UACJ Corporation (5741) Earnings Call Transcript & Summary

Good morning again. I am Tanaka. Thank you very much for taking the time out of your busy schedule today to attend UACJ Group Sustainability Briefing. Today, I would like to explain how UACJ pursues both economic and social value and aims to continuously improve our corporate value. I'd like to explain in terms of our philosophy, vision and strategy. Let me begin by explaining the theme of role of aluminum and UACJ's contribution. This is the corporate philosophy of the UACJ Group, which we have presented to you many times. Under our corporate philosophy of "contribute to a prosperous sustainable society with technologies that brings out innate power of materials," we have defined our vision and values as follows. Regarding our values, we have established the "UACJ way" shown here as a guideline for our actions toward our philosophy. This is the long-term vision for 2030 that we have announced in May 2021. We aim to make the 4 contributions shown on the right side of this slide towards the year 2030. This is to provide products that contribute to the societal development by capturing demand in growing industries and markets. We also will enhance aluminum materials to bring economic benefits to communities worldwide. And we will develop all new products and business models that offer solutions for challenges facing society and reduce environment impact throughout product life cycles. We will work to maximize the power of aluminum in the areas of mobility, lifestyle, health care and environment and energy. Based on our vision of passing down a brighter world over the next century, we have established the basic sustainability policy as a foundation of our activities, and the entire company is working together to implement them. We compared the light world that we -- the UACJ Group should aim for to the north and south of the compass. We have identified 3 important materialities, 3 environmental issues and 2 social issues that must be resolved in order for the UACJ Group to remain sustainable with the society. By placing them to the north and the south of the compass, respectively, we indicate the direction that the UACJ Group should aim for. Today, Ms. Narita, Chief Executive of the Corporate Sustainability Division; as well as Mr. Urayoshi, Executive Officer of the Business Support Division, will explain our initiatives focusing on the environment and people. Of the 3 environment-related materials, the central one is regarding a circular economy in aluminum. The promotion of the circular economy, which also contributes to the climate change countermeasures and nature positivity aims to achieve recycling rate of 80% by fiscal year 2030. Using the UACJ recycling rate as an indicator, UACJ recycling rate for FY '24 reached 73.9%, and we are making good progress in this area. We are accelerating our efforts throughout the supply chain, including the establishment of new recycling facilities in Japan and overseas, the expansion of environmentally friendly products such as a general-purpose aluminum sheet using new green ingots and the development of the branding activities under ALmitas+ SMART brand. Next, I will discuss national policy trend and UACJ's strategy. June 2025, the Japanese government's cabinet approved the Basic Policy for Economic and Fiscal Management and Reform the so-called but just an outline policy. In this context, the promotion of GX and expansion of the circular economy are positioned as national strategies. Aluminum was introduced for the first time as an important material for solving social issues. This is a significant big turning point for us at UACJ, and we are encouraged that it is a strong tailwind. Aluminum is truly a sustainable material, combining lightweight, high strength and high recyclability. With technology that maximizes the power of this material, we at UACJ are in the position to contribute even more deeply to solving social issues with the support of the government's policy. Specifically, it is expected to examine recycling system, provide various types of support for the recycling of aluminum and other metals and promote international cooperation and rulemaking. These developments will further accelerate our efforts to build a recycling-oriented society for aluminum. UACJ work with this policy more than ever to contribute to the realization of a sustainable society from both production and recycling point of view. Aluminum is a material with infinite possibilities to be reborn over and over again. While taking advantage of these characteristics, we aim to make circle of circular economy thicker and larger. Therefore, UACJ will go beyond being a mere materials manufacturer. Rather, we aim to both maximize environmental value and create economic value. We will always drive the realization of recycling-oriented society for aluminum, keeping in mind of domestic and international policy trends. We will now explain UACJ's approach to human capital. We believe that the source of our corporate value is in our people. In the face of dramatic changes in the external environment, the UACJ Group has once again become keenly aware of the importance of engagement and well-being. Based on this recognition, we have redefined our fundamental approach to human capital and the ideal form of human capital management. And we have formulated a People Statement to guide us. This will promote the concept of human capital on a full-scale company-wide basis. Through teamwork, we empower our people to create a lighter future. This phrase embodies our strong conviction that every employee who shares the UACJ Group's philosophy is a key player in shaping the future and that their collective strengths is the source of our company's sustainable growth. We have been working honestly on initiatives related to people and have now compiled the UACJ's People Statement and overall vision of human capital management as the group aspirations. On the left is the UACJ People Statement, which summarizes the UACJ Group's approach to human capital. The source of creating the future is in people. And the first step is to embrace the well-being of those who work for us and to become the best team possible. To this end, it is a declaration that we will promote organizational development, human resource development and creation of a working environment through management that draws out the strengths of each and every employee. We will constantly create a lighter future. The purpose of our business activities is not merely the pursuit of economic profit. We aim to continuously create economic value by solving social issues, maximizing environmental value and contributing to society through environmental consideration, strategic investment in human resources and social contribution. UACJ is a company that embodies value creation through its business activities themselves. We will promote social, environmental and economic growth as a trinity. We will achieve sustainable growth while creating social value by integrating activities that address societal challenges such as climate change, resource constraints and demographic shifts into our business operations. This includes researching and developing low environmental impact products, procuring environmentally conscious raw materials, establishing collection and recycling systems for the used products and fostering long-term human resource development. A company where employees can be proud to work for UACJ and continue our efforts to be a company that our customers and society trust saying that they are happy to do business with UACJ and to work towards a lighter world 100 years from now. That is all for my explanation, and thank you very much.

