We will now begin the earnings presentation on the full-term business performance results for the FYE 2026 of Nippon Sanso Holdings Corporation. Thank you very much for taking the time out of your busy schedule to attend our information session today. I am Kajiyama from IR team of the Group Finance and Accounting Office. After the presentation, there will be time for Q&A session. Questions will be answered at that time during the Q&A session. We will now begin the earnings presentation. Please have our presentation materials ready at your hand. The materials can be obtained from the IR information page of our company's website. We send you a link in the chat section of this webinar to access the material for you to download. Please take some time to download the materials from this link.
Please note that today's session will be bilingual in English and Japanese using the simultaneous interpretation function of Zoom. Please select the language you'd like to use in the Zoom control panel. If you'd like to participate in the Q&A session in English, please set the Zoom audio language to English. Now, allow me to introduce today's speakers. President and CEO, Hamada. Executive Vice President, Watanabe. Executive Officer, CFO, Kubo. Board of Director and the President of Nippon Sanso Corporation, Nagata. Chairman and CEO of Nippon Sanso Matheson, Draper. Board of Director, Chairman, and President of Nippon Sanso Europe Holdings, Giudici. Executive Officer of Group Business Management Office, Sawa. President of Thermos K.K., Kataoka. Senior Executive Officer of Group Sustainability Management Office and CSO, Miki. Let me begin by outlining today's agenda.
The session is scheduled to consist of approximately 45 minutes for the presentation, followed by about 45 minutes for Q&A. First, President and CEO Hamada will provide a review of the previous medium-term management plan. This will be followed by Executive Vice President Watanabe, who will present the new medium-term management plan. Next, the business plan for the fiscal year ending March 2027 will be presented by the heads of each segment. Following these presentations, CFO Kubo will provide an overview of the financial profile of our group. Now, Mr. Hamada, please begin your presentation. Over to you.
Good morning, or hello. This is Hamada of Nippon Sanso Holdings. Thank you very much for taking the time out of your busy schedules to join today. May 11th, we had a teleconference to announce the fourth quarter financial results of the fiscal year ending March 2026. In continuation from this session today, we would like to conduct a full-year earnings presentation. In today's session, we will first look back on our previous medium-term management plan, NS Vision 2026. Then, last month from April, we started our new medium-term management plan, Next Innovation 2030. We will give an overview of our new medium-term management plan and present our business plan for the fiscal year ending March 2027, this fiscal year, which is the first year of the new medium-term management plan. Following this, our CFO, Mr. Kubo, will explain the financial profile of our group.
In addition, as we have mentioned at the outset, we are joined today by the heads of our business segments in Japan, United States., Europe, and Asia- Oceania, as well as the President of Thermos, who will each present their respective segment business plans. Now, let us begin our presentation. First, a recap of our previous medium-term management plan, NS Vision 2026. Under the four year plan, NS Vision 2026, which concluded in the fiscal year ending in March 2026, we established five focus fields. Based on our global operating structure of four regions, Japan, United States, Europe, and Asia- Oceania, plus Thermos, we worked to execute these strategies in each region. Through these efforts, the entire group has been engaged in driving towards the realization of our overall vision. In the final year of NS Vision 2026, as you can see, there are the financial KPIs and non-financial KPIs.
In the fiscal year ending March 2026, we accept the financial and non-financial KPIs. The non-financial KPIs were introduced from NS Vision 2026, in response to requests from our stakeholders and also as part of our commitment to advanced sustainability management. Based on this, I would like to give a report. The previous management plan was the company's first plan after transitioning into a holding company structure. By placing the domestic and other operating companies in the same layer under the holding company, NSHD, it became possible to compare KPIs, initiatives, and results among all operating companies. As a result, it became clear that the profit margin of our Japan business was lower than that of our other businesses. We were able to confirm this point once again. Simultaneously, there was COVID-19 and the Russia-Ukraine conflict.
There were these various geopolitical events and also international energy problems, which led to supply chain issues, leading to the fact that manufacturers alone cannot overcome the situation just by our own efforts. There was that much cost increase. Consequently, we were forced to proceed with price revisions in Japan as well. Historically, it is often said that due to cultural differences between Japan, Europe, and the United States, it has been said that passing increased costs on to customers was difficult in Japan. But as price revision actions advanced in our European and U.S. businesses, our Japan team also strongly promoted price management and continued careful, persistent negotiations with our customers. As a result, the environment of rising prices for many goods and materials accompanying inflation became a tailwind, allowing us to take solid actions and achieve concrete results.
This successful experience has served as the foundation for the global price management and revenue enhancement strategy included in the new midterm management plan that began in April this year. Now I will discuss the progress of our financial and non-financial KPIs. Non-financial KPIs, this phase, it replaced sustainable KPI from this fiscal year. The content is slightly different as well. We have also decided to rephrase this, bearing in mind the trend in the world at large. First, on the financial side, to strengthen the price management across the group, promotion of productivity improvement initiatives, and steady and planned debt repayment, we successfully achieved all of our financial KPI targets. Despite the extremely challenging external environment, we believe that we have made steady progress in improving both our earnings capability and financial position.
Regarding non-financial KPIs, this is the first time for us to set such non-financial KPIs in our midterm plan. Third-party certification is necessary, and at this point in time, we only have results currently available only up to the fiscal year ending March 2025, because we have to receive certifications from a third party. We achieved our targets ahead of schedule in areas such as reduction of greenhouse gas emissions within the group, the contribution to customers' greenhouse gas reductions through environmentally friendly products, and compliance training participation rates. Finally, with respect to the execution and outcome of our focus fields. Under the five focus fields outlined in the previous management plan, we have steadily implemented various measures across the group. While there are differences in progress, results, and the challenges faced by each strategy and segment, we have seen increasing instances.
