Toray Industries, Inc. (3402) Earnings Call Transcript & Summary

Thank you very much for joining us today despite your busy schedule. First, I would like to extend our deepest sympathies to the persons affected by the novel coronavirus infection and I would also like to express our respect for all those in the forefront day and night in the battle to prevent further spreading. Toray as a company has taken necessary preventive measures to deal with the spread, and we'll do our utmost for this situation to be resolved as well as for the development of the society and economy thereafter. I would like to take this opportunity to extend my gratitude toward your continued understanding and your interest in our management and business activities. Please turn to Page 1. These are the topics that I will cover today. First, I would like to explain our newly formulated long-term corporate vision, TORAY VISION 2030, perspectives for the business environment in and around 2030. Page 3 describes Toray's corporate philosophy. Toray Group management has centered on achieving sustainable growth by practicing its fundamental principle to contribute to the society through business activities. Following this fundamental principle, Toray Group will practice its store management in order to realize the corporate philosophy of contributing to society through the creation of new value with innovative ideas, technologies and products. Based on the values which we chose as the management core values of contributing to society through business activities, management from a long-term perspective and people-centric management, Toray Group has established the TORAY VISION 2030 with the aim of providing new value to society by focusing on the 4 priorities to build a world envisioned by the group as set out in the Toray Group sustainability vision. TORAY VISION 2030 will be achieved by pursuing co-creation with the customers and business partners that make up the supply chain by sharing Toray's management strengths in R&D, sales and marketing and production, all with a materials-oriented approach. Please turn to Page 5. We believe that Toray Group's mission is to deliver innovative technologies and advanced materials that provide real solutions to the challenges the world faces by balancing development and sustainability. Toray Group's sustainability vision indicates the world Toray Group envisions in 2050 and its contributions for the realization of the vision. The Green Innovation and Life Innovation Businesses are expected to contribute to the realization of such issues. Page 6 introduces Green Innovation and Life Innovation Businesses that are expected to contribute to solving social issues, utilizing its advanced materials and core technologies. Green Innovation Business are expected to contribute to solving global environmental resources and energy issues. Meanwhile, Life Innovation Business are expected to contribute to better medical care and longevity, foster public health and support personal safety. On Page 7, I would explain about the growth model for achieving the sustainability vision. The categories used to classify businesses by growth stages during the previous long-term corporate vision, namely core growth driving businesses, strategically expanding businesses and intensively developing and expanding businesses will no longer be used in TORAY VISION 2030. For the realization of the 4 perspectives of the world envisioned in 2050, we will drive revenue and profit growth by pursuing cross-segmental business expansion with GR and LI Businesses. Meanwhile, as for large-scale teams for the next growth stage, we will accelerate the development and the generation of business models as a group-wide Future TORAY 2020s Project or the FT Project for new business creation. Please turn to Page 8. Regarding the anticipated business environment over the coming 10 years, major changes are expected due to Asian populations, environmental issues and technological innovation. Changing industrial and social structures create business opportunities. However, there is the risk that existing business areas will contract. TORAY VISION 2030 is designed to realize sound, sustainable growth in such changing business environment. Under TORAY VISION 2030, Toray Group will promote the basic strategy, specifically, global expansion in growth business fields. We will realize the growth strategies by working to strengthen competitiveness through measures such as continuous innovation in business models and total cost reductions while carrying out a basic strategy of strengthening the management foundation via appropriate investment scale adjustment and active investment from a financial perspective. From these measures, Toray Group will aim to maximize the group's value in the long to medium-term. Page 9 shows major quantitative targets in TORAY VISION 2030. The fiscal 2030 targets related to sustainability are milestones for the realization of the world as envisioned by the group in 2050. Now let me review on the results of the current medium-term management program, Project AP-G 2019, which we have worked on over the past 3 years from fiscal 2017. Please be reminded that due to the postponement