Sumitomo Chemical Company, Limited (4005) Earnings Call Transcript & Summary

Hello, everyone. I'm Keiichi Iwata. Welcome, and thank you for joining Sumitomo Chemical's IR Day. I want to express my deepest appreciation to our investors for your continued support for and understanding of our business. This is today's agenda. I'm just going to give you an overview of the main points. So my part will be fairly short. Please go to Page 4. We are improving our business portfolio by strengthening or expanding our businesses as well as exiting from or shrinking some of the businesses we do. What you see in the upper half of the slide are some of the investments we've made or the milestones of our development efforts since the last time we spoke on the IR day. The details will be provided later in the presentation. At the same time, we are exiting from or shrinking some of the businesses we do to further increase the metabolism of the organization, if you will. For instance, we exited the caprolactam business back in October as we had announced. We will also exit the dyestuffs business in March next year as scheduled. As for our Pharmaceutical business, we divested the U.S. sales rights for Brovana and Xopenex respiratory drugs. And we announced in the press release last week that we had decided to divest the shares in Sumitomo Pharma Food & Chemical. This company is a subsidiary of Sumitomo Pharma and it deals with foodstuffs and food additives. We decided to sell this company because its business is not exactly germane to the pharmaceutical business which we should focus on. We are, of course, looking across the organization and considering to divest some other businesses regardless of their size, taking into account their growth potential and profitability. I will not say today which businesses we're going to divest because that would create a necessary speculation. I just want to say that we're moving forward with agility. The next topic I want to talk about is that we're going to build a new plant for semiconductor process chemicals near Houston, Texas. We made the decision back in September. The new plant is scheduled to be operational in 2024. More recently, the major chip makers have announced one after another that they are going to build additional lines in their foundries. The red stars you see on this map represent those boundaries. As the world's top supplier of major semiconductor chemicals, Sumitomo Chemical has developed and perfected technologies, such as ultra-high purification and trace impurity analysis and build a quality assurance structure, and these are our strengths. We decided to build a new plant because we are convinced that we will be able to grow our business in the U.S. market by further leveraging our strengths. We are also bolstering our compound semiconductor materials business. So far, silicon semiconductors have been mostly used for power devices. But nowadays a renewed focus has been put on compound semiconductors, which are more suitable for smaller high-performance power devices. In fact, we believe that the market is evolving to a new stage. We estimate that the market size will grow sevenfold to more than JPY 1 trillion between 2022 and 2030. And we are doing the following to bolster our compound semiconductor materials business. While we are working to develop and commercialize the technology that allows us to mass produce larger wafer gallium nitride substrates for power devices, we are exploring opportunities to work together with some of the world's leading power device makers. For more flexibility and agility, we absorbed 100% owned subsidiary, SCIOCS, as we announced the other day. The next one is also something we announced in the press release last month, which is about the development of soft solid-type batteries. We've been working on this with Kyoto University since 2020, and this year, we developed a new material and successfully created soft solid-type batteries. And we look forward to the commercialization of the soft solid-type batteries in 2025. Current solid-state batteries based on solid inorganic compound electrolytes are literally solid or hard, and there is always a contact issue at the electrode-electrolyte interface. Our soft solid electrolyte solved this contact issue because it allows contact without the need to apply pressure. We will continue to make improvements to this to achieve much higher capacity than many of the current liquid electrolyte lithium-ion batteries. Our target is 500 watt-hour per kilogram. When it comes to our biorational business in the crop sciences sector, our focus continues to be on growing this business through organic growth as well as mergers and acquisitions, as I explained several times before. The point I want to make with regards to R&D within organic growth is the expansion of the Biorational Research Center in Illinois. One of the most recent achievements from this center is, of course, that we began selling a plant growth regulator. This time, we added new facilities to the center, and they are scheduled to be operational in April 2024. And this investment will accelerate the development of over 40 promising pipeline projects. In addition to this organic growth, we are also focused on adding more biorational products in our portfolio through mergers and acquisitions. There are a number of