There are ups and downs depending upon strategy and segment, but we have seen increasing instances of sharing best practices and successful initiatives across the group in a horizontal manner. As a result, collaboration and execution capabilities on a group-wide basis have steadily strengthened. Based on these achievements and remaining challenges, in the new medium-term management plan, we have retained the essence of the five focus fields in the previous medium-term management plan, while reorganizing them into three key strategies. Details of the new midterm management plan will be explained by Mr. Watanabe after my presentation, but through its steady execution, we aim to further drive growth. This concludes my part of the presentation. From here, Mr. Watanabe will explain the objectives in the new midterm management plan, as well as the outlook for the current fiscal year, which is the first year of the MTMP. Mr. Watanabe, please.
Thank you very much, Mr. Hamada. My name is Watanabe from Nippon Sanso Holdings. At the end of March, and, yeah, we conducted the new midterm management plan briefing, and today's explanation may overlap with that, so I'd like to keep it brief and succinct for those parts which may overlap. As CEO Hamada just mentioned, these are the three key strategies under our new midterm management plan, Next Innovation 2030. The basic idea is to enhance productivity in our core industrial gas business. Continuously we will raise productivity, including price management, so the best practice within the company and the group shall be pursued so that we can enhance the profitability within the group. As for electronics business, bulk gases, material gases, equipment, and insulation, including everything, we would like to aim for the expansion of our electronica business in a combined manner globally.
At the same time, we aim to nurture new growth drivers that relates to gas, which can be compared to our electronics business in the future for further growth potential. In addition, we recognize that the management foundation supporting these strategies must continue to evolve. As you see on this slide, we have identified the six key themes and will advance initiatives according to further strengthening our foundation. Now, moving on to the next page about the KPIs. First of all, financial KPIs. Let me first of all reiterate our approach to setting numerical targets. For the top line, we aim to achieve a compound annual growth rate, or CAGR, of 3% in revenue. As for profits, we intend to drive steady improvements in profitability and target growth of approximately twice the rate of revenue growth.
We plan to continue improving margins by at least 50 basis points per year. Some of our targets are presented as ranges, reflecting our consideration of current geopolitical risks as well as macroeconomic uncertainties. Regarding financial soundness, we will introduce a new indicator, the net debt to EBITDA, in place of the traditional D/E ratio. Given that we successfully reduced the interest-bearing debt as planned under the previous medium-term management plan and that our financial base has reached a sufficiently strong level, we believe this new indicator more appropriately reflects our financial position under the new plan. As for the sustainable KPIs that was mentioned earlier, we have expanded from the previous eight items to a total of 10 items by adding sustainable business and engagement.
Through these measures, we will further strengthen initiatives that support sustainable growth across areas such as environment, safety, human resources, and compliance. Now, moving on to the next page, please. I will outline our business plan for the current fiscal year, which is the first year of the new medium-term management plan. For the fiscal year ending March 2027, based upon recent foreign exchange trends, we assume a slightly stronger yen against the major currencies such as the U.S. dollar and the euro compared with the previous fiscal year. Despite the headwind, we expect to achieve both revenue and profit growth. That said, we forecast a revenue growth of 1.5% and core operating income growth of 2.4%. This is below the annual 3% revenue growth target I mentioned earlier.
The primary reason for this is due to the fact that we estimated slightly moderate growth for the first year of MTMP because of the uncertainties that we see in economic environment today. Allow me to move on to the next page, which explains the full year forecast and the assumption for that. With respect to the business environment at present, rising geopolitical uncertainty in the Middle East is increasing concerns over higher energy costs, including electricity prices. Furthermore, due to the continued global inflationary environment, costs including labor cost, logistics, and raw materials, are expected to remain elevated and stay at high level. Against this backdrop, our group-wide initiatives will focus on continuing to enforce disciplined price management to appropriately address cost increases. At the same time, we will further strengthen productivity improvement initiatives and cost controls to secure profitability.
We also expect demand to remain resilient in sectors that are less sensitive to economic cycles, such as food and beverages and healthcare. We will continue to place greater emphasis on these areas. In addition, for acquisitions completed in previous years, we will steadily execute post-merger integration, PMI, to maximize synergies. As for key initiatives under the new medium-term management plan beginning in April, we have been promoting the establishment and global rollout of the unified Nippon Sanso brand. With regard to our group-wide IT and digital strategy, we are advancing the development of roadmap under the leadership of our CIO, who assumed the role in April last year. Based upon this roadmap, we will drive communication efficiency among the group, operational efficiency, and enhance competitiveness through greater utilization of data.
When it comes to DX, we are trying the various DX tools, and if they turn out to be successful, we would like to deploy such tools on a group-wide basis. Each segment will review performance under the new midterm plan and outline key initiatives under the new plan for the current fiscal year. First of all, let's begin with Japan. Nagata, please.
Good morning. This is Nagata from Nippon Sanso. Today, I will review the performance of the Japan segment under the previous management plan and outline our initiatives going forward. First, a recap of the previous management plan. As written in the presentation material, in the Japan segment, left-hand side, there is the segment strategy.
We've been focusing on enhancing the power of our core business and exploring and nurturing growth businesses. That being said, as you can see in the middle of the material, core operating income in the fiscal year ending March 2023 was JPY 31.6 billion, with a core operating margin of 7.5%. By the final year of our fiscal year, the fiscal year ending March 2026, core operating income increased to JPY 54 billion, representing an improvement of JPY 22 billion over the four-year period. Core operating margin also rose significantly to 13.3%, substantially exceeding our initial target.