of the business results announcement, the figures of fiscal 2019 used here are those of the forecast announced on the 10th of February this year. With basic strategies of business expansion in growth business fields, expansion and advancement of global business and strengthening competitiveness under AP-G 2019, Toray Group carried out growth strategies focused on business expansion in order to complete the long-term corporate vision. At the same time, we strengthened initiatives designed to generate new revenue sources that would help Toray Group to deliver sustainable growth and increase corporate value in 2020 and beyond. First is the Green Innovation business expansion project or the GR project, which is the first area of growth in the basic strategy, business expansion in growth business fields. Please find the progress of the GR projects we have made during the past 3 years as described on the left side of the slide. As seen on the graph on the right, the net sales of Green Innovation Businesses are expected to increase by 10% annually at JPY 830 billion in fiscal 2019, with contributions mainly from the new energy area, such as Carbon Fiber Composite Materials and battery separator films. Next is Life Innovation Business expansion project or the LI project. Please find the progress we have made in the LI project during the past 3 years as described on the left side of the slide. The net sales of Life Innovation Businesses are expected to increase by 4% annually at JPY 220 billion in fiscal 2019, mainly from advanced materials such as nonwoven fabrics for hygiene products. Next is the AE project. As shown on the left side of the slide, under AP-G 2019, the group has been making growth investments all over the world, where business expansion is expected and has enhanced or started new operations at various sites and worked to acquire profit opportunities. As a result, the net sales in these regions are expected to increase by 5% annually at JPY 1.21 trillion in fiscal 2019. Next is the total cost reduction project or the TC Project. Under AP-G 2019, Toray Group continued with the group-wide total cost reduction project to ensure total cost reduction and continued strengthening of the corporate structure as well as sales and marketing. As a result, over the 3 years period during the medium-term management program, we reduced JPY 90.2 billion in variable costs, JPY 77.5 billion in fixed costs and JPY 52.4 billion from the effects from the innovation of production process. The total reduction is expected to be JPY 220 billion. Please find major topics in strengthening the corporate structure and sales and marketing shown at the bottom of the slide. Page 16 indicates the AP-G 2019 targets and the fiscal year 2019 forecast, which we announced on the 10th of February this year. During the 3 years period, major KPIs have fallen short of our targets. This slide on Page 17 shows the variance of net sales and operating income for fiscal year 2019, the final year of AP-G 2019 against the AP-G 2019 targets. Under AP-G 2019, we have been making proactive investments in growth business fields for business expansion. However, having been impacted by the deteriorating Chinese economy caused by the U.S.-China trade frictions as well as a slowdown in demand for automobiles and smartphones, we could not achieve the targets only -- mainly to the underachievement in change in quantity. In order to cope with the underachievement in a change in quantity, Toray Group thoroughly pursued reduction in variable costs and fixed costs by implementing measures such as improving profitability through high value-adding products and total cost reductions. However, we could not compensate for the negative impact, including the soaring raw materials and fuel prices. Page 18 shows the difference between the fiscal year 2019 forecast for net sales and operating income and the AP-G 2019 targets by segment. Fibers & Textiles did not reach the target due to the impact of the deteriorating Chinese economy resulting from the U.S.-China trade frictions and garments being affected by the warm winter. In Performance Chemicals business, sales volumes saw sluggish growth due to the impact of the deteriorating Chinese economy caused by the U.S.-China trade frictions and the sluggish worldwide demand for automobiles. In the films business, sales volume did not reach the target, reflecting sluggish smartphone market conditions. As for battery separator films business, sales volume fell short of our expectations despite production capacity increase and cost reduction. In electronic and information materials business, the growth in the mainstay smartphone market were lower than expected. As for Carbon Fiber Composite Materials business, operating income results fell below our expectations, mainly due to lower-than-expected sales from industrial applications, the impact of soaring raw materials and fuel prices, increase in costs related to the start-up of new business at a composite subsidiary in Germany and increase in M&A-related goodwill. This graph on Page 19 describes the trends in cash flows during AP-G 2019. During the 3 years period, we have made active capital investments and invested in R&D