Mitsui Chemicals, Inc. (4183) Earnings Call Transcript & Summary

Thank you very much for taking the time out of your busy schedule to attend [CEO] presentation today. We would like to express our sincere gratitude for your continued support of our business. We would like to take the opportunity to thank you once again. Our group announced and started its long-term management plan, Mitsui Chemicals VISION 2030 in 2021. 3 years have passed since then. During that time, the external environment has changed significantly with friction between the U.S. and China, conflicts in Ukraine and the Middle East and various forms of inflation. In particular, the Basic & Green Materials sector has been significantly impacted by major changes in the environment due to large-scale expansion and production increases in China. We have led to structural changes in orders received. I'm very sorry to say that we are unfortunately falling behind schedule in achieving the JPY 200 billion in operating income on a corporate basis that we had initially projected for 2025. As I explained in the previous business overview, we have had a lot of internal discussions and have made some revisions. Today, I would like to give you a brief overview of the contents of the meeting as well as your awareness of the issues and our outlook for the future. There will be a question-and-answer session afterwards. So I would like to hear your frank opinions. First of all, I would like to present the current business forecast for fiscal 2024. As you can see here, we had initially projected core operating income of JPY 125 billion with sales revenue of JPY 1.770 billion, core operating income of JPY 105 billion, and net income bottom line of JPY 56 billion. However, there was a trouble in the core cracker division. This had an impact of about JPY 1 billion and in the growth area of elastomers for mobility, we revised downward our forecast for TAFMER or solar panels, which we had initially assumed would not perform as expected. So this is the main reason why we have revised our core operating income to JPY 105 billion. However, the current situation is very solid. The mobility area is also doing better than we had originally expected. We are looking at other things besides TAFMER. We are also making considerable progress in developing TAFMER for applications other than panels. We are aware that the situation is much less severe than we had expected. Under these circumstances, we are returning profits to our shareholders. We have recently announced the figures for shareholder returns. First of all, we pay a dividend of JPY 150, JPY 75 each for the interim and year-end. As far as the current business performance is concerned, we are confident that we will be able to meet the dividend payment. In addition, as announced on November 22, 2024, we will acquire about JPY 10 billion of our own treasury stock. We will carry out in the In any case, we will adhere to our return policy. In other words, to the 4 points of the policy that I have just mentioned and outlined. As I will explain later, we will be looking at a higher base. And after discussions, we have come to the conclusion that we will review our return policy and revise it upwards. Unfortunately, our basic strategy is not progressing as expected. So we are reviewing the basic strategy of VISION 2030, which we have been working on for the past 3 years. First of all, there are 5 basic strategies: The first of which is the pursuit of business portfolio transformation. There are 2 points. First, as I will explain later, we are pursuing a growth rate of 12% on a compound annual growth rate, CAGR base over the 5-year period from 2019 to 2024. In terms of core operating income, we have almost doubled our profit. And although we had planned to accelerate the growth even further, we are aware that we are still achieving steady growth. On the other hand, in Basic & Green Materials, we had originally projected an operating income of JPY 30 billion. But unfortunately, as I mentioned earlier, the overcapacity problem in China had a significant impact on the market structure. The current yield operating income is about minus JPY 10 billion. Partly due to the problems at our core plant, the core plant problem is a temporary one. So it will not be a problem that will continue into the next fiscal year. If the trouble at the core plant had not occurred, we would have achieved a surplus of JPY 1 billion or JPY 2 billion in real terms. So we have made improvements of about JPY 10 billion. We recognize that Basic & Green Materials needs to reinvest the cash earned in its own section in order to become sustainable. And for doing so, it is necessary to generate an operating income of about JPY 30 billion. How do we get there? And I'm aware that it will take some time, and I'll explain the point later. In terms of contributing to the resolution of social issues, which is one of the goals of our VISION 2030, we are monitoring progress in these 2 areas based on Blue Value and Rose Value KPIs. The sales ratio is increasing 1.5 to 2 percentage points every year, and we are seeing steady growth in this area as well. With regard to the solution-based business model, especially in new business development, we have launched a corporate venture capital company, and we are making progress in alliances various partners, regional