Yes. Good afternoon, I am Chikumoto, President and CEO of Mitsubishi Chemical Group.

Thank you very much for joining us for today's earnings call. Our CFO Kida will provide more detail explanations later, but for FY2025 results, core operating income is down 2% to 225 billion yen.

However, due to the substantial amount of non-recurring items totally 194.9 billion yen, operating income declined 79% to 30.1 billion yen, and a profit attributable to owners of the parent fell 74% to 11.8 billion yen, resulting the extremely challenging result. However, these results reflect our strong determination to fully carry out what must be done by FY2025 for the company's future growth.

As a result, we made decisive structural reforms, such as sustainable growth, the withdrawal of the coke and carbon materials business, ethylene restructuring in Western Japan, dissolution of overseas MMA joint ventures, and voluntary retirement and next stage support program. We also almost completed to recognize major impairment losses associated with the structural reform within the FY2025.

On the other hand, in our SoarnoL business, which is one of the company's growth drivers, we recorded substantial impairment loss of approximately 30 billion yen following the review of the plant construction in the UK. Furthermore, FY2025 results fell short of our previous forecast.

We take these matters very seriously. We would like to sincerely apologize to our shareholders and all our stakeholders for the concerns that we have caused you.

We recognize that this is quite exceptional in nature, and at this point, similar impairment risks have not materialized in any of our other investment projects. Going forward, management will implement even stricter oversight and monitoring than before to ensure that investment plans progress as scheduled.

In addition, with regard to this matter, we determined that it was necessary to take responsibility for our failure to uphold the three principles of disciplined business management that we had pledged. Accordingly, I, Chikumoto, as President and CEO, and Egawa, the Management Executive Officer responsible for the SoarnoL business, is going to have a 20% voluntary decline in compensation for 6 months.

In 2026, while continue to pursue structural reform and cost reductions, we expect a significant growth in specialty material business. In Germany and in Europe, we have commenced operations of a large-scale investment project for the polyester film business, and it will contribute earning contribution.

In the semiconductor and battery business, we continue to expect existing businesses, such as synthesized quartz and precision cleaning for semiconductors and anode materials, along with significant growth in the new projects. In the carbon fiber business, operations will begin in full scale for existing mobility application, but also business related to robot taxis and the new type of mobility solution.

In addition, we have aerospace industry to bear fruit. By capturing a steady growth in specialty material businesses, the core operating income will increase substantially and operating income and profit attributable to owners of the parent in FY2026.

We need to continue to closely monitor uncertainties in the external environment, including the one in Middle East, and we will carefully assess this potential impact. CFO Kida will provide more detail explanation on this point later.

Detail explanation of the growth strategy for each business will be provided at the investor briefing on May 25th. Now CFO Kida will explain FY2025 financial results and FY2026 earnings forecast.

Mr. Kida, CFO, please.

I am Kida, CFO. I would like to summarize the results of FY2025.

Business conditions in specialty materials remained generally solid. However, MMA and basic materials and polymers continued to face challenging conditions.

The market is soft, and since March, uncertainty have also increased due to the rising geopolitical risks, particularly in the Middle East. Core operating income in the chemicals segment was positive 24.3 billion yen.

In addition to earnings growth driven mainly by improved margins and higher volumes in specialty materials, we also benefited from better margins and cost reductions resulting from structural reform in the coke business. On the other hand, worsening MMA monomer market conditions, together with the impairment loss related to SoarnoL assets in the UK, had a significant impact, resulting in a 43% decline year on year.

Supported by solid performance in industrial gases, however, the group as a whole limited the decline to 2% year on year. Profit attributable to owners of the parent decreased 74% year on year.

Although we recorded gains related to the transfer of Mitsubishi Tanabe Pharma, this was outweighed by losses associated with the decline to withdraw from the coke and carbon material businesses, as well as special retirement payment related to the Next Stage Support Program at Mitsubishi Chemical Corporation. Now let me go to the 2026.

The core operating income is expected to be 305.0 billion yen. Core operating income in the chemicals segment is expected to increase 75.7 billion yen year on year to 100 billion yen.

This reflects higher sales volume across products in specialty chemicals, continued cost reduction, and recovery in MMA monomer market conditions. Industrial gases is expected to be solid; core operating income is projected to be 44.3 billion yen year on year to 205 billion yen, but this does not include the Middle East impact.

