Earnings Call: Q4 2021

May 12, 2021

This is Shun Taguchi in Group Finance and Accounting Department. Thank you for this opportunity. I will explain the outline of financial results using the agenda on Slide 2. Please look at Slide 3. This shows the highlights of FY 2020 results. In FY 2020, we received an order for a large refinery modernization project in Iraq. We also received orders in Japan in chemical and biomass and power generation. We secured the orders of JPY 680,000,000,000 more than the initial forecast. The impact of COVID-nineteen is still going on. Its impact is rather severe rather than we had first expected. Though we do not have a rapid recovery in net sales in the second half of the year, but ongoing projects are making a good progress. We achieved improved profitability in some projects, both at home and abroad, thanks to the strong project execution. We also reduced SG and A. All in all, operating income and ordinary income in FY 2020 exceeded our initial forecasts. This shows the Slide 4 shows an income and the comprehensive income. Today, we separately disclosed notice of disparity between earnings forecast and actual results. Year on a basis, actually income declined and the profit increased. Net sales was 433,900,000,000 yen down 46,800,000,000 yen year on year. It was lower than the initial forecast. In the initial forecast, we had assumed the business environments affected by COVID-nineteen would be back to normal during the year. Unfortunately, we did not see a big improvement in our business environment. Thus, we could not see our expected rapid recovery moving toward the end of the fiscal year. Gross profit was JPY 43,700,000,000, up JPY 400,000,000 year on year. This was better than the initial forecast. Profit ratio was 10.1%, up 1.1. Year on year. We had an increase in profit, thanks to the smooth execution in projects both at home and abroad up until the Q3. Though we had an expense from the loss quotation in the Q4, but the project profit turned out to be rather firm. Operating income was JPY 22,800,000,000, up JPY 2,600,000,000 year on year. Thanks to the reduction of S and A, operating income shows a growth compared with the initial forecast. Oinar income was JPY 25,500,000,000, up JPY 3,100,000,000 year on year. Profit attributable to owners of the parent was JPY 5,100,000,000, up JPY 1,000,000,000 year on year. It was 35% lower than the initial forecast. This was caused by the impairment of 2,900,000,000 yen in the 4th quarter as well as 1,300,000,000 yen for the valuation loss of investment securities. They were caused by the impairment we had in the U. S. Crude oil and gas production and sales assets due to the sluggish price of crude oil as well as by devaluation loss due to the substantial price reduction in the power generation and water business in the UAE. There are special loss of 4,900,000,000 yen. This is just onetime loss without cash out. As for the annual dividend per share, it is 12 yen per share, no change from the initial forecast. Next is segment information. In the total engineering segment, sales decreased due to the continued impact of COVID-nineteen, but profits increased owing to the steady execution of projects in Japan and overseas. Net sales were JPY 388.5 billion and segment profit was JPY 16.8 billion. In the Functional Materials Manufacturing segment, both sales and profits were down due to the continued decline in overall product demand caused by COVID-nineteen. Net sales were JPY 40.7 billion. By COVID-nineteen. Net sales were 40,700,000,000 yen and segment profit was 5,800,000,000 yen In other businesses, sales and profits were down. Next, moving on to the consolidated balance sheet. Current assets increased by 10,400,000,000 yen year on year to 548,300,000,000 yen due to an increase in accounts receivables among other factors. And fixed assets increased by JPY 20.8 billion to JPY 154.1 billion due to factors including the consolidation of new subsidiaries. Total assets grew by JPY 31.2 billion to JPY 702.5 billion. Current liabilities were down by 31,300,000,000 yen to 197,000,000,000 yen year on year due to redemption of bonds and decrease in accounts payables for construction. Non current liabilities increased by 35,900,000,000 yen to 87,800,000,000 yen due to the issuance of bonds and the effect of newly consolidated subsidiaries. JGC's share of cash held by the joint venture, which is not recorded on the balance sheet, was 197,000,000,000 yen The shareholder's equity ratio was 59.4%. Let's move on to the consolidated cash flow statement. Operating cash flow was positive 12,400,000,000 yen Investing cash flow was negative 13,500,000,000 yen due to the purchase of tangible fixed assets and the purchase of investment securities, among other factors. The balance of cash and cash equivalents at the end of the fiscal year was 268,200,000,000 yen almost unchanged from the end of the previous fiscal year. Next is the outline of contracts. Overall, orders received were 683 billion yen exceeding the initial forecast. Overseas, there