TOPPAN Holdings Inc. (7911.T) Earnings Call Transcript & Summary

I am Kurobe from the Finance division. Thank you for taking time out of your busy schedule today to attend our financial results briefing for fiscal year ended March 31, 2023. First, let me explain our overall performance. Please look at Page 3. As for our consolidated results for fiscal 2022, net sales increased 5.9% from the previous year to JPY 1,638.8 billion, operating profit increased 4.3% to JPY 76.6 billion. Ordinary profit increased 6.4% to JPY 81.1 billion, and profit attributable to owners of parent decreased 50.6% to JPY 60.8 billion. Please see Page 4. As for net sales, BPO projects related to economic stimulus contracted, but our DX business centered on digital marketing and security business increased. Flexible packaging increased in Japan and overseas. As for the overseas Living & Industry business, companies acquired last year, such as InterFlex in the U.S., Toppan Specialty Films in India and Majend Makcs in Thailand contributed to performance. Overall sales increased due to an increase in photomasks, FC-BGA and other semiconductor-related products. Operating profit was affected by rising new raw materials and energy prices as well as contraction of BPO economic stimulus related business and existing businesses, including business forms and SP related business and by market downturn, lowering profitability for decor materials overseas. However, growth in semiconductor-related businesses such as photomasks and FC-BGA helped overall operating profit to grow. Ordinary profit increased due to an increase in operating profit and foreign exchange gains. Profit attributable to owners of parent decreased due to a decrease in gain on sale of investment securities and an increase in impairment loss. As for the decrease in gain on sale of investment securities as part of our capital policy, we aggressively reduced our strategic shareholdings recording a gain of JPY 108.7 billion in the previous fiscal year and JPY 55.3 billion in the current fiscal year. This has led to the difference in the gain on the sale. The impairment loss will be explained later. Please see Page 5. As for the reason for the year-on-year increase in operating profit, the change in the fiscal year end over Taiwanese semiconductor subsidiary had a positive impact of JPY 3.1 billion on operating profit of JPY 73.5 billion for fiscal '21. Infrastructure development cost decreased by JPY 0.9 billion, mainly due to the absence of M&A expenses and business taxes on sales of securities recorded in the previous fiscal year. The price increase in petrochemical material, paper and energy was passed on to clients and the rate of price pass-through was less than 90%, resulting in a negative impact of JPY 6.1 billion. Growth in new businesses generated JPY 15.6 billion in profit due to expansion mainly in overseas living and industry-related businesses and semiconductor-related businesses. In existing businesses, business forms, sales-promotion-related business tools and color filters decrease, resulting in a negative JPY 10.4 billion, while operating profit for fiscal 2022 was JPY 76.6 billion, an increase of JPY 3.1 billion. Please see Page 6. I'd like to explain our business performance by segment. In the Information & Communications segment, net sales declined 1.8% to JPY 887.5 billion, and operating profit fell 16.3% to JPY 42.8 billion. The digital shift in information media has led to a decline in demand for paper media, while demand for digital media is growing. In this market environment, net sales decreased due to contraction of BPO projects related to economic stimulus packages, although there was an increase in security business such as payment services and digital marketing such as web advertising. Operating profit decreased due to contraction in BPO projects as well as a decline in existing businesses, such as business forms and sales promotion-related business despite an increase in profit from higher digital related sales. Please see Page 7. In the Living and Industrial segment, net sales increased 17.2% to JPY 520.6 billion, and the operating profit declined 17.6% to JPY 23.5 billion. Although the business environment remains challenging due to supply constraints and price hikes for raw materials, new demand is expanding due to growing awareness of the global environment. In this market environment, net sales of flexible packaging increased in Japan due to the demand for food and sustainable packaging materials, while overseas sales expanded mainly Indonesia and the flexible packaging materials manufacturer in the U.S. and the foam manufacturer in India acquired last year and a flexible packaging materials manufacturer in Thailand acquired in May contributed to our business performance. Operating profit increased due to these volume increases, but profit decreased for the core materials overseas due to sluggish demand in Europe and U.S., causing deterioration in profitability in addition to price hikes of raw materials and energy. Please see Page 8. In the Electronics business segment, net sales increased 15.3% to JPY 255.3 billion, and operating profit rose 60.6% to JPY 48.2 billion. Although the semiconductor market is expanding year-on-year, growth is slowing due to sluggish demand for personal electronic devices as the state