Good afternoon. This is Kuraray President Kawahara. Thank you very much for joining us at the Kuraray Group's financial results briefing and midterm management plan briefing. We very much appreciate your being here with us. Against the backdrop of COVID-19 still being prominent, we have decided to hold this meeting online. I'd like to begin by explaining the financial results for the full fiscal year 2021. Please see page two. In fiscal year 2021, economic activities were stimulated by the easing of behavioral restrictions related to COVID-19, mainly due to the progress of the vaccination rollout. The economic recovery trend continued in all regions of the world. In most of our business domains, we have successfully captured the recovered demand. As you can see in this slide, net sales increased by JPY 87.6 billion year-on-year to JPY 629.4 billion. Operating income increased by JPY 27.9 billion to JPY 72.3 billion. Net income increased by JPY 34.7 billion to JPY 37.3 billion. Sales and profits both increased significantly. Net sales turned out to be the record high in our history. The next page three shows the major initiatives that made progress in fiscal year 2021. All of these measures will continue being executed even in 2022 onwards, and will be explained in detail in the next part on the midterm management plan. Please see page four. This slide shows the actual sales and operating profit of each segment in comparison with the previous year. Despite significant increases in raw material and a few prices and logistic costs, due to sales increase and negotiations on selling prices in response to rising costs, sales and profits increased in all segments compared to the previous fiscal year. Please see page five. Here onwards are the business situation by segment. Please refer to the comments on the right side of this page for the sales status of each business. In the Vinyl Acetate segment, although EVAL and PVB film businesses were affected by the reduction of automobile production in the second half of the year, overall sales were strong, with a generally solid recovery seen in demand. Although raw materials and fuel prices have soared in all businesses, and our logistic costs rose significantly, increased sales and price negotiations resulted in increased sales of JPY 47.6 billion and operating income of JPY 16.9 billion over the previous year. Next is page six. In the Isoprene segment, the impact of higher raw material and fuel prices and logistics costs was a factor in the decrease in profits in raw materials, fuel and exchange, and others. Sales increased by +JPY 11.6 billion, and operating income increased by JPY 1.9 billion due to increased sales and progress in price negotiations in all businesses of refined chemicals, elastomers, and GENESTAR. Page seven. Sales and profit in the Functional Materials segment both increased due to expanded sales of new products launched in medical and dental materials, and the increased sales of activated carbon used mainly in water treatment applications in Europe and the U.S., grown even in the COVID-19 situation. Page eight. In the Fibers and Textiles segment, sales of CLARINO for footwear applications, industrial use of KURALON and VECTRAN recovered and expanded, offsetting the delay of the demand recovery of KURAFLEX, and resulted in an overall increase in both sales and profit. Page nine. This slide shows the operating profit bridge, elaborating on the increases and the drops of the various factors. Due to the sharp rise in raw material and fuel prices in the second half of the year, the coverage ratio by sales price and composition for fiscal year 2021 remained only 55%, but we will continue to negotiate prices through 2022 to improve our coverage ratio. Page 10. This is the cash flow and key indicators of the fiscal year 2021. Page 11. In this slide, the balance sheet is compared to the end of last year. Total assets increased by JPY 39.4 billion compared to the end of the previous year, but the impact of the exchange rate was over JPY 40 billion. Setting that aside, the level was similar level to the previous fiscal year-end. The capital adequacy ratio at the end of the fiscal year increased by about 4.0% from the end of the fiscal year and was 51.3%. Page 12 now. On this slide is the full year earnings forecast for fiscal year 2022. As assumed, the exchange rate is set at $1 = JPY 110, and EUR 1 = JPY 130. Domestic naphtha is priced at JPY 58,000 per 1 kiloliter. As shown on the slide, net sales is expected to increase by JPY 20.6 billion to JPY 650 billion. Operating income is projected to increase by JPY 0.7 billion to JPY 73 billion. Net income is expected to increase by JPY 5.7 billion to JPY 43 billion. Assumptions for capital expenditures, depreciation, amortization, and research expenses are as shown on the page. Page 13. This slide shows the operating income bridge, elaborating on which factors impacted how much the comparison of 2021 and 2022. We will continue to negotiate prices to cover the increases in raw materials, fuel prices, and the logistic costs, all of which rose significantly in 2021. We expect to see a profit increase of JPY 23.1 billion with the factor sales price and composition. On the other hand, we assume that raw material and fuel prices will continue to be high, higher than the 2021 levels. That explains the raw materials, fuel, and foreign exchange, giving JPY 24.8 billion drop in profit. + JPY 11.8 billion due to the volume of factors, - JPY 9.4 billion due to the other factors, mainly logistic costs. The total increase is expected to be JPY 700 million. Page 14. This slide shows the forecast of 2022 compared to 2021. From fiscal year 2022, the company will adopt the accounting standard for revenue recognition, and there will be segmentation changes in the AQUA business. The main reason for the large decrease in sales in the Trading segment for fiscal year 2022 is that sales of proxy transactions in the Trading segment are the net amount instead of gross transactions with the adoption of the accounting standard for revenue recognition. Page 15. This slide is by segment operating profit bridges elaborating which factor is impacting how much. The fibers and textiles segment is forecasting a decrease in profit due to the significant impact of the sharp rise in raw material and fuel prices and our logistics costs. We will continue to negotiate prices and then, by increasing the coverage ratio more than planned, improve profitability. Page 16. This page is about shareholder returns. For FY 2021, we have decided to pay an interim dividend of JPY 20 per share. The company plans to pay a year-end dividend of JPY 20 per share, hence the annual dividend of JPY 40 per share. For FY 2022, we plan to pay an interim and year-end dividend of JPY 21 per share each for a total annual dividend of JPY 42 per share. In addition, as part of its capital policy, the company will purchase up to 11 million shares, JPY 10 billion worth of its own stock in fiscal year 2022. Page 17 onwards contains detailed numbers. Please refer to them as necessary. This is the end of our fiscal year 2021 financial results reporting. Next, let us go on to the announcement of our new medium-term management plan. Next, let me share our new medium-term management plan, which started rolling from this fiscal year. This medium-term management plan covers the period up to 2026, the year in which our company will celebrate its 100th anniversary. We have named this new medium-term management plan of ours PASSION 2026. We plan to depart from the rather closed-in thinking and behaviors the pandemic forced us to have. E very employee of the Kuraray Group will hold passion at our core, and we, as a collective, will unite our sense of mission in realizing our vision. The first is the Kuraray Group's aspirations. I'd like to first introduce the very roots of Kuraray. Kuraray was established in Kurashiki, Okayama Prefecture, in 1926 with the aim of manufacturing rayon, an artificial silk material. Magosaburo Ohara, the founder of Kuraray, said all the wealth gained from society should be returned to society. While running his business, he worked to improve the working environment for his employees and to provide medical care and welfare, and provided services to local residents and communities. He focused on what is now called a wide range of stakeholders and conducted management based on his philosophy, which was, in essence, a CSR practice ahead of time. Soichiro Ohara, the second president of the company, said any profit that a company might gain should be confined to those profits that come from technological innovation and from consideration of the social and economic benefit it brings to the entire nation. After the Second World War, when supplies were scarce, Kuraray decided not to rely on imports, using only raw materials available in Japan at that time, and industrialized the first purely domestically produced synthetic fiber, KURALON. Later, we developed CLARINO man-made leather to replace natural leather and commercialized it. We have always been committed to solving social issues through our business activities. As shown by the words and the deeds of the founding family, Kuraray has been consistently tackling social and environmental issues head-on. This attitude has led to the originality and challenging spirit of the Kuraray Group today and has been an essential part of our DNA. We will continue appreciating in this very root of ours, and will continue to solve social issues throughout our business activities, heading towards our 100th anniversary and beyond. To further contribute to the realization of a sustainable society, we have formulated our long-term sustainability vision. As shown here, as a sustainability leader, Kuraray will develop innovative solutions with unique products and cleaner technologies to improve the natural environment and enhance the quality of life for people everywhere. In addition, in order to steadily advance these sustainability activities, we have set up a system this year where the CSR committee is now the sustainability committee under the direct control of the president. It will periodically report to the board of directors in this new structure. We're committed to addressing the issues that society wants to see solved. Kuraray identified the following five as its materiality. One, improving the natural environment. Two, improving the living environments. Three, effective use of resources and reduction of environmental impact. Four, improving supply chain management, and five, building a company that people can take pride in. In order to solve these material issues, we have established six project teams under the sustainability committee and promote their activities. As one of the