Toray Indus Inc Unsp/Adr

Thank you very much for joining us despite your busy schedule. Today, I'd like to explain about storage vision from the medium to long-term perspective and the medium-term management program, Ignition 2028, our initiatives to realize our vision. Now, I'd like to follow the index shown on this page. I'll begin by sharing our overall view of the key issues, then explain our long-term vision and management strategy, as well as our medium-term management program. First, reviewing the current medium-term management program, APG 2025. I'd like to summarize the achievements of the past three years and clarify the challenges that have emerged for the next stage. This slide presents the consolidated progress on APG 2025 target. The left side shows the trends in revenue and cooperating income and the right side ROIC and ROE. Revenue and cooperating income are forecasted to increase significantly compared with FY 2022 reflecting strategic pricing and structural reform. Compared with APG 2025, however, we fell short of the target as lower sales volumes caused by delays in business expansion, particularly in performance chemicals and carbon fiber composite materials. By advancing management with ROIC as our core management principle, we expect to reach the ROIC target of around 5%. Meanwhile, ROE is expected to be below the target. Next, the progress on target by segment. This slide shows the trends in each segment's revenue growth rate, cooperating income growth rate, and ROIC. Cooperating income increased and ROIC improved across all segments except for the life science segment under structural reform. The graph on the right shows trends of cooperating income by segment. The segment with the largest increase in cooperating income was performance chemicals. While the utilization rate increased in the resins and fumes businesses supplying related materials due to the recovery of the automobile market, effects of structural reform were also seen. While profit improvement progressed across the group, increasing cooperating income of the carbon fiber composite materials segment was limited to ¥4.1 billion. In terms of harvesting returns on invested capital, challenges remain going forward. This slide analyzes improvements in cooperating income by initiative. Under APG 2025, in response to changes in the business environment and rising geopolitical risks, we have pursued profit improvement initiatives through Darwin Project, targeting businesses and companies with the greatest impact. Specifically at Soltech, we reduced fixed costs by reviewing the production structure and achieved significant improvement in profitability. In the PET film business in the US and Europe, we promoted a review of the production structure and strategic pricing. We are also proceeding to review the product mix and to reduce fixed costs in the PP span bond, ABS resin, and polyester staple fiber businesses. Through these initiatives, we expect ¥27 billion of improvement in cooperating income compared with FY2023. In addition, strategic pricing has delivered about ¥30 billion of FX as we expected. Next is an overview of progress toward sustainability target. We are seeing steady progress across key indicators including revenue growth of sustainability-related products, CO2 emissions avoided in value chain, and water usage per unit of revenue in production activities. Next, we will summarize the achievements and challenges of the current medium-term management program, APG 2025. After I became the president, in response to changes in the business environment, I defined the TORES vision for the future, identified issues and steps to take towards the vision. Furthermore, we set out 7 management initiatives and 18 priority issues by structuring them along the time axis. This page summarizes the achievement and the remaining challenges of the seven key management measures. Through the internal penetration of Torres Starr IOIC Management, Strategic Pricing, and Darwin Project, we have gained a certain level of confidence in improving our structure of profitability. In addition, we implemented several business divestments and asset optimization by reducing cross-share holdings by ¥150 billion while acquiring treasury stock of the same amount. On the other hand, further improvements are still required in profitability and asset efficiency, and there remain areas where our efforts in business growth capability, creation of next-generation businesses, sustainability, and human capital management have yet to be fully translated into competitive strength. As shown on the right, we recognize the remaining challenges as follows. Further improvement of profitability and asset efficiency, promoting and accelerating structural reform, creating a next-generation business, sustainability measures, enhancing management foundation, and dialogue with capital market. From the next slide, while taking these challenges into account, I will explain our long-term management strategy defined from a long-term perspective as well as TORES vision. Using this page and after, I'll explain the direction of Tori's long-term management. First, I'd like to explain Tori's philosophy and its vision. Tori has an unwavering philosophy framework, anchored by our corporate philosophy positioned at the highest level, contributing to society through the creation of new value with innovative