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Edited Transcript of 4004.T earnings conference call or presentation 19-Feb-21 10:59am GMT

·32 min read

Full Year 2020 Showa Denko KK Earnings Presentation Tokyo Feb 21, 2021 (Thomson StreetEvents) -- Edited Transcript of Showa Denko KK earnings conference call or presentation Friday, February 19, 2021 at 10:59:00am GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Kohei Morikawa Showa Denko K.K. - President, CEO & Representative Director * Motohiro Takeuchi Showa Denko K.K. - CFO, Managing Corporate Officer & Representative Director ================================================================================ Presentation -------------------------------------------------------------------------------- Kohei Morikawa, Showa Denko K.K. - President, CEO & Representative Director [1] -------------------------------------------------------------------------------- Good morning, everyone. I'm Morikawa, President and CEO of Showa Denko. Today, thank you very much for joining our financial results meeting despite your busy schedule. This slide shows contents of briefing. In addition to 2020 results and the forecast for 2021, let me walk you through the state of core growth businesses and stable earnings businesses, which will be a key growth driver to recover from COVID-19 impact. And both are part of 4 portfolios that I described in the long-term vision announced on December 10 last year and overview of major businesses, progress of long-term vision, integration with Showa Denko materials and contribution to sustainable society. Detailed results of 2020 will be explained later by CFO, Takeuchi. In 2020, greatly affected by deteriorated market condition due to COVID-19, shipments of various products decreased sharply. From second half of 2019, global crude steel production fell, in particular, and customers were adjusting their inventories of graphite electrode and COVID-19 impact overlapped with this, resulting in the drastic decrease in shipment volume, and that worsened profit substantially. To counter this, we implemented profit improvement measures, including closure of our production site and the application of lower of cost or market accounting method and strived to enhance business structure. On the other hand, due to demand increase in electronics equipment with the expanded teleworks, solid growth has -- was achieved in Electronics segment even under COVID-19. Backed by the recoveries in automotive production and steel demand from the second half of 2020, we expect significant business recoveries in 2021 year-on-year in almost all businesses. As for integration with Showa Denko Materials, which has become a consolidated subsidiary in 2020, we are making steady progress towards substantial integration in July 2021 and complete integration in 2023. 2020 results and forecast for 2021. In 2020, all levels of profit decreased substantially, and this includes temporary cost of JPY 25 billion related to integration with Showa Denko Materials. We plan to pay a dividend of JPY 65 per share for the stable dividend payout. In 2021, in almost all businesses, sales and profit will recover, and operating income is expected to be JPY 45 billion. Figure of aluminum sheets and rolled products and aluminum cans businesses, whose sales were announced the other day, are excluded from the figure for the second half. Temporary cost of JPY 8 billion related to integration with Showa Denko Materials are included. Given COVID-19 impact continues to be uncertain, as of today, we set the annual dividend for 2021 as JPY 65. This is a comparison of 2020 results and 2021 forecast. Due to the solid demand dynamics of semiconductor-related products for PC and data centers, we expect the shipment increase of the products related to ITC, spread improvement by stabilized naphtha price in petrochemicals and market price recovery of graphite electrode from the second half of 2021, and they are the factors for the operating income growth. Four business portfolios that were showing the long-term vision in the previous year are divided into 2 groups of core growth and net generation business, and stable earnings and fundamental technologies and material business, showing the 2020 results and 2021 forecast. Core growth in next-generation business shown on the top, we'll achieve strong sales growth of 12% in 2021 year-on-year. And in stable earnings business and fundamental technologies and material business, EBITDA will grow more than threefold and profitability recovers substantially. Growth business of electronics and mobility will be the key sales growth driver for the entire group and stable earnings business will earn cash. This shows how we realize the portfolio aimed by the integrated company. I will explain the market presence of core growth businesses. In the electronics market, in 2019, semiconductor market weakened slightly. But in 2020, due to the progress of 5G and