was a marked tendency for large projects to be pushed back to the following fiscal year or later due to customers' revised investment plans. As there were no large scale projects following the oil refinery modernization project in Iraq, the total project in March was muted at 509,000,000,000 yen In Japan, we received 182,100,000,000 yen in orders, far exceeding our initial expectation, mainly for biomass power generation projects. Next slide is a status without signing contract. The order backlog at the end of March 2021 was JPY 1,000,000,000,241,200,000,000, and we have secured a volume of work that will serve as a baseload for the next several years. By sector, LNG accounted for 41 percent petroleum refining, 36% and power generation grew to 13%. By region, North America and the Middle East accounted for 36% each. Major projects include the LNG project in Canada, the oil refinery project in Iraq and the biomass power generation project in Japan. Lastly, I would like to explain our business forecast for fiscal 2021. The EPC market, especially in the oil and gas sector, continues to be challenged by uncertainties, and hence, we are targeting 500,000,000,000 yen in order. Net sales are expected to increase year on year to 4.70,000,000,000 yen thanks to the progress on ongoing LNG Canada project and the oil refinery modernization project in Iraq. Gross profit is expected to go down year on year to 38,000,000,000 yen and the gross margin is expected to fall to 8.1%. We have factored in the risk of a decline in capacity utilization rate due to a decrease in the number of large projects underway and limited orders for new large projects. As a result, operating income and ordinary income are expected to decrease to 16,000,000,000 yen 19,000,000,000 yen respectively. Net income attributable to owners of the parent is expected to increase to 13,000,000,000 yen due to a decrease in foreign taxes. We forecast a dividend of 15,000,000 yen per share, aiming for a consolidated payout ratio of 30%. This forecast is based on an exchange rate of 107 yen to the U. S. Dollar. And this concludes my explanation on the financial summary. Thank you very much for your attention. Hello. This is Shizuka, President and COO. If I may, I would like to be brief in my explanation on the business report since after being a long term management division and medium term business plan will be explained. Please turn to Page 3. As Taguchiin explained, consolidated orders received in FY 2020 was JPY 683,000,000,000, almost part to the target. In overseas and oil and gas business, we received a large order in Iraq and a gas processing project in Saudi Arabia. We achieved about JPY 500,000,000,000. In the Overseas Infrastructure business, in the middle column, non ferrous refinery project was postponed due to COVID-nineteen. Thus, we could not achieve the target. Here in Japan, we have been backed up by strong life science and renewable energy sectors. We achieved JPY 182,000,000,000 more than the target. So putting them together, it became 683,000,000,000 yen. Please turn to Page 4. Total engineering aims at 500,000,000,000 yen in the consolidated orders for FY 2021. We are still faced with market uncertainties, so we are going to focus more on those projects whose probability is rather high. And this has been the policy in making our plan. Here, I need to remind you that we had changes in our organizations. FORMAT Overseas Northern Gas became Energy Solutions and FORMAT Overseas Infrastructure became Facility Infrastructure Solutions. So what you see here are those new names. First, Energy Solutions. As I have already mentioned this, we have projects like non ferrous metals in Indonesia, gas chemical project in the United States and oil refinery in Russia. We will focus on those projects because they are quite plausible. This has been already mentioned earlier. Now here, we will aim at 260,000,000,000 yen Facility and Infrastructure Solutions aims at 80,000,000,000 yen in orders. Major expectations include LNG fired power in Indonesia and storage and tank business in Taiwan, water treatment in the Middle East and the railways related in the Philippines and others. Our expectations in domestic PPC, Life Science continues to be rather strong. We also now have opportunities in nuclear power and maintenance. We would like to aim at a total of 100 and 60,000,000,000 yen. Now please turn to Page 5. Functional Materials Manufacturing. Here we have 3 areas: Catalysts and Fine Chemicals and Fine Ceramics. In a nutshell, Catalysts with the COVID-nineteen surge, energy demand has been declining, so refinerally, utilization has come down. So we believe the demand here is going to be flat or decline a little. Fine Chemicals in the middle. This area has also been affected by the COVID-nineteen, but there has been a gradual recovery recently in automotive, exhausting gas, cleaning catalyst, supporting materials, functional coating materials and coating materials for eyeglasses. So we can have some expectation for profit recovery. Yes, we