Sekisui Chemical Co

Hello, I am Keita Kato, President of Sexy Chemical. Thank you for taking time out of your busy schedule today to join our FY 2021 Financial Results and Management Plan Briefing. I will go straight into the presentation. First, I will explain the results of FY 2021. On page 2 is an overview of FY 2021 results. Both net sales and operating profit increased, which were essentially in line with the January forecast. Ordinary profit reached 97 billion yen, a record high. Profit attributable to owners of the parent was 37.1 billion yen, 3.1 billion yen higher than the January forecast, despite a decrease in profit due to the impairment loss on aerospace in the first half of the fiscal year. Dividends will be 49 yen per share, as planned. Next, let's look at the results by divisional company. Both sales and profits increased in each segment. HPP, the high-performance plastics company, and the medical segment posted substantial gains in both sales and profit, exceeding the forecasts announced in January. The medical segment posted an operating profit of 11.2 billion yen, which was the highest ever. On the other hand, the housing and UIEP, urban infrastructure and environmental products companies, achieved an increase in profits but were slightly below the forecast announced in January. First half and second half results are shown on page 4. Each segment reported an increase in profits for both the first and second half. As for the second half of the year, although the effects of COVID-19 and semiconductor shortages were prolonged, the company as well as each segment were able to exceed fiscal year 2019 pre-COVID levels. By segment, HPP achieved a significant increase in profit driven by the three strategic fields. Despite the impact of high raw material prices, The housing company was significantly affected by the prolonged impact of COVID-19 and soaring material prices, but secured higher sales and profits due to an increase in the number of houses sold and a recovery in the renovation business. UIEP hedged against surging raw material prices as much as possible by improving selling prices and controlling fixed costs and secured increases in both net sales and profits by expanding sales of prioritized products and overseas sales. In the medical business, demand for diagnostics recovered both in Japan and overseas. In addition, increased demand for COVID-19 testing in the U.S. also contributed to record high profits for the fiscal year. Page 5 shows an analysis of FY21 results. The business environment remained challenging due to continued sharp rises in raw material prices, COVID-19, and the prolonged impact of the semiconductor shortages. We minimized the impact of soaring raw material prices through improvement in selling prices and cost reduction, etc., and strived to increase sales volume and product mix, mainly from sales of high-performance products. Although slightly below the operating profit forecast of 90 billion yen announced in January, profits increased significantly to 88.9 billion yen. From page 6, I will explain our plans for FY 2022. Regarding foreign exchange rates, although the yen has been weakening recently, the plan assumes 115 yen to the dollar and 131 yen to the euro, in accordance with the internal standards at the time the management plan was formulated. Page 7 shows the overview of the FY 2022 plan. We are aiming for net sales of 1 trillion 241.6 billion yen, the highest ever since 1996, operating profit and ordinary profit of 100 billion yen, and 66.5 billion yen for profit attributable to owners of the parent, aiming for record high profits at each level. We plan to raise annual dividends by 4 yen to 53 yen per share, the 13th consecutive year of dividend increases. In addition, the company has established a budget for share buybacks with an upper limit of 8 million shares or 16 billion yen. Page 8 shows market assumptions. First, regarding the impact of Russia's invasion of Ukraine on our business, direct transactions to the region are negligible, and we do not trade in the region at this moment. However, indirectly, if the sharp rise in LNG prices and other fuels and the expansion of automobile production cuts in Europe persists, this may affect our business. In the case of global automobile production, although we face the risk of prolonged impact of semiconductor shortages and the continued expansion of automobile production cuts in Europe, we expect a certain degree of recovery in FY 2022. We expect smartphone shipments to increase in reaction to the impact of the semiconductor shortages in FY21, and we assume that trends will be firm in FY2022. In the housing business, we will continue to focus on attracting customers online to raise the overall number of visitors. New housing starts were affected by corrections following the earlier rush prior to the termination of housing loan tax measures in the second half of FY21, but we expect a modest recovery in FY2022. Domestic NAFSA prices are expected to rise further from the second half of FY2021 to 70,000 yen per kiloliter, which is one level higher than in the second half of