Thank you for being with us here today to participate in the Kuraray Group's financial results briefing. I am the President and Representative Director, Hitoshi Kawahara. Let me begin now with the overview of the fiscal year 2022 earnings. Please see the second page. In fiscal year 2022, while gradual recoveries continued as restrictions on economic activity eased in many countries, the global economy showed signs of slowing in the second half of the year, and the future continued to look uncertain and unpredictable. Raw material and fuel prices, and logistics costs rose or remained high, and the Kuraray Group focused on stably supplying high value-added products by leveraging the global network it has built up over the years, while at the same time revising prices of our products affected by the sharp rise of raw material and fuel prices.
As a result, as shown on this page, our net sales increased by JPY 127 billion year-on-year to JPY 756.4 billion. Operating income increased by JPY 14.9 billion to JPY 87.1 billion, and net income increased by JPY 17 billion to JPY 54.3 billion. Net sales, operating income, and ordinary income all reached record highs, and the net income attributable to owners of the parent also reached a record high level. The foreign exchange and raw materials and fuels prices for the period were, as you see at the bottom of the slide. Please go to page three. This slide is the company-wide operating income bridge, a breakdown of factors that affected the changes in operating income.
While raw materials and fuel and exchange rate was a negative factor of JPY 45.8 billion due to high raw material and fuel prices, selling price and a product mix was a positive factor of JPY 73.3 billion due to sales price revision and our shift to high value-added products. In others, there was an increase in distribution costs and in other expenses. But with the impact of inventory valuation difference, in total others was a JPY 4.2 billion plus factor for our operating income. Page four. This slide shows the fiscal year 2022 results for the financial KPIs set forth in the PASSION 2026, our midterm management plan. The FY 2022 results for each KPI were ROIC of 7.0%, EBITDA of JPY 152.6 billion, and ROE of 9.0%. We will continue our efforts to improve our capital efficiency and cash-generating capability. Please see page five now.
The shareholder return policy under the medium-term management plan, PASSION 2026, as has been indicated, total return ratio of 35% or more, and dividend of JPY 40 or more per share, and the flexible implementation of share buybacks. The year-end dividend for fiscal year 2022 has been revised from the previous forecast of JPY 21 to JPY 23 per share for an annual dividend of JPY 44 per share, including the interim dividend of JPY 21 per share. Regarding the share buybacks, the company repurchased a little over 9.4 million shares at a cost of approximately JPY 10 billion from February 10 to June 23, 2022, as stated here. As a result, the total return ratio for fiscal year 2022 will be 45.5%. Next is page six. This page shows our forecasts for fiscal year 2023.
Regarding the business environment for the current fiscal year, there is an uncertain outlook for the situation of Russia and Ukraine and the accompanying extreme instability in the current fuel prices. In major countries, there are signs of economic deterioration due to monetary tightening. In addition, China is expected to experience some turmoil as a result of lifting of its zero COVID policy. We see that the fiscal year 2023 business environment is to be overall uncertain and challenging. Under such circumstances, we will start operation of isoprene plants in Thailand, an activated carbon production line in the U.S., which would bring increases in the depreciation burden, hence be factors of decrease in profit. We are also planning to expand our business in our core business in vinyl acetate business by maintaining a solid global supply system and steadily capture demand to achieve medium-term growth.
In light of all of those, in fiscal year 2023, we expect net sales to increase by JPY 73.6 billion to JPY 830 billion, compared to fiscal year 2022, and operating income to decrease by JPY 3.1 billion to JPY 84 billion, and net income to decrease by JPY 3.3 billion to JPY 51 billion. Page seven. Based on the earnings projections stated, as for fiscal year 2023 shareholder return, we plan to pay an interim and year-end dividend of JPY 24 each, for a total annual dividend of JPY 48. We will flexibly implement share buybacks as becomes necessary. Please see page eight. On page eight and the following page nine, we explain the measures set forth in our midterm management plan, PASSION 2026.