strategies, et cetera, and some very promising items are emerging. In particular, we have launched a corporate venture capital in our new business development. In promoting this, we have had [indiscernible] who has a variety of know-how from a downstream perspective or rather perspective closer to the customer come in and give us advice on various matters. And we are making considerable progress in developing new business in a variety of different ways. Providing solution across the company, as I will talk about later, we are working to solve this issue, the promoting business in a more efficient manner, while also raising issues to be addressed in the future. Regarding the third point, strengthening responses to circular economy. Carbon-neutral regional cooperation is progressing in the East West industrial complex. This has already been reported in newspapers and other media, and we're making good progress. In addition, we are taking various measures to reduce GHG and we are almost on track to achieve a 40% reduction by 2030. Regarding this digital transformation, the full strategy of corporate transformation through DX. This part was initially delayed due to the difficult financing situation in the past. But we are now replacing SAP, which was established 20 years ago with S/4HANA. This is already progressing as planned, and we plan to go live in 2026. In addition, we are also working to improve operational efficiency, quality and marketing capabilities through the use of generative AI. We are also working on specific items that will be linked to these things. Ultimately, the key point will be how to monetize these activities. And as for the management and business transformation, in pursuit of the solution and the circular type business models described above, we are now beginning to explore new business opportunities, while promoting allocation of resources to regional operations from a global perspective. So we are now beginning to explore new business opportunities while promoting the allocation of resources. In addition, we are changing our management approach to risk management, not only from a negative point of view, but also from a positive point of view. The deficit is a negative point. But in short, we have been talking about problems at our core plants. During the past 3 years, we have been implementing various measures, including management based work style reform. And we have been working in a very agile manner, trying out various things and making revisions. We are doing things with this kind of thinking. So we are trying to integrate the entire process with a view to uniformity. We have found many points lacking in terms of adjustment and optimization. And we recognize that we need to reiterate these points as issues truly addressed. Well, this is a new issue that came to light only because they have been working on this for the past 3 years. And if you can probably turn up, we will be able to achieve higher capital efficiency or overall efficiency. The policy on how we will achieve our goals is described here. First of all, we will not change our goal of achieving core operating income of JPY 250 billion in 2030, and we will maintain this goal by accelerating portfolio transformation. We will increase capital efficiency by converting to light asset for strengthening returns. In other words, our original target for ROE was 10% or more, but we will raise this target to 13% or more. In addition, we will raise corporate value by doing so. Regarding the core operating income target of JPY 200 million set for 2025, we will delay it by 3 years with the goal of achieving JPY 200 billion in 2028. In order to achieve that goal, we will implement the policy set forth here with a sense of speed. First, in pursuit of business portfolio transformation, we will intensively invest resources, including M&A and alliances in differentiated fields where we can leverage our strength. Furthermore, we will actually replace the portfolio from the perspective of the best-owner and by thoroughly implementing this policy, we will accelerate growth. In the past, we have focused on the Basic & Green Materials business and have been replacing the portfolio. But we intend to thoroughly implement this policy in the growth domain as well without any sacred areas. Regarding the replacement and portfolios. First, what will establish firm indicators. If the portfolio does not meet those indicators, we will first promote restructuring. And if further restructuring is difficult, we will consider replacing the portfolio from the perspective of the best owner in the sense of speed. We will strengthen our efforts to promote solution-oriented business models by strengthening collaboration across the company and utilizing internal and external resources, while utilizing the co-creation space shown here to promote further solution-oriented business model. As for the circular economy, we will promote the conversion of fuel as the first mover and the early implementation of carbon-neutral technologies by actively promoting regional cooperation between the East and West chemical complexes. As for the management infrastructure, we are planning to form a team to strongly promote the creation of management infrastructure with higher total efficiency by promoting the prospective listed here. Originally, when we created a long-term