FY2021. Currently, prices are surging further, and we are responding by, for example, improving selling prices swiftly. Page 9 shows FY22 plans by divisional company. As I mentioned earlier, we expect the business environment to be difficult due to geopolitical risks and raw material trends, but we plan to increase profits in each segment by securing margins by improving selling prices and continuing to expand sales of high-performance products. The HPP company plans for operating profits to reach 48 billion yen, in line with the mid-term plan, by offsetting the rising costs of raw materials and energy, by improving selling prices and increasing sales volume and product mix, centered on high-performance products. The housing company plans for an increase in both net sales and profits. Although it will be further affected by soaring prices of steel, lumber, and other materials, it will strengthen cost reduction, increase the number of houses sold, raise unit prices of houses, and expand the renovation and town and community development businesses. the UIEP company will aim to achieve a significant increase in profits and record high profits at the divisional company level by steadily capturing projects that were delayed in FY21 due to COVID-19, promptly improving selling prices in response to soaring raw material prices and expanding sales of overseas and prioritized products. In the medical business, we expect demand for diagnostics to continue to recover. and we aim to achieve operating profit of 12.5 billion yen, the second consecutive year of record profits, in line with our medium-term plan. In addition, a POC plant for the biorefinery business, which produces ethanol from waste, will start operating this fiscal year. We will also promote digital transformation, security, and other materiality initiatives even further. Page 10 shows the breakdown by first half and second half. We plan to increase both net sales and profits for the entire company in both the first and second halves. Page 11 is an analysis of the FY22 plan. While raw material prices are expected to continue to surge and remain high, we will strive to secure margins by promptly implementing selling price improvements. While we expect market conditions to recover by a certain degree, we plan to significantly increase both net sales and profits by shifting to high-performance products and high-value-added products through sales expansion of high-performance interlayer film, smart houses, and prioritized products, and by significantly increasing sales volume and product mix. In addition, we will not relax our efforts to strengthen profitability, but will shift to growth and strengthen preparations for the next medium-term period. Page 12 is about returns to shareholders. As promised in the current midterm plan, we will continue to actively provide returns to shareholders in FY22 with a total return ratio of over 50%. FY22 will be the final year of the midterm plan, so from page 13, I will explain the progress of the midterm management plan. Page 14. This page shows FY22 guidance against the targets presented in the midterm plan. Key points are, due to lower demand caused by the prolonged impact from COVID-19 and other factors, the plan for FY22 is slightly short of the midterm targets in terms of profit. On the other hand, we plan to make some progress in capital efficiency and management efficiency with ROIC in line with the midterm plan and and ROE expected to reach FY19 levels. Please also refer to the progress in each of the segments here. Page 15 shows the historical progress of the medium-term plan. In FY 2022, we will steadily shift to a growth trajectory and aim to achieve operating profit of 100 billion yen. From page 16, I will explain the differences of the midterm plan. First are the differences of the market assumptions made in the midterm plan. The most significant deviation is the prolonged impact of COVID-19. In the medium term plan, we had assumed that COVID-19 would be resolved in the second half of FY2020. Although automobile production fell below the assumptions of the medium-term plan in FY21 due to the impact of the semiconductor shortages, we expect market conditions to recover to the level of our assumptions in FY2022. Smartphone shipments recovered to almost the same level as assumed in the medium-term plan in FY2021. In FY 2022, smartphone shipments are expected to slightly exceed assumptions. Regarding new housing starts, houses for sale, which are mainly for first-time buyers, are expected to exceed assumptions. Domestic NAFTA prices are surging much higher than assumed. As for exchange rates, the yen is expected to weaken against both the US dollar and the euro more than assumed. Page 17 is an analysis of the difference from the mid-term plan. We expect to hedge the impact of surging raw material prices which greatly exceeds assumptions of the mid-term plan through sales price improvements and cost reduction, etc., and by controlling fixed costs. On the other hand, the impact of demand decrease and delay in demand recovery due to the prolonged effects of COVID-19 is significant. and we expect to