This page eight shows how we did in the fiscal year 2022 in terms of the goal we have set forth in our medium-term management plan, the PASSION 2026. Building a more sophisticated business portfolio and what we will be particularly focused on in fiscal year 2023 for the same goal. For fiscal year 2022, we decided to invest in businesses with a growth potential, such as optical, poval film, EVAL, and KURARAY LIQUID RUBBER. We also proceeded to liquidate and withdraw from unprofitable businesses based on quantitative and qualitative assessments. In fiscal year 2023, we will safely launch large-scale facilities that we have already invested in, such as the new isoprene base in Thailand, the new water-soluble poval film plant in Poland, and the new activated carbon production line in the United States, and bring them to contribute to earnings as soon as possible.
As announced today, the new isoprene plant in Thailand has been in operation since this February, launching gradually product by product. In addition, we will continue to allocate resources to growth businesses such as EVAL, VECTRAN, and the medical dental materials, aiming for further growth to achieve the goals set forth in PASSION 2026. Please go to page nine. This page shows you the fiscal year 2022 results and fiscal year 2023 key focus topics for the three challenges also set forth in PASSION 2026. The top of the page is referring to fiscal year 2022, the bottom half, 2023. The yellow parts are the challenge sustainability as an opportunity. The blue, innovation starting from networking. Orange, transformation of people and organization.
In fiscal year 2022, regarding the yellow challenge, the sustainability as an opportunity, we expanded the disclosures in line with the TCFD framework, introduced Portfolio Sustainability Assessment as our portfolio evaluation indicator, and expanded the use of internal carbon pricing scheme. Regarding the challenge in blue, innovation starting from networking, 10 themes in six strategic areas, including automotive, agriculture, and paper and packaging, are progressing toward business commercialization. In the area of transformation of people and organization in orange, we have expanded the use of CRM, customer relationship management system, and sharing the results of an analysis of collected data with the innovation networking center to uncover unmet needs of customers. In fiscal year 2023 too, we will continue those efforts and in addition to those, we will promote initiatives such as for sustainability, applying for SBT certification and strengthening sustainability procurement.
For innovation, accelerating development and commercialization of 10 themes by fully utilizing company-wide resources such as technology, people, and facilities. For DX, digital transformation, promote DX personnel training programs. In addition, we will strengthen our investment in human resources based on the belief that our people are the source of our competitiveness. This was in brief our fiscal year 2022 financials overview and forecast for 2023. Keiji Taga, Managing Executive Officer, will explain the details of the results.
Hello, this is Taga. I will now explain the details of the fiscal year 2022 financial results. Please find page 11. This slide shows net sales and operating income results for each segment compared to the same period last year.
Although net sales increased in almost all segments, some segments saw a decrease in operating income, mainly due to the impact of higher raw material and fuel prices and the economic slowdown in the second half of the year. This is page 12. Here onwards will be the details of each business segment. First is the vinyl acetate segment. This segment saw an increase in both sales and profit compared to the previous year. Please refer to the comments in the right-hand table for the detailed account of each business. Operating income of vinyl acetate segment increased by JPY 19.3 billion over the previous year, reflecting higher raw material and a few prices. Raw materials and a few prices and exchange rate function was a negative factor of JPY 29.1 billion.
On the other hand, selling price and product mix gave + JPY 15.8 billion with the product price revisions and our shift to high value-added products. All in all, vinyl acetate operating income increased from last year. While the changes in the sales volumes of major products will be explained later in this segment, although the volume of optical poval film decreased by about 20% from the previous year, other products such as EVAL contributed significantly to the segment's overall profit growth. Please go to page 13. Isoprene segment. Isoprene segment reported higher sales and lower operating incomes compared to the previous year. Please find the detailed explanation for each business at the top right table. Operating income for the whole isoprene segment decreased by JPY 1.8 billion. The selling price and product mix was a factor of a + JPY 7.3 billion due to the price revisions.