keep our fingers crossed here. Lastly, Fine Ceramics. Demand in semiconductor is now expanding. Silicon nitride substrates for power semiconductor for electric vehicles and hybrid vehicles are promising. This is another area we can have expectations like fine chemicals. With this, I would like to conclude my brief explanations on business overview. Thank you for your kind attention. Hello, everyone. This is Masayuki Sado, Chairman of JJC. As you know, the business environment surrounding JJC Group are changing so dramatically, believing that in order for us to grow continuously, we must transform ourselves by having a long term perspective. With this in mind, we produced our long term management division called 2,040 Vision. This time, we announced a 2,040 Vision and Medium Term Business Plan, BSP 2025 at the same time. Why? Midterm Business Plan or the BSP 2025 is the very first 5 year plan looking into long term business structure transformation. This is a plan to enable us to achieve our financial goals. At the same time, the 5 year plan, though its contributions to business performance is somewhat limited, is here to secure a large amount of strategic investment for us to develop a future growth engine. I hope you understand this point. Time is limited today. So without further ado, I will now explain some of the highlights of 24 division for the JGC Group. Please turn to Page 5. In Developing 24 division, we redefined our purpose. So first allow me to explain this purpose itself. As you see here, the Jejushin Group was established in 1928. Since then, we have been engaged in supporting the foundations of industry and society at large at the crossroads of challenges in balancing energy and environmental needs. The business environment surrounding the JGC Group is changing so dramatically. In order to grow continuously, we must respond to immediate changes quickly and flexibly. We need to raise our perspectives. We have a long term and global vision that we are here to contribute to the healthy future of people and the globe. Every one of the employees must share this purpose, That is enhancing planetary and health. It contains our aspiration that we want to enhance both human culture over the human lives and in global environment over the nature systems people depend on. Now please turn to Page 11. Here now I would like to explain the background of 2,040 vision. What are the social issues we, Jijisan Group, aspires to solve? The social issues in our group and aspires to solve are: 3, pursuing both stable energy supply and decarbonization reducing environmental impact of resource consumption and building and maintaining vital infrastructure and services. Moving toward the year 20 14, we have our purpose of making contributions to making a healthy future for humans and the planet, and we aim at solving those 3 social issues. Now please turn to Page 13. Here now I would like to explain our 2 billion in the year 2,040. In order for the Jejisen Group to solve these 3 social issues, as we move into 2,040, we will transform the Jejuisen Group itself in 5 business areas where we can leverage our technology and track records and core competence. They are energy transition, Health Care and Life Sciences, High Performance and Functional Materials, Circular Economy and Industrial and Urban Infrastructure. Now please turn to Page 14. Here, now I would like to give you specific numbers we aim at in 2,040. Currently, oil and gas is most dominant in our business areas. We aim at 60% with energy transition and 40% with other areas. In terms of business models, currently EPC is dominant. We aim at 60% with EPC and non EPC accounted for 40%. By expanding non EPC business, we would like to diversify our earnings structure. Please turn to Page 16. Here, now I would like to explain on three aspects of transformation to realize our 2B. First is the transformation in business areas. This is a shift from oil and gas centric business to energy transition as well as expansion of business areas. 2nd is business models transformation. Its focus is placed on EPC and manufacturing models. Here now we are now talking about deepening our EPC business model as well as diversifying into non EPC business models. 3rd is transformation of organization. Here now, we are talking about how we can transform and reinforce our organizations. In addition to the traditional Japan centric management and mega sized projects, we need to establish a regional based management, and we need to enforce our culture of innovation. Next, please look at Page 17. We will focus on 5 business areas to transform the business portfolio with a long term perspective. We will position the 1st 5 years from fiscal 2021 to fiscal 2025 as 5 years of challenge in which we will integrate the current oil and gas and renewable energy businesses and establish the energy transition domain as our core business. In other words, the existing infrastructure business such as megasolar and biomass power generation, which are the track records that we have built up