fall short of the midterm plan, mainly in terms of sales volume and product mix. Page 18. As the last part of my explanation, I would like to introduce the strategic areas map that we have developed by identifying keywords for each business domain as a compass for the realization of our long-term vision, Vision 2030 for the year 2030. Based on the strategic areas map, We will allocate capital in a focused manner to expand enhancement areas. In addition, we will further promote fusion and aim to develop composite strategies between each domain in innovation areas. I would like to add that we are currently planning to hold a separate briefing session for analysts and investors on the life science business, along with an explanation of this strategic areas map. With that, I'd like to end my presentation. Thank you for your kind attention. Hello, I am Tatsuya Nishida, Executive Officer and Head of Corporate Finance and Accounting Department. I will explain the financial results for fiscal year 2021. First on page 20, the number of consolidated companies decreased by six companies, to 155 companies. The impact of the changes in consolidated companies on the financial results is shown here. Turning to page 21, I will explain the details about ordinary profit and the profit levels below. Ordinary profit was a record high 97 billion yen, an increase of 34.4 billion yen from the previous year. Due to an increase in operating profit and an improvement in non-operating income, due to foreign exchange gains and other factors. Extraordinary income included a 25.9 billion yen gain on the sale of shares, resulting from a review of the level of strategically held shares. Extraordinary losses included 49.5 billion yen in impairment losses on aerospace goodwill and intangible assets. The increase in income taxes is greater than the increase in profit before income taxes, but this is since tax-effect accounting is not applied to the impairment of aerospace goodwill. As a result of the above, profit attributable to owners of the parent was 37.1 billion yen, down 4.5 billion yen from the previous year. Next is the balance sheet on page 22. Total assets increased by 48.8 billion yen to 1,198.9 billion yen. Of the increase, 27.6 billion yen was due to the weakening of the yen at the end of March 2022. Inventories increased by 20.9 billion yen. Regarding the housing sector, inventories of ready-built housing and land for sale are slightly decreasing, while the balance of work in process housing under construction increased. Other types of inventories increased, such as raw materials. This is due to the soaring prices of materials and raw materials in FY 2022, as well as the return of inventory levels that had fallen at the end of March 2021 due to difficulties in procuring raw materials and other factors. Property, plant, and equipment increased by 13.9 billion yen due to PP&E acquisitions that exceeded the level of depreciation by approximately 10 billion yen, as well as the impact of the weaker yen. Details of the impact of impairment of goodwill, etc., and the reduction of strategic shareholdings, which I mentioned earlier, are also described here. Next, please turn to page 23. Net interest-bearing liabilities decreased by 72.7 billion yen, making us virtually debt-free. On the other hand, gross interest-bearing liabilities decreased by only 15.6 billion yen, because it's mainly composed of corporate bonds and long-term borrowings from FY2020 in consideration of COVID-19 risk. As a result, cash-in deposits, as shown on the previous page, increased by 57.1 billion yen, leading to a relatively high level of cash on hand. Retained earnings increased to higher net profit but was negatively affected by dividends paid and the cancellation of Treasury shares. During this fiscal year, we acquired and cancelled 5 million Treasury shares. In addition, there was a decrease in net assets due to the reduction of strategic shareholdings and an increase in net assets due to the yen's weakening. ROIC, ROE, equity to total assets, and the DE ratio are as noted here. Next on page 24 is consolidated cash flows. Cash flows from operating activities were plus 105 billion yen, with the year-on-year increase in profits contributing. Cash flows from investing activities were plus 2.7 billion yen, with cash inflow and outflow at about the same level. This was due to the level of cash outflows for capital expenditures which was in a transition period being about the same as the gains on sale of strategic shareholdings. As a result, free cash flow, including dividend payments, was plus 84.5 billion yen. Depreciation, amortization, capital expenditures, and EBITDA by segment are shown on page 25. Depreciation is on an increasing trend and capital expenditures of about 1.2 times depreciation were executed in FY 2021. Goodwill and other amortization have decreased due to impairment in items ending the amortization period. EBITDA by divisional company, which is the source of funds, are also stated here and was 2.6 times greater than the level of capital expenditures. Plans for depreciation, capital expenditures, and R&D expenses