Sumitomo Chemical Co Ltd

TSE:4005

Earnings Call Analysis

Return to Profitability Driven by IT-related Chemicals

In the first quarter of fiscal year 2024, Sumitomo Chemical returned to profitability with a core operating income of JPY 5.7 billion, a stark turnaround from a JPY 53.6 billion loss the previous year. Net income also soared to JPY 24.4 billion, improving from a JPY 33.2 billion loss. Revenue increased by JPY 49 billion to JPY 612.1 billion. The IT-related Chemicals segment achieved a record high core operating income of JPY 18.5 billion due to strong demand for display and semiconductor materials, supported by yen depreciation. Sumitomo Pharma reduced expenses by JPY 28 billion through rationalization. The company is optimistic about achieving its fiscal year target, boosted by an anticipated second-quarter contribution from crop protection business.

Strong Return to Profitability

Sumitomo Chemical has made a remarkable return to profitability in Q1 of FY 2024, recording a net income of JPY 24.4 billion compared to a significant loss of JPY 33.2 billion in the same period the previous year. This is the first time in seven quarters that the company has seen profits, driven by improvements across all segments.

Impressive Performance in IT-Related Chemicals

The IT-related Chemicals segment was notably strong, registering a record high core operating income of JPY 18.5 billion, a significant year-on-year increase of JPY 11.9 billion. This was attributed to robust shipments of display materials and semiconductor-related materials, along with the favorable impact of the yen's depreciation.

Revenue Growth and Cost Reductions

The company's sales revenue increased by JPY 49 billion year-on-year, reaching JPY 612.1 billion. Concurrently, Sumitomo Pharma achieved a JPY 28 billion reduction in SG&A and R&D expenses, contributing to the positive performance seen in the first quarter.

Challenging Automotive and Chemical Segments

While overall performance improved, some segments faced challenges. The production volume in the automotive segment declined, impacting profitability. Similarly, in the Essential Chemicals segment, market conditions for products like polyurethane and polypropylene remained difficult, particularly in China where production capacity outpaced demand.

Optimistic Outlook Despite Petro Rabigh Losses

Although Petro Rabigh's results included a substantial loss of approximately JPY 20 billion, the overall performance improved beyond expectations. The management remains confident about meeting the annual forecast, especially with added contributions from the seasonally strong crop protection business starting in Q2.

Strategic Shareholdings Reduction

In alignment with its short-term intensive performance improvement measures, Sumitomo Chemical has significantly reduced its strategic shareholdings. This move is part of an ongoing effort to generate cash and improve overall financial health, with the ratio of cross-shareholdings decreasing from 15.6% to 4.9%.

Strong Guidance and Strategic Initiatives

Sumitomo Chemical aims to achieve a core operating income of JPY 100 billion for FY 2024 through ongoing cost reductions, structural reforms, and strategic asset sales. The company continues to negotiate and implement further initiatives, with a strong sense of confidence in attaining its financial goals.

Earnings Call Transcript 2025-Q1

[Operator]

We will now begin the conference call for the presentation of our financial results for the first quarter of fiscal year 2024. Thank you very much for your participation. Today, Mr. Sasaki, Managing Executive Officer, will give you a briefing on our financial results for the first quarter of fiscal year 2024. Later, he will be joined by Mr. Yamauchi, Executive Officer and General Manager of Accounting Department, to take questions. We plan to conclude the call at 5:50.

Mr. Sasaki, over to you.

[Keigo Sasaki, executive]

Thank you. I'm Sasaki from Sumitomo Chemical. Thank you very much for attending our conference call despite your very busy schedule. I'd like to thank the investors and analysts for your daily understanding and support to our management. Thank you very much for that. Now let me start with the explanation of our financial results for the first quarter of fiscal year 2024. Please turn to Slide Page 4. This page shows a summary. The core operating income in the first quarter was a profit of JPY 5.7 billion, a significant improvement from the JPY 53.6 billion loss in the same period of the previous year. This is the first time in 6 quarters that the company has returned to profitability since falling into the red in the fourth quarter of FY 2024. Net income attributable to owners of the parent for this quarter was JPY 24.4 billion, a significant improvement from the loss of JPY 33.2 billion in the same period of the previous year.

