UACJ Corporation (5741) Earnings Call Transcript & Summary

It is time. So we would like to begin the explanatory meeting. Thank you very much for taking time out of your busy schedule to attend the UACJ IR Day. During this meeting, we will use the material posted on our website. Please look at our website if you have not prepared the material in front of you. I am Kouzo Okada, General Manager of the IR department, and I will be moderating the session. Information, including future projections, may be referred to during the explanation, but they are only our projections at this point. Please note that the actual results may materially differ from these projections due to various factors. Now we would like to start today's program. President Ishihara, the floor is yours.

I am Ishihara. Good morning. Thank you for joining IR Day of UACJ despite your busy schedule. It has been 3 years since I assumed the presidency. We have been proactively conducting IR and SR activities. Through quarterly results briefings and small meetings, we have received many advice from investors. Thank you very much for that. In today's IR Day, at the beginning, I will explain the concept of the third mid-term management plan and future outlook, which was announced on May 12 once again. In addition, mid- to long-term strategy of each business and area as well as financial strategy, which were requested by many investors, will be explained by each responsible person today. I believe it is significant for the company management to come face-to-face with capital and financial market. So I look forward to today's meeting. I will introduce to you today's program. Flat-rolled product business and financial strategy will be explained from the headquarter members in Tokyo. UATH business will be explained by local President, Hironori Tsuchiya, in Thailand; and UATAA business will be explained by CEO, President, Henry Gordinier, from the U.S. live, respectively. Please do understand that questions and answers will be mainly addressed by members in Tokyo. In implementing structural reform for all employees to give their full attention looking at the same direction, in February 2020, we redefined UACJ Group philosophy, which expresses our purpose. We express our commitment to contribute to a richer society, leveraging our technology, the society and the world that can be created, particularly with aluminum and respect for diversity and value that all our executives and staff members have embraced and will cherish going forward. The code of conduct that must be followed by all employees is established as UACJ Way. And as the President at the forefront, these business leaders are promoters in penetrating the UACJ Way. In order for our company to contribute to realization of sustainable and affluent society, it is only natural the company must become sustainable. The values we have cherished as UACJ Group is expanding the potential of aluminum with skills and techniques we have pursued over 100 years since we made inroad to aluminum rolling business for the first time in Japan in 1898. Based on our pride and confidence demonstrated throughout our history, we considered what we must do going forward, and we expressed it in new corporate philosophy and the tagline, Aluminum Lightens the World. We would like to embrace our corporate philosophy and BCM as sustainability and the mid- to long-term strategy as a comprehensive topic from fiscal year 2021 onward to solidify sustainability as a company, though we have addressed them, having individual objectives since the foundation of UACJ Group. From now on, I would like to talk about UACJ Vision 2030 as a long-term plan and the third mid-term management plan covering 3 years from fiscal year 2021 to fiscal year 2023, which lay foundation for realizing Vision 2030. Social structural change dramatically progressed due to COVID-19 pandemic as external environment changes through technological innovation and through realization of sustainable society. Envisaging the society in 2030, we have described how UACJ would like to contribute to the society by striving to achieve our corporate philosophy that is described in our UACJ Vision 2030. In Vision 2030, we set up these 4 areas of contribution at UACJ: contributing to wider society by capturing the demand of growth sectors and growth markets, contribution to social and economic value creation through value chain and supply chain with materials and -- plus alpha, contributing to solving social challenges through new business domains and business models, contribution to alleviating environmental burden through carbon dioxide reduction captured through our product life cycle. Envisaging the image where UACJ contribute to the world in Vision 2030, mid-level employees, who will be playing major roles in the group in 10 years, came up with their contribution in 3 new domains, namely mobility; lifestyle, health care; and environment, energy. By backcasting from our Vision 2030, we see ourselves eventually having relevancy to 4 SEG goals through contributing to solving social challenges using added values of our strength of wide variety of machining capabilities, supply system built around 3 global pillars and solid customer base. We can envision such a world. By defining the UACJ Group sustainability policy to contribute to realization of sustainable society, we will address important challenges or materiality through corporate activities. The executives and staff members in our group companies launched workshops, listened to external experts' views and defined the materiality. Six materialities are linked to SEGs and will be addressed by the entire group