candidates that we are looking at right now. The next topic I want to talk about is the progress on our partnerships with start-ups in relation to the creation of next-generation businesses. In the field of synthetic biology, one of the required technologies that we currently don't have is a cutting-edge technology and strain design. That is exactly why we've gone into partnership with leading start-ups such as Conagen and Gingko Bioworks to explore business opportunities together. We put together details in this slide, so please take a read. The other 2 next-generation businesses are related to health care. Mirage is a start-up from Kyoto University and our partnership with Mirage started this April in the field of cell culturing technology. The next slide is about the progress made to the nidus Green Investment Fund Projects. Four projects in chemical recycling, one project in recycling of secondary batteries and one project in the development of membrane-based CO2 separation. These 6 projects of ours are funded by the fund. Let me quickly go through the progress made in some of the projects. At the top, on the production of olefins by direct decomposition of waste plastics, we are working with Maruzen Petrochemical and Muroran Institute of Technology in Hokaido. The development of catalyst technology is the key. We have confirmed in the lab that the amount of olefins generated meet the target yield. As for the efficient alcohol production from CO2, we are working with Aist and Shimane University. We've locked down the basic design of a reactor, which is the core of this technology and have just started building a pilot facility. We hope that through these partnerships, we can complete the development of these new technologies by 2030. This is our business forecast, comparing core operating income between the fiscal year 2022 forecast and the 2024 target. The forecast for pharmaceuticals is still under review. So we are just highlighting the other 4 sectors in light blue. We are working to achieve these targets by thoroughly executing our growth strategy. Essential Chemicals and Plastics is expected to struggle to earn profits for this fiscal year due to significantly lower margins. However, as Takeshita-san is going to explain after me, the measures we're putting in place right now will boost the profitability, and we expect that Essential Chemicals will earn JPY 50 billion in fiscal year 2024. Energy and Functional Materials earns about JPY 20 billion right now but as we increase the capacity of -- and sales in the separators and boost the capacity of super engineering plastics, we expect that it will go up to JPY 30 billion in fiscal year 2024. IT-related chemicals earns around JPY 50 billion today, but through the expansion of semiconductor materials business and the next-generation display materials, we expect that this sector will be able to earn JPY 60 billion in fiscal year 2024. Health and Crop Sciences right now is very profitable, earning more than JPY 70 billion. Thanks to our Crop Protection business, which is very strong. And as a result of further expanding our crop protection business in South America and the biorational business, it is expected to reach JPY 85 billion in fiscal year 2024. Mito-san will later give you more details on how we're going to achieve that. The next couple of slides are about our financial strategy. First, let me touch upon the progress with regards to our CapEx, investments and loans. Because of the weakening of the yen and a higher inflation, the amount of money we're going to invest in a future project will be bigger than we initially anticipated. However, we will stick to the cap of JPY 750 billion in 3 years through selective investment. This is the allocation by area on the basis of investment decisions. As I mentioned earlier, a lot of investment decisions we have made so far are for semiconductor-related and biorational businesses as we are still exploring or considering opportunities in the areas of environmental impact reduction of battery materials and super engineering plastics. We will see more investment decisions made in those areas in the months ahead. When it comes to pharmaceuticals, our investment to turn Myovant into a 100% owned subsidiary far exceeded the JPY 90 billion in cap for this sector. However, these expenses are expressed as a net amount, which is the acquisition minus asset divestitures. So it is tentatively over the JPY 90 billion cap today, but we will continue to divest assets by 2024, so that the net figure will be within the JPY 90 billion cap in the end. Of course, we will continue to maintain financial discipline and remain focused on growth and selective in making an investment decision. Last but not least, this is an outlook of our debt-to-equity ratio. Turning Myovant into a 100% owned subsidiary is going to reduce our net assets while increasing borrowings. So our D/E ratio will deteriorate by the end of fiscal year 2022 from the 0.8 level a year ago. Of course, we will divest assets to reduce interest-bearing liabilities and a boost of our profitability to increase net assets at the same time. We believe that this 2-pronged approach will lead us to achieving the target of 0.7 or so by fiscal year 2024, the final year of the current corporate business plan. That's it from me. Thank you very much.