home special demand has been fulfilled, global inflation is occurring and the prolonged Russian invasion of Ukraine. Under such market environment, overall net sales increased on the back of strong demand with expansion of semiconductor-related products such as photomasks and FC-BGA substrates and an increase in TFT LCDs which capture demand from industrial equipment applications. Operating profit increased due to higher profit from sales expansion, improved profitability of TFT LCDs and the inclusion of high value-added products such as photomasks and FC-BGA substrate. Please see Page 9. I will now explain the status of cash flows. Operating cash flow for the period was JPY 106 billion, up JPY 41.3 billion from the previous year, mainly due to an increase in operating profit and an improvement in the receivables turnover ratio. As for investment cash flow, while we continue to invest aggressively during this period, we also promoted the sale of strategic shareholdings. These factors resulted in a year-on-year negative JPY 31.4 billion, down by JPY 64.2 billion. As a result, free cash flow, the sum of operating and investing cash flows was JPY 74.6 billion. We will continue to focus on expanding cash flow to achieve sustainable growth while striving to increase profitability and soundness as well as enhance shareholder returns. I will now explain impairment losses. This fiscal year, we recorded impairment loss on the goodwill of our flexible packaging converting business in the U.S. and on the fixed assets of our folding carton business in Japan. The goodwill impairment of the flexible packaging converting business in the U.S. is due to the delayed start-up of the recycling environment in North America because of COVID-19 inflation, which has also delayed the initial expectations of realizing acquisition synergies. Meanwhile, we have already started supplying sustainable packaging materials in the European market and plan to accelerate global development in the Asian and North American markets. We expect our SX business to expand steadily. As for the domestic folding carton business, we are reallocating the business nationwide in order to maximize profits. Impairment loss was related to these structural reforms. This concludes the summary of our business results for the fiscal year ended March 31, 2023. I will now explain the outlook for the fiscal year ending March 31, 2024. Please see Page 11. Our consolidated forecasts are net sales JPY 1.645 billion, up 0.4% year-on-year. Operating profit, JPY 78 billion, up 1.8% year-on-year. Or net profit, JPY 77 billion, down 5.1% year-on-year and profit attributable to owners of parent, JPY 43 billion, down 29.4% year-on-year. Net sales are expected to be impacted by a reaction or decline in the current fiscal year due to increased demand for Photomasks in the previous fiscal year as a result of the semiconductor shortages. However, overall sales are expected to increase in the information and communication business field due to the expansion of Erhoeht-X and in the Lifestyle business field due to growth in SX in Japan and overseas living and industry-related businesses. Electronics business field is expected to grow due to the expansion of semiconductors and new businesses. Erhoeht-X will continue to expand sales of its core solutions and area of security payments and telecommunications infrastructure, while BPO will leverage its ability to respond to business design and shift to continuity projects to transform its earnings structure for steady growth. In SX in Japan and overseas Living and Industry-related businesses, we will steadily capture demand for sustainable packaging around the world through M&As we have conducted to date. In the Electronics business field, we will expand our semiconductor business and establish new businesses by leveraging our technology competencies in next-generation digital areas such as communications at the core. Please see Page 12. I will explain the reasons for the increase in operating profit compared to the previous year. Operating profit of JPY 76.6 billion for the fiscal year ended March 31, 2023, included JPY 4.5 billion due to foreign exchange effects and JPY 9.4 billion as a onetime effect due to a change in the fiscal year-end of subsidiary and external environment impact of photomask caused by the semiconductor shortage. Operating profit adjusted for these effects was JPY 62.7 billion. To strengthen our management foundation, we expect an increase of JPY 9.2 billion in infrastructure development costs due to the transition to a holding company system, the abolishment of legacy systems and the transition to a new system. In addition, as a special impact from the current fiscal year, we expect a decrease in profit of JPY 6.3 billion due to increased amortization costs resulting from the standardization of usability cycles for Photomask businesses. To counter these negative impacts, we will continue to transform our business portfolio by expanding Erhoeht-X domestic SX and overseas Living and Industry-related businesses, along with new semiconductor businesses. Further, through recovery in sales promotion demand and reviews of low-profit products and packages, we anticipate to boost profits by JPY 8.9 billion in existing businesses, resulting in operating profit of JPY 78 billion for the fiscal year ending March 31, 2024, an increase of JPY 1.4 billion. The whole company is united to achieve these goals, and we look forward to your continued support. This concludes the business outlook for the full year. President Maro will now explain the medium-term plan.