We would like you to refer to page 20 for that. Profit attributable to owners of the parent is forecast to increase 111 115.2 billion yen year on year to 127 billion yen, compared with the previous year when we recorded substantial non-recurring losses related to asset optimization.

As set for shareholder returns, we forecast a dividend of 16 yen per and annual dividend of 32 yen per share. We will thoroughly implement measures based on the three principles of disciplined business management, further concentrate management resources on next-generation and growth driver businesses, and steadily execute initiative for the chemical segment.

I will explain the results for the fiscal year ended March 2026. The average exchange rate for the full year was 151.1 yen per dollar, representing a 1% appreciation of the yen year on year.

The naphtha price was 65,200 yen, down 14% from the previous fiscal year. Sales revenue was 3 trillion 704 billion yen, a decrease of 243.6 billion yen year on year.

The main factors were a 109 billion yen decrease in sales price, 106 billion yen decrease in volume, 66 billion yen decrease from business restructuring, and a 37 billion yen increase from exchange rates. Core operating income was 225 billion yen, down 3.8 billion yen from the previous fiscal year.

This fell below our October full-year forecast of 250 billion yen, primarily due to the 30.3 billion yen impairment loss following the review of our SoarnoL investment plan in the United Kingdom. Special items amounted to negative 194.9 billion, worsening by 107.7 billion yen year on year.

Operating income was 30.1 billion, income before taxes was 0.7 billion, and net income from discontinued operation was 94.8 billion, including gains from the transfer of Mitsubishi Tanabe Pharma Corporation. Net income attributable to owners of the parent was 11.8 billion, down 33.2 billion year on year.

Next, I will explain the sales revenue and core operating income by business segment. In the chemicals business overall, sales revenue decreased 11% and profit decreased 43% year on year.

Sales revenue decreased by 295 billion yen, due mainly to business divestitures resulting from steady progress in structural reforms, as well as declines in market prices and raw material prices. Core operating income was supported by solid performance in specialty materials, while carbon products steadily improved.

However, for the chemicals business overall, profit decreased by 18.4 billion, due mainly to the deterioration of the MMA monomer market and the recognition of impairment losses on SoarnoL-related fixed assets. Details for each segment will be explained on the following pages.

Industrial gases showed steady progress, with revenue up 4% and income up 8% year on year. Here is a breakdown of the 3.8 billion year-on-year decrease in core operating income.

The price gap was a negative 26.6 billion yen. While price gap in MMA and derivatives deteriorated significantly due to falling market prices, specialty materials maintained and improved selling prices, and price gap improved for polyolefins and carbon products in basic materials and polymers.

Volume was a positive 4.1 billion yen. While demand in Europe and the U.S.

was generally weak, particularly in industrial gases, sales of carbon fiber composite parts, mainly for robot taxis, increased. Cost reduction contributed to a positive 62.2 billion yen, with both industrial gases and chemicals accumulating savings across their respective businesses.

Others resulted in a negative 43.5 billion yen. This includes impairment losses on SoarnoL-related fixed assets in the UK and higher costs associated with inflation.

Now I will provide details by segment. Core operating income for specialty materials increased by 8.4 billion yen year over year.

The price gap improved by 8.1 billion yen. Advanced films and polymers and advanced solutions saw price gap improvements by maintaining or raising prices for semiconductor-related and other products.

The volume gap contributed a positive 15.5 billion yen. In advanced solutions, semiconductor-related businesses, particularly precision cleaning services, saw higher sales volumes, but volume was negatively impacted by lower demand for EV electrolytes, mainly in Europe and the U.S.

In advanced composites and shapes, volume improved due to increased sales of high-performance engineering plastics for semiconductor manufacturing equipment and carbon fiber composite parts, mainly for robot taxis. Cost reductions added 13.8 billion yen through structural reforms in businesses and rationalization impact from production base optimization.

The negative 29 billion yen in others was due to the SoarnoL fixed asset impairment loss in the UK and inflation-driven costs. MMA and derivatives saw a decrease in core operating income of 37.2 billion yen.

The price gap deteriorated by 40.3 billion yen. While the price gap in coating and additives improved, the MMA monomer market fell sharply, narrowing spreads.