are shown on page 26. Capital expenditures are expected to start increasing in FY22. Lastly, on page 27, I'd like to reiterate the overview of the FY2022 plan and returns to shareholders. In line with our shareholder return policy for the current medium term, we will increase dividends and conduct share buybacks and cancel treasury stock. Thank you for your attention. I am Ikusuke Shimizu, company president of the High Performance Plastics Company. Please turn to page 29, where performance trends are shown. In FY21, despite high raw material prices and a shortage of semiconductors, we achieved an increase in both net sales and profits, with net sales of 358.8 billion yen and operating profit of 42.4 billion yen. Operating profit exceeded the 42 billion yen upwardly revised forecast announced in October last year. For FY22, despite an uncertain business environment, we expect net sales of 388.6 billion yen and operating profit of 48 billion yen. In line with the midterm plan, by successfully securing margins and improving the sales volume and product mix through sales expansion of high-performance products. Turning to page 30, FY 2021 net sales were 358.8 billion yen, up by 48.9 billion yen from the previous year. The graph on the right shows the analysis of the factors behind the changes in operating profit. Operating profit increased by 13.4 billion yen over the previous year. In addition to higher than expected raw material prices and automobile production cuts due to the shortage of semiconductors, the effects of supply chain disruption, such as container shortages, were also expanding. However, in addition to improved selling prices and cost reduction, etc., we were able to achieve a significant increase in profit, exceeding the January forecast thanks to improved sales volume and product mix in the three strategic areas, especially in mobility. Next on page 31 is the FY 2022 plan. While the uncertain business environment continues, especially in Europe, we plan net sales of 388.6 billion yen, an increase of 29.8 billion yen from the previous year. based on the assumption that the automobile and smartphone markets will recover to a certain degree as the semiconductor supply situation improves. As shown in the analysis of factors contributing to changes in operating profit on the right, we plan to increase operating profit by 5.6 billion yen year-on-year by hedging against the effects of soaring raw material prices and container shortages by improving the selling price and sales volume and product mix, We are also planning to invest in growth in anticipation of the next medium term.

Next, on page 32, I'd like to cover the progress in the three strategic fields in cost innovation. We finished FY21 with increasing sales and profits in each of the three strategic fields. Although it is not stated on the slide, it's worth mentioning that the electronics field achieved record high profit for two consecutive years, and the building and infrastructure business also recorded the highest profit ever. For FY22, we expect a certain recovery in the automobile and smartphone markets, along with an improvement in the semiconductor supply situation. In addition, we expect sales and profits to grow in all three strategic fields and sales to exceed our medium-term plan thanks to improvement in selling prices and a shift to high-performance products. Now, let me give you an overview of how we stand in each of the strategic fields. In FY21 for the electronics field, sales of LCD-related products overachieved the plan, driven by higher production of small and medium-sized LCD panels mainly used for tablets. We also enjoy steady sales in the non-LCD business. For FY22, we expect sales of LCD-related products to be strong, assuming a recovery in the smartphone market. At the same time, by increasing the non-LCD-related sales, mainly focusing on the semiconductor applications, we would like to continue the sales growth momentum for the overall electronics fields. Moving on to the mobility business presented at top right, in FY21, we were confronted with challenging business environment with the lingering impact of automobile production cut that stemmed from chip shortage. Despite that, we were still able to achieve growth for both sales and profit, thanks to the sales expansion of high-performance interlayer film. For FY22, we expect the supply of semiconductors to improve, and with that personally reflected in our projection, we will continue our efforts to grow the sales of high-performance interlayer film, focusing on the wedge-shaped interlayer film for head-up display, or HUDs. Sales of wedge-shaped interlayer film for HUDs is expected to grow by 15%. We are also making progress with price revisions and plan to achieve sales and profit growth. Although uncertain business environment, especially in Europe, poses a risk, we intend to respond with additional measures such as fixed cost reductions. Sekiso Aerospace has been able to establish a production structure to meet the current demand level, which has suffered due to the prolonged slump in demand for aircrafts used for international flights. We