Thank you very much for joining us for the earnings briefing of Mitsubishi Chemical Group Corporation. We will begin with a presentation on results of Q3 FY2025 by our CFO, Minoru Kida, and then take questions.

We have 60 minutes scheduled for the whole of this conference. Before we begin the conference, let us remind investors that we may make forward-looking statements based on company expectations and information available as of now, which are subject to risks and uncertainties which may be beyond company control.

Please be advised that actual results or outcome may turn out to be significantly different. Please also be advised that this conference is recorded and will be made publicly available on our website.

With that, we would like to begin, and I'd like to give the floor to our CFO.

Good afternoon, everyone. Thank you very much for joining us this afternoon.

Let me begin with an overall summary of Q3 FY2025 results. During the third quarters of FY2025, semiconductor-related businesses performed steadily.

However, the business environment remained sluggish for materials-related businesses due to economic stagnation and uncertainty in various regions, with no signs of improvement in market prices and demand. Core operating income of chemicals for the first 9 months came to 41.2 billion yen.

Core operating income decreased 22% year on year as the situation remained challenging for MMA monomer and basic materials despite the accumulation of cost reduction effects, in addition to revenue growth due mainly to the price gap in specialty materials. The MCG Group's overall core operating income decreased only 2% year on year, partly due to solid performance of industrial gases.

Net income attributable to owners of the parent for the group on the whole increased 77% year on year, due mainly to the proceeds from the transfer of Mitsubishi Tanabe Pharma recorded in Q2, despite the non-recurring loss recorded in Q3 resulting from the decision to withdraw from the coke and carbon materials businesses. With regard to the full-year forecast, as the company expects to record additional non-recurring losses associated with the acceleration of structural reforms, including the recent decision to withdraw from the coke and carbon materials businesses, we have revised the forecast for profit attributable to owners of the parent for the full year from 125 billion yen to 47 billion yen.

The forecast for core operating income remains unchanged after the revision after our first-half earnings in October, reflecting the expectation that an early recovery in sluggish demand for products in basic materials and polymers and MMA monomer market conditions would be difficult. As for dividend, we maintain the initial forecast of year-end dividend of 16 yen per share and an annual dividend of 32 yen per share.

We will continue to rapidly and steadily implement initiatives aimed at portfolio transformation and profit improvement based on the three criteria for business selection and three disciplined approaches in business operations under the guiding principles for our business operations in the medium-term management plan 2029. Now on profit and loss for the first three quarters.

The average exchange rate during the three quarters was 149.3 yen to the dollar, with the yen appreciating 2% year on year. The average price of naphtha was 65,000 yen per kiloliter, down 15% year on year.

Revenue during that period came to 2,737.3 billion yen, down 245.4 billion yen, or 8% year on year. Major negative factors here were 89 billion yen due to prices, 91 billion yen due to volume, and 66 billion yen related to business restructuring.

Core operating income came to 185.6 billion yen, down 4.6 billion yen year on year, and is generally progressing well against the forecast for the second half announced in October. Special items came to a net loss of 72.3 billion yen, down 27.8 billion yen year on year.

Operating income came to 113.3 billion yen; income before income taxes, 89.3 billion yen. Net income from discontinued operations came to 94.8 billion yen, which includes the gain from the transfer of Mitsubishi Tanabe Pharma Corporation shares.

Profit attributable to owners of the parent came to 105.4 billion yen, up 46 billion yen year on year. Next, let us review revenue and core operating income by segment.

For specialty materials, revenue came down 2% year on year, but core operating income increased 35%. Revenue declined by 19.5 billion yen year on year due to the divestiture of business as a result of steady progress in structural reforms, lower demand for applications related to EV and for construction materials, and the impact of U.S.

tariffs. Core operating income increased by 11.8 billion yen year on year thanks to rationalization, mainly in the carbon fiber-related businesses, in addition to improvement in the price gap through retaining and improving selling prices for each product.

For MMA and derivatives, both revenue and operating income came down significantly by 18% and 95% respectively year on year due to the continued decline in market prices of MMA monomers since the second half of the previous fiscal year. For basic materials and polymers, revenue was down 24% year on year, but operating loss was reduced by 9.1 billion yen.

Revenue decreased by 191.6 billion yen year on year due to the impact of the transfer of shares in subsidiaries and lower feedstock prices, as well as a decline in sales volume after reducing coke production capacity. Core operating loss was reduced by 9.1 billion yen year on year.