In addition, EBITDA margin surpassed our segment target of 17%. The key driver behind this performance was customer management, specifically the continuous promotion of customer-centric value creation. The industrial gas business is fundamentally about providing the invisible value of gases, the functions and services gases deliver, and we can call it a service. We are offering a solution created by our various functions of our gases. In this sense, our business is not only B2B, but also one that ultimately serves end users through the value embedded in those functions and solutions. Even amid the challenging economic environment over the past four years, including COVID-19, supply chain disruptions caused by the situation in Ukraine, and significant increases in energy prices, we believe our customers appropriately recognize the value of stable supply and the functional benefits of gases.
Furthermore, we have demonstrated strong capabilities in supporting major projects in Japan's electronics industry. There's been many large projects in Japan. In addition to bulk gases and specialty material gases, we have provided integrated solutions, including gas supply systems, equipment, and engineering services. Based on this review, our key priorities going forward are, above all, further evolution of our core businesses and commercialization of growth businesses. These are the two key priorities. Over the next four years, expanding the electronics business will be a key focus for the Nippon Sanso group as a whole. The Japan segment would like to contribute to an extent here. In the electronics field, for example, we are developing and marketing advanced materials for next-generation semiconductor processes, not just the specialty gas, but the materials gas as well.
To support this, we are constructing a new advanced materials development building at our Tsukuba Development Center. Through this facility, we aim to develop new process materials and handling equipment used in advanced processes and further strengthen our ability to provide solutions that address customer challenges. In addition, we are focusing on growth businesses. Although they may be niche areas, we do have growth businesses such as stable isotopes, compound semiconductors, and additive manufacturing. While these are niche markets, we utilize them as areas where we have competitive advantages, and we aim to expand the scale and profitability in Japan and overseas. At the same time, to support the expansion of these growth areas, further evolution of our traditional core businesses is essential.
We will continue to invest in bulk gases, with CO2 small on-site and large on-site businesses to maintain and expand our business base, while further strengthening initiatives to maximize customer value. As of the next four years in the new medium-term management plan, we expect that the CAGR of revenue and profit to be maybe slightly below the global average. However, we will maintain a strong focus on profitability and aim for continuous improvement in core operating margin based upon the new medium-term management plan Next Innovation 2030. We aim to focus on profitability and aim for continuous improvement of corporate margin, and we also target exclusive segment EBITDA margin goal of 19%. Finally, let me outline our outlook for the fiscal year ending March 2026, the first year of the new medium-term management plan.
Given the prolonged geopolitical tensions in the Middle East and rising electricity costs, we remain cautious regarding gas shipment volumes. In addition, this fiscal year represents a transitional period for large-scale electronics related equipment installation projects. Despite these conditions, from medium to long-term perspective, we will continue to invest in R&D for next generation semiconductor related electronic material, gases and equipment, expand our products and service offerings and strengthen market development. In the short term, we are focused on maintaining and strengthening our core businesses through customer management and customer-centric value creation. This includes securing volumes and continuously optimizing pricing levels. As a result, for the first year, we expect performance to be slightly below the overall growth trajectory for the four-year period, with revenue and profit both in line with the previous year, providing a steady start to the new four-year medium-term management plan. Thank you for kind attention.
Good morning, everyone. This is Alan Draper from Nippon Sanso Matheson. Today I would like to review the performance of the U.S. segment under the previous medium-term management plan and outline our initiatives going forward. First, I'll look back at the previous medium-term management plan. In the U.S. segment, we operated our business based on the segment strategy shown on the left-hand side of this slide. Supported by favorable foreign currency, disciplined pricing, and productivity improvements, both revenue and core operating income profit grew steadily. Although profitability declined in the final year, performance improved overall when viewed across the four-year period. Based on this review, we identified several key challenges going forward: the need to sustainably enhance profitability, further expand on-site projects, and strengthen the electronics business.
These priorities are reflected in the new segment strategy shown on the right-hand side of the slide under the new medium-term management plan. Our strategy centers on strengthening the earnings base through improved plant utilization and increased business density, while enhancing our position as a key supplier to resilient growth markets, including food and beverage, healthcare, and electronics. Within the U.S. segment, the electronics related business accounts for only around 5% of sales as of this fiscal year ending March 2026. Looking ahead, we aim to expand this business by focusing not only on electronic material gases, but also through the equipment business, building an integrated model that combines materials, equipment, and engineering. In the industrial gas business, we will continue to propose applications-driven solutions while advancing additional on-site projects. This approach strengthens long-term customer relationships and contributes to more stable earnings.
Over the next four years, we expect the compounded annual growth rate of sales and profits to exceed the global average. In terms of profitability, we are targeting a steady and sustainable improvement of at least 50 basis points per year. Finally, I would like to discuss our outlook for the fiscal year ending March 2027, which will be the first year of the new medium-term management plan. While we expect shipment volumes to recover gradually, the pace of recovery may be limited due to heightened geopolitical tensions in the Middle East and rising electricity and energy costs. On the other hand, the benefits of our ongoing price management and cost control initiatives are expected to become more visible, and contributions from newly secured on-site projects should materialize.
Under these conditions, our focus will be on strengthening the electronics equipment and construction business, as well as securing additional on-site projects through proposals to change supply modes. As a result, for the first year, we aim to achieve a start broadly in line with the overall growth trajectory anticipated for the four-year period. Thank you very much for your attention. I will pass it over to Raoul.