the spread of teleworking, electronics equipment demand increased. And with the data center-related demand growth for the data storage, market returned to growth track. And from 2021, continued market expansion is expected. Semiconductor demand will continue to expand 5% per annum from 2020 to '25. And we expect that our semiconductor business will achieve even higher growth than the market. As for mobility market, in addition to the recovery of automotive production from the second half 2020, in 2021, many programs for the new car models in our group are waiting for adoption. This will enable us to achieve higher growth than the market. From this slide, let me explain market trend of stable earnings business, which will serve as a driver for recovery. As for graphite electrode business, global crude steel production has been on the recovery track from the second half of the previous year. And growth in the production volume from the electric arc furnace will be sustained after 2021. Steel demand, excluding China, contracted sharply 13.3% year-on-year in 2020. But in 2021, plus 9.4% growth year-on-year is expected. In response to the market recovery from the second half 2020, graphite electrode inventory adjustment at electric arc furnace makers is almost over. And in 2021, we expect the graphite electrode sales will recover. Market trend of hard disk media and petrochemicals. As for hard disk media, operational ratio of hard disk drive makers went down temporarily, affected by COVID-19, but now they recovered. Due to the drastic growth in data volume with the progress of 5G and IoT, demand for data centers will be increasing. And as the demand for externally attached HDD has been growing steadily with the expanded teleworking, inexpensive mobile PC demand with HDD, which can be used also for online learning has been rising as well. And market price of 3.5 or 2.5-inch drive is picking up, though they have been on declining trend for a long time. In Petrochemicals business, in addition to China's quick economic recovery from COVID 19 impact to drive the overseas demand further, we will see the firm demand for lifestyle-related products in Japan. And by the automotive production recovery, we expect demand will be as strong as that of 2019, and crude oil and naphtha price will be moving in a stable manner. As for capital investment, we will continue carefully selected investment, placing priority on ones to strengthen competitiveness. In 2021, out of total investment of JPY 102 billion on a decision basis, JPY 45 billion will be spent on core growth and next-generation businesses and JPY 39 billion will be spent in stable earnings and fundamental technologies and materials businesses. And we will start building the Stage for Fusion, an integrated R&D complex. From now, I will elaborate on the major businesses forecast and measures more in detail. As for the information and communication business, in core growth business, semiconductor demand in 2021 will be record high level, backed by the solid progress in 5G and market recovery of smartphone. In high-purity gas for electronics materials, we will continue investment to enhance stable supply structure through local production for local consumption in demand areas, China and Taiwan, among others. We'll also expand production capacity of advanced functional laminated materials and CMP slurry of Showa Denko Materials to respond to market growth. By utilizing Packaging Solution Center, we will promote the development of next-generation package. We'll continue to actively invest in the semiconductor-related fields, which will continue to be core growth business and will achieve double-digit growth, which is higher than the expected market growth of 5%. Mobility in core growth business was heavily hit by COVID-19 impact in the first half of 2020. From the second half, car production showed major recovery and we expect this trend to continue in 2021. Our group products such as backdoor modules, which lower the weight and realize high fuel efficiency and environment-friendly copper-free disc pads respond to market needs and will be introduced to about 20 car models in 2021 in new programs. By steadily starting up these programs, we would achieve growth outperforming the market. We will continue to develop various products to fulfill future needs for the next-generation cars with materials to reduce weight for vehicle electrification and thermal management and pursue higher than market growth. As for graphite electrodes business and stable earnings, customers' inventory adjustment was completed at the end of 2020 as crude steel production recovered from the second half in 2020. Crude steel production continues to increase steadily in 2021, leading to a major graphite electrode sales volume increase compared to 2020. Through production capacity optimization and resolution of the feedstock cost adjustment of main material needle coke by implementing lower of cost or