Hello. I'm Noriaki Takeshita and I am in charge of Essential Chemicals and Plastics sector. Thank you for joining us today. I don't think I need to introduce what our business is about, but I just want to briefly speak about the market situation on Page 19, although I know you are all aware of it very well. After all, it's a cyclical business, and that's why we are seeing such a roller-coaster results. When it comes to our takeaway of the previous corporate business plan, first, let's take a look at the core operating income. As I said, it's been a roller coaster, especially in 2020, we saw a significant volume difference at PetroRabigh due to some troubles and the scheduled maintenance. And coupled with a huge drop in crude oil prices, we posted big losses for the year. However, as you can see, we achieved the final year target of the previous corporate business plan, thanks to the stabilization of PetroRabigh operations and the recovery in petrochemical product prices. We also made progress on the major action plans we set forth in the previous corporate business plan. The topic of carbon neutrality began to garner much attention in the past 3 years, and we put in place those initiatives, which include, first of all, efforts to reduce GHG emissions within our organization. For instance, we decided to switch the fuel source from coal and oil to natural gas to power our major works in Ehime and Chiba. The construction of new generators is under way. We are also focusing our research and development priorities on creating technologies to achieve carbon cycle. We've been working on the development of material recycling technologies, and we are working closely with other companies and academia for the development of chemical recycling technologies, which are very much related to the Green Investment Fund projects mentioned earlier. One of the most important priorities in the previous corporate business plan was, of course, the stabilization of PetroRabigh operations at its Phase 2 plant. The operations have since been stabilized and the completion guarantee was released in September 2020. We have continued to strengthen our technology licensing and catalyst businesses, although we saw some slowdown in the past couple of years due to the restrictions on face-to-face communication during the pandemic. Also, as mentioned earlier, we've been restructuring our underperforming businesses. We decided back in April to exit from caprolactam business, and we stopped the operation in October. Next, I'd like to talk about our sector-wide direction set forth in the new corporate business plan. We understand that the current business environment is the one where we need to survive this disastrously weak petrochemical market. Feedstock margins have shrunk to such low levels that they won't even pay for the variable costs. These are some of the short-term changes that are happening to the business environment. And of course, there are mid- to long-term changes as well, such as the trends of increasing concerns about the planet and the reduction of GHG emmissions which have been our focus since the last corporate business plan. And in fact, governments and corporations around the globe set up specific targets for carbon neutrality and are working to achieve them right now. Chemical companies in the West, in particular, are increasingly moving towards the electrification of naphtha crackers because that's the most carbon-intensive part of the petrochemical production. Japanese companies instead are shifting to clean fuels, such as ammonia to reduce emissions. At any rate, we need to survive this expected market downturn and step up our efforts to earn a profit. At the same time, as part of the green transformation efforts, we will continue to work hard to find ways to move away from the one-way processing of fossil feedstock to our carbon cycle system and not only develop technologies to make that possible but also make changes to the current production model. That is the assumption underlying the new corporate business plan. As you know, we changed our name from Petrochemicals and Plastics to Essential Chemicals and Plastics in April this year. Plastics made from fossil-based raw materials and feedstock are literally essential to our modern living. But this one-way stream from production to consumption to waste disposal is not sustainable. We need to make a drastic change in the way we live and a shift towards more circular economy. And when we think about it, we have been doing petrochemical business for more than 6 decades, not only in Japan but also in other parts of the world for a really long time. So we also take pride in being one of the essential business sectors within Sumitomo Chemical. We chose to call ourselves essential because we remain committed to deliver products that are essential to our society by stepping up our efforts across manufacturing, R&D and sales to transition from the one-way stream to circular economy. Next, I want to look at our business direction from the geographic perspective, if you will. We have 3 operational places in the world, Japan, Singapore and Saudi Arabia. As you may know, we did restructuring our operations in Japan. We've shut down the cracker operations in Chiba Works back in 2015. The facilities we have in Japan have been refitted to function as a model factory or model lab, which focuses on R&D and efforts to bring our technologies to overseas markets. Our operations in Singapore, on the other hand, generates the most cash in fact, have been doing so historically. We added the Saudi operations subsequently because we expected to generate much cash from what was supposed to be low-priced feedstock. We were at first struggling to stabilize the operations there, and it took more time than we had expected. You know what we have been through. We finally stabilized the operations. So now is the time to get returns on the investment we made so far. We are down with investing in the Saudi operations for the time being. We've been