will continue our relentless efforts to improve profitability through better productivity, price hikes, and other measures. Meanwhile, we are making steady progress in our product portfolio reforms, aimed at developing applications other than aircraft, such as medical among others, and we are determined to make contributions to sales growth in the future. The bottom left is the building and infrastructure field. Chlorinated PVC business has been underpinned by strong demand, mainly coming from India, and increasing number of customers are accepting the price hikes. For FY22, we expect the overseas demand to remain strong, the domestic construction market to continue its recovery, and better selling prices to contribute, and project a significant increase in both sales and profit. Cost innovation, shown at bottom right, is the most important issue we are addressing. Structural reforms through supply chain innovation by optimizing procurement and improving productivity, as well as a fundamental review of low-margin businesses, are likely to deliver better outcomes than the initial targets set under the FY22 midterm plan. In FY22, we will continue to strengthen profitability and further accelerate the growth engine to achieve the targets under the current midterm management plan, which will end in FY22. We will also prepare for the next medium-term management plan. Page 33 will be the last slide for HPP. In terms of growth engines, we will step up our measures for sustainable growth in all three strategic fields. We will also focus on fostering the next growth domains. First, the electronics field. The sales ratio of the non-LCD-related product is projected to be 55%, which is lower than the 64% target for FY22 under the medium-term plan. This is because the lingering impact of COVID-19 moderated the drop for LCD-related demands such as for tablet, while it also hindered the market growth for next-generation displays, and the non-LCD sales did not grow in line with our expectations. However, the total sales for the electronics field is expected to exceed the medium-term plan. We will continue to promote sales growth in the non-LCD field by expanding sales of products for semiconductors, such as high-adhesion easy-peeling tape SELPHA and MLCC binder resin. In the mobility field at top rate, we will strive to win more business for wedge-shaped interlayer film for HUDs with new model launches to gain market share. Furthermore, we will make efforts to expand our business by appealing our products to be adopted for the next generation vehicles by adding the sound and heat insulation features for the HUD and other high-design interlayer films, mainly focusing on electric vehicles. For thermal insulation and non-combustible material business, sales was greater than what was projected in the business plan, mainly driven by the non-flammable urethane sales. Although the thermal insulation material business was partially impacted by the shortage of shipping containers in the Middle East and ASEAN, we were able to bring back the business to a level comparable to the previous fiscal year. For FY22, we aim to grow the business by launching new products for non-flammable urethane and expand sales of thermal insulation materials in markets like Japan for further global rollout. The following are our focus for next-generation growth domains. Next-generation communications such as transparent reflective film for 5G in the electronics field. For mobility, in addition to further shift to multiple function and high-performance interlayer film, we will expand application of CFRP products in the next-generation mobility field. In building and infrastructure, our focus will be on the next-generation healthcare material domains such as sensing devices like NCL used for monitoring purposes in the nursing care service. That is all from me. Thank you very much for your attention. I am Toshiyuki Kamiyoshi, company president of the housing company. I'd like to start my presentation with a performance trend on page 35. Housing company sales reached a record high in FY21, even with the prolonged impact of COVID-19. Profit also increased thanks to sales growth and cost reduction efforts, despite the impact of soaring component costs. On the other hand, we fall short of a January forecast due to delays in component delivery, heavy snow, and the earthquake off the coast of Fukushima Prefecture. In FY22, we expect further impact by sharp rise in component costs. However, we aim to achieve the same level of operating profit as in FY19 by growing sales and reducing costs to mitigate the higher cost pressure. Next, slide 36 is the analysis of the FY21 results. As shown by the graph at lower left, each business segment achieved sales growth, reaching a significant total net sales growth of 29.9 billion yen. Factors behind the changes in operating profit is illustrated on the right. In the housing business, the number of houses sold increased by 330 units. Although we fell short of the forecast updated in January by 110 units due to the impact from natural catastrophes in Omicron variant, we achieved a profit growth of 