SK Innovation Co., Ltd. (A096770) Earnings Call Transcript & Summary

[Interpreted] Good morning. I am [ Cheo Lee ], IR Project Leader at SK Innovation. Thank you for taking the time to join us today on this 2022 Q1 earnings call. Today's presentation has yet to be reviewed by our external auditor, so the results may be subject to change based on such review. With that, let me hand it over to the CFO, Mr. Yang-Sub Kim, for the presentation.

[Interpreted] Good morning. I am Yang-Sub Kim, CFO of SK Innovation. First, let me thank our shareholders and investors for your continued interest in the company. On the call with me today are executives from SK Innovation and its major subsidiaries who will answer your questions during the Q&A. Now let me start the presentation on SK Innovation's 2022 Q1 performance. First, let me start with the full company performance, including sales and operating profit. For sales, Q1 saw an increase in crude and refinery product prices as well as EV battery sales volume. And as a result, it was up by KRW 2,540.2 billion Q-o-Q to KRW 16,261.5 billion. For operating profit, a surge in refining margins and oil prices led to higher inventory gains for refining, while E&P profit also improved, resulting in operating profit increasing KRW 1,707.6 billion Q-o-Q to KRW 1,649.1 billion. On nonoperating profit, larger FX-related losses driven by a weak Won and more derivative losses on the back of rising crude led to a decrease of KRW 222.4 billion Q-on-Q to result in a nonoperating loss of KRW 273.1 billion. In detail, the nonoperating loss can be broken down into FX-related losses of KRW 82.8 billion, derivative losses of KRW 152.8 billion, net interest expenses of KRW 76.9 billion, equity method gains of KRW 38.9 billion and others, KRW 10.5 billion. Next, let me go over the balance sheet. Total assets as of the first quarter increased KRW 5,004.8 billion versus 2021 end to KRW 54,539.8 billion. The main drivers were higher inventory and trade receivables stemming from the rise in crude and refining product ASP and also an increased intangible and intangible assets from investments made. Liabilities increased to KRW 4,022.1 billion to KRW 33,946.3 billion, and the debt equity ratio is 165%. The main drivers are an increase in trade payables of both due to higher crude and an increase in debt. In addition, net debt increased KRW 1,984.6 billion to KRW 10,397.5 billion as net working capital increased in tandem with crude and facility investments were made for battery capacity additions. Next, let me drive into the Q1 market and performance of each business. First, the refinery business market backdrop. Though monetary tightening led by the Fed rate had started, global oil prices surged as an ease on COVID restriction in major markets fueled the recovery in demand and the Russia-Ukraine conflict that took concerns about supply challenges for oil. If we look at the Q1 product crack, it strengthened significantly, and demand led by middle distillates recovered with looser COVID measures and U.S. refineries blackout amid low inventory and shortage in Russian feed in Europe which drove crack higher. In terms of gasoline crack, it strengthened on an increasing mobility demand in the region and export quota cuts from China and U.S. refineries production issues. Against low inventory, diesel crack also surged on concerns about supply shortages in Europe, which is highly dependent on Russia. In kero crack, it rose due to stronger winter heating demand and expectations on a recovery in jet demand and also the influence of stronger diesel crack levels. Next, let me discuss our performance. In terms of the operating profit for the refining business, strong refining margins, coupled with a weak Won created a better market backdrop, while the rising crude translated into higher inventory gains. On a Q-o-Q basis, our operating profit increased KRW 1,286.5 billion to KRW 1,506.7 billion. In detail, the geopolitical tensions around Russia and Ukraine shocked the supply balance of global crude and petroleum products, which increased refining margins. Q-o-Q exports grew significantly, leading the improvement in profit. Inventory-related gains, including LCM in the Q1, was KRW 588 billion. For Q2, refining margins