I'm Narita, Chief Executive of the Corporate Sustainability Division. Thank you for your time today. I will talk about the company's initiatives to counter climate change, which is one of the social issues that needs to be overcome. I will touch upon UACJ's activities that would enable the realization of a lighter world 100 years from now, a world that UACJ's companies character, [ Yumeno Arumi ] dreams of. UACJ Group's 3 materialities, which the company believes are critical issues that must be solved in the environmental field are shown on this slide. Leading a circular economy in aluminum, taking measures to address climate change and supporting environmental health and nature, nature positive. These are not standing in isolation. They are mutually connected, supporting and merging with each other. This all leads to UACJ Group's environmental concept, which is we are focused on creating a more sustainable society through loving care for a lush blue earth and realizing the full potential of aluminum. We have targets for elements of each materiality, such as UACJ recycle ratio and reduction in Scopes 1, 2 and 3. We strive to reduce the environmental burden. Here are the topics to highlight from 2024 to 2025. In the upper part of the slide, you see initiatives to promote reduction of environmental burden. As Mr. Tanaka mentioned earlier, UACJ's target for recycle ratio in fiscal year 2030 is 80%. As of fiscal year 2024, we have reached 73.9%. We are working to secure recycled raw materials and enhancing our facility to accommodate those materials. We have completed the development of vertical high-speed twin rolled casting experimental machine for which we had the support of NEDO. We are working on experiments to get ready for the actual rollout of the machine. In the lower part of the slide, you see information on ASI certification. ASI requires renewal every 3 years. Review for renewal are completed for both PS certification and CoC certification. Nagoya Works has also gone through the review as a new facility. In addition, TAA and Logan Aluminum Inc. in the U.S. as well as Whitehall or UWH's Mexican plant have been reviewed for ASI certification and they have been certified. As you can see on the bottom right, the volume of sales for ASI-certified material grew approximately 20x compared to 2022. This shows that UACJ is now considered a trusted supplier for clients who would like to purchase environmentally friendly materials. With regards to carbon neutrality, as you can see on this graph, we are moving steadily towards achieving the goal in fiscal year 2030 for all Scopes 1, 2 and 3. Scope 1 and 2 have been reduced significantly in 2024 due to production volume and product mix. Scope 3 has also been reduced due to increase in recycle ratio. The reduction rate is 20.1% in fiscal year 2024. As we work on carbon neutrality, it would also contribute in areas other than climate change. As you can see on the slide, financial impact will be increasing. It is because of the progress made in fossil fuel levy or the so-called carbon tax, CBAM, as well as emissions trading in Japan. From the next page on, I will explain about each initiative. First is fossil fuel levy. The company believes that its impact is quite big on the business. Levy is determined by the amount of CO2 emission contained in the fossil fuel. If we use more, the monetary value will also increase. However, when Scope 1 and 2 targets are achieved, we would be able to reduce JPY 7.2 billion in financial impact in 2030. And in 2050, we would be able to reduce the risk by more than JPY 50 billion. This information can be found in the integrated report as part of the information disclosure based on TCFD recommendation. Please do take a look. Products exported to Europe would be subject to CBAM from 2026. This is a payment that is required of European customers on the products that they purchase from outside Europe based on the difference of carbon prices in that region against prices within Europe. European customers ask UACJ to make calculation as UACJ is providing emissions information together with the products. Currently, European Commission is considering calculation methodologies and mode of declaration. By developing and manufacturing low environmental burden products, we believe we can reduce our customers' burden. We will continue to develop and manufacture these kinds of products, so the customers around the world, including Europe, will continue to choose us over others. Next is emissions trading in Japan. Going forward, emissions trading would become obligatory. Since 2023, GX League has been promoting emissions trading. Based on the outcomes of the pilot emissions trading, emissions trading would become obligatory from next fiscal year. Subject to this obligation are companies which are annually emitting 100,000 tons or more in Scope 1. There are multiple aluminum companies included, and UACJ is one of the companies within the scope for emissions trading. To reduce emissions, the government has set a quota for emissions. If emissions exceed the quota, the excessive portion must be dealt with by purchasing emissions allowances. That would incur costs. We manufacture many products at Nagoya Works and Fukui Works, and we fit into these criteria. However, METI doesn't envision reduction of emissions that would reduce the competitiveness of industries. For industries with higher emission, benchmark is set by industry. Reduction would be pursued based on the benchmark. This applies to steel and cement industries where emission level is very high. Aluminum was not included at first, but aluminum industry agreed that if we work together as one, we could be recognized as being eligible for the benchmarking and initiatives are being taken to that end. We will know more in December, such as free of charge quota or whether a reduction ratio can be carried over. Once we get the information, we will identify how we will proceed going forward, such as buying credits in advance or invest more to reduce Scope 1. Emissions trading system will be implemented fully going forward. Until now, environmental value was not recognized. However, the emissions trading would enable investment in value-added and improvement of environmental value, which would lead to improvement in the economic value. We are hoping to spiral up in value. UACJ recycle ratio was 65% in fiscal year 2019. We are working to achieve our target set for fiscal year 2030. And in fiscal year 2024, we achieved 73.9%. We will continue to monitor the usage rate of recycled materials and collect scrap from the market. We will also promote the development of new products using PCR. Customers are recognizing our effort in developing recyclable materials. Customers are buying those products. And through that, they can further pursue environmental value. In the future, we would like to continue to secure sufficient amount of scrap and promote recycling through lobbying activities through industry organizations. As Tanaka mentioned earlier, the beauty of aluminum is that it can be recycled permanently over and over again. To fully leverage this strength, we believe the UACJ Group must make efforts across the entire supply chain. The strength of the UACJ Group lies in its linear approach, handling aluminum from casting to finished products, including alloy design and the development of environmentally friendly products. Furthermore, our diligent technological development in aluminum and our long-standing relationships with customers enable us to collaborate closely with customers on product design. We can work together with customers to propose product designs such as how to incorporate recycled materials into their products or to design products that are easy to separate and sort for recycling. Such collaborative approach is our greatest strength. Also, by leveraging our connections with suppliers we have worked with in the past, we can promote the development of advanced scrap sorting technologies and the procurement of new resources. Utilizing the UACJ Group's strengths, alloy design proposals to customers and connections with suppliers, we will strive to be the heart of the aluminum cycle. We will contribute to the creation of a sustainable society with loving care for our lush blue earth through exploring further potential of aluminum. We believe this will help us develop a sustainable society by solving social issues, and will also lead to the enhancement of the UACJ Group's corporate value. That is all I have to say from Narita. Thank you very much.

