I am Minoru Kida, the CFO. Thank you very much for joining us in this hot weather.

First, I'd like to explain the financial results summary for the first quarter of fiscal year March 2027. During the first quarter of FY March 2027, I'd like to give you the summary.

During the first quarter, specialty materials continue to perform steadily. Amid unstable situations in the Middle East, the business environment remained challenging with naphtha price soaring and risk of raw materials procurement rising.

However, we're seeing inventory valuations gains and a temporary increase in demand. Core operating income for the chemicals business increased year-on-year by ¥48.4 billion to ¥60 billion.

Contributing factors to core operating income were the effects of sustained pricing strategies and strong performance of semiconductor related products in specialty materials, and improved conditions in the MMA monomer market in MMA. In basic chemicals, inventory valuation gains resulting from rising raw material prices contributed to higher profits, despite the expanded scale of scheduled maintenance where we had a schedule maintenance in Ibaraki this year, a production slow down to prioritize continued operation of cracker plants in response to the situation in the Middle East, and a decrease in sales volume caused by an influx of lower prices overseas products.

Partly due to the solid performance of industrial gases, the overall core operating income for the group increased year-on-year by ¥57.5 billion to ¥114.1 billion. Net income attributable to owners of the parent increased year-on-year by ¥38.1 billion to ¥57.7 billion.

Next, I'd like to discuss our earnings forecast. In light of the first quarter results and current business environment, we have revised upward our first half forecast for core operating income and net income attributable to owners of the parent from ¥139 billion to ¥194 billion, and from ¥59 billion to ¥86 billion, respectively.

Meanwhile, our full-year forecast remains unchanged from the previously announced figures due to uncertainties in trends in raw material prices. We have not created any new forecast, and there is no change from the previously announced figures.

Our dividend forecast also remains unchanged, a year-end dividend of ¥16 per share and an annual dividend of ¥32 per share. We'll continue to rigorously adhere to the three disciplined approaches in business operations, concentrate our management resources on areas that serve as next-generation growth drivers, and steadily implement proactive growth initiatives to achieve sustainable growth and enhance corporate value.

I will now explain the overview of the first quarter of FY March 2027. The average exchange rate for the full year was ¥160.7 to the dollar, representing a 12% depreciation of the yen year-on-year.

The naphtha unit price was ¥118,900, up 79% year-on-year. Sales revenue totaled ¥1 trillion 4.2 billion, up ¥123.5 billion, or 14% year-on-year.

The breakdown of the increase was as follows: ¥88 billion increase due to higher selling prices, ¥33 billion decrease due to lower sales volume, and ¥68 billion increase due to foreign exchange effects. The core operating income was ¥114.1 billion, up ¥57.5 billion year-on-year.

This represents 82% of the first half earnings forecast announced in May. I will explain the details of this later.

Special items amounted to positive ¥4.3 billion. Operating income was ¥118.4 billion, and income before taxes was ¥111.8 billion.

Quarterly net income attributable to owners of the parent was ¥57.7 billion, up ¥38.1 billion year-on-year. Next, I will explain sales revenue and core operating income by business segment.

For the chemicals business as a whole, revenue increased by ¥76.5 billion, and profit increased by ¥48.4 billion year-on-year. As for revenue, despite shipment restrictions at some sites due to the situation in the Middle East and expansion in scale of scheduled maintenance and repairs compared to the previous period, there was an increase of ¥76.5 billion due to soaring product market prices, an increase in sales volume driven by customers' efforts to secure inventory against the backdrop of situation in the Middle East, higher selling prices for various products, particularly in specialty materials, and the impact of foreign exchange rates.

The core operating income for the chemicals business increased by ¥48.4 billion, driven largely by strong performance of specialty materials, as well as significant inventory valuation gains in basic materials resulting from rising naphtha prices. Industrial gases segment showed steady progress, with revenue up 15% and profit up 20% year-on-year.