market accounting method, or LCM, we are maintaining a certain level of spread and expect performance to recover with the drastic increase of shipment volume of graphite electrodes. Through the acquisition of AMI Group shares announced on February 8, we will start consulting sales to provide solutions to realize optimum electric furnace operation, which will contribute to customer CO2 reduction. Compared to blast furnace, CO2 emission from electric furnace at the time of steel production can be reduced. There is no change to the global trend of expanding electric steel production. Our group will promote this aggressively as a product that contributes to the SDGs. Hard disk media in stable earnings business. As the volume of data to be stored significantly increases, data center investment is recovering. We decided to increase the production capacity of aluminum substrate used for the hard disk media for nearline by 30%. High capacity media is much needed for this area, and we will expand the supply of MAMR media, which is next-generation recording method and continue to develop the HAMR media. In addition to the growth of nearline, hard disk market is showing changes from the long-term declining trend such as higher demand for external hard disk drives due to the expansion of the remote work, an increase of relatively low-priced PCs with HDD for online school classes. We can expect these changes to continue in the post-COVID-19 times. We continue to respond to brisk demand based on our best-in-class strategy. In Petrochemicals, in stable earnings business, export trended strongly as demand recovered in China. Our cracker continues full capacity operation from July 2020 with the recovery of domestic demand. And feedstock cost adjustment is improving with higher naphtha price. We continue to implement measures to control fluctuation of income, such as expansion of the derivatives, refined catalyst, optimized plant operation utilizing AI-based predictive maintenance system and improved profitability stably through export expansion to growing East Asia. On December 10 last year, we announced long-term vision in order to become a global top level functional chemical manufacturer in 2030. This year is the final year of the current medium-term business plan, The TOP '21, in which appropriate measures are implemented based on the road map to become KOSEIHA Company in 2025 on the way to achieving the long-term vision. Through the substantial integration with Showa Denko Materials and further enhancement of each business, we will make sure to realize KOSEIHA Company and become a global top level functional chemical manufacturer, which can compete in the global market in 2030. This shows the integration of technologies of Showa Denko and Showa Denko Materials shown in the long-term vision. Through the integration of evaluation and simulation technology in chemistry to think, materials technology in chemistry to synthesize and application technology in chemistry to formulate, we will provide unmatched unique functions and strengthen existing businesses and realize self-directed portfolio that leads to the development and creation of new businesses. Initiative to realize short to medium-term synergy is shown here. We are working on the profit structure improvement through integration, asset streamlining and business portfolio restructuring. We expect to realize JPY 12 billion profit structure improvement within 2021 to achieve JPY 28 billion target by 2023. As for asset streamlining with working capital improvement and sale of marketable securities, we achieved JPY 73 billion in 2020, ahead of schedule, which is much higher than our target of JPY 50 billion in 2021. As for business portfolio restructuring, we announced to sell-off aluminum can and aluminum rolled products businesses on January 28. R&D, creation of synergies status is shown here. Let me first explain the chemistry to think, which is positioned as a basic research for our group. Our computational science and structural analysis technologies can be deployed to Showa Denko Materials, and we can use their evaluation and simulation technologies to improve both quality and speed of R&D. By unifying intellectual property management system of 2 companies, we are working to integrate the strength of Showa Denko and Showa Denko Materials in the area of IP as well. Next is synergy creation through integrating chemistry to synthesize and chemistry to formulate. By linking and combining Showa Denko's Materials technology and Showa Denko Materials application technology, we'll pursue synergy generation in various areas. We are making progress in many areas such as reaction control, precision polishing, lithium-ion battery, resin materials and others. In the medium-term business plan, The TOP '21, we started to work on cross-company marketing platform to grasp the precise needs of the market and customers to propose solutions. Based on this platform, corporate marketing