This is the first time in 7 quarters that our company has returned to profitability since falling into the red in the third quarter of FY 2022. By segment, as I will explain the details later, all segments reported year-on-year increase in profit. The consolidated results for this first quarter include Petro Rabigh's results announced locally for the period of January to March with a lag of 3 months. The loss was approximately JPY 20 billion in terms of our shareholdings, which is a big loss. After fully absorbing these losses, we're able to achieve profits. IT-related Chemicals had a profit of JPY 18.5 billion in core operating income, a record high as of first quarter thanks to strong shipments of display materials and semiconductor-related materials with a tailwind from the yen's depreciation. Sumitomo Pharma is working to stop the bleeding as soon as possible through thorough rationalization.

The plan is to reduce SG&A and R&D expenses by JPY 108 billion per year. And in the first quarter this fiscal year, JPY 28 billion reduction was achieved. Core operating income has recovered to a level where losses has almost disappeared. Looking at these factors as a whole, we feel that the first quarter for this fiscal year got off to a very good start towards achieving the V-shaped recovery of our business performance in FY 2024 that we have set as our goal. Now please turn to Page 5, which is the business environment surrounding us. First, economic conditions. Still low growth is expected in terms of exchange rate. So currently yen is appreciating. In this first quarter, profitability improved in exports and overseas businesses due to the weakening of the yen. And below shows the business environment of our major business areas using weather marks.

Let me introduce the business areas that we saw changes. First, the second from the top, automobiles. The first quarter saw a decline in production volume, which had an influence. Under that displays, there was a strong demand for mobile device related components. And at the bottom, pharmaceuticals. For the 3 key products compared to the plan, the performance performed strongly. Business environment of the first quarter was introduced. And next on Page 6, let me introduce the outline of the consolidated financial results. Consolidated financial results for first quarter FY 2024. Sales revenue was JPY 612.1 billion, up JPY 49 billion year-on-year. Core operating income expressing recurring earnings power was JPY 5.7 billion, up JPY 59.3 billion year-on-year. Nonrecurring items not included in core operating income was JPY 5.8 billion, improvement of JPY 24 billion year-on-year.

In addition to JPY 10.1 billion gain on sales of fixed assets from sales of land for dormitories and company housing, restructuring costs including reorganization of Sumitomo Pharma's North American subsidiary narrowed from minus JPY 19.3 billion in the same period of the previous year to minus JPY 3.5 billion. As a result, operating income was JPY 11.5 billion, a large improvement of JPY 83.2 billion year-on-year. Finance income was JPY 26 billion, increase of JPY 4.1 billion year-on-year. Out of this, there was a gain of foreign currency transactions of JPY 29 billion because of a weakening of the yen, an increase of JPY 5.3 billion year-on-year. As a result, net income attributable to owners of the parent for this quarter was a gain of JPY 24.4 billion, improvement of JPY 57.5 billion year-on-year. The current exchange rate is stronger than JPY 150 to $1.

The JPY 29 billion financial income includes gain on foreign currency transactions that will be eliminated under the current rate even if this is eliminated because of majority Sumitomo Pharma's gain on foreign currency transactions, which influences the noncontrolled shareholding. But at the moment even if this foreign currency transaction difference disappears, still JPY 5 billion would remain. Next is sales revenue by business segment. I will explain the segments with large changes. Let me skip to Page 11. In the IT-related Chemicals segment, the core operating income was JPY 18.5 billion, up JPY 11.9 billion year-on-year. For the first quarter, this was a record high core operating income for this segment. And in the analysis of year-on-year comparison in terms of price variance, selling prices of polarizing films declined in the display-related materials.