in the previous midterm business plan, will be a source of earnings as our core business stepped energy transition under the 2,040 Vision. The subsequent 5 years from fiscal 2026 to fiscal 2030 will be positioned as the 5 years of harvest, and we will establish health care, life sciences and high performance functional materials as growing businesses, following years of strategic investments in the preceding 5 years. In the latter part of the 2,040 vision, slated as 10 years of rapid growth from fiscal 2,031 to fiscal 2,040, circular economy and industrial and urban infrastructure will be added to the business portfolio as pillars of earnings, and their initiative in developing the 5 business domains will be completed. We will pave our ways into the urban infrastructure field as a new opportunity going forward. Please proceed to Page 18. This is the level of operating income we are aiming for in fiscal 2,040. We will target an operating income level of JPY 150,000,000,000 to JPY 200,000,000,000 in 2,040 by actively making strategic investments. I would now like to explain how we plan to approach the different aspects of transformation. Please turn to Page 20. First, I would like to touch upon the business area transformation, starting with the domain of energy transition. The group's mission is to concurrently respond to the world's demand for more energy and less carbon in the context of the global consensus to achieve net 0 CO2 emissions by 2,050. In energy transition, which is positioned as our core business, we will focus on 2 areas: the low carbon oil and gas business that will be reshaped to be even more green than the current format and clean energy, the shift we have been accelerating from the decade starting in 2010. Please turn to Page 21. This slide illustrates our initiatives to shift to low carbon and decarbonized oil and gas business. Here, we will focus on the following four areas: CCS, energy saving technologies carbon credits and blue hydrogen and fuel ammonia. As a direction for developing the business, in addition to the existing oil and gas project, we will contribute to low carbonization by combining CCS and energy saving technologies with the oil and gas project. Furthermore, we will go beyond our EPC capability and provide solutions from the business planning stage and participate in business operations for carbon credit. In addition, we will contribute to the penetration of blue hydrogen in fu ammonia, CO2 free energy sources derived from the fossil fuel. To that end, in order to scale up the blue hydrogen in fu ammonia production facilities, we plan to invest in technology development and strategic partnership, capitalizing on our expertise in large scale plant expansion and risk management capabilities cultivated in the LNG business. Please turn to Page 22. Next, I would like to cover the clean energy in the Energy Transition business. We will focus on 3 areas in Clean Energy: Offshore Wind Power Generation, Green Hydrogen and Fuel Ammonia and SMRs or Small Modular Reactors. As for our vessels development policy, we will enter the offshore wind power generation market first through alliances in the domestic market, which is expected to grow over the next few years. In addition to EPC, we will also participate in the business through Offshore Wind Power SPCs. For green hydrogen and fuel ammonia, we will participate in the new energy value chain by promoting social implementation while utilizing the knowledge gained from the demonstration plant in Fukushima prefecture. As for SMRs, we will build up track records in the U. S. And other countries and aim to implement SMRs to practical use. Page 23, please. In the Health Care and Life Sciences segment, which is another growth business area, we will focus on the 3 fields of pharmaceutical plants: traditional and smart hospitals and digital health care. In developing the pharmaceutical domain, we will expand our business, including striking strategic partnerships in Japan and overseas in order to meet the growing needs of pharmaceuticals on a global scale. In the hospital related domain, we will make upfront investment in digital technology for hospitals and clinics to develop the smart hospital business. And by collecting health and medical data, we will strive to expand the opportunity into digital health care in order to improve the quality of medical care. Please proceed to Page 24. Next, in High Performance Functional Materials, which is another growth business, we will focus on the following 4 fields: high thermoconductivity silicon nitride substrates and polishing nanoparticles for semiconductors catalysts for carbon and chemical recycling, materials for energy storage and new energy applications and life science materials. Our business development plan is to strengthen and speed up the current system for new product development. We will further expand our current functional materials manufacturing business, including our presence overseas, by improving our manufacturing technology and production capacity for high