members. For the environment, we will address challenges in realizing carbon neutral in 2050, focusing on the environmental issues I mentioned earlier. In the existing areas, we will expand our scale, mainly in growth markets of North America and Southeast Asia and growth area of can stock and automotive areas. Just like we started auto parts business by combining sheet extrusion and precision machining components business, we would like to generate plus offer added value to materials, such as plasticity processing, recycling, modules and services, which can be realized only by a unique aluminum manufacturer with diverse businesses of flat-rolled products, full extrusion, precision machine components, casting and forging and automotive components. By generating synergy across business and beyond to adjacent areas, we will expand into a new external arena, leveraging our various know-how as foundation. Targeting the year 2025, which includes this mid-term plan period, we will expand areas to recycling of upper and lower processes of materials and processing of auto parts business so that we can roll out a new business area in 2030. This diagram shows how UACJ develops with aluminum. Based on customers' needs, we will polish up our material designing, functional designing production technology so that alumina material is chosen by our customers. Furthermore, toward 2030, by utilizing features of aluminum as material, we will aim to develop our businesses in new areas, leveraging our seas of basic and applied technology with our passion in aluminum. The new areas are the following: mobility as transportation service that is areas of future transportation infrastructures, including hydrogen fuel and new mobile area; lifestyle, health care, which is the future of food and improvement of health care and nursing care using robotics and more abundant society by providing better disaster prevention and mitigation measures; environment and energy areas, such as contributing to society using reduced energy, building recycling-based society, hydrogen energy and power generation. These are positioned as strategic areas for our stable growth. Our strength is our ability to understand market needs deeply and correctly, ability to realize market needs in the form of material and business foundation, having diverse interfaces to the market needs. By leveraging those strengths, we will aspire to create the value of materials plus alpha in the following ways: offering high added value components by combining materials and processing, such as high-strength car bumpers; offering services optimized to customers' production process through customers' manufacturing process optimization using material strength; offering the unique environmental values of aluminum to society, such as can-to-can 100% recycling. Capitalizing on abundant expertise, manufacturing know-how and business foundation accumulated on aluminum, we will think about providing services combining material plus recycling, data utilization and recycling. Fiscal year 2030 target is net sales of JPY 800 billion or over, an operating margin of 6% or above and 10% of overall ROIC and ROE. We will capture demand in growth markets and sectors and create new businesses. We aspire to improve profit margins and capital efficiency by expanding our scale and material plus alpha. Nonfinancial targets tied to 6 materialities is shown here. In response to climate change, we would like to reduce carbon dioxide emission in the entire supply chain to achieve carbon neutrality by 2050. On consideration to human rights, there were strong requests at all employee workshops of overseas group companies, and we included it in our materiality. We will start from conducting due diligence on human rights. As a foundation to realize our Vision 2030, we have selected HR, technology, DX and culture, and we will create road map for each area to build the foundation. Now I will talk about the backbone of the third mid-term management plan. The third mid-term management plan is the 3-year business plan, starting from fiscal year 2021 as an initial year. The concept is completing structural reforms and establishing the foundation for achieving Vision 2030. To be a sustainable business, this year marks the new starting year for the UACJ Group. Now once again, I will ask for your understanding about our business characteristics. Rolled aluminum business is a massive equipment-intensive industry, which takes an exceptionally long time, at least 5 years, to go from the initial investment planning, construction, start of production to maximization of production capacity. Securing long-term investments capacity and human resources to achieve such growth was the purpose and significance of the merger and establishment of UACJ in 2013. Starting from the UATH first phase, we have completed making major upfront investment in fiscal year 2019, such as enhancement of TAA, establishment of a new finishing line for automotive materials in Fukui Works. It was good that we were able to smoothly launch them under COVID-19 pandemic despite some challenges. And now we are recouping our investment. There are 3 major policies in the third mid-term management plan. They are to complete structural reforms, strengthen foundations for growth and contribute to achieving a lighter world. The details of individual region and business will be explained by each representative later on. Fiscal year 2023 financial targets are shown here. Current ROE and ROIC are not at satisfactory levels. In the third mid-term management plan, we will lay foundation to realize a vision and aim to improve capital efficiency further in the next