ideas, technologies, and products. We newly define the world we aim to achieve by 2050 as Torre Vision 2050, evolving from the Torre Group's sustainability vision and systematically clarify its relationship with our philosophy. We aspire to realize the following worlds. A world where people live in harmony with the planet, resources are recycled, and nature regenerates. A world where prosperity is created and shared in safe and secure societies. A world where everyone lives in health and comfort. To realize this vision, we have positioned Tori Challenge 2035 as a long-term management strategy and Ignition 2028 as a medium-term management program. These strategies are summed up in the phrase weaving science into society, which reflects our commitment to weaving science into the future of society. As a material manufacturer, we can create value for society only by implementing our technologies in real-world applications. Science is used as a comprehensive concept that encompasses not only materials, but also chemistry, physics, engineering, expertise, process, data, and marketing. Into society reflects our determination to deliver tourist products and technologies in diverse forms amid an increasingly uncertain world. This slide outlines TORA's vision for the future from the perspectives of business and value creation. We'll drive our growth by leveraging the TORA Group's strengths, including advanced material development capabilities, high quality and stable supply, and capabilities to build global value chains and solution proposal capabilities based on materials. Through these efforts, we aim to create economic value and social value simultaneously and achieve sustainable growth in corporate value. Next, we turn to our business portfolio. In pursuit of realizing the three worlds envisioned in Torrevision 2050, the Torre group operates a diverse range of products and business fields. We address a wide range of social challenges through a broad portfolio of businesses, including fibers and textiles, resins and chemicals, films, electronic and information materials, carbon fiber composite materials, water treatment, pharmaceuticals, and Medical Products and Comfortable Materials This slide presents our management materiality. We have redefined our previous CSL materiality as materiality fully integrated with our management strategy. In the environmental field, our focus areas are decarbonization, recycling, and air. In the social field, they include semiconductors, space, and defense and mobility. In the human field, our priorities center on healthcare and comfort. By combining the strengths of tourist businesses with data and engineering, we aim to turn risks into opportunities and create both economic and social value in addressing these social issues. This page presents our long-term management policy. The left side shows the major changes in the business environment and business trends anticipated over the next decade as well as their long-term impact on the Tore Group. The right side outlines five long-term management policies in response to these changes. While uncertainty is increasing, it is essential to transform these risks into opportunities through business transformation and to create value by fully leveraging the global assets that the Tory group has built up for years. This mindset is embodied in the phrase weaving science into society which I mentioned earlier. We bring the products we create into widespread use in society. This slide shows our targets toward around 2035. As its long-term vision toward around 2035, the Toro Group targets about a 10% ROIC. As a milestone towards this goal, under the next medium-term management program, we will pursue the growth strategy and structural reform as two wheels aiming to achieve a 7% ROIC. We aim to deliver tourist value in society by integrating non-financial initiatives, profitability improvement, strategic pricing, Darwin Project, and so on. From this page, I'll explain our next 3-year medium-term management program, Ignition 2028. Based on the achievements and challenges of our current program, APG 2025, as well as our long-term management policies, we have positioned Ignition 2028 as the first execution phase. The name Ignition reflects our intention to reignite growth and step into the next stage. This slide explains the review of our business segments as Ignition 2028 begins. This segment realignment is not merely a change in categories. It is intended to reflect the approach to value creation articulated in a long-term management strategy and television 2050 at business unit management. Specifically, we will integrate the water treatment business and the pharmaceuticals and medical products business, which have previously been managed as separate segments, as reorganize them into a single water treatment and healthcare segment. This decision reflects our view that it is more effective to consider technologies, customers, and business opportunities in an integrated manner under the shared value axis of healthy lives for people and a safe and secure society, thereby enabling us to more clearly define our medium to long-term growth strategy. In addition, the engineering business plays an indispensable role in delivering materials in society. Moreover, inspection equipment for the semiconductor and data center fields as well as data analysis has become increasingly important both directly