Toray Indus Inc Unsp/Adr

Thank you very much for joining us today despite your busy schedule. On behalf of Torii Group, I would like to take this opportunity to extend my gratitude towards your continued understanding and your interest in management and business activities. Now, I would like to follow the table of contents shown on page 1. This is the summary of the business performance and forecast. Now, I would like to report Tore's business results for the fiscal year ended March 2024 and the business focus for the fiscal year ending March 2025. Furthermore, I would like to report company has decided a policy to reduce the amount of cross-share holdings and all proceeds from sales of cross-share holdings will be used for share buybacks. I will explain the details starting from the next page. I would like to begin with an overview of business results for the fiscal year ended March 2024. Please turn to page 4. Revenue for the fiscal year ended March 2024 decreased 1% to 2 trillion 464.6 billion yen compared with the previous fiscal year, and cooperating income increased 6.9% to 102.6 billion yen. Net income decreased 69.9% to 21.9 million yen. As for annual dividend, the company anticipated to pay 18 yen per share of common stock. ROIC was 2.8% while ROE was 1.3%. Page 5 explains special items. Special items for the period worsened by 57.9 million yen to negative 45 billion yen compared with the previous fiscal year. Details on impairment losses announced on May 8th will be explained later. Page 6 is about assets, liabilities, equity, and free cash flow. As of March 21, 2024, Tori Group's assets and liabilities were affected by the increase in translated yen amounts of overseas subsidiaries because of the depreciation of the yen. Total assets stood at 3,466,500,000 up 272,500,000 from the end of the previous fiscal year, mainly due to increases in trade receivables and other receivables, tangible fixed assets and other financial assets. Total liabilities increased 61.9 billion yen from the end of the previous fiscal year to 1,620.2 billion yen owing mainly to increases in deferred tax liability. Total equity came to 1,846.4 billion yen up 210.6 billion yen from the end of the previous fiscal year. Owner's equity was 1,736,000,000 yen, interest bearing liabilities was 949.7 million yen, and DE ratio was 0.55. Free cash flow was positive at 64.7 billion yen. The table on page 7 shows revenue and cooperating income and factor analysis of 6.6 billion yen increase in cooperating income for the fiscal year ended March 2024 on a year-to-year comparison. In the performance chemicals segment and carbon fiber composite materials segment, utilization rate has improved, capturing steadily recovery of demand in automobile market and in aircraft. Moreover, due to promotion of structural reform and strategic pricing, the cooperating income rose 6.9% to 102.6 billion yen. Cooperating margin improved 0.3 points. The cost of alliance, etc. worsened due to the increase in utilization rate, However, the difference in quantity didn't increase along with the utilization rate because of the effect of demand decrease for wind turbine blade and the change in product mix from business advancement, which is promoted in the business structure reform. Using page 8 and after, I would like to explain the results of each segment. First, fibers and textiles. Revenue of the overall segment decreased 2.4% to 974.8 billion yen compared with the previous fiscal year and the cooperating income rose 6.8% to 54.7 billion yen. Despite the harsh business environment including soaring raw material prices, cooperating income increased due to improvement in spread by passing on cost increases to sales prices and promoting high added value creation. Apparel applications were strong specifically for trading subsidiaries in and outside Japan, although affected by deteriorating market conditions in the US and Europe. In industrial applications, recovery trend continued as demand for automobile applications recovered due to alleviation of semiconductor shortages as well as expansion in EV applications. Page 9 is the performance chemicals segment. Revenue decreased 2.6% to 886.1 billion yen compared with the previous fiscal year and cooperating income rose 20.8% to 36.7 billion yen. Improvement in product mix in the resins and film business resulted in 3.9 billion yen of net change in price contributing to the increase in cooperating income. I would like to explain the conditions of each business on next page. In the resins and chemical businesses, as demand decline in the Chinese market continued, revenue of the resins business decreased, but profitability improved due to improvement in product mix through increased ratio of high added value products and further proceeding with passing on cost increases to sales prices, reduction in fixed costs, etc. In addition, automobile applications in Japan showed signs of improvement. The chemicals business performed strongly. In the films business, even though the mainstay electronic parts related application of PET film is recovering gradually, the impact of inventory adjustment in supply chains persisted in some areas. In the electronic and information materials business, for OLED-related materials and circuit materials saw some recovery. Page 11 is the carbon fiber composite materials segment. Revenue increased 3.1% to 219.5 billion yen compared with the previous fiscal year and cooperating income fell 17.2% to 13.2 billion yen. I would like to explain the status of each application on the next page. In the aerospace applications, the production rate of