fourth mid-term management plan. Nonfinancial targets are described on the slide. Later on, I will talk about our actions against climate change, too. Ordinary income target in fiscal year 2023 is JPY 25 billion, and comparison with fiscal year 2020 is shown using waterfall chart. Preconditions are written on the left top. Factors contributing to ordinary income improvement are following: recovery of demand due to dwindling COVID-19 impact, lower breakeven point of domestic business and monetization past investment overseas. Impact of structural reforms is expected to be JPY 18.5 billion in comparison to the base year of fiscal year 2019, making our structure lean. As a result of structural reform, minimized the impact of COVID-19. First major policy is completing, finishing off structural reforms. Initiatives planned for the structural reform has been making steadily progress as planned. With delays in customer certification of manufacturing transfer and decrease in sales volume due to COVID across some products, we are seeing some setbacks in realizing consolidation effect and establishing optimum production organization as well as improved product mix, especially in flat-rolled products and extruded products. This, I believe, will eventually go back on track in accordance with our road map. This is our plan in enhancing earnings power, which is one of the themes for structural reform. Of the JPY 21 billion impact of structural reform, which we planned at the time of announcement, JPY 18.5 billion is factored in. As mentioned earlier, we are on track in terms of measures implemented, but still short in achieving target owing to delays due to COVID-19 in the domestic business. Shift to aluminum is delayed because of COVID-19 impact on development in automotive-related materials. It is expected to take more time than originally hoped for before we see profit contribution. Preference for aluminum is quite strong in the relevant fields. Therefore, I expect to return to scheduled pace. Additional measures will be put in place to achieve our initial goal of JPY 21 billion. Second major policy is strengthen foundations for growth, and it consists of 4 key issues. One of the key issues are increasing added value. Let me take you through how this will be addressed. We will expand customer base through increasing value propositions by adding value to our materials. Increasing added value includes offering UACJ-certified recycled materials, UACJ Smart, with increased use of recycled materials to contribute to energy saving in the product life cycle. This will help enhance the value of aluminum as an environment-friendly material and contribute to reducing environmental load for our customer supply chain as a whole. UACJ Smart is the name of environment-friendly aluminum brand we plan to roll out in the future. This is an aluminum product with reduced environmental impact with special management of raw materials, ingredients and manufacturing. The plan is to roll out across a variety of fields. We will leverage the diverse know-how and processing capabilities we have across the group to offer broader products and services. Profit growth is sought by expanding value-added businesses in line with the transition towards a recycling society. This page covers creating new business domains. These are the initiatives to create new business domains that contribute to resolving social challenges as well as issues faced by our customers by leveraging the technological seeds unique to our company. We are yet to start any initiatives on a full scale, but examples of initiatives that have started include creating a recycling ecosystem for aluminum under collaboration with partner companies and jointly developing pharmaceutical packaging foil that can detect whether a package has been opened. Third key policy is contributing to achieving a lighter world, promoting sustainability. Sustainability activities will be promoted to realize our vision of contributing to creating a lighter world by pursuing our passion, aluminum. The main challenge is to achieve CO2 emission reduction across the entire supply chain and product life cycle by leveraging the advantages of recyclable aluminum products. As already mentioned, CO2 emission reduction target for fiscal year 2030 in Scopes 1, 2 and 3 is 22% cut from fiscal year 2019. Achieving carbon neutral by 2050 is our target goal, and 2030 is a mid-year towards the goal. Earlier, I talked about creating new domains. There are examples in-house of uncovering buried seeds and setting up in-house venture companies. We make -- will be utilized to identify new opportunities by making use of seeds inside the company. This initiative is very promising, and I am looking very much forward to it. Let me talk about making use of aluminum characteristics. A large part of CO2 emission comes from the upper process of the aluminum life cycle in the process of manufacturing primary or virgin aluminum. When recycled aluminum is used, CO2 load during regeneration is as low as 3%. CO2 emission during manufacturing of primary aluminum or aluminum materials can be reduced to close to neutral by improved energy efficiency from using aluminum and making products lighter with better thermal efficiency as well as by promoting recycling. Through technological development and improved recycling rate by building a recycling loop with stakeholders, including customers, we will contribute to reduced environmental load in the transition to a circular economy. Your continued support for UACJ Group is greatly appreciated. That is all for me. And I now would like to ask the heads of departments to give their presentations.

