Sumitomo Chemical Co Ltd

TSE:4005

Earnings Call Transcript 2019-Q2

[Operator]

Thank you very much for participating in the Sumitomo Chemical conference call for fiscal 2018 second quarter financial results. First, Sumitomo Chemicals Director and Senior Managing Executive Officer, Mr. Nozaki, will give a briefing on fiscal 2018 second quarter financial results; and later, he will be joined by Mr. Sasaki, Executive Officer; and Mr. Tan, General Manager of accounting department, to take questions.

Before we begin the conference, let me give you some reminders. In the briefing, future projections based on current forecasts may be provided, but please be informed that they involve risk and uncertainty. We ask that you be aware that sometimes the actual results may differ greatly from the projections.

We'll now start the conference call. Mr. Nozaki, please.

[Kunio Nozaki, executive]

My name is Nozaki from Sumitomo Chemical. Thank you very much, indeed, for joining us for this conference call out of your busy schedules. To the investors and to the analysts, I'd like to take this opportunity to thank you for your understanding and your support. Once again, let me express my gratitude.

Now I'd like to start my briefing on our performance for the first half of fiscal 2018. Please go to Page 4: 2018 first half consolidated results. Sales revenue was JPY 1,122,001,000,000, up JPY 81.8 billion year-on-year. Core operating income representing recurring earnings power was JPY 102.1 billion, down JPY 24.9 billion year-on-year.

Equity in earnings included in core operating income was JPY 23.9 billion, up JPY 1.2 billion year-on-year. As for nonrecurring items not included in core operating income: changes in fair value of contingent consideration, JPY 6.9 billion; business structure improvement expenses, JPY 2.4 billion. In total, it was a loss of JPY 10.2 billion. Since in the same period last year there was a gain on sale of PPE, it was a deterioration of 9.3 -- JPY 19.3 billion year-on-year, and as a result, operating income was JPY 91.9 billion according to IFRS, down JPY 44.2 billion year-on-year.

Finance income and expenses, it was a gain of JPY 10.4 billion, better by JPY 8.3 billion year-on-year, of which gains and losses on foreign currency transactions due to weakening of the yen towards the end of the period, it was a gain of JPY 10.2 billion, an improvement by JPY 7.3 billion year-on-year.

Income tax expenses were JPY 20.8 billion, down by JPY 6.5 billion year-on-year, and as a result, net income attributable to owners of the parent was JPY 61.5 billion, down JPY 15.6 billion year-on-year. ROE for the half year period was 6.4%.

Now the foreign exchange rate and naphtha price, which have an impact on our performance. Starting with the exchange rate; U.S. dollar average rate during the period was JPY 110.26 to $1. Compared to last year, it was -- the yen was slightly stronger. As for naphtha price, it was JPY 51,100. Compared to last year, it was up by JPY 13,500, or 36%.

Overseas sales revenue ratio was 64.6% with higher shipments of petrochemicals and IT-related chemicals, mostly to China. Overseas sales revenue ratio was up year-on-year.

Next, sales revenue -- or results by segment. Go to Page 5, please. Sales revenue -- total sales revenue was up by JPY 81.8 billion year-on-year. By segment, Petrochemicals & Plastics, Energy & Functional Materials, IT-related Chemicals, Health & Crop Sciences saw increases year-on-year.

As for sales revenue changes by factor, on sales price, in IT-related Chemicals and Pharmaceuticals, sales price declined. But in Petrochemicals & Plastics, with higher feedstock prices, market prices went up. So sales price variance was a positive JPY 24.5 billion.

On volume, excluding Pharmaceuticals and Others, in all other segments, shipping volume increased, so shipping volume variance was a positive JPY 59.7 billion. Overseas subsidiary sales revenue foreign currency conversion variance was a negative of JPY 2.4 billion because of a slightly stronger yen.

Now moving to Page 6. Total core operating income was down JPY 24.9 billion year-on-year. By segment, Energy & Functional Materials and IT-related Chemicals saw higher operating income.

By factor, for price variance, IT-related Chemicals and Pharmaceuticals were impacted by lower sales price, and Petrochemicals and Health & Crop Sciences had deterioration in profit margins, leading to a negative price variance of JPY 18.5 billion.

On cost variance, in IT-related Chemicals, rationalization efforts progressed, but in Pharmaceuticals, it had higher selling expenses. So it was a negative JPY 6 billion.