Basic materials and polymers narrowed its loss by 10.4 billion yen. The price gap was 11.4 billion yen.

In materials and polymers, profit improved due to the timing lag in polyolefin sales price adjustments and the ability to maintain sales prices at a relatively high level during the decline in naphtha prices. In the carbon business as well, the price gap improved year on year as the reduction of production capacity in Kagawa was completed and loss-making transactions based on market prices were reduced.

Cost reductions added 7.1 billion yen, primarily from structural reforms in carbon business. The negative 9 billion yen in others reflects impairment losses on ethylene oxide and ethylene glycol manufacturing equipment, along with poor inventory valuation in materials and polymers.

Core operating income in industrial gases increased 14.6 billion yen year on year. Although earnings margins were negatively impacted by higher electricity costs in the United States and sales volumes declined mainly in Europe and North America, earnings increased due to cost reductions driven by productivity improvement initiatives across each region.

Next, special items. Total special items for the full year amounted to negative 194.9 billion yen.

In the fourth quarter, we recognized an additional 122.6 billion yen in special item losses. In the fourth quarter, we recorded a number of expected expenses, including 59.2 billion yen in restructuring provisions, 30.6 billion yen in impairment losses, and 15.8 billion yen in special retirement payment.

These expenses mainly resulted from the promotion of various structural reform measures, including the withdrawal from the coke and carbon material business. Although the full-year total reached to a substantial amount of 194.9 billion yen, we believe these structural reforms were necessary to support growth from 2026 and onward.

Let me explain the cash flow. The operating cash flow totaled to inflow of 433 436.3 billion yen.

Cash flow from operating receivables and payables was an outflow of 16.3 billion yen, mainly due to a decline in trade payables resulted from the lower naphtha prices. Investing cash flows resulted in inflow of 124.5 billion.

Cash flow related CapEx was outflow of 292.1 billion. Growth investment projects in specialty materials continue to progress, including capacity expansion for carbon fiber composites in Italy and capacity expansion of SoarnoL in the UK for barrier packaging applications, and cash flow from asset sales was positive 541.6 billion yen.

As a part of ongoing portfolio review, we recorded proceeds from the sales of shares in affiliates, mainly Mitsubishi Tanabe Pharma, as well as proceeds from the sales of cross-shareholdings and strategic holding. Other investment and financial activities resulted an outflow 125 billion yen.

This includes expenditures related to the acquisition of subsidiaries in Australia and New Zealand industrial gases segments. As a result, cash flow was positive 560.8 billion yen.

Financial cash flow was outflow 375.2 billion yen, mainly due to debt repayment and dividend payments and share buyback. Next is the consolidated statement.

Total asset were 5,876.6 billion yen, down 18 billion yen from the end of previous fiscal year. This mainly reflects a decrease of approximately 630 billion yen due to the business restructuring centered on the sales of the MTPC.

On the other hand, assets increased due to cash proceeds remaining on hand at the end of March from MTPC sale, as well as the impact of foreign exchange movement. Netting these factors, total assets reduced to approximately 18 billion yen overall.

Net interest-bearing debt decreased 387.5 billion yen from the end of the previous year, and the net D/E ratio, debt-to-equity ratio, improved significantly to 0.83 from 1.06 at the end of the last year. This page provides additional details on the changes in core operating income from the third quarter to the fourth quarter of FY2025.

Cash operating income in the fourth quarter was 39.4 billion yen, down 20.1 billion yen from the third quarter. Specialty materials recorded a loss of 12.9 billion yen in the fourth quarter, a decline of 25 billion yen from the 12.1 billion yen of profit recorded in the third quarter.

Although results benefited from the end of winter holiday impacts in Europe and North America, improved performance in the composite parts business mainly for robot taxis, and rationalization efforts and effects from the partial suspension of general-purpose carbon fiber production lines, earnings declined significantly due to the impairment losses related to SoarnoL assets. MMA and derivative recorded a loss of 3.1 billion yen in the fourth quarter, largely unchanged from 2.6 billion yen in the third quarter.

Basic materials and polymers recorded a loss of 1.3 billion yen in the fourth quarter, a decline of 0.8 billion from the 0.5 billion loss in the third quarter. In the carbon, earnings returned to profitability due to improvement in inventory valuation gains and losses.