business plan, we regretted that. We did not have an adequate perspective, especially in the area of cost. The reality is that the cost of various items are rising, and the situation is not as we had originally envisioned. We will make a project with an awareness of the issues and pursue what we call cost reduction or the best point of cost appropriateness in terms of efficiency and amount for the best optimization of resources. From the above perspective, the so-called numerical targets are as shown here. And the target for 2028 are as follows: Core operating income of JPY 200 billion, net income of JPY 110 billion, ROE of 10% or more, ROIC of 7% or more, net DE of 0.8% or less and Blue Value and Rose Value, the ratio of 30% or more. And the final target of 2030 is a net income attributable to owners of parent company of JPY 150 billion or more. This was originally set at JPY 140 billion, but we have raised it by JPY 10 billion. In addition, ROE was raised from 10% to 13% and ROIC was raised from 8% to 9%. This is the foundation of our efforts to raise the efficiency of the company. The final direction we will take is the one we have already presented to you and there are no major changes in that direction. The strategy for free growth domains and the strategy for Basic & Green Materials differ greatly. So I have presented them separately. And the gross domain, we will agent build them into high-growth, highly profitable global specialty businesses. In Basic & Green Materials, what will make it a sustainable green chemical business is induced less and we have not changed this direction. As I mentioned, there are different strategies in the growth domain and the Basic & Green Materials areas. This graph shows the history of these strategies in terms of numbers. As you can see on the left-hand side of the graph, the growth area has been steadily increasing profits from 2019 to the present. The CAGR for growth at 12%. And if we can achieve growth in a manner that maintains this 12% rate, achieving core operating income of JPY 200 billion in the growth domain in 2028 or JPY 250 billion in 2030, is not an improbable figure. We have discussed these figures extensively, and we have fixed these figures based on the accumulation of various measures. As you can see on the right, the volatility of Basic & Green Materials was originally quite high. And we have been trying to improve it. But unfortunately, it is still quite volatile. And we are now seeing the impact of our measures in China. And we are currently implementing various policies based on the assumption that the impact or measures in China will not be transitory, but will continue for some time. We have set a target of JPY 36 billion in 2030. The combined numbers for both is shown in this rightmost graph. For Basic & Green Materials, we have to draw on a dash line for WACC. Ultimately, we need to get to level where we can go exactly beyond this brand. We are determined to accomplish this because we can have the web in Japan as an essential industry, unless we implement the plan. Overall, tax management will be in this form. But in any case, we have a goal of eventually exceeding 9% for this ROIC as well. For a past, we have set this kind of numerical targets, and we will put in reality. Historically, when we are in a very tight finance situation, our operating cash flow was in the triple digits, in the range of JPY 50 billion, JPY 60 billion or JPY 70 billion, and we are going around in circles. In the past, the base operating income was less than JPY 100 billion. Now we are finally generating operating cash flow of JPY 100 billion to JPY 150 billion. This means that we are now able to manage our cash flow at a level between JPY 100 billion and JPY 150 billion. Although there have been various unforeseen incidents if we are to further increase core operating income from JPY 200 billion to JPY 250 billion, we must raise the current operating income base. We need to double the current operating income base to more than JPY 200 billion or we will be in a difficult situation. We are looking at JPY 1.6 trillion and income from operations or cash generation. This is a cash flow management from 2024 to 2030. So this is what we call the cash conversion cycle. For example, with regard to inventories, we will thoroughly pursue CCC, which includes accounts receivable and accounts payable. In addition, we will review and liquidate policy shareholdings. In addition, we expect to generate approximately JPY 200 billion by promoting various so-called restructuring measures in Basic & Green Materials, which will lead to the shift to light assets. We also plan to allocate JPY 1.6 trillion to growth investment in existing businesses by creating securing JPY 100 billion by devising fundraising method. At the moment, we had a 50-50 image of generating and securing cash and allocating. However, once we are able to maintain and strengthen existing businesses and make progress and restructuring Basic & Green Materials, we will be able to lower the portion and allocated that amount to investment for growth. In conjunction with the progress of the plan in this area, we will allocate JPY 1.6 trillion in this area. The other is to return profits to our shareholders. As a matter of course, the company's profit level will rise and we plan to return JPY 300 billion to