thermoproductively silicon nitride substrates and polishing nanoparticles for semiconductors. Please turn to Page 25. Next, in the future business area of circular economy, we will focus on chemical recycling. In developing the business, we will acquire chemical recycling technologies in areas where we have already commenced the work, such as plastic waste and utilize the operational know how we have gained through demonstrations to provide licenses and operational consultation in addition to EPC. Last but not least, in the area of industrial and urban infrastructure, we will focus on 4 areas: railroads, water treatment, industrial facilities and complex urban infrastructure. Our business development strategy is to become a major player in urban infrastructure, such as log waste and water treatment, primarily based on EPC and to enter the integrated infrastructure systems market by combining solutions from other business areas such as energy transition and circular economy. Page 27, please. Next, I would like to explain the business model transformation. In order for the group to grow in a sustainable manner, it is necessary to have a structure that can generate higher profits with more stability. To this end, we will work to deepen our EPC business model and diversify our profit structure by expanding into non EPC business models. Please turn to 328. In order to deepen the EPC business model, we've utilized digital technology to increase price competitiveness and improve the certainty of receiving orders as well as to reduce risks in project execution. With regard to the use of digital technology, we established a dedicated DX organization last year to accelerate the activities for the early realization of our long term IT strategy, IT Grand Plan 2,030. We will continue to invest in the development of DETO Technologies and introduce them into project execution in order to demonstrate prosperity in EPC execution. In addition, we are envisioning future EPC business scenarios for 2,040 based on advances in digital technology, and we will continue to transform our EPC business by anticipating what's to come in the future and spearhead active investment. Please turn to Page 29. With respect to business model diversification, we will work to expand into non EPC models originating from EPC and diversify into new business models. In the area of EPC led expansion into non EPC models, we will use the technologies we have cultivated in EPC as a starting point to expand into upstream and downstream in the value chain, including licensing, PMC and digital O and M. Moreover, in order to diversify into new business models, we will work on platform businesses that utilize digital technologies and business participation in focused businesses. In order to implement measures for business model diversification, we will actively pursue related strategic investments. In addition, the high performance Functional Materials field is an existing business. And although it is not mentioned on this page, we will continue to work on expanding the Functional Materials manufacturing business model and the business itself. Page 31, please. Next, I would like to walk you through the organizational transformation. In addition to the conventional approach to each country in region from the head office in Japan, We will work to strengthen our regional management system with enhanced customer service capabilities and propose and implement solutions to local issues in a timely manner. Please proceed to Page 32. In order to move forward the 2,040 version, we will reshape our organization and human resources systems to establish a corporate culture to innovate by repeating the cycle of creating new businesses while leveraging the execution capabilities cultivated in growing the existing businesses. We will also aim to acquire organizational capabilities that enables ambidextrous management by deepening and exploring opportunities. Page 33, please. As part of our corporate contribution to the creation of a healthy future for people and the planet, We will declare our commitment to becoming carbon neutral by 2,050. Page 34, please. Last but not least, I would like to conclude my presentation on the 2,040 Vision by introducing the 3 promises made here as a message to our employees and all other stakeholders for the group. Thank you very much for your attention. I will explain the first phase of 2004 division. I will cover this division starting from FY 2021, ending in FY 2025. Since the time is limited, I will just go through the highlights. Allow me to move to Page 2. Our vision up until 2,040 consists of 3 phases. The first 5 years is positioned as the 5 years of challenge. Here now I would like to expand on the strategy as well as the financial targets for this 5 year period. Please turn to Page 3. Here now I'd like to expand on the purpose and strategy in the 5 business domains Mr. Sadu explained. The first 5 years are years of challenge. Please pay attention to those 4 elements. And for this matter, please refer to the information