are expected to remain strong as supply remains tight due to Russia-Ukraine, and inventory continues to be low. But in the second half, we actually believe that refining margins may change based on the length of the Russia-Ukraine conflict and impact on global supply and demand from such a situation. In addition, possible post-COVID recovery in global demand or contraction may also take place due to high oil prices having an impact. Next, let me talk about the petrochemical market. For polymer, in the first quarter, overall market recovery has been slow and inventory for system products, including PPE, have rose, resulting in weak market fundamentals and product spreads. For aromatics, including PX, PTA demand increased as new capacity from China Yancheng went online. Moreover, some Chinese have cut capacity and supply because of transportation issues, which together created flat to strong spread on a Q-o-Q basis. Let me move on to the business performance. For the petrochemical business in Q1, polymer spreads such as PE and PP were weak, but operating profit was supported by better Q-o-Q PX spreads and gains on inventory from higher crude and naphtha. In total, turning operating profit back to the block. On the 2022 polymer market outlook, there is downside pressure coming from factors including a ramp-up of new PE capacity in the region, but we also expect supply issues from lower utilization as cost increase. As COVID-19 in China surges, the timing of a recovery in PP demand is uncertain, but spreads are expected to improve as naphtha prices stabilize and some capacity goes into turnaround. For PX and other aromatics, the second half turnaround for PX and PTA capacity and new additions of PX and PTA in China are expected to lead to more volatile supply/demand dynamics, but spreads, in general, are expected to improve gradually. Next, let me discuss the Lubricants business. Lubricant margins and sales volume decreased as crude prices increased, leading to operating profit decreasing KRW 56.1 billion quarter-over-quarter to KRW 211.6 billion. As for the 2022 BO market outlook, we expect spreads to soften versus the fourth quarter of 2021 as costs increased and base oil supply eases. But as sales prices increase on the back of rising costs, spreads are still expected to maintain the first quarter levels. Moving on to the next page. I'll talk about the E&P business. For the first quarter, E&P operating profit, it was up by KRW 86.5 billion quarter-over-quarter at KRW 198.2 billion, which was the result of sales prices increasing, though sales volume decreased slightly. Next, let me go to battery sales business. Battery sales in the first quarter increased KRW 193.4 billion quarter-over-quarter to KRW 1,259.9 billion due to stronger sales by Europe OEMs and an increase in ASP driven by higher metal prices. Even though material prices increased and initial costs related to the new #2 Hungary factory was recognized, an increase in sales volume and the base effect created by the absence of one-off expenses recognized in the previous quarter led to the first quarter operating loss improving KRW 37 billion Q-on-Q to a loss of KRW 273.4 billion. This year, full-fledged production from the new U.S. and Hungary factories is expected to generate revenue for our new customers, such as Ford and Volkswagen. For the details of capacity expansion by region, please refer to the appendix. For the full year 2022 sales, it is expected to exceed our initial guidance of the mid KRW 6 trillion and land closer to the mid KRW 7 trillion in level due to strong customer demand and higher ASP levels. And finally, let me move on to the I/E Materials business. Those sales volumes softened, sales prices were adjusted in the beginning of the year and operating expenses increased. The consolidated operating profit of the I/E Materials business in Q1 was up KRW 29.3 billion Q-on-Q to record a loss of KRW 3.1 billion due to the base effect of the previous quarter. For the details of the LiBS capacity expansion plans, again, please refer to the appendix. This is the end of our presentation, and we will now start the Q&A session. [Operator Instructions] In addition, please remember that the Q&A will be conducted with consecutive interpretation.