Thank you, Alan. Good morning, everyone. This is Raoul Giudici from Nippon Sanso Europe. I will now explain a review of the previous medium-term management plan for the European segment, and same I will do for initiatives going forward. But first, let me review our recent performance. In the European segment, we operated our business based on the segment strategy shown on the left-hand side of the slide. Key achievements included the strengthening of our engineering capabilities through the acquisition of a plant engineering company, which we did in Italy. As well as the acquisition of a home care business in Spain, which has enabled us to further expand our presence in resilient markets such as food, beverage, and healthcare. In the electronic business, we have also expanded our business foundation through initiatives such as increasing production capacity for electronic material gases.
While the business environment was characterized by significant cost volatility, particularly in energy prices, we executed timely and appropriate pricing management, and we continued productivity improvement initiatives. As a result, as you can see, profitability improved significantly, and this confirms that we are leaving the medium-term plan structurally stronger despite a highly volatile and more complex business environment. Now, when moving forward, our key priorities still include maintaining rigorous pricing management in response to ongoing cost volatility and leveraging gas applications to grow our volumes. Clearly, further strengthening the electronics business will also be important, especially in light of the growing semiconductor-related investments across Europe. More precisely, we will focus on developing total solutions, including equipment business as well as the total gas and chemical management services, and we will aim to establish a high value-added business model that combines electronic material gases, equipment, and operational management services.
Over the past four years, as I said, we have expanded production capacity for the electronic market. As we speak, electronic-related sales account for only around 3% of our total revenues. That means that we see a very nice space to grow our presence in Europe. Other priorities when moving forward will include steadily capturing business opportunities in healthcare, where Europe is growing older and more in need of assistance, and also using our technologies to follow energy transition, which is clearly a priority for all European countries. For the next four years, we expect the CAGR of both sales and profits to be broadly in line with our global average. While at the same time, we are fully committed to steadily achieving an annual improvement in profitability of at least 50 basis points. Let me finally outline our outlook for the fiscal year ending March 2027.
Given the prolonged geopolitical tensions which we see in the Middle East and the rising electricity costs, we tend to remain prudent on volume recovery. While we clearly want to maintain tight control over pricing and productivity. This is also why we're increasing our focus on business development to push organic growth. At the same time, we expect some extraordinary contribution from inorganic growth, such as the acquisition, which is being completed successfully in Spain. With this approach, we believe we are very well positioned to deliver this year, as well as to ensure sustainable performance over the course of the new medium-term plan. With this, I conclude my presentation, and I thank you very much for your attention.
Good morning. This is Sawa from Nippon Sanso Holdings. Today, I'd like to review the performance of the Asia and Oceania segment under the previous mid-term management plan and outline our initiatives going forward. First of all, the review of the previous mid-term management plan. In Asia and Oceania, we have operated our business based upon the segment strategy on the left-hand side of the slide. Key achievements include strengthening our ability to meet electronics-related demand through expanded production capacity for electronic material gases in East Asia, as well as executing two acquisitions in the Oceania region, which contributed to an expanded market presence. Turning to performance over the past four years, electronics-related sales accounted for approximately 40% of the total revenue.
During this period, however, there were phases in which gases and as well as equipment sales and construction was sluggish due to the customer inventory adjustments and postponement of investment. In addition, factors such as the softer helium market resulting from oversupply weighed on the business environment and overall profitability remained broadly flat. But in the Oceania region, supported by the effects of acquisitions including Kleenheat and Coregas, both the revenue and the core operating profit achieved strong growth with a CAGR of approximately 10%. While we have been able to demonstrate solid growth momentum, we recognize that improving profitability and further accelerating initiatives to expand the business scale are key priorities going forward.
As shown on the right-hand side of this slide, in electronics business, we will enhance our comprehensive proposal capabilities by offering not only electronic material gases, but also on-site solutions as well as equipment and installation services. In addition, we will move beyond East Asia to pursue full-scale expansion into Southeast Asia and India, aiming to become the number one total solution provider in Southeast Asia and India. In parallel, we will strengthen governance structures to support this expansion. For the next four years, we expect a CAGR of sales and profits to exceed the global average. In terms of profitability, we aim to steadily achieve an annual improvement of at least 50 basis points. Finally, I'd like to outline our outlook for the fiscal year ending March 2027, which is the first year of the new mid-term plan.
Due to the prolonged geopolitical tension in the Middle East and the rising electricity cost, uncertainty remains regarding the recovery of gas shipment volumes, including those for the electronics market. On the other hand, we will move forward with strengthening the electronics business in Southeast Asia and India, creating synergies with acquired business in Oceania, and further enhancing pricing management and productivity improvement initiatives across the region. As a result, for the first year, we expect the performance to land at a level broadly in line with the overall growth trajectory. Thank you very much for your kind attention.
This is Kataoka from Thermos. I would like to review the performance of the Thermos segment under the previous management plan and outline our initiatives going forward. First, let me review the previous management plan. In the Thermos segment, we have operated our business based on the segment strategy, as shown on the left-hand side of this slide. Key achievements include the launch of the new sub-brand, & ONDO, and our entry into the apparel accessories market, as well as the continued launch of new products under strategic pricing that reflects added value. In addition, we worked to improve demand forecasting accuracy and optimize inventory management through digitalization, DX, digital transformation. As a result, even amid the business environment characterized by both risk and growth opportunities, we achieved revenue growth while maintaining and improving profitability.
Based on this review, we recognize that the key challenges going forward are to further enhance customer experience through a diverse range of products and to accelerate operations and decision-making in order to respond to various changes in the business environment. With this recognition, we formulated the segment strategies of our new management plan. As shown on the right-hand side of the slide, over the next four years, we aim to evolve from a business focused primarily on vacuum insulated containers to a lifestyle brand that provides a diverse range of products and services that support everyday life. At the same time, we will embed sustainability as part of our corporate culture while strengthening brand equity in global markets and expanding overseas through partnerships. We will focus on sustainability and DX as well. We would also like to focus on these initiatives.