while keeping the target and carried out M&A such as purchasing TenCate and taking a capital stake in Pacific Textiles. Regarding capital investments, in addition to the versions of unexpected risks, many investment plans did not achieve the target set under the business plans due to inadequate risk response. We consider that the issue is to reliably earn the initial targets on investment. Now I would like to explain our new medium-term management program, Project AP-G 2020, resilience and proactive management, sustainable growth and new development designed for the coming 3 years to fiscal 2022. Despite the worldwide efforts to prevent the infection of the novel coronavirus from spreading, downturn in the world economy seems to be unavoidable this fiscal year, owing to such factors as the disruption of supply chains and the stagnation of production activities and consumption behaviors. We formulated the medium-term management program based on the assumptions that the economy will return to normal in fiscal 2022. Page 21 shows the 3 basic strategies under AP-G 2022 and its specific measures. In AP-G 2022, Toray Group will maintain the basic strategies of AP-G 2019, which are business expansion in growth business fields and strengthening competitiveness, while newly adding a concept of strengthening the management foundation in order to increase cash flows and improve asset efficiency. Toray Group will work on these basic strategies and maximize the value it creates over the medium to long term and will also build a system that will drive sustainable growth into the future. From Page 22, let me explain the specific measures in the 3 basic strategies of AP-G 2022. The first basic strategy is global expansion in growth business fields. We will further advance the GR project through a group-wide approach for the expansion of Green Innovation Businesses. Under the GR project, we will actively expand business by prioritizing resource use for capital expenditures and R&D to large-scale initiatives, such as lightweight materials, biomass origin materials, recycling materials, lithium-ion battery separator films, large tow carbon fiber for wind turbine blades, water treatment membranes and materials related to hydrogen and fuel cells. By making steady progress in this GR project, we plan to increase sales revenue from Green Innovation Businesses to JPY 1 trillion in fiscal 2022. On Page 23, let me introduce 3 growth business sales in the Green Innovation Businesses. First is the battery separator films. As the battery separator films for automotive applications, high growth is expected, particularly in the European market, and the market for consumer applications is also showing expansion. We plan to secure demand by pursuing production capacity increase and cost reduction at the newly established production base in Hungary. The second growth business field is the carbon fiber for wind turbine blades. In addition to the increase in the number of wind power generation systems, increase in size of blades and the proportion of carbon fibers used is expected, given the fact that installation locations are shifting to offshore and low wind areas due to site restrictions. In order to capture the market growth, we will invest continuously to launch the carbon fibers for wind turbine blade applications at Zoltek's bases in Hungary and Mexico and aim for business expansion. The third growth business field is the reverse osmosismembranes. Demand for water treatment membranes is expanding in China, where environmental regulations are tightening, and in the Middle East, where the construction of large-scale seawater desalination plant continues to increase. Given this increase in demand, Toray Group will aim for worlds #1 market share through strengthening of the global production capability by establishing a new production base in Foshan, China as an example. At the same time, we will work on the development of new high performance products while pursuing cost reduction. Please look at Page 26. We will also expand the Life Innovation Businesses in line with the basic strategy, global expansion in growth business fields. Under AP-G 2019, businesses that contribute to supporting health maintenance and longevity and improving the quality of medical care ease burden on medical professionals were defined as Life Innovation Businesses. Now in AP-G 2022, the definition will be broadened to include products for supporting personal safety, respond to threats on society such as recently increasing natural disasters and extreme weather. Toray will provide solutions to various health-related issues by leveraging its power of materials and aim for business expansion. Page 27 explains the specific details of the LI Businesses. With the businesses that support health and longevity, such as nonwoven fabric for hygiene products, and carbon fibers used in materials for facilitating access, we believe that this will contribute to the improvement of activities of daily living of elderly people and home care recipients, ease burden on medical professionals and to the continuation of healthy and independent conditions. The business is to improve quality to health care, ease burden on medical