On the other hand, materials and polymers losses widened, mainly due to impairment losses related to ethylene oxide and ethylene glycol production facilities. Industrial gases increased from 51.4 billion yen in the third quarter to 56.3 billion yen in the fourth quarter, an improvement of 4.9 billion yen driven by pricing management and productivity improvement initiatives.

Under our current medium-term management plan, we have set the three principles of disciplined business management to improve profitability chemical business: pricing discipline, investment discipline, and asset optimization. In FY2025, the impact of measures based on these three principles of disciplined management amounted to 58 billion yen.

The impact of pricing discipline was 29 billion yen. In carbon, this was driven by reducing loss-making export sales and shifting to cost-linked pricing formulas.

In MMA, the expansion of cost-linked pricing formulas also contributed to the improvement. In other businesses as well, price increase initiatives were promoted mainly in specialty materials, resulting a full-year impact of 29 billion yen.

Asset optimization delivered an effect of 29 billion yen. This was driven by cost reductions from capacity reductions in carbon business, as well as a number of structural reforms across businesses, including the withdrawal from unprofitable operations.

Regarding the selection of concentration in chemicals business, we have made decisive equivalent to approximately 490 billion yen over the past two years against the 400 billion yen targeted for the business restructuring and investment and divestment set out in the medium-term management plan, thereby establishing a foundation of growth. Next, I will discuss the full-year forecast for fiscal year ending March 2027.

Before the forecast details, I will explain the changes in reporting segments. Following the reorganization on April 1st, 2026, our reporting segments will change from the fiscal year ending March 2027, as shown on the slide.

Specialty materials will be divided into five segments: Films & Performance Materials, Composites & Shapes, Information Electronics, Polymer Compounds, and Water & Infrastructure. Films & Performance Materials mainly consists of businesses formerly under Advanced Films & Polymers.

Composites & Shapes mainly includes businesses from the former Advanced Composites & Shapes. Information Electronics focuses on semiconductor and battery and electronics businesses previously in Advanced Solutions.

Polymer Compounds combines Performance Polymers previously included in Advanced Films & Polymers with engineering plastics and polypropylene compounds from the Materials & Polymers. Water & Infrastructure includes water and environmental and infrastructure businesses from the former Advanced Solutions.

MMA & Derivatives remains largely unchanged and mainly consists of businesses previously included in MMA & Derivatives. Basic materials mainly consists of businesses from the former Basic Materials & Polymers.

We reorganized these groups to enable management to more directly oversee each business and achieve the goals of KAITEKI Vision 35 and our mid-term management plan. We apologize for any inconveniences to investors and analysts and appreciate your understanding.

I will now present the full-year forecast for the fiscal year ending March 31st, 2027. Our forecast assumes an exchange rate of 150 yen to the dollar and a naphtha price of 63,000 yen.

Sales revenue is forecast at 3 trillion and 800 billion yen, an increase of 96 billion yen from FY2025. Core operating income is expected to reach 305 billion yen, up 80 billion yen.

Operating income is forecast at 300 billion yen, income before taxes at 270 billion yen, and net income from continuing operations at 200 billion yen. Net income attributable to owners of the parent is expected to be 127 billion yen, an increase of 115.2 billion yen.

This forecast does not include the impact of Middle East tensions, such as a potential closure of the Strait of Hormuz. If the current situation persists through September, we estimate a downside impact of approximately 18 billion yen on forecast core operating income for the FY2026.

In FY2026, we expect the benefits from the measures based on the three disciplined approaches in business operations to be 48 billion yen. As part of our pricing policy, we will continue promoting price increases centered on specialty materials.

Regarding investment benefits, we expect profit contributions from the full-scale shipment of carbon fiber composite parts for robot taxis. As for asset optimization, we expect benefits from fixed cost reductions through the Next Stage Support Program implemented in FY2025, as well as from our continued efforts to promote cost reductions and structural reforms in each business.

Here is a forecast by business segment. Although specialty materials will be affected by higher costs associated with inflation, we expect increased sales in businesses positioned as growth drivers, including polyester film for MLCCs, SoarnoL for barrier packaging applications, semiconductor-related businesses, and composite parts mainly for robot taxis, in addition to the absence of impairment losses on SoarnoL-related fixed assets.