Inventory valuation worsened, but there was a positive impact of the timing of sales price revision for polyolefins and the benefits of structural reforms in carbon products. For chemicals business as a whole, revenue decreased 13% year on year, and core operating came down by 22% year on year.

Specialty materials was firm and drove performance, and carbon products improved steadily. However, with the decline in the MMA market, chemicals as a whole had core operating income decline by 11.5 billion yen year on year.

Industrial gases has been steady, with revenue up 3% and core operating income up 5% year on year. Slide 6 is a breakdown of the 4.6 billion yen decline in core operating income.

Prices had a negative impact of 23.8 billion yen. This includes a negative 1.2 billion yen impact of the foreign exchange rate.

Excluding that, the price impact was significantly down for MMA and derivatives due to a decline in market prices. On the other hand, specialty materials succeeded in retaining and improving selling prices.

The price impact was positive for basic materials and polymers, too. That was also true for carbon products.

Volumes had a negative impact of 9.2 billion yen. Demand was firm for semiconductor-related businesses, but particularly for industrial gases, demand in Europe and the United States were generally weak.

Cost reductions had a positive impact of 41.1 billion yen, reflecting increased effects in each of the industrial gases and chemicals businesses. Others had a negative impact of 12.7 billion yen and includes cost increases due to inflation and deterioration in inventory valuation gains and losses due to a decline in naphtha prices.

Let me provide further detail by segment. Now at the segment level, major factors of year-on-year changes are not much different from Q2.

First, specialty materials, core operating income was up by 11.8 billion yen year on year. Prices had a positive impact of 7 billion yen.

For advanced films and polymers and advanced solutions, this was thanks to retaining and raising selling prices, in particular for semiconductor-related products. The volume factor was positive by 600 million yen.

For advanced films and polymers, volumes had a negative impact due to customer inventory adjustments for display applications. For advanced solutions, volumes had a negative impact as demand declined for electrolytes for use in EVs, mainly in Europe and the United States, and as solid sales volume of construction materials and printing materials declined.

For advanced composites and shapes, the volume factor was positive thanks to increased demand for high-performance engineering plastics. Cost reductions had a positive impact of 10.1 billion yen thanks to rationalization involving structural reforms and review of production sites in each business.

The negative difference of 5.9 billion yen from others came from increased costs associated with inflation. MMA and derivatives recorded a profit decrease of 31.4 billion yen year on year.

The price gaps deteriorated by 33.5 billion yen. While the price gaps for coatings and additives improved, the market price of MMA monomers declined significantly year on year, narrowing the spread.

The volume also worsened by 3.4 billion yen due to reduced demand. Basic materials and polymers reduced its loss by 9.1 billion yen year on year.

The price gaps improved by 9 billion yen. Within materials and polymers, discrepancy in the timing for revision to polyolefin prices and ability to maintain relatively high sales prices during the naphtha price decline phase contributed to profit improvement.

The carbon business also saw an improvement in the price gaps from the year before as the reduction of production capacity in Kagawa was completed, reducing loss-making transactions based on market prices. The cost reduction impact was positive 5.1 billion yen, accumulating effects from fixed cost reduction in materials and polymers and structural reforms in carbon products.

Other differences were negative 4.5 billion yen, reflecting increased costs due to inflation. Although inventory valuation losses in the carbon business decreased due to falling raw material prices, valuation gains and losses in materials and polymers deteriorated.

Industrial gases recorded a 6.9 billion yen increase in core operating income year on year. Although price gaps deteriorated due to rising electricity prices in the U.S.

and sales volume decreased primarily in Europe and the U.S., profit increased due to the effects of cost reduction through productivity improvements being promoted in each of the regions. Special items.

The special items for the first three quarters totaled a negative 72.3 billion yen. The first half recorded a negative 39.6 billion yen, and the third quarter recognized an additional 32.7 billion losses.

As announced on February 2nd, we have decided to withdraw from the coke and carbon materials business. Measures such as reducing fixed costs through downsizing production, reviewing the sales portfolio, and implementing thorough cost reductions were progressing steadily, and profitability was improving.

However, the overseas coke market remains depressed due to prolonged oversupply caused by excess production in China. There is no prospect of resolving this structural issue.