professionals, aside from pharmaceuticals, are designed to provide people with better medical checkups and treatment and help improve their prognosis. Advanced Materials and innovative technologies, such as hitoe, a functional material for vital signs monitoring, dialyzers and catheters will contribute to supporting people sells and reduce burden on medical activities. With the businesses that support personal safety, such as a heat shielding, light shielding and UV protective fabric, SUMMER SHIELD; and protective clothing LIVMOA, we are committed to protect people safety from extreme weather and accidents with the power of materials. By making steady progress in such initiatives in the LI project, our plan is to improve sales revenue from the LI Business to JPY 300 billion in fiscal 2022. From Page 28, I would like to introduce 2 products where we expect future growth in the Life Innovation Businesses. First is the SATAKE HotBalloon ablation system. With the progress of aging society, the number of patients with atrial fibrillation, a type of cardiac arrhythmia, are increasing. For the treatment of such atrial fibrillation using pathogens, SATAKE HotBalloon ablation system was developed and launched in 2016 as the world's first application of high radio frequency heat in a balloon ablation system. The expected benefits include the shortening of the procedure time and lower reoccurrence rate as it ablates pulmonary veins seamlessly. Currently, the 2020 model, which pursues further safeness, effectiveness and handling is being developed and is planned to be launched in between summer to autumn of 2020 in Japan. We seek to expand further overseas where the market is expected to grow and are committed to make contributions to the treatment of patients with atrial fibrillation. The second product is the protective clothing, LIVMOA. Infectious disease risk is increasing with the impact of climate change and globalization of people and products. Therefore, there is a need for products that ensure safety and ease burden on medical professionals. LIVMOA has safety properties that protects humans from the infection caused by permeation of body fluids, blood and its dropless at high level. Also, it has excellent permeability properties, which provides comfortability during use by controlling the temperature inside the suit even under a high temperature and high humidity environment. By wearing the suit, the physical and mental burden on medical professionals can be reduced. We seek for business expansion in the Life Innovation Businesses through these Advanced Materials. I will explain the capital investment for business expansion on Page 30. Under AP-G 2022, Toray plans to spend JPY 500 billion for capital investment in 3 years period for fiscal 2020, mainly in growth business fields, such as battery separator films, carbon fibers for industrial use and RO membranes. About 50% will be invested to Green Innovation and Life Innovation Businesses for the purpose of business growth and expansion. We aim to minimize potential risks by carefully selecting the investment plan and making efficient use of existing facilities. As for M&A and business alliances, we will carry out M&A and alliance activities to pursue the growth of existing businesses, where Toray Group can expect synergies that leverage its strength in core technologies, Advanced Materials and global business platform and accelerate the launch of new businesses. Meanwhile, we will invest strategically within a framework separate from capital investment. Under AP-G 2022, Toray Group will continue to implement the group-wide FT Project in order to create the revenue sources for the next growth stage. We will invest resources selectively in both quality and quantity to large-scale teams for the next growth stage that are expected to form a single business domain in the 2020s and accelerate product development and the establishment of business models. In order to address global scale environmental issues and support safety, security, health and longevity, we set specific themes such as hydrogen fuel cell-related materials; biomass utilization products and processing technologies; environmental-friendly printing solutions; hygiene, health care products; and sensing devices-related materials. Our plan is to create about JPY 1 trillion in sales in the 2020s. Page 32 explains about R&D and intellectual property. We will invest about JPY 220 billion in R&D expenses over the 3 years from fiscal 2020 to future large-scale themes and highly profitable themes. We also plan to upgrade and optimize research and technological development and production with digital utilization. At the R&D innovation center for the future, which opened in December 2019, we will further deepen materials research while looking ahead 50 years and 100 years. The center will focus on research themes that build on Toray Group's strength in materials, such as innovative separation materials, innovative medical materials and regenerative medicines, IoT and sensing devices as well as computer sciences. This will ensure that the group creates innovative materials, devices and systems that lead to solutions for a sustainable future society. In the area