in the bottom half of this slide. First, three key strategies: transformation of EPC and operations expansion of manufacturing business for high performance functional materials, this is number 2 and the third point is establishment of future engines of growth. And for us to execute on these strategies, we are planning to make strategic investment as much as JPY 200,000,000,000 for 5 years. And in FY 'twenty five, targets are net sales of JPY 800,000,000,000, operating income of JPY 60,000,000,000, net profit of JPY 45,000,000,000, alloy being 10%. In terms of shareholders' return, dividend payout ratio of 30% or more, minimum dividend of JPY 15 per share. Here, if I may, now I would like to put net sales numbers into perspective since those numbers are scattered around on several pages. Net sales of 80,000,000,000 yen consists of large EPC, 350,000,000,000 yen EPC Growth and Expansion, 300,000,000,000 yen High Functional Materials, 60,000,000,000 yen new business areas, JPY 50,000,000,000. And this is not on the slide, but we have maintenance JPY 40,000,000,000. Putting them together, we have a total of JPY 800,000,000,000. I hope you understand these numbers. Next, allow me to move on to Page 4. I will follow this agenda. Please, Page 6. Before I explain the new medium term business plan, allow me first to review the previous medium term business plan. The bottom line is we missed the financial targets. The markets turned out to be quite different from the ones we had assumed. Within a trigger point of an oil price erosion so rapidly, we were faced with the tough market situations. Yes, we had the final loss in the 1st year in FY 2016, but our reinforced efforts of risk management benefited us. Operating income improved from 3% in FY 2017 to 5.3% in FY 2020. With the transition to the holding company structure, getting away from our heavy dependency on oil and gas, we strengthened our efforts toward the social trend of low carbon and decarbonization. We expanded our net force toward Functional Materials Manufacturing, Infrastructure and Environment related Business and others. We succeeded firmly in moving towards sustainable growth. Next, I would like to move on to Page 9. Here, I will explain our new midterm business plan. First, I will expand on the 5 business segments that we aim at. First is the Energy Transition segment. With the tight supply and demand expected in the latter half of twenty twenty, We assume new projects on the scale of tens of millions of tons are expected to start within the midterm business plan horizon. As for non LNG areas, we believe the existing oil and gas area now will make further on our energy saving efforts, utilizing CCS and CCUS. We believe new initiatives for low carbon emission generating many projects in many different sizes, both at home and abroad. We are now focusing that the renewable energy demand will expand, such as solar power, energy storage and biomass and power generation. We also assume that with the midterm business plan period, new opportunities such as offshore wind power now will develop fully here in Japan. We also want to keep an eye on the hydrogen fuel ammonia. Those markets are believed to grow firmly. Please look at Page 10. This explains the high performance Functional Materials area. Since Mr. Saron already explained this matter in his Vision section, I will be in a brief. In nutshell, the calculation appears to be flat, but efficient areas such as Fine Chemicals and Fine Ceramics seem to be promising. As for new areas, Silicon Nitride substrates and Nanoparticles for CMP are expected to grow in demand. Now Page 11, please. Next, the remaining areas in the 5 areas: Health Care and Life Sciences, Circular Economy, Industrial and Urban Infrastructure. Market here is expected to expand in light of higher standards of living and aging population. Health Care and Life Sciences are expected to grow both at home and abroad. The market for the circular economy is expected to grow, including waste plastic recycling. Market expansion is also expected in Asia driven by economic growth. Here, we keep an eye on the water treatment and railways in the industrial and urban infrastructure area. Next, Page 13. In this section, I will explain on the 3 key strategies to be pursued during the midterm business plan in order to realize our 2,040 vision. The first and key strategy is that we will transform EPC in operations, which is still accounting for 80% of revenue in 2025. Here, besides our efforts for the mega size and EPC projects, we will further expand into growth markets and segments such as pharmaceuticals, health care and industrial and urban infrastructure. We will also expand our efforts to expand non EPC business opportunities. Its core is going to be in high performance functional materials. We will also now try to establish future engine of growth. Next Page 15. Here now, I will explain the first key strategy, transformation of EPC in operations. Two points here. Point 1 is our further efforts to improve our competitiveness and