On the other hand, raw materials and fuel exchange rate was a - JPY 5.1 billion negative factor due to higher raw material and fuel prices, and volume was a - JPY 2.4 billion negative factor due to temporal raw material procurement difficulties, production defects, and inventory adjustments in automotive components and electronic devices. Page 14. The functional materials segment also reported higher sales and lower profits compared to the same period last year. Please find the details explained for each business at the top right. Price revision in response to rising raw materials and a few prices was a factor of a + JPY 10.4 billion, as you see it at selling price and product mix.
On the other hand, raw materials and a few prices and exchange rate was a negative factor of JPY 6.9 billion. In addition, the volume and others were also negative factors. Please see page 15. Fibers and textiles. This segment reported higher sales and profits compared to the same period of last year. Again, please see the details on the right-hand side. Operating income increased in total by JPY 1.5 billion. While raw materials, fuel, and exchange rate was a negative factor of JPY 3.7 billion, selling price and a product mix was a positive factor of JPY 4.8 billion. Page 16. This slide shows the difference between the fiscal year 2022 forecast announced in November 2022 and the actual results.
As you can see, operating income increased by JPY 9.1 billion, mostly due to vinyl acetate business. As you know, the mild winter has caused natural gas prices to drop in Europe. While most of this impact has been carried over to fiscal year 2023, there is some impact to the 2022 as well. The main reason for the discrepancy between the forecast and the actual increase in profit are as follows. The most significant was the upward effect of volume and price revisions for EVAL. Another significant one is the price revision for PVOH Resin. Others are the product mix improvement of the advanced interlayer film. The increase in demand for optical use poval film or over before the Chinese New Year.
Next is page 17. Fiscal year 2022 cash flows and important KPI results compared to the previous year. Operating cash flow was JPY 51.7 billion, investing cash flow was - JPY 72.0 billion, and free cash flow was - JPY 20.2 billion. The acceptance basis capital expenditures increased by JPY 6.7 billion year-on-year to JPY 72.6 billion. Depreciation and amortization expenses increased by JPY 6.5 billion to JPY 65.5 billion. R&D expenses increased by JPY 1.8 billion to JPY 22.7 billion. Page 18. This slide compares the assets section of the balance sheet with the end of last year. Current assets increased by JPY 63.8 billion.
While cash and deposits decreased by JPY 28.2 billion, trade receivables increased by JPY 21.2 billion due to increased sales and a weaker yen, and inventories increased by JPY 67.7 billion, partly due to the effect of exchange rates and high raw fuel prices. Non-current assets increased by JPY 66.8 billion due to an increase in capital investment and a rise in the value of non-current assets of overseas subsidiaries, again, due to the weaker yen. Page 19. This slide shows the liabilities and net assets as sections of our balance sheet. Liabilities increased by JPY 41.6 billion as a result of the issuance of a commercial paper and corporate bonds, and the depreciation of the yen against foreign currencies.
Net assets increased by JPY 88.9 billion. As a result, the equity ratio increased by 1.6 points from the year-end of fiscal year 2021 to 52.9%. Page 20. The slide shows our forecasts for fiscal year 2023. Net sales and each income are as Kawahara touched upon earlier. Net income per share will be JPY 152.38 based on the JPY 51.0 billion. The annual dividend is planned to be JPY 48 per share. Capital investment on a decision basis will be JPY 90 billion. On an acceptance basis, capital investment is expected to be JPY 77.0 billion, including the expansion of optical use poval film production facilities at the Kurashiki plant. Depreciation and amortization expenses are expected to increase by JPY 11.5 billion to JPY 77.0 billion due to the start of operations of the isoprene production facility in Thailand, and activated carbon production facility in the U.S.