1.1 billion yen. The renovation business missed the January forecast due to delays in delivery of parts and materials caused by the lockdown in China. However, the renovation business posted an increase of 1.3 billion yen in operating profit. In other businesses, sales in the town and community development business exceeded the projection, and the real estate business remained strong, resulting in an increase of 0.7 billion in profit. In sum, the housing company as a whole posted an operating profit of 35.3 billion yen, an increase of 4.8 billion yen over the previous year. Slide 37 outlines a plan for FY22. We expect the impact of the sharp rise in material prices to increase in the current fiscal year as well, but we will strive to recover the operating profit close to the level achieved in FY19 by growing sales and reducing costs. As shown on the left side, we expect net sales to increase in all business segments, with an overall net sales growth of 32.8 billion yen year-on-year to 548 billion yen in line with the medium-term plan. Next, I will explain the factors behind the changes in operating profit using the chart on the right. In the housing business, we expect an increase in fixed costs due to the higher component costs, increased business activities, and upfront investment, among others. However, we plan to increase operating profit by 1.3 billion yen with a plan to increase the number of houses sold by 500 units, improvement in CR by leveling the production throughout the year, improved product mix and raising the housing prices. In the renovation business, although we expect higher fixed costs stemming from strengthening the sales structure, the plan calls for a profit growth of 2.3 billion yen thanks to higher sales and productivity gain. In other businesses, we expect a profit growth of 0.6 billion yen due to higher contributions from the town and community development in real estate businesses. The housing company as a whole is guiding for 38 billion yen in operating profit, growth of 2.7 billion year-on-year. Slide 38 shows the outlook and measures for new housing orders. The line graph on the upper left shows the number of visitors, and we plan to increase the number of visitors in FY22 compared to FY21 by augmenting the online channel. The number of orders by type of construction indicated by the middle table illustrates that while sales of subdivision housing continue to drive the overall order level in FY21, the orders for rebuilding also recovered to 109%. As for the order projection on the right, we plan to continue to grow the order book mainly with subdivision housing, aiming for 100% for the first half, 108% for the second half, and 104% for the full year. On the topic of measures to acquire orders shown at the bottom of the slide, three growth strategies that were implemented are delivering steady outcomes and will further strengthen these strategies. For activities around Salesforce and attracting customers, we will increase the number of visitors by strengthening the web marketing and capitalizing more on experience-based facilities to enhance customer experience. For product strategies, on the back of natural catastrophes and rising energy prices, we expect heightened needs at Forsyth Seeheim's prominence, namely smart and resilience, as well as the ability to cope with the new normal. We will further pursue our prominence. We are making steady progress on the launch strategy, and we will strive for further progress with our quarter 50th anniversary town and community development project. Last slide from me is page 39 on the stock business and town and community development business. In the renovation business shown at top left, we will work to expand and improve our sales structure, product lineup, and productivity. In particular, we will strengthen our proposals on smart and new normal products as well as introducing our experience-based facilities through periodic home diagnostics to increase orders to 101 billion yen. In the real estate business that operate, the B. Hein brand, which was launched two years ago as a purchase and resale brand, achieved firm sales growth last fiscal year. In FY22, we plan to accelerate the nationwide rollout of this brand and aim to achieve sales of 130 units to further expand the business. For town and community development business, the sales plan for FY22 is 12 billion yen. We will leverage the strength of the Sekisei Chemical Group to create distinctive permanent products that are smart and resilient, adaptive to new normal, and will be designed to strengthen our brand. In addition, we will focus on land procurement with a view on the next medium-term management plan and further strengthen our business structure. That is all for the housing company. Thank you very much for your attention. I am Yoshiyuki Hirai, company president for the Urban Infrastructure and Environmental Products Company, or UIEP for short. Let me start with the performance trends of UIEP on page 41. Although net sales and profits for FY21 undershot the January guidance, we were still able to achieve growth both in sales and profit by offsetting