Details for each segment will be explained later on a separate page. The following is a breakdown of the ¥57.5 billion year-on-year increase in the core operating income.

The price gap was positive at ¥4.6 billion. While the price gap deteriorated for polyolefins in the basic materials amid rising naphtha prices, it improved due to improved selling prices in specialty materials and rising market prices for MMA monomers in MMA and derivatives.

The volume resulted in a drop of ¥1.2 billion. In specialty materials, although sales of various products were expanded, the volume worsened due to restrictions on shipments from certain MMA sites caused by the situation in the Middle East, as well as an increase in the scale of scheduled maintenance and repairs in the basic chemicals.

Cost reductions resulted in a positive impact of ¥13.8 billion, with the industrial gases and chemicals segments each achieving cumulative effects. Others resulted in a positive impact of ¥40.3 billion.

This figure includes a ¥48.5 billion gain on inventory valuations due to soaring naphtha prices. I will now explain the details by segment.

Specialty materials posted a year-on-year profit increase of ¥20.9 billion. The sales gap was positive at ¥11.9 billion, improving across all subsegments, including semiconductor related products.

The volume contributed to a rise of ¥9.1 billion. In films and performance materials, the volume improved due to increased sales of polymers for barrier packaging materials and films for multilayer ceramic capacitors.

In composites and shapes, the volume improved due to increased sales of high-performance engineering plastics for semiconductor manufacturing equipment and carbon fiber composite parts, primarily for robotaxis. Cost reductions totaled ¥4.9 billion, driven by the cumulative effects of rationalization measures such as the Next Stage support program and the review of production sites across business units.

The others of negative ¥5 billion was attributable to cost increases resulting from inflation. MMA and derivatives posted ¥4.3 billion increase in profit year-on-year.

The sales gap was positive at ¥7.7 billion. Market prices for MMA monomers improved from a year before, leading to a widening of spreads, as I said before.

In functional chemicals as well, sales gap improved due to higher sales prices for additives. The volume resulted in a drop of ¥5.5 billion, on the other hand.

In the MMA segment, the volume deteriorated due to shipping restrictions at some sites and sluggish operating rates caused by the situation in the Middle East. Core operating income in basic materials increased by ¥21.5 billion year-on-year.

Prices had a negative impact of ¥17.7 billion. In basic chemicals, polyolefin selling prices lagged behind rising naphtha prices.

Volumes had a negative impact of ¥6.3 billion. Volumes worsened due to larger scheduled maintenance in basic chemicals and lower sales from an influx of low-priced overseas products.

Others had a positive impact of ¥44 billion, which includes ¥48.4 billion in inventory valuation gains from rising naphtha prices. Lastly, industrial gases.

Core operating income increased by ¥9.1 billion year-on-year. Earnings grew thanks to business expansion through acquiring industrial gas businesses in Australia and New Zealand, as well as cost reductions from productivity initiatives across regions.

Next, special items. Special items in the first quarter had a positive impact of ¥4.3 billion.

We recorded a ¥12.8 billion gain on sale of fixed assets from the land transfer for Nippon Sanso Holdings head office relocation. Offset by losses from structural reforms, special items totaled positive ¥4.3 billion.

Now, let me explain cash flows. Operating cash flows was an inflow of ¥35.1 billion.

Inventory cash flow was an outflow of ¥38.1 billion, mainly due to higher raw material prices such as naphtha. Other cash flows were an outflow of ¥98.7 billion, including severance payments for last year's Next Stage support program.

Investing cash flow was an outflow of ¥26.3 billion. Capital expenditure was ¥66.2 billion.

Growth investments in specialty materials progressed, including capacity expansion in carbon fiber and composite engineering in Italy. Cash flow from asset sales was positive ¥42 billion, driven by proceeds from selling cross-shareholdings.