MMA & Derivatives is expected to turn profitable through higher volume and a gradual recovery in the MMA monomer market. In basic materials, although price gap is expected to deteriorate due to timing differences in polyolefin price revisions, losses are expected to narrow due to improvements in inventory valuation gains and losses and the absence of impairment losses on ethylene oxide and ethylene glycol production facilities.

Industrial gases is forecast to grow profits through pricing management and productivity improvement initiatives. I will now discuss the dividend forecast.

The forecast year-end dividend per share for FY2025 remains unchanged at 16 yen and is scheduled to be resolved at the Board of Directors meeting on May 20th. Regarding the dividend forecast for FY2026, we plan to set both the interim and the year-end dividends at 16 yen per share, the same amount as the year-end dividend for FY2025.

As a result, the forecast for the annual dividend for FY2026 is 32 yen per share. This concludes my presentation.

It's one question. I would like to ask the impact of Middle East.

It's 18 billion yen, and that's raw material inventory revaluation is included in the net out? What is the situations of the raw materials, and the raw materials from Thailand?

How about the domestic naphtha? I think we have a good report, but other raw materials, other than naphtha, is the procurement and what's the inventory valuation?

Can you elaborate on the Middle East situations more in detail?

Thank you very much for your question. The Middle East situations, I gave you 18 billion yen.

Also,

as you can see on this page, this is a segment-by-segment details. As you have asked, as we have some receivables included, but also let me give you assumptions.

Now, we have to buy the higher price of naphtha, we will be able to transfer the cost to our customers. Naphtha procurement cost, if it goes substantially higher, it's not going to be just a cost increase that we have to bear, but we will transfer the cost to the customers.

In addition, if you cannot produce the production because of shortage of naphtha, I don't think that's the situations. We cannot relax, but I don't think it's as serious as you cannot produce.

To the customers who we deliver the products, if there are other products that they are get from other suppliers, there might be reduced orders to us because of supply chain issues. Also if there's a small quantity amount that we have to procure from inside, there might be some shortage in the supply chain issues.

As you have seen, MMA derivatives is 10 billion, it's more than half of 18 billion yen. As our core facilities in the Middle East.

Supply chain disruptions or issues is the biggest issue in the Middle East. I think this is only hypothetical.

MMA is approximately a loss of 10 million going down by 10 million.

Other than that, you think that it depends on the situations, but it's going to fare quite well. Naphtha assumption is 60,000 yen or so, in the basic chemicals in the first half it's going to be the losses, but it is going to be substantially positive.

What do you think?

Thank you very much. It very well.

In the month of April alone, naphtha was higher in the prices. On a monthly basis, there are some payment increase, but as it comes down, it will profit.

Net-in-net, there is not so much impact. It is offset each other, and some remain in the next quarter or next year, but we're not going to positively benefit much.

Thank you very much.

I'm Miyamoto from SMBC Nikko Securities. I would like to ask you about page 27, specialty materials, the reasons for the increase in profit in the new year.

So 45.1 billion yen increase, SoarnoL impairment loss if it's deducted, it's about 15 billion or so. Can you give me the details on this point?

Especially the composites and shapes, the profit increase is quite large, and I think it's a full-fledged shipment for the robot taxis. The number of shipments for robot taxis has tripled or maybe increased by four times.

To that extent, can you please share with us the numbers, and what is the increase in the broad cost? I would like to ask you mainly the reasons for the increase in profits for the specialties for the new year, including composites and shapes.

Yes. For page 27, I did make some comments in the differences page.

What is not shown here, maybe I can verbalize what is kind of shown between the lines. Regarding composites and shapes, regarding robot taxis, unfortunately, we are not able to give you the details of the number of shipments because of the contractual terms, but as you just mentioned, I think you're pretty much right in your direction.

We started to ship from the latter half of this year, but next year, I think it's going to maybe triple or maybe four times next fiscal year. Going forward, we will be able to make profits based on the previous upfront investment for composites.

