty Materials and the Basic Materials put together.

I was referring to the Specialty Materials May I remind you that.

Okay. Thank you. And on the Basic side, it's not that large. As for the Basic Materials, allow me to say the following. In terms of impairment, actually Federal BPS action plan, of course, again in pace with this the loss of JPY 4.2 billion. Again, this is quite large.

I got it. And in regard to the Health Care in Radicava, actually a competitive drug, actually all -- actually going through the filing out again on industrial competition. So how do you feel about it? And Mounjaro, actually, you shared the latest number in the previous fiscal year. I wonder if you could share the latest updates.

Radicava and Mounjaro actually in FY '24 are actually the forecast. And here, I'd like to have Kida-san to respond to the questions.

Yes, would be happy to market response. In regard to the Radicava, [indiscernible] actually is the thing I think you're referring to, if I'm not wrong. Well, actually decided to withdraw from the market. Actually, this is going to be minus an option available to the patients. So we feel really bad about that. Regarding to the Radicava, of course, some patients are going to go through the distribution that could be quite possible. But having said that, that actually is not reflected into the latest forecast in terms of the numbers. Concerning your second question, well, this is Mounjaro, right, madam. Well, in the previous fiscal year, of course, the numbers are given there. But as you see in the bottom for the current fiscal year, well, actually, it is not -- they are not disclosed. I hope you understand that. That said, actually on the forecast for the sales revenue by product, please refer to Page 52. Long term, there is efforts there. The Mounjaro is actually in part of the current fiscal year. So the sales revenue, I think you can make an educated calculations. The [indiscernible], actually, due to the agreement with them, we simply cannot disclose the number. So actually, the number there is going to go up.

Now let me introduce the next question from SMBC, we have Mr. Miyamoto.

Yes, this is Miyamoto speaking from SMBC, and I have 2 questions myself as well. The first question is for the President, Chikumoto and this may not be an easy question for the assets right now. Page #3, you talk about clarifying business model strategy for the group as a whole, and I have read your interviews in the industrial papers. But once again, can you tell us how you feel, I think a part of your business portfolio and you have 2 different businesses, Chemical and Pharma? But then still Industrial Gases make up the major part of your profit. And then also there was talk from certain businesses in the previous management team. So can you discuss more about your business portfolio strategy.

So we can say that everything is under review. Industrial Gases have strong earning power and also it is growing in a stable manner, and that is a fact. And the Pharma business, too, including Radicava, we have a strong product still. So we are very grateful to this. But then on the other hand, if you look at the Chemical businesses, we are losing our capabilities to our net profit revenues. So we are stressed about this. Then there is no quick remedy to increase our revenues. But then recently, we have been working on pricing strategies and we are not caught up in the past but we are speaking with our customers about it. And we are gaining our customers' understanding on our pricing. So we are hoping to realize the pricing strategy works well for us, and that's what we have been doing in the past year. And we are still like cost reduction and is making progress in overseas as well. So including that, we are to increase our power of the Chemical businesses. And about the Carbon business. Overall, the market, it's still not doing well. But then gradually, there has been some improvement in March, April. But then fundamentally speaking, spread is bad and still business market is not doing well. And there are some special factors. In Australia, the price with the material coal that we have been purchasing that is going up. But still, we are discussing about how we can prevent from incurring losses. And also by the future plans, it is one of the important items last reviewed. So we are looking into all the possibilities. And for any business, we are not biased. So we might make an announcement after a thorough review. But so far, nothing is decided.

So regarding the synergy with pharma, [indiscernible] this managing Pharma and Chemicals together, can you discuss about it?

So regarding synergy between the pharma and the chemical business, I think that it's quite difficult for us to achieve. And the Industrial Gases too, if this strong [indiscernible] or not, where I think it's still difficult for us to achieve my personal observation.

Understand. The second question is about MMA. In fourth quarter, in spite of the market growth, it seems the IR profit was not quite catching up. And then, I was wondering if you had to book an impairment losses. And then also you are planning to increase profit by greater marketing in new fiscal year. But it seems it's quite slow and also material shortage or regular maintenance, there could be an impact to you as well. So we can discuss about MMA forecast and also the related strength as we are now entering into our new fiscal year.

Okay. So MMA Q4, if there were any onetime factors and also business prospect for fiscal year '24. Mr. Kida, can you please take this question?

Yes, this is Kida speaking. Regarding any onetime factors that maybe could impact. We don't really see the such onetime factors or the impact. And if we think about our current market, it's more about the supply side problem and age has been tight, and [indiscernible] is not doing well as a [indiscernible] coming out and because of natural, we are not getting the byproduct out as yet to that tight. If this situation might continue for some time. But then in the end of the day, as I had explained earlier, as a part of our performance for gas, we are JPY 210 billion that is a must-achieve target. So of course, we are being careful to an extent here. And markets situation right now, I cannot really say how much but this may not be a onetime but current situation might continue for some time. And then if we take our current -- latest price level, I think that is the level we should be referring to, and I think we'll be trending our latest price.

So regarding the $2,000, which is the latest, how do you see the market at -- what trend from here? And also how about consolidating budget-wise?

So recently, it's exceeding to about $2,000. And I think $2,000 has done good enough. And then about [indiscernible], we are doing a review now. So no decision has been made yet but I will continue to review.

Let me introduce the next person Daiwa Securities, Mr. Umebayashi, please.

This is Umebayashi from the Daiwa Securities. Actually, I've 2 questions. The first question is actually on Specialty Materials. Again, fourth quarter profit and loss in the previous fiscal year. Actually, you made a reference to the impairment and also the other negative factors in the fourth quarter, put them together JPY 8.5 billion negative factors according to what I've heard from you but that's actually JPY 12 billion in the fourth quarter in the loss size. So actually that I think it is going to be a quite substantial loss impact. And actually, looking at the revenue on the Specialty side and Q-on-Q improvement by JPY 9 billion. So even though the sales grew but actually -- in terms -- what's the reason why business substance has not been improved? From Q3 to Q4, revenue grew but profit went down. What's the reason?

And I'd like to have Kida-san to respond to that question.