As a result, free cash flow was positive ¥8.8 billion. Financing cash flow was an outflow of ¥93.4 billion, mainly for interest-bearing debt repayments and dividend payments.

Here is the consolidated statement of financial position. Total assets increased by ¥4.4 billion from the previous fiscal year-end to ¥5 trillion 881 billion.

Cash and cash equivalents decreased by ¥82 billion due to debt repayments. Meanwhile, inventories rose by ¥41.8 billion on soaring raw material prices, and foreign exchange impacts also lifted total assets.

Netting these factors, total assets increased by about ¥4 billion. The net D/E ratio stood at 0.83, remaining at the same level as the end of the previous fiscal year.

This page supplements the change in core operating income for FY 2025 Q4 to FY 2026 Q1. Q1 core operating income reached ¥114.1 billion, up ¥74.7 billion compared to Q4.

Specialty materials posted ¥38.3 billion in Q1, an improvement of ¥47.8 billion from negative ¥9.5 billion in Q4. Earnings grew significantly, reflecting the reversal of the ¥30.3 billion impairment loss on SoarnoL-related fixed assets recorded in Q4, steady sales centered on semiconductor related products, and higher sales volume as customers built up inventories amid the Middle East situation.

MMA and derivatives posted ¥8.8 billion in Q1, turning profitable by ¥11.2 billion from negative ¥3.2 billion in Q4. This was driven by rising MMA monomer market prices and increased sales volumes from customer inventory stockpiling and functional chemicals.

Basic materials recorded ¥1.8 billion in Q1, up ¥19.3 billion from negative ¥4.5 billion in Q4. In addition to resolving the ¥5.2 billion impairment loss on ethylene oxide and ethylene glycol production facilities in Q4, earnings through inventory valuation gains improved despite worse price spread differentials for polyolefins from soaring naphtha prices.

Industrial gases decreased by ¥2.2 billion from ¥56.3 billion in Q4 to ¥54.1 billion in Q1, mainly due to a reaction after electronics-related equipment and construction concentrated in Q4. Next, I'll explain the revised financial forecast for first half of FY 2026.

Based on Q1 results and current business conditions, we have revised up our first half forecast. In our May 13 forecast, first half core operating income was set at ¥139 billion.

Q1 core operating income reached ¥114.1 billion, showing strong progress of 82%. This strong performance was driven by robust demand for semiconductor products, higher sales volume from customer inventory building amid Middle East tensions, higher MMA monomer prices, and inventory valuation gains from rising naphtha prices.

Our Q2 assumptions are ¥155 to the US dollar and a naphtha price of ¥86,000 per kiloliter. Sales revenue is projected at ¥1 trillion 38.8 billion.

Despite lower sales volumes following Q1 customer stockpiling, sales are expected to increase over Q1 as scheduled maintenance in basic chemicals ends. Core operating income is expected to decline quarter-on-quarter due to smaller inventory valuation gains and payback from customer stockpiling, but the first half total will reach ¥194 billion, upside of ¥55 billion from the May forecast.

Our new forecast for operating income is ¥189 billion, and midyear income before tax is ¥175 billion. Net income attributable to owners of the parent is projected at ¥86 billion, an upside of ¥27 billion.

Here is the first half forecast by business segment. Specialty materials core operating income is expected at ¥65 billion, up ¥27 billion from the May forecast.

Factors include robust semiconductor demand, volume growth from customer inventory stockpiling due to Middle East conditions, and improved selling prices across products. MMA and derivatives is forecast at ¥10 billion, up ¥5 billion, driven by rising MMA monomer market prices, which I've been explaining.

Basic materials is forecast at ¥12 billion, up ¥18 billion, mainly due to larger inventory valuation gains from higher naphtha prices. Industrial gases is expected at ¥107 billion, up ¥6 billion, partly owing to a weaker yen.

That concludes my presentation.

Watabe from Morgan Stanley Securities. Thank you very much for the presentation.

Yes, you really produced profits, didn't you?