and indirectly in realizing the TORES vision. Going forward, we'll leverage the technical capabilities we have cultivated through internal production process improvements to create new value. Through this segmental realignment, we'll further enhance strategy formulation in line with the actual state of our businesses as well as advance the sophistication resource allocation and growth management. In this slide, I'll explain the basic policy of Ignition 2028, our medium-term management program for the next three years. Through the current medium-term management program, ABG 2025, we've achieved results such as improvements in our profit structure and the penetration of ROIC-based management. However, while progress has been made, the recovery of our underlying growth capability and the transformation of our business portfolio remain ongoing. Against this backdrop, and in light of the future vision set out in our long-term management strategy, we've set Ignition 2028 for the next three years with a primary focus on reigniting growth. The goal of Ignition 2028 is to reignite growth and to enhance the certainty of achieving it. We will further improve the quality and certainty of the growth strategy and structural reform pursued to date, while proceeding the transformation of our business structure and strengthening our management foundation. Through a review of our business portfolio and segmental realignment, we will pursue business management with a clear focus on growth potential and strategic relevance while further prioritizing the allocation of management resources to business fields that contribute to medium to long-term growth. At the same time, rather than pursuing growth through volume expansion alone, we will place emphasis on improving the quality and certainty of growth by simultaneously advancing value creation, strengthening competitiveness, and driving business reform through human resource and digital transformation. Ignition 2028 is positioned as a three-year period for stepping into the next stage of growth toward 2035 and beyond, looking ahead to 2050. In this slide, we explain the quantitative targets for FY2028 under Ignition 2028. First, we aim to raise RIC from about 5% in the FY2025 forecast to about 7% in FY2028. ROE is also targeted to increase from about 5% to 8%. As the basis for these ROIC and ROE targets, we plan to increase revenue from 2.6 trillion yen to 3 trillion yen and cooperating income from 150 billion yen to 230 billion yen, pursuing both growth and profitability improvement. The cooperating margin is also targeted to improve from about 5.8% to 8%. As for DE ratio, we'll continue to maintain a guideline of 0.7 or lower. Although rising tensions in the Middle East could lead to significant changes in the business environment, Ignition 2028 is formulated based on the business environment assumed as of the second half of FY2025. Next, I'll explain our business portfolio strategy. As we have already presented at the management briefing, we'll further clarify the positioning of each business based on perspectives that include growth potential, profitability, competitiveness, and the time axis. We'll organize our businesses into four categories. Core growth businesses with high growth and high profit, stable profit businesses, structural reform businesses, and next-generation businesses with investment in advance and allocate management resources appropriately across our businesses. Based on this approach, we'll continue to advance the evolution of our business portfolio. This slide outlines a specific direction of a business portfolio review. In addition to the structural reforms currently underway, we'll reassess each business from the perspectives of whether it can fully fit into our value creation model and whether we are the best owner. Comparing the FY2025 forecast with the FY2028 targets, we plan to increase the proportion of core growth businesses and stable profit businesses, while gradually reducing the share of structural reform businesses and next-generation businesses with investment and advance. Through these measures, we aim to achieve a balance between growth and profitability. Next, I'll explain our approach to improve cooperating income. Under Ignition 2028, we aim to achieve high-quality business expansion centering on innovation creation and strategic pricing. We'll build effective mechanisms for profit improvement by enhancing genbaryoku, or workplace competency, of pricing, establishing data infrastructure, and strengthening collaboration across the group. In addition, we'll review and replace businesses subject to structural reform to accelerate the pace of profit improvement. This slide shows the key initiatives for continuous creation of high-profit businesses. We'll focus on proactive engagement with markets, customers, and partners, the integrated implementation of R&D and business strategies, and expansion of contribution margins through the creation of new products and new value. We'll strengthen our overall value creation capability through close collaboration across production, quality assurance, sales, and R&D. Next, I'll explain the continued promotion of structural reform. Under Ignition 2028, we'll maintain our structural reform framework and for businesses with large invested capital and low RIC, advance reforms from a company-wide perspective under strong top management