Therefore, we have decided that achieving medium- to long-term growth would be difficult even with various measures to improve profitability and the superior quality of our coke. Furthermore, the carbon material business continues to face oversupply and sluggish demand.

Considering these circumstances and comprehensively reviewing the mid- to long-term positioning of these product lines within our overall business portfolio against our three criteria for business selection: consistency with our vision, competitive advantage, and growth potential, we have decided to withdraw from these product lines. Consequently, we recorded a non-recurring loss of about 19 billion yen in the third quarter, primarily due to impairment losses on fixed assets.

We anticipate equipment removal costs and expenses related to employee support measures totaling about 66 billion yen, which will be recorded as estimates in the fourth quarter of FY March 2026. Let me now explain cash flow.

Operating cash flow resulted in an inflow of 247.7 billion yen. Cash flow from inventories was an outflow of 6.4 billion yen, primarily due to building up inventories in preparation for full-scale shipments of carbon fiber composite parts for robotaxis.

Investing cash flow resulted in an inflow of 123.1 billion yen. Cash flow from capital expenditures was negative 209 billion yen.

Growth investments in specialty materials are progressing, including capacity expansion at CPC in Italy for carbon fiber composites and in the UK for SoarnoL for barrier packaging applications. Cash flow from asset sales was positive 534 billion yen.

This reflects proceeds from the sale of shares in associated companies and group companies, primarily MTPC, as well as proceeds from the sale of cross-shareholdings and non-core assets driven by our ongoing portfolio review. Investing activities resulted in a net outflow of 201.9 billion yen.

This includes expenditures related to the acquisition of subsidiaries in Australia and New Zealand within the industrial gases segment. As a result, free cash flow was positive 370.8 billion yen.

Cash flows from financing activities were negative 347.3 billion yen, primarily due to repayments of interest-bearing debts, dividend payments, and share buybacks. Now the consolidated statements of financial positions.

Total assets were 5,821.5 billion yen, down 73.1 billion yen from the end of the previous fiscal year. There was a drop of 630 billion yen primarily due to the impact of business restructuring centered on the sale of MTPC.

On the other hand, factors contributing to an increase in assets included the portion of proceeds from the sale of MTPC remaining as cash on hand as of the end of December and foreign exchange rates. Net of these factors, total assets decreased by about 73 billion yen.

Net interest-bearing debts decreased by 324 billion yen from the end of the previous fiscal year, and the net D/E ratio improved significantly to 0.83 from 1.06 at the end of the previous fiscal year. This slide shows the trends in core operating income from the second quarter to the third quarter of FY March 2026.

The core operating income for the third quarter was 59.95 59.5 billion yen, a decrease of 10 billion yen from the second quarter. Specialty materials recorded 12.1 billion yen, a decline of 6.9 billion yen from 19 billion yen in the second quarter.

In advanced films and polymers, sales increased as customer inventory adjustments for display applications slowed, but profit decreased due to scheduled maintenance and repairs at some sites and impact of winter holidays in Europe and U.S. In advanced solutions, semiconductor-related businesses generally performed well, but profit decreased due to the absence of one-time revenues from large-scale water treatment projects for semiconductors completed in the second quarter and other temporary factors at some businesses.

Advanced composites and shapes saw improved performance in its high-performance carbon fiber and composite parts businesses, but losses widened due to the impact of winter holidays in Europe and U.S. MMA and derivatives recorded a loss of 2.6 billion yen, down 2.9 billion yen from the second quarter.

This was primarily due to worsening price gaps caused by weak market conditions for MMA monomers, as well as the impact of scheduled maintenance and repairs at various sites. Basic materials and polymers saw a 1.7 billion yen decrease in profit from 1.2 billion yen in the second quarter to a loss of 0.5 billion yen in the third.

Materials and polymers posted a loss despite improved inventory valuation gains and losses due to deteriorating price gaps caused by timing differences in polyolefin price revisions. However, in carbon products, the loss narrowed due to improved price gaps from progress in structural reforms and improved inventory valuation gains and losses.

Industrial gases saw a decline in sales volume due to sluggish gas demand. However, foreign exchange impacts, price management, and productivity improvement activities led to an increase in profit from 48 billion yen in the second quarter to 51.4 billion yen in the third quarter, up 3.4 billion yen.