Thank you. The

specialty materials especially was performing well, but the temporary demand increase, where in the products did you see that? If quantitatively, from there will be all segments where there will be decreasing from first quarter second quarter, this will be true, but can you explain more?

What would be the recovery with shipment restrictions sites? What about inventory valuation gains and losses in the second quarter, if you can explain all these special factors?

Thank you very much. As for temporary demand increase, the first part of your question, we cannot really specify which products that we have seen this in.

For specialty materials products, well, for semiconductor-related products, we have not seen them too much, but even in those products, partially for this emergency situation, customers all in general wanted to secure their inventory, we cannot really specify which products. Quantitatively, basically it's very difficult to specify that, but

in the second quarter, what would be the turn that we are expecting?

There will be some reactionary decrease that we are expecting, and from the first quarter to second quarter, probably the numbers are expected to decline as you can see from the numbers that we have shown. What about what does it those second quarter figures mean?

Basically, we are expecting these numbers to go back to the original budget. We have seen much increase in first quarter in sales, but we're not expecting that much decline in the second quarter because of that in specialty materials.

In the panic buying effect impact from the first quarter is as I just explained. With regard to shipment restrictions, more specifically the biggest one is in MMA, and maybe you are aware of this, but from April, plant in Saudi Arabia has not been operating, and this is really natural.

Rather than securing the operation, we are giving top priority safety, and at the other end of the Hormuz Strait, and where there's a risk of missile landing, we cannot really operate the plant. Unfortunately Saudi Arabian plant has been in suspension since April.

Rather than shipment restriction, there is some shortage in raw materials in some sites in Southeast Asia, we may it may not be so appropriate to say shipment restriction, but we were not able to produce products because of shortage of raw materials. There's some decline in volumes, and we cannot expect Saudi Arabian plant to restart the operation because of uncertainty, and that is the assumption that we are using for second quarter.

Raw naphtha is the next part of your question. In the presentation, you've seen this, but ¥118,900 is naphtha price and ¥86,000 is first half assumption, and there is some decline.

Because of that, it's very difficult to specify the amount. We did come up with ¥86,000 for naphtha price, but for the past 12 days or past 10 days, US forces have started the attacks on Iran, and so crude oil Brent has also recovered from $90, it's very difficult to tell what is going to happen.

Have you seen this reactionary losses in or decline already from June?

Yes, we have seen this from June for some products, but in April, I'm not going to exaggerate this, but just simply put, just for the purpose of making it easier to understand, panic buying, to speak, was to some extent seen, but in Japan, crackers and other derivatives, we had assured the customers that we're going to continue to operate the cracker plant and others, there was some panic buy in April. From May onward, customers have a bit settled down, there is some reactionary decline even within this first quarter in some products.

For overseas products especially, especially this tendency was prominent in China, the Chinese players have come to buy in large amounts, especially in MMA, the customer inventory levels has been increased as we can see. In the second quarter, there might be some reactionary decline that you might expect.

Thank you.

I am Miyamoto from SMBC Nikko Securities. Congratulation for the strong performance.

I'd like to ask you about the composite and shapes. From the fourth quarter to first quarter, the profit increased by ¥1 billion, and on page 22, when you look at the breakdown, the profit increased in all subsegments, but could you elaborate on them?

On the second quarter, Q-on-Q, you expect profit decline of about ¥3 billion, why do you expect such a large decline? You talked about panic buying, is that happening in the segment as well?

For Zoox, they said that they will soon start mass production, can you tell more about the shipment for Zoox as well?

Thank you very much. I feel a little bit embarrassed when you say it was a very strong performance, because it was only for the first quarter, but we hope that we will be able to sustain this performance as much as possible.

Now regarding your question, composite and shapes, last year in the fourth quarter, we were able to turn profitable in the fourth quarter, finally, and in the fourth quarter of last year, it was ¥5 billion, and this year, ¥6.4 billion. We were able to build up the profits up to ¥6.4 billion.