initiatives of the sustainability long-term vision, let me explain our actions to reduce greenhouse gas emissions. The Kuraray Group has a 2050 carbon net- zero goal and has started taking actions for it. The next is our roadmap for greenhouse gas reduction and intermediate goals. The base year will be 2019. This is coming from the fact that our current business operation scale is being established with the 2018 Calgon Carbon acquisition. It's also because we consider 2020 not an appropriate year to be the base, with economic activities stagnated in that year due to the pandemic. The group is currently expanding its facilities in line with its business expansion. With the operation of these new facilities, the amount of greenhouse gas emissions will temporarily increase. However, by introducing and combining various efforts such as energy-saving investment, process improvement, transition to renewable energy, and CCUS, we aim to reduce greenhouse gas emissions by 30% from the 2019 level before 2030. In order to reduce greenhouse gas emissions, the company is scheduled to make around JPY 80 billion in capital investment by 2030. The amount of investment during the PASSION 2026 period is planned to be JPY 30 billion. During this period, we will actively promote the development of technologies to further reduce greenhouse gas emissions. In addition to adopting technologies and reduction efforts internally, the company will keep monitoring the technological development trends around the world and collaborate with other companies where feasible. The capital investment that will lead to further reduction will be brought ahead of schedule as much as possible. Detailed roadmap after 2030 is difficult to be elaborated at this timing, as it may depend on the technology trends and infrastructure conditions of our premises. We aim to achieve net zero carbon emissions by 2050 with the efforts of shift of energy sources and adaptation of new technologies and new energy sources. Our company's carbon net zero scope includes the greenhouse gas emission of Scope 1 and Scope 2. Next, let's take a look at Kuraray Vision 2026. Kuraray Vision 2026 was originally announced with the previous mid-term management plan, PROUD 2020. This time, we have added the message, "Contributing to customers, society, and the planet," to its content. We are now identifying ourselves as a specialty chemical company contributing to customers, society, and the planet, and growing sustainably by incorporating new innovation platforms into our own technologies. We now have an even clearer picture of what Kuraray Group strives to be. To achieve Kuraray Vision 2026, every one of our employees will work with passion and enthusiasm to make actions as stated in the new mid-term management plan, PASSION 2026, happen. The upper left-hand side shows our mission. We are committed to developing new fields of business using pioneering technology that improves the environment and enhances the quality of life throughout the world for people and the planet to achieve what no one else can. This is Kuraray Group's unchanged mission. For all employees to act with a passion to realize our goals, it is critical that Kuraray is a safe and secure workplace for people to work. Safety is the cornerstone of everything we do, is our guiding principle presented in our values. This is the foundation of every activity we conduct. Next, let me talk about the Kuraray Group's business portfolio for achieving our vision. We're a specialty chemical company, and our strength is in intermediate materials. To further improve our corporate value and for sustainable growth, what is critical is to bring out the maximum potential of such materials. This slide shows that image of how that can happen. While adapting to the mega trends and environment changes as presented at the center, with things like improvement of global environment, effective energy use, improvement of quality of life, we will continue reinventing the combination of product materials, the usage, the region, et cetera, and we will shift and expand the large and small circles on the left-hand side to the right-hand side, and as a result, upgrade our portfolio. More specifically, what we will do is to refer to the two axes. One, the quantitative criteria economic value, and then two, social environmental value, which is a combination of quantitative and qualitative criteria. There, we conduct business evaluations and decide to actively expand, maintain, downsize, or withdraw depending on business conditions. On the right-hand side of the slide are the representative examples of businesses and products for which we will focus resource allocation. We will proactively allocate resources to businesses and products that contribute to growth. The details of these businesses will be explained in the business-specific strategies later on in this presentation. Next, let me explain the three challenges stated in the medium-term management plan, PASSION 2026. We have set three challenges dubbed as our challenges in PASSION 2026 for the Kuraray Group to continue to grow in the coming ages, where the prediction of mid- to long-term economic trends and external environmental changes in extremely difficult. The first concept is sustainability as an opportunity. We will work together to make sustainability activities as our great opportunity and succeed as a group. The second concept is innovation starts with networking. We will create new growth drivers by connecting people to people and technology to technology, both outside and inside the company. The third concept is a transformation of people and organizations. We change processes with digital, expand the range of ideas with the diversity, and bring about changes in people and organizations. Through these three challenges, the Kuraray Group strives to be a company that grows sustainably, being needed by society. Let me talk a little more in-depth around the first concept, sustainability as an opportunity. Based on our sustainability long-term vision introduced earlier, we have formulated a midterm sustainability plan, which runs up to 2026. For the materiality that Kuraray Group has identified, the directions we should take are explained with the three Ps, planet, product, and people. We will promote the sustainability midterm plan and contribute to the natural environment and people's enriched life in various situations, aiming at the fourth P, prosperity. There's a social prosperity. In the following pages, you will see a few specific examples. First is a planet. This is connected to improving the global environment. We will implement measures to address the climate change issues. TCFD, Climate-Related Financial Disclosure Task Force, will implement roadmap actions without fail and move ahead with the phased disclosure process. We will also proactively seek opportunities to move up the information and disclosure schedule. Regarding SBT, Science-Based Targets, we aim to obtain a certification for up to 2024 by setting a Scope 3 reduction goal. In order to promote company-wide reduction on greenhouse gas emissions, we will utilize internal carbon pricing. The price is set at JPY 10,000 per metric ton of CO2, and it will be incorporated in our capital investment and business evaluations. Next, let's look at the product element, the pursuit of innovation through sustainable products. The details are shown in the slides, but we have set five target areas in line with the mega trends. Those five include improvement of the global environment, the securing of food and water. We will contribute to the improvement of the natural environment and the people's living environment by expanding sales of Kuraray Group products in these areas. To expand our sales of Kuraray Group products in those five target areas, we have adopted PSA, Portfolio Sustainability Assessment, an objective product portfolio evaluation system. The PSA is an evaluation index that is being adopted largely by European chemical manufacturers. Products that contribute to the Kuraray Group's materiality are categorized by application and region, and each category is evaluated on a five-point scale based on criteria such as laws and regulations, relative evaluation to benchmarks, and economic value, with the top two- ranked products being PSA contributing products. As of 2020, the percentage of PSA contributed products to total sales was 46%. 16% being products contributing to the natural environment, 30% products contributing to people's living environment. PSA contributing product percentage goals for the PASSION 2026 period are 55% by the end of 2024, 60% by the end of 2026. Here on the slide, let us introduce some of our products. One, those contributing to the natural environment. Two, those contributing to people's living environment. In the center of the slide, activated carbon, which contributes to water and air purification. EVAL, which contributes to the reduction of carbon burden in the logistics system and food loss. The bio-derived PLANTIC is contributing to both the natural environment and people's living environment. Products that contribute to the improvement of the natural environment include KURALON, which is used as a substitute for asbestos, and liquid rubber and fiber products made from bio-based and recycled materials. Products that contribute to the improvement of people's living environment include dental materials that help reduce the burden on dentists and patients. VECTRAN, which contributes to faster communications. GENESTAR, a heat-resistant polyamide resin that helps reduce the weight of EVs. Let's go now to the people. Creating a great workplace. The Kuraray Group has been expanding its business globally, including through mergers and acquisitions since the early 2000s, and this has led to the development of diversity, and we have personnel of various nationalities and backgrounds. The entire group has more than 11,000 employees. 