shareholders. This will also help the company to raise its overall capital. We are considering raising the total return ratio from 30% to more than 40%. Now let's look at the content in a little more detail. This table shows what the growth strategy is for each business division. Basically, the basic framework of these 4 business divisions will remain unchanged. First of all, as you can see here for 3 growth domains, we have various plans and progress. Regarding the progress of the plan, some progress has been made and some has not. Due to time constraints, we will focus on the main strategies here. Life & Healthcare is basically vision care and agrochemicals, which means that the Life Care and wellness areas have been growing quite steadily, and we are aware that we can maintain and possibly accelerate this growth in the future. The challenge is how to create the third pillar? Oral care and orthopedics and examination and diagnosis will be the third pillar. We are reorganizing our strategy once again to narrow it down to these areas, integrate them and grow based on the core technologies we have here. I mentioned oral care at the last time. We are considering various M&As. In particular, the U.S. market is a large market with very high profitability. So we will strengthen the market and pursue M&A and alliances. We are continuing activities. However, we are still in a situation where things have not gone as well as we had envisioned because of the conditions of the other party. Basically, the U.S. project was still ongoing. As I will explain later, we are developing a business based on a technological foundation. In particular, with regard to oral and orthopedics, we can use the same base materials and technologies based on our core technologies. So we will use those technologies in the orthopedics area as well as make new M&As and alliances, thereby increasing our total profit. The other is to use a slightly different technology for examination diagnosis. It is more of a bio-based technology that we have. The technology is based on acrylamide. We will enter several new areas of testing such as rapid diagnosis of sepsis, for example, by combining technologies based on equal and genetic recombination technologies with the already announced alliances and partnerships with external organizations. In the area of mobility, overall growth is basically steady. We are also seeing steady growth in composite material, PP compounds and functional compounds. However, something happened at TAFMER that we did not initially anticipate. Another key point is how to tackle the target and take the allocation of funds to a different part of the market. Well, the reality is that, regarding Chinese market, panel materials are not being replaced from EVA to TAFMER. The other is that solutions business centered on ARRK has been slower than initially expected, and ARRK has finally turned profitable. We will continue to promote solutions with ARRK as a course. So one of the key points is whether we can populate nurture the area. In terms of ICT, we have been investing intensively in ICT for the past 3 years. And one of the key point is how to reap the benefits of returning ICT market and linkage to cash flow. We are also looking ahead to the next stage. This is what led to the investment of Shinko electric industries. In this plant, we believe it is important to focus on priority business and invest intensive to expand our performance, which will ultimately lead to market expansion. Basic & Green Materials, well, first and foremost, accelerates the second act of restructuring. And by doing so, we will quickly bring this category to the new state that we are aiming for. The key point is to create a structure that can run on its own through these activities. Then how do we envision increasing core operating income to JPY 200 billion? This is a graph of the past, present and future. The left-hand side shows how we have grown from JPY 72.3 billion in 2019 to this point. The yellow areas are the negative factors. As shown in this figure, the original assumption was that growth would be up to this point. But in reality, it was JPY 105 billion. This figure roughly represents the original image of the plan. This shows that about JPY 50 billion is expected to the organic area. And the image was that there will be about JPY 10 billion in profit in the remaining areas. And the left most trouble of the transient factors. This is a little over JPY 10 billion. In addition, there are various M&A delays, market changes and negative market impact, as you can see below. The impact of this factor is shown in the dash line. And although there are some negative factors in total, we have come this far in spite of blue color part. So I was thinking, what about the next time we go here? One of the things that we are looking at is the growth of organic area, we're looking at a lot. And we have an image of roughly JPY 60 billion here. In addition, there are M&A and structural improvement project that we are working on. We are looking to add another JPY 95 billion to the total -- to bring the total to JPY 200 billion. Basically, we will not drag out the trouble in the next fiscal year. So that part naturally adds JPY 10 billion to the total. Furthermore, the key point is to make it realistic by promoting the measures indicated here. As I mentioned at the