saying this many times over for the past couple of years. It's got to be a cash cow as it is supposed to be. Now there hasn't been much collaboration between the operations in Japan and Singapore so far. But especially when it comes to polyolefin, we are working on material recycling technologies and the development of high-value-added products in Japan. So it makes a lot of sense to integrate our manufacturing and sales systems in both locations. While it is important to keep some of the operations separated, we are very much moving forward with the integration of operations. One of the challenges, of course, is the fact that the company in Singapore is not a 100% owned subsidiary. So we need to trade very carefully not to violate any antitrust laws and regulations. These are other priority initiatives. We need to further strengthen our earnings ability, and we continue to focus on the technology licensing and catalyst businesses and step up our efforts to turn our resin business into a high-value-added business. As I said earlier, the technology licensing business was not growing as strongly as we would have hoped but we remain focused on it. This is a business model where we benefit from stable demand for catalysts generating much-needed cash as expected as more companies become licensees of our technologies. Also, as I mentioned earlier, we continue to promote green transformation partly because it is our obligation to reduce GHG emissions. And we will continue to focus not only on R&D on plastic recycling, material and chemical recycling but also on the creation of viable business models. The core operating income target for fiscal year 2024 is JPY 54 billion. As mentioned earlier, margins will be significantly lower in 2024 than in 2021, but that will be offset by the recovery in volumes because there is no scheduled maintenance in 2024. Please go to the next slide. Today, the market conditions have become even more challenging for us. This graph is showing the raw material margins for polyolefin from an external data source. As you can see, the margins for polypropylene plummeted at the start of the Ukaranian crisis. In fact, the margins began to fall last December, even before the war in Ukraine. Even in the month of November, with the raw material margins for polypropylene are negative. That's the reality of the market today. Moreover, here is the guidance for petroRabigh's earnings. PetroRabigh, in fact, has been doing great between January and June this year, earning a remarkable profit in the second quarter thanks in large part to extremely high refining margins. However, the refining margins tanked all of a sudden and the crude prices began to slide in the third quarter. That's why PetroRabigh went from a record profit to big losses. The refining margins have somewhat picked up since then, but remain quite subdued in the fourth quarter and the petrochemical market itself continues to be sluggish, as I mentioned earlier. That's why you see 0 for our November guidance. So in order to achieve our target of JPY 54 billion in core operating income, of course, we put in place a lot of initiatives and are executing them right now, but I just want you to remember that the market cycle plays a big role in determining our performance. And historically speaking, our Singapore operations have been the major cash flow generator for Sumitomo Chemical, as I mentioned earlier, between 2010 and today. The Singapore business earned almost 2/3 of the group's total core operating income. TPC is a producer of polyolefin and is showing solid performance in the midst of worsening market conditions. But PCS as an upstream petrochemical company, more vulnerable to market contractions is expected to suffer losses this year. Even the MMA polymer business is doing poorly. From 2010, the contribution of PCS and TPC combined to our group's core operating income is about JPY 17 billion every year on average. But their contribution to the group's bottom line is going to evaporate this year. It's likely that we will report losses of a few billion yen so the difference will be about JPY 20 billion. And these are the measures we put in place to turn our situation around: raise prices, expand the licenses business and cut costs. They don't look like eye-catching at all. They all sound boring, but we know they will work. In fact, we expect that these measures will add JPY 10 billion to the earnings for fiscal year 2024 compared to the 2022 results. And in the medium term, we will see more improvement to our earnings, though we haven't quantified it yet, by integrating operations between Japan and Singapore. The current priority is to integrate the operations to optimize logistics but we are looking across the board right now and ultimately hope to integrate the entire manufacturing operations between the 2 locations. We will share with you more detail once we have plans in place. To give you more detail about the strategy for each business as for the Technology Licensing and Catalyst businesses, we will continue to make improvements to the processes and catalysts. We need these businesses to be more competitive and get more licensees. Of course, our focus continues to be on the PO-only process in the hydrochloric acid oxidation process, and we wanted to draw more attention to their GHG emission reduction effects. When it comes to the polymer or resin business, we have just launched a mono-material polyethylene product Sumika. It's not at the level of commercial success yet, and we want to focus on marketing this product in many parts of the world, including Southeast Asia. This slide is about greenhouse gas reduction in the group to explain the fuel conversion projects Ehime and Chiba Works mentioned earlier. It has been put into commercial operation in Ehime this November and the conversion in Chiba Works will be in November next year. We expect the GHG reduction of about 900,000 tons per year by then. In addition, we're using the ammonia tank in Ehime with a capacity of 30,000 