leadership. Through these efforts, we'll steadily enhance the stability of our earning space and reallocate resources to growth business fields. Next slide outlines our initiatives for next-generation markets. To achieve sustainable growth, we will continue to broaden our product portfolio and invest in facilities and R&D in growth business fields such as AI data centers and AI semiconductors, separation membranes, space, and hydrogen. In particular, for AI data centers and AI semiconductors, we will strengthen the development of next-generation technologies including optoelectronic integration technologies such as multi-core optical fiber and nurture these fields as new business clusters that will support our growth over the medium to long term. By leveraging our comprehensive material capabilities, we will steadily capture growth opportunities in next-generation markets. From this page, I'll explain the specific initiatives by business under Ignition 2028. I'd like to describe how the quantitative targets and portfolio strategy outlined in the previous slides will be executed in each business. Under Ignition 2028, based on the characteristics of each business, we will seek to maximize business value under a company-wide consistent strategic framework. Revenue and cooperating income are expected to grow across all segments under Ignition 2028. Among them, we anticipate particularly strong growth in three segments, performance chemicals, carbon fiber composite materials, and water treatment and healthcare. In the performance chemical segment, driven by expanding demand in growth markets such as XEVs and semiconductors, together with a shift toward higher added value products, we plan significant growth not only in revenue but also in core operating income. In the carbon fiber composite materials segment, supported by a recovery in demand mainly in the aircraft, space and defense, as well as expansion into industrial and new applications, we expect strong growth in both revenue and profit. For the newly established water treatment and healthcare segment, we expect it to play a key role as a high-growth segment driven by expansion in water-related fields such as seawater desalination and wastewater reuse as well as growth of high added value products in the pharmaceuticals and medical products fields. In the Fibres and Textiles segment, we aim to maintain stable growth and position the segment as a foundation supporting overall performance, focusing on growth business fields such as airbags textiles as well as integrated businesses from fibres, textiles to garments. Under Ignition 2028, we will execute strategies tailored to the characteristics of each segment. Page 29 and 30 describe business plans and strategies for the major businesses within each segment. Further details are provided in the reference. In the fibers and textiles business, enhancement in cooperating income will be driven by profit improvement in the industrial applications and sales expansion in the apparel applications. In the performance chemicals segment, increase of capacity utilization in the fumes business and the electronic and information materials business will contribute to profit improvement. In the carbon fiber composite materials business, increase in sales volume in each application will drive higher earnings. Meanwhile, in the water treatment and healthcare business, business expansion in water treatment is expected. These factors will be a key contributor to profit growth under medium-term management program. From page 31 and after, I'll explain our capital allocation under Ignition 2028. This slide explains our capital allocation under Ignition 2028. With RIC improvement positioned as our highest priority, we will advance business investment for deeper growth and structural reform as two wheels. Over the three-year period from FY2026 to FY2028, we expect for cash-in about 920 billion yen in operating cash flow before deduction of R&D expenditure. Using this as our funding source, we plan to allocate 400 to 500 billion yen to capital expenditures and about 250 billion yen to R&D, thereby advancing investment in growth fields and strengthening competitiveness. In addition, to accelerate future growth, we will flexibly consider strategic investments including M&A. At the same time, we will enhance our cash generation capacity through measures such as structural reform and asset divestment and continue to deliver shareholder returns on a persistent basis underpinned by profit growth. We aim to further enhance capital efficiency by maintaining an appropriate balance among gross investment, financial soundness, and shareholder returns. Next, I'll explain capital expenditures by segment. During the Ignition 2028 period, we plan 400 to 500 billion yen of capital investment. The large-scale capital investments in carbon fiber composite materials business implemented under APG 2025 have largely learned their course, and the next medium-term management program is positioned as the phase in which their effects will be seen. Ignition 2028 represents capital investment for the subsequent three-year period, with investments to be made in business fields and regions such as AI data center-related, digital transformation, environmental initiatives, and India in the fibers and textile segment. Next, this slide shows our shareholder return policy. Under our previous medium-term