beginning, Blue Value and Rose Value are growing steadily. If I go a little further into the individual items, I would like to mention one more point about Life & Healthcare, which I mentioned earlier. So for Life & Healthcare, we're going to have a CAGR of 19% originally in 2019. Life & Healthcare was only JPY 14.8 billion. If we can maintain this growth rate, we believe that it is not an unachievable goal, and we are currently working on concrete measures to achieve this goal. How do we make sure that this medical part of our business gets a good boost. And I'm sure that the other 2 areas, life care and wellness will be progressing well. I will not touch on Life Care and Wellness. The lens monomers and coatings are shown here. In the area of lenses, we're basically targeting the U.S. and emerging markets in China, and we will replace polycarbonate and acrylic materials with new ones. In addition, we will sell the peripheral coatings and equipment used to apply the coatings. We have already connected a considerable amount of M&A to expand in these areas, and we will further promote M&A to increase profit. Since the area of lenders is also quite important. We have been able to generate considerable profit. As shown here, we were able to acquire James Robinson's photochromic technology and we expect further growth in the area of pigments. As you can see here, our agrochemical business has been growing steadily, especially overseas. New materials are finally being registered and sold in major markets such as Brazil, Thailand, India and Southeast Asia and we expect to continue growing at this pace for some time to come at several other new materials have registered in these markets. In addition, I've been working on the regional strategies I mentioned earlier and have established a new organization called the Emerging Market Development Office in Africa, South America and other regions. We're in the process of developing new areas, a petition to the areas have already been launched and are growing, and we expect further expansion in this field. In the medical field, which is the most important point, we have divided the upper part and the lower part in this diagram. The upper part is our original inorganic technology. This technology can be applied to dental and surgical materials. With this technology at the core, we have made the investments you see here. We have invested in [indiscernible] Medical and [indiscernible] as well in MDM Japan. The key point is how to organically link these investments and monetize them, and we are currently exploring further M&A and alliances in this area. We have already had several concrete projects in the pipeline, which I'm not liberty to disclose at this time, but if they grow, we can expect a considerable increase in profit. And I believe it is important to broadly pursue such measures. The other area is so-called testing and diagnosis area at the bottom of the chart, where we have been working on a number of projects. In this area, we are strengthening our efforts, including collaboration with the DNA chip Research Inc., in which we recently invested. Next is Mobility. Mobility is expected to grow by about 10%. The graph is going up and down a little bit, but our target for the future is JPY 93 billion. I think that in fiscal 2024 and fiscal 2025, we will probably hit a plateau because we are allocating the TAFMER products I mentioned earlier and allocating products to other areas. However, we hope to grow steady again starting in 2026. The current situation is not as bad as expected. We have already started to make progress in allocations and sales. And I think we may be able to get back on the growth trajectory from the second half of fiscal 2025 depending on the situation. In any case, we are aware that this part of graph is the bottom, and that it will not get any worse. In the end, we would like to achieve profit growth up to this point. This is an area where we have a great deal of resources to begin with. The biggest score of our mobility business strategy is a provision of materials. We will strengthen our elastomers and composite materials business. As in the future, we will also strengthen our solutions business. In case of ARRK, our efforts have finally paid off and company is now profitable. The key point is both a full-fadged solution-oriented business by leveraging resources such as Kyowa and the mobility development center with this [remote] area as the core. And the business of providing materials, there are some products that are already on the market, and some materials are already used in certain products. But they have not yet been a big market. So the key point is how to make them bigger. In terms of development of elastomers, in particular, we have TAFMER, MITSUI EPT and LUCANT, which are core product, the market for renewable energy, automobile and high-performance packaging materials are quite large. In addition to these, there are various lifestyle materials and other products. So in addition to developing our business in these areas, we are also exploring new growth markets in emerging countries, which we have not seen before, and we are now beginning to expand into these areas. The key point is to get our growth back on track by expanding both geographically and by expanding the range of applications. This page shows the field of composite