40% of them work at bases located outside of Japan. We would like to bring the best of our great talent and create a variety of innovations by having each of these diverse human resources be ambitious and interact actively with each other. The first major initiative to achieve is the development of a consistent HR infrastructure. We will establish an integrated global grade system for managers and build an HR database to visualize HR assets so that we can maximize the efficacy and efficiency of our HR strategies. Second is optimized placement and facilitation of personal growth, and ensuring global mobility. This is an expatriation system that spans countries and group companies. In addition to dispatching employees from the head office to overseas group companies, we support the career development of individuals and the efficient operation of businesses by promoting active exchange of talents across group companies, so many coming from overseas subsidiaries to the headquarters, and also between subsidiary companies. Thirdly, challenge a welcoming organizational culture. We will develop a personal evaluation system that encourages taking challenges proactively and promotes and instills diversity and inclusion. In this section, the targets for ensuring the diversity of core human resources are presented. The total ratio of women, foreign nationals, and mid-career hiress in management positions is to be elevated to 25% by the end of 2030, from the 12% level of 2021. Remote working has already taken root in our group with the pandemic influence, and we continue to enhance our work system to support the diverse work style people desire. Let's now go to the second concept. Innovation starts with networking. The Innovation Networking Center was established in January 2022 with the aim of creating innovation and solving social issues by connecting people and technology both inside and outside the company. The Innovation Networking Center will function as an organization to promote internal and external collaboration. It will promote cross-divisional and global collaboration between internal business units and marketing, R&D, and production technology departments across organizational boundaries and by working closely with our customers and partners, create value by identifying and solving problems for our customers. By leveraging the Kuraray Group's diverse human resources in Japan and overseas, its technological capabilities that have produced many unique products, the relationships with the society, customers, and markets that it has cultivated over the years, and our comprehensive strength, we will accelerate the creation of innovation by fully utilizing external resources such as external research institutions and digital technologies. This slide shows our R&D efforts. During the PASSION 2026 period, we will develop products that support the growth of each business and promote R&D that contributes to sustainability. We plan to spend JPY 150 billion on R&D over the next 5 years with the three major initiatives. The first is to develop from the customers' perspectives. The Innovation Networking Center, as I mentioned earlier, can discover unmet needs in the market through collaboration and dialogue with customers. In addition, we aim to develop new businesses and products by responding to latent needs and the demands that even customers themselves are not aware of. The second is development that contributes to sustainability. We see sustainability as an opportunity to develop materials that contribute to the improvement of our natural and living environments and provide solutions to the world. We will promote the development and expansion of products that contribute to waste reduction, health, beauty, and wellness, bio-based materials, and biodegradable products. We will also accelerate the development of technologies for CO2 capture, fixation, and utilization in line with our company-wide policy for greenhouse gas reduction. In January 2022, we established The Environment and Energy Research Laboratory to strongly promote research in these environmental and energy-related areas. The third is the planning and promotion of intellectual property strategies. The IP Management Center, which was established in January 2022, will play a central role in supporting the intellectual property strategies of each business unit, as well as planning and promoting a globally integrated intellectual property strategy. This slide shows the direction of research and development, showing the issues that we can contribute to solving in each target area. The first target area here is to address mega trends related to improving the global environment and securing food and water. For instance, we can use our unique absorption technology to contribute to issues such as water and air purification. We're already contributing to this field with activated carbon and hollow fiber membranes. We are working to add value by developing products with even higher performance and products using bio-based materials. We will also work to contribute to the prevention of global warming through the development of technologies to absorb and separate greenhouse gases, and to improve agricultural productivity with products related to insect control and seed coating, thereby contributing to food security. The next slide shows the target areas for mega trends related to digitalization and communication, effective use of energy, and improvement of quality of life. Currently, we're seeing the development and evaluation of materials for the practical use of components that enable high- capacity, high-speed communications being underway. The material is lightweight, durable, and increases power generation efficiency, which may contribute to the promotion of renewable energy, such as offshore wind power generation and medical products that have a low burden on patients and doctors, which can contribute to improving the quality of life. In addition to allocating management resources intensively to businesses and products related to these areas, we will also consider M&A and alliances with other companies to expand existing businesses and create new ones. The third concept is the transformation of people and organizations. The Kuraray Group has formulated a new digital transformation vision to improve competitiveness, continuously evolve, and contribute to the world as a digitally savvy company. In order to promote digital transformation at the management level and realize our digital transformation vision, we established The Global Digital Transformation Office in January 2022. The first step is to think and then make decisions based on data to realize a data-driven organization and to improve the digital literacy of our employees. Although we have just begun our comprehensive efforts, we're promoting digital transformation as a company-wide management initiative, aiming to become a digitally savvy company, a company that uses digital technology at its disposal. We will work on the four priority areas listed in the slide for this. Here comes our business goals. This page shows the targets for net sales and operating income. The actual results for 2021 were net sales of JPY 629.4 billion and operating income of JPY 72.3 billion, as explained earlier in the FY 2021 financial results reporting. In 2026, the final year of our midterm management plan, PASSION 2026, we aim to achieve net sales of JPY 750 billion and operating income of JPY 100 billion. Please refer to the outside of the column for the exchange rate and the domestic naphtha assumptions used for the subject period. This page shows net sales and operating income by segment. The key measures for each segment will be explained later in the respective business strategy section. Kuraray Group will apply the accounting standard for revenue recognition, ASBJ Statement No. 29, from FY 2022. As a result, in the Trading segment, the amount of sales of principal trading will be changed from a gross amount to net amount, resulting in a significant decrease in sales. There'll be no impact on our total sales because there will be larger adjustments. During the PASSION 2026 period, we will manage our business with an awareness of capital efficiency and increase our ability to generate cash. Our targets for fiscal year 2026 are ROIC of 8%, EBITDA of JPY 170 billion, and ROE of 10%. In addition, as non-financial indicators, we have set KPIs for the reduction of greenhouse gas emissions, the ratio of sales of our PSA-contributing products, and the diversity of our core human resources, which I have explained earlier. Next is the capital investment plan. During the five years of PASSION 2026, we plan to invest a total of JPY 380 billion, mainly in growth and strategic investments, including investments to reduce greenhouse gas emissions. Major projects planned include the construction of a new EVAL plant, expansion of optical and water-soluble POVAL film, expansion of the VECTRAN production, and expansion of dental materials production. In order to ensure safe and stable production and high quality, about 40% of the investment will be allocated to maintenance and renewal. Operating cash flow for the five-year cumulative period is expected to be JPY 600 billion. As explained on the previous page, capital investment is planned to be JPY 380 billion on a decision basis. We plan to invest JPY 30 billion in greenhouse gas emission reduction, and we will bring forward the investment project scheduled for 2027 and beyond as much as possible based on the trend of technology development. Assuming JPY 100 billion as funds for M&A, we will consider expanding our business with our focus on allocating resources to businesses such as high- functional plastics, dental materials, and carbon materials. The next page is the shareholder returns. As in the previous midterm management plan, PROUD 2020, our policy for shareholder returns is to maintain a total return ratio of at least 35% and an annual dividend of at least JPY 40 per share. Another policy of ours is to implement share buybacks in a flexible manner. For fiscal 2022, we plan to pay an annual dividend of JPY 42 per share, as explained earlier in the financial results part. In addition, we will implement a share buyback of up to JPY 10 billion or 11 million shares. Kuraray will continue to aim for earnings growth and enhanced returns to shareholders. Now, let's take a look at strategies of each business segment. First, let's look at each business in a vinyl acetate segment. For details of each, please refer to the document. The strength of the vinyl acetate segment lies in its vertically integrated value chain, which starts from raw materials and is produced in-house, as well as its global supply chain. We have earned the trust of our customers by continuing to provide a stable supply, even during the global logistics disruptions that began last year. In addition, we will strengthen our supply capacity and streamline costs in order to further strengthen our strong businesses, such as optical use POVAL film and water-soluble POVAL film, where we have a strong competitive edge. On top of that, we will further strengthen our value chain by optimizing our global logistics network. In water-soluble PVA film, we will continue to expand volume further based on our strong partnerships with the customers and develop new applications. With the stable start-up and expansion of the new production base currently under construction in Poland, we're aiming for an average annual growth rate of 8% throughout the period of this midterm business plan. Next is the