the impact of soaring raw material prices through improvements in selling prices as well as recovery in overseas sales. For FY22, we continued to phase-start price in the raw material prices. We aim for significant profit growth by steadily passing on the cost increase to the customers without delay and growing the sales of prioritized products as well as in the overseas business. We will not reach the target under the mid-term management plan, but will still aim for record high performance with a focus on KPIs such as operating profit target of 18 billion yen. Next is analysis of FY21 results on page 42. As shown on the left, sales in Japan fell slightly short of the January forecast on the back of sharp rise in Omicron cases in Q4, which led to construction delays caused by shortage of labor and equipment on site. Overseas business was also impacted by COVID-19, causing delays in the delivery of properties and the result was below the January forecast. However, growing semiconductor-related demands such as piping for ultra-pure water systems helped to boost the sales significantly compared to the previous year. On the right is a waterfall chart for operating profit. The pace of raising the selling price could not keep up with the speed of soaring raw material prices. When we adjust for the impact of the retirement benefit expenses, the profit growth in the second half was marginal. As I mentioned earlier, with the succession of delays in the delivery of properties in Q4, the profit improvement stemming from sales volume in product mix was 900 million yen less than the January forecast. Let me also share our business plan for FY22 on page 43. Net sales shown at left is expected to increase both domestically and overseas due in part to the effect of improved selling prices. In total, the plan calls for a growth of 18.6 billion yen. The right-hand side shows our profit analysis. Since we have reached agreements on new selling prices with most of our customers by the end of March, the negative impact from FY21 is expected to be offset in the current fiscal year. However, to cope with the current sharp rise in raw material prices, we have already announced another price hike on April 20 so that we can pass on the cost increase to customers without delay. In terms of sales volume and product mix, we plan to expand sales of prioritized products in Japan by promoting the appeal of contributions to SDGs. Overseas, we will focus on capturing properties carried over due to delays, as well as acquiring new projects for profit contribution. Page 44 describes our three strategic fields and structural reforms. Sales are expected to increase in all three areas, partly thanks to improved pricing. For piping and infrastructure field on the upper left, sales in both the first half and the second half increased in FY21 thanks to housing demand and strong demand for semiconductor-related projects. In FY22, we project sales growth with an expectation of continuing to capture the capex-related demand mainly driven by semiconductor investment, as well as a certain level of market recovery in the non-residential demand and improvement in pricing. For the building and living environment business at bottom left, we have been able to build a fairly stable earnings capability. In FY22, we will strive to expand sales of prioritized products by pursuing new market opportunities, such as the high-flow rate drainage system in rainfall drainage management logistic and warehouse facilities and products to support nursing care and independent living for unit bath to help boost the business profitability. For advanced materials at upper right, marketing for new applications has started to bring some solid results from the second half of FY21 in the North American non-aerospace sheets business, such as robotics and 5G antenna cover. We will continue to expand product applications in FY22. The FFU railway sleeper business is under pressure with restrained investment in the railroad industry in Japan. However, orders are firm overseas. Sales of high-performance containers are also steady, and we project sales growth. Structural reforms, including business transfers, withdrawal from low-margin products, and production reorganization are making progress, and we expect cost reductions to exceed the 5 billion yen target under the medium-term plan. We will continue to promote further structural reforms and productivity innovations, such as production automation and productivity improvement through DX, and strive to improve ROIC. Page 45 is our growth strategy. For prioritized products which struggled with COVID-19, the sales have started to recover as we leveraged the SDGs appeal as a new selling point which we fit the current trend. Typical examples are presented at top right. These are the one and only type of products that are unique to Seksoy so let me introduce them from left to right. The first one on the left is the Rehabilitation Pipe with sufficient self-supporting strength that enables pipe renewal without relying on the strength of existing pipes. Next is the Earthquake Resilient Water Supply Polyethylene Pipe