I am Maro, President of the company. I will now explain our new medium-term plan. First, I'd like to explain the changes in the involvement surrounding our company and the vision that Toppan is aiming for. In this medium-term plan, we recognize that the environment is changing and society's needs are becoming more complex and diverse, including accelerating digitalization, rising geopolitical risks and the practice of advanced sustainable management. In this highly uncertain society, we must have a more far-sighted perspective, and we are required to have the ability to perceive environment changes as growth opportunities and link them to the creation of value. Under these circumstances, Toppan aims to become a leading company that solves social issues worldwide through DX and SX by continuing the previous plan and setting digital and sustainable transformation as a key concept in this midterm plan. Next, I'd like to review the previous midterm management plan. First, let me talk about improving profitability. Both consolidated net sales and operating profit grew steadily on the top line. Regarding the transformation of the business portfolio, ratio of Erhoeht-X, a growth business and Japan SX and overseas Living are lower in fiscal '22 than in fiscal '20. This is due to clear factors such as upfront investment for solidifying the foundation of Erhoeht-X, the impact of raw material in the Living business and the underperformance of the decor materials overseas. While the scale of operating profit is expanding when including the growth business and the priority semiconductor-related business in electronics; however, we recognize that we are still in the process of transforming our business portfolio and improving ROE on a core business basis. Next are the achievements and challenges. We have seen certain results in the corporate transformation through the infrastructure development phase, including growth in portfolio transformation, expansion of the scale of priority businesses, Toppan Forms becoming a wholly owned subsidiary, the start of preparations for the transition to a holding company system to strengthen the management foundation, strengthening of R&D and various ESG-related actions. However, further acceleration towards sustainable growth for value creation has emerged as an issue, including the establishment of a profitable earnings model for growth businesses to achieve high profitability, the creation of growth synergies and the evolution of sustainable management. Next, I will discuss the overall picture of our new medium-term management plan based on our achievements and challenges. First, let me explain the positioning of the result delivery phase of this midterm plan. This phase is positioned as a period of accelerating transformation and expansion, and we will speed up our efforts to maximize enterprise value by creating both economic value through business portfolio transformation and social value through expanding ESG initiative. In addition, we will achieve ROE of 5% on a business basis in fiscal '25, the final year of the current midterm plan, leading to ROE of more than 8% and PV ratio of more than 1 in the next midterm plan and beyond. Next, we will discuss the big picture. As in the previous midterm, we will continue to focus on 3 key measures to achieve ROE, transforming our business portfolio, strengthening our management foundations and expanding our ESG initiatives. In the transformation of the business portfolio, we will seek to increase profitability and create new business pillars in the growth business of DX and SX, while in existing businesses, we will secure stable profits through structural reform of low profit businesses. To achieve this, we will also implement investment and financial strategies with view to sustainable growth. Our financial targets for fiscal '25 are net sales of JPY 1,810 billion, operating profit of JPY 110 billion and ROE of 5%. Please see the next slide on business portfolio transformation. The business is spotted on a subsegment basis. As for growth businesses, we will focus on Erhoeht-X, which is centered on the digital business and BPO subsegments and SX in Japan and overseas Living & Industry centered on overseas packaging, decor materials and flexible packaging in Japan and semiconductor businesses. In addition, new businesses at the initial stage will be shifted to growth businesses by scaling up development themes. We will also implement structural reforms in communication media centered on publication and commercial printing, folding cartons in the packaging business in Japan and display-related businesses to turn them into businesses with stable profitability or drastically reduce or terminate operations. Although we have been using ROIC as an indicator for plotting each business, we will strengthen our management in the future. Next is the vision for profit expansion. As shown in the upper profit composition graph, we aim to achieve the majority of fiscal '25 with Erhoeht-X Japan SX and overseas living and new growth businesses combined. As for