Isoprene segment strategy for each business. Again, please refer to the document for details. In the Isoprene segment, the most important issues are to steadily establish a base in Thailand for further business growth and to develop a global operation system to contribute to earnings as soon as possible. Although there were some delays due to the pandemic, the construction of the Thailand base is progressing more or less smoothly. According to the latest estimates, trial operation will start in the second half of this year, and a full-scale operation will start subsequently, although the timing may vary slightly depending on the product. Immediately after the start of operations, the burden of depreciation will increase significantly, which will put temporary pressure on operating income. However, by increasing the utilization ratio through export sales expansion and expanding value-added products, in 2026, the final year of this medium-term management plan, we plan to achieve segment sales of JPY 90 billion, operating income of JPY 10 billion, and develop this business into a core business that supports the Kuraray Group. GENESTAR™ has been highly evaluated for its characteristics, and its use in automotive parts is rapidly expanding in addition to its traditional mainstay use in the electric and electronics fields. With the start of operations at the Thailand base, we now have a supply system with the three bases, including two in Japan. Including sales, marketing, and technical services, the network will consist of 13 bases worldwide. Through our global support system, we will further promote the development of applications that take advantage of the materials' characteristics, which will lead to the second phase of expansion in Thailand. The next is the strategy of the business in the Functional Materials segment. As a comprehensive manufacturer of activated carbon, we offer a lineup of new and recycled carbon derived from a variety of raw materials. We also have the ability to comply with environmental regulations based on our extensive experience in Europe and in the United States. In addition to these strengths, we're developing a number of new themes through new initiatives with our corporate research centers. The virgin carbon production site in the U.S. and the reactivated carbon facility in Belgium, both of which are currently being expanded, are scheduled to start operating in the first half of 2023, and are expected to generate synergies of JPY 10 billion by 2026 by capturing growing demand and expanding new applications such as materials for energy storage devices. Let me elaborate here on the activated carbon and the recycled carbon business that contributes to the circular economy. This is a business in which we ship our activated carbon to industrial users, collect the used activated carbon, reactivate it, and then supply it again to the users. This results in an 80% reduction in CO2 emissions during production compared to new carbon. On the user's side, there is no need to dispose of user-used activated carbon, which also brings cost benefits. This business is currently being developed in Europe and the United States, and we will further expand it there as well as in Asia in the future to contribute to the circular economy. The following is an explanation of our dental materials business. In the dental materials business, we aim to reduce the burden on dentists and patients and contribute to disease prevention and treatment of the elderly. In addition to expanding the range of products centering on zirconia, an inorganic material that combines aesthetics and strength and enables shorter treatment times in the medical field, we will continue to develop materials with high biocompatibility and other products. We will also strengthen marketing in Europe and the U.S. to raise awareness of our products, which are unique and superior, for further expansion. Now, businesses in the Fibers and Textiles segment. For details, please refer to the document. In the CLARINO sphere, the demand for sustainable products is becoming stronger, especially among high- brand customers in Europe and the United States who are highly environmentally conscious, and the adoption of corresponding products is expanding. In addition, the global trend toward animal welfare and veganism is growing, and hence we expect a steady growth in demand here too, along with a sustainable product. In the field of Fiber Materials, VECTRAN is expected to expand significantly at a CAGR of 10% through the development of applications that take advantage of the characteristics of liquid crystal polymer fibers, such as high strength, low water absorption, dimensional stability, and abrasion resistance. In response to the increase in sales volume, we will consider the next stage capacity expansion. Finally, the Trading segment. The Trading segment is the business of the group company, Kuraray Trading Co, Ltd. Here, in addition to expanding our trading company functions to handle Kuraray Group products, we will strengthen our earning power by adding more value through the expansion of our original products in the processing business. We will also aim to expand overseas sales, particularly in Asia, by utilizing our sewing machine factory in Vietnam. This concludes the sharing of our medium-term management plan, PASSION 2026, which begins this year in 2022. The following pages are appendices for your reference. We, Kuraray Group, will realize our vision as a collective of individuals who hold passion at their core. Thank you very much for joining us here today. Prior to answering your questions, let us provide the growth rates of major products that are often asked in this kind of event. It will be explained by Takizawa. Mr. Takizawa, please. Hello, this is Takizawa of IR Department. Thank you very much to all of you for joining us today. As [Kawahara quickly introduced, as we are often asked, I'd like to give the figures for the growth rates of the major products upon our starting this Q&A session. This will be about major sub-segments. First of all, I will share the growth percentages from FY 2020 full year to 2021 full year. Then the second half will be the expected growth percentage between 2021 full year actuals and the 2022 forecasts. First, from 2020 to 2021, POVAL film for optical use, plus a little more than 10%. Water-soluble PVA film, the same, plus a little more than 10%. PVB, these two, plus a little more than 10%. EVAL, a slight plus. POVAL, plus around 15%. Elastomer, plus a little more than 10%. GENESTAR, plus a little shy of 30%. Now from FY 2021 actuals to FY 2022 forecasts. In the same order. POVAL film for optical use, flat. Water-soluble PVA film, plus a little shy of 10%. PVB, plus a little more than 5%. EVAL, plus a little more than 5%, the same level. POVAL, flat. Elastomer, a slight positive. GENESTAR, plus a little more than 5%. This is it. Thank you. We will now begin the question- and- answer session. First of all, Mr. Watabe of Morgan Stanley MUFG Securities, please. Hello, this is Watabe from Morgan Stanley. Thank you very much for your explanation. I'd like to ask you one question about medium-term business plan and another one about the financial results. In the area of isoprene chemicals, I heard that the project in Thailand is finally going to start up in the second half of this year. I'd like to know the investment amount for the project. Currently, I see operating profit margin is around 10%, and I see sales to be up by JPY 30 billion by 2026, profit by JPY 4 billion-JPY 5 billion. I guess the incrementals are coming from the Thailand project, but the profitability of the project in Thailand looks a little high. I believe the competition is fierce in the styrenic thermoplastic elastomers and other areas. Could you give me more details on which raw materials you would be advantageous with? More details of Thailand project, please. Maybe there's a situation of GENESTAR being okay because you're the only one providing something of that kind. Well, thank you for your question. This is Takizawa. First of all, the investment amount for the isoprene related project in Thailand is around JPY 60 billion, as we have explained in the past. This has not changed. Although some of the projects will start from the end of 2022, most of the projects will start from 2023, and the depreciation burden will be booked from 2023, more or less. As you mentioned, the increase in the sales and profits in the Isoprene segment is largely due to the project in Thailand. The start of the project in Thailand will give us some extra capacity for the plants in Japan, and we should be able to promote the development of new products using the freed- up capacity. The incremental is not solely coming from Thai project. I won't be able to explain the detail of that here today, but that is what we are planning. I hope this is answering your question. Is there any situation of a competition to be tough, especially with regard to thermoplastic elastomers, et cetera? Well, as you mentioned, there are some difficult competitive situation regarding thermoplastic elastomers. In Thailand, we're thinking mainly producing butadiene elastomers. With our relationship with our partners or suppliers, we should be able to obtain an inexpensive butadiene and selling products using that. Got it. Thank you very much. The second question on the financial results. Numbers landed higher than initially projected. What was the reason behind the upward revisions, including the inventory factors maybe, and some extraordinary losses, such as the loss and the suspension of operations that I cited? Right. Thank you for your question. Taga will answer. Overall, as I explained at the beginning of the report, the overall business was generally good. Regarding the item you pointed out, we did include a loss of over JPY 1 billion in Q4 due to the shutdown of operations. We found problems with some of the infrastructure equipment at our domestic factory during regular inspections, and we had to do maintenance work on them, and it took a little longer than expected. Of course, we consulted with our accountant about how to record the loss, and we handled it appropriately. Nevertheless, not only the operating income, but also the bottom line has gone up as well, hence the overall increase in profit. I hope this is answering your question. Was it the shutdown of the Functional Materials lines? No, it's the infrastructure, so it's not one business, but rather impacted across different business domains. Right. So it spans the segments? Exactly. Understood. Thank you very much. All right. Thank you. Question two. Next, Mr. Okazaki of Nomura Securities, please. All right. Hi, this is Okazaki of Nomura Securities. I have two questions. The