It is always sad to hear the news of water cut-offs due to earthquakes, but this PE pipe has not suffered any damage from earthquakes so far. I'd also like to note that this pipe has been approved for application to high-pressure fire extinguishing pipes, where conventionally only metal pipes were approved for such application. Our pipes are used for Shurijo Castle reconstruction projects in Okinawa as well as in industrial plants. FFU sleepers have also been adopted by JR Central for use in preventing derailments. Overseas, sales are also on an upward trend, although some of that growth is coming from the currency benefit. The table at bottom right highlights the strategy for respective businesses. In the FFU business, we are launching new products with European specifications and developing processing systems geared toward the start of operations at the production site in the Netherlands, slated for next spring. We expect substantial growth for the pipeline renewal business as we work to introduce new products that facilitate easier installation. The same is projected for plant and industrial piping as we augment the production capability in Taiwan. That concludes my explanation. Thank you very much for your attention. I am Futoshi Kamiwaki, head of business strategy department. I will present on the medical business. Let me start with the performance trend on page 47. In FY21, net sales reached 88.5 bn yen with an operating profit of 11.2 bn yen, renewing the previous record high operating profit. Recovery in demand for diagnostics in Japan and overseas was particularly evident, and higher demand for COVID-19 testing kits also contributed to the performance. In addition, the pharmaceutical science business also marked steady growth, driven by new pharmaceutical ingredients. For FY22, we are targeting net sales of 87 billion with an operating profit of 12.5 billion yen, which will be another record high profit in line with the medium term plan. Despite expectations of some demand drop for COVID-19 testing kit, we will endeavor to strengthen profitability mainly with new product launches to achieve profit growth. Next, let me go through the analysis of FY21 results on page 48. Net sales grew by 16.2 billion, with an operating profit growing by 4.2 billion yen, which was on par with the January forecast. Domestic diagnostics business, overseas diagnostics business, and pharmaceutical science business achieved profit growth across the board, and the steady progress in these three businesses was the key factor which helped to boost the profit. Now, let me continue with the plan for FY22 on page 49. Sales is projected to go down by 1.5 billion yen. This is due to an expectation that demand for COVID-19 testing kit in the US will drop to a certain extent. However, operating profit is expected to increase by 1.3 billion yen. This is based on our assumption that diagnostics demand in Japan will continue to be strong. We also aim to enhance the business profitability in the overseas diagnostics business by actively switching to new products to offset the decline in demand for COVID-19 testing kit. We expect profit growth especially in Europe, US, and China. In the pharmaceutical science business, we expect an increase in profit as new pharmaceutical ingredients make profit contribution in FY22 as well. As for fixed costs, we plan to invest mainly in R&D with our eyes on the next medium-term management plan. Lastly, on page 50 is the overview of the business. Domestic diagnostics business at top left observed steady demand recovery in FY21. The business expanded mainly in the clinical chemistry and immunology domain, which are domains over competitive strength. We can expect further growth in these areas for FY22. Furthermore, we will launch a new diagnostics equipment for blood coagulation, and we can expect further growth in synergy between the cells of machines and diagnostics reagents. For the overseas diagnostics business at TopRite, COVID-19 diagnostics kits in the U.S. boosted the sales significantly, especially in the second half of FY21. From FY22 onward, we will switch from the licensed-in product as we have completed the FDA filing of a product that was under development and this should help us secure profit. In China, blood coagulation reagents business expected to enjoy steady trend in FY22 as well. The pharmaceutical sciences business at bottom left has achieved substantial growth from the second half of FY21, backed by strong sales and profit contribution from the new pharmaceutical ingredient business supplied to a major pharmaceutical company. In FY22, we will continue to focus on new pharmaceutical ingredient business. This year, the new plant in Iwate, for which we have been investing, is slated for operation, and we'd like to start recouping the investment in view of the next midterm management plan. In addition, with regard to the new product development, we plan to increase the number of new product launches in FY22 compared to FY21, and we'll focus on preparing for the next midterm plan. That is all for the medical business. Thank you very much for your attention.