management program, we have maintained a basic policy of stable and continuous dividends while providing shareholders return in line with business performance. Under Ignition 2028, we will maintain this approach as a foundation while pursuing progressive dividends driven by profit growth as well as flexible share buybacks, taking into account our financial position and capital structure. Specifically, we aim to achieve a DOE of 3% or higher by FY2028. While maintaining a balance with growth investments, we will enhance capital efficiency and steadily strengthen shareholder returns over the next three years. From this page, I'll explain how the TORE group is addressing sustainability challenges. At TORE, we position sustainability as the foundation for sustainable growth and the enhancement of corporate value. From the three perspectives of environment, society, and people, we strive to achieve both economic value and social value by addressing these challenges through our business activities. This slide outlines the basic policy of our sustainability initiatives to realize Torre Vision 2050. We'll promote sustainability through our business activities with a focus on the two pillars, environment and people. We aim to increase both economic and social value through the expansion of environmental and human contribution businesses by balancing environmental contributions such as the reduction of greenhouse gas emissions with the enhancement of human value through the people-centric management approach. This slide shows non-financial target. In terms of KPIs for greenhouse gas emissions reduction, we will shift from revenue-based intensity metrics to absolute reduction amounts. In addition, from the perspective of human capital management, employee engagement has been adapted as our KPI. Although sustainability innovation businesses have been positioned as a KPI to date, our products fundamentally contribute to society by delivering value to the environment, society, and people based on our belief that such value should be implemented across society. As this concept therefore applies across our entire business portfolio, we have decided, from a beyond sustainability perspective, to shift away from the sustainability innovation business categorization and instead explain our strategy through business clusters. Even for items such as water usage that are no longer set as KPIs, we'll continue to monitor them, set internal targets, and pursue ongoing reductions. On this slide, I'd like to explain about our initiatives to reduce greenhouse gas emissions. We aim to achieve our reduction targets for FY 2030 and FY 2035 by implementing steady and practical measures such as energy conservation and fuel conversion. At the same time, we'll continue our efforts to reduce waste, water usage, and volatile organic compound or BOC emissions and fulfill our social responsibilities as a manufacturer. This slide focuses on people-centric management. At TORE, we define the following as the core pillars of human capital management. Inclusion of diverse human resources and values. Creating human resources and organizations that adapt to change. Empathy with TORE philosophy and career development with rewarding and engaging work. We aim to achieve sustainable growth through encouraging employee autonomy, challenge, and co-creation as well as by enhancing engagement. This slide presents a clear picture of how we address social issues through our businesses. We leverage advanced materials and technologies to convert social value into economic value in areas such as climate change, circular economy, water resources, and well and comfort life. Next, I'll explain our initiatives related to the circular economy. Through initiatives such as promotions of fiber and film products made from recycled materials and the use of bio-based materials, we are expanding the share of used recycled and renewable resources. We will contribute to the realization of a circular economy by achieving targets of 20% by FY 2030 and 30% by FY 2035. Lastly, I'd like to give you a summary of initiatives under Ignition 2028. This slide summarizes how the discussed ideas are translated into concrete challenges within TORI, and how those challenges are addressed through specific initiatives under Ignition 2028. Over the next three years, we will enhance the quality and certainty of our growth strategy and structural reforms shift to a business structure that consistently delivers and 7% ROIC strengthens our management foundation and ultimately become a truly sustainable enterprise. From this page and after, detailed data by segment is provided as reference material. In today's presentation, I have focused on the overall picture of Ignition 2028 as well as its underlying thinking and direction. Therefore, I do not go into detailed strategies or quantitative targets for each segment. They'll be covered in greater detail at our IR Day scheduled for June, where persons in charge of each business will present their respective business strategies and growth scenarios. I hope this material will serve as advance information and reference data to help deepen your understanding ahead of those discussions. I'd like you to have a clear understanding of Ignition 2028, the total group's long-term objectives, and our plans for execution over the next three years. This concludes my presentation. Thank you very much.