R&D expenses are expected to increase by JPY 1.3 billion to JPY 24.0 billion. Page 21. This slide shows the operating income bridge from 2022 results to 2023 forecasts. Selling price and product mix is expected to bring +JPY 23.6 billion due to the effects of the product price revisions that were negotiated during 2022. On the other hand, the other segment was responsible for a JPY 32.9 billion decrease in income. This is due to, number one, selling general and administrative expenses, including labor costs. Number two, an increase in depreciation expenses accompanying the operation of large facilities, as explained earlier, and three, inventory valuation difference. Each of these three factors accounts for about one-third of the total. All in all, operating income and year-on-year decrease is calculated to be JPY 3.1 billion. From page 22 onwards, this is for your reference. This concludes my explanation.
Thank you very much for your listening.
Right. We would like to go to the Q&A section, but before starting getting questions from the audience, we would like to cover the frequently asked questions, how the volume has increased on each product. IR department head, Shinichi Takizawa, will read out the numbers.
Hello, this is Takizawa. As we always do, let me report you the volume change percentages of each product. I will be talking about 2021 - 2022, and then 2022 to 2023 plan. From this time onwards, last year, we actually had an orientation and on the activated carbon, and you asked about the volume. We have added an activated carbon to this list. This volume of activated carbon, there is a new and the recycled. The usage is the same, so volume-wise, we are going to be providing you the data of the combined.
First is optical use poval film. 2021 to 2022 is -20%. 2022 to 2023 plan, we are projecting a +10%, and a little more. For water-soluble poval film, 2021 to 2022 was flat. 2022 to 2023, plus a slight positive is what we are estimating it to be. PVB, 2021 to 2022, flat. 2022 to 2023, a slight plus. EVAL 2021 to 2022 was a plus, a little shy of 10%, and 2022 to 2023 plan, a slight positive number as what we are projecting. PVOH Resin 2021 to 2022 was minus, slightly more than 15%, and 2022 to 2023 plan, we are projecting -10% or a little more. Elastomer 2021 to 2022 was minus around 10%, and 2022 to 2023 plan, we are expecting it to be slightly more than +20%. GENESTAR 2021 to 2022 was -20% or a little less.
2022 to 2023 plan, we are expecting a +35%. Activated carbon 2021 to 2022, a slight positive was the result. 2022 to 2023 plan is +5% or slightly more. KURALON from 2021 to 2022, -5% or little less. 2022 to 2023 plan would be flat. That is it from myself.
Thank you. Thank you. Great. We would like to start taking questions from the audience in this room. If you do have questions, please raise your hand and we will bring you a microphone. It would be great if you can start off with your affiliation and your name. Thank you.
Thank you very much. My name is Yamada from Mizuho Securities. I have two questions. The first is about the fluctuation and the performance of the vinyl acetate segment. Could you tell us a little more about fiscal year 2022 actual and the fiscal year 2023 forecast? The 2022 actual seems to be quite out of sync with the projection you provided at the time of the third quarter. With that in mind, how much did the performance of the vinyl acetate segment fluctuate, and to what extent did the optical use poval film fluctuate in the first and the second half of the fiscal year?
In addition, in the analysis of the factors behind the fluctuation, the selling price and the product mix showed an increase that far exceeded the negative impact of the raw material and the fuel prices. I would like to know the reason why the fiscal year 2023 volume difference is small. Is this because the 10% increase in the optical used poval film was offset by the overall decline in PVOH resin? Also, as for the composition improvement in fiscal year 2023, is it correct to think that that is mainly due to PVOH resin? Finally, regarding the - JPY 13.1 billion in others, is it correct to understand that the negative associated with the inventory valuation difference is well incorporated?
I have a few more questions, but the result of the vinyl acetate segment, which includes a PVOH resin, are quite different from what you explained in the third quarter. First of all, it would be great if you can answer to that.
I will answer, this is Taga, about the overall situation. As I mentioned in the slide presentation, the vinyl acetate segment alone increased approximately JPY 10 billion from the third quarter announcement, with EVAL being that largest in terms of magnitude, followed by PVOH resin, advanced interlayer film, and the optical used poval film.