In terms of cost variance, depreciation expenses got higher due to a new semiconductor related plant coming online at overseas subsidiary. In terms of volume variance, et cetera, in addition to the increase in shipments of polarizing films and touchscreen panels, recovery trends in the demand for semiconductors led to increased shipments of processing high purity chemicals and photoresists resulting in a significant increase in profits. Please go to the Health & Crop Science segment. The core operating income was JPY 5 billion, up JPY 12 billion year-on-year. In terms of price variance, despite lower selling prices for crop production products in South America, profit margin improved due to higher market prices for methionine. In terms of volume variance, the backlog of distribution inventories is being resolved in each region and due to the recovery from extreme weather, shipments increased mainly to India.

Now in the Pharmaceuticals segment, the core operating income was minus JPY 0.5 billion, an improvement of JPY 32.7 billion year-on-year. In comparison to the previous fiscal year in terms of price variance, selling prices declined due to the impact of NHI drug price revisions in Japan. In terms of cost variance, due to streamlining business operations through combination of group companies of Sumitomo Pharma in North America, SG&A expenses decreased resulting in a significant improvement in profitability. As for volume variance, shipments of 3 key products increased. That's all for the business results by segment. The next page is about the consolidated statement of financial position. Total assets as of June 30, 2024 were JPY 3,949,7 billion, up JPY 14.9 billion from the end of the previous fiscal year.

While Sumitomo Pharma sold investment securities; due to seasonal factors, there was an increase in inventories of crop protection products and of yen converted value of assets owned by overseas subsidiaries due to weaker yen resulting in mostly flat total assets. So there was only an increase of JPY 14.9 billion. Interest-bearing liabilities totaled JPY 1,518.7 billion, down JPY 44.8 billion year-on-year. Equity was JPY 1,226.9 billion, up JPY 62.6 billion year-on-year. As a result, the debt-to-equity ratio improved to 1.24x, which was an improvement of 0.1 point. Moreover, we are disclosing for the first time the status of strategic shareholdings, which is of high interest to investors. If you look at the right bottom corner of this slide, the ratio of cross-shareholdings of Sumitomo Chemical and Sumitomo Pharma to consolidated total equity is shown here and as of the end of March 2024, it was 15.6%, but that was reduced to 4.9%.

Details will be explained on the next page. We have been reviewing the significance of our strategic holding of shares every year and selling them as when necessary. But as we facilitate cash generation as part of short-term intensive performance improvement measures, we have been accelerating the reduction in recent years. This graph shows the balance of strategic shareholdings by Sumitomo Chemical on the parent basis and Sumitomo Pharma, which have recently decreased significantly due to the sale of Roivant shares by Sumitomo Pharma this year. Now the dark blue part shows the Sumitomo Chemicals nonconsolidated balance. Since 2021, the balance has been declining because of the sale and due to the transfer of about JPY 18 billion worth of shares of Inabata & Company, which was excluded from equity method affiliates as a result of partial sale of its shares last year. The decrease may appear small and that is about JPY 18 billion.

So the decrease may appear small. But if this factor were excluded in this graph, as you can see on the right hand side corner, the balance would be about 1/3 of that in fiscal 2021. The graph below shows the balance as a percentage of consolidated total equity. In fiscal 2023 due to a decrease in total equity, the denominator caused by the posting of large deficit, the ratio rose to about 16%. But this year because of accelerated sale, it is now below 5%. Now the last page. In the first quarter of this fiscal year, we achieved a significant improvement in profits at all levels year-on-year and as a first step, we're able to return to profitability. As we reported in May when we announced our financial results for the fiscal 2023, we had expected to start the first quarter in this fiscal year in the deficit.

About JPY 20 billion or more than JPY 20 billion in deficits were assumed, but our performance improved more than expected especially in IT-related Chemicals segment. The net income attributable to owners of the parent for the quarter exceeded the annual forecast due to a strong core operating income and foreign exchange gains from a weaker-than-expected yen, JPY 24.4 billion which is exceeding the JPY 24 billion, which is the annual forecast. As indicated in the table, the progress of core operating income against the annual forecast is not that large. But on our part, we feel that we were able to return to profitability at owner stage. So we feel strongly, strong sense of confidence. From the second quarter onward, the contribution of crop protection business, which is highly seasonal, will be added. So we expect that the probability of achieving the announced forecast has increased to a considerable degree.