I am Urayoshi, Chief Executive of the Business Support Division. Thank you for this opportunity today. I would like to present on enhancing the well-being of employees, UACJ Group's human capital strategies. First, the UACJ Group focuses on 3 pillars: my mind and body well-being, my work well-being and our work well-being with the aim to realize our corporate philosophy and corporate value by creating a virtuous cycle that enhances the well-being of each employee while promoting the development of our people and organization. This is the UACJ People Statement and the overall framework of human capital management, as explained by Tanaka at the beginning of the presentation. First, on the left is the People Statement outlining the UACJ Group's approach to human capital. The source of creating the future is people. First, we must enhance the well-being of our employees and then become the best team possible. To this end, we declare to promote the development of the organization, people and the workplace environment. The image on the right shows the overall picture of human capital management of the UACJ Group. By promoting 3 human capital strategies, organization building, people development and workplace environment enhancement and also by enhancing the 3 aspects on the left side, my mind and body well-being, my work well-being and our work well-being, and by creating a virtuous cycle, we aim to realize our People Statement. This ultimately leads to the realization of our corporate philosophy and the enhancement of corporate value. That is our human capital management of the UACJ Group. This illustrates the overall framework of human capital management and its relationship to the sustainability compass. The sustainability compass outlines 2 desired futures in the North and the South, aiming to pass down a lighter world over the next century, as explained by Tanaka earlier. We believe that enhancing well-being will lead to the realization of the vision for the South, a healthy and harmonious society where everyone can feel their well-being. UACJ Group's human capital management is driven by the belief that promoting initiatives for people and organizational development and striving to realize the well-being of each and every employee working at UACJ ultimately contributes to the realization of a healthy and harmonious society where everyone can feel their well-being. This page illustrates the alignment between our business strategy and human capital strategy under the fourth midterm management plan. In coordination with our business strategy, we are implementing initiatives under the 3 pillars of the human capital strategy, organization building, people development and workplace environment enhancement to realize UACJ Vision 2030. This page outlines the HR initiatives we will implement and their objectives for the 3 pillars of our human capital strategy, organization building, people development and workplace environment enhancement. For organization building, we focus on cultivating and expanding leadership, improving employee engagement and promoting Dei-Ay. For people development, we focus on talent acquisition and retention, training programs and evaluation and allocation. For workplace environment enhancement, we will be enhancing our remuneration and benefits, promoting health management and improving the workplace environment. We are striving to achieve respective goals. This page summarizes major KPIs related to our human capital strategy, along with our FY 2027 targets and the status of initiatives in FY 2024. As an example, we are addressing each challenge by focusing on improving engagement for organization building, talent development for people development and enhancing the remuneration and benefits program for workplace environment enhancement. As we have reported, we have now formulated the People Statement and the overall framework for human capital management, recognizing our new goal of enhancing the well-being of every individual working for the UACJ Group. We are currently analyzing the relationship between our various human capital strategy initiatives and the 3 pillars of well-being, my mind and body well-being, my work well-being and our work well-being with cooperation from Kyoto University. We believe it is crucial to clarify how the promotion of people and organizational development contributes to a virtuous cycle of improving the well-being of individual employee and ultimately how this contributes to improving financial metrics and creating corporate value. This enables us to formulate and execute even more effective human capital strategies. We already have identified correlations with some of the HR initiatives. Moving forward, we plan to expand our analysis to other well-being areas and consider focus areas for human capital strategy. Furthermore, we will continue analyzing how these HR initiatives ultimately impact financial performance. Here's a brief update on our recent achievements. Our efforts to improve the work and environment have resulted in our Platinum Kurumin certification. Also, our company was featured at the Work Style Reform EXPO as a best practice for actively promoting paternity leave. This is just an introduction. As explained so far, we will steadily advance our human capital strategy to contribute to the sustainable development of our group from a people perspective. By executing this strategy, we will realize individual well-being and the virtuous cycle of people and organization development. This will foster the well-being of every UACJ Group employee who are at the center of well-being. And then we extend that individual well-being to their colleagues, family, business partners and the wider community and society. This is the ultimate Well WAVE. That concludes my explanation. Thank you.

Thank you for this opportunity today. Please don't be too hard on me. At the beginning of the briefing today, you explained where UACJ Group was headed to and what it would accomplish in the mid- to long term. That was followed by the explanation of 2 important initiatives for generating economic, social and environmental values, which are initiatives related to environment and human capital, which were presented by Ms. Narita and Mr. Urayoshi, who are executive officers. Based on the presentations given, I would like to have the opportunity to deep dive on those themes among Mr. Tanaka, Ms. Akabane and myself. I hope our frank dialogue would enable those gathered here today to have deeper understanding of what UACJ Group is doing and have more confidence in us. First, I will turn to you, Mr. Tanaka. It has been 1.5 years since you have assumed the role of the President. You had kicked off working on Vision 2030, and you have implemented the fourth midterm plan up to this point. In last year's sustainability briefing, Mr. Ikeda, who is an external Board member, had said that our CEO is not just a Chief Executive Officer, but also a Chief Circular Economy Officer. After 1.5 years, how do you frankly feel about being a CEO, if you could briefly comment?

Thank you for a very straightforward question. It has been 1.5 years since I assumed the role of the President last April. 1.5 years flew past is what I can say about those days. Since I assumed the role of the President in April of last year, the environment surrounding the company has drastically changed, and I feel the variety of changes that are going on. For example, there have been geopolitical issues. Since the beginning of this year, there have been things like change in the policy due to change in the administration in the U.S. Due to these changes, our initiatives on sustainability have significantly evolved. We have been working very hard on sustainability, but we also need to be mindful of the environmental changes. We need to sense the change and determine what must be done. May I talk a bit more?

Please.

I just mentioned about the environmental changes. Since April of last year, the fourth medium-term plan has been implemented. The key to the fourth midterm plan, which are growth strategy and value-added strategy, have at its core promotion of recycling. Promotion of recycling involves identifying UACJ recycling ratio and bring up recycling benchmark of 65% to 80% in the long term. Aluminum as a material has environmental value, and it is a metal that can contribute to solving societal issues. We would like to capitalize on this to improve recycling ratio. Currently, we have gotten to the point where recycle ratio is on plan. However, the only field where we have been able to achieve improvement in the recycle ratio is beverage cans, which are in front of us. Because of cooperation from various parties, beverage can recycle system is already in place. Because of that, recycle ratio is going up. Long life cycle aluminum, such as cars have 5- to 7-year life and sometimes 10 years. Construction materials have longer life cycle, 10 to 30 years. We do not have system to accommodate this longer life cycle aluminum. I feel that we need to work with stakeholders within the supply chain to build a system that would enable us to recycle better. Sorry, I talked too long.