This is due to a temporary increase in rush demand before the Chinese New Year. Sales of water-soluble poval film has remained almost unchanged. The sales overall have not actually increased much, only profit. I think that is the point that you may not agree completely or been convinced, but EVAL has increased in volume and the sales price. I think EVAL has achieved both. Conversely, the volume of the PVOH resin has fallen. However, the better composition made a larger contribution to the selling price, and the total effect was in the positive direction. As for the advanced interlayer film, the volume itself has not really changed, but the product mix became better. For instance, the construction purpose one in Western world was better than expected, and so it ended up in being plus.
As I mentioned earlier, we had a thought that the last optical used poval film would be bad for the entire second half of the year, but we had some demand in December, and this area turned out to be positive. This was the overall situation. As explained earlier in the operating income analysis bridge for fiscal year 2023 on slide 21, the - JPY 30 billion in others includes over JPY 10 billion each in SGA expenses and the depreciation expenses. With that, the difference of a little over JPY 10 billion is what we call the inventory valuation difference. I understand that the negative impact of the increase in depreciation expenses have little to do with the vinyl acetate segment, right? In fiscal year 2023, depreciation expenses will increase for the company for the whole.
But for vinyl acetate in 2023, it is not depreciation expense, but the negative inventory valuation difference that is the major impact.
Well, you have asked several questions at the beginning with the many different angles, so we might not have addressed all the questions. Can you elaborate once again what hasn't been answered by Taga?
You said that the optical use of poval film would be 50% less for the second half, and that would be the pace for the third quarter, but I don't think that was not the case. How much was the situation better than projected? You said that the contribution of the increase in profit was largely from the EVAL, the next the PVOH resin, and advanced interlayer film the next, and the least was the optical use of poval film. Is that correct? On page 23, there was this figure, minus 131+ 93 was the number for 2022. I guess the inventory valuation difference bringing a profit has been excluded in the budgeting of the 2023. So there's no special factors incorporated in the budgeting for the 2023?
Right. First of all, about the optical use of poval film of 2022, as you said, at the end of the third quarter, we were expecting the fourth quarter to be similar level as third quarter. But at the end of the fourth quarter, we discovered that the fourth quarter was better. In percentages, quarter-on-quarter, fourth quarter was +40%. But in our plan, the optical use poval film, you asked when would the recovery for the optical use poval film would start. Apology.
The fourth quarter 2022 was better than third quarter, but it wasn't really the recovery, it was more of the advanced capture of the demand of the Chinese New Year of January. So the true recovery will be a little bit later. Either way, fourth quarter 2022, we had a better number than projected, and that's why we see this little bit of a discrepancy from the announced number of the third quarter. How about the special other factors? For other factors, for 2022, I guess Taga already explained. EVAL and PVOH resins price rises, the impact was bigger than we expected. Also EVAL had a bigger volume than we expected. Those are the factors. On page 12, there is this others, + JPY 9.7 billion, and on page 23, - JPY 13.1 billion of others of vinyl acetate.
Those are largely coming from the fluctuation of the inventory valuation difference. -JPY 131 of fiscal year 2023 is bigger. The total of the two years would be minus in total, is how you're projecting the overviews? Yes, regarding the others, for 2022, we benefited from the inventory valuation difference, and the number turned out to be plus. For 2023, particularly for the first half, it will be counterbalancing that, hence will be negative.
Let me check one more thing. I will make my next question simple. Regarding optical use of poval film, you mentioned that the sales in the third quarter dropped by 50% from the average of the first half.
So, if we assume JPY 20 billion in the first half, the sales will be JPY 50 in the third quarter, JPY 70 in the fourth quarter, and JPY 320 in fiscal year 2022. In contrast, the sales in 2023 increased by about 10% to a pace of JPY 350 or so. In other words, is it correct to assume that the average for fiscal year 2023 will not return to the first half of 2022?
Yes. We see the first half of 2023 starting to return, but not completely. I imagine that if we go to the second half of the year and see the half-on-half, we are expecting 30% increase. The second half of the 2023 will be coming back to the similar level of the first half of 2022. Okay. So second half of 2023 will be similar level as the first half of 2022.