office was established in January to strengthen marketing functions. integration with Showa Denko Materials extended our value chain to the downstream. As we can better understand needs of customers and market, we'll fully utilize our strength in materials and technologies to contribute to enhance core growth businesses. Let me explain the status of PMI progress. As a step toward integration, joint management committees where management matters are discussed together started in 2021. In April, we will start integration of information sharing platforms. We will consider organizational structure and design head office and business functions. After substantial integration in July 2021 and integration of head offices in October, we'll proceed to full integration in January 2023 as planned. In order to cope with social issues such as achieving carbon neutrality, recycling-oriented society and contribution to improved quality of life, our group will promote R&D and production process improvement, expanded recycling of steel and plastics and efficient use of resources and develop products and applications to improve quality of life, learning and health and change society with the power of chemistry and contribute to solve SDGs-related issues and realize sustainable society. In 2021, all divisions will clarify how our major products contribute to solve social issues. We will formulate and announce the vision of the newly integrated company pertaining to sustainability of society and our materiality. Thank you very much for your attention. -------------------------------------------------------------------------------- Motohiro Takeuchi, Showa Denko K.K. - CFO, Managing Corporate Officer & Representative Director [2] -------------------------------------------------------------------------------- I am Takeuchi, Chief Financial Officer. Thank you very much for your consistent interest in our business results. I would like to start with the overview of the results for 2020 ended in December. Please turn to Page 2. Net sales were JPY 973.7 billion. Showa Denko Materials consolidation from the third quarter increased sales by JPY 302.7 billion, but sales of existing businesses, mainly in Inorganics and Petrochemicals segment went down. Operating income was minus JPY 19.4 billion. Despite increase in Electronics segment, significant profit decrease in Inorganic segment affected and operating income fell sharply. As for Showa Denko Materials, semiconductor-related business was firm, but due to impact by reduced automotive production in the third quarter and by the goodwill posted for integration and step-up of the inventory assets, the results were minus JPY 6.3 billion. As for major special factors affecting 2020 results, JPY 18.5 billion related to COVID-19 and JPY 38.9 billion related to integration with Showa Denko Materials were posted. Details will be provided on Page 5. Year-end dividend per share as of the end of 2020 will be JPY 65 as announced on December 25 in the previous year. From October, former Hitachi Chemical was renamed to Showa Denko Materials. Due to its consolidation, 91 companies were added. And the integration of subsidiaries in Europe resulted in the decrease of 1 company, and total number of subsidiaries was 151. Equity method applied company was 13, with additional 2 Showa Denko Materials companies. For selected data, please refer to the list. This slide shows a summary of consolidated results for 2020 ended in December. Sales and profit of Showa Denko Materials were included from July. Net sales were JPY 973.7 billion, up JPY 67.2 billion or 7.4% year-on-year. Operating income was minus JPY 19.4 billion, with drastic decrease of JPY 140.2 billion year-on-year. Details on net sales and operating income will be given on Page 9 and 10. Ordinary income was minus JPY 44 billion, substantially down by JPY 163.3 billion year-on-year. As for nonoperating income and expenses, equity and earnings of affiliates improved by JPY 0.5 billion year-on-year due to new affiliates from July. Foreign exchange gain or losses worsened due to yen's appreciation by JPY 2.3 billion year-on-year. And interest/dividends income and expenses show the increase of expenses by JPY 4.9 billion year-on-year, along with the stock acquisition of Hitachi Chemical. Other expenses increased by JPY 16.4 billion year-on-year related to temporary financing for stock acquisition of Hitachi Chemical. In total, expenses increased by JPY 23 billion. Special factors affecting full year results will be shown on the next page. Extraordinary profit and loss will be explained on Page 7, but net expense increased by JPY 2.9 billion. Net income attributable to owners of the parent were minus JPY 76.3 billion, down by JPY 149.4 billion year-on-year. Please turn to Page 5. Let me explain the special factors affecting the full year results. In Petrochemicals segment, feedstock adjustment adversely affected due to naphtha price decline, along