Next, I will explain the revisions to the full-year earnings forecast for FY March 2026. We maintain our full-year forecast for sales revenue and core operating income announced at the interim results earnings briefing.

While core operating income for the third quarter was 59.5 billion yen, the chemicals business as a whole performed largely as expected, and the industrial gases business also showed steady progress. We will continue our efforts to achieve the full-year core operating income target of 250 billion yen.

However, due to the recognition of losses associated with the withdrawal from the coke and carbon materials businesses and acceleration of structural reforms, we anticipate additional losses under special items, resulting in the latest forecast for the full year of a loss of 180 billion yen. Accordingly, the latest forecast for operating income of 70 billion yen and net income attributable to owners of the parent of 47 billion yen.

This concludes my explanation. Thank you for attention.

Thank you very much for your kind attention. We will now take questions.

First, I'd like to invite from SMBC Nikko Securities, Miyamoto-san.

Good afternoon. This is Miyamoto from SMBC Nikko Securities.

Earlier you talked about chemicals market, and you said that it was generally as expected. If you look at specialty materials toward Q4, it would be challenged to meet the full-year target.

If you could perhaps talk about the outlook for Q4, maybe qualitatively, for each segment, please.

Thank you very much, Miyamoto-san, for your question. Towards Q4, well, this time, 250 billion yen target is maintained, as I mentioned earlier.

As you look at Q3 results, you can actually do the math and understand that for chemicals, we will need an income of about 20 billion yen in Q4. For industrial gases, we will need about 45 billion yen.

As of now, and obviously there are uncertainties, but if you look at segment by segment, I may be able to provide some light. Advanced films and polymers, there is seasonality.

In Q4, this is always down. That is an annual pattern.

That would be a negative factor, but overall, the business is expected to transition firmly. For advanced solutions, again, we do have some negative factors such as scheduled maintenance, but as I mentioned earlier, the demand for use in semiconductors is strong, and so we believe that Q4 should also be firm.

Then advanced composites and shapes, and this is where you ask questions and there's a lot of focus on. In Q3, the high-performance engineering plastic is usually centered around Europe, and the holiday actually had a negative factor, but then in Q4, that typically comes back.

With regard to composite parts, used in robotaxis, and this will really start up in calendar 2026. Every year, we are shipping for about 100 units or so, or in units of 100 100, this business, we have quite high certainty that this will be more profitable.

For MMA, in Q3, there were a lot of scheduled maintenance turnaround, so that will be gone, but then the market situation is still challenging. Currently, if you look at ICIS levels, $1,280, that's probably $30 to $50 better than where it was at the bottom.

The competitors in China is still being challenged. Then if you look at the feedstock, the acetone prices are coming up slightly, and that is pushing up the MMA prices a little bit.

We do see some signs of MMA prices rising. Then after the Chinese New Year, we will try to focus on what happens to the prices and supply-demand balance.

For basic materials and polymers, petrochemicals would be challenged, and that's probably unchanged from up to Q2. For polyolefins, the strength is continuing.

Polypropylene is as expected, but even for polyethylene, the strength is actually exceeding our expectations. Then for the liquid, like ethylene derivatives, for example, ethylene glycol and [acid-5?

/ acidified?] ones, or C3 polypropylenes and oxo alcohol, acrylic acid, those are still facing difficulties.

For carbon products, in Q4, we expect this to turn profitable. Recently, we announced the withdrawal from the business, but there is still profitability here thanks to structural reforms.

Maybe I'm praising myself, but we did really make really, really hard and difficult efforts, and that is really bearing fruits, and that will be making tangible contribution in Q4. That was the overall view of what we expect for Q4.

Thank you very much. Just one follow-up question.

What about cost reduction?

This time about 29 billion from prices, and then you were also looking at asset reduction, and was the expectation— Oh, we haven't changed the outlook there. We will continue to work on pricing policy, and this is clearly making a difference in Q3, and we will continue for this in Q4.

Thank you very much.

Thank you very much, Miyamoto-san. Next question from Yamada-san from Mizuho Securities.

Yamada from Mizuho Securities. Thank you.

Carbon products restructuring was mentioned, and thank you very much it was on February 2nd. I was not able to make it, but I'd like to learn more, taking this opportunity.

Impairment loss of 19 billion yen is recognized, and 600 members will be given support for the retransfer. Adding that, probably the loss would be 25 or 30 billion yen losses, but you are saying that 80 billion yen level losses to be recognized.