[Foreign Language] [Operator Instructions] [Foreign Language] The first question will be presented by Hyunryul Cho from Samsung Securities.

[Interpreted] I am Hyunryul Cho from Samsung Securities. I would like to ask you 3 questions. First question is you have just mentioned that regarding your guidance for your battery revenue, you are going to upgrade that guidance from KRW 6 trillion level to mid KRW 7 trillion level. Could you explain as to the rationale behind that change? And also, can we still expect your operating profit to reach a breakeven point in Q4? Second question is regarding the capital requirements or the resources that are required for SK On. I understand that your refinery business has recent posted quite a bit of profit. I'm wondering whether SK Innovation, hence, has a plan to participate in capital increases for the benefit of SK On. And the third question is, recently, we've seen a very tight supply of the raw materials and feeds that are used for battery. And also in Europe, there is a move to make battery recycling, a mandatory requirement, but through legislation. I would like to understand and get an update as to what the company's BMR, Battery Metal Recycle program, is currently at.

[Interpreted] This is [indiscernible]. I'm from SK On. I'm Head of Battery Strategy and Planning Office. Responding to your first question as to the rationale behind why we have increased our initial guidance of mid KRW 6 trillion in revenue to mid KRW 7 trillion. One of the key drivers behind that is because the key resources that's used for battery development is metal, and the metal prices are passed through on to the ASP or the price of the batteries. And because of that pass-through mechanism, we have seen our revenue actually go up. That actually is one of the rationale behind the adjustment in the guidance. In terms of the operating profit, whether we can actually achieve breakeven point by Q4. From a mid- to long-term perspective, as we see increase in production volume, we expect that as we gain economy of scale and excellence in operation, we will be able to see improvement and profitability. From a short-term perspective, though, in 2021, there were some semiconductor supply issues for the auto industry and also because of geopolitical issues, the prices of the raw materials have been pushed up. So there had been some external risk factors. Internally, there were relevant costs that were required, too, for the initial operation of our sites in United States and in Hungary. And also with the capacity additions, there were also requirements for additional head count. So from a short-term perspective, there were some upward pressures on the cost base. However, we still -- However, therefore, for Q4 of 2022, whether we would be able to achieve breakeven point in operating profit, there is, I'd say, a slight possibility that this time frame may be pushed back a little.

[Interpreted] This is the CFO, I'm Yang-Sub Kim. I would think that you asked the question because there is expected to be quite a significant amount of investment that will be required on the part of SK On. And so I think it will be opportunity for me to walk you through the funding plans for SK On. Now in terms of the need for financing for investment, one of the ways is to go through the JV entity. For instance, the JV entity that we have set up with Ford, when we are financing through the joint venture, there will be equity investment on the part of our company as well as on the part of the OEM. And in light of the fundraising capacity of the JV entity itself, there will also be that financing that has actually been done by that JV entity. And also the incentive program that's provided by the government is another very important source of financing. Also in light of, therefore, the JV entities capacity to raise funds, as well as the incentive provided by the government, we believe that the level of burden in terms of resource support that we need to provide to that entity is going to be much lessened. And after that, if we need any additional financing, as you know that there's currently negotiation and discussion going on the pre-IPO or we call it the long-term financial investor process. So through the long-term FI, we will be able to finance for the required resources. And as the battery business continuously develops. The earnings is going to go up, and it will generate cash flow and part of that will, of course, also be used for funding such investments. So we believe we have sufficient plans in place to support the growth. Do we have such financing plans well in place. So there will not be a case where SK Innovation will be making capital increase and injecting that to SK On. And the key purpose and reason behind splitting off SK On as a subsidiary is basically to secure that investment resources. So I can tell you that SK On will be able to continuously, on its own, fund and finance the required resources for investment.

[Interpreted] I will respond to your third question. I am [ Hyun-Suk Kim ] Head of [ BMO ] Business Development Office. As you have mentioned, in Europe, starting 2030, there is a legislation in place, making it mandatory for battery makers to use a specific percentage of recovered and recycled metals. Of course, we would have to wait and see a little more. But I think from a [ BMO ] perspective, this actually triggers a creation of a separate market apart from mining or extracting metal from salt lake. So that is quite positive. Regarding an update on our [ BMO ] initiative, we shared with you during the previous conference call that with respect to the lithium recovery plant, have actually achieved mechanical completion in December and that we are planning to operate -- go into operation in February. And as mentioned, we have actually started the operations of the demo plant as of February 18, and it is under normal operation. We will be testing many different, I guess, parameters and conditions for the most optimal running of this plant, and we will be able to define the optimal level of perimeters and data for the commercial plant in the future. And we will also make thorough preparations for a commercial plant.

[Foreign Language] The next question will be presented by [indiscernible] from CIMB.

[Interpreted] I'm from CIMB. I would like to ask you 2 questions. First, due to the lockdown in China, I would presume that this would have an impact on the supply chain. For the company as well, you're currently operating 3 plants in China, and I understand that you are adding capacity at Yancheng as we speak. So has there been any disruptions or interruptions in your production or in terms of logistics? Second question, can you provide us with an update on your battery developments with respect to different form factors like the prismatic and also the LFP?

[Interpreted] This is [indiscernible] from Head of Battery, Strategy and Planning Office. Relating to the lockdown impact in China on our production. Basically, our site is currently under normal operation. The site that we are located in is not directly impacted by the lockdown or the restrictions on travel as had been applied to Shanghai. And also at Yancheng, we are very closely talking and cooperating with the local government. And so at this point, there is no production-related interruptions that we are experiencing. And we will continue to very closely communicate with the local authorities so that we make sure that there is no interruptions in the build-out of the second plant. Now in terms of the logistics, currently, it is correct that there is restrictions in the access to major ports within China, but our production sites in China have actually some alternative routes that we were able to secure like in locations at Qingdao and Tsingtao. And so in terms of logistical aspect, there aren't any problems that we are experiencing [Audio Gap] is extended, then we will, of course, continuously secure or put in our efforts to make sure that we secure additional capacity in other port locations. And in order to do that, we are, on a real-time basis, monitoring China's COVID-19 related policies, and we are responding accordingly.