If you add up, it went up about ¥1.4 billion, but if you look in detail, we call this engineering shapes. This the large one is engineering plastic for semiconductor manufacturing equipment.

The shipment for those will increase in the first quarter, and I think this portion includes some panic buying. Because it's for semiconductor manufacturing equipment, they don't want to fall short, and customers were sort of rushing to buy, and I think that's more intense compared to other products.

In the second quarter, we accept some reactionary decline. On the other hand, for the carbon fiber composite for Zoox, it's coming as expected, and the monthly production is also increasing, and we believe we will be able to deliver as we planned for this fiscal year.

As you just mentioned, yesterday I think, Zoox, they said that they will get license for running operations in United States as well, meaning that the project overall is progressing steadily, and they also need to increase the five vehicles. We want to make sure that we can deliver this so that they do not fall short of the products.

Carbon fiber composite, first quarter, second quarter, I don't think there will be major changes in numbers. In the engineering shapes, the high-performance engineering plastics, we expect some reactionary decline in the second quarter versus first quarter.

Thank you very much. Carbon fiber composite, 1Q on 1Q, we thought that you'll be able to expect increase in profits, but you're saying that the fixed cost is going to go up, or are you being a little bit conservative?

When it comes to composite, we're not really being conservative. If you look first quarter to second quarter, especially in the first quarter, I think we were able to capture higher prices ahead of schedule, especially composite engineering.

We have clean business as well, and that we expect some decline in the second quarter. In the second quarter, I think we will be able to increase the new products, and we've been launching those new products, so that's something that we expect as a growth.

I see. ¥12 billion is a full-year forecast, and you already expect ¥10 billion in the first half, which means that it's growing higher than expected.

Which one specifically do you think is really growing stronger than what you had expected usually?

Maybe this is my personal opinion, but engineering shapes, as I mentioned at the outset, this is for semiconductor manufacturing equipment, the demand is very strong, we can expect some upside. Maybe I should not call this upside, but for carbon fiber, over last 2 years, we've been going through major structural reform, and this impact of supply chain rationalization, I think we're starting those to take effect.

We also launching new products as well, those are some of the factors for potential upside. How it will turn out on a full-year basis, it's still kind of uncertain.

Therefore, for the full-year forecast, we have not made any changes. Thank you.

Thank you very much, understood.

Omura from UBS Securities. Thank you.

I have a question on page 17, information electronics. This time, you have made upward revision, and ¥5 billion is the upward revision, and you have also revised upward the sales revenue by ¥5 billion.

Probably this will be mainly from the price factor, but if there are any other factors, please let us know. Because the wafer manufacturers or wafer materials are going up in prices, that's what they say, your silica, the synthetic quartz, maybe you have easier time in revising your price.

Can you explain more about semiconductor materials trend?

Thank you for your question. With regard sales revenue and profits, well, were there price factors that were involved?

In one word, in the mix of the products has been changed. As you rightly expected, synthetic silica or quartz is increasing significantly in profits.

Do you ask us if we have increased the prices significantly, yes, but the volume has also increased. As for synthetic silica, there are not so many customers that were selling products to, but more recently, from the late half of last year, there have been more inquiries from new customers, and shipments from those customers are increasing, the volume is increasing for synthetic silica, quartz.

I cannot give you too much detail, but especially for semiconductor related products, there are products that are not growing as we had as much as we expected, or they failed to reach the volume that we expected, honestly speaking. For semiconductor processes, there are some materials that are selling, but customers have improved their production processes, and they have been able to save the volume of products that we have been selling for use.

Honestly speaking, there was some decline in volume. Synthetic silica, and also there's cleaning business that is increasing significantly as well, the price factors were there, but product mix has been changing.

The composition amongst the different products that were selling has been changing. That has been a greater factor.