first is on the thinking around the midterm management plan. On page 31, you're discussing investment and M&A. Until now, I believe, you had some PMI issues of it taking rather long time. Having had that up until now, what kind of investment discipline you are applying is what I'd like to hear going forward? The second question, the President talked a little bit about increasing capital efficiency already and, having selection of businesses, asset-light way of conducting business. What are your thoughts on that is what I'd love to hear a little more. Right. This is President Kawahara. Thank you for your question. On the midterm, page 31, we have mentioned JPY 380 billion CapEx for the total of five years, greenhouse gas reduction related amount for JPY 30 billion. In terms of a regular CapEx, non-GHG reduction CapEx, it's JPY 350 billion in five years. That's basically within depreciation range. During the period of PROUD 2020, including in fiscal year 2021, we had a Calgon Carbon acquisition, its expansion, the large- scale acquisition and investment in Thailand for isoprene. For the next period, PASSION 2026, I guess we first need to make sure that these initiatives from PROUD 2020 be up and running and that they contribute to earnings. That will be the foundation. During the next phase, we will surely be doing maintenance and renewing of the facilities and make necessary additions. Basically, we will be a little more rigid or rather conservative. We will invest in facilities within the depreciation scope. I wouldn't call it a discipline, but that's our guiding post. Having said that, as I mentioned in the sustainability long-term vision, which is looking a little farther ahead beyond the midterm, we have set a milestone of reducing greenhouse gas emissions by 30% by 2030 from 2019 level in order to reach the ultimate goal of carbon net- zero by 2050. We're currently expecting to invest JPY 30 billion during this midterm period, but expecting JPY 80 billion total up to 2030 or 2035, including this JPY 30 billion. This will be for technological innovation and infrastructure. Infrastructure can be further accelerated, schedule moved forward depending on external conditions. Therefore, this is a possibility that there will be some additional for JPY 30 billion within the JPY 380 billion. In addition, as for the portfolio, we have announced in PASSION 2026 that we will introduce PSA as a new basis for assessing economic value and social and environmental value, both qualitatively and quantitatively. You can see from the 2021 annual results, there's no particular bad or extremely problematic businesses. We would like to look at capital efficiency in terms of economic value as well as our contribution to the environment and society, including of greenhouse gas emissions. We would like to move our portfolio in the right direction, to the upper right. In the area of capital efficiency, while we are trying to reduce capital investment to a certain extent to be staying within the depreciation range, as I mentioned earlier, there are some areas that have boomed a bit. We are aiming for a return on equity, ROE, of 10% or higher for the first final year. We also aim for a return on invested capital, ROIC, of 8% or higher. That's it from myself. May I add an additional question? M&A is about JPY 100 billion, right? I just want to understand the discipline around this. Looking at it from a stock perspective, it seems that profitability has been lagging a little bit in the past. Do you have any thoughts on this? Right. You're referring to past M&As? Yes. The improvement in the earnings seem to be lagging a little, including how synergistic impacts are rolling in. Could you tell us your thoughts on the investment discipline of M&A for the next five years? Right. You may be referring directly to Calgon Carbon, maybe, which is JPY 10 billion for 2026. At the time of the acquisition, yes, we were expecting some more surplus production capacity, and there will be sales synergy impacts. We also thought that we would be able to create synergies by producing in the U.S. and bringing them to Japan or vice versa. However, it became clear to us in the post-merger integration that the capacity gain was not as much as we hoped. That's why we ended up needing a new investment. With regard to this, however, we will do our absolute best to do what we promised to do. We will make steady progress toward our goal of JPY 10 billion by 2026 as defined in PASSION 2026. With this in mind, in terms of M&A, we did execute large-scale M&As in the past. KG, POVAL in the early 2000s, the current Kuraray Europe. We have had successful experiences, started with the PVA, MonoSol in 2012, et cetera. We will take into these learnings, reflections, and mistakes we made in a place securely and surely. JPY 100 billion is a number, but this is not the must achieving goal, and it's not the upper limit either. We will respond accordingly if we come across a good opportunity at an adequate timing. Thank you very much. One more point I wanted to ask was the page 32, shareholders return-related returns. Reading this suggests that things stay pretty much the same as how it's been, but what is your thoughts around here? You have announced the share buyback this time. Any change in your thinking around this topic? Thank you for the question. This is what the document looks like. However, we will continue to work strongly and firmly. For strong and sustainable success, profitability and its growth are the most critical. Unfortunately, due to various issues such as the lawsuits in the U.S. over the past few years, we were not able to increase our bottom line. We did manage to secure the minimum promised level, but we're not the proudest in how much we have been able to return to our shareholders. In PASSION 2026, we have promised to achieve a total return ratio of at least 35%, including the growth of the bottom line. The average annual dividend per share will increase to JPY 60 or JPY 70 between 2024 and 2026 when calculated simply. The flexible buyback of our own shares were announced at the same time as our financial results, and then it will be maximum JPY 10 billion or 11 million shares. Our policy is to actively provide returns to our shareholders by combining such measures. Is that correct to say that the lawsuit that has been dragging you down is now being resolved to some extent, so there's a possibility of you going a little more aggressive than before? Yes. 2020 and 2021 were quite scattered because of COVID-19. The general economic recovery is there, so that's one thing. Regarding the lawsuit, I cannot say much about it, but we have come quite a bit in terms of its progress, and only a small part remains. We can say that we are ready to fully restart. Okay. That's all from me. Thank you. Thank you very much. Right. Next is Mr. Miyamoto of SMBC Nikko Securities, please. Hi. Miyamoto from SMBC Nikko Securities. From myself, two questions. First on the mid-term plan and the second on the financial results. Page 34 of the mid-term plan suggests that Vinyl Acetate be the segment with the largest increase in profit towards 2026. Earlier, when you were talking about investment, you mentioned new or additional plants for EVAL, optical use POVAL, and water-soluble PVA, all of which are related to Vinyl Acetate. I have some understanding of water-soluble PVA as you explained here and in the slide on page 36. Could you give us a little more background on the expansion of the optical use, POVAL, and the EVAL plants? With regards to EVAL, I think that the food packaging applications will grow considerably, but I also think that the shift to EVs is progressing at a pace faster than expected, which may be a bit of headwind. I think that the POVAL film for optical applications will continue to grow on a size basis, but I wonder if there is a risk that it will reach a ceiling at some point. Okay, thank you. This is Kawahara. First of all, for EVAL, we had planned to build a new plant in Asia in prior 2020 or last year. The COVID pandemic was one unforeseen factor, but the major trend is decarbonization or the shift to EVs. Originally, we were suspecting that the peak of a gasoline vehicle would be 2035 or 2040, and it would slow down. Looking at the situation up to the present, it seems that this trend has moved forward considerably, and regulations in Europe and in China are also moving forward ahead of time. We had originally thought that gasoline tank applications for automobiles would be one of the main parts of our plant in Asia, but we're now reconsidering. On the other hand, meanwhile, food packaging applications are growing as expected or even faster than expected. This is where our specialty high- barrier products come in. The high barrier technology, which is one of our specialties, can provide higher oxygen permeability, gas permeability, and barrier properties with the same weight and thickness. Since it can be made thinner, the weight can be lowered, and the film thickness can be reduced. We're now reconsidering the design of the plant and other aspects. This is very compatible with the recycling, especially in Europe, and the demand is increasing considerably due to their certifications. We're therefore now reconsidering the design of the plant, et cetera. Since the current demand has been growing very steadily, we may have to combine capacity expansion as well. In any case, I think we will have to make some kind of a decision in the first half of the new midterm plan, which will probably be this year or next year. As for POVAL film for optical use, the number of LCD TVs, which is the most important application, has hardly increased and has not decreased either, though. The expansion of the size had the greatest impact. The demand for POVAL film, which can be used for larger screens, has been increasing. The very wide one. We're thinking that we will probably have to make a decision on the next increase in capital within this fiscal year. We are also considering the effective use of narrow- width facilities that have been in operation for more than a decade, shifting to value-added products, and thinking about compatibility with water-soluble PVA film. We are considering to combine expansion of optical use POVAL film using large-scale facilities. Also modification of existing facilities and creating synergy with other businesses. All right, that's it. In terms of POVAL for optical applications, is it true that some of the old equipment is being converted to other uses, so that in effect it is a scrap and build process? That's right. I think that will be the case for facilities that have been in operation for more than 10 years. I see. In terms of size, it still going to grow? Yes. On a total size basis, it