In shipping volume variance, which includes changes in equity in earnings of affiliates, it was positive in Energy & Functional Materials and IT-related Chemicals; that saw shipment increases. But in Pharmaceuticals, that recorded a gain from sale of business last year. And in Petrochemicals, that had the impact of periodic maintenance this period, it was negative, and in total, it was a negative JPY 400 million.

Next, performance by segment. In Petrochemicals & Plastics, sales revenue was JPY 380.4 billion, up JPY 60.3 billion year-on-year. Core operating income was JPY 35.4 billion, down JPY 6.5 billion year-on-year. On sales revenue, with higher feedstock prices, market prices went up. Also, increases in shipment of Rabigh products pushed sales revenue higher.

On core operating income, it's negative. MMA, caprolactam and such raw materials for synthetic fibers, profit margins improved. In addition, equity-method affiliate Petro Rabigh, with continued stable operation, it has a much better performance than the same period last year, when it had an equipment problem.

But on the other hand, in overseas market, synthetic resin profit margins deteriorated, and in Chiba factory and in Singapore, there was the impact of periodic maintenance. And there was a recognition of license revenue last year same period. So there was a onetime negative factor which was bigger than the positive factor, leading to a decline in core operating income.

Next page. As for Energy & Functional Materials, sales revenue was JPY 140.9 billion, up JPY 20.6 billion year-on-year. Core operating income was JPY 12.8 billion, up JPY 2.5 billion year-on-year.

On sales revenue, with higher market price for aluminum and lithium-ion secondary battery separators, cathode materials precursors, high-purity alumina had shipment increases, leading to higher sales revenue.

On core operating income, similar to Petrochemicals, there was the impact of periodic maintenance at Chiba factory. But with higher shipment volume generally, operating income was higher year-on-year.

As for IT-related Chemicals segment, sales revenue was JPY 195.4 billion, up JPY 6.9 billion year-on-year. Core operating income was JPY 14.8 billion, up JPY 5.8 billion year-on-year.

The sales revenue. The sales prices of polarizing films and touchscreen panels dropped, while, in volume, shipment of polarizing films increased, so this resulted in increase in sales revenue.

As for core operating income, negative impacts from lower sales price were offset by positive effects from increase in shipment volume and rationalization and other cost reduction efforts. This resulted in a positive growth in core operating income.

Next, for Health & Crop Sciences segment, sales revenue was JPY 138.1 billion, up JPY 400 million year-on-year. Core operating income was JPY 2.5 billion, down JPY 5.9 billion year-on-year.

The shipment of crop protection chemicals increased in overseas market, in South America and in Asia, especially. But Indian rupee, Brazilian real and other emerging countries' currencies weakened, which led to foreign exchange losses. So sales revenue remained almost flat because of those positive and negative factors offsetting each other.

Core operating income dropped, due to higher feedstock prices and deterioration in performance of Nufarm, an equity method-applied affiliate overseas.

As for Pharmaceuticals, sales revenue was JPY 242.7 billion, down JPY 5.4 billion year-on-year. The core operating income was JPY 39.3 billion, down JPY 18.9 billion year-on-year.

As for sales revenue, the shipment of Latuda in North America, an atypical antipsychotic agent, and Aptiom, an antiepileptic agent, increased. But in Japan, NHI price revisions had an impact, and a decrease in shipment of [ long-listed ] brands also happened, and this pushed down sales revenue.

As for core operating income, a decline, due to NHI price revisions in Japan and increases in sales expenses in North America, as well as absence of onetime gain from the divestiture of a business recorded in the same period of the last fiscal year.

That's all for segmental performance. And next page is the breakdown of nonrecurring items, and the breakdown and amounts of nonrecurring items were already explained at the outset, so let's skip this slide. But the changes in fair value of contingent consideration actually deteriorated significantly and dipped in negative territory, changing from the positive numbers in the last fiscal year.

Now consolidated balance sheet. As of the end of September 2018, total assets posted JPY 3,263,008,000,000, up JPY 195.2 billion from the end of the last fiscal year or March 2018. This was mainly due to increase in property, plant and equipment and inventories.

Interest-bearing liabilities totaled JPY 906.6 billion, up JPY 64.5 billion from the end of last fiscal year.