For the next four years, we accept a CAGR of sales and profits broadly in line with the global average. In terms of profitability, we plan to steadily achieve an annual improvement of 50 basis points. Finally, I would like to outline our outlook for the fiscal year ending March 2027, the first year of our new medium management plan. While implementing strategic pricing and cost management in line with the business environment, we will continue to introduce new products in growth categories such as cookware and apparel. In parallel, we will work to strengthen customer engagement through digital initiatives. As a result, for the first year, we expect performance to land at a level broadly in line with or slightly above the overall growth trajectory anticipated for the full year period. Thank you for your kind attention.
Hello, ladies and gentlemen. This is Kubo, CFO. Thank you very much for joining us today. Now I'd like to start my explanation. First, I'd like to briefly review the progress of our financial KPIs under the previous midterm management plan. We have set five key financial KPIs for the period, and I'm pleased to report to you that we successfully achieved all of these targets. By the fiscal year ending March 2025, we had already met our targets for revenue, core operating profit, and ROCE after-tax. In the final fiscal year ending March 2026, we also achieved our targets for EBITDA and adjusted net D/E ratio as well. As President Hamada mentioned earlier, at the beginning, these results were driven by disciplined pricing management and ongoing productivity improvement initiatives across the group, and with steady progress in reducing debt.
Through these efforts, we believe we have steadily strengthened our profitability, financial soundness, and capital efficiency. Next, I will explain the financial KPIs under the new medium-term management plan. In this plan, we have set targets for each KPI towards the final year, the final FYE 2030. We have also outlined our outlook for the current fiscal year, which is the first year of the plan, as shown on the slide. For the current year, we expect the revenue and core operating profit to grow at a somewhat more moderate pace compared with the overall four-year plan. Accordingly, improvement in the core operating profit margin is also expected to be around 20 basis points. On the other hand, we are targeting an improvement of 80 basis points in the EBITDA margin over the planned period.
In addition, we have newly introduced net debt to EBITDA as a KPI in this plan. While this ratio stood at 2.37 times for the FYE 2026, we expect it to be 2.07 times in the current fiscal year. Next, I will explain our approach to capital allocation under the new medium-term management plan. Over the four-year period, we expect to generate approximately JPY 1.17 trillion in operating cash flow. We plan to allocate two-thirds of this cash to capital expenditures and investments, and the remaining one-third of the cash to debt reduction and the dividends. Let me now walk you through our cash flow outlook and the dividend forecast for the current fiscal year. We expect operating cash flow of JPY 263.9 billion and plan investment cash flow of JPY 181.0 billion, resulting in free cash flow of JPY 82.9 billion.
For dividends, we plan to pay an annual dividend of JPY 66 per share. We have increased our dividend for 10 consecutive years so far, achieving a compound annual growth rate of approximately 13%. We also maintain a long-term dividend payout ratio target of 20%-30%, and we remain committed to providing stable and reliable shareholder returns. This concludes my presentation. Thank you very much for your kind attention.
Thank you for your kind attention. We will now proceed to the Q&A session. Our IR division, Mr. Ishimoto, will now moderate and give you some points to keep in mind.
My name is Ishimoto from the IR Department of the Group Finance and Accounting Office. We will now proceed to the Q&A session, but I would like to mention some points to keep in mind. As mentioned at the outset, if you wish to communicate in English during the Q&A session, please join through the English audio channel on Zoom. Please note that for the Japanese audio line, when Mr. Draper and Mr. Giudici respond, we will provide translated audio through simultaneous interpretation. In addition, we are providing interpretation audio by simultaneous interpretation. So if we could please appreciate your consideration and cooperation such as speaking a little slower or keeping your questions as concise as possible.
Thank you for your kind cooperation in advance. Next, I will explain about the procedure for today's Q&A session. First, please raise your hand by pressing the Raise Hand button on the control panel displayed at the bottom of the Zoom screen. Then click on the Q&A button to fill in your company name and name. You do not need to fill in your question. Once we nominate you, please state your question. When you ask a question, please state your name and affiliation first, and then proceed with your question in a one question, one answer format, please.
If you wish to cancel your question, please press the Raise Hand button again to put your hand down. Please note that your questions will be posted on our corporate website along with our presentation and also concurrently with audio data. This is the information I have before the Q&A. We will now take your questions in the order received until the scheduled ending time of the briefing. SMBC Nikko Securities, Shintani-san, please.
SMBC Nikko Securities, Shintani speaking. Thank you for explanation. First, the overall situation of this fiscal year's plan, core operating income by region forecast, that's the major concern I have. When you think about these Q4 results, ex-Japan, besides Japan, there's expected increase in profit income. Bearing in mind the explanation today, in the four year period, improvement will be made in the U.S., Europe, as well as Asia and Oceania, mainly speaking. I want to receive more detailed explanation of the ups and downs, differences by region. Last fiscal year, particularly for the United States, FY 2025, that was the only segment that declined in profit last fiscal year. I'm wondering what we can expect going forward. I want to know a bit more of the regional differences.
Thank you for the question. First, I will give an overview. This may be a repetition of what was explained before, but then Mr. Kubo will explain. After that, specifically when it comes to the United States, if additional explanation is necessary, we would like to call upon the people responsible for each of the business segments to make additional explanation as well, if necessary. First, overview. Actually, above all, from February of this year, there's the issue in the Middle East and in the medium-term management plan, as well as this fiscal year's budget. After both of these were completed, the Middle Eastern issue started and what impact will this pose, and will that be a long-term issue or just a half-year or one year impact? It's very difficult to forecast this future.