[Interpreted] Yes, I will respond to your second question. I'm Head of Battery Business Strategy Office. So you are correct in that recent trends -- you are correct in that the recent trend shows that there is diversified need for different chemistry and different form factor, and SK On in order to equip ourselves with appropriate readiness, we are engaged in technology development. So for our company, we actually had an experience of developing an LFP 10 years ago. And if we can bring our technological capabilities in bringing high-nickel content, on top of which, if we can improve on the energy density, as well as the fast-charging capabilities of LFP, that will prove to be quite helpful. So we are planning to actually complete the development of LFP by the end of this year, and we are currently in discussions with the relevant customers on that. Of course, however, we will align our mass production schedule in line with the needs and the order requirements that we are seeing from different OEMs. Now in terms of a comparison between LFP in terms of energy density output as well as low temperature -- low-temperature characteristics, it actually lags behind the properties of NCM. And also, recently, there has been an increase in the cost base. The lithium carbonite prices have actually gone up. So we will continuously monitor the technological trend, as well as the cost backdrop. So in terms of the prismatic, we are aware of some of the customer needs and requirements as we go on with the development, but we do not have any concrete commercialization of business plans in place. However, on a technology basis, we will be able to leverage the technology that we have used in developing the pouch-type batteries. And if we utilize that, we will be able to gain a differentiated edge and also the prismatic cells as well.

[Foreign Language] The next question will be presented by Parsley Ong from JPMorgan.

Congrats on the strong results. I have 3 questions. First question is on your battery division. I think most investors are a little concerned about your Hungary and U.S. plant turnaround. Could you share with us some details about their operational status, like the ramp-up schedule and customer new model launch schedule? So I see some headlines about Volkswagen delaying some ID.4, ID.5 model. So maybe could you provide some color on the demand and new model launches for European customers? And is there potential for your U.S. plant to breakeven earlier than your Hungary plant? And can you share with us what the margins are like at your China plants in 2021 versus first quarter 2022? Are they already profitable? Second question is on raw material cost pass-through. Some of your peers have negotiated more raw material cost pass-throughs. Could you share with us the details which SK has negotiated to be on a cost factor basis? Third question is on your inventory gain. Could you just give us the inventory gain breakdown by division?

[Interpreted] Yes, this is [indiscernible] from the Head of Battery Strategy and Planning Office of SK On. And maybe I can take your first question. As you have mentioned in Hungary for the #2 factory there, and in the U.S., we do have the #1 factory that just started commercial operations. Since the commercial operations have just started in the first quarter in terms of the productivity levels, whether it be in terms of utilization or in terms of yield, we are still yet to reach a very stable level. As we have seen in the case of other capacity, we're still in the initial stages of commercial operation and production. And as a result of that, in this process, we are facing some minor issues that we need to iron up. And as a result of that, as you can see, there were some initial costs that we recognized. And with regards to the point about our OEM customers and their sales plans going forward, I do believe that there are a wide variety of elements that would impact our OEM customers' sales plans. For example, how semiconductor shortages or software and a wide variety of other factors. So as a result of that, it would be difficult for us to share with you in detail or confirm whether there would be a delay in that plan or not. What we can say is that, from our side, according to the initial plan, we are trying to ensure that we are ready, whether it be in terms of mass production or in terms of sales to move when necessary. And about your point about the Chinese margins, what I can say there is that, of course, for China, the mass production there is now in the second to third year. So on a relative basis, this is a more mature site that we have. So when compared to the new capacity or our new sites that we have opened, of course, the margin levels are higher. So as a result of that, as was the situation last year from China this year, we do believe that stable margins would be enjoyed. And as -- and in addition to that, for the new sites that we have opened in the U.S. and Hungary, we are trying to apply the know-how that we have been able to accumulate from other production sites elsewhere. And as a result of that, we do think that the overall stabilization of that capacity will take in a very quick manner. So as a result, our expectations are that in the second half of the year, whether it be in terms of yield or in terms of utilization, we will be able to be on par with the levels that we see in other production sites. And maybe to move on to your second question about metal prices and the pass-through mechanism that we have with our clients. As you are well aware, in terms of battery prices and battery costs, the largest cost item is the metal that goes into the cathodes. And therefore, for that portion, we do have a pass-through agreement with our OEMs. So any price increases in the middle will actually be passed through to our sales price. However, if you look at the current situation, not only for these metals that are passed through, but on the nonmetal side for other materials such as the tin-copper film or in terms of aluminum or the electrolytes, these prices have also been rising. So as a result of that, that has uplifted our overall costs. So for these non-linked materials over the mid- to long term, the strategy is that we want to have a strategic relationship with our suppliers so that we can increase their capacity and also decrease their unit production costs. And at the same time, with our clients, we continue to have ongoing discussions to try to broaden the scope of pass-through materials that we have. And this is, of course, an ongoing process.