No problem. Thank you for your input. You need to adapt to the change in the business environment, holding your antenna high to sun it. Our priority is promotion of recycling. Potential of aluminum materials would grow even further. Beverage cans have better rate of recycling now. Though progress is made, longer life cycle products such as cars and construction materials still have room for improvement. I think this brings us more opportunities. I would like to ask one more question to Mr. Tanaka. Change in the business environment is not just in Japan. It's occurring in the U.S., China and Asia overall. We have 3 region structure, and the company has offices in Japan, Thailand and in the United States. Changes in the business environment sometimes were a tailwind for us. And in some cases, it posed a risk as a headwind. In your view, do you see opportunities overall? Or is it a significant risk that would force the company to move more carefully? How do you feel?

It is a very difficult question. I feel that situation differs depending on the time lines and areas. In the longer term, basically, the challenges regarding environment would remain. However, I think the situation varies by area because each area faces different situations that changes the environment surrounding them. For the coming 5 to 10 years, I think there would be a time when sustainability response to issues in the environment and climate change would be required of us. Because of that, in the longer term, it would work in our favor.

Thank you. Now I would like to turn to Mr. Akabane. I would like to hear from you as an external director on how you felt about what Mr. Tanaka said.

The company is aiming to get to 80% recycle ratio by 2030. I think the company has reached the point where it can aim for the achievement of that goal. If things go as is, 80% can be reached. However, as an external director, I cannot help but feel that the company can do better by setting up a stretch goal. In raising the growth in the rate, there are some challenges that the company must overcome, such as construction materials and cars, which have longer life cycles. There was a mention of promotion of lobbying activities. But is it also related to boosting the rate? In addition, I think Thailand is getting business inquiries from Europe, Middle East as well as Africa in raising the gradient of the growth of recycle ratio, what are the bottlenecks? I would like to know.

I think what is being said here is that recycle ratio is probably going to reach 80% in 2030. So you would like to see stretch goals being realized. So how do you respond, Mr. Tanaka?

I think it is a very good point. Raising the recycle ratio is going as planned as of fiscal year 2024. However, going beyond 75% and then 78% and on to 80%, it would become more difficult. We not only need to collect the materials but also utilize them in an optimal manner. That is the difficult part. Going forward, we would, of course, consider raising the target. However, at this point in time, we want to make reaching 80% certain.

So what do you say, Ms. Akabane?

I myself have experience working for a B2C company. It was very difficult to collect what is being distributed in the market, transport it and recycle it. Because of this, I understand that the difficulty is quite different from collecting leftover materials from plants. However, what you are trying to do would require consensus from the society as well as improvement of people's understanding on these matters. I think you need to consider where you would like to go at it alone and where you create a societal movement.

I think you are right. You need to consider to what extent the company would go at it alone and where you would work with the society to be more friendly to earth for the creation of sustainable earth. You use the term societal movement, but I think that is necessary.

You have talked about B2C. We need to have B2C customers understand more about the attributes of aluminum. They need to know what kind of metal aluminum is and that by recycling it, energy use can be reduced by 97%. I think the company must communicate more about this.

Thank you for your comment.

I would like to talk about branding. In the earlier slides, there was a mention about focusing on branding. There are brandings for B2B business. And even if consumables are out of the scope for the company, there are ways to appeal to consumers. So I would like to know what kind of branding you are envisioning currently.

I would like to talk further about recycling. We established a brand called ALmitas+, and we have developed ALmitas+ SMART, which has significantly high recycle ratio. I mentioned about UACJ recycle ratio of 80%. 80% will be the average. For aluminum for specific users, it may be able to aim at 80%. A customer may ask 80% recycle ratio or 90%. There are even customers who say they need 100% recycle ratio. We can supply ALmitas+ SMART 80%, 90% or 100%. The customers can understand that UACJ's products have high recycle ratio. We will build various brands considering those characteristics in mind.

When customers give the company such requests, we would be able to prove our technology development capabilities. I think the fact that the customer is making such inquiries makes me believe that the social movement is being created.

Yes, we are seeing inquiries from customers. At the start, though we try very hard on our sales activities, no one bought our idea. Our customers seem to think that our product was just more expensive. However, our B2C customers who are facing end users and our B2B customers who interact with can appeal that our products are contributing to the reduction of CO2.

I think it's a win-win for our customers and end consumers because it becomes a tool to make themselves more appealing. I think that's where we need to pay more attention. I would like to also comment about the business. For environmental matters and human capital, a compass has been set forth to reach Vision 2030 and materiality activities can be thoroughly monitored. I believe that because now we finally have the platform for moving the organization forward in place, we have more work to do. I need to thoroughly monitor what is being done, and that is the job of us outside directors.

May I? I would like to ask you, Ms. Nagata, looking from outside or as external director, how do you see our recycling activities?

I'm frankly happy to hear that ALmitas+ SMART has had a great start. However, from the perspective of a general consumer, the recognition level is not so high. We still have a long way to go. I think you can advertise more proactively, and I think it's worth investing in that. I'm hoping some projects would be generated together with our customers and such initiatives would expand further to others. Thank you. In that sense, it would be important to make strategy and implement it or strategy and capability to be aligned with each other under the current environment where changes are occurring very rapidly. Mr. Tanaka, you talked about the strategy. But how do you see the company's potential in terms of capability to execute and achieve desired results?

In general?

Yes, in general.

We are a comprehensive aluminum manufacturer. And so far, we have been able to determine where we want to head to with regards to sustainability and materiality. What's left for us to do is to execute. Our biggest near-term target is achieving the goals we have set for the fourth midterm plan. And in the near future, we will start deliberating the specifics of the fifth midterm plan, which runs up to 2030. I believe through execution of the plan would enable us to achieve what we intend to accomplish.

Environment surrounding the company is changing. Speed in adjusting to the change is critical. I have been saying this in the Board meetings. But even though the company is working to create a lighter world, it seems that the speed at which the company is moving is still slow, heavy footed, so to speak. What is your take on this comment?