We appreciate your continued support for our company. That is all for the financial results. We'd like to start entertaining your questions. Thank you.

[Operator]

[Operator Instructions] Now the first question is from Morgan Stanley MUFG Securities, Mr. Watabe.

[Takato Watabe, analyst]

I'm Watabe from Morgan Stanley. Congratulations for achieving profits. I have 2 questions. One, on the 30th of April, there was an announcement of the structural reform. About the progress, cash flow JPY 600 billion to be created or short-term concentrated improvement of performance, what is the point of progress? The Q1 core operating income, does that include the sales of assets or not?

[Keigo Sasaki, executive]

Thank you for your question. About your question, on the 30th of April we announced our structural reform or the immediate term concentrated measures to create cash of JPY 600 billion. At the moment it is advancing quite smoothly. We will be increasing the amount and at quite a fast pace, I think we are able to catch up. In some areas there are some points that we are not yet able to announce, but we started to get quite sure. And your other question, within this profit, sales of businesses, only a few is included. There were some announcements we have already made in China, LCD chemical-related assets or other businesses, which don't have such a big impact.

[Takato Watabe, analyst]

Then the large increase in profit IT-related Chemicals is really based on your ability, there is nothing in particular included.

[Keigo Sasaki, executive]

Yes. In that sense, some onetime asset sales are not included. And actually, as I explained, display and semiconductor materials demand increased so shipments also increased. That is the major impact.

[Takato Watabe, analyst]

I see. And the plan is core operating income of JPY 100 billion. But each segment; in IT-related Chemicals, I think they are having good results. But Essential Chemicals and Health and Crop Sciences, what is that situation? Rabigh seems to be difficult for the April to June period. So what is the current market situation to achieve the full year target?

[Keigo Sasaki, executive]

Thank you for your question. First of all for IT-related Chemicals, as I mentioned, I expect the good performance will continue for a while. And for Health & Crop Sciences, first quarter usually is not that large. South America would be in the second quarter and North America also profit concentrates on the fourth quarter. That is the situation. So at the moment I cannot say anything in particular. I don't have any information at the moment, but I believe we can move forward to achieve the plan. For Essential Chemicals, as you mentioned, Petro Rabigh financial results, you have to wait for a while. We are waiting for their financial results. And after that, MMA market situation is recovering for example, but polyurethane; polyethylene is a little better, but polypropylene is in a very difficult situation. So centered on China, production capacity is increasing, but demand is not increasing that much. This situation is continuing.

[Operator]

Next question, Mr. Yamada from Mizuho Securities.

[Mikiya Yamada, analyst]

Yamada from Mizuho Securities. A confirmation on the previous question by Watabe-san, In the first quarter, the onetime factor like business transfer is not included. Is it only for IT-related Chemicals or for the whole company?

[Keigo Sasaki, executive]

The whole company. There's not much included in the whole company.

[Mikiya Yamada, analyst]

So this is the real earnings power that is shown for the whole company.

[Keigo Sasaki, executive]

Yes.

[Mikiya Yamada, analyst]

And then my first question. In Essential Chemicals, the cost variance crossed [ 10 ] so depreciation costs may have been lower. But in the fourth quarter in the last fiscal year, there's large nonrecurring losses and 70% were from Essential Chemicals, that's what you said. So depreciation cost decline from that has not manifested itself that much. Has there been any reshuffling of the items?

[Keigo Sasaki, executive]

Thank you for the question. For the Essential Chemicals cost variance that you mentioned, the gain on this part; large portion of that is from the last fiscal year's impairment loss that has resulted in the increased gain, but there is an increase in fixed costs. So it may look a bit smaller.

[Mikiya Yamada, analyst]

So what has increased and from the second quarter, would those items would see decline?

[Keigo Sasaki, executive]

Well, in the first quarter, there's no large item; but there's repair and maintenance expenses that was in a lump-sum manner that was incurred in the first quarter, but we will not expect this to continue.

[Mikiya Yamada, analyst]

You don't think this to continue. Does that mean that the impairment loss effect from the last fiscal year would be manifesting more in the second quarter onward?

[Keigo Sasaki, executive]

Yes.