[Interpreted] this is [indiscernible], Head of the Finance [indiscernible] Office. And maybe I can give you the breakdown of the inventory-related gains that we have for each business line. So for the Refinery business, it was KRW 588 billion; for the Petchem business, KRW 87 billion; and for the Lubricants business, KRW 56.5 billion.

[Foreign Language] The next question will be presented by Jae Sung Yoon from Hana Financial Investment.

[Interpreted] This is Jae Sung Yoon from Hana Financial Investment. I would like to ask you 2 questions. First, because of the geopolitical issues surrounding Russia, Russia had stopped supply of gas to European countries, really pushed up the electricity price. I would like -- and so some of the plants based in Europe had to stop their operations. You have plants in Hungary and Poland, I would like to understand what the impact of that rise in electricity tariffs has on your operations. Second question, the run rate of the CDU is currently 77%. How far do you think that run rate could actually go up? And the diesel margin we are seeing has been very strong recently. Are there any efforts on part of the company to further bring up the yield?

[Interpreted] I am [indiscernible] from Battery Strategy and Planning Office. Responding to your question about the impact of the electricity cost in Europe. SK On, yes, has 2 plants based in Hungary. And recently, because of the Russia-Ukraine conflict and some other issues, LNG price and electricity tariff has gone up significantly. However, we have in place in Hungary a mid- to long-term contract, electricity supply contract, and we also utilize spot contracts as well. So in terms of the power supply to our Hungary locations, we are currently experiencing no interruption.

[Interpreted] Yes, I am Yun-hi Lee, the Head of Corporate Planning Office of SK Energy. I will respond to your second question. So the way that we determine the level of utilization of the run rate is in consideration of the refining margin. And the refining margin is comprised of the CDU margin as well as the secondary process that follow or which is called the cracking margin. So typically, a CDU margin is going to be in the negative realm. So what we do is rather than utilizing the crude, we minimize the run rate of the CDU facility, but we want to maximize the use of the upgrading facilities by adopting an external feed source in order for us to maximize the refining margin. And then basically, in order to determine the run rate of the facilities for the upgrading process -- processing or upgrading facilities, basically different refinery companies have different CDU or the differences in the CDU facilities that they operate. And hence, it is based off of that baseline that our CDU run rate is 77%. However, for us, we source some other external feed, and that helps us to determine the CDU run rate. And based off of the actual operation base run rate, currently as of Q1, that run rate or utilization is at 95%. So in Q2, we expect with the prolonging Russia-Ukraine conflict and people's expectation for the resumption post-COVID following the reopening, we expect the product crack to be maintained at an elevated level. And based off of that crude conversion base or the actual of run rate-based figure, we are expecting our run rate to be 95%. Recently, because we are seeing strong diesel margins, we have adjusted the process mode in order to maximize the production of kerosene or the middle distillate, and also the CDUs, diesel production had gone up, and we have also adjusted the [ SCCO ] in order to focus on maximizing the diesel production for [ SCCO ], excuse me.

[Foreign Language] The next question will be presented by Young-chan Baek from KB Securities.

[Interpreted] Thank you for the opportunity to ask questions. There are 2 questions that I would like to ask you. First is about your battery operations for the initial costs that you incur for new capacity. There was some that we recognized in the first quarter related to your Hungary site. In the second quarter, what sites? And also, what amount of the same type of initial ramp-up cost would be recognized? That's the first question that I have. And the second question that I have is for your next-generation battery roadmap in terms of development, whether it be solid-state batteries or cobalt-free batteries, I do think that there are various other battery types that are under development. So if you could discuss that with us, that would be appreciated.

[Interpreted] Yes, this is [indiscernible], Head of the Battery Strategy and Planning Office at SK On, and maybe I can address your first question about the initial costs related to new batteries. So your question asked about, in the second quarter, whether there would be another or more initial costs that we recognized. It is true that if we look at the second quarter in itself, for the overall normal ramp-up of these sites, we do think that it will be very challenging to reach 100%. However, for the time being, we don't have any other, or for the short term, we don't have any other sites we will be opening for mass production. And we don't have any new products that would require new specifications. So as a result of that, we do think that we can focus on the current 2 sites that we have and stabilizing those production.