Electronics, due to special factors such as the foreign exchange rates in fiscal '22, growth is expected mainly for semiconductor-related products, but the composition is set to decline. As for the profit trend graph in the bottom, although existing businesses in Electronics are shrinking, we aim to achieve JPY 110 billion in operating profit in fiscal '25 by increasing profits through expansion of growth businesses. I will now explain the profit structure of the growth businesses. Next, I will explain the strategies by segment for business portfolio transformation. First is Information & Communication. As a midterm strategy for information and communication, we aim to achieve JPY 965 billion in net sales and JPY 62 billion in operating profit in fiscal '25 by supporting our clients' digital transformation as a value co-creation partner and achieving high growth through the promotion of Erhoeht-X. We will establish a cyclical business model for Erhoeht-X growth business and expand business in 5 key themes by leveraging our competitive advantages in information processing and management, security, technology, marketing and a strong client base. In addition, we will create synergies by combining solutions and sharing resources among priority categories, aiming to achieve net sales of JPY 500 billion and an operating margin of about 8% in fiscal '25 for Erhoeht-X. In fiscal '25, Erhoeht-X's sales is projected to account for majority of the Information & Communications segment. In existing businesses, we will maintain and improve profitability by implementing structural reforms. Ahead of the changes in the outlook, we will continue to consolidate printing basis and shift resources such as bases and human assets to the DX business. As noted at the bottom, the subsegment of Information & Communication has been revised since this fiscal year. Next, strategies by priority category. The hybrid BPO and security categories will be the major drivers of Erhoeht-X's sales in fiscal '25. These 2 categories are based on the integration of the security businesses of Toppan Forms and Toppan to establish Toppan Edge in April, it will create synergies and expand the business. Hybrid BPO will target the finance and government sectors to meet their needs for outsourcing of noncore operations. We will expand net sales by providing one-stop services that cover the entire operation from BPR. In Japan, the security business will expand sales of information gathering, distribution and digital viewing service. In the payment service, we will secure stable earnings by expanding connected terminals and a number of settlements. Overseas, we will expand our business in the government ID, payment and logistics IoT areas through group collaboration. In marketing DX, in addition to conventional client marketing support, such as online advertising and CRM, we will expand the scope to include sales and operational reforms to increase sales and revenue. In addition, we will continue to expand our business in the categories of digital content and manufacturing and distribution DX and Erhoeht-X will grow to earn JPY 500 billion in net sales and approximately 8% of operating profit margin in fiscal '25. Next, our measures to expand Erhoeht-X profits. Profit growth in hybrid BPO will be achieved by improving the order mix toward continuous projects and by standardizing the business to achieve higher profitability. Productivity will be enhanced by expanding continuous projects and leveling out fluctuations. For continuous projects, we are currently awarded a BPO contract for the City of Sapporo's Administrative Office Center. We handle 14 administrated jobs, including applications for school attendance subsidies, and we will increase the number of such continuous projects to increase the ratio to 90% in hybrid BPO in fiscal 2025. By standardizing these projects, work processes will be automated and manpower will be saved, while production capacity will increase the costs will be optimized, increasing profitability. The security business will expand profits in Japan through a low marginal cost model. We will expand the number of adoptions of AIRPOST, a common administrative procedure platform and EngagePlus, a multi-delivery and browsing service as de facto standards for information collection, distribution and browsing services. AIRPOST has already been adopted by major financial players, and we will continue to expand its adoption to more companies in the future. In the payment business, we will grow revenues from payment charges and platform usage fees by promoting support for Thincacloud in amusement facilities and vending machines. In Marketing DX, we will develop a continuous order model by becoming clients BX support partner and expand the scale by bolstering specialist personnel. As an example of business transformation to support customer experience transformation in the delivery business, we have enhanced convenience for users by developing an application through which they can place orders. For salespeople, we will transform the employee experience through improved customer service by sharing customer information through digitization. And for headquarters, we create databases to support digital transformation, which leads to enhanced sales strategies, integrating customer and sales information. We support BX