Good morning. I am Taguchi of the flat-rolled products division. I will give an overview of the current status and outlook on flat-rolled products business. Overview of flat-rolled products business. As shown in the graph, our business consists of 3 core pillars of UACJ in Japan, UATH in Thailand and TAA in North America. First, about the domestic market. As shown in the pie chart on the right, our business is quite diverse, covering can stock, automotive, industrial materials and others. On the left, our entity in Thailand globally supplies can stock, automotive heat exchanger materials, fin materials, to name a few. TAA is our core entity in North America centered on can stock. This chart illustrates trend in sales volume for the 3 pillars. Initially, in the years immediately after integration, sales volume was a little over 900,000 tons, which, from around 2019, grew to 1.2 million tons. Our plan is to exceed 1.3 million in 2023. Let me take a moment to take you through the strengths of the 3 entities and highlights going forward, starting from Japan. As our President mentioned earlier, we will first focus on completing structural reforms. It is progressing on track, and Nikko Works is already closed. Next step will be to expand sales of key products such as can stock and automotive products. Thailand. Investment into industrial machinery has been completed and is in full operation. Going forward, we will maximize production capacity and sales volume by utilizing existing facilities. TAA in North America. Here again, investment has been completed. In order to capture the strong demand in the North American market, we will pursue opportunities to further expand production capacity while maintaining profitability. This is demand forecast for can stock by region. As shown in the graph, strong growth can be expected globally. Bar on the left is 2019, and bar on the right is estimate for 2025. In the North American market, in particular, annual increase of 0.5 million ton is expected. This is a bar graph showing total stock -- total can stock sales volume for the 3 pillar entities. While the total was around 600,000 tons, it has grown to 800,000 recently. Our plan is to exceed 900,000 tons by 2025. In the Japanese market, which is one of the 3 pillars, there are, again, 3 main entities: Fukui, Fukaya and Nagoya. I want to spend a few minutes to talk about these 5 entities, 3 in Japan and UATH and TAA. Starting with our sites in Japan, Fukui Works has an outstanding competitiveness in cans and automobiles, which we will leverage to offer high quality, rapid delivery and high level of service. Fukaya Works is about to complete its structural reform and transforming itself as a plant focusing on thick plates. Nagoya Works, in the bottom center, covers a wide variety of products by producing products that are not manufactured in Fukui or Fukaya. I have already covered the characteristics of UATH and TAA. 2030 vision for the flat-rolled products business. We will show our presence in the world as world #1. In other words, not only focusing on volume, we will aim to create businesses that have capture. More specifically, for can stock, we will promote can-to-can recycling. For automotive materials, we will develop materials that pursue machinability and recyclability. In industrial materials, develop products that aim to reduce environmental impact. Lastly but not least, in thick plates, we will offer added value through coordination with machining. This is our future direction. I will not dwell on this page as our President already covered it. Key issues for the rolled products business is shown on the right. In addition to improving profit, we intend to improve cash flows by reducing inventory, promote recycling and work on talent development, which is critical for the company. This is our sales strategy, regions on the horizontal axis and products on the vertical axis. Regional focus will be on Japan, Southeast Asia and North America. Key product areas are can stock, automotive materials. And in Japan, we will also focus on industrial materials, thick plates and coil centers. Lastly, expected sales volume growth in the domestic market from fiscal year 2020 to 2023. First half 2020 was sluggish owing to COVID-19 pandemic. We will first focus on regaining lost ground. In automotive and thick plates, semiconductor-related business is expected to grow further with 5G, IoT and AI. Thick plate is used in the manufacturing machine for such products. Our expectation for robust growth in these areas are reflected in these numbers. That concludes my presentation. Thank you very much.