will increase. A supplemental question. Could you tell us how you're viewing the average unit price? According to what you said 2 months ago, Chinese polarizing film manufacturers are also looking for high value-added products. I had the impression that the average unit price would not go down. Is that correct? As for unit prices, although production sites have changed due to changes in the global needs of polarizing plate manufacturers, we have been able to maintain our unit prices because our brand composition has changed due to the shift to value-added products and have changed our brand composition overall. As mentioned last year, we will continue to shift to high transmission films and low shrinkage films, which can add value to polarizing plate manufacturers and consumer electronics manufacturers. This shift is one of the strengths of Kuraray's integrated production of differentiated POVAL and high functional POVAL. We're focusing on this area, and it is actually growing. With all of these, we will maintain our prices more to some extent. Understood. My second question is on the financial. The actuals of 2021 had an upward revision of the Vinyl Acetate and Functional Materials from their plans. In the case of Vinyl Acetate, the volume difference was higher than what you saw three months ago. What specific products saw an increase? It seems that water-soluble PVA has increased slightly. Is that correct? Also, in the area of Functional Materials, I think that the factors for the upward swing are the selling price and the composition. I'd like to know, for example, whether the number of activated carbon mix was more than expected, et cetera, and what the background of that was. In addition, the Isoprene was at JPY 1.3 billion or lower, and I see the volume has fallen. Perhaps it's to do with the reduced production of automobiles, but could you tell us a little more? Right. Thank you for your question. I'd like to answer this for myself. This is Takizawa. I understood that you are asking about the difference between the forecast of three months ago and the actual landed numbers. First of all, Vinyl Acetate is the largest segment in terms of profit growth. Although there have been changes in several businesses, the major ones are POVAL, resins, and EVAL, which have contributed to the increase in sales and profits due to growth in their volumes. In addition, water-soluble PVA film also saw an increase. The total of these factors contributed to an increase in operating profit of about JPY 2.2 billion. Unfortunately, the total sales of Isoprene have swung to the negative side. For example, in the fine chemicals business, the volume has recovered slightly, or is in the positive direction, but the sales composition and the impact of the high cost of raw materials and then fuel have had a greater impact than expected. The same applies to elastomers. Sales of elastomers were also affected by raw materials and fuels, as well as by disruptions in logistics, which resulted in a larger than expected negative impact. As for GENESTAR, sales have not changed much, but due to the high cost of raw materials and fuel, as well as the disruption in our logistics, profits have also been slightly negative. In that sense, all of our businesses have been affected in the same way, resulting in negative trends. In the area of Functional Materials, there were both positive and negative factors. First of all, the market for methacrylate, the raw material for methacrylate has been trending downward. At this point, has been higher than expected, and this has had a positive effect. In the dental materials business, we had originally expected that there will not be much growth in the first quarter, but due to the overall strong performance last year, we have changed our forecast to a positive one. In the environmental solutions business, the activated carbon business is on a recovery trend as a whole. The actual situation is positive after subtracting these factors. Yep. The balance is balancing out as a positive. All right. Thank you very much for the details. Thank you. Next question will be from Mr. Ikeda of Goldman Sachs. All right. Thank you for your presentation. This is Ikeda from Goldman Sachs. Two questions. First, I'd like to ask you about the basic business of Vinyl Acetate, in particular with regard to POVAL. There were some irregularities in the second half of the fiscal year due to the impact of the 2021 hurricane and the dramatic power restriction in China around September and October, which caused the price of Vinyl Acetate to soar. The impact of Chinese products having less impact on the global market is another trend. As a result, the second half results were a little irregular. Profits in Q3 and Q4 periods were affected by such factors, I guess. I guess some of the reasons was to do with the delay in the production of POVAL, as mentioned earlier. Do you expect this situation to continue with the structural changes of 2022 and beyond? All right. This is Kawahara. Thank you for your question. Basically, 2022 included, I feel that the position of raw materials and our fuels in this area will not change much. That is how I'm seeing it when I look at the current supply and demand of VAM. With regard to the POVAL business, we have made announcements of price increases on a global basis, already six times in 2020 and 2021. We're now getting the impact of the fifth and the sixth announcements. About this, we had been saying that we could not raise the price of POVAL anymore because it was already a general purpose product. Over the last one year and a half, customers have been willing to pay a good price for what they need, and while the positioning of raw materials and fuels will remain unchanged, we should be able to maintain our sales volume and the sales ratio passing, the extra cost on the prices. Having said that's the 2022 situation. Having said that, if we look at this over a long period of time in the midterm plan context, this will not continue forever. The raw material and the fuel cost will eventually settle down. As a result, the selling price will rise while maintaining margins and the situation will settle down, is how I'm seeing. I might be repeating, but that's how I'm seeing the situation to be. Okay. The situation in the POVAL chain was quite severe due to the factors such as the Chinese capacity. In that sense, the environment has become more conducive to raising prices. In that case of your company, the cost of raw materials increased in 2021, but this was a production constraint for other manufacturers too, and then this situation will more or less stay the same. Is it correct to say that the 2021 numbers were not necessarily too good and then cannot be replicated? Yes. In China, Chinese PVA manufacturers have had a large surplus of capacity, so they have been exporting that amount to Asia and Europe. However, last year, an anti-dumping complaint was approved in Europe, and Chinese products, and then some Taiwanese products have been subject to anti-dumping duties for Europe. At the same time, in terms of raw materials, the market price of acetic acid and VAM has become quite high. So rather than making acetic acid, VAM, or PVA, just selling acetic acid and VAM is better off for those manufacturers. Situation is such that Chinese products are not sold at a low margin by manufacturing PVA, and Chinese products are not bargaining and coming out into the market. I think that will continue throughout fiscal year 2022. Got it. When the acetic acid and the VAM come down, some of them might go to POVAL again, and you don't know how the situation will be in 2023 and beyond? Anti-dumping situation in Europe will be reviewed every five years, so the surplus situation won't change. The environmental regulations are becoming stricter in China, and the government is tightening its grip on PVA, which is produced by most manufacturers using the carbide method. We're assuming that although there is the regulation and the filter facility capacity on our end, we will not be able to randomly increase the amount of the PVA again in the future, although further analysis will be necessary. Okay, understood. Thank you. One more question from myself about activated carbon business centered around the Calgon Carbon. Calgon Carbon consists of 1/3 of your company's total greenhouse gas emissions, and you're making a large investment in fiscal year 2023. How do you plan to reduce greenhouse gas emissions? Is what I'd like to hear more. Will it be largely through process improvements or whether it will be related to electricity usage? I'd assume those initiative to start paying off after some time. They won't bring improvement right away. Out of carbon net zero initiatives stated on page seven, I'd like to know more about the efforts tied to Calgon Carbon in particular. Yes, this is Kawahara. I will talk a little bit, and I will hand over to Ide, who is the General Manager of Corporate Sustainability Division. Page seven of midterm business plan states our greenhouse gas emission volume of 2019 to be 3.23 million metric tons. The volume of Calgon Carbon has been added since 2018, and it is about 900,000 tons globally. It is correct, Calgon Carbon accounts for a little shy of 30% of our total greenhouse gas emission. Since the decision was made last year and the year before to add capacity for virgin carbon in the U.S. and reactivated carbon in Europe, the amount will increase again, when these plants come online in 2023 or 2024. If we look at Calgon Carbon alone, the volume will be more should no reduction efforts are made, so we need to reduce and minimize as a whole. The situation is very difficult if you're simply adding and subtracting the figures, but, there are some areas where we have already reached a certain level, by technological development of separation, of CO2, capturing and utilizing it, and storing. The page has the term CCUS, and that's about handling the CO2 that comes out of carbon factories by facility. Ide will add some more account here. Right. Hello, this is General Manager of Corporate Sustainability Division, Ide. Your question included, since what Calgon Carbon handles is an activated carbon, it naturally emits CO2 as a byproduct of its own manufacturing process. This is something that is completely different from other chemical manufacturers, and then we have to do something about it ourselves, and we are recognizing this as our very big challenge. As Kawahara mentioned, with the additional capacity, it will be more than 1 million ton level of volume from the current 900,000. About 70% of that will be greenhouse gas emissions coming from our own production process. Therefore, the first step for this 70%, we need to take this, is to reduce the amount as