We are frequently told we are moving too slow. We don't jump and embrace the change right away when it occurs. There are cases in which with careful observation, it would be wiser not to change. Currently, there are many moving parts. However, our materiality in sustainability would remain unchanged. This may be regarded as sustainability gone too far, but I don't believe it is. This is something that would change into economic value. Environmental issues would eventually lead to social issues. If we are able to solve those issues, the society would recognize it. They would want to come to us. There are various opinions about how that translates to economic value. However, it is a fact that there is an increasing number of customers who want to work with us. It is true that when surrounding environment changes and everyone is looking at the right, we wonder whether we can continue to look left. However, we want to be carefully think ourselves and decide.

Thank you. I think it's very important to carefully consider and decide. I completely agree with you on that point. However, please bear in mind that you need to take a stand that you will change when it's necessary. Ms. Akabane, can we go to the next topic?

Before moving on, I would like to touch on the point you said about not changing. What I said earlier does not mean that we would not change. Well, I feel that the company is two faced. Back when I had just assumed the role of the External Director, I had an opportunity to make a comment. I cannot elaborate on the specifics, but it was about an item that I considered was associated with certain risks. I commented that the company should work to reduce that risk. Based on that comment, the company took very speedy measures. The company may be slow in some ways. But what I felt when I saw those speedy measures being taken was that the company is accepting and sincere. So I wanted to tell you that.

Thank you, Ms. Akabane. I hope the audience would see that at times, the company seemed slow to move, but it does have capability to make speedy and timely responses. Thank you for having your back. I would like to move on to the next topic. Today, in the first part, there were presentations on environmental visions and talent strategy. In order for the market to understand us better, I think information disclosure is very important along with branding. Disclosure of financial information on sustainability has greatly improved in terms of quality, volume and timing. It's been 3 years since I have come on Board, and I really feel that progress. This year's integrated report is very different from how it used to be, and I think people can learn about our company and feel affinity to it. I also think it is a good trend that third parties regard it highly. On the other hand, there are changes globally in how people view sustainability topics such as the environment and diversity. Regarding diversity, there have been movements in the U.S. and North America in general that slowed down in the progress. In the area of environment, COP meeting was recently held, but it was difficult for the parties to agree on one direction. How do you view this, Ms. Akabane? Under the circumstances, what actions should we take? Or conversely, should we not take any action and wait and see instead?

Sustainability is my area of expertise. So it might be a difficult request, but the global trend is moving toward climate change, of course, as well as biodiversity, harmony with nature and TNFD. These are all emerging priorities. And there's TISFD, the Task Force on Inequality and Social-related Financial Disclosure also started last year. While it focuses on disclosure regarding the past companies should take concerning sociality, people and disparity, we should keep this trend in our mind. That said, I believe our current disclosures are very comprehensive. And thanks to this, we have been honored to receive the Disclosure Award for 2 years in a row. However, there are companies that are even more advanced. While we may have become a leading company, there is still much more we need to do. For example, even though edited, there are several companies in Japan that stream video of their Board meetings. And I also think there's room for greater disclosure around governance transparency. Also, the integrated reports we are currently publishing are for investors. But when we ask them, investors, they say there are too many pages. They often tell us that ideally, it should be within 50 pages long or about 18 pages at best. That is what they often tell us. I understand the desire to include as much information as possible in an integrated report. But since this pertains to sustainability-related financial information, I believe our company should focus on presenting sustainability content that contributes to our financial information within this report. Therefore, I also think we should consider reducing the number of pages. One more thing I'd say regarding disclosure is digital reporting. Now that financial information is available in formats like XBRL, discussions are starting globally about whether sustainability information should also be disclosed in this format. This would enable analysts to perform their own cross comparisons. With that direction in mind, I see this as a good opportunity for us to consider how we can integrate sustainability into our core business.

I believe our current level of disclosure is fairly adequate, as you said. But if you look at the world, there are many others who are ahead of us. So we should continue studying them and also consider investor feedback. For instance, some of them suggested there may be room for improvement in the amount of information provided in our integrated reports. Mr. Tanaka, since becoming President, I imagine your opportunities to engage directly with institutional or individual investors through IR and SR meetings have increased significantly. I think most of the dialogues are financial in nature, but sustainability-related matters probably come up as well. How would you describe the tone of these discussions?

Yes. regarding dialogues. To be honest, before becoming President, I never had many opportunities to speak with stakeholders, especially with general investors. I started to have more conversation with them. And what shocked me most was that when I explained UACJ, they didn't even know the name, UACJ. They don't know our name. That is a serious big problem. Yes, this is a big problem. And when I continue and say we're an aluminum company, people don't know where or how aluminum is used. They might recognize this is aluminum. But beyond that, they don't know anymore. If I say it's used in cars, exterior panels and here and there, they'll just respond, oh, yes, I think I know that. So over the past 1.5 years, I've come to recognize just how crucial it is for us to explain much more about aluminum, that it's a material with tremendous potential for reducing environmental impact and that UACJ handles precisely that metal, addressing it as a sustainability materiality. We need to ensure our stakeholders understand such aspect.

I see. Did this start with the company's name?

Well, it was probably last April or May. In one of those meetings when I attended the first time, I asked the attendees if they knew the company name UACJ, then only a few of them raised their hands. But at this year's briefing for general investors, about half the attendees raised their hands. While some likely came because they already knew about us, I got a slight sense that others were becoming more familiar with our name and showing interest.

That is very important, and it's a favorable change that's happened over the past 1.5 years, indeed. We must promote the UACJ name outside the company and both internally and externally, we need to communicate what aluminum is used for and where you can find it in your daily lives.

That's right. We still have a lot of work to do, not only externally, but also internally. Since I became President last year, I've been holding Tsunagu Dialogue Meetings. I sit down with a few members and we discuss things like what kind of company are we? What are the users of aluminum? What significance does it hold? We cover these topics in a quiz format and through conversations all while explaining the content of our fourth midterm plan. Surprisingly, even within the company, people are very knowledgeable about their own specialized areas, but they often don't know much about aluminum in general or they hear about certain activities for the first time. So I think we need to step up our promotional efforts, not only externally but also internally.

You're absolutely right. This really makes us want to relearn -- it is a material with tremendous potential, and it even transforms. The fact that it can transform multiple times is truly amazing. Thank you. Sustainability can sound serious and somewhat distant from everyday life. Yet it is something we need to feel very connected to. I realized while listening to your talk that aluminum could be the link holding together companies, society and individuals. Opportunities are expanding.