Please turn to Page 1, overview of UATH. As a core plant in Southeast Asia region, we have established a system to produce 320,000-ton capacity. We have 1,270 employees operating our business in more than 20 countries throughout the world. This describes development of UATH investment and sales volume. At the bottom, you see investment we have made in the first, second and the third phases. In total, the investment amount is about JPY 100 billion. The upper graph shows the development of sales volume. Though the 2020 saw a slowdown due to COVID-19, but it has been growing smoothly. UATH major policies and key issues. Achieving our vision of UATH with a great presence that draws on our strength of completing recycling-based manufacturing. The left-hand side shows our major policies. Firstly, we will achieve effects from launch of 3 phases of business and ensure existing facilities are thoroughly utilized. And the other is to pursue new technologies to promote the reduction of environmental impact. On the right, you see key issues, which I will explain later on. Next is sales volume and ordinary income target. The left-side graph shows sales volume development. The year 2020 saw a slowdown due to COVID-19 impact. But generally, we saw smooth increase. This year's plan is 310,000 tons, but the recent trend suggests we will sell far more than that. In 2022 and beyond, the order situation is very robust. Right-hand side graph shows the development of ordinary income and loss. This fiscal year's plan is positive JPY 800 million. And in financial year 2023's plan is JPY 2.3 billion. From 2024 and beyond, we expect the order will continue to be firm. In this situation, we will improve our selling prices and product mix. We will also keep improving our capacity and reducing cost thoroughly as well as promoting recycling technology. By so doing, we will recoup our investment. Sales strategy. As a first major strategy, we will increase regional market share as one-of-a-kind mill in Southeast Asia. Recently, we have been capturing robust demand in North America, but at the same time, we aim to expand sales in Asia. In Thailand, we will establish can stock recycling loop, leading to market share increase. And the second major strategy is to enhance our competitive strength as a global supplier and enhance relationships with global customers. What it means is to utilize the system built around the 3 global pillars to strengthen can stock sales and to further strengthen direct sales system. And the third major strategy is to build a win-win business for both customers and UACJ through recycling. We will lead the creation of recycling initiatives not only in Thailand but also in Southeast Asia. This is a table summarizing our initiatives, targeting key issues. The left column is for this fiscal year, the middle describes up to fiscal year 2025, and the right is up to fiscal year 2030. If you look at the very top, which says productivity enhancement for this year, the priority is to establish stable production system with 320,000-ton annual capacity as there is enough demand in the market. Against this backdrop, on the environmental response, we turn toward the lower part of the graph. In this fiscal year, we will acquire ASI certification. On recycling, starting a development of new recycling technology is what we would like to conduct in addition to what we currently pursue. Looking at the middle column of up to fiscal year 2025, we will establish world-class productivity and cost reduction. In this situation, as shown below, improvement of sales prices, consideration on product mix optimization will be carried out as well. In addition, we will aim to complete smart factories and establish localization of plant operation. On the environmental response, by establishing developed technology on recycling, we will move to primary can stock recycling within Thailand as shown at the bottom. There are mainly 4 points on UATH's use of the power of materials. First is to aim to increase usage of can stock scrap. We will tackle alloy separation technology of UBC. Second is aimed at increasing performance of can stock. That is to develop thin-walled, highly moldable volume materials. The third is to increase end-material moldability of cans. Fourth is to promote automation through utilization of the IoT. This is about participation in can-to-can journey, where we participate in an aluminum can recycling promotion project, the activity led by the Thai government to reduce environmental impact. In Thailand, there was no manufacturer to produce material for cans. So naturally, used can needed to be brought to overseas. Well, as UACJ made inroad into Thailand, for the first time, it became possible to conduct can-to-can recycling within the country. At Rayong Works, we plan to install large-scale solar panels and cover some power usage with renewable energy. With this facility's completion, it will be the largest rooftop solar power generation facility in Thailand. This is about smart factory initiative. We will lay groundwork for shift to smart factories to be completed by 2030. To this goal, we will promote 4 initiatives shown below. This is about future plans for personnel development. Currently, planned operation is all conducted by Thai people. As we engage in smart factory initiatives shown in the previous page, we will promote management by local people, transferring operation to be done by Thai people. Please look at the slide for concrete details. This concludes my explanation.