much as possible by improving our processes. After that, for the remaining part, we're planning to promote technological development in both directions. One is CCS, a system which captures and then stores the CO2. The other, the utilization approach, which converts the emitted CO2 into other things. We're thinking of both these directions. The capture technology has already been established in the world, so the S and the U parts remain to be developed. For this midterm business plan period, we have already started a company-wide project to develop the technology, and we're committed to devote about 10 years to deliver concrete outcomes. Gas emission reduction is a must-do, but it will be quite costly. Therefore, we're at the same time preparing the internal carbon pricing, ICP system, which will carry some of the burden on the business side. Our ICP has been pricing quite aggressively. Our strategy is to prepare our business environment in these multiple ways, properly. I hope this is answering your question. Thank you very much for the details, Ide. Everything is clear now. Thank you very much. Well, thank you. Now Mr. Yamada of Mizuho Securities, please. Hi, this is Yamada from Mizuho. Two questions on your medium-term management plan. First is on sustainability you have just touched upon, and the second is on our challenges. On the first topic, Ide-san, it's been a while. You mentioned that you're going to spend JPY 30 billion for sustainability-related activities and greenhouse gas emissions reduction. What kind of effect do you expect to be coming out of the JPY 30 billion spending? It's my first question. Naturally, if you improve the efficiency, it will lead to cost reduction, and then you may also be able to sell low carbon or low carbon activated carbon at a premium. In addition, by properly engaging in public relations, if you communicate it effectively, Kuraray's brand value might be enhanced. Then that might help successful hiring of talent. Also, about PVA, which came up earlier, I think you have been talking about it for more than a year. But the idea may be that since the carbide raw VAM is no longer available, there is an economic benefit to be gained by your company taking the initiative ahead of competitors. Please share with us your thinking around this. Right. Hi again, this is Ide, Corporate Sustainability Division. It's been a while, Mr. Yamada-san. Thank you for your question. As for your question topic, the main breakdown of the greenhouse gas reduction forecast from the midterm management plan is that we will, first of all, work on process conversion, energy conservation, and other areas that are easy to implement in the business. We'll do what we know to work. In addition, as I mentioned earlier, the CCUS, which is a pilot plant, is also included in the JPY 30 billion. As Mr. Yamada pointed out, process conversion and energy saving brings the benefit in the context of low carbon and directly generate cost reduction, hence contribute to our earnings. As for the low- carbon part, we have also included the business contribution of expanding products that contribute to the natural environment and the people's living environment. The natural environment contributing products will bring a low- carbon benefit. We believe that we will be able to add value to our business offerings by expanding these products. We will not only reduce emissions, but also contribute to society while generating profits through our approaches connected to our actual businesses. This is what we're envisioning right now. Right. Thank you. Earlier, you mentioned 8% ROIC for a normal investment. Is it a bit too much to expect that a similar ROIC can be expected for greenhouse gas reduction with a premium pricing and cost reduction of low carbon, given all goes well? I'd love to hear your take on this. The GHG investment is planned to be JPY 30 billion scale, and that will be 10% of the total investment. Even if we can expect an improvement of profits around there, its impact on the overall business will not be that large, unfortunately. Having said that, if we look at over a longer period of time, I believe that these areas will give a fundamental impact on our business. By steadily increasing our products that contribute to the natural environment, as I mentioned earlier, we should be able to make a stepping stone in a positive direction for the future. Understood. My second question. There are three challenges defined in your our challenges, and then the first opportunity, elaborate on what you are trying to achieve in the context of sustainability. What I'd like to understand better are the other two. What do you mean by innovation starting from networking? What is the essence or the ultimate purpose of your company's digital transformation? We hear often customer experience transformation is the objective. What its objective is. If that's your case too, what kind of customer experience are you envisioning to create? Don't need to denote how, but what you are trying to achieve. Okay. This is Kawahara. Thank you for your question. First of all, regarding the innovation part. In formulating the medium-term plan, PASSION 2026, we reflected on our learning from the past. Reviewed the past decades, and we needed to admit that we have not been able to produce truly innovative new products or new businesses as a whole since GENESTAR. Nothing that contributes to profit sustainably, substantially, or to the company's business has emerged. We had a lot of discussions, including R&D and technology development team, and then listed insights from the past, good, bad, challenges and opportunities. We might not have achieved all our goals in those years, but we still have leveraging our own technology in our mission and vision. We might have actually been too focused on having our original technology, and the learning was that maybe we did not connect with our customers and the market perfectly in a more realistic way, up until now. Hence, we launched the Innovation Networking Center back on January 1st this year. The name might suggest otherwise, but it's an organization, not a facility. One of the first things we did there was to set up a cross-organizational team. We realized that development and innovation require not only R&D efforts, but also of marketing and sales. In turning innovation into a business, you need involvement of production technology team and the successful establishment of processes. Another learning from the past was that we were wasting time and endlessly experimenting with the many trials and errors, tackling things one by one. Therefore, at the Innovation Networking Center, we have gathered a team of 20 people with various backgrounds of careers and skills, including members of R&D, production technology, marketing, sales, and maintenance, and created a dedicated team. In addition to that, we have created dozens of ambassadors, so-called, in each of the company's businesses and divisions, who also serve as the liaison between the business and the networking center. Until now, we have had a company system and a divisional system. We have always dealt with the customers by product. For example, we used to deal with the customers by product, EVAL, GENESTAR, and Acrylics, et cetera, separately. Now we're trying to find business opportunities cross-sectionally, identifying customers' needs where multiple product businesses can be involved, nailing their unmet needs. As I have explained earlier, the role of the Innovation Networking Center will be to seek both quantity and speed that are different than in the past. Even if we do trial and error, we need to run our PDCA cycle a little more quickly. Another important thing to note is that half of our organization is now non-Japanese nationals. We're truly global. One of another regret we have about our past is that we were seeing the world as the domestic market plus some more. It's not that we didn't see the global market, but our communication involved a much smaller picture of the global market we could have targeted otherwise. Nowadays, many of the innovative things that we're witnessing in the world are being born in the United States, Europe, Asia, and China, et cetera. We will utilize all the global human resources available at the center and make this center the hub for combining functions in the global world. As I mentioned earlier, we are committed to bringing concrete results in three-five years. Things won't come along right away, but this is what we are committed to do. Thank you. As for the digital transformation, what exactly we provide as customer experience, this is also related to innovation. Our materials are currently not properly recognized by our customers, unfortunately. In the past and even now, the following is the case, for both in Japan and overseas, that we communicate our advantages about our materials and technologies only to customers who we get to have direct contact with. Our main goal going forward is to strengthen the ties with the customers and the market by disclosing our information in various ways, sometimes using digital technologies. Maybe we can disclose our technologies in a cloud-like environment, and having customers adopt and then evaluate our technologies while we're developing our products. We simply need to strengthen our connections with partners, our customers in the market. Okay. The second and the third challenges, do you have the fundamental commitment to connect more with your customers in the market? Yes. That's the biggest and the most crucial part. We connect with them, letting them know more about us, or us getting to know them better, and collaborate even more. We need to strengthen all of these aspects. There, our core technologies, which we call our core capabilities, our technological capabilities, development capabilities, and human resources can be shared more openly. We believe the way to achieve this is to have global approaches and to combine these capabilities. Understood. There have been about three products of yours in the past 20 years that I had high expectations for, but did not grow at all. I'm hoping that such problems will be reduced in the future. Thank you for your answers. Thank you. Now, next, Mr. Nishihira of Okasan Securities, please. Hi, this is Nishihira from Okasan Securities. I have two questions regarding the financial results. I'm now looking at the financial data, page nine, 13, and 15. I'm curious around the balance between raw material, fuel prices, product prices, and the selling prices. I think there are still some areas that the demand was not adequately captured because of the increase of raw material, fuel prices in the last fiscal year. In this new fiscal year, demand will be strong, so I think it'll be possible