[Mikiya Yamada, analyst]

Okay. And the third question, the balance sheet. The other asset items, there is no breakdown that is seen here. So with this yen's depreciation in foreign exchange adjustment item, I think there will be a larger number, but that is not the case because the investment securities valuation amount has been declined. Is that the reason?

[Keigo Sasaki, executive]

Yes, exactly.

[Operator]

The next question is from SMBC Nikko Securities, Mr. Miyamoto.

[Go Miyamoto, analyst]

I'm Miyamoto from SMBC Nikko Securities. Congratulations on returning to profit. About Health & Crop Sciences on Page 12. First, there's a price variance of plus JPY 9 billion. On the other hand, on Page 22 in analyzing sales revenue, there's a volume variance of plus JPY 800 million. What's the background of this difference? And on Page 25 by region sales, in general there's an increase of 4.4%. If you exclude the foreign exchange impact, maybe there is a reduction. So how would the volume fluctuate if you exclude the foreign exchange influence? And also in South America, you mentioned about impact of competition. But in South America, generic price compared to previous year I think you expected increase, but is the situation changing? So what is the impact that you feel? What is the situation of Health & Crop Sciences?

[Keigo Sasaki, executive]

Thank you for your question. For Health & Crop Sciences; for sales revenue, volume variance and in the profit and loss analysis volume variance; there are discrepancies I think that is what you meant. In profit and loss it says volume variance and others so there are other factors also included. For example the weakening of the yen for internal transaction that is [ weakened ] off. But there's a gap in terms of foreign exchange rate influence that would be included in the volume variance. So there are different factors included. And also in the sales revenue there's a decline, but profit is reflected in a higher figure. The gross profit with things of high unit price and low unit price depending on composition, there may be differences. What was good this time? As I have mentioned, India was doing well. And in general for the inventories, they are recovering in each region. North America, South America, we are seeing improvements. In particular, India was doing well. On other hand, as I mentioned, in South America in the beginning of the year we expected improvements. However, the current situation, we've seen the first quarter competition was severe so price was not raised that much and that was the result of the first quarter.

[Go Miyamoto, analyst]

I see. About the volume of shipments of Crop Protection Chemicals, was there an increase?

[Keigo Sasaki, executive]

For shipment volume and the sales revenue, looking at the detailed sales revenue, which I think was disclosed. South America centered on herbicides, there are declines. That is a major factor. So there's a decline. And in terms of volume, it's not that different, but price was difficult. And in Asia, excluding India, there was a recovery in the weather and it's growing quite a lot. In particular, there was no impact of sales of businesses in this segment.

[Go Miyamoto, analyst]

There is an influence of foreign exchange rate and nonrealized gains, right? No asset sales are included. I understand. My second question is also about Health & Crop Sciences. The situation of INDIFLIN, how much is growing? That is 20 sites, you mentioned that the composition has improved. And the new herbicide Rapidicil, which was registered in Argentina, what is the situation? You can expect a lot of increase in sales of those products. So could you tell me about the situation of those products?

[Keigo Sasaki, executive]

Thank you for your question. First, about INDIFLIN. In South America or in Brazil, it was launched in 2022 and in this season, this is the third season and gradually there are increases. In this season, we expect increase in shipments. But in the first quarter itself, still we are not seeing those effects yet. So after the second quarter, I believe we can expect such effects. And your other question about Rapidicil in Argentina. As I mentioned, we were able to get registration. The main market is Brazil, but we are not yet able to get a registration in Brazil. So going forward, I believe Argentina will also grow. But the main market Brazil, we hope we can get an early registration. And as you mentioned, the peak sales we expect about JPY 100 billion. So I hope that in the early stage, we will be able to launch in each region.

[Operator]

The next question from Daiwa Securities, Mr. Umebayashi, please.

[Hidemitsu Umebayashi, analyst]

Umebayashi from Daiwa Securities. I have a question about IT-related Chemicals. In first quarter, things were quite well and maybe you can continue this momentum in the second quarter. That's what you said. But the first quarter may have been too good, that were some of the views that were expressed. So with regard to displays and semiconductors in first quarter and second quarter, any changes in between those different quarters? Any changes that you are expecting? Can you explain more on that? And with regard to sensitivity to foreign exchange, it may be difficult to calculate now. But with ICT, what is the sensitivity for foreign exchange? How are we supposed to look at that?