We are making our utmost effort to communicate with our users in the chemical and steel industry, et cetera. We are watching very closely the trend of our customers. We interview them and we confirm information in the news. However, I'm not intending to criticize here, but the Japanese government is explaining about NASA and on the field, whether there's enough raw material feedstock or not. What's actually happening seems to be different from what the Japanese government is explaining. It's difficult to judge which is correct. The conclusion, therefore, I want to give is the medium-term management plan itself is a medium-term management plan, as the word denotes, and it indicates the future direction the company intends to head towards.
We kept our medium-term management plan intact. This fiscal year, as Mr. Kubo, as well as each of the segment heads explained, compared with previous fiscal year's numbers and this fiscal year's forecast, we may have a weak stance in terms of positioning within the new midterm plan when it comes to this fiscal year. This fiscal year, we are full of uncertainties. There might be a significant impact on our customers, and maybe this impact will not be in the first half, but in the second half. We have to wait and see to have a clearer understanding.
We are in the industrial infrastructure business. We are not expecting immediate impact. It's very difficult, therefore, for us to forecast the future. Consequently, this fiscal year's guidance, when preparing this, we had no choice but to come up with these forecast numbers. In the medium-term management plan, we have buffers in the group as a whole. We expect group business growth, but we also have set the buffer. Inclusive of that, we think we should be able to sufficiently recover. That is why we came up with this guidance. I would like to call upon Mr. Kubo.
This is Kubo, I would like to make a supplementary explanation. The overall view that we have is, as Mr. Watanabe as well as myself, as we mentioned at the outset, in the medium-term management plan, when we prepared this, compared with the growth rate factored into the midterm plan, we do have a somewhat conservative forecast because the economic environment is full of uncertainty, and we are expecting this uncertainty to continue based on the assumption we've had this fiscal year's guidance.
Therefore, the overview that we have in mind is sales volume. We are not expecting sales volume to grow significantly. Still, until last fiscal year, there's been a series of M&As and large equipment and installation projects completed. From this fiscal year, we should be able to progressively enjoy the benefits of these initiatives. We hope we should be able to enjoy benefits of these initiatives as scheduled from this fiscal year. That will contribute to revenue expansion, which is already factored into this fiscal year's guidance and our vision. In particular, we've embarked on M&A, and there's been large investments and there's impact from that in the U.S., Asia and Oceania, particularly in these two regions. With regards to Europe as well, Esteve Teijin, end of March, we closed a completed M&A, and this impact should be fully contributing to the group's performance.
In terms of sales or costs. For costs, because of worsening of the Middle Eastern situation, how will cost trend going forward? It's extremely difficult to forecast future cost trends. So far, there's been COVID-19 as well as Russia and Russian situation. There's been a lot of economic uncertainties and through operational expenses as well as the pricing, we've been able to overcome these economic uncertainties through these initiatives. This fiscal year, this benefit is factored into the guidance of each segment. Stable cash flow should be generated in this fiscal year's guidance as well. Mr. Nagata commented on Japan. Equipment and installation business is in a transitional period. Excluding that, various initiatives are being taken, as is the case in other regions, and we should be able to make steady progress this fiscal year on this concrete isolation.
Understood. Thank you very much. I would like to ask you another question, if I may. Once again, it is quite difficult to tell, probably because of the uncertainty, but the first and second half for the profit margin on a quarterly basis, could you please explain more about how you see the changes about the profit margin?
Right now, the energy cost is rising, inflation is ongoing, but at the same time, your capability to shift these cost increase to selling price is solid and no major challenge on a full year basis. But considering the time lag between April through June or the July through September when electricity cost may increase, are you going to feel the impact? Or in the second half, more and more cost increase may be passed through to the selling price. The margin changes throughout the year, if you could give me some idea, please.
Thank you very much for your question. It is very difficult to respond to the question with detailed specifics. But when it comes to energy cost, in the U.S., for example, electricity cost, including gasoline prices, already there is a clear sign of the increase in these cost items. Naturally, price management is what we are going to do in order to recover the impact of the rising cost. But what is going to happen to gasoline prices or the electricity prices going forward? Even in Japan, there is a time lag of three months. It will be visible in electricity cost. We do not know for sure, but the assumption is that it is going to increase as a cost. Europe as well.
Of course, the situation is different from country to country, so we cannot give you one single answer. But for Asian countries, the situation there is totally different from country to country. But the energy costs and largely the costs are expected to increase, unfortunately. The countermeasures for these are taken by each operating company. As CFO Kubo mentioned, price management and productivity improvement. So we need to promote these two in order to cope with the rising prices cost. In that sense, on a full year basis this year, of course, we have to take various measures, initiatives, but the numbers shown here, we believe that we will be able to reach and satisfy these target numbers. Profitability, as I mentioned, energy cost or the changes in the cost or D/E will affect profitability.
Without allowing much time lag, we explain the situation to the customers, and before we know that for sure, we take actions in order to improve the productivity. By so doing, we need to respond to these challenges. CFO Kubo, I wonder if Kubo-san has additional comments. I would like to welcome additional comments.
Yes. President Hamada has just rightly mentioned pricing activities and operational excellence activities. Basically, for the costs to be raised, we need to take actions for that. When will it happen on a fourth quarter basis? It is very difficult to foresee when it is going to come up. So when costs stay at a high level and the assumption that the difficulty may continue on a full year basis, that is our basic assumption on a full year basis. We need to recover and make the correction and take actions immediately so that the impact will not prolong. So quarterly breakdown of the profitability was made and designed with that idea behind.