Thank you. To supplemental question, as for lithography products, and also the materials, have you been experiencing easier time in price revision?

Or you're talking about resist?

Yes. It's not that easy to do price revision or convince customers to accept that, but we're not in that much challenging situation in terms of price increase.

We're not feeling that much that it has become easier to convince customers for price increase.

Okay. Then just for clarification, naphtha price or raw material price increase, that has been passed on to the selling prices just for that much?

If you ask us yes or no, then honestly speaking, we cannot tell which one yet. On the other hand, for the petrochemical derived basic materials, we have been making sure that we can pass on the cost increase to the selling prices, and we have been able to do that.

Thank you.

I am Yamada from Mizuho Securities. Thank you.

In the second quarter, I don't really understand why you expect decline in profits. Inventory valuation differences and others, I'd like to confirm.

So ¥40 billion or so is expected absolute value, it had a gain of about ¥40 billion, but if you look at inventory, compared to the end year-end of last fiscal year, it increased by ¥41.8 billion, and ¥600 million is related to Nippon Sanso Holdings, the inventory increased by about ¥36 billion. If you compare fourth quarter, first quarter, and second quarter specialty materials revenue, not much change from the first to second quarter, meaning that the inventory level went up for the specialty materials.

That means that you curbed production in other areas substantially to control your inventory level. Is this correct?

If that's the case, maybe there is some impact from the periodic maintenance. In the first to second quarter, I think there are positive impact from the fixed costs allocation and differences in operation, and basic material segments.

I do not really see such impact in the second quarter. Please elaborate on how I should think about inventory levels.

Thank you very much. I said thank you, but I'd like to also apologize as well.

Maybe I'm not fully understanding what you said fully because I was not able to fully catch up graphs. When you say inventory valuation gains and losses, I really don't like the way it's expressed.

If I explain how we fill that gap, there's a gap in the price that we receive and how much we expensed, and we try to multiply that with the volume. I would like to make sure that people would understand.

When we say inventory valuation gains and losses, I don't think it's a good naming. We have about ¥60,000 in the previous quarter, and now we have a new naphtha price as well that is more expensive, ¥120,000.

We should be consuming naphtha at ¥120,000, but we bought naphtha at ¥60,000 in the previous year, so that is reflected in the numbers. I'm sure you know this, Mr.

Yamada. We're seeing the decline in prices that we receive.

Now the expensed portion, the expense portion is expensive than what we had received. That is happening temporarily right now.

The prices, if that continues to drop, the expensed portion is going to decline, but at some points will catch up and converge. Depending on how naphtha will move, it's very difficult to project.

In the first half, we had this much gap, but in the second quarter, as I mentioned earlier, naphtha prices, we expect about ¥86,000, and meaning that majority of that gap or valuation difference is going to peel off. The biggest different reason for the decline in the first to second quarter is that one.

However, how this is going to really turn out, well, about 2 weeks ago, the attack has restarted, and if you look at the oil, the Brent oil has gone up to about $90, and the naphtha prices, the market prices is also going up again. It depends on where naphtha prices will settle, that is going to determine our second quarter results.

This is something that we're really struggling with. Now, when you look at different inventory items levels, when the cost is rising, the inventory valuation is going to go up.

Especially when it comes to specialty materials, we do see an increase in the inventory levels volume-wise. In the second quarter, we would like to control the inventory levels, because if we keep high inventory levels and if we see sales decline, that's worse.

We really need to have a good control over inventory in the second quarter as part of our business operation.

Thank you very much. As you mentioned, if it's a difference in valuation, receipts and expenses, the volume is the same, ¥40 billion of inventory difference, you should see an increase in inventory volume, but it's not really happening.

Considering that specialty material volume is should be going up, we assumed that you had a very controlled production in the first quarter. Is this correct?

According to what you said, you will be controlling production in the second quarter as well. When the naphtha prices go down in the future, we expect the recovery to be much lower.