transformation that delivers the value of CX, EX, and DX. Since issues vary by industry and by company, we will increase the number of projects by providing close support to our clients and increase profitability by utilizing AI in operations and sharing BPO resources. Next is the Living & Industry segment. The medium-term strategy for Living and Industry segment focuses on growth markets from perspective of regions and the environment and make contribution to a decarbonized and secular economy centered on providing SX products and services, aiming for net sales of JPY 585 billion and operating profit of JPY 52 billion in fiscal '25. In Japan, SX and overseas Living, which we position as growth business, we will promote high value-added and global business expansion through a shift to SX packaging. By leveraging our competitive advantages, such as barrier film technology, product development capabilities, global network and a strong client base, we will expand our flexible packaging and phone business overseas by implementing region-specific strategies and in packaging in Japan, we increased the ratio of SX packaging to achieve higher profitability. In Decor materials, we will implement structural reforms and growth strategies for Interprint to achieve earnings recovery and profit growth. As for Japan SX and Overseas Living, we aim to achieve net sales of JPY 390 billion and operating income margin of about 9% in fiscal '25. In fiscal '25, we plan to increase the sales composition of Japan SX and Overseas Living to 67% of the total of the Living & Industry segment. In existing businesses, we will close the Sagamihara plant, the main base of the folding carton business and will promote its restructuring effect and the profit improvement by reviewing low-profit orders. In the Living & Industry segment, we are also reviewing the subsegments going forward, as indicated in the note at the bottom of this page. Next, I will explain the development of a global platform in the Living & Industry segment. In the overseas Living & Industry segment, we expect the market to continue to expand steadily in Europe, the Americas and the Asia Pacific region. In addition to market expansion, demand for SX packaging, mainly flexible packaging materials is also growing due to increasing environmental needs in Europe. This trend is expected to continue in the Americas and Asia Pacific. In light of this market environment until fiscal '22, we have been developing infrastructure by aggressively pursuing M&A in growth regions and entering markets. In the previous mid-term plan, the noncontinuous growth portion contributed significantly to sales expansion. In our current plan, we plan to establish some new manufacturing bases, but will respond to market growth and environmental needs and promote net sales and earnings growth by expanding production capacity at our own basis and strengthening development collaboration among regions. We will also continue to consider alliances in M&A for further business expansion. Next is the SX packaging expansion strategy. Environmental issues such as CO2 emission reduction, plastic consumption reduction and resource circulation exist at various stages of the product life cycle. By providing our SX packaging to address these environmental issues, we will expand our scale while helping to solve them. To expand SX packaging, we will strengthen the development of packaging films with eco-friendliness and functionality centered on GL BARRIER, which has a competitive advantage. We aim to achieve net sales of JPY 200 billion in fiscal '25 with commercial products that contribute to solving these 3 environmental issues identified as our SX priority themes. Next, measures to increase profits from Japan SX and Overseas Living. In Japan SX, we will transform the order mix by expanding sales of SX packaging. Centered on flexible packaging, we expand sales of SX packaging that helps reduce CO2, reduce plastic or circulate resources and drive higher profits by replacing existing low value-added products. In addition, by offering comprehensive proposals such as filling BPO solutions that combine SX packaging with toiletries and health care to be filled, we will add value to packaging services and increased profits. In overseas packaging, we will aggressively execute investments to expand production capacity. As for Europe and the Americas, GL BARRIER faced difficulty in the previous fiscal year due to the deteriorating market conditions, but it is showing signs of recovery in the current fiscal year. We will cater to demand for mono-materials in Europe and aluminum alternative in Americas, and we will build a new GL BARRIER base in Czech Republic. This will establish a global barrier film supply system with 3 bases in Japan, the U.S. and the Czech Republic. InterFlex's existing business will continue to make a stable contribution to earnings, but in parallel, it will respond to demand for SX packaging in the United States and United Kingdom. In Asia Pacific, we will build a new film manufacturing line at our Indian base. The Indian packaging market is expected to reach JPY 2.2 trillion in fiscal '25, growing rapidly, approximately fivefold in 10 years since 2015, we will capture this packaging demand and expand net sales and profits. In Decor materials overseas, we will implement structural