We need to expand them further.

Yes, we actually can expand them further. In the fourth midterm plan, there is also discussion about new businesses and expanding our domain beyond our current territory. So is there a story here that reflects your vision, Mr. Tanaka?

Well, I won't go into a concrete story, but there are still plenty of things that can be replaced with aluminum or that will be better replaced with aluminum. By better communicating the significant benefits of switching to aluminum, we can connect it to business. Therefore, we will expand aluminum applications while promoting recycling. Increasing recycling rate requires expanding the range of applications for recycled materials. Therefore, expanding applications while boosting recycling rate to build a circular society is precisely what we should do.

Just yesterday, I, together with Ms. Akabane and the other outside directors visited the production facility. It was a very large factory, and we had some talk there. Ms. Akabane, what did you think? We were at Oyama Works yesterday.

Yesterday, I visited Oyama Works and saw the briquette press machine running. It's a recycling machine born from an in-house innovation. A briquette press collects shavings and compresses them tightly into a size of about 800 grams each very tightly. That machine was popping and moving. Seeing it in action was truly great. Even from an outside perspective, seeing young people on the shop floor working with energy really made me feel they're creating a truly great workplace.

Yes, I truly felt that it was an enormous factory with massive equipment, which was quite impressive. But what struck me even more was seeing firsthand and confirming that recycling within the factory was effectively linked to the products. It's truly reassuring to see such young people working hard and they presented well. It was very reassuring to see how well people are being developed here. As outside directors were all members with backgrounds completely unrelated to aluminum. So we are truly grateful to have such opportunities. It also serves as a forum for exchanging opinions among the outside directors, which I believe was highly effective.

From that perspective, it's also very valuable for us inside the company to have people from outside actually see and experience it for themselves. What kind of factory is this? What kind of people work here? What's the workplace atmosphere like? Seeing this firsthand will be extremely useful in various discussions to come. So I'd like to arrange similar tours again.

I agree with you as an outside director, being able to verify on-site whether the explanations provided by management are truly accurate is highly effective in terms of enhancing our monitoring level. So we're in the second half of our time approaching the final summary. I'd like to have some dialogue with Mr. Tanaka and Ms. Akabane regarding governance. We hold several exchange sessions with Mr. Tanaka and outside directors each year. Mr. Tanaka, how have you been handling these sessions alone?

Since it's one against many, it always feels like I'm the outsider. In those situations, I'm able to discuss a wide variety of topics, and I find it extremely helpful. Even among outside directors, depending on their background, you often find that while their opinions are similar, the process they take is somehow different. With us too, the final target is probably the same, but how we get there, that's where the difference lies. So as we listen to such discussions, we always tend to want to take a linear straight approach. We understand the situation inside. So we want to go straight without detours. But sometimes when viewed from the outside, we receive opinions questioning whether that approach isn't risky. At such times, it gives us much to consider, including whether our approach is truly right. I think such feedback is extremely valuable.

Now that you mentioned it, the opposite is also true.

Yes.

When Mr. Tanaka suggests taking the long way around or rather a specific direction he wants to pursue, I think some people have argued that since other companies can take more straight path, shouldn't we do the same?

Yes, it's hard to pinpoint exactly what the right answer is. So among all the different opinions, we need to figure out how to proceed, whether to go this way, that way or somewhere in between. We're getting various perspectives on that point. So I think the current situation is that we'll work through it by discussing also with the executive members.

It's not a stress interview, but still it is one against many. So it's quite demanding, though the atmosphere is warm. I really do think you are putting in a tremendous effort.

I do receive harsh criticism, but I feel your support. Thank you.

That's a model answer. Thank you. Ms. Akabane, what do you think about the opinion exchange meetings?

I've been able to participate in opinion exchange sessions with Mr. Tanaka and also in Board meetings and the Nomination and Compensation Committee. And I always feel that psychological safety is consistently guaranteed throughout. I truly appreciate that. And when I say something, as I mentioned earlier, my comments are not just brushed aside. It's not an atmosphere where if the Board meetings for 2 hours, you just endure listening and that's it. Sometimes I receive feedback confirming that what I suggested is actually being properly considered within the company. I can truly see that they take the opinions expressed by outside directors quite seriously.

Thank you. And I echo what you've just said under this title, promoting transparent management, it's not just the successes that come up from the executive team. The challenges are also properly brought up from the monitoring perspective. While various critical opinions are voiced, I believe we can speak up because we trust this leads to enhancing corporate value. And I think this is also because the executive team listens and takes our opinion seriously. Now time is up. Finally, if there's something you'd like to share with the audience today, Ms. Akabane?

I imagine many of you are concerned about how we are addressing competitors and what is the competitive landscape. Initially, I too thought that might be a valid concern and asked various questions about it. Of course, we are aware of the competition. But as mentioned earlier, we want to promote aluminum itself as a material with our own effort. The give and take with competitors is a huge factor in the material sector. When I was in consumer goods, I was extremely conscious of competitors' moves, always striving to stay ahead and avoid falling behind. But with materials, it's not about outpacing others, it's more about advancing the materials themselves. I realize every day how crucial that is for society. Yes, that is my comment.

Thank you. That is a PR of aluminum. I think the perspective of the entire industry working together is also important. What I would like to convey to the audience here today is we discussed human capital strategy. And as Chair of the Nomination and Compensation Advisory Committee, CEO succession planning is a very significant topic. In this context, I believe it is crucial that the list of candidates considered for succession planning continues to expand. I expect that we'll see more people on the list or people across generations joining the list, thus getting increasingly diverse. Last but not least, Mr. Tanaka, could you wrap up in about 1 minute, please?

Thank you very much for today. I believe we were able to have a discussion just as we always do. As I mentioned earlier today, we need to ensure our customers and stakeholders understand more about aluminum and about UACJ. This isn't just about us. As Ms. Akabane alluded to, it's about the entire aluminum industry working together to effectively communicate how aluminum is an outstanding metal, a metal with such excellent properties. However, this is not something we can accomplish alone. It requires the entire supply chain. We must work together, sharing these efforts among individual aluminum companies, the aluminum industry as a whole and also our customers and end users. Mechanisms and such aren't something you can establish overnight. But even with beverage cans like this, we spent a long time carefully building a robust system, and now we've reached a 99.7% collection rate. So step by step, we want to steadily build a mechanism to encourage even greater use of aluminum.