Thank you very much. My name is Henry Gordinier. I am the President and CEO of Tri-Arrows Aluminum. I am also an officer of the UACJ Group. I want to thank everybody today for taking time to join us on this Investor Day for the company. I'm very proud to talk about Tri-Arrows and the North America business with the UACJ Group. I also want to start with a message of hoping for and wishing for your health and your safety. I'd like to -- a brief message about COVID-19 in North America. I'm very proud that about 90% of the Tri-Arrows' office and 90% of our manufacturing facility have been vaccinated with both doses of the vaccine. So our operations are very stable, and our employees are health -- and have strong health. And I am very encouraged that we will be able to deliver the operational performance and financial performance that is expected from our business. A little bit about Tri-Arrows Aluminum. So we are located in -- our business is about 1 day's distance in terms of the distance of a truck for reference. We sit equidistant between the Rocky Mountains to the West Coast and our East Coast, which allows us very close access and favorable freight lengths to all our customers that are in the Midwest as well as in the East Coast in the south of our nation. What we're known for is world-class productivity. Tri-Arrows Aluminum is a low-cost producer of flat-rolled aluminum sheet. And we have a very performance-based culture driven by continuous improvement and driven by maintaining a competitive advantage in the marketplace relative to our competitors, driven by service and driven by economic value. We sell over 454 kt annually. Our business is entirely focused on packaging and can sheet. And we're very proud to be a preferred supplier with all our customers, which include both can makers and also the large brands. As a business, we're driven by safety, sustainability and partnerships. Our JV production facility operates over -- with over 1,400 employees. With our mid-term plan, we're transitioning from a period of really rapid growth and very rapid and very significant capital investment from the UACJ Group. UACJ made a capital investments of approximately $425 million. Starting in FY '17 through FY '20, we deployed that capital and commissioned equipment in multiple machine centers that has increased our capacity by over 30% and our profitability by over 50%. Actually, and -- our EBITDA here has grown 105% since FY '17. So with the investments of the UACJ Group, we have literally doubled our profitability as a company. When I look to our mid-term plan, our focus now that we've commissioned this, aligned with the mid-term plan, will be upon debt reduction and improvement in leverage and operating our business in a stable profile, which is what is seen on this slide between our FY '21 results and FY forecast and FY '23 forecast. And we've got ideas for how we can debottleneck our operations for some modest growth as we head into '24, '25 and '26. A very key message for the group is the significant returns that we've had, the stable profile of our business today and also the fact that our capacity is sold out for the next 5 years. FY '21 through FY '25 for our business, we've sold all our production. And in fact, many customers or all customers are asking for more volume when we are sold out. And many are beginning contract cycles even today that would extend in FY '26 and beyond. It's a very strong market in North America, and I'll spend some time now talking about that. The demand for the aluminum can in North America is projected to grow 5% per year all the way through 2030. It's a significant growth that has not been seen for many decades in this country. You can see here, beverage container sale, these are units, actual cans, have surpassed the 100 billion can mark and are quickly moving towards 150 million (sic) [ 150 billion ] units by the time of 2030 arrives. The demand has been driven by consumer presence, which is very positive for us in terms of the confidence that we've got in the demand. Consumers right now in the North America are very focused on the environment. This message of sustainability is very real. Not just words, it's purchasing power. It's how consumers are making their choice. It's how my family is making choices. And it's also driving businesses to make different decisions, financing institutions to find new products to support investment and government policymakers. Another factor for consumer preference here is just that the can has become a symbol of a premium product in North America. This is actually -- when I was growing up, it was -- the glass bottle was the package for premium products. But when I look at my children's generation and the younger generation, today, they look at the package of an aluminum can as being the premium product. They'll pay more money for those products, and they look to the brands that they want to drink to be in the aluminum can. And lastly, what we're seeing is a massive shift for new product launches to be in the aluminum can. And a lot of these new products are incremental growth, most of it. It's products that are alcoholic seltzers, products that are energy drinks and products that are like flavored water. But this is -- these are brand-new categories. And what we're seeing is incremental volume in this area. Currently, the can line expansions