reforms and growth strategies for Interprint. Interprint expects market recovery and normalization of supply and demand from the second half of the year, we will increase productivity through cost reduction and technical assistance and develop production capabilities in optimal locations for each region. As for sales, we will roll out high value-add products in our film business and digital printing in advanced nations. As for restructuring, we will relentlessly implement structural reforms in the folding carton business, which is in need of review. Next is the Electronics segment. As for the regional strategy for Electronics, we aim to achieve net sales of JPY 295 billion and operating profit of JPY 41 billion in FY 2025 by creating new businesses based on leveraging elemental technologies and supplying devices centered on semiconductor-related products. In the semiconductor-related business, we will continue to develop production capabilities to respond to supply chain changes and the policies of each country in light of the growing semiconductor market in the mid- to long term. We will secure and maintain competitive edge through technology development. In the semiconductor-related business, we aim to achieve net sales of JPY 196.5 billion in FY 2025. This is about measures to increase profits in the electronics sector. The JPY 41 billion operating profit for electronics in FY 2025 is based on operating profit from the previous year, which is strong, excluding special factors, and it is a highly probable plan with low volatility. In semiconductors, FC-BGA aims to expand stable earnings by supplying key devices in the high-end area and through cooperative initiatives with clients. Further, we will firmly capture demand by increasing production capacity in line with market growth. In photomasks, we will maximize production capacity through business expansion in growth areas and collaboration among global basis. In displays, we will work on high value-added products for antireflective polarization plates and develop new film products by utilizing thin-film coating technology. As for TFT LCDs, we will accelerate structural reforms, strengthen cost competitiveness and secure stable earnings. We will also focus on areas where we can demonstrate our technology superiority such as industrial equipment and automotive applications to secure a stable share of the market. As for new businesses, we will create businesses that will contribute to earnings such as light control films and smart inspection support services by integrating new internal and external technologies with core technologies owned by Electronics. Lastly, I would like to discuss new businesses. In this midterm plan, we plan to achieve net sales of JPY 50 billion in FY 2025 and operating profit of JPY 8.7 billion more than in FY 2022 by rapidly scaling up the main themes of focus. In addition, we will promote business development to create many new themes that will serve as seeds for future growth. The key themes of this medium-term management plan are health care, sensors, carbon neutrality and Metaverse with which we aim to make contributions to earnings. In health care, we will use Health Big Data to establish a data analysis business based on medical record data as well as embark on business supporting personalized medicine and drug discovery through leveraging 3D cell culture. For sensors, we will establish a business for devices with a competitive edge, leveraging top sensor technology, such as autonomous mobile robots and cameras with built-in range sensors. In carbon neutrality, we will develop electrode parts for hydrogen energy and enter the fuel cell market. In Metaverse, we will build our own metaverse platforms and first provide metaverse services to industrial and public sectors to expand into the B2C field. Next, allow me to explain the Toppan-wide Healthcare business strategy that we envision for our new business in health care. The ultimate vision is to establish the same cyclical business model as Erhoeht-X, which provides health care-related value-add services from digital services to consulting, but we believe there is a lot of potential for business expansion in this area by simply combining these business segments, such as BPO for the COVID-19 vaccine office in the Information & Communications sector, medical contracting in the Living & Industry sector and a new health care data business. The healthcare-related business profitability of each of these businesses is higher than that of existing businesses. We intend to make health care a major business pillar of our company by establishing a system that strengthens cross-divisional collaboration. Next, I will explain our financial strategy to achieve management conscious of cost of capital and stock prices. First, our cash allocation policy. Under the 3 basic policies of strengthening investment for sustainable growth, advancing structural reforms and providing stable shareholder returns, this medium-term management plan will leverage operating cash flow for growth investments. We will generate more than JPY 400 billion in operating cash flow over the 3-year period, which will be allocated to business investments and businesses in its initial stage. This will amount to approximately JPY 400 billion. Next, we will promote asset divestment and