Thank you, Mr. Tanaka. We appreciate you closing our discussion with your strong statement. With that, we will conclude our roundtable discussion. Thank you.

It is time to start the Q&A session. The two following individuals will also participate in the Q&A session. Joji Kumamoto, Chief Executive Corporate Strategy Division Director, Senior Managing Executive Officer.

I am Kumamoto, Great to meet you.

Chief Executive, Finance and Accounting Division Director, Executive Officer, Kozo Okada.

I am Okada, Great to meet you.

Now we'd like to entertain questions from you all. [Operator Instructions] Are there any questions? First question. Mr. Yamaguchi with SMBC Nikko Securities.

I am Yamaguchi with SMBC Nikko Securities. I feel that it was quite productive. In the previous midterm plan, it was rather clear what is reduced and what's added, and cost will be reduced and also capacity utilization rate will be improved. And also, there was an additional factors such as price raising. And therefore, it was quite clear. But this time around, for the first time that I heard about the current midterm plan, I honestly do not quite understood how to achieve both recycling and growth. And I wasn't quite clear what is going to happen. However, I visited Thailand works in this spring, and I was able to see site well furnaces and other equipment actually, and I was able to feel firsthand that what is the direction of the company. And once again, I heard about the recycling, and I was able to understand quite well. So I believe that communication and information dissemination is very important. And if there is still somebody who couldn't understand, please bring them to the works and take a look, and it is just a suggestion. And as for the question, about the recycling, there seems to be no problem with the cans. However, in regard to the alloys, there are different type and different metals are included. And therefore, there might be some challenges. But when I look at the chart, it seems that 30% of GHG emission reduction target for Scope 3 could be achieved by 2030. But what issues do you recognize? From my point of view, scrap cost is rising and be it Japan and Thailand, perhaps the margin -- margin improvement is a bit stagnating. And making your customer recognize the value and try to increase the prices, I believe that the budget seems to be achieved in the second half, and that's why stock price is rising, but how you would try to realize the profitability improvement? Other point is regarding governance. It's been over a little bit over 10 years since your company became a listed entity in the stock market. And it seems that other analysts are saying the different things and directors are saying different things time to time. And it seems that the financial discipline has been really stringent in the past yet 2019 and onwards, the things dramatically changed in your company. I feel that it is a great time, and you have presented the status as is about your company. In regard to the disclosure, I am in charge of the Security Analysts Association that your disclosure was superb, and it is just my impression, not a question.

Well, thank you very much for your question. First of all, well, thank you very much for sharing your feeling and impressions from the Securities Analyst Association. Now at the outset, you said that is just a comment, but thank you very much for visiting our scrap melting furnace at the Thai work. And in Thailand, scrap melting furnace is used. And also in Japan, UBC processing facility in Fukui will start operation at the beginning of the next year. And at U.S. TAA, UBC shredders are going to be introduced. So therefore, in the 3 regions, Japan, U.S. and Thailand, all the 3 locations will start to operate the recycling facilities, which, of course, which is one of the major pillar in our midterm plans and plan, and we are progressing as we plan. Now in regard to your first question, what about the beverage cans, I believe. And in regard to the collection rate is 99.7% according to the last fiscal year. Now what about can-to-can recycling ratio, which is about 75%? There's still a 25% of discrepancy, which conversely means that there's so much room for improvement. In regard to the second point regarding the scrap prices, as you're fully aware, by area, there are big differences in scrap prices. In Japan and in Thailand, scrap prices is rising tremendously and the procurement cost is also increasing as well. On the other hand, well, scrap price in the United States is stable. However, LME plus premium becomes larger, and it is depending on the scrap. So there are some benefits in some regions vice versa, there are some disadvantages as well, but the scrap price is from a long-term point of view will rise steadily. So key here will be how can we collect the scrap and successfully increase the recycling rate in this context. I believe these are the key for long term. So we are also in the process of increasing our scrap throughput, and we'd like to respond to these issues as we develop in this area. Now your third point is regarding governance. It has been over 10 years since this company was established. And as a matter of fact, as for the members working at the head office, well, former Sumitomo employees or former Furukawa employees or new employees, it is 1/3 each, to be honest, equally distributed. At the time that we were integrated at the time, although the targets were truly shared, however, the way which we work was slightly different and some people may felt a bit uncomfortable. However, now, others are harmonized quite well, and no one is feeling uncomfortableness any longer. And there's a new people, 1/3 of the people joining the company. And therefore, we are creating a new UACJ culture on their own. Are there any comments from the outside directors?

In fact, I've joined this company without feeling anything. And therefore, over 10 years, I wouldn't know who's coming from which company.

Ms. Akabane, what do you feel?

Unless I was told that who's from where I wouldn't notice the difference at all.

Did I cover all the 3 topics?

Fully covered.

Next is Mr. Matsumoto from Nomura Securities.

I am Matsumoto of Nomura Securities. First is Ms. Nagata. It seems that the changes are not fast enough. And I cannot see that clearly from outside. So if you could elaborate more on this point would be appreciated. And the second point is People Statement is something that I got interested in a lot. Now President, at the beginning, you emphasized that the company have recognized the importance of the human resources, human capital. What made you to renew this awareness, if you could elaborate?

Now we'd like to ask Ms. Nagata to respond to the first point.

Once again, it is Nagata. Perhaps changes are not fast enough. And I made such remarks, and I understood that you want further clarification on this point. For instance, in the global market, something that I recognized as a fast-moving area is the trend in electric vehicles and automotive area, where it used to be considered as a fast-growing area, but the growth is slowing down. Against such a backdrop, toward the automotive OEMs, what we provide to EV areas where our sales is not growing that tremendously. And if this area doesn't work and what else should we do in order to grow our business, what we can do, we need to stretch our strategy. Now in regard to the outlook, well, we can't change the course of actions right away because we can anticipate the sales and transactions in the future. But if in the near-term future, the business seems to be struggling, and then we would need to provide more options, and we need to improve how we can provide the options. And that's the area where we still see some improvement.

Now in regard to the second question, what made us to issue the People Statement? Mr. Urayoshi, please.