[Keigo Sasaki, executive]

Thank you for the question. For the last question, the sensitivity to the foreign exchange fluctuations. So the whole company, JPY 1.5 billion to the JPY 1 change. And as for IT-related Chemicals, about [ 10 ] for fiscal 2034 so JPY 1 billion. So with the yen's depreciation and depreciation, there is some difference in the impact perhaps, but that is how we're looking at the sensitivity. And then as for IT-related Chemicals in the first quarter, as I explained, things were as I explained. But in particular as for display-related product films, in terms of polarizing films perhaps in the second quarter, there were some that have been moved up to the first quarter partially. There may have been some front-loading. But in general, we are looking at the demand being quite strong. So this status is expected to continue in the second quarter.

Obviously this segment portion in IT-related Chemicals, our business performance will continue until the Christmas sales and then fourth quarter, we will see the decline. So how much we can earn in first, second and third quarter is the key. But in our estimate for now, we believe that we can do quite well. And as for the touchscreen panels, things are not bad and that is expected to continue in the second quarter. As for semiconductor-related materials; depending on the products, there are some variances; but high purity chemicals is performing quite well. That is how we see it. And AI-related products like products for data centers for instance, we have high expectation in those types of products. I think it is a [indiscernible] make even now. So it's not just high purity chemicals, but including photoresist. Going forward, things are expected to go quite well.

[Hidemitsu Umebayashi, analyst]

Just for clarification. On year-on-year basis JPY 12 billion in profits increase. Display and semiconductor-related, which one is larger? The display is larger. Is that correct?

[Keigo Sasaki, executive]

Yes, that is correct.

[Hidemitsu Umebayashi, analyst]

And then I have a question about restructuring initiatives. As you have been saying, there are various projects that are ongoing and you are just implementing those initiatives steadily. And if you do that, then you can achieve the target for this fiscal year. Is that correct? Or additionally, there might be something else that you can do? If that is the case, then please share that with us especially the sale of shares of related companies. Inabata & Company, you have already finished that; what has been initially planned has been already achieved. So there's no additional sale that you are planning. Is that correct? Can you elaborate more on that?

[Keigo Sasaki, executive]

Thank you for the questions. Well, the short-term intensive improvement initiative for profitability, it does include sale of businesses and some of the asset sale including related companies. And what has been already announced is only part of those efforts. And now of course we have the counterpart that we have to deal with and we are now under negotiation intensively with some partners and some may be a bit challenging. But in other deals, things look better. So there are those projects. So JPY 100 billion does include some sale of businesses. That's what we said at the beginning of this year, but of course we have to achieve those. But in addition, in terms of profitability, the IT-related Chemicals and other segments profitability could make more progress than we expected. So the probability of achieving JPY 100 billion has been increased. That's what we said. So we have to steadily and meticulously implementing those initiatives, but some have higher probability of success in terms of restructuring of the businesses than others. If you can understand that way, that would be appreciated.

[Operator]

The next question is from Nomura Securities, Mr. Okazaki.

[Shigeki Okazaki, analyst]

I'm Okazaki from Nomura Securities. Congratulations for the good performance in Q1. My first question is also about IT-related Chemicals. In particular from Q1, display was doing very well for television use or for mobiles. For mobiles, for the Chinese large companies, which were the companies doing well? And towards the second quarter, the direction of display what would you assume?

[Keigo Sasaki, executive]

About your question for display, let me talk about displays. The large-sized products for televisions. In this area sometimes we see recoveries, but then it turns bad again, it goes up and down. On the other hand for monitors, I believe it will be doing well going forward. But what was better is for mobiles, OLED polarizing film was doing very well and to a certain extent I believe this may continue going forward. As I mentioned, in Q1 there were some demand carried forward from second quarter. So this may not be a straight increase from Q1 to Q2. That is polarizing films. For LED touchscreen panels, in the first quarter I think it was doing well and compared to the fourth quarter, it was quite good and I hope this situation will continue towards the second quarter as well. There may be some demand carried forward. So it may not be growing immediately, but I think the growth will continue at a certain pace. That is for displays. And for semiconductors, it will be difficult to say. Usually towards the second half of the year, we expect full-fledged recovery. But first quarter was good, but going forward I believe that station will continue in a stable manner towards full-fledged recovery.