enhance shareholder returns. Through the reduction of strategic shareholdings and other measures, we intend to return more than JPY 140 billion to our shareholders by selling more than JPY 120 billion of assets as well as utilizing cash on hand. We will also promote structural reforms by utilizing JPY 260 billion of cash on hand. Structural reforms will include reorganization and consolidation of production basis for the folding carton business, existing printing business of publication and commercial printing and other unprofitable businesses. In addition, we will also study land utilization of idle assets in Itabashi, Asaka as well as Sagamihara, which will be closed due to redevelopment. We will also restructure the Akihabara area as a hub for maximizing group synergies after the transition to a holdings company system. In addition, we will introduce a stock compensation plan for employees and respond to the subcontractor law based on the declaration on partnership building -- additional returns will be considered as well, taking into account the status of structural reforms. As a basic policy, we will strive to improve the level of dividends by implementing share buybacks of JPY 100 billion over 3 years and maintaining a total payout ratio of 30%, which we anticipate will be more than 50% under this medium-term management plan, including share buybacks. As a minimum target, our commitment is to reduce strategic shareholdings to no more than 15% as a percentage of consolidated net assets. Regarding dividends, we have increased the year-end dividend for the fiscal year ended March 31, 2023 by JPY 2 to JPY 24 per share in light of our business performance as well as to show our gratitude towards the continued support of our shareholders. For the fiscal year ending March 31, 2024, we would like to reiterate that we plan to pay an interim and year-end dividend of JPY 24 per share, respectively. Moving on to our investment strategy. In the result, attainment phase, which is superior covered by this medium-term plan, we plan to invest approximately JPY 400 billion over 3 years. We will make priority investments in M&A activities and businesses at their initial growth stage. The breakdown is 25% for business investment with expected M&A mainly in DX, SX new business areas. 50% for growth businesses in its initial phase, such as a new European base for SX barrier film, flexible packaging business and electronics business, including semiconductors and other new businesses and 25% in structural reforms and infrastructure development for businesses in need of stable earnings or restructuring. Next, I would like to discuss the policy of reducing strategic shareholdings. In consideration of capital cost and financing, we will continue to divest assets based on assessment of the rationality of holding them. By FY 2025, we will reduce the balance of strategic shareholdings to less than 15% of consolidated net assets as a minimum target. And thereafter, we will continue to further reduce the balance to less than 10%. Next, I will explain the development of management foundations to support our growth strategy. We will strengthen our management foundations from a group-wide perspective in preparation for the transition to a holding company system starting October. In terms of system infrastructure, we are developing data usage infrastructure to support Erhoeht-X expansion and strengthening IT infrastructure from both offensive and defensive perspectives. In the area of manufacturing infrastructure, we will continue to promote the shift to smart factories throughout our nationwide manufacturing basis, which will lead to manufacturing cost reductions and our intellectual property strategy in order to gain a competitive advantage position in our business through the creation of effective intellectual assets, we will create robust business models by utilizing the IP landscape and build a group-wide IP governance system. In human asset strategy, we will secure leverage and develop human assets to drive growth businesses. By linking business and human asset strategy, Erhoeht-X aims to expand its human assets to 6,000 by FY 2025 to achieve the midterm goal. Next, I would like to explain again the transition to a holding company system in October. As an operating company, Toppan Inc., which takes over the main divisions of former Toppan Inc. was merged with the former Toppan Forms and Toppan Inc. Security division, which were established in April to establish Toppan Edge Inc., which is driving business portfolio transformation and information business as well as Toppan Digital Inc., which is advancing Group-wide DX business strategy. Then a holding company, Toppan Holdings, Inc., will be established to manage these operating companies from the perspective of overall group optimization. Although approval of the proposal at the general shareholders meeting scheduled for June 29 is required, we will proceed with the transition to a holding company system to maximize group synergies and strengthen group governance. Next, I will explain expansion of ESG initiatives. As part of our efforts towards sustainable management, we have established business activity materiality and company-wide activity materiality. And under a sustainability promotion system, we are working to achieve the SDG's midterm targets in