There will be dismantling costs that will be incurred that much. Why is this large?

Also, carbon materials and the cokes, you have withdrawn from these businesses, the whole group is going to be withdrawn. Why IFRS, it is not categorized as discontinued businesses, and the downward revision for discontinued ones, the restructuring expenses for carbon businesses is outweighed by this recognition.

Why is that?

Thank you very much for the losses in the carbon business. I'm repeating myself, but what has been recognized in the third quarter is about 19 billion yen or 18.5 billion yen, and majority was the impairment losses on fixed assets.

Also inventory losses are also recorded, valuation. All the losses recognized in third quarter is impairment losses.

As I said, in the fourth quarter, this is just an estimate for the time being, it's not accurate. At the moment, we're estimating 66 billion yen in losses to be recognized.

On this 66 billion yen, there's dismantling fee, removal fee of equipment, and also support for employees that are transferred, and also there will be some close-up and shutdown expenses for the businesses. The removal and dismantling construction cost would be really large, and to what extent you will do this is really a question.

Those that are not related to safety will be removed and then the remaining ones will be just left in place. That is one approach, but you can also dismantle everything on the ground.

Then there are long pipes that are under the ground, and you may have to pull them out, in a sense. At this time, of course, we have to consider attracting other businesses on-site, we are now trying to remove everything on the ground, and that dismantling fee is really large at this moment.

This will be recorded in the P&L, but this will be incurred for the next several years. In the discount calculation, the net present value under the discounting will be recognized as the losses for this fiscal year, so that's why we have estimated 66 billion yen.

Then as for the discontinued businesses, why we are not categorizing this in the discontinued businesses. Compared to the accounting standards, the discontinued ones won't have the scope of those that have the businesses that will be continued for more than one year.

We've decided to withdraw from this business, but the ultimate shutdown of this coke business will not be until the second half of fiscal 2027, because there are long-term contracts that we have signed with the customers, and we have to fulfill that contract obligation. Put it differently, you cannot really switch off all the lights of the one house.

That is not the case that is going to happen, at least we have to keep burning the cokes for one year or more, and that business will be continued. That's why we are not allowed to reclassify this as discontinued businesses compared to the regulations.

Full withdrawal in the fiscal 2027. In the beginning of 2027, is it going to be classified as discontinued business?

That would be difficult. Okay.

Expecting in the second half of fiscal 2027, or by March 2028 at latest, all the shipments that are scheduled will be completed. If you look at MTPC, maybe you can get the idea.

In the case of Mitsubishi Tanabe Pharma, the sale was announced to be July 1st, and then the first quarter would be the one where this is reclassified as discontinued business. This would be the timing that you have to look at.

Probably this is not going to be reclassified as discontinued business until first quarter or second quarter of 2027. This will be part of coke's business until then.

Okay.

The downward revision was more than the total of 66 billion and 19 billion. Why is that?

I'm sorry, but we cannot disclose details by item. In December, Tsukamoto explained about this, but majority of the ones should be dealt with by the end of this fiscal year.

As far as we can, we would like to put this to an end. Then we have some idea about how to do it now.

Obviously, for ethylene in western Japan, that is also taken into account. There are many backlogged ones that have been accumulated for many years will have to be dealt with, and we would put it an end by the end of this fiscal year.

Thank you.

Next, we would like to invite Watanabe-san from Morgan Stanley MUFG Securities. Good afternoon.

This is Watanabe speaking. Overall for Q3, you have the core operating income of 66 billion yen.

Was it mostly in line? Could you give us more granular view?

For carbon products, next year, you are expecting that to be break-even?

Thank you very much for the question. With regard to Q3, the internal expectations and how did the results fare?

Obviously, there are some ups and downs, but generally speaking, they were in line. Then obviously, there are some ups and downs or deviations, perhaps let me go through this.

Maybe MMA and films really came in line with expectations, almost exactly. There was some upside for advanced solutions.

For semiconductor-related businesses, like synthesized quartz or cleaning agents for semiconductors, those are actually came in a little better than expected. On the other hand, advanced composites and shapes, that was slightly down.

For high-performance engineering plastics, there were some small M&A that we executed in the United States, and so the United States operations were expected to grow more. Then the high-performance engineering plastic operations in United States slightly underperformed.