Thank you very much. This is a follow-up question. Particularly in Asia- Oceania, particularly energy cost is rising, and I believe impact is going to be very big. So compared to the previous medium-term management plan, margin improvement was somewhat slower in Asia- Oceania, particularly. So more proactive price management and actions. Are you taking these actions sufficiently? Do you think that you will be able to take necessary actions in Asia and Oceania?
Yes. Thank you. Later, Mr. Sawa will respond more in detail. First of all, Asia- Oceania, as was mentioned, the situation is quite different from country to country. For example, even between Japan and Korea, the inventory of crude oil, the stockpile is different. So situation is quite different. We are including basic economic strengths. They are not uniform. They are different. So it is very difficult to give you one single answer to cover all these countries and not be specific country by country. But if Mr. Sawa knows more in detail, please respond.
Thank you very much. This is Sawa. So the significant increase in cost was experienced in Asia since the COVID-19 pandemic. There are a lot of learnings and lessons learned from that experience when it comes to price management. We will try to include such factors into the contract and agreement. That is what we have started to do since then.
The countries are different in Asia, but if the cost increase is expected, then in a timely fashion, we are trying to shift the cost increase to selling price. We have accumulated knowledge and know-how so far. I believe that we can utilize such expertise now. So basically, without time lag, the pricing management, selling price management can be done more effectively. So that helps us to achieve the current plan going forward. Thank you.
Thank you very much for the encouraging words. This concludes my questions.
Mr. Shintani, thank you very much. Next, Mizuho Securities, Mr. Yamada.
Yamada from Mizuho Securities. I'd like to ask Alan as well Raoul regarding the investment as well as growth opportunities in Americas as well as Europe. As far as America is concerned, you're talking about the business density improvements. Does it mean more ASUs projects, or do you mean the improvement of the density of the logistics web as well as other distribution channels? Could you please elaborate this part? In addition to that, as far as EU is concerned, you're talking about the business opportunities regarding the energy transition, which I think relates to the carbon neutrality. However, the company experienced impairment loss recognitions in the last mid-term system, thanks to the slowdown of the pace of the energy transitions. Do you see any risk associated with the energy transitions in Europe? If it's possible, could you please elaborate how are you planning to manage those risks? Thank you.
Thank you for the questions. We would have to ask the presidents of each operating companies to respond one by one. First, Mr. Alan Draper from the United States, and next up from Europe, we would like to call upon Mr. Raoul Giudici to respond in that order. First, Mr. Alan, please.
Thank you, Hamada-san, and thank you, Yamada-san, for the question. Overall, the U.S. business still has a lot of opportunities for growth. We have ASUs that we're working on economic models for. We're hoping that we find good, lucrative models to install into the ground. We're also looking at doing small on-sites. Small on-site plants are another opportunity for us. That's either converting large bulk plants to small on-site or even finding new applications for small on-site customers.
I think we can increase the density through both ASUs as well as small on-sites. Also, I think there's some opportunities for M&A. We're always looking at the small distributors, little tuck-in distributors that can provide synergies and benefit to the business, and that also provides some density for us from a customer perspective. In the first 50 days or so that I've been there, a lot of opportunities have come to me for my review, and I think we're going to have a lot of opportunities during the next midterm plan. Thank you.
Yamada-san, for your question, this is Raoul Giudici from Europe. Regarding investment, which we see on our horizon, first of all, we want to be clearly selective. Volatility keeps being very high in Europe, but we have identified a clear strategy, and we want to focus on resilient businesses such as medical, for example. Electronics is going to be one of our priorities. As you may know, the European Chips Act is driving growth significantly, and we see many opportunities across all the territories. When referring specifically to carbon neutrality or decarbonizing, what we are seeing now more and more is actually a different concept, which is more about energy security. There is still a very high focus in Europe on energy.
But rather than being driven by decarbonizing, now the priority for most of the European countries and most of the European market industry segment is about energy security and making sure that energy is there, available, reliable, and cheap. We believe that through our applications, such as, for example, oxycombustion or also upgrading biogas into biomethane, we can play a very active role in helping our customers and, more in general, the European industry in getting a secure source of energy, while at the same time pursuing decarbonizing. We see this clearly. There are some risks which are associated with the macroeconomic environment, but we still see this as a promising opportunity for our business and for our growth across Europe. Thank you for your question.
Thanks very much for the elaboration. May I clarify a few points? As far as the U.S. is concerned, you are talking about a small separation unit. That means are you planning to improve the quality of the distribution channel as well as the distribution networks within the existing businesses? Is my understanding correct? If that is the case, I would assume that this will probably reduce the overall logistics cost in the States and also increase the barriers to entry. Am I understanding right? Could you please confirm? As far as the E.U. is concerned, since you are talking about the affordable energy transition, I will assume that the risk of impairment recognition is much more manageable compared to the U.S. case. Is my understanding correct? Could you please confirm?
First of all, Alan, could you please respond?
Sure. Thank you. This is Alan Draper. Regarding your question on the small on-sites, small on-sites have a couple different advantages. One, they allow you to delay maybe larger investments.
Yep.
If you switch a customer from a large bulk account to a small on-site account, then maybe allows you to free up capacity on the large ASU that may be tight on capacity. So it allows you to delay your investment a little bit and provide smaller investments. So it is maybe a little bit more efficient from a capital efficiency perspective. Regarding the distribution side, sometimes it is very beneficial from a distribution point. You will definitely reduce distribution costs, and usually there is a margin shift a little bit as a result of that as well.
Yeah.
That is one of our targets and strategies. So it is both freeing up capacity in the ASU as well as maybe reducing some costs in the model. Thank you.