[Interpreted] Yes. This is [ Eugene Suk ] from SK On, Head of the Battery Business Strategy Office, and maybe I can address your second question. So as you said and as you have mentioned, by different car types, we do think and also by different segment that there is a wide variety of different technology that will be required. For example, there could be a cobalt-free and also cobalt-less. So I do believe that in light of that overall backdrop, it would be better for us to look at and understand the customer needs better and also the evolution of technology available to give you more details about the future road map at a later time. But I think what we can say is that of the various battery technology that is available for a solid-state battery, this is an area in which we are very actively engaging in research and development. As you are probably aware, internally, for solid-state batteries, we have a dedicated organization, which is called the Emerging Energy Research Center. And we are exerting various efforts through this organization to strengthen the overall resources required and also the R&D capabilities. And as you are also aware, we have made an equity investment into solid power. So as a result of that, going forward, we also will continue to have a very open stance towards using and utilizing outsourced technology and partnering up with different outside partners and engaging in open innovation. So for solid-state battery, of course, it does have its own benefit, whether it be in terms of energy -- it does have its shortfalls, whether it be for stability, energy density and also the inventory that can be hold. But we think that at the same time, there are issues that need to be solved, whether it be for the ionic conductivity or the lithium dendrite. So right now, there are a lot of battery producers that are saying that a solid-state battery can be created by the mid-2020s. However, if we look at the overall situation, we do think that there will be more time that would be required for such development to take place. And in addition to that, not only does the technology need to be in place, but also the processing and also the equipment that would be required to create these batteries in a more mass format. At the same time, to be able to have more customized products for OEMs, that in itself would require product development and also the mass production of that. So if we take all of these different factors into consideration, for our solid-state battery, to be truly commercialized, we do think that it will have to be the late 2020s for that to take place. So from that point of view, right now, we are focusing on the technology development that would be required for us to be in a state of readiness for the market to take off in the late 2020s.

[Foreign Language] Due to time restriction, we will take the last question of today. [Foreign Language] The last question will be presented by Oscar Yee from Citi.

Could you talk a little bit more about the sort of revenue guidance increase? Obviously, there was part of the ASP from the metal cost pass-through. But in terms of shipment, battery shipments, are you actually raising your target compared to your original numbers? Or is it all the revenue increase is all because of ASP pass-through? Second question is also for your first quarter results in terms of your revenue for EV battery. Can you also roughly given an idea about in terms of the shipment basis, on a Q-o-Q basis? Is it flat or up or down? Any sort of guidance? And thirdly, I saw your waterfall chart on the battery sort of cost. The raw material price increase factor, you mentioned there, right, is actually quite big, it's roughly working out to be around 4 percentage points, which, to me, actually looks a little bit high because most of your metal has been passed through anyway. Is there any particular -- I mean, among all these sort of other non-capital item, electrolyte or copper foil, could you identify which of these items are driving that sort of raw material price increase on a Q-on-Q basis?

[Interpreted] Yes, this is [indiscernible] from Battery Strategy and Planning Office. Responding to your first question, yes, we increased our revenue guidance by about KRW 1 trillion, and we mentioned that the rationale behind that is because of the ASP rise on the back of metal price increase. In terms of the shipment or the volume impact, we will not be able to say that there was any additional volume as against our plan. Now what I mean by that is because if you look at Q1 figures, because of the semiconductor supply issue relating to automobiles, our volume shipment had been actually less compared to our plan. But as we enter into the second quarter, we believe that such supply issue will somewhat be mitigated, and hence, we will be able to ship out based on the projections or the target that we put in, in our plan. Now moving on to second question, I just mentioned just a minute ago that our sales volume and shipment had been lower compared to our plan. But on a Q-on-Q basis, there was an increase. So as we entered into mass production in U.S. and Hungary site, starting Q1, we've seen higher revenues come through from Daimler and Ford. And hence, we have also seen an increase in volume. Your last question on the items that are not passed through, globally, there's been commodity price increases. And as you've said, there's been a price rise in anode, electrolyte, copper foil and aluminum. So I cannot say that there was just 1 single item that had significantly impacted the P&L.

[Interpreted] Yes. With this, we would like to wrap up the Q&A session and also the conference call for the first quarter of 2022. Thank you for your participation. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]