that we're seeing are going to provide for what's announced, over 120 billion units annually for new can, and more is coming. Can-making capacity. So we've talked some about demand. Can-making capacity. Our customers are adding over 900 million pounds of capacity that's been announced. That's 408 Kt approximately of can making, of new can-making capacity. So these are announced projects. This is announced and approved capital investment that's in the works today. And what's really amazing is many of these plants, these are not the plants that were built 20 years ago. These plants are massive with multiple lines, some of which a single plant will consume up to 200 million pounds of volume. So customers have put hard money to work, and they're doing it with scale. And what you can see is the investments happening all across the country. It's happening from the Pacific Northwest all the way to the Southeast. And it's happening with many, many customers, Ardagh, Ball, Crown, Coke, and we're also seeing new customers enter the market. Customers like CanPack, a new company called Vobev, a company called Envases. These are new entrants into the can making -- for customers into can making. So we're seeing a lot of capital at work and an extreme amount of confidence from our customers in this growth. Now when I think about what this means to North American market situation, the growth in can demand in the United States is going to require additional rolling capacity. So today, the market is actually in deficit when we look at the demand in North America for flat-rolled aluminum sheet versus domestic supply, where today, imports are filling that gap. But when we look at the growth in -- of volume, both in the announced expansions that we've seen and the demand trend profiles, we're looking at 1 billion to 2 billion pounds of sheet. In fact, our customers, all of whom are looking at 2030, requiring 6 billion pounds of sheet. And for context, that's equivalent to an entire new rolling mill. So there's a domestic in U.S. can sheet, and that's focused to be 1 billion to 2 billion pounds. A lot of this available capacity is reduced -- of the domestic capacity because of automotive sheet. We're also seeing a strong building products market. There are some imports that are in today, but when we think about longer term, the use of imports to supplement the kind of volume shortage that we anticipate is not practical just due to the supply chain risks, due to splicing complexity and really cost, inland freight and the logistics to manage across our oceans. Talk to you briefly about sustainability and what it means to our business. Obviously, as we've spoken, sustainability is the key messages with our customers. Many of them have own metrics that they're putting out and commitments that they're making. Sustainability is a key message to consumers who have a preference towards a greener solution as we talked about, and it's key for policymakers. At Tri-Arrows, one of the things we're proud about is with the money and the funding from the UACJ Group, that the casting center that we put that is fully integrated and allows us to consume scrap and convert scraps, both used beverage cans as well as other post industrial scraps. And we're able to use those products and actually convert it into rolling slab. We've seen an increase of 88% in terms of the volume of material that we're using as a company into a scrap and recycled material into our aluminum ingot. And as a total package, we're up to greater than 75% of our product is actually being produced on average from recycled material. So we've seen an 88% increase in recycled scrap usage. We've seen 45% reduction in water consumption in our manufacturing process, which is critical. And carbon emissions, with the investments as I mentioned earlier, we expanded our capacity by over 30%. But what we're saying is that we were able to hold our carbon per metric ton. On a unit basis, we've been able to hold it flat throughout these expansion projects. Additionally, Tri-Arrows is pursuing certification of the Aluminum Stewardship Initiative, which is a key way to link what we're doing in this space to what our suppliers are doing around sustainability and with our customers. So it's a way to talk about how our industry itself is organized around the goals of sustainability. In summary, the North America can sheet market is growing, and it's growing on the back of strong consumer preferences. And I'm very proud of Tri-Arrows Aluminum. We're very well positioned in the market as a preferred supplier with our customers and with a healthy balance sheet and strong cash flows. Sustainability movement is really driving new opportunities for us. It's opening up doors to this -- for new economic opportunities, and it's opening up doors for new partnerships and new sources of value. And lastly, a bit about the management team. Our leadership team has a broad amount of industry experience throughout the aluminum industry. We've got really strong internal systems in place to help create a very strong platform for what we anticipate will be a very bright future for this company and for the UACJ Group. And that's a summary of my business. I want to thank you all once again today for listening to this presentation and for your support of the UACJ Group and for UACJ's support to Tri-Arrows Aluminum. Thank you.