to reflect how much was there and how much could not be captured. However, looking at page 13, just looking at the new year, the selling price and the raw material cost increase is balanced out. I don't see the assumption of recovering the amount that could not be captured last year. In particular, I think that there are still some areas of Vinyl Acetate that have not been harvested. Since the demand is strong, I think you can negotiate more forcefully, aggressively. What do you think about this? Okay, thank you for your question. This is Takizawa. As you suggested, we have naturally been negotiating price changes in the process of raw material and fuel price increases. But due to various reasons, including the matter of contract signing timing, we have not been able to develop such negotiations in a timely manner. We have been giving such explanations every quarter up until now. The cost of raw materials and fuel has risen more than we anticipated. For instance, for 2021, unfortunately, there are some areas that could not be fully covered. Overall, as I mentioned in my explanation, the coverage rate for 2021 was 55%. As you mentioned, in the fiscal year 2022, price of raw materials and fuels remained high or in some cases continuing to soar. We will continue to make further price changes. Page 22 has the simulation of that. It's in the appendix, the very last page 22. There, the coverage rate for each quarter of fiscal year 2021 are stated, and the dotted line in the middle on the left is the 2021 total, 55% as I mentioned earlier. As for fiscal year 2022, the current fuel level will be compensated as a single year, and ultimately the dotted line in closing part on the far right shows the accumulation of the two years, 2021 and 2022. We will be able to pass on about 2/3 of the cost of raw materials and fuel to our customers, is how this is planned. Understood. Thank you. The second question is on POVAL film for optical applications. Assuming that the sales volume is flat, the inventory adjustment of LCD panels generally started around the end of last year, and the adjustment has been going on for about six months, I believe. I was wondering if the inventory adjustment would open up soon. Are there any signs of recovery on the demand side, or if there are any stories of a positive development that you can tell us about? Also, I would like to ask you to explain in more detail your assumption that the new fiscal year will be flat or unchanged. Thank you for your questions. First of all, I would like to explain the premise. Although we are using the term flat or leveling off to describe the whole year trend, but in reality, the first and the second half of the year would show different waves. From the second half of 2021 to the first half of 2022, we're expecting a drop. There will be a recovery from the first half of 2022 to the second half of it. In the end, on average, the year will look to be flat from the previous year. Various research institutes and reports have indicated that although inventory adjustments have been made, the total area will still grow. This is our assumption. Okay. Understood. Thank you. Next is Mr. Umebayashi of Daiwa Securities, please. Thank you for your sharing. This is Umebayashi from Daiwa Securities. I'd like to ask a question on earnings and the midterm and management plan. Firstly, page 18 of the financial results. The guidance for this fiscal year shows a large decrease in profit in the Textiles business. Apologies, this was sales. Sorry, I meant page 19. Well, there's a significant drop in profit in the Fibers and Textiles business. The price hikes have been delayed more than in other segments, was what I heard. Also an explanation at the beginning of this document, it is assumed that the growth rate of Isoprene, GENESTAR this year will be about only 53%, whereas, although it grew significantly last year. Please explain the reason for this. Right. First of all, the textile. As Kawahara explained in this slide presentation, the Textiles business has not been able to pass on raw material and fuel prices as much as other businesses. There are various reasons for this, depending on the application. Unfortunately, due to the business environment or the environment of our customers and their products, it's been the case that it's difficult for them to accept our requests as we make. Although we have not been able to factor this into our plan, our business teams are actually negotiating tenaciously to increase the coverage rate outside the plan. All right. Okay. Thank you. All right. Please share with me your count on GENESTAR now. For GENESTAR, since the start of the COVID-19 pandemic, there has been a large increase in electronics and electrical products. In this environment of remote working and online classes, there has been a large increase in the number of PCs and mobile devices. As I mentioned earlier, the 30% has been the year-on-year increase. This trend will continue into the future, but pandemic-driven market will settle down eventually, and we expect that this trend will level off then. Having said that, we're seeing the trend of adaptation to more automobiles, so we are expecting the growth of GENESTAR and engineering plastic to continue. I'm assuming that it will settle down a little in 2022, though. Right. Thank you very much. Let me ask my second question, which is on page 35 of the medium-term management plan regarding the vinyl acetate global network. I believe that the capacity of various products will increase in the future, and in the case of your company, the supply chain is quite long in terms of raw materials, resins, and films. It probably is quite difficult to control the supply chain at each base or on a global basis. When we look at your business performance, we often see a sharp increase or decrease in inventory from one quarter to another. As a result, we see a sharp upward or downward swing in profits. When you implement the measures described here, do you think that inventory control and the exchange of goods between locations will be balanced? In addition, if you have any quantitative information, such as whether there will be an improvement in profits after implementing these measures, how much the inventory turnover will improve, or whether the cash flow will improve as a result, please share it with us. I'd love to know a little more around this area. Right. This is Kawahara. Thank you for your question. The global network for vinyl acetate is really one of our strengths. As I mentioned earlier in the video, even in the midst of this logistical turmoil and soaring raw material and fuel prices, we were still receiving strong demand from our customers, including requests for help where our competitors were unable to supply. We have gained strong demand and trust from our customers, and then we're strengthening our position in this regard. That is why it's mentioned here. Having said that, if I'm to put it another way, since the process from raw materials to the final product is so long, and since we have to handle all of these processes, naturally, asset efficiency, including inventory, working capital, and asset efficiency, again, are a bit lower than manufacturers who simply sell raw materials or buy raw materials and then only process the products. For example, the production volume of EVAL's existing plants, it is currently the largest in the U.S., larger than Japan or Europe. Asia has grown to a considerable scale, and Japan's production capacity of 10,000 tons alone is not enough. The demand capacity is now more than double that. Most are brought in from the U.S. and Europe. By local sourcing, we can reduce the amount of inventory transported in between and also can reduce the amount of inventory needed to be held. These are included in calculating investment returns upon making new investments. In terms of the number of months of inventory, if we can shave by 1/10 month scale, we can have a drop in total months' worth, only if we simply look at them as a single business unit, though. In this sense, we will be able to improve the efficiency of our inventory with the impact of the Thailand isoprene and a transfer between them and Japan or the U.S. We have already announced the launch of a water-soluble PVA film production line in Europe, which is now under construction, and we will start up a film production line in Poland. In the process of the expansion, the amount of film currently brought from the U.S. to Europe will then be produced locally, and that will naturally reduce the amount of transportation. While increasing the security of supply to meet demand, we will also increase the efficiency of our assets. The slide is not describing it in detail, but I will show in numbers delivered. It is not really possible to calculate how much this will amount to for the entire company in combination, but we can say that it will have a concrete effect on each individual business. Thank you. I hope to see improvements in the production and logistics. Thank you very much. Now, Mr. Okazaki of Nomura Securities. This is probably going to be the last question for the day. I apologize for me coming on again. A quick answer is fine. On page 19 and in 21 of the financial report, I see the number for Vinyl Acetate for the last Q4 as JPY 14.8 billion. The first half operating profit is at JPY 28.5 billion. It is difficult to know this data as of the raw materials and then the transfer. Could you share with us your thinking for Q1 and then Q2? Right. This is Takizawa. Let me confirm your question. You wanna know our take on the Q1 and then Q2 of the previous fiscal year found on page 21? The situation in the last quarter with 2021 will continue into 2022, is the forecast. Hence, the first half of 2022 to be double of that number as an extension of it. As for the transition between the first half and the second half of 2022, I guess this will be connected to the passing on of raw material fuel prices. It will happen more towards the second half. Profits will be higher in the second half. That's the assumption we have. If you look at Q1 and then Q2, is it correct to say that you are not expecting any significant changes in terms of trading conditions or sales volume in between Q1 and Q2? That's right. We're not foreseeing any major changes between Q1 and thenQ2. Thank you. Let me quickly add just one more thing. For optical use POVAL film, we are expecting difference between the two quarters. Okay. Thank you. Thank you very much. Now we have come to the end of the schedule and close this Q&A session. This also concludes the whole telephone conference. Once again, thank you very much for your participation. Please make sure to terminate your call on your end. Thank you. Thank you very much for your joining.