profitability in our mega sized projects. We will also expand our efforts in the growth markets and areas in EPC Business. Here, we intend to further advance our ongoing measures for risk management and winning project schemes. By doing so, we aim to ensure a steady gross profit ratio of 10%. We aim at net sales of JPY 350,000,000,000 in megasized over sales EPC projects in FY 2025. We have already now achieved about JPY 400,000,000,000 plus with LNG, Refinery and Chemical Business mainly. But this time, we came up with a somewhat conservative target based upon the scenario that we have made in light of the market conditions for the next 5 years as well as the trends of opportunities. Next page, 17, please. The second point here is taking on EPC Growth Markets and segments. Net sales target here is going to be JPY 300,000,000,000. Asian as a region is growing remarkably, so we will establish Asian offices and reinforce human resources. In Japan, we will increase our manpower in pharmaceuticals, EPC and chemical fields. We had 130,000,000,000 yen in net sales in FY 2020, mainly from Japan operations. So now we would like to further grow this business in Asia through business expansion efforts. We keep an eye on possible M and A and strategic partnership for Asian Business Expansion. Next, on Page 19, please. The second key strategy is expansion of manufacturing business for high performance functional materials. This business is generating profit firmly even now. With this business backing up in future group business management, we plan to offer more product lineups in the existing core business. We intend to sell more strategic products. We aim at 60,000,000,000 yen in 2025 in terms of net sales. We will also explore and develop next generation business opportunities. I will not go into details because you have already heard about our business plans and vision. Here now we aim at net sales of 50,000,000,000 yen. Next Page 21. In the High Performance Functional Materials Manufacturing business, we will focus on strategic products for top line growth. Specifically, the areas of focus to achieve our goal will be methanation, chemical catalysts such as synthesis gas, CNP nanoparticles and production and CapEx for high thermoconductivity silicon nitride substrates used for power semiconductors. Please turn to Page 26. These are the new businesses that we aim to establish as primary source of future revenue. The five areas of focus as future growth engines are illustrated on Slide 26. Our goal is to achieve net sales of 50,000,000,000 yen in fiscal 2025. The market is expected to expand rapidly in each of these fields in 10 years, and we plan to develop the businesses to generate sales in the magnitude of 500,000,000,000 yen. Since the opportunities will primarily be in the markets that are projected to be newly developed, revenue today is almost nil. However, we will achieve growth by accurately grasping the needs of society and making strategic investments, including M and As. Of the 50 boyyen sales target for fiscal 2025, 30 boyyen is expected from the offshore wind power generation business. Out of the projected sales of 500,000,000,000 yen in fiscal 2030, we plan to generate 100,000,000,000 yen from Offshore Wind Power Business, 100,000,000 yen from Ammonia and Chemical Recycling Combined and 200,000,000,000 yen from SMR and Urban Infrastructure. Please proceed to Page 27. Regarding the offshore wind power generation opportunity that I mentioned earlier, we expect further penetration of offshore wind in energy market. Therefore, we will build up our track record in EPC and aim to achieve sales of 30,000,000,000 yen in 2025 and 100,000,000,000 yen in 2,030. In order to establish a position as a major player in this field, we will not only engage in EPC, but also actively participate in business formation for projects and make capital investments for EPC business. In the medium- to long term, we intend to enter the floating offshore wind power market, which is technically more challenging but is an area where we can utilize our experience in offshore LNG plants. Please turn to Page 28. In the field of blue hydrogen in fuel ammonia, which are expected to become the next generation energy sources, we will target sales of 50 by 2,030 despite the fact that sales contribution will be small as of 2025. Ammonia is an alternative fuel that we are focusing on because it has the lowest life cycle emissions in terms of CO2 and lowest adoption cost for the society. In addition to EPC, we will explore various business models for building a value chain, including acquisition of licensed technologies, business participation and M and A. For the Hydrogen business, we are participating in a feasibility study for green hydrogen production as well as blue hydrogen, and we will continue to actively work on this project. Please go to Page 29. In chemical recycling, we have already obtained a license for the EUP process for waste plastic treatment, and we are working to obtain feasibility study orders to win the EPC