commercial aircraft at the major customer has steadily recovered. The sports applications were slow due to the full-fledged inventory adjustment mainly in general-purpose products for outdoor leisure. The wind turbine blade application was impacted by production adjustment from declining demand, In addition, demand for the industrial applications softened. Page 13 In the environment and engineering segment, revenue increased 6.7% to ¥244.1 billion compared with the previous fiscal year and cooperating income rose 17.7% to ¥23.2 billion. In the water treatment business, shipment in the US and China, the two major markets for reverse osmosis membranes, was strong. In addition, sales of a construction subsidiary in Japan were strong, while plant-related business at an engineering subsidiary grew. Page 14 is the life science segment. Revenue decreased 2.8% to 522.2 billion yen compared with the previous fiscal year, while cooperating income was negative 1.3 billion yen, 1.5 billion yen decrease compared with the previous fiscal year. In the pharmaceutical business, while sales volume of orally active prostacyclin derivative donor expanded for the overseas markets, sales of pruritus treatment remits were affected by the introduction of its generic versions as well as by an NHI drug price revision. In the medical devices business, Though sales of dialyzers were affected by the soaring prices of raw materials and fuels, shipment of dialyzers for ammonia filtration in Japan was strong. Page 15 shows the business results of major sub-series and regions. At Torre International, sales of 500 textiles resins, chemicals, and fumes decreased, but cooperating income was the same level as the previous fiscal year, stemming from enhancement of the initiatives with major customers. After a sub-series in Southeast Asia, in the fibers and textiles business, apparel applications were affected by the worsening market conditions, while in the industrial applications, automobile applications were on the recovery trend. The performance chemicals business, mainly in resins business, was affected by the sluggish Chinese market conditions, but the spread showed a trend toward improvement. At our subsidiaries in China, in the fibers and textile business, the apparel applications were affected by the sluggish market conditions in the US and Europe. However, domestic sales were strong. In the industrial applications, automobile applications showed a recovery trend. The performance chemicals business was affected by the demand decrease in resin products, but the spread showed a trend toward improvement. As for our subsidiaries in the Republic of Korea, in the fibers and textiles, supply and demand balance of nonwoven fabric worsened. Meanwhile, in the performance chemicals business, sales of film products expanded. Next, I would like to explain the consolidated business forecast for the fiscal year ending March 2025. Please turn to page 17. The pace of recovery in the global economy is likely to remain slow due to factors such as the high interest rates in the US and Europe, dampening consumer spending and capital investment, as well as the slow recovery in the Chinese economy. The Japanese economy is also expected to show a gradual recovery. However, the prolonged real estate recession in China, slowdown in consumption in the US and Europe, owing to the delay in start of interest rate cuts, rising tensions in the Middle East, a change in the bulk of Japan's monetary policy, and foreign exchange fluctuations are among downward risks for the economy in Japan and abroad. For the fiscal year ending March 31, 2025, Toray expects revenue of 2,620,000,000 yen, corporate income of 135,000,000 yen, and profit attributable to owners of parent of 81,000,000 yen given the business expansion in the gross business field and proceeding the improvements in profitability. In terms of annual dividend, the company anticipates to pay ¥18 per share of common stock with a payout ratio of 36%. Page 18 shows the consolidated business forecast for the fiscal year ending March 2025 by segment. We expect sales volume increase in the performance chemicals segment from the end of the supply chain adjustment and in the carbon fiber composite materials segment from the sales expansion of aircraft applications and recovery in the industrial applications. Furthermore, By promoting and taking in the effects of the strategic pricing and profitability improvement projects, all segments are expected to increase both in revenue and cooperating income year on year. Cooperating margin is expected to improve by one point. Page 19 shows the comparison of cooperating income between the actual results for fiscal year ended March 2024 and the forecast for fiscal year ending March 2025 with breakdowns into segments. I would like to explain further about the business performance of the carbon fiber composite materials business in the fiscal year ended March 2024 and focus of this segment for the fiscal year ending March 2025. Corporating income of the fiscal year ended March 2024 was 13.2 billion yen, a decrease from the forecast of 17 billion yen at the beginning of this fiscal year. Reviewing the business performance by segment, factors are as shown in the center column. No.1 Demanding commercial aircraft steadily recovered. However, No.2 It was significantly impacted by the declining demand for wind turbine blade application. Consequently, we implemented the significant operation adjustment in the large total carbon fiber. In addition, industrial applications were affected by the temporary inventory adjustment at customers