of intellectual property, we will raise barriers for market entry through strategic patent applications and know-how protection. We will also enhance global intellectual property by strengthening patent management systems at group companies worldwide. From Page 33 and onwards, let me introduce our 3 R&D themes, which we will focus on during AP-G 2022. First is the initiatives for the realization of a hydrogen society. Toray Group has been engaged in the research and technological development of hydrogen-related products at each stage in the production; transportation, storage; and its usage. For example, in the case of polymer electrolyte fuel cells used in fuel cell vehicles, Toray is expanding business in the production -- Toray is expanding business in the products components such as polymer electrolyte membranes and membrane electrodes assemblies. Toray Group aims to create a sustainable low carbon and circular economy by providing these products and technologies and to contribute to the development of the production, infrastructure and the utilization technologies related to hydrogen. The second theme is the development of early diagnosis technology with DNA chip. In the late 2000s, it was found that a micro RNA released into the blood from cancer cells has the potential to be a cancer diagnosis marker. However, the amount being so miniscule, only Toray's DNA chip enabled the detection of micro RNA by achieving 100x more sensitivity than conventional products. As a result, Toray's DNA chip was adopted in the national project with a joint project with Japan's National Cancer Center and identified markers for 13 kinds of cancers and dementia. Based on these findings, we successfully developed a DNA chip test kit for the detection of pancreatic cancer and biliary tract malignancy, which are considered as difficult types of cancer to detect. This DNA chip test kit was designated as an in vitro diagnostics in the SAKIGAKE review stages by the Ministry of Health, Labor and Welfare. We are currently aiming for application within fiscal 2020. The company intends to sequentially apply for diagnostic drugs for other types of cancer after determining the order of priority. The third theme is related to antibody drugs, which is the anti-cancer drug, TRK-950. The conventional antibody drug system is designed to attack the target or the protein at the surface of the cancer cell. The expected advantage is that side effects will not occur unlike the normal anticancer drug treatment. However, there still remain cases where negative expression of the target in the same type of cancer are seen. Toray has successfully detected a new target that expresses at a high level on the surface of many types of cancers. Furthermore, based on a bio method, we developed a cancer-attacking antibody, which binds specifically to cancer cells through this new target. As a first-in-class anticancer drug, we aim for approval of this TRK-950 in the 2020s. Regarding clinical trials, we have started Phase I clinical trials in the U.S. and France from March 2017 and expanded research sites from 2019. And additionally, started confirmation of safety and effectiveness for treating human cancers, including colon cancer. Page 36 is the second basic strategy, strengthening competitiveness. Toray Group has been working on total cost reduction on a group-wide basis. In strengthening competitiveness, Toray Group will continue with total cost reduction and will add specific measures of business advancement, high added value creation and enhancing workplace competency in sales and marketing and production. In total cost reduction, Toray Group will work on promoting the group-wide total cost reduction, NTC Project in order to achieve the target to reduce JPY 150 billion in 3 years. In the business advancement high added value creation, Toray Group will strive to advance products and add high value by integrating and combining products and services, create new value in collaboration with external partners and maximize added value by pursuing innovation in the value chain using ICT or information and communication technology. As for enhancing workplace competency in sales and marketing, we will lead the maximization of value adding by strengthening the ability of the sales force to gather information, provide supply chain insight, the ability to make comprehensive sales proposals and the ability to resolve issues. From the perspective of production, we will continually improve labor productivity by strengthening the ability to maintain equipment, resolve on-site problems and the ability to resolve issues in order to meet customer requirements. From Page 37, we will describe the details of the third basic strategy: strengthening the management foundation. The first specific measure is strengthening financial structure by improving cash efficiency. In order to realize sound, sustainable growth, we will conduct business operations with greater awareness of cash flow. Our goal is to create free cash flow of JPY 120 billion or more, including M&A, over the 3 years for fiscal 2020. As for capital investment, we will enhance measures to increase the certainty of return on investment. We plan to introduce