Well, the reason that the company decided to declare the People Statement is such that declining birth rates and shortages and human resources is widely talked about in the society at large. And of course, human resources is quite an important capital for the company to increase the corporate value. And once again, we wanted to have all the key senior executives to be clear on this point. And we wanted to compile all this concept, and we sorted out the concept and put together in one statement. And that's why we issued this People Statement.

This is Tanaka. I will supplement some information. Well, what we call career track generalist corporate staff members, mostly comprised of college graduates, the willing people to work and manufacturers are actually declining, and that's one reason. And what we call the skilled workers, engineers who work on the shop floor and manufacturing floor, problem with the night shifts and working over weekends, we recognize that the current situation is that the people who wish to work in such circumstances becoming less and less. Of course, it is a bit difficult to accommodate with all types of question and needs, but we need to accommodate that to some extent. Otherwise, for the people who are working, some of the staff and workers may recognize issues in the company and maybe decide to change the company that they work. So we need to be really careful and detailed in responding to their request as much as possible. And that was actually the trigger of us to think about. And of course, we've been doing this in the past as well, but we needed to do more systematically, and that's why we decided to announce the People Statement.

Moving on to the next question from UBS Securities, Mr. Goroh, please.

I am Goroh with UBS Securities. What sets your company apart from others is that you have set your capital cost targets and tried to reduce them. You have actually made a declaration and demonstrated in your results. Regarding the sustainability initiatives, from a financial point of view, what initiatives were resulting in which financial results and such relationship was demonstrated. And in fact, cost of capital is also a factor that directly affects shareholders' value. So positive impact need to be verified, and we want to hear the ultimate results of a positive contribution ultimately. Now my question is related to the question from Yamaguchi-san at the outset, well, sustainability efforts will result in the shareholders' value. There are some reality versus ideal plan versus actual. There is some gap between the two. I think that it is -- there is a gap because of the time lag. It will be cost increase that realizes the first, and we have to wait for a certain period of time to see the financial results and how the company will augment the differences is quite important. So you should just do an initiative once and for all is not sufficient. You need to dispatch the second initiative as well. And there might be some supporting or complementing efforts as well. For example, initiative for the closed loop that users and industries are shifting to a one trend versus reversing back once again. And society may sometimes see a setback. And when you look at the holistic picture, in order to demonstrate your results for a continuous way, how would you like to do going forward? Of course, the Director Nagata is well versed in the beverage industries. So I'd like to ask also from her what the bottlers trends are at this moment. And the second point is the CBAM or GX-ETS that none of the metal company have been making a proactive direct comment on this at this moment. So you are quite unique and if you are to buy carbon credit and perhaps the society will not generously accept that because you are putting out the sustainability quite clearly. So what is your position of the selling credits and GX-ETS? If you could have your analysis, could you share with us?

I'd like to invite Ms. Nagata to take the first part of the question in regard to the beverage industry.

In fact, in the last year's sustainability briefing, I've talked about EcoEnd. And this time around, as Mr. Tanaka mentioned, the recycling ratio of Can to Can is only 70%. And thus, in the course of the technical development, there will be new and easy-to-recycle can to be produced and the company is prepared to work with the customer, and that will actually expand the potential for further recycling. Well, this company is the material manufacturers. And therefore, we have to work with the end user, which is our customer to work with. But what type of a proposal that company can bring about is really key. Well, correct me if I'm wrong. Well, option that is already completed should not be simply suggested one way to the end users. At the earlier stages, you need to partner with the end users to provide the options. I know that you are working with the customers to develop together. It may not be as serious as alliances, but the company in this nature should not consider on your own, but you need to join hands with other players so that you can come up with better output. Ms. Akabane mentioned earlier that we should not be considered as a competitor, but the whole industry in aluminum has to think as an industry-wide initiative. But I believe that the beverage industry is something that is required to do in a similar way. EcoEnd is something that is adopted by the beverage industry on the whole. But such an effort needs to be expanded so that the probability of successful second initiative, the third initiative to end in great success will evolve further going forward.

On top of that, I'd like to talk that cost will start to incur ahead of the results. But in fact, in the fourth medium-term growth strategy, the core lies in development strategy, and that is about recycling. It will take 4 years to improve the recycling ratio, and it will be continued beyond 2027. And it's not just a can, but the material itself will have a premium. I don't expect that the old customer will change their mindsets and start to buy premium products. And yet a number of customers who are buying premium products are actually increasing. And what we are working as we speak is in other parts of the fourth medium-term plan, and there's an investment plan that the recycling facility has to be deployed in all 3 regions. And that is actually easier for end users to understand. And that's what customers are looking for. And therefore, that will be the initiative that we are implementing ahead of the others. And gradually, we are making a systematic approach to the recycling one after another. And we need to be really strenuous in doing such efforts. When we start up to begin with, do we really secure a premium? No. That's not the case, but we will be able to make a progress in a steadfast manner. Now in regard to the second question regarding CBAM, we would like to invite Ms. Narita to take that question.

Regarding CBAM or GX-ETS, your point exactly, we are the leading company in this area and try to buy or purchase some rights using such scheme that we'd like to avoid as much as possible. There are some energy saving efforts that we've been accumulated over the years, and we will continue to accumulate this area. That's one point. And the second point is what optimum energy mix that are we going to procure. For example, the emission trading system, depending on the conditions and terms, the proportion of optimum energy mix is going to be different, but we need to coordinate that in the company going forward. And the third, there are various types of aluminum manufacturing processes. In this context, for example, like as I mentioned earlier briefly, the vertical twin-roll casting equipment can produce energy-saving products with a higher marginal energy efficiency than normal processes. So we'd like to consider new production processes as well. Furthermore, we believe by increasing our production volume, we could secure some emission quarters for our industry as a whole. And if we continue to communicate with other customers, we'd like to secure some quarter for the whole industry. So we try not to buy quarters as much as possible as we consult with the finance department.

Well, as for the emissions trading system, it is just starting to establish the mechanism itself. And therefore, we and the aluminum industry, we would like to reach consensus, and we'd like to respond any initiative well going forward.

Now it is time. Therefore, we would like to now conclude the UACJ Corporation sustainability briefing. We will continue to strive to meet the expectations of our shareholders and our stakeholders. And therefore, we look forward to your continued support and engagement of our company. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]