That could relate to industrial gases, but overall throughout the year, whatever the trading in the United States was generally slower than expected. Another area was petrochemical, that was slightly down.

Material and polymers, as I mentioned, the polyolefins were very strong, sometimes they exceeded expectations, but the liquids, like C2, C3 derivatives, were expected to improve further, but it appears that the Chinese products are still having a great impact and a drag on the market, and the prices were lower, so that was slower than expected. Then what was better than expected was industrial gases.

Industrial gases are steady, and we expected it to be steady, but it's a little better than expected. That would be the review of Q3 against what we had expected.

I'm sorry, it was a bit qualitative.

For carbon products, next quarter or next year would be zero or break-even?

Yes, close to zero. In Q4, as I mentioned earlier, it is to turn profitable.

Then carbon products contracts are usually on annual basis, we are negotiating next year's prices and contracts. We are trying to transition into tolling business that is less subject to market prices.

For some customers, they have accepted that, and we have been able to do that in this financial year. Obviously, it depends on the counterpart.

In Q4, we are in a review or renewal process, and that is making us profitable in Q4. We're not sure if we can do that for everyone in next financial year, but we probably won't have billions of yens of losses going forward.

Thank you very much.

Thank you, Mr. Watanabe.

Next question, Okazaki-san from Nomura Securities, please. Go ahead.

Thank you. Okazaki from Nomura Securities, thank you.

In the December briefing, carbon products and MMA and petrochemicals businesses are struggling, that's what you said. By the end of this fiscal year, you are going to come up with some certain measures, and the actual that was done for carbon products, thank you.

As for the remaining ones, MMA and petrochemicals, in what way can we expect a certain announcement by the end of this fiscal year? What is your current thought?

Thank you.

Thank you very much for the question. As for carbon products, yes, we have made announcement.

In the carbon products business, as Yamada-san said, even if we say carbon product business, there's not much that is left with us. As for carbon business, we have clarified future direction, the remaining question is how to execute that.

For the remaining two businesses, as for petrochemicals, the western Japan ethylene was already explained, and Mizushima cracker will be shut down, that was decided. In a sense, this is not the end of the story, but actually, this is the beginning of the story.

Far, as we have the opportunity to have dialogues, we have been explaining about this. Crackers are just a part of the whole business, what about the derivatives other than crackers?

This is also true with the western Japan ethylene business. As for petrochemicals, why do we have to stay involved?

We're not planning to make a lot of profits from petrochemicals, but as a green chemical business foundation technologies, petrochemical has relevance. In terms of commercial and monetization, we talked about ethylene, but when it comes to derivatives, you have to look at broadly, looking at various options like collaborations.

That's what we are discussing right now. With regard to collaborations, I'm not sure whether we can get to that point or not, but that is a general direction that we are having discussion on.

What are the steps that we have to follow until we reach that time, and those three steps will be announced by the end of March. Whether this can be explained by March 31st or at the timing of full-year earnings results for this fiscal year, we may announce that.

There might be some time lag, but that's the timeframe that we're looking at for now. As for MMA, compared to petrochemicals and cokes, in terms of the scale, it is one order of magnitude smaller.

As we explained in the briefing the other day, there are three businesses that would require structural reforms in the quadrant diagram in the left bottom corner. There's some differences in terms of priorities or scales between MMAs and the other two, because we stay number one player in MMA in the world, and we have the ability to compete still.

How we can take advantage of our competitive advantage and take action in the market, and what about global allocation of our system, and what do we do about production capacity? There are several options, and we'd like to put them into one single package and present it by the end of March.

With regard to MMA, even if the current market condition continues, can we expect this to break even in the next fiscal year? If the current market condition continues, then we're not going to make it to the break-even, honestly speaking.

Of course, what about the prices of the acetone? But $1,280 on ICIS basis, that's the price, but it used to be 1230 or 1240 on ICIS basis, it is going up.

Still, we're not there yet. There needs to be one more round of cost reduction, and also there's production allocation and relationship with joint ventures have to take into account.

There was unevenness in terms of capacity adjustment in some sites. At the current price level, we may be able to have break-even or not, we're almost there, barely there.

Thank you. Thank you, Mr.

Okazaki. Next, Umebayashi-san from Daiwa Securities, please.

Good afternoon. This is Umebayashi from Daiwa Securities.