business. We have also started a business for recycling waste fiber through an alliance with Teijin and Itochu. We aim to achieve widespread adoption and commercialization in this field and will shoot for a sales target of 50,000,000 yen by 2,030. Please proceed to Page 31. This is your policy on strategic investment. Aiming to improve profitability in the 3 key strategies I have explained so far, we will proceed with a total of 200 byon yen in strategic investments under the current midterm business plan. We plan to invest 70 byon yen in transformation of EPC operations, 50 byon yen in growth of the High Performance Functional Materials Manufacturing Business and 80 byon yen in 80 banyan in establishment of future growth engines in the areas of digital M and A, production facilities, business development, commercial demonstration and R and D. Out of the 70 boyyonyen investment for transformation of EPC operations, following are the main components. For EPCDx, roughly 20 boyyonyen over 5 years, on top of the group's general IT budget of 50,000,000 yen including digital transformation. We also have M and A planned to gain the business capability to cover the Asia market. For high performance functional materials manufacturing business, CapEx budget will be €30,000,000,000 And we also have appetite for M and A reflected in the plan. The investment plan for the future growth engines will be roughly JPY 20,000,000,000 in offshore wind JPY 5,000,000,000 in SMR or small module reactors, which we have already made some investment 15,000,000,000 yen in hydrogen and fuel ammonia, including license acquisition and 20,000,000,000 yen in PLC study for chemical recycling. Please proceed to Page 33. In order to implement our key strategies, we will expand and realign our human resources and build a system to continuously create innovation. We have 10,800 employees for the whole group, out of which 9,000 people are in the EPC business and 1800 people are in high performance functional materials manufacturing business. Within EPC, we have 4,600 employees in Japan and 4,400 overseas. With a total headcount of 12,000 people, we will execute the key strategies. Please turn to Page 34. Without going into details, this is how we plan to review our organization, process and systems in place to create an environment for continuous innovation and to transform the group towards our 2,040 vision. Now let's move on to Page 36. Here, I would like to go over our financial targets. As our financial targets, we are aiming to achieve net sales of 800 banyan, operating income of 60 banyan and net profit of 45 banyan and ROE of 10% in fiscal 2025 by steadily implementing the 3 transformations and achieving the targeted results in the 3 key strategies. In addition to the energy transition field, we will also expand our business areas in accordance with the policies we have discussed so far. As for non APC sales, we will focus on expanding our domestic maintenance and service business and high performance functional materials manufacturing business. Please turn to Page 38. This is our capital policy and shareholder return policy. Our basic policy is to maintain a strong financial base to support the execution of mega sized EPC projects and specifically keep our shareholders' equity ratio of 50% while at the same time promote NIMBO strategic investments for future profit growth. Through disciplined investment and capital allocation, we aim to improve profitability and achieve 10% ROE. Please proceed to Page 39. The slide illustrates our financial strategy for implementing the capital policy described on the previous page. Please turn to Page 40. With regard to the shareholder return policy, we will continue to aim for a dividend payout ratio of 30%. But in order to provide stable returns to our shareholders, we have set a minimum dividend of 15 yen per share. The lower limit of 15 yen per share is set based on the net profit target of 13 by yen for fiscal 2021. We will consider share buybacks as appropriate, taking into account the business situation. Please turn to Page 44. Last but not least, I would like to explain the specific initiatives to achieve carbon neutrality by 2,050 as explained by Mr. Sato. In order to achieve net 0 CO2 emissions from our corporate activities in 2,050, we will reduce our CO2 emissions per unit of production by 30% in 2,030. In addition, we will work with stakeholders to reduce Scope 3 emissions, which are emissions from the value chain. To help the stakeholders reduce their emissions, the JGC Group will provide solutions for energy transition by making full use of our technological capabilities we have accumulated to date. Please turn to Page 45. This will be the last slide. The JGC Group aims to become a corporate group that contributes to the improvement of planetary health in 5 areas, including energy transition, and will steadily implement the measures set forth in this medium term business plan to achieve the numerical targets. This will conclude my presentation. Thank you for your attention.