Equity stood at JPY 1,335,001,000,000, up JPY 82.9 billion from the end of last fiscal year, and this is because of the increase in retained earnings. As a result, equity attributable to owners of parent to total assets, or equity ratio, was 30.4%, an improvement of 0.2 percentage points from the end of last fiscal year.

Next, consolidated cash flow. Please turn to Page 14. Cash flow from operating activities was JPY 55.6 billion, down JPY 60.2 billion year-on-year. This was due to drop in operating income and increased working capital.

Cash flow from investing activities posted -- was outflow of JPY 83.1 billion, an increase of JPY 28.5 billion year-on-year, mainly due to increased spending on acquisitions of property, plant and equipment. As a result, free cash flow was a negative JPY 27.5 billion, representing an increase in cash outflows of JPY 88.7 billion from the net positive year posted in the same period last fiscal year. Cash flow from financing activities was a net inflow of JPY 22 billion, up JPY 47.7 billion year-on-year.

That's it for the results of the first half. Now let me move to the estimate for the full year as a last item for the presentation.

We have not changed the financial estimate for the full year from the numbers announced in May. Sales revenue is expected to post JPY 2,490,000,000,000; core operating income, JPY 240 billion; operating income, JPY 205 billion; and net income, JPY 130 billion. So these have not been changed.

As was explained, the result of the first half declined from the year before, but this was mainly due to onetime factors. I may be repeating myself, but those include a periodic plant maintenance in Chiba and Singapore for about JPY 9 billion, and license revenue that was posted in last fiscal year was slightly more than JPY 2 billion and gain on divestiture of a business for JPY 9 billion in Pharmaceuticals. In total, JPY 20 billion was onetime factors was there. And in Pharmaceutical, there was an impact of more than JPY 4 billion from NHI revision. And so there are -- there is a drop in profit because of onetime factors, so compared to the core operating profit of JPY 262.7 billion in the last fiscal year, the base profit would be the same.

On the other hand, compared to the forecasts for the first half announced in May, we have achieved 113% in core operating income, 115% in operating income and 112% in net income, exceeding all our expectations. This was mainly due to strong performances in Petrochemicals & Plastics, Energy & Functional Materials and IT-related Chemicals. We expect this strong trend to continue for the time being. However, at present, there are expanding concern of trade friction between the U.S. and China and manifestations of geopolitical risks in the Middle East, so there are heightened level of uncertainties. So we have to take into account the possible risks associated with those, and for the feedstock prices, the crude oil prices are going up and down. And foreign exchange rates are expected to be quite uncertain going forward. So in light of those background factors, we decided to leave the full year estimate unchanged by considering those risks, even though we have overachieved the first half.

That closes my presentation on the financial results. I'd like to now take the questions from you. Thank you very much for joining us once again.

[Operator]

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

[Takato Watabe, analyst]

Now it's about IT-related Chemicals. First quarter was quite strong. And second quarter, unprecedented numbers. Maybe it's impolite for me to say this, but JPY 10 billion for 1 quarter, so from the first quarter to the second quarter, what has happened? Other companies have problems, and there was the impact of rain. So including that towards third quarter and the fourth quarter, can you give us an outlook?

[Kunio Nozaki, executive]

Well, in the first quarter, originally, we thought that it will be a better performance from the first quarter. But in polarizing film, the launch was delayed somewhat. So that included -- in the second quarter, there was a huge boost to the second quarter. Midsize, small-sized and large-sized applications included, it was very strong. Especially, if I may mention, compared to other companies, competitors, we don't know. But in the case of our company, for smartphone applications, polarizing film, there is the -- smartphones are using full-screen, but different shaped processed goods still exist, for example, the screen to see videos. In that case, polarizing film -- the way that the film would be cut would be more complicated. This is called different-shape processing. But because of the difficulty, we can differentiate ourselves. This is an area where we can add value. So in the second quarter, this is the area that saw a lot of growth. The second is for TV applications. Extra-large, super large, 55 or 65 inches, such large-sized applications. Again, technically, relatively speaking, this is high value-added, so we see a lot of shipments of these products. In addition, in the case of touchscreen panels, OLED -- if migration to OLED progresses, touchscreen panel volume will go up further. So that included, in the first quarter -- well, in the first quarter, we feel that we could have done better, but towards the second quarter, we recovered for the shortcomings in the first quarter. And you talked about going forward; at this point in time, currently, the pace hasn't changed that much, but as you might know, in this world, in this segment, for the Christmas shopping season, manufacturers are producing in large amounts. So July to October, or maybe up to November, this is going to be the period where there's going to be a peak in activity. So in the third quarter, we feel that it's going to be reasonably strong. But in the fourth quarter, because of seasonality -- and in China, TV application panels, increases in production could be expected, then demand and supply may loosen up a little bit. This may be just a concern on my part, but that's something that we are thinking of. So up to the fourth quarter, if we have an outlook, we may need to think about some of those risks. That's where we stand. Thank you.