Okay. Got it. Thank you very much for your patience answering to my question. But I have another one. Regarding the new construction of facilities for Calgon Carbon, we were told at the last briefing that since the utilization rate would be high, we should be able to cover to some extent with a marginal profit. I see that still in your plan. Can I confirm that your confidence level is quite high of this? Also regarding isoprene. Unfortunately, the depreciation expenses, not all of it will reduce the profit, correct? But can we expect to see a larger marginal profit around fiscal year 2024?
Right. Thank you for your question. First of all, about Calgon Carbon, what you said is pretty much the correct understanding. The second quarter will be the beginning of the operation. It's not going to be achieving 100% of the utilization rate, but we will maximize the utilization from the very beginning phase. For the isoprene, Kay Omatsu will answer about isoprene.
So 2024, we have three products, and one of the three can generally cover its depreciation burden with a marginal profit. We expect that the other two will not be reaching to that level within that year.
What is the one product that will be able to cover the depreciation? GENESTAR. Right.
Thank you very much for your question. Anyone having questions? The next is Mr. Watabe over Morgan Stanley MUFG Securities, please. Right.
This is Watabe of Morgan Stanley. Apologies for not able to make it to the venue. Looking back at fiscal year 2022, is that correct to understand that the reason you left operating income unchanged at JPY 78 billion at the time of the third quarter is that you thought it would go a little higher, but since it was the third quarter, you didn't change it, and that the upside was significant?
Regarding the vinyl acetate segment, I would like to know if you have any quantitative figures on the movement of inventory valuation difference from second quarter to third quarter and third quarter to fourth quarter.
This is Kawahara. First aspect, regarding the forecast at the timing of the third quarter, it is not that we did not disclose what we knew. On the demand side, especially in Europe, the sharp rise in the price of natural gas caused a cooling down of the economy. In addition, we had anticipated a rapid contraction in demand due to rising interest rates in Europe and the U.S. In that sense, when we left the operating income forecast of JPY 78 billion unchanged, we did not only anticipate an upward swing, but also naturally assumed a downward swing as well. We decided to go with the middle range, JPY 78 billion.
We saw quite a significant level of risk involved in the situation, and that is why we did not upgrade the number. The second aspect, Taga will answer.
The inventory valuation difference is the hardest part to understand, I guess. Basically, the biggest is that where the cost of raw materials is rising, the portion remaining in inventory goes to the next fiscal year. Of course, the vinyl acetate segment is the most affected by this. In addition, the fact that the inventory at the end of the fiscal year did not decrease as much as expected also had an impact. Is this answering your questions?
Do you have any quantitative numbers? Second quarter to third quarter, third quarter to fourth quarter.
The portion to be carried over from 2022 to 2023 is a little over JPY 10 billion for the entire company, most of which is in the vinyl acetate segment. If so, am I correct in understanding that vinyl acetate in the first quarter will see a considerable drop in profit?
Well, certainly there is an impact of high inventories there. On the other hand, there is also the impact of lower natural gas prices in Europe. First quarter will be a little tough, but from a long-term perspective, we believe we can go with our projected figures more or less.
Okay. Second, I would like you to look back the fiscal year 2022 a little more. I asked you about the change in the volume of major products. While only EVAL has grown, the profit has increased so much overall. You mentioned that the selling price and the product mix exceeded the impact of raw materials and fuel. Could you tell us what happened in a more precise manner? What happened in the fiscal year 2022?
It is a little bit technical part, but as I mentioned earlier, the inventory valuation difference refers to how much of the difference in cost incurred during 2022 will be applied to inventory in the following period. While there is also the concept of the lower of cost or market. Europe saw the price of natural gas rise very sharply, and if it continued, they would have to lower their inventory valuation at the end of the year. On the contrary, as you know, we did not have to lower prices due to the warm winter. This is one of the reasons for the upward swing from the third quarter released figures to the fourth quarter.