tons. We intend to expand the business with ammonia as a clean fuel. We have already announced a partnership with Yara. And we are now looking into specific ideas about what we can do. Next page is about plastics recycling. We are studying technologies for materials recycling to avoid downgrading and cascading down as much as possible for horizontal deployment. As for chemical recycling, we are working on technologies for earlier mentioned Green Innovation Fund project as well as PMMA recycling and aim to promptly launch a product suitable for the brand name Meguri announced last year. As for materials recycling, we have been discussing with Rever Holdings about the reuse of waste plastic from automotive shredder residue and have recently decided to install new equipment at Nissan Chemitech Corporation's Chiba plant to further improve the separation process that Rever Holdings is tentatively using for recycling. And eventually, we will supply automotive materials by mixing recycled and virgin plastics. This will be a closed system at the request of the automotive industry. And we are now discussing recycling automotive materials for automotive materials, specifically for Honda in mind. We are now considering further strengthening our relationship with Rever Holdings as well. This slide is about chemical recycling. The PMMA chemical recycling facility will be completed by the end of this month. Commissioning of the facility is scheduled at the beginning of next year and expect to start offering recycled products in the next fiscal year. We have been receiving a great deal of interest from Japan and overseas so we will finalize this work as soon as possible for commercial-scale production. This is the last slide about further diversification of raw materials and feedstocks. We built a pilot or quality demonstration plant for dehydrating ethanol in April this year and this is specifically to use waste produced by Sekisui Chemical. We are currently conducting tests with purchased ethanol. We have been able to achieve what we expected, and we are also producing polyethylene using the pilot equipment and research facility and started to produce samples. In the future, we are considering the production of ethylene directly from bio-based raw materials instead of using conventional naphtha crackers for purpose production. This will affect the future of petrochemical complexes and will be a quite complicated matter that we want to draw a big picture by working with other companies involved in this initiative. We believe that this will be a big challenge, including restructuring of existing old polymer plant as well as integration with the operations in Singapore. Unfortunately, we do not have a specific image about this yet, but we will organize it as soon as possible. That is all from me.

I am Mito in charge of the Health & Crop Sciences sector. I'll explain about the summary of the previous corporate business plan, then the basic sector-wide direction for the new corporate business plan, and lastly, individual business strategies. First is about the summary of the previous corporate business plan. Sales revenue was almost in line with the plan for the final year of the previous corporate business plan. However, unfortunately, core operating income fell far short over the plan. We assume there were 2 reasons for it. One is the downturn of the price of methionine, and other is intensifying competition with generics mainly in the agrosolutions market. In order to cope with these circumstances, we have been working to reform our portfolio and strengthen our global footprint, but I must admit that we have fallen behind and did not achieve our plan. However, looking at the current business performance, the measures taken in the previous corporate business plan amid of difficulties are beginning to show results. I'll explain about it with later slides. Next is about the basic direction and the new corporate business plan. And this slide shows the long-term vision of our sector. Actually, this vision has not changed for a decade and it is based on R&D to develop businesses that contribute to food, health and environment. However, we have added one point in the current corporate business plan that is to expand and strengthen sustainable product business. Our vision for the current corporate business plan is to promote business operations with a focus on sustainability. This slide shows a summary of the external environment surrounding the current business and internal issues and the direction in addressing those issues. Looking at the external environment, major agrochemical companies are merging each other to become even larger and generics makers are increasing their presence. There is also a growing awareness of environmental issues or sustainability, and DX is expanding rapidly. Under such a circumstance, we are increasing our strategic investment for future growth. And as a result, our working capital has remained at a high level. Also, our supply chain is becoming complex as we deploy our business globally. To conduct businesses in this environment, we will invest our resources, which are more limited compared to major companies with concentration in areas where we can expect to win. That is sustainable products, meaning sustainability. And for internal issues, we will improve our financial strength and strengthen our global supply chain by actively utilizing DX. That is the direction of the current corporate business plan. This slide shows individual actions under the major direction. As I said, we are strengthening our sustainable product, which include biorationals and botanicals derived from natural products as well as crop protection chemicals with stronger focus on reducing environmental burden. And we'll ensure economic return from investments made in the past, strengthen our supply chain, improve financial strength, continue our effort in R&D and actively utilize DX for business process reform and new business model building. I have been talking about