[Takato Watabe, analyst]

Now touchscreen panel, from the first to second quarters, there has been an improvement.

[Kunio Nozaki, executive]

Yes, that's right.

[Takato Watabe, analyst]

Second question is about petrochemicals. Market prices are rather weak. But in the second quarter, it was as strong as first quarter. Of course, there's the difference of periodic maintenance. And towards the second half of the year, it's higher than your expectation. But towards the second quarter, what are your projections?

[Kunio Nozaki, executive]

Yes. In the first half, it was rather strong, we feel, in the first quarter and the second quarter. In the first quarter, in Chiba, there was the periodic maintenance, which had an impact, and in the second quarter in Singapore, there was the periodic maintenance impact. So in just Petrochemicals, it was about JPY 8 billion, the size of this impact. So I would say it was more or less the same as last year -- or slightly better than last year, in terms of profits. For one thing, Petro Rabigh was rather strong. And in terms of market prices, MMA, compared to the year before, margins were better. But our concerns are polyolefin, especially polyethylene. In the second quarter -- towards the end of the second quarter, the margin has started to shrink -- at least that's been the tendency. So in the first half, MMA was strong, and Rabigh products sold quite a bit, so this was good. But in the second half, MMA, according to our expectations -- we have lowered our expectations -- but right now, margins have not deteriorated or it could have even go up. So margins could be expanding a little bit. But for polyolefin, it's a bit tight. I think we should have a tighter projection, that things could get a bit difficult towards the second half in Asia. U.S. shale gas-based polyethylene is already coming in -- or it could be entering in some parts, and therefore, market prices are coming down. Propylene-related products are not impacted that much. But in any case, there's the risk of a slowdown that we may need to think about. Did I answer your question? Thank you very much.

[Takato Watabe, analyst]

Yes, that answered my question.

[Operator]

Next question, from Mizuho Securities, Mr. Yamada.

[Mikiya Yamada, analyst]

I am Yamada from Mizuho Securities. First question, this performance forecast has remained unchanged. But if you look at Page 22, by segment, for the time being, the numbers have been -- remained unchanged but, according to your presentation, the IT-related Chemicals do have uncertainty. However, there is a lot of progress made. And also, good progress has been made also in Petrochemicals & Plastics, and if there's any differences in different segments, which segment seems to be weaker? Can you explain more about Page 22, including those differences in different segments?

[Kunio Nozaki, executive]

Well, there are variances from segment to segment. In reality, if I choose negative ones, the Health & Crop Sciences segment, probably we will not be able to achieve the full year forecast, probably, and the factors follows. Methionine is the first one. The price of methionine, as we have been saying all along, compared to the last year, we were expecting the prices to go up -- that was the initial forecast, but -- in the first quarter, there was signs for prices to go up, but in the second quarter, actually, it -- the prices are going down slightly, and the prices to the customers -- rather than the price to the customers, but there are a lot of volume in China, and because of the renminbi weakness, the renminbi-denominated prices converted into dollars, that numbers have dropped. So the price increase has stalled in that sense. On the other hand, for the feedstock price, propylene is the main feedstock. And because of crude oil price increase, the price of this propylene has been increasing, so we are in a challenging situation. But as of now, gradually, we are moving into a demand season because this is a feed for chicken, and chicken is going to be sold ahead of December. And so the price -- selling prices tend to go up while costs are also increasing. But initially expected sales price increase is going to be difficult to be realized. So that's the reason why we expect Health & Crop Sciences to underachieve the forecast. But for the other segments, as Mr. Yamada said, in the first half, we are overachieving our forecast, and so we can offset the negative factors in Health & Crop Sciences and we can expect the unchanged forecast. So the Petrochemicals, Energy & Functional Materials and IT-related Chemicals are doing well, and you have some uncertainty about Health & Crop Sciences. But they can achieve the overall forecast for the full year. So thank you.