materials, such as compounds, PP compound and elastomers, there are so many kinds of materials in this area. Each of them is a very small invites. However, they are used for very specific applications and are targeted at the high end of the market. We will continue to focus on these activities. This is a very important point. If we can do this properly, we will not be placed in a competitive situation, and we will be able to expand our business while securing the market for a strong point. Next is the ICT Solutions. As I mentioned earlier, it is also important to concentrate resources on priority businesses. As you can see here, we have made considerable investments over the past 3 years. So the key point is how to convert these investments into cash. As shown here, our products are used in semi conductor, image, converting and battery materials. As I mentioned earlier, including our affiliates, our products are used in a wide variety of semiconductor processes, both in the back-end and front-end processes. With this as our core, we have already begun collaboration with Shinko Electric Industry Corporation. In addition, the second uptown facility for imaging was in Osaka. And although it was difficult to start up, the market has come back and is starting up, and the operation rate is gradually increasing. Therefore, we're trying to further increase spend operation by developing new applications for imaging, such as smartphones, AL and VR and so on. Converting solution is also a very solid business. The category's products surely be used, especially as mono-materials and various industrial products become more sophisticated. So Mitsui Chemicals has a very large global network of basis and would like to expand our products there. The key point is to expand geographically, especially in emerging countries. I have not mentioned battery materials, but we have been strengthening our resources in this area as well. We are also working on the development of next-generation materials including electrolyte and some other materials for batteries with a view to the next generation. This is what I just mentioned. While EVs are being developed in the world, we will also keep an eye on hybrid vehicles, for example, as we develop the next-generation EV. This is what I just mentioned. We are aware that many of our products, including those of our affiliates are actually used in the semiconductor process. And we expect that the various products we are developing with Shinko Electric Industries will be released in the back-end process in the future. In the area of converting, as I mentioned earlier, we have these bases, and we will further expand them, which will lead to the development of new products and the expansion of our geographical areas. In particular, in the packaging materials and ICT fields, there are certain products that we are receiving strong inquiries about, and we will focus on expanding our business in these areas. In the area of battery materials, we are seeing a new trend and requirements such as rapid recharging, safety and the need for products that can withstand extended use. To meet these needs, we have a variety of additives and other products, such as electrolyte MILLET shown on the right, as well as [indiscernible] and other products that are used in coatings and adhesives. The key point is to further develop and expand these products for next generation. So here is a Basic & Green Materials. The figure here has shown how we achieved the goal of JPY 32 billion by 2028, one is for profitability by promoting the second act of restructuring. The other is to strengthen the outflow, so to speak. The other is what we call down for enhancement, which is to improve capital efficiency, create synergy with other products and ensure economic security. We are now selecting inductors with these 3 points in mind and the selection of industries, those that meet these criteria will be strengthened and enhanced business for both our process. In particular, a new MDI plant has already started commercial operation. This is a very good time to start up a new plant. So we are accelerating the commercial operation. Even if I have to push a little. So some of our induce products are very portable and have good future potential. So we will focus on such products to strengthen downflow. By doing so, we are aiming for JPY 32 billion in 2028 and JPY 36 billion in 2030. I have written here about the various things we have been doing. But let me talk about the new things that are emerging today. The first is that we are now considering the conversion of our overseas business in phenol into a light asset. The second is the pursuit of optimization of domestic phenol. The third is the shutdown of phenol facility in Chiba. This has already been decided, but we are now working diligently to shut it down by fiscal '26, which means 4 [indiscernible]... And as for the new propellant plant, we can produce high value-added and high recyclable products. This plant is coming online. In anticipation of this, we are currently considering suspending the operation of [more] line at the Ichihara plant. We are also considering collaboration with the other companies in order to strengthen our polyolefin business as a whole. We are currently starting the optimization of this collaboration. And although I cannot give you any specific