Italian CPC, we've been doing a lot of reorganizations and restructuring, and they've been producing unprofitable composite parts, but now we're consolidating the production sites into one place, and we're starting to change our customers for both government and commercials, drones, and we are getting new inquiries for the aviation and space-related projects, and that is also trying to shape up. For films and performance materials, I think the biggest one is we have 33 billion yen of impairment losses, so that is going to resolve.

That is a big factor. In Germany, we are inspecting a new line for the polyester and MMC.

Previously, it took some time to get the certification for new customers, but now we're starting to make shipments for those. Also for the SoarnoL, we are seeing a steady increase in the sales as well.

All these factors are included. Regarding electronics, this is an area next year, we are going to see the launch of the new product with new investments for synthetic quartz or rigid photoresists.

This year, we've seen a lot of inquiries regarding the synthetic quartz, and we are currently expecting to sell to the extent we can under current capacity. We do see a lot of inquiries related to semiconductor business.

These are something that we are expecting. As we explained in the previous conference call, composite, SoarnoL, semiconductor-related, and also gallium nitride, this is something that we expect for the next generation.

I don't think it's going to really drive the sales next fiscal year for gallium nitride, these are the areas where we can expect quite a lot of increase in the volume for the next fiscal year. Thank you very much.

Regarding the impact from the Middle East, specialty is that about 6 billion? Is it mainly related to the raw materials?

Can you tell me which products have difficulty passing on the cost? Are there any raw materials that is facing the shortage because of Middle East?

Yes, thanks very much. We are not seeing any shortage of the materials in a material way, but special items, the ones that we do not really think about too much, there are some concerns related to some of the materials.

The majority of the impact from the Middle East is not so much about the price transfer or cost transfer. As I mentioned earlier,

there are some shortages of the materials that we do not necessarily get delivered to the customers, but there are some shortages of those materials that lead to the reduction of utilization rate on the part of the customers, and that is part of the supply chain issues. It's not something that we are considering to pass on the cost.

It's not so much on our part. On the customer side, some of the auxiliary materials and other materials are in shortage, and that resulted in the lower sales of our products.

Understood. Thank you very much.

I'm Okazaki of Nomura Securities. Thank you very much.

The Middle East situation covers the petrochemical area. If this continues till September, it is going to be 2 billion negative impact in the basic chemicals, basic materials area.

In the basic materials, it's going to be 2 billion yen, right? Can you explain more in detail?

I think utilization was 90% before the conflict. In the first half, what's going to be the situation, and how about the other derivatives and the market impact?

Thank you very much for the question. Cracker utilization, for example, before the war in Japan, in general, cracker utilization was approximately 75% or so.

Compared to that, our cracker utilization, due to the support from the customers, we were able to continue at a higher level. Now this time, commodity market is quite difficult and softening, but we have the regular maintenance starting from the 9th of May in some plants in Okayama.

We will be able to continue approximately 80% of utilization after the regular maintenance. We don't know what's going to be the utilization level, but at this moment, we are not really seeing any deep quick drop of utilization.

However, we have to watch the situations, and we cannot be relaxed and be vigilant. However, because a shortage of raw materials could lead to reduced production in some materials and products, we have to watch the situation.

However, especially for the 2 billion negative is not really based on the big reduction in the production at this moment. Now as for the reduced production or supply chain concerns of the customers were no concern, but we can change the transportation routes, and we can diversify and have multiple procurement.

We are already working on that. For the petrochemical, basic materials and polymers, I don't think that we don't have much problem.

It's very difficult to forecast what's going on and whether our actions are completely right. As far as we continue to have this concern, we cannot be relaxed, and therefore, we are going to be vigilant and watch the situations.

If there are any movements or development, we are going to be agile and take a very quick actions.

In the total amount of yen, it's not going to be a large amount. However, it's going to be mainly due to the reduced production, is that right understanding?

Also, as you have pointed out, do you have a regular maintenance? That, of course, would be already discounted and included in your original plan, is that right?

Yes, your understanding is completely right. Of course, there are some reduced production expected.

However, rather than that, it's the current development that we watch very carefully. There was a previous question that naphtha currently continues to be weak and difficult till the end of September.

Are you going to have separate numbers for the first half impact? Yes, if the naphtha is higher, we have to pay higher prices, but if it goes higher, it might stay at a flat at some point, and if it comes down, it's going to be opposite impact.