I understand the background of inventory valuation difference, but fiscal year 2022, EVAL was the only one which grew in volume, but then you managed to have this significant profit increase. If you see this analysis on page 12, I guess now we understand, but there is some big discrepancies in selling price and the raw price. How has this been achieved, is what I would like to understand.
This is Kawahara. Thank you for your question. If you see just fiscal year 2022, the selling price could compensate the rise of the raw material cost. But if you see the whole flow of 2020 to 2021, 2022, and then 2023, we were still behind all the rises of the fuels or the cost rises.
Therefore, in fiscal year 2022, we focused a great deal of effort on raising prices in businesses, not only in vinyl acetate, something which was considerably in delay as of fiscal year 2021. In vinyl acetate as well as in other businesses, the sales price and product mix component turned out to be a major factor. While some of the increase in the sales was due to foreign exchange, the increase in operating income was largely due to the selling price. The situation regarding the coverage of price hikes was different when viewed on a single year basis than when viewed on a cumulative year basis. We are going to be observing a similar trend more or less in 2023 as well.
Thank you for your explanation.
All right, so it would be great if Mr. Okazaki from Nomura Securities can start the questions.
This is Okazaki from Nomura Securities. Thank you very much for your presentation. I heard that the vinyl acetate segment is slightly increasing from 2022 to 2023. Please elaborate on this, about the trend of each vinyl acetate product. EVAL, for instance, is increasing in profit, et cetera.
Takizawa will answer to that.
2022 to 2023, slight increase is what we are seeing. As for poval film for optical use, although the volume is expected to return slightly, profit is expected still to decrease due to the impact of the inventory valuation difference. On the other hand, with regard to profit, the largest contribution will come from EVAL. The volume will increase, albeit slightly. In addition, although we revised the price several times of EVAL last year, we plan to maintain the increased price to some extent, partly because supply and the demand are tight.
The price will stay the same, and we are seeing a significant increase in the profit. The order has been reversed, but then EVAL will see an increase in the profit while poval film for optical use will be negative. As for PVOH resin, we expect a decrease in volume, but we will maintain the price that we revised last year. In addition, we will shift and concentrate on high value-added products. We also expect an increase in profit from PVB since we are proceeding with the price revisions, and the volume is expected to increase slightly. Due to these changes, vinyl acetate will see a slight increase in profit. As for MonoSol, the volume is expected to remain flat, and the price will not fluctuate much due to its proximity to finished products.
But on the contrary, the negative inventory valuation difference carried over from the previous year will appear, resulting in a slight decrease in profit.
Thank you very much. So in the profit increase/decrease analysis on page 23, am I correct in understanding that the EVAL, PVOH resin, and the PVB are positive in terms of sales price and composition product mix? The optical use poval film and water-soluble poval film are negative?
That understanding is correct.
Okay.
Thank you. Next is Mr. Umebayashi of Daiwa Securities.
Right. Thank you. I'd like to ask you about your plans for vinyl acetate for this fiscal year 2023. If you look at sales in the first and the second half of the year, I think they will be pretty much flat. However, with regard to profits, the plan is for them to be low in the first half and to rise in the second half. I understand that one of the reasons for this is inventory valuation difference, but I would like to know about other reasons such as the foreseen status and dynamism of each product.
Right. So Takizawa will answer again.
For fiscal year 2023, as you said, the second half will have bigger profits than the first half. Again, as you said, the inventory valuation difference would be impacting in a negative way, and the inventory consumption will happen, but it will happen in the first half, so the profit will be significantly different between the first half and the second half. Optical used poval film is expected to recover from the second quarter onwards, and the volume of it naturally will be bigger in the second half.
Now, for sales, this will be a plus factor for the second half. Those are the major factors. So the revenues will stay the same because the second half, you expect the price will come down with the lowering of the fuels? Yes. We have said that we will maintain prices, but not all the products. If we see raw fuel prices dropping, we will make some price adjustments. However, this does not mean that the price will be returned as it was. In fact, there is a time lag for some products, and we will maintain a slight wider spread. Nevertheless, we have some drop in prices incorporated in the plan.