with the fallen crude oil price in the first half, and the impact was minus JPY 4.5 billion. In graphite electrode, we devalued inventory in accordance with lower of the cost to our market accounting method. But reversal gain of JPY 4.5 billion was posted with shipment, and they resulted in minus JPY 17.2 billion. Impact by COVID-19 on operating income was minus JPY 8.2 billion in October to December, and full year impact was minus JPY 18.6 billion. As for integration expenses with Showa Denko Materials, PMI expenses were JPY 4.7 billion. Interest on borrowing was JPY 5.1 billion. Change in firm name costed JPY 0.7 billion. Preferred stock dividends were JPY 8.8 billion. And in total, expenses were JPY 38.9 billion, including JPY 5.1 billion of extraordinary loss or closure of a graphite electrode site. Total impacts by special factors were minus JPY 84.3 billion. Page 6. This slide shows the impact by amortization of goodwill and expenses for step-up of inventories belonging to Showa Denko Materials. Amortization of goodwill and intangible fixed assets in July-December were JPY 17.2 billion and selling cost of goods sold related to inventory step-up, we posted JPY 10.9 billion lump sum in the fourth quarter. Operating expenses were JPY 28 billion. And combined with JPY 1.1 billion equivalent to goodwill amortization of investment and other assets related to equity in earnings of affiliates, which is nonoperating expenses, in total, JPY 29.1 billion was posted. Page 7. As for extraordinary profit, gain on sales of noncurrent assets increased JPY 2.3 billion due to 1 by Showa Denko Materials, in addition to the posting by SHOKO Company Limited, as explained at the first quarter meeting. Gain on sales of investment securities increased JPY 3.2 billion year-on-year with the sell-down of strategic shareholdings. In total, extraordinary profit increased by JPY 5.5 billion year-on-year to JPY 8.4 billion. As for extraordinary loss, loss on sales of noncurrent assets decreased from the previous year, mainly posted losses related to Yokohama. But the business restructuring expenses increased JPY 4.2 billion due to posting of JPY 5.1 billion with closure of graphite electrode Meitingen Plant in Germany. Impairment loss of JPY 16.6 billion was posted, which was up JPY 0.9 billion year-on-year. Others includes loss on sales of investment securities. In total, expenses increased JPY 8.4 billion year-on-year to JPY 32.7 billion. Net extraordinary profit and loss worsened by JPY 2.9 billion to minus JPY 24.3 billion. Page 8. Asset streamlining and JPY 50 billion of cash flow improvement for the deterioration of economic environment up to 2021 were described in the long-term vision, which was announced on December 10, 2020. For this target, in 2020, we achieved improvement of JPY 73.1 billion compared to the year-end of FY 2019. Working capital improvement, including squeeze of inventory and account receivable was JPY 42.6 billion against a target of JPY 25 billion. Sell-off of marketable securities was JPY 22.7 billion against a target of JPY 20 billion. And the Sell-off of other assets was JPY 7.7 billion against a target of JPY 5 billion. In all of these, we overachieved the target areas in the plan. Before 2021, we overachieved the target. So I think initiatives delivered results. Page 9 and 10 show the sales and operating income variance analysis by segment. In Petrochemicals, sales were down JPY 57.3 billion year-on-year to JPY 193.4 billion, and operating income was down JPY 12.3 billion to JPY 4.9 billion. As for olefin, affected by COVID-19, supply-demand balance in East Asia softened due to demand decline in China in the first half, and the market price decline and volume went down and sales decreased. Profit fell sharply due to deteriorated feedstock adjustment caused by naphtha price drop with crude oil price plunge and by the tightened spread. But in the second half, demand has been firm and our ethylene plants have been in full operation. As for organic chemicals, both of sales and profit declined due to volume decline of ethyl acetate and vinyl acetate with shutdown maintenance and market price declines. Sales and profit of SunAllomer decreased due to volume decline due to shutdown maintenance, among others. In Chemicals segment, sales were down JPY 1.7 billion year-on-year to JPY 155.8 billion, and operating income remained almost unchanged at JPY 13.5 billion. As for basic chemicals, volume of ammonia was down due to sluggish domestic demand affected by COVID-19. Market price of acrylonitrile was down and export volume of chloroprene rubber declined and sales went down. As for profit, ammonia profit increased but acrylonitrile and chloroprene rubber profit decreased. And in total, profit was down. In electronic chemicals, production of semiconductor recovered mainly in memory from the second half of 2019 and volume increased and both of sales and profit increased. Industrial gas sales were affected by