management-based free cash flow internally. As a group-wide initiative, we will reduce working capital by implementing thorough management of inventory, receivable and payable. The target of the upper limit for the D/E ratio will be reduced from 1.0 or less to about 0.8. The company now aims for a dividend payout ratio of around 30%. The second specific measure is business structural reform of low growth and low profitability businesses. Under AP-G 2022, we will not only promote structural reform in each segment, but also as part of the group-wide strategy, will identify and promote structural reform of the low growth and low profitability businesses. Low growth and low profitability businesses are defined as those falling below threshold values for profitability and sales growth. The target businesses and companies are selected once a year. For low growth and low profitability businesses, individual plans are prepared for the goal to reform the business and organizational structures. Meanwhile, for businesses with low market growth potential or businesses that are determined as difficult to make the most of the group's strength in the future, we will consider options including downsizing and withdrawal. From Page 39, I will introduce the key initiatives under AP-G 2022. The first is initiatives for a secular economy. Toray has been contributing to initiatives, including biomass plastics, recycling, promoting of renewable energy and the use of hydrogen and water reuse with its various technologies. The examples include material recycling and recycling within operating processes of Toray's mainstay products such as Fibers & Textiles and plastic products, including resins and films. In addition, we have successfully recycled nylon fiber products through chemical recycling, which is a recycling method that returns material such as places, which cannot be reused into basic chemicals such as monomers and gases. We are also developing materials using plant-derived raw materials, utilizing raw materials from biomass origin made by nonfossil resources And membrane-integrated biotechnology. Furthermore, Toray's technology is making contributions in the circular economy by generating renewable energy, such as electricity and hydrogen, which can be used in the manufacturing process and in promoting water reuse. On Page 40 is an example of our initiative for a circular economy, which is the utilization of biomass. Toray has developed a processing technology that realizes cost reduction through energy saving and recycling by applying water treatment membranes for the production of cellulosic sugar made from nonedible biomass with the saccharification process. We have started prototype evaluation at a demonstration plant. With the practical implementation of this process, we aim to realize a supply chain for the production of materials and chemical products from nonedible biomass. For biomass origin fiber, we have started mass production of partial bio-PET fiber with plant-based ethylene glycol as the raw material and applying it to our Ultrasuede. For the 100% bio-PET fiber, we have completed prototype production at a demonstration plant. We positioned this as a top level environmental-friendly material, and our target applications are for sportswear and automotive interiors. The aim is to realize mass production in the early 2020s. Please turn to Page 41. The second initiative for a circular economy is the promotion of recycling. Toray is involved in the regeneration-type recycling and the collection and circulation-type recycling. In the regeneration type, we are carrying out plastic bottle recycling and the recycle of production process wastes. Products using exceptionally white plastic bottle-derived fibers that incorporate traceability will be sold under the commercial brand &+. In the collection and circulation-type recycling, we collect used fibers and textiles and resin products and reuse them utilizing Toray's technologies. Please look at Page 42. The second key initiative is reduction of greenhouse gas emissions in the production stage. We launched a new group-wide project, challenge 30 project under AP-G 2022 for the achievement of targets in fiscal 2030 to reduce both greenhouse gas emissions and water usage per unit of sales revenue by 30% compared to fiscal 2013. We will work to expand our use of biomass fuels in coal-fired boilers and promote wastewater recycling in plant, utilizing our water treatment technologies. Please turn to Page 43. The third key initiative is to promote advancement in management through the utilization of digital technologies. In the group-wide Toray digital transformation DX project, Toray will drive advancement and streamlining of management by leveraging digital technology in research and technological development and production. The main themes include material and bio design and the improvement in quality and productivity. In R&D, we plan to enhance research of Advanced Materials through digital Monozukuri, in other words, manufacturing. In production, we will improve labor productivity by applying an automatic monitoring system utilizing AI technology. Meanwhile, we will visualize global management information in the area