I would like to ask you how in which direction are you going to make efforts?

We will continue to make efforts, but when it comes to details of the quarterly inventory levels, we will not be able to disclose. Intentionally controlling our inventory levels, not really.

If you look at the results, MMA, that's one of the representative product. In many ways, production was lower than what we had planned for, and in order to meet customer demand, we did produce quite a lot in with some of the products.

It's very difficult to say across the board. However, in the second quarter, controlling inventory level is something that we need to be very meticulous about and very cautious about.

Understood. Thank you very much.

I do understand that you do control inventory levels, we expect to continue your good management operations. Thank you very much.

Okazaki from Nomura Securities. Very good business performance.

Congratulations on these earnings. I have a question on MMA.

In the fourth quarter, ¥5.1 billion loss to ¥4.2 billion profit, and also ¥2 billion 200 million loss in Q2, what was the results in Q1 and assumption for Q2 compared to the current situation if you can tell us that? As for operation capacity operation, the Saudi Arabian plant, you have suspended the operation in Q1 and you expect this to continue.

What about the capacity utilization in other plants in Q1 and Q2? With regard to conditions for restarting Saudi plant, you said that the missiles are flying and you cannot really restart the plant, but what would be the condition to enable you to restart the plant in Saudi Arabia?

Last question is about structural reforms. Maybe something there is something that you still have some study on, can you explain as much as you can disclose?

Thank you.

From first quarter to second quarter, how the changes have been how the prospect has been changing? The way we look at the spread has been changing.

In the first quarter, generally speaking, the IC Asia has exceeded $2,000, and last year, throughout the year, $1,400, especially toward the fourth quarter, it was even lower. The naphtha prices were lower, obviously, it's not just the product prices, but the product prices has been higher in the first quarter.

That was a big factor. In the second quarter, this is expected to decline significantly.

If you look at the IC more recently, $1,600 to $1,700 level is the one that we are looking at. Also, there's one step lower in China.

In the first quarter, we were easier, but we cannot have that much easy prospect in the second quarter. As for capacity utilization, as I said, in Saudi Arabia is in the situation that I stated, it's been suspended.

For others, there's some difficulty in securing raw materials, especially in Southeast Asia and part of Chinese sites, we were forced to reduce capacity utilization. In China, in the petrochemical, our businesses in upstream, there are two plants in China, one in Shanghai, ACH, and also acrylic, and also Kaishi plant, the CNOC cracker derivatives.

We are not sure what is going to happen to those sites yet. In second quarter, it's very difficult to tell what will be the capacity utilization, but we at least we are not expecting significant improvements, so that's the assumption that we have incorporated in this prospect for second quarter.

What are other questions?

Structural reforms and the conditions to restart Saudi Arabian plant.

Conditions for Saudi Arabian plant, we cannot really specify the condition because we don't know what is going to happen, and at least if either side is flying missiles, it is out of question to restart the plant. Permanent ceasefire, it has to be there in order to restart the plant.

As for the structural reforms, we are making steady progress, and at least for the moment, we have withdrawn from the joint venture in Taiwan. We are the subsidiary of the Taiwan, we have shown that we're going to sell the shares in this.

What about India?

We have to also reconsider what is we are going to do in the US. Please give us more time.

After that, we can share with you some more specific measures.

Q2 market prices as about $1,600 to $1,700, is that assumption that you're using?

Yes.

As for capacity utilization, you are assuming that there's no change in Q1 and Q2. Profit is going to decline because of the market price decline, is that correct?

Yes, correct. It's not just a price, but the spread is going to change.

The capacity utilization is not going to change from Q1 to Q2, everything else with the spread is going to worsen and that is going to be reflected in profits.

Yes. Thank you.

Thank you very much. I am Umebayashi from Daiwa Securities.