[Shigeki Okazaki, analyst]

For confirmation; for mobile and OLED was good. Is that centered on the China area companies? What's the situation for major companies? Chinese companies, well, sales to China is growing quite steadily including for smartphones. That is my understanding. And also for large companies, is that going well?

[Keigo Sasaki, executive]

Yes. You are right.

[Shigeki Okazaki, analyst]

Basically you are strong for OLEDs. So in total, does it mean that you're increasing your share?

[Keigo Sasaki, executive]

I cannot disclose information about individual customers. But in principle, OLED is doing very well.

[Shigeki Okazaki, analyst]

My second question, the core operating income for this year; sales of businesses, onetime gains of JPY 30 billion is included. But at the moment, does that remain unchanged? And in Q1 they are not yet included. It may be difficult to say what is the timing, but do you think they will be influenced from the sales of businesses in the second half?

[Keigo Sasaki, executive]

Thank you for your question. Some level of sale of businesses are included in these figures and to do that, we are now working to do that. But there is a counterpart to that so it is difficult to say when this is going to be realized. But after the second quarter, I hope we can realize. So we are now doing our efforts to do that.

[Shigeki Okazaki, analyst]

Basically the amount that you had remains unchanged.

[Keigo Sasaki, executive]

Within the JPY 100 billion, a certain amount is included, but we are not yet in situation that we have to change our figures.

[Operator]

We are approaching our scheduled ending time so we would like to take the last question. JPMorgan Securities, Nakada san. Would you please limit your question to 1?

[Yasuhiro Nakada, analyst]

Okay. Congratulations on being profitable. I had not expected this so congratulations. Petro Rabigh, there is a cumulative loss that is building up so Petro Rabigh April to June performance is very challenging and if the cumulative loss is building up, what would happen? And what is the future direction? You said that you are forming task force for discussion. Can you update me on the progress made as far as you can tell?

[Keigo Sasaki, executive]

Thank you for the question. As for Petro Rabigh, as we explained every time since this is a listed company, there's limit to what we can say. So I hope you can understand that. And for the first part of your question, the task force has been formed and Petro Rabigh profitability improvement is being discussed including various initiatives. That is how we are and that's exactly what we said on April 30. That situation has not changed. That has been continuing. And also for April to June performance, we're not privy to that. So probably they will make announcement as part of earnings call and we have to wait for that. And because of loss in Saudi Arabia for the capital or equity, if there is a certain level of losses cumulated, then you have to make announcement so we have to take action. That is part of the regulation of loss. So in terms of compliance with the loss, there will be certain procedures that they would follow. But at this moment, there's nothing that we can say because we have no idea. So we're just waiting for the information to come.

[Yasuhiro Nakada, analyst]

So if they are in a situation where action is required, then so would that facilitate and accelerate the discussion for a solution? Is that the expectation that we can have?

[Keigo Sasaki, executive]

Well, originally regardless of the situation, we are aware of this challenge and we have been going through various discussions already. So they may not be exactly directly linked with the actions required by the law. But if the initiatives can be presented as soon as possible, that will be better.

[Operator]

Thank you very much. This concludes the Q&A session. Lastly, I'd like to invite Mr. Sasaki for the final remarks.

[Keigo Sasaki, executive]

Thank you very much for attending the conference call today. The first quarter, as I explained, we were able to make a good start. But we should keep our efforts to achieve V letter-shaped recovery of our performance and then accelerate our efforts. And also to strengthen our financial situation, reduce the interest-bearing debt as well. So we look forward to your further support in the future. Thank you very much.

[Operator]

This concludes today's conference call. Thank you very much for your participation.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]