our business activities. In our company-wide activities, we are promoting initiatives to reduce environmental impact, advancing human capital, diversity and sustainable production. We are committed to implementing sustainable management and creating social value. Regarding our efforts to achieve the SDG midterm targets, we have set and announced mid- to long-term targets in 9 business activity themes and the results for FY 2022 are shown in this document. Although there are some minor items that have not been achieved according to the original plan, we generally made good progress in FY 2022. We are reviewing the targets and definitions for FY 2025 and FY 2030 in light of our performance and situation. The SDG midterm targets have been set in conjunction with the midterm management plan, and we will continue our efforts to achieve the targets. Next, our efforts to reduce environmental impact. The Toppan Group Environmental Vision 2050, a long-term policy for addressing global environmental issues formulated in FY 2021 was further expanded and announced in April. Scope 3, which includes net 0 greenhouse gas emissions and biodiversity conservation has been added as a new theme and the greenhouse gas emission targets for Scope 1 and 2, along with Scope 3 have been revised upward to meet the 1.5-degree Celsius scenario, a common global target. New targets were also set for biodiversity, conservation and optimal use of water and an upward revision was made regarding final landfill waste targets. To achieve this vision and our medium- and long-term environmental goals, we will address environmental issues throughout our value chain, including our supply chain to preserve our rich natural environment and pass it on to future generations. Next, we will discuss human capital and diversity. Based on the principles of "respect for human beings "and "a company is only as good as its people," the Toppan Group, in aiming for sustainable growth and contribution to society, considers human resources to be an important asset of the company and believes that innovation by people, which is generated by maximizing use of human resources is a source of corporate growth. Based on this policy, we will implement a variety of human asset development programs to secure and nutrition the resources to support business portfolio transformation. Diversity and inclusion will promote the advancement of women. In addition, we will enhance our efforts to support the balancing of work and childcare, work and nursing care, and initiatives related to gender diversity. As for the well-being of employees, we are committed to improving the motivation and job satisfaction of employees, further promoting health and wellness and improving the mental and physical condition of each and every employee. As for our treatment system, we introduced a unique Toppan job-type-based system last fiscal year to promote the utilization of human resources with diverse capabilities and careers. In addition, we will consider a stock compensation plan for employees that aligns enterprise value enhancement with employee motivation. Through our human capital and diversity initiatives, we will invest in human capital and strive to secure human resources to support the growth of our business. Next, I would like to discuss our efforts for sustainable production. Regarding human rights, we formulated the Toppan Group Human Rights Policy in FY 2021, and we are promoting respect for basic human rights and efforts to prevent human rights violations from occurring in our business activities. In FY 2022, we conducted human rights due diligence of our group companies in Japan and overseas. Starting this year, we will implement measures to rectify and mitigate humor rights risks identified and disclose information. In the supply chain, we revised Toppan Group Sustainable Procurement Guidelines in FY 2021 and conducted a risk survey in FY 2022. We will continue to expand the scope in the current fiscal year and beyond while propelling a cycle of awareness, operation, auditing and taking corrective measures of the guidelines to raise the level of our sustainable procurement activities. We will further strengthen and expand our governance structure to maximize enterprise value. Finally, we would like to announce that we have created a new Toppan's Purpose & Values as a common philosophy for the group in preparation for the transition to a holding company system this October. We have looked back and reexamine the value we provide for our clients, our strengths and the unique value we offer to society and people's lives to drive the vision of a society that we want to realize. The meaning of Toppan's existence, its purpose has now been slated as breathing life into culture with technology and heart. In order to realize our purpose, the values of the Toppan Group and all employees should have been or defined as the 4 values: integrity, passion, proactivity and creativity. We will continue to strive for sustainable growth in order to realize the society in which diverse cultures are closely intertwined to people's lives and richly embedded in their daily lives. This concludes the presentation of the medium-term management plan. Thank you for your kind attention. [Statements in English on this transcript were spoken by an interpreter present on the live call.]