Since our President already covered the earnings target, I will be covering financial aspects and the policies of the mid-term management plan and Vision 2030 and IR. We went through a process of internal discussions on how we in the finance and accounting division can contribute to enhancing corporate value. Our purpose calls for the company to contribute to society by realizing a sustainable and prosperous society. How can the finance and accounting division play its part to that end, strengthen the financial base and management? By starting from our 2030 Vision and backcasting to 2023, the final year of the mid-term management plan and 2025, our positioning in the interim, going on to 2030. This was the thought process of our discussion, leading up to the financial policy in the mid-term management plan. As mentioned by previous speakers, our President, Taguchi-san, Tsuchiya-san, Henry, we are experiencing changes in the business environment, aluminum being one of them. We are seeing unprecedented levels of changes in recent years, let's say, the last 2 to 3 years. Against this backdrop, how can we, as the financing and accounting division, contribute? Another major issue is on the environmental aspects with ESG and SEGs as well as DX. In order for the company to become stronger, what kind of support can we offer as the financing and accounting division? These are some areas in which we have discussions. If the diverse -- of the diverse discussions we had, I highlighted 3 points on this slide. As shown in the center, since the integration in the past 6 to 7 years, the priority for the company was on capital investment, which may not have enabled us to generate as much cash flow as we wanted. We will improve our financial position to change that. This is our priority. It goes back to the structural reform initiatives that started in September 2019. In order to ensure this is achieved, we will put renewed focus on strengthening capital efficiency oriented management and combine it with shareholder returns to create corporate value. Let me start with capital efficiency management and cash flow management using ROIC. The company called for ROIC-based management in the previous mid-term management plan. However, P&L fluctuated quite significantly, which hindered ROIC management from taking root in the company. Since the structural reform also aimed to enhance management capabilities, we want to renew our focus on strengthening cash flow management through ROIC. Based on ROIC, we talked about hurdle rates, which we define as capital cost plus alpha. The graph shows the ROIC trend over time since the integration in 2014. Bar on the left is shareholders' equity and debt, and the bar on the right is operating income. It is by intention that we are using simple operating income, not NOPAT. ROIC was in the doldrums in 2018, '19 and 2020. We, of course, had COVID-19 in 2020. Interest-bearing debt increased as a result of investment, but profit did not grow as much as we expected. ROIC, capital efficiency, therefore, deteriorated. As we will start to see investment returns, the bar on the left will gradually decrease, while the bar on the right, operating income, will grow 6% in 2023. We aim to achieve a higher ROIC as early as possible to reach 10% over the medium term. The plan is to increase corporate value by reaching higher ROIC. Next is ROE. From a capital efficiency perspective, ROE is showing similar trends as ROIC. Pink bar is shareholders' equity, which is growing gradually. In the meantime, however, profit was not generated. Please look at the net income and ordinary income. Net income is not growing as much as ordinary income, which is a trend that became apparent in 2018 and 2019. The biggest factor behind it is the start-up of our Thai factory. The company was not eligible for tax effect accounting because it was making losses. That is why net income dropped more than ordinary income. Beyond 2021, however, profit will be generated, not only ordinary income, but net income will also increase. ROE is expected to improve in line, 7.5% in 2023, aiming for 10% in the near future. This is the mental arithmetic, if you like, for financial management. Improve financial position. This is included in the mid-term plan. Cash flow was negative from 2014 to 2018. Capital expenditure was quite large during those years. There was not much of an inflow in operating cash flow either. As a result, cash flow was negative till 2018. In 2019, investment had nearly run its course, and improvement was seen as the company divested from copper business. In 2020, while we suffered from COVID-19, working capital decreased as a result of reduced business activities. It had a positive impact. We will continue our efforts beyond 2021 to improve our balance sheet. Instead of suppressing or holding back investment, as we have already made investments, there will be less investments needed going forward. Working capital will be kept under control by monitoring the cash conversion cycle. This is debt. Same story again. Debt peaked in 2018 at JPY 375.1 billion. We have been steadily reducing the debt level over the last 2 years. While I did not include in the slide, interest-bearing debt at the end of September 2019 was JPY 365 billion, and the mid-term plan calls to reduce by JPY 80 billion by 2022. In 2023, we plan to go below JPY 280 billion. While debt will be reduced, EBITDA will increase with improved business performance. We intend to lower the EBITDA multiple to 4x and 3x. Lastly, on shareholder return. Change in share price and dividend from 2016 with 2015 as the base year is shown in the graph. Our apologies for paying no dividend for 2020 as the company incurred losses. Our share price in the meantime is recovering after hitting bottom in 2019. TSR from the base year of 2015 is 126%, still quite low. Generating profit, improving EPS and improving our financial position, which we think is reflected in the low share price, will be our focus. For the next 3 years, we will strengthen our financial position while ensuring EPS, earnings per share. As mentioned earlier, as low loss-making UATH business will turn around, we will be seeing impact on net income more than ordinary income, increase in profit leading to increase in EPS and enhanced corporate value. This is how we believe the company will be able to make comprehensive shareholder returns. That is all for me. Thank you for your attention. [Statements in English on this transcript were spoken by an interpreter present on the live call.]