Thank you very much. I have a question about the three-way consolidation in west Japan for petchem.

You talked about green investments and utility facilities, the tank, etc., for those new chemicals, and you've got this grant from the national government. It's not each player, but you'll start this new joint venture, a three-way joint venture.

That's my understanding. Then the dismantling expenses at Mizushima for the ethylene cracker, etc., that should actually be borne by all the three parties.

That sounds like a fair way to me, but in reality, is it maybe you and Asahi Kasei, the joint venture, is that joint venture going to shoulder all that? If that's the case, it doesn't seem too fair as a scheme, could you elaborate on that, please?

Thank you very much for the question. First and foremost, maybe the other way around.

With regard to who bears losses and expenses, this joint venture you mentioned, the specific framework, we using JVs and LLP, and they are different. There will be one LLP, and if the LLP is three companies coming on equal footing, so that's investment, and then the LLP would actually take care of everything that is not so essential.

The Mizushima dismantling, etc., those expenses that are associated with closure of what is already there, those will be borne by the three parties in an equal way. Then this JV, as this is about the continued operation, this side will depend on the offtake balance among the three parties.

The investment would depend on how much offtake is expected from each partner. The JV will be about the remaining operations, and then the LLP is for dismantling, etc., for the discontinued operations, and that would be borne equally by the three parties.

Thank you very much for that clarification. That kind of negative part, taking care of what's no longer necessary, the losses there would probably happen after the operations cease, or do you actually try to allocate some expenses upfront?

With regard to that, we're not in a position to share all that in detail today, and I'm not in a position to discuss specific figures. Obviously, it will be done according to accounting rules.

What the accounting rule says that if you have something that isn't going to be utilized in the future, you will need to do impairment. That's the rule.

Such impairments would probably happen before long. Then what happens after that, and dismantling, etc., we have yet to finalize the fine details.

At this point in time, the only thing I can say is that the losses will be borne effectively by the three parties. That's probably the only thing that is certain at this point in time.

I get that.

Thank you very much. Thank you very much.

There's only 8 minutes left.

Are there any other questions? Miyamoto-san, please go ahead.

Miyamoto from SMBC Securities. I would like to ask one more question with regard to carbon composite.

From 2026 calendar year, there has been shipment of 100 units per month. In terms of production, are you already doing mass production, or for the next fiscal year, you are going to increase the production rate, and the shipments will be increased from the April to June or July to September?

Can you give us the current status of that carbon composites?

Calendar year and fiscal year are mixed together, it may have been confusing. From 2026 calendar year, the shipments have been started on a full-scale basis.

Because of the relationship with the customers, I cannot specify the exact number of units to be shipped. For this fiscal year, or FY2025, total number of units to be shipped, there's still several hundreds that we have in mind.

For the next fiscal year, as estimate, there's going to be quite a large number, like 4 times more is the order of magnitude that we're looking at in terms of forecast. I'm not sure if what you are imagining is in line with what we have, but compared to the FY2025, in 2026 fiscal year, there's going to be a huge increase in units, and there will be a more contribution to profit.

That's what we are expecting to see. Okay.

On December IR Day, the production units has been increased from 5 per week to 10 per week, but there has been one more step of increase, and there's no problem in terms of increasing the production volume that much. Can you give us the answer?

You talked about tens per units, but in January or February, that 10 units per week has been made larger by 3 times or 4 times in January and February, and that will be further increased in FY2026. That's what we're expecting for now.

Then the past 1, 2 months, there has been increase in the production quite a lot, and there's going to be further increase in the production volume, and there's no problem that you're facing. In January and February, the shipments units is going to be increased larger.

What about the production volume? That production volume has been increased.

Thank you.

Let me give the floor to our CFO once again.

Ladies and gentlemen, thank you very much for joining us for the earnings conference. There is some uncertainty and sluggishness with regard to economy here and there, and the business environment around us isn't that favorable yet.

At the same time, we talked about a lot of non-recurring items, and we will continue our efforts toward portfolio reform and profitability improvement. We will accelerate that, and we are now seeing some tangible results and effects of those efforts.

We will continue our company-wide efforts to implement those measures so as to live up to the expectation of our stakeholders. We ask for your continued support.

Thank you very much.

Thank you very much. With this, we would like to close today's earnings conference.

Thank you very much, once again, for joining us.