[Mikiya Yamada, analyst]

The second question about IT-related Chemicals segment. The rationalization seems to be working. But the -- in the fuel and raw materials cost increase, has there been any breakthrough that you've seen? And in the volume, the semiconductor materials and other high-purity sulfuric acid and [ XRM ], where you are the top leader, can you explain about the first half results and the forecast for the second half?

[Kunio Nozaki, executive]

Well, with regard to rationalization, well, in terms of films, the speed of pulling is the matter, and there has been always the items where we can do rationalization. But in the first quarter, if we have -- had lower operation -- capacity utilization ratio, and then that rationalization doesn't work much. But in the second half -- or the second quarter, we have seen more effect from rationalization because of capacity utilization. And as for value-added products, to what extent the rationalization has worked and to what extent the product mix has worked? We don't know, and we have to take advantage of that different-shape processing, and we have seen significant improvements there because of that. And your second question is about LCD -- or non-LCD. Well, for that business, it is not attracting too much attention, but they are mostly related to semiconductors. The semiconductors themselves are quite performing well. So in accordance with that, we are seeing increase in our business, especially compared to the last fiscal year. For each of the products, we have seen increase. In terms of operating income, they are performing well. And especially the chemicals for semiconductors and color resists, we have higher shares in those products, and so we have seen increasing volume and increasing profitability in accordance with that. So the volume, there is -- has an impact of JPY 16.5 billion in sales. And rationalization has worked because denominator has increased. Because of that increased denominator, you have seen more effect. Yes, in this segment, the sales prices are dropping but the raw material to be purchased also reduced in prices, and that is also included as part of the rationalization effect. Thank you.

[Operator]

Next question is from Citigroup Securities, Mr. Ikeda.

[Atsushi Ikeda, analyst]

My name is Ikeda from Citigroup Securities. I came and joined this meeting from the middle, but in IT-related Chemicals in the second quarter, OLED and LCD different-shape processing, which was the major contributing factor? And your competitors, from October onwards, they had a bullish outlook, so it's different from your outlook. So how do you approach this? This may have already come up, but let me ask this question.

[Kunio Nozaki, executive]

In the second quarter, most of the profit was driven by these different shape processed goods. And TV applications, especially super large-sized ones, shipments was strong, so this also made a profit contribution. I don't know about our competitors, but in the third quarter, at this point in time, I think the pace is quite good. But going forward further into the future, obviously, there is going to be the Christmas shopping season, and towards that season, all of the manufacturers -- device manufacturers are working towards that, so they are pushing up and increasing their production volumes, and therefore, in the third quarter -- towards the end of the third quarter to the fourth quarter, there could be some slowdown in production of various companies. And as for our shipment, we could see some slowdown, so that could be considered as a risk. At least, we thought that we would consider that risk. And therefore, we are taking a more or less conservative view. Did I answer your question?

[Atsushi Ikeda, analyst]

One supplementary question. OLED polarizing film, there was not big improvement from the first quarter to the second quarter. And smartphone market is quite weak, but high-end full displays, the market is quite favorable. Is this the correct understanding?

[Kunio Nozaki, executive]

OLED polarizing film, well, yes, it has gone up in the second quarter. But of course, full-screen panels, this is driving profits.

[Atsushi Ikeda, analyst]

The second question is about Energy & Functional Materials. From the first quarter to the second quarter, can you give us an analysis? Separators, resorcinol, there's the difference for the periodic maintenance. Can you give us a general comment about this analysis?

[Kunio Nozaki, executive]

In the first through the second quarters, the impact of the periodic maintenance came in the first quarter. So in the second quarter, about JPY 1 billion or so, that's the image we have, it's better by about JPY 1 billion because the Chiba factory maintenance started from the beginning of May, towards the end of June to the beginning of July. So by that much, second quarter would be improved. Now this separator, every quarter, shipments volumes are going up solidly. TV maker in the U.S., their production system is now being put into place, we hear, and in substance, towards that, our shipments are actually going up. So second quarter has higher shipments compared to first quarter, and the third quarter is going to be higher than the second quarter. That's how we look at it. Did I answer your question?

Resorcinol is at a plateau level. Resorcinol were up to the maximum of production. We cannot produce any more. The market is quite tight, so sales price is already staying at a high level. So there isn't any difference between the first quarter and the second quarter, but in terms of the product itself, it is generating profits reasonably. Did that answer your question, Mr. Ikeda?