in the third quarter, and the sales decrease caused declining the utilization rate of production lines in the fourth quarter. For the fiscal year ending March 2025, recovery trend of the demand for commercial aircraft will continue. Demand in wind turbine blade is also on the recovery trend from the fourth quarter of the fiscal year ended March 2024, and we expect further recovery from the second half of the fiscal year ending March 2025. As for industrial applications, the inventory adjustment which occurred in the fiscal year 2023 ended within the fiscal year, and the demand in the sports applications, which continues to be sluggish, is expected to recover from the second half of fiscal year 2024. Business performance of the carbon fiber composite materials business will steadily step up toward the targets set in APG 2025. Page 21 describes the trends in capital expenditures, depreciation and amortization and R&D expenditures. Capital expenditures for the fiscal year ending March 2025 are expected to be 240 billion yen, depreciation and amortization 130 billion yen, and R&D expenditures 81 billion yen. This is all I have to explain about the business results for the fiscal year ended March 2024 and the business focus for the fiscal year ending March 2025. Page 22 shows the major companies that posted impairment losses in this financial results business environment short-term initiatives for profitability improvement and forecast. The large-scale carbon fiber business in the carbon fiber composite materials segment posted ¥19.2 billion of impairment loss for M&A goodwill as well as some intangible assets and fixed assets from decreasing profitability due to demand decrease caused by cancellation and delay of wind power projects in the US and Europe. Going forward, we will work on reduction of fixed costs and utility costs. Moreover, full operation is expected at Mexico plant in the post-quarter of fiscal year 2024, as demand in wind turbine blade application is expected to be on a recovery trend. In the performance chemicals segment, battery separator film and PET film businesses posted impairment loss for production lines whose competitiveness has decreased. We work to restore profitability in fiscal year 2024 by promoting sales expansion and strategic pricing, in addition to further cost reduction. The fibers and textiles segment posted impairment loss for sub-series in China, etc. As in PP spanboard business, the supply and demand balance worsened and competition is increasingly fierce. We aim to restore profitability in fiscal year 2024 by proceeding additional countermeasures such as reviewing production capacity and pursuing further cost reduction. Please turn to page 23. To accelerate capital efficiency improvement, we have decided to reduce cross-share holdings by half. Specifically, we will reduce 50% about 100 billion yen in 3 years from fiscal year 2024 to 2026. All the proceeds from the sales of cross-share holdings will be used for share buybacks. Next, I will explain about capital allocation. As an addition to the capital allocation under APG 2025, we will reduce cross-share holdings and implement shareholder returns, that is share buybacks, with proceeds from the sales. There is no change in the targets established under APG 2025, positive free cash flow in 3 years total, and DE ratio of 0.7 or lower. Now, I would like to explain about the progress of medium-term management program, Project APG 2025, for three years from fiscal year 2023 to fiscal year 2025. In one of the basic strategies of APG 2025, sustainable growth based on Torre Group sustainability vision, we have positioned the sustainability innovation or SI business and the digital innovation or DI business as growth business fields for Torre Group, where we can leverage our strengths and expand revenue growth. In fiscal year 2023, revenue from SI businesses increased 2.2% compared to the previous year to ¥1,311.5 billion as carbon fiber for aircraft applications and the water treatment business were strong. although the large-toe carbon fiber for wind turbine blade was impacted by the slow demand. Meanwhile, although release fee for semiconductor molding and other products was low, revenue from DI business in fiscal year 2023 increased 9% compared to the previous year to 181.3 billion yen, due to the strong sales of FED-related manufacturing equipment as well as electronic coating materials for OLED. Page 28 describes cost competitiveness. In APG 2025, we will promote cross-organizational cost reduction that leverage the collective strengths of the organization and by sharing the information and implementing the cost reduction activities globally, We will work on raising the level of cost competitiveness of the Tore Group as a whole. In fiscal year 2023, we achieved the cost reduction of 71.1 million yen with a 36% progress rate. We will promote each activity, aiming 200 billion yen of cost reduction in 3 years through self-efforts. Page 29 summarizes financial targets. Page 30 shows the sustainability targets. In addition to our financial targets, we are committed to achieving these targets in terms of sustainability. Lastly, I would like to report that I have reorganized and prioritized the basic strategies and specific measures of APG 2025 as key management measures given the changes in the business environment. In addition, we have assigned the members of the board as persons in charge of execution to increase effectiveness. This slide shows the overview. Details will be explained at the management briefing on May 27th. This concludes my presentation. Thank you very much.