COVID-19. Carbon dioxide volume for beverages decreased and sales went down, but the profit was sustained year-on-year. Functional chemicals were also affected by COVID-19. Volume in Japan and for China declined, and sales and profit went down. Coating materials sales went up with increased trend of cooking at home in Europe and America, affected by COVID-19. In Electronics segment, sales were up JPY 1 billion year-on-year to JPY 97.4 billion, and operating income was up substantially by JPY 4.3 billion to JPY 9.1 billion. As for hard disk media, media shipment for data center increased but partly due to customers' reduced production in the first half affected by COVID-19, sales were down. But profit was sustained year-on-year. Compound semiconductor sales and profit increased due to export volume increase. Lithium-ion battery materials, sales and profit increased due to shipment growth of packaging materials, SPALF. SiC epitaxial wafers, sales and profit increased due to volume growth for domestic railways. In Inorganics segment, sales were down drastically by JPY 147.2 billion to JPY 82.9 billion, and operating income was down substantially by JPY 121.6 billion to minus JPY 32.3 billion. Ceramic sales decreased due to shipment decrease of abrasives caused by reduced production in auto and steel industries. But operating income increased due to reversal gains in lower of the cost or market accounting method. Graphite electrode sales decreased as the customers' inventory optimization was deferred to the end of the year with global slowdown of steel production and our production reduction was accelerated, and volume decreased sharply. With market price decline at the end of the second quarter, the variation for inventory was applied and profit decreased sharply. Page 10. In aluminum segment, sales were down JPY 17.4 billion to JPY 80.2 billion, and operating income was down JPY 1.3 billion to JPY 0.4 billion. Volume of high-purity foil for capacitors decreased, affected by production adjustment in the aluminum electrolytic capacitor sector, but operating income increased slightly. Aluminum specialty components were affected by the global auto production reduction due to COVID-19 and components volume for auto decreased. And the components for FA also went down and both sales and profit decreased. As for aluminum cans, in addition to domestic production capacity reduction in Vietnamese market affected by the movement restriction due to COVID-19, shipment declined sharply and sales and profit decreased. Segment of Showa Denko Materials, which was consolidated at the end of the second quarter, includes 6 months results from July. Sales were JPY 302.7 billion, and operating income was minus JPY 6.3 billion. Backed by the market growth of 5G and data centers, electronic materials, including slurry for CMP and functional materials, including copper clad laminated board were robust. But due to lower production of auto affected by COVID-19, advanced components and systems mainly mobility materials, including the plastic molded products and carbon anode materials for lithium-ion battery have been sluggish. Operating income increased minus JPY 28 billion, which includes amortization of goodwill and inventory step-up costs, along with acquisition of stocks. Without goodwill-related deduction, operating income was plus JPY 21.8 billion. Other segment sales and profit decreased due to market price decline of metal ceramic business in SHOKO Company Limited. Please turn to Page 11. Operating income year-on-year variance analysis by factor. Volume impact was minus JPY 50.8 billion. Mainly graphite electrode in Inorganic segment was severely affected by production reduction in electric arc furnace industry due to COVID-19, and sales volume declined sharply mainly in Europe and American market, whose impact on operating income was minus JPY 38.5 billion. As for price changes in Inorganics, international market price of graphite electrodes plummeted, which is minus JPY 60.5 billion. Total of this factor was minus JPY 55.5 billion. Total cost reductions was JPY 19.6 billion, including JPY 10 billion fixed cost reduction on lower production of carbon business in Inorganics, JPY 10 billion for repair cost review and others, JPY 3.2 billion productivity improvement of aluminum and others and JPY 3.2 billion productivity improvement of hard disks in electronics. In addition, in Petrochemicals, minus JPY 4.5 billion due to the lower naphtha price for olefin and lower graphite electrode market price in Inorganics led to devaluation of inventory based on LCM accounting method, impact was minus JPY 17.2 billion. Page 12, the consolidated balance sheet is shown here. Showa Denko Materials is included as consolidated subsidiary into the financial statement as of the end of Q2. Comparing end of Q2 and end of Q4, fractional shares of Showa Denko Materials were purchased at about JPY 120 billion, leading to the increase of interest-bearing