It's very difficult to have the impact of the volatility.

There are profit and losses, but off and off, I think net, it's not going to be much impact. Thank you very much.

Next,

I'm Omura from UBS Securities. Can you hear me?

Yes.

Thank you very much. It's a little detailed question.

I'd like to ask about the materials and polymers. In the fourth quarter, from the third to fourth quarter, I just wanted to confirm the changes.

From March, naphtha on a spot basis, the prices have been going up, but domestic naphtha on a converted basis, it's not really going up that much. Such impact in March alone, what was the impact?

Inventory levels seems to be a little bit lower than usual, and I was wondering what was the numerical impact from that. In the first half forecast, from the first quarter to second quarter, how are you going to switch?

Any ideas that you can share with us at this moment? Thank you very much.

Petrochemicals, especially in the third to fourth quarter changes, I know it's not easy to see and understand. Ethylene oxide impairment loss was 5.2 billion.

That is the one data that you need to understand. In FY2025, it's minus 1 billion yen, we believe.

Utilization of crackers went down, but on a full-year basis, that did not have a big impact, but we had higher material costs in the end. FY2025, I mentioned already.

For first half of 2026, FY2026, if you divide in quarters, it's very difficult to explain. For example, if you look at just April month, the numbers were very good.

Because of the naphtha receipt cost, we saw a lot of gains, but how long this is going to continue is not really clear. We need to wait until things come to an end.

It's difficult for us to give you the detailed forecast of what's going to happen for each quarter. Therefore, unfortunately, we are not able to release here any detailed numbers.

Understood. Thank you very much.

However, if you look at April month alone, as you just said, you have enjoyed a lot of gains. Yes, if you look at the inventory receipts, we did see a lot of gains in April.

Is it because you raised prices earlier than usual, and that is the reason for this big gain? I'm just talking about the inventory receipts.

We had been discussing with our customers, and when it comes to petrochemicals, for each quarter, we had a lot of lead time. We refer to the previous quarter.

In the second quarter, we refer to the price in the previous quarter, which is first quarter, and deliver to the customers based on that. If we cannot produce the products, it's going to be a big issue.

We need to discuss with customers. For example, we could refer to the previous month so that we can kind of shorten the time lag of which month we're going to refer to.

There are certain customers like that.

Understood.

Thank you very much. Thank you very much, Omura-san.

JP Morgan, Nakada. Can you hear me?

Yes, we can. Go ahead, please.

Once again, in the naphtha impact, I'm sorry to be repetitive, but there is a big benefit in receipts and issues and in and out. How about polyolefin as a business?

In April, there is a gain in the in and out, and spread negative impact is more than offset by the price differences of in and out.

Thank you very much. For the month of April, we haven't closed, and we don't have detail numbers yet.

We had a Golden Week of consecutive holidays, and in the operating days, it's not a monthly timing, but according to the qualitative hearings in the receipts and issues, and I think we have more benefit and gains in the receipts. However, as for the details that Nakada-san questions, we have to calculate very closely, and we also need analysis.

Is that due to the inflow and outflow, or is that actually we have taken the entire spread?

We haven't closed the numbers for the month of April yet. We have to be able to wait the results and also what we are going to do in May.

However, for the month of April, for the receipts and issues, and I think it's positive because of the inventory received.

Yes. It's a major gain that you have already identified.

In Omura-san's question, the price refer was changed to the previous month refer, and is that you're talking with the customers? What is the timeframe that customers will accept the price increase?

How you decide the price with the customers? In MMA, I think you're going to change how you charge the customers, but is that going to advance the price negotiation substantially?

We have no idea at this moment yet, but, we are saying that every time, every time when we ship, we are going to have the market price increase to be accepted. For the longer-term customers, the situation could be different in petrochemical.

For MMA, MMA is different, but for other products, formula, I think sales is also negotiating with the customers. At this moment, what's the percentage of the customers, what's the percentage of revenue that can accept the price increase is not yet fully identified yet.

Thank you very much. Sorry for the long question.

Thank you very much.

If you look back at FY2025, 25 billion missed target, is it because of the impairment loss of SoarnoL and EOG, and that's 35 billion, and gas was plus 4 or 5 billion? These were the main reasons.