[Atsushi Ikeda, analyst]

Yes.

[Operator]

We are approaching the ending time, so we are going to take the last question. Let me introduce the next question from SMBC Nikko Securities. Mr. Takeuchi, please.

[Shinobu Takeuchi, analyst]

I am Takeuchi from Nikko Securities -- SMBC Nikko. Maybe this is a repeated question. In the first half, the Petrochemicals & Plastics, Energy & Functional Materials and IT-related Chemicals, they have achieved more profits than forecast. But there was the upside because of a part maintenance -- periodic maintenance. But for Energy & Functional Materials, polarizing sales, profit upside. And for IT-related Chemicals, separator volume increased. Were they factors for upside?

[Kunio Nozaki, executive]

Well, as for petrochemicals, as you -- what you said is right. And as for Energy & Functional Materials, the return on separators, we have been quite conservative in our forecast. But actually, in particular, in the second quarter, the business has been taking off quite smoothly. And for battery materials, other battery materials, for example, high-purity alumina, it is used for coating the separator and super engineering plastics, maybe we have been too conservative. But for each of the products, what we have been focusing on has been growing steadily. So that's how it -- they are. And as for IT-related chemicals, we have been slightly conservative in our forecast, probably. But will this performance continue? Not that easy, I would say. With smartphones or TV sets, if you look at the full year, what is going to happen, that is what matters. And possibly, in that sense, earlier than later, we may have seen the peak, so we have to closely watch what is going to happen for the rest of the year. But what is unique about our company is that big touch sensor -- touchscreen panels or polarizing films, we focused our resources on high-end products. Therefore, how -- to what extent high-end products would grow would be a key in our profitability going forward. And in the last fiscal year, those high-end products were quite good, but whether or not this will continue, it's unclear yet.

[Shinobu Takeuchi, analyst]

One clarification. For separators, in the second quarter, there was much growth. But in the third and fourth quarter, are you -- do you see more upside than the second quarter? Is that correct?

[Kunio Nozaki, executive]

Well, I have said this earlier, but the automotive manufacturer in the U.S. is increasing the production volume steadily, as I -- we heard, and in terms of our shipment, accordingly, we have been seeing increase in shipments, and they are getting better, so we expect this to grow further.

[Shinobu Takeuchi, analyst]

Second question is about Health & Crop Sciences, methionine. You are -- have completed the construction for production capacity increase. But for -- are you going to see the full scale contribution for the 6 months in the -- until the end of the -- this fiscal year? And after the production capacity, there's no risk of decline?

[Kunio Nozaki, executive]

Well, the -- we are going to start the commercial operation in early November. And we have been running the trial operation, and it has been going well, so we can expect commercial operation as expected. In terms of volume, this market is quite difficult in forecasting. But in terms of volume, market is -- the business is growing steadily. So in terms of selling the products, we won't find it too difficult. We will be able to sell products, but in terms of selling prices, they may not increase as much as we had expected, so that is a concern. And on our part, this year, we have increased our production capacity. In Abenomics, we're going to increase its production capacity next year. That's also known. And so that's why the prices may be declining. But once the products are coming into the market, we don't expect the prices to go down further because of the actual products in the market. So the products are in the market, then people would feel more assured. Maybe that would help push up the price. That's our hope. We do not have any forecast for the prices to go up too much. So the depreciation will start from November, and the marginal profits -- or the fixed price -- fixed expense increase can be covered, you can reach the marginal profit, yes. So the sales will be -- as expected to be going well from the initial start, yes. So does that answer your question, Mr. Takeuchi?

[Shinobu Takeuchi, analyst]

Yes.

[Operator]

Thank you very much. That concludes the question-and-answer session. Mr. Nozaki of Sumitomo Chemical, can you say the last word?

[Kunio Nozaki, executive]

Well, thank you very much for joining us for the conference call for our company today. So this year is the final year of the current medium-term management plan. Change and Innovation Create Value is the slogan. And we probably will be able to achieve the profit for the final year, but we will have to remain committed. And I'd like to ask for your kind cooperation and support. And thank you very much, once again, for today.

[Operator]

Thank you very much. This conference call today is going to be posted on the website of Sumitomo Chemical as an archive, and you can access and play at any time you like. So please make use of this recorded conference call. And that concludes the conference call today. Thank you very much for joining us today.