sustainability-conscious management and this slide summarizes what sustainability means to our sector. There are 3 key concepts. The first one is to actively deploy products and technologies with lower environmental impact that contribute to carbon neutrality, specifically, the biorationals and botanicals from natural products as well as crop protection chemicals that combine seed treatment technologies with low environmental impact. I will explain them on a later slide. The second point is to develop product technologies that contribute to environment and carbon neutrality from a life cycle assessment perspective. Methionine is one of those examples. Methionine is a product that emits GHGs during its production process. We produced slightly over 200,000 tons of methionine and emit a little less than 1 million tons of GHGs during its production process. On the other hand, when methionine is mixed in livestock feed, the amount of nitrogen and feed can be reduced, which leads to reducing GHGs. We'll offer such products and technology to contribute to carbon neutrality and sustainability in their usage. The first 2 concepts are technologies to stop environmental degradation or to achieve carbon neutrality or to control GHG emissions but it is often said that climate change cannot be controlled unless we recover the GHGs already emitted to the atmosphere. To address this issue, we are currently developing a filamentous fungus called Mycorrhizal Fungus, which has the function of fixating atmospheric GHG in the soil by promoting photosynthesis in plants. This act to collect already emitted GHG is called carbon negativity, and we will actively challenge this field. With these 3 concepts, we will contribute to sustainability in our business. R&D is the growth driver in the current corporate business plan. Currently, we have 7 items in the pipeline that have been launched or are close to launch and 4 of them have already been launched in major countries. We believe to have 7 items in the later stage, we'll close the launch in the pipeline is not inferior to those of major agrochemical companies. With this pipeline, we hope to generate sales of several tens of billions of yen by FY 2024, the final year of the corporate business plan. This is the R&D direction and the current corporate business plan. As mentioned earlier, we will promote R&D by both conventional chemicals and biorationals and botanical derived from natural products. In addition, we will boldly challenge new fields such as nucleic acid medicine and the development of next-generation agrosolution technology using tools like Jones. This slide is about the supply chain. And as you know, the business environment is undergoing dramatic changes such as global inflation, the yen depreciation and the rising energy costs. There are also geopolitical risks, which have disrupted logistics and the supply chain, in general, is in turmoil. In this context, we are working on integrated business planning or IBP. As you probably know, this is a system to share information in real time for production, sales, purchasing and logistics and to manage them in an integrated manner for speedy decision-making as the supply chain has been expanding significantly will strengthen the supply chain by horizontally expanding this IBP system to our group companies worldwide, and we will actively utilize DX to make this idea into reality. This is the performance target for the current corporate business plan. We aim for JPY 590 billion for sales revenue and JPY 84 billion for core operating income. We will achieve them by transforming our portfolio, by strengthening sustainable products, securing returns on investments in the past, strengthening the supply chain to overcome this turmoil and aggressively promoting R&D. As I said earlier, the measures taken in the previous corporate business plan amid of difficulties are beginning to show results in the recent performance. Weaker than expected yen is kind of a gift for us. But other than that, we have steadily strengthened footprint in major markets, such as Brazil and India, launched a major new agrosolutions product by promoting R&D and transformed the portfolio with biorationals and seed treatment. By implementing these measures steadily in the previous corporate business plan, the current business performance is growing steadily. We have already achieved our target for consolidated net sales for the final year of the corporate business plan, and we are also working hard to achieve consolidated core operating income of over JPY 70 billion. Now I would like to explain the individual business strategies. This graph shows a list of the top agrosolutions market. And as you know, Brazil is currently the largest market in the world, recording over $10 billion in 2021. Although the official figures for 2022 are not yet available, the Brazilian agrosolutions market is expected to have grown larger than 2021. China is a difficult market for R&D-oriented companies to enter due to many counterfeit products and concerns about data leakage. However, as you can see in the chart, we have established a very strong footprint in the most important markets such as Brazil, the U.S., Japan, Argentina and India, which rank at the top. In particular, for India, its market size is currently smaller than Japan. But compared to the U.S. and Brazil, for example, Indian population is 4x larger than the U.S. and 6x larger than Brazil. Still, the amount of crop protection used in India is only 1/7 of the U.S. We believe India has the potential for explosive growth in the future. In this context, we have been working diligently for many years to strengthen our footprint in India where we are currently in the second largest group. Even with major agrochemical companies, we intend to grow our business in the future by strengthening our footprint in such market with high potential. This slide shows the results of our R&D activities for many years. As I just said, Brazil is the world's largest agrosolutions market, and