debt. Page 13. Consolidated interest-bearing debt balance, equity ratio and change of net debt equity ratio from the end of 2019 is shown. Page 14. As we booked net loss, cash flow from operating activities significantly worsened. However, with lower inventories and others, cash flow from operating activities increased by JPY 30.7 billion year-on-year to JPY 109.3 billion. With cash outflow to acquire shares of Hitachi Chemical, cash flow from investing activities showed major increase of JPY 881.9 billion year-on-year and reached minus JPY 930 billion. As a result, free cash flow was JPY 820.8 billion, down JPY 851.2 billion year-on-year. With higher borrowings to acquire Hitachi Chemical shares and issuance or preferred shares, cash flow from financing activities reached JPY 896.5 billion, up JPY 915.1 billion year-on-year. As a result, end of term balance of cash and cash equivalents, including ForEx impact and others, was JPY 197.9 billion, up JPY 76.2 billion year-on-year. Page 15. This shows capital expenditures and depreciation by segment. With the consolidation of Showa Denko Materials, CapEx increased by JPY 23.1 billion. But as selectively chose projects to deal with slow demand due to COVID-19 in Inorganics and others, CapEx was reduced significantly. Total CapEx was up by JPY 18.9 billion. Depreciation increased by JPY 21.5 billion with the consolidation of Showa Denko Materials. In others, depreciation increased by JPY 1.1 billion as core system S/4HANA started its operation and depreciation started. Total depreciation increased by JPY 22.9 billion. Page 16. Now let me explain the 2021 full year forecast. This shows the selected data for your reference. In terms of ForEx sensitivity, JPY 1 change against the dollar is JPY 1 billion, half of which is Showa Denko Materials. The remaining is mainly hard disks and graphite electrodes. Page 17. This is consolidated forecast. In 2021, Showa Denko Materials is consolidated for full year. Major businesses of each segment mostly hit the bottom in Q2 2020 and improving. Net sales forecast is JPY 1.280 trillion, up JPY 306.3 billion or 31.4% year-on-year. Operating income forecast is JPY 45 billion, up JPY 64.4 billion year-on-year. I'll talk about the details of net sales and operating income on Pages 20 and 21. Ordinary income forecast is JPY 35 billion, up JPY 79 billion year-on-year. We expect net extraordinary loss of JPY 20 billion. Net income forecast is 0, which is JPY 65.1 billion improvement. Forecast of net loss attributable to owners of the parent is JPY 4 billion, major increase of JPY 62.3 billion. The difference between net income and net loss attributable to owners of the parent, which is JPY 14 billion, is almost equivalent to the preferred share dividend. Therefore, before the preferred share dividend payment, we expect to reach the level of 0 deficit, including the cost to acquire former Hitachi Chemical shares. We forecast steady recovery in 2021, making a good start toward achieving 2025 targets in long-term vision. Although net loss attributable to owners of the parent is expected, it is our responsibility to pay stable dividend to shareholders who are important stakeholders. We believe this would build trust with shareholders. Therefore, year-end dividend forecast of JPY 65 per share is expected to be maintained based on the shareholder return policy in our long-term vision. Page 18. Total amount of impact of special factors on full year forecast is minus JPY 48.2 billion. Total temporary expenses are JPY 18.8 billion in relation to COVID-19. Continuous expenses for the integration are JPY 29.4 billion. Page 19. Total recognized amount of goodwill, intangible fixed assets and others are fixed at JPY 625.9 billion. Amortization periods are listed here. 2021 amortization amount forecast, including goodwill, intangible fixed assets and others is JPY 36.6 billion. Subtotal at operating expenses is JPY 34.4 billion. Next is full year sales and operating income forecast by segment. In Petrochemicals, sales forecast is JPY 196 billion, about the same as the year before. Operating income forecast is JPY 11.5 billion, up JPY 6.6 billion year-on-year. Asian demand will be firm. Full capacity operation of ethylene plant is expected. As 2020 naphtha factor gets resolved, spread is expected to improve to push up profit. In Chemicals, sales forecast is JPY 166 billion, up JPY 10.2 billion year-on-year. Operating income forecast is JPY 15.5 billion, up JPY 2 billion year-on-year. With the expansion of semiconductor market, the volume of electronic chemicals will rise. COVID-19 impact is expected to improve both for basic chemicals and industrial gases. In Electronics, sales forecast is JPY 110 billion, up JPY 12.6 billion year-on-year. Operating income forecast is JPY 12.5 billion, up JPY 3.4 billion year-on-year. Higher sales and profit of hard disk are expected with increasing volume of hard disk media for nearline for data centers. Higher