Is this understanding correct? Also, on page 19, three basic approaches to business operations, disciplined approaches, asset optimization 35 billion, next stage is about 15 billion or so.

I wonder what the rest of 20 billion. Looking back on FY2025...

It's a little bit like a math issue, but as you just mentioned, SoarnoL 30.3 billion, and EO, EOG or ethylene and ethylene glycol, and we also do other ethylenes, 5.2 billion for the impairment losses, so that totals 35.5 billion of impairment losses.

Chemical 24.3 billion, and without this impairment losses, it would be 59.8 billion. The guidance was 65.7 billion.

Specialty chemicals 32.0 billion for core operating profit, without the impairment losses, it would be 62.6 billion. The guidance was 65 billion.

I think it was pretty much within the range of guidance in our view. Of course, we're trying to pass on the costs to prices, and there's been a lot of initiatives and measures taken by our employees.

One of them is Next Stage Program, and also we've been trying to reduce costs on a fixed cost level. Result of all these efforts to save costs, we've been able to see this impact.

That is how we see it from the financial perspective.

For FY2026, the breakdown of 35 billion, what is included in this, first is this Next Stage Support Program that reduces the head count to quite a large extent, so that's a little bit more than 10 billion. For each business, we've been saving costs like consolidation production sites, and we're reducing not just fixed costs, but also variable costs, so that's like 10 billion plus.

The logistics and procurement-related cost saving is also there. We've been buying from different places, but we tried to centralize the procurement, which we should have done much earlier.

Also the logistics, we've been shipping from different places, but we're trying to consolidate that, so that's a few billions of yen. It's difficult to give you all the raw numbers, but 35 billion yen breakdown on a high level will be what I just explained.

Thank you very much.

It's not humorous questions and it's second round, but sorry for that. Let me ask about MMA in a new fiscal year.

Base case is a moderate recovery of the market. Is it going to be $1,500 as assumption?

What's the demand trend and utilization? Also, you talked about a 10 billion yen of a negative impact because of Middle East, but on the other hand, MMA market is going beyond $2,000.

Methanol raw price is increasing. Considered margin-wise, it could be a positive impact.

But 10 billion negative impact, what's the margin assumption of MMA?

Thank you very much for the question. As for the MMA market assumptions, originally, before the war, $1,400 or a little less than $1,400 was the assumptions.

In China, they said $1,100 as the price offered in the market. However, the operations of the players in the industry in China also based on the cost assumptions is going to be the level of $1,400, and spread is going to go back to the level that we can be profitable.

However, at this moment, in ICIS, Southeast Asia, it's coming down, but it's around $2,000, and that's the price index available. As may have touched upon, and naphtha is approximately $1,000, a little less than $1,000, just simply put, just looking at the numbers, spread seems to be widening in some perspective, but if you look at actual prices in China, it's more difficult.

MMA market-wise, it's a very difficult forecast, and that's the current situation. MMA is going to be a large business and large impact, 18 billion yen, and maybe 10 billion is from MMA, as I explained, but it's not really because of the spread, but it's the volume impact, especially the products from Middle East.

You produce in Middle East and export to other countries is going to be slower. It's getting more and more difficult compared to the time before the war, and we have a quite conservative forecast that it's not coming out from Middle East, and that's going to be a negative impact of approximately 10 billion yen.

It's volume impact mainly, and it's not really based on the spread widening or narrowing in the 10 billion number. If this situation continues, for example, summer, because of the reduced production, it's going to be a 10 billion negative impact, but it's going to be upward because of that price of the market, in any case?

It's very difficult to forecast. It's difficult to look at the April.

MMA is slightly positive. However, there are a lot of reasons are complicated and intertwined each other, and therefore, it's very difficult to understand what's going to take place in the coming months.

Thank you very much for joining our earnings presentation today. While FY2025 results were challenging, we believe they reflect the implementation of structural reforms necessary for growth from FY2026 onwards.

We've been able to implement in a very bold manner. In the new fiscal year, FY2026, the outlook remains uncertain due to rising geopolitical risks centered on the Middle East.

However, having thoroughly completed our structural reforms over the past two years and with the growth of specialty materials, we expect a significant increase in profits. We will continue working together across the entire group to meet the expectations of all stakeholders.

Thank you for continued support. Thank you.