it has a JPY 300 billion market for a single disease of a single crop Asian Soybean Rust. We have been trying hard to launch a promising new product. And finally, this year, we were able to launch INDIFLIN. In conjunction with this launch, we were also able to establish a direct sales system in Brazil. And now we are in the process of its vertical launch. This year is essentially the first year of sales, and we expect to reach sales of JPY 10 billion and hope to achieve sales of over JPY 40 billion in the early 2020s. I mentioned the business operations with an awareness of sustainability. Of course, it is important to grow the business of biorationals and botanicals derived from natural product, but we also believe conventional chemicals can also contribute to sustainability. For instance, No-till farming is a very efficient farming method that skips cultivation before planting and is very effective to prevent soil loss and to reduce GHG emission from the soil. We have Flumioxazin and a new agent Rapidicil that are compatible with this farming method. Seed treatment is also considered as an environmentally-friendly technology because as indicated by the name, it reduces the amount of agent used in the environment by applying it directly to seeds. We have a wide range of products that can be used for seed treatment, and we will promote business operations with awareness of sustainability and conventional chemicals business as well. Flumioxazin is a relatively old agent, but it continues to grow in line with increasing note cultivation in North and Latin America and we expect to achieve sales of over JPY 70 billion in the final year of the corporate business plan. The seed treatment business has already grown to over JPY 10 billion, and we expect to grow this business to over JPY 20 billion by the final year of the corporate business plan. The biorational business is an extremely important agenda. At present, sales have reached over JPY 40 billion and we want to grow the business to JPY 60 billion in the final year of the corporate business plan and to over JPY 100 billion toward 2030, making it a solid pillar of our business. To achieve this goal we need to strengthen R&D, sales and production. For production, we have one of the world's largest fermentation production facilities for agricultural materials in Iowa , the U.S. We will further enhance this facility and start operation during 2024. The biorational business is growing steadily in Brazil. So we plan to build a biorational formulation line in a formulation plant in Brazil to strengthen the global supply chain for biorationals. Regarding sales, conventionally, the push-type sales style is used to distribute crop protection products for wholesalers. But for biostimulant, which is a very unique product among biorationals, we need to expand our business by actively promoting the technology to farmers to stimulate demand for the product. So in North America, we have established a sales organization specializing in the biostimulant business to expand sales of such products. R&D is very critical. Biorational market is divided into quite many segments, and we need to expand our product lineup. As President said at the presentation, we currently have more than 40 projects in the pipeline and we'll promote them by further strengthening our biorational research base in Chicago. Lastly, let me explain a little about our Pharmaceutical Chemicals business. Pharmaceuticals consists of conventional small molecule drugs and antibody drugs which have received interest in the past 10 to 20 years. And in a sense, antibody drugs can be considered macromolecular drugs. Also, there is another category called middle molecule drugs that stand in the middle, and they are gaining attention recently. To be more specific, they include nucleic acid drugs and peptide drugs. Regarding nucleic acid jobs, there has been an increasing number of start-up companies recently that developed gene therapy technologies in this category, and they are concentrated in Boston, North America. For such development, it is necessary to produce long-chain nucleic acid with very high purity by chemical synthesis. It is little data about the details, but as shown at the lower left, nucleic assets are produced through repeated polymerization of monomers and when this process is repeated 50 or 100x, the yield drops significantly, and it eventually becomes impossible to produce nucleic acid. However, we have established a proprietary technology to produce long-chain nucleic acid with very high purity at high yield to be used for gene therapy and we have received very strong inquiries from start-ups in Boston. A new production plant in Oita is under construction to start operation in 2023, and we expect to develop it into one of the pillars of our Pharmaceutical Chemicals business. This slide is about CDMO, the contract development and manufacturing of small molecule drugs business, which is an existing pillar of our pharmaceutical chemical business. In this business, customers once had become a little price conscious and brought their business to China and India. But recently, they prefer to have their supply chain in the home country and the quality requirements are getting more and more demanding in this business. They consider stable supply and quality are more important than the price and our ability to provide a stable supply and high-quality products are highly evaluated, and we are receiving strong inquiries from customers. We are constructing a new plant in Oita for small molecule drugs, which is scheduled to start operation in 2024. This is the last slide. Currently, the scale of Pharmaceutical Chemicals business is at a JPY 30 billion level. And with the nucleic acid truck business as a drive and by building a solid foundation for small molecule drugs, we aim to grow this business to over JPY 45 billion by the early 2020s. That is all from me. [Statements in English on this transcript were spoken by an interpreter present on the live call.]