Right. Thank you very much.
Next is Mr. Miyamoto of SMBC Nikko Securities, please.
This is Miyamoto from SMBC Nikko Securities. I'd like to ask you about the sales composition of 2023. Page 21 for fiscal year 2023, I think you're projecting an increased factor of JPY 23.6 billion, and you have a segment-by-segment figure also on page 23. We see that the selling price and composition is a big plus in all of the businesses. Normally, as you just mentioned, raw fuel is going down, and so I think that there will be some price reductions over the second half of the year. Can you tell us the background behind the positive outlook for sales price and composition, and what products in particular are the major factors in each segment?
I understand that the supply-demand balance for EVAL is tight, while the supply-demand balance for PVOH resin has become a little looser. Could you please explain a little more about your sensitivity to the selling price and product mix in the new year?
Thank you. This is Taga. As a whole, I guess there are two aspects in the selling price and the product mix. One is that the part of the pricing fees from the beginning of 2022 will take effect for the full year. The other is that although raw materials and the fuels will be in a declining trend, there is a time lag between the price revision accompanying the rise and the fall of raw materials and the fuels. This time lag is the reason for the price revision. This area also constitutes the increase factor in the selling price and in composition. The vinyl acetate segment is in a very different situation depending on the product.
For example, poval was very unstable in terms of supply and demand last year, and we also had a very tough time. Even in such a situation, we have been able to supply properly by utilizing our global network. So in areas where we are competitive, our customers have been recognizing our prices to be feasible. So we do not really need to drop the prices even if the fuel or raw material costs are down. Customers will consider us to be a viable, very important supplier. So we do not need to bring down the prices, regardless of how the fuel prices would be. Some of the price rise came late. If some product is in an area where the price rise is unfamiliar.
Raw materials prices are coming down, but we do have some of the products that we are negotiating price rises as we speak since the beginning of this year. So if you see the current trend of the world, you might feel that this is a little bit unorthodox, but I think we can manifest in what we envision with the price changes as well.
Thank you. I also would like to hear about the JPY 8.9 billion of the selling price and product mix of the functional materials segment.
As for functional materials, a new plant for Calgon Carbon will start up in the second half of the year, so product mix will change slightly, significantly. That will impact the number greatly.
Noted. Thank you very much.
Yes, thank you very much.
Now we would like to go to the last question. Mr. Nishihira of Okasan Securities, please.
Hello, this is Nishihira of Okasan Securities. I have one question regarding the optical use poval film. You say that shipments will return from second quarter of fiscal year 2023, but I would like to ask about its probability. Panel makers, production plans, and other manufacturing's latest trend proving such would be the case. Also, I think there will be improvement in the second quarter, third quarter, and fourth quarter. But I would like to ask if there is anything that can be quantitatively demonstrated. Do you have any figures that you can provide? What is your sense of directions on this?
Thank you for your question. Frankly, we make decisions based on a variety of information in a comprehensive manner. So we do not really have any particular data that we solely depend on our decisions. We look at the trends published by outside research firm as well.
As the industry's number one supplier, we have strong ties with our customers, and we have made a comprehensive judgment based on the information that we receive from our customers, polarizer manufacturers, and panel manufacturers beyond them. This was a comprehensive decision-making. The plan incorporated quarter on quarter of a +2% for the first quarter of 2023, and almost flat. With second quarter, we expect to see a recovery of over 20% in quarter on quarter. We see a real recovery to happen from second quarter. The third and fourth quarter, we don't have specific numbers respectively. But second half compared to first half will be 30% recovery. We are making judgment, incorporating various information coming from all the different sources, and this is the projection that we have.
Okay, thank you very much.
Thank you very much for all the questions. The scheduled end of time has come. We'd like to conclude this Q&A session and also conclude today's briefing session. Thank you once again, for all of you, for your participation today.