I'd like to ask about films and performance materials, changes on Q-on-Q basis. Fourth quarter to first quarter, I understand the impairment losses is gone, and the actual revenue increase against 10 billion, and the profit is about 10 billion increase.

If you look at first quarter to second quarter guidance, revenue is going down by 9 billion, and profit is going to go down by about 7 billion. I think the profit changes is substantial compared to the changes in the revenue.

Yamada-san earlier in the Q&A asked about the inventory level intentionally being curbed in the second quarter after its increase in first quarter. Other than that, maybe trade terms, maybe some of the cost higher cost of materials is not going to happen in second quarter versus first quarter, for example?

Thank you.

You talked about the fourth quarter of previous fiscal year, but if you look at the changes from first to second quarter this year, I understand your question is mainly the difference between first to second quarter this year, let me answer based on that assumption. We do expect some level of reactionary decline.

Films and performance materials, we have very broad customer portfolio. We do have some automotive, we have some electrical, and also dial-up, it's a wrap for food packaging.

We do expect some reactionary decline in various areas. Another one is display related.

We had very strong results in the first half because when there's sports event, TV sells very well, and the World Cup had impact as well. For the display, in the second quarter, we expect to settle.

That would be the major factors that I can think of. Overall the volume is expected to go down, and the highly profitable liquid crystal is going to go down, and you expect to control inventory.

MLCC, the demand is quite strong, and we did not really expect this decline in the second quarter from the first quarter. What you just mentioned, or what other people mentioned, is pretty much going to happen from the first to second quarter is as shown in the numbers.

Thank you very much.

Thank you very much,

Nishiyama from Citigroup Global Markets Japan. I'd like to ask about information electronics and Q1.

Especially semiconductor profits seems to be quite strong, what is the background behind this strength? Was there any one-time factors?

From Q1 to Q2, Q-on-Q, as information electronics, there was a slight increase in profit, but there is going to be a slight increase in revenue, but big decline in profits. What is the background behind this?

Thank you very much. As for information electronics, as was said in the previous question, synthetic silica and cleaning business for semiconductor, those were very strong.

From Q1 to Q2, was there any is there going to be any major drop? I wouldn't expect that.

From Q1 to Q2, what is going to decline, then partially the spread is going to deteriorate rather than sales price decline, but raw materials price is catching up and spread will contract. There was some special factors in Q1, and there was not a panic buying, but is very with detailed gallium gallium nitride, well, so far was in the incubation initiatives, it's just accounting processing, but we're not posting any sales.

It's just expenses that were posted, but from this fiscal year, we are expecting very much on gallium nitride. From this fiscal year, we're going to recognize sales for gallium nitride products, and at the same time of recognition of sales, the inventories for sales will be posted in the first quarter, so that would be the profit that we can get from the posting this in the inventory in the first quarter, but that is gone in the second is going to gone be gone in second quarter.

There's some special factor in account accounting process in the first quarter. With regard to commercial environment, like volumes and prices to customers, between first quarter and second quarter, there's not major no major change.

The what happened in the first quarter is expected to continue in the second quarter.

As for the special factor for first quarter, is it going to be worth ¥1.5 billion, and in the second quarter profitability will decline from this first quarter, but if you look at the guidance from the first beginning of the fiscal year, the profitability is still higher, profitability improvement is progressing, is that correct?

Yes.

So ¥1.5 billion worth for special factor?

No, not that much, but we cannot disclose any detailed numbers. Thank you.

Thank you very much for joining our earnings presentation today amid your busy schedules. I know the hot weather is continuing, and I was answering all your questions, and I'm very hot, I apologize, but I had to take off my jacket.

The first quarter results were strong compared to our initial outlook, although uncertainty remains ahead. We will continue working as one group to meet stakeholder expectations.

We will continue to make efforts, we will continue to make improvements, but in the first quarter, we had unexpectedly good results, partly due to TI, and we hope to have this strong performance as a result of our efforts, and we'd like to seek your continued support. Thank you very much.