of sales and marketing, finance and accounting and purchasing and logistics. Page 44 is about securing and developing human resources. Toray will secure, develop and promote future management candidates and professional human resources with strong capabilities to lead on the front line by realizing a people-centric management. From a company-wide perspective, the company will strategically provide core staff with the opportunity to develop their career and promote the acquisition of expert knowledge, capabilities and experience necessary for formulating management through initiatives to address important management issues. The company will proactively develop human resources, including young candidates and strategically secure, develop and promote core staff outside Japan. As to secure and develop professional human resources, the company will promote the development of professional human resources by clarifying expert knowledge and capabilities necessary for each job class in order to strategically develop each individual's career. This Page 45 explains about the changes in the performance measures following the adoption of IFRS scheduled from the first quarter of fiscal 2020. Toray plans to disclose ordinary business revenue and profit as core operating income as a measure of management performance. Core operating income is derived by adding nonoperating income and expenses, excluding net financial expenses and costs, and a portion of special credits and charges to the operating profit under the Japanese standards. All the account items and the nonoperating income expenses under the Japanese standard, such as costs related to idle facilities and start-up of new facilities, will be included in the core operation income under IFRS. However, net financial expenses and foreign exchange gain or loss will be excluded. By adopting the core operating income, the regular conditions of production facilities and the situation of operations will be reflected in the gain and loss without emission. The AP-G 2022 targets will be disclosed as core operating income. Page 46 indicates the financial targets set under AP-G 2022. Our IFRS-based targets for fiscal 2022 is to achieve JPY 2,600 billion in consolidated sales revenue and JPY 180 billion in consolidated core operating income. ROA target is about 7%, and ROE target is about 9%. The guideline of D/E ratio is set out around 0.8. Free cash flows for the total of 3 years is aimed at JPY 120 billion or more. In terms of dividend policies, Toray aims for sustainable increase of dividends linked to business performance, and target for dividend ratio at about 30%. Page 47 indicates the sustainability targets in fiscal 2022. Toray Group will strive to achieve the targets also from the perspective of sustainability. Page 48 shows the trends in consolidated net sales and operating income. The business environment surrounding Toray Group is changing day by day. We will see these changes as opportunities for creating new businesses and will make the most of the strengths of the Toray Group to achieve the targets under AP-G 2022. Finally, let me introduce our initiatives for the strengthening of the company's corporate governance. Please turn to Page 50. Understanding the importance of strengthening the corporate governance, Toray will implement the following 3 measures: the first is the reduction in numbers of members of the Board and change in its composition. While reducing the number of board members from 19 to 12, we will increase the number of outside directors from 2 to 4 in order to deepen the discussions concerning the group management policies and midterm management programs from a wider perspective and aim to further enhance the effectiveness of the management that contribute to increased corporate value in the medium to long term. The second is strengthening the governance committee. We will increase the number of members of the Governance Committee, which had conventionally been consisted of 2 outside directors and 1 internal member of the Board to 4 outside directors and 3 internal members of the Board. Accordingly, general matters related to governance shall be discussed and reported from a variety of perspectives. The third is the introduction of an executive officer system. Toray will aim for a flexible and efficient management execution based on quick decision-making by responding accurately to the changes in the business environment in order to accelerate the business expansion globally. Page 51 describes the corporate governance structure. The auditing functions of the Board of Corporate auditors towards the Board of Directors have already been strengthened last fiscal year by increasing 1 outside corporate auditor. From these strengthening measures of its corporate governance, Toray will accelerate business expansion globally based on solid policies and decision-making in the medium to long term by responding accurately to the changes in the business environment. This concludes my presentation of the new medium-term management program Project AP-G 2022. We have attached reference for the medium-term strategies by segment. So please refer to them later. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]