details at this time, I would like to disclose this issue again when we are ready to disclose it. As for the reorganization of the so called new chemical complexes in the East and West and the study of greeting, as we announced in the newspapers, the situation is progressing rapidly. For our side, we want to make it so that it can run and walk on its own. One perspective is to optimize the so-called efficiencies, and the other is that we have to promote green. We are now promoting these measures in order to make Basic & Green Materials firmly rooted in Japan as the final essential industry. In the future, it will be necessary to further realize the current measures, including GHG emissions by actually implementing them, and we are working diligently to study ways to advance these measures. In this process, as I mentioned earlier, we are also looking at a 40% reduction in GHG emissions by 2030. We are now working on a grand design for the reorganization of the cracker, which is to be managed by the Chiba crackers, one in the East and the other in the West. First of all, with regard to Keiyo and our company have already formed an LLP. And we have decided to consolidate the two crackers into one. We are now in the process of finalizing the study to realize the plant, which will be completed in 2027. When the plant is scheduled for a periodic repair and shutdown, we will convert to a single cracker at that time. Our objective is to create an advanced chemical complex and for this purpose, 4 companies in Ichihara area, Marusan Chemical, Sumitomo Chemical, our company and Idemitsu Kosan must work together to realize this goal. The 4 companies are working together to realize an advanced chemical industrial complex apart from optimization. In the West, as well as is closed in the newspaper, Mitsubishi Chemical, Asahi Kasei and Mitsui Chemicals are forming joint operating entity. And we will accelerate our activities to realize advanced chemical complex in Mitsushima area and Osaka area. And we have already started various kinds of consideration. In any case, we will work closely with the authorities because of the antimonopoly law. We will draw up a plan for this kind of reorganization with a sense of speed. And at the same time, we would like to implement it with a sense of speed as well. I have high expectation that restructuring will move at a considerably accelerated pace in a different way than in the past, since all the companies involved working with the same work. As for the 40% reduction in GHG emissions and realization of carbon neutrality or in other words, CO2 reduction. As I mentioned earlier, as you can see here, we have been able to see the so-called restructuring part of the project, and we are now able to produce figures for what we can expect from the restructuring. And we include this in our efforts such as the conversion of raw fuel and the new development of ammonia, which has been subsidized by GI fan and which is also progressing closely, we can see that achievement of 40% is now a very concrete reality. As I mentioned earlier, we are pursuing a solution-oriented business model in these 3 business areas with the new business development center playing a central role. The first CVC fund has already been launched with JPY 5 billion and is almost ready to be created and the consideration of the second fund is now underway. In any case, we are working towards the early implementation of this idea, which is different from our past B2B type or self-sustaining circulation. In order to realize this idea, we will create a co-creation space in [indiscernible], Niigata and Nagoya to provide support for semiconductors, research and mobility, respectively. So we will further accelerate the development of new business and new products in cooperation with the co-creation spaces centering on these areas. This is the last part of our presentation. And I mentioned earlier, we will be reviewing our target in order to improve our corporate value. As you can see here, one of them is that what would be necessary to first accelerate the business part of our transformation. So we will expand earnings in gross domain. And we will do so without sanctuary, regardless of whatever we are replacing the so-called portfolio or gross domain. By doing so, we will maximize operating cash flow. The second is a -- the second act of Basic & Green Materials by improving capital efficiency, thereby reducing volatility in the area of Basic & Green Materials and performing the shift to light assets. In addition, we will transform the company into an advanced chemical complex. The other thing we need to do is to review our policy holdings and promote the conversion to light assets. So in addition to CCC improvement I mentioned earlier, we will promote the shift to light assets in terms of cash generation. We will double operating cash flow to a level exceeding JPY 200 billion by expanding earnings and improving CCC, which is linked to this measure in terms of capital policy, we will strengthen shareholder returns by raising the total return ratio from 30% to more than 40%, including dividend increases and share buybacks. We will also reduce the cost of capital through such measures. We will improve capital efficiency in a way that raises our eyes to reach our goal of 2030. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]