volume is forecast for compound semiconductors and lithium-ion battery materials. Sales forecast in Inorganics is JPY 77 billion, down JPY 5.9 billion year-on-year. Operating income forecast is JPY 3 billion, up JPY 35.3 billion year-on-year. Graphite electrode market is expected to improve from the second half on higher sales volume, but decreased sales forecast due to the lower annual average price. Lower needle coke cost will lead to wider spread and major increase in profit. We caused some concerns, but sales volume is clearly showing upward trend. Although first half profit is still at low level, it will improve in second half. Forecast is based on 130,000 ton annual sales volume assumption, 30% higher than 2020 as announced at the Q3 results briefing at the end of last year. Recent trend shows that we might exceed this level by far. With slow recovery of abrasives, ceramic sales are forecast to decline, and its profit is expected to decrease slightly. Page 21. In Aluminum, sales forecast is JPY 58 billion, down JPY 22.2 billion year-on-year. Operating income forecast is JPY 3.5 billion, up JPY 3.1 billion year-on-year. As for aluminum rolled products and aluminum cans, impact of business transfer announced the other day is reflected. Profit of aluminum specialty components is expected to increase on higher volume of automobiles. Showa Denko Materials will contribute to higher full year sales and profit. 2020 temporary factors, expenses for the step-up of inventories will be resolved. Continuous strength of the semiconductor-related materials will push up profit of functional materials. Car production recovery will lead to higher volume of raising of plastic molded products for new car models. Product volume for mobility is forecast to rise. In others, sales are expected to increase with market improvement and profit is forecast to slightly decrease. Page 22. With higher net income, cash flow from operating activities is expected to increase by JPY 25.7 billion year-on-year. Cash outflow from investing activities is forecast to decrease by JPY 855 billion year-on-year. As a result, free cash flow forecast is positive, JPY 60 billion, with the decrease of outflow by JPY 880.8 billion. Cash flow from financing activities forecast is minus JPY 60 billion, with the decrease of inflow of JPY 956.5 billion. Page 23. CapEx forecast is JPY 94.6 billion, up JPY 25.5 billion year-on-year. CapEx of the Showa Denko Materials is up by JPY 29.3 billion on full year consolidation. CapEx of electronics with -- will rise with expansion investment in aluminum substrate for hard disk media. Aluminum CapEx will decline on business transfer of aluminum rolled products and aluminum cans. Depreciation forecast is JPY 85.5 billion, up JPY 24.9 billion year-on-year. Main reason is the full year consolidation of Showa Denko Materials pushing up the depreciation by JPY 24.1 billion. Page 24 and onwards; for your reference, please turn to Page 26. This shows the Q-on-Q comparison of sales and operating income. Petrochemicals profit decreased. But in organic chemicals, market price of ethylene acetate increased. Vinyl acetate market recovered. Higher operating rates made positive contribution. In Chemicals, industrial gases profit was down due to seasonality. But in basic chemicals, profit rose on higher volume of ammonia, chloroprene rubber and acrylonitrile. Electronics profit increased mainly with higher volume of hard disk media for data centers. Inorganics profit decreased on lower market price despite higher graphite electrode volume. Page 27. In Aluminum, rolled products volume increased on market recovery. Aluminum specialty components profit rose with moderate volume growth. As for Showa Denko Materials, electronics-related business continued to show strength. Car production recovery led to major growth in real profit, excluding goodwill amortization and step-up of inventories. As a whole, in comparison to Q3, Q4 performance is steadily improving. Although petrochemicals profit is down due to the feed cost -- feedstock cost adjustment, trend is firm. Lower prices led to lower inorganics profit, but sales volume of electrodes increased significantly, showing solid recovery trend. We see clear recovery trend in all other segments, bringing momentum for major improvement of 2021 business performance. Pages from 28 to 31 show the quarterly operating income by segment in bar graphs. Page 32 and onwards show topics by segment. Finally, as stipulated in our long-term vision announced last December, we will promote expansion of growth businesses through early realization of integration synergy and rationalize assets and steadily implement measures to optimize business portfolio as promised. Thank you for taking time out of your busy schedule to join us in this online conference. We ask all the analysts and investors to continue to have interest in our business performance. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]