Understood. Could you please confirm whether this small on-site includes liquefaction or not?
The smaller on-sites are gaseous plants.
Gaseous plant. Understood. Thanks very much.
Thank you.
As far as concerned with the risk of impairment and the exposure to cancellation of projects, Yamada-san.
Yep.
I don't see such a risk for our operations and business. Because first, as I said, we want to be very selective. What is also important to highlight is that the European industry, as you may know, is structurally different from the U.S.
Yep.
We don't see large projects for HYCO in Europe, and in any case, this is not really one of our priorities. Regarding green hydrogen, we believe that it is important we start building our expertise, but we don't see the opportunity of investing heavily in green hydrogen because green hydrogen keeps being not very competitive. As part of a European strategy, we see more and more the opportunity of using biomethane- as a very good alternative to green hydrogen because it is cheaper and also largely available. That is an opportunity which we see on our horizon. But again, investments are much smaller, and the risk of impairment is not there.
Very well understood. Thank you very much. I have good expectation. Thank you.
Thank you very much for questions, Mr. Yamada. Next. In chat, we received Q&A, and the secretary will read the question, and it is a question in English.
For Mr. Alan Draper. Please talk about the changes you want to implement at the U.S. operation now that you are the U.S. CEO. What are the areas that you feel have room to improve, and what KPIs do you view are most important to you? What are the areas of top-line growth that you see have the most potential midterm? Any room for M&A in the U.S.?
Alan, are you ready to answer all this?
Yes. This is Alan Draper. Overall, I've been in this position for about 50 days, and some of the things that we're already working on are making sure that we have better plant reliability. We do have a relatively aging fleet, so we want to make sure that we're investing in predictive and preventative maintenance and also coming up with additional new capital when that's required as well. I think reliability is one of the most important aspects that we have to work on. In regard to strategy, electronics is clearly a strategy for us. We're going to work with the team of the Nippon Sanso Corporation group in Japan, the center of excellence on the electronic side, and make sure that we grow the electronics business much more than we have in the past.
We've not had as many resources in that organization as we need, and we're resourcing up our organization to make sure that we can do more on the electronics side. In addition to electronics, we also see a good opportunity in aerospace. We do have aerospace customers today. It's a small portion of our business, but the United States, I think, leads the world in satellite launches and also in rocket launches. We're going to continue to try to focus on aerospace as well. M&A is definitely something that we're interested in.
There's always distributors that are looking to sell, and we'll always be an opportunistic acquirer. In addition to being opportunistic, we also knock on doors of distributors that we think would be a good purchase for us. They'd have a lot of synergies, and that they fit into our profile. We are looking at building our plant reliability, looking at electronics, looking at aerospace, and of course, we'll look at food and beverage and medical, which are also resilient markets. Then we'll focus on M&A as well. Thank you very much for your question.
Thank you very much. This is the follow-up question. Once again, in English, I'd like to read.
Is the profitability volatility that the U.S. has witnessed over the years, what needs to be done?
Alan, go ahead.
Again. Overall, the results of the volatility and the fluctuation in profitability is related to several aspects. First of all, our costs are relatively lumpy. What I mean by lumpy is at certain points, you might have to have turnarounds and outages. I think a lot of investors have referred to the fourth quarter of last year, the first quarter of the following year. We had some major fluctuation, and that was a result of timing of repairs and maintenance. We have to make sure that we're doing, I'll say, disciplined preventative maintenance, predictive maintenance, and also our productivity projects. We also have under-resourced the organization, so we have to continue to focus on the commercial side of things.
We have to continue to invest in our business and make sure that we have the appropriate staff so that we can grow in applications development and also into markets that we would like to invest in, such as aerospace as well as electronics. It is a combination of things that we have to make sure that we have relatively good maintenance profile, predictive maintenance, preventative maintenance. Also, we really focus on growing the top line. I am committed to growing our margins across the business. We are going to continue to do pricing, productivity, and I think we will get the business back on track in the coming quarters. Thank you very much for your question.
Thank you very much. Now, any questions from the audience? Morgan Stanley MUFG Securities, Mr. Watanabe please.
This is Watanabe from Morgan Stanley. Can you hear me?
Yes.
I have two brief questions. First, about the Japan segment. Somewhere I heard that with regards to the Japan segment, the low profit business portfolio is being revisited. Taking a list from your company in the Japan segment, which areas of the Japan business do you think you see room for improvement? As risks are engaged with competitors, and if you take a look at the Japanese industrial gas industry, do you think there is room for further industry consolidation? I want to hear a view on this point as well. That is my first question.
Thank you for the question. This is Mr. Nagata I will respond to this question. Low profit segment review. That was the main theme in the previous management plan. As written on material on the left-hand side. What is written on the left-hand side of the slide, for example, Astomos Group with them, we are working on the propane business, and this is the finance and accounting issue. JFE Sanso Center became a joint operation, no longer consolidated. A JPY 70 billion -JPY 80 billion decline in revenue is created and JPY 420 billion to-
There is a decline, but JPY 20 billion increase in profit. Business portfolio review, as a result of that, JPY 70 billion- JPY 80 billion, we have divested. We are focusing on main business instead of that. We are seeing growth in our main business of electronics and industrial gas. In the next management plan, rather than low profit businesses, we want to focus on strengthening profitability more. The low profitable transactions that we have, we have to drill down into them.
At the transaction and deal level, we have to be able to make improvement. That, we think, is in the phase we are in now. We have transitioned to this kind of a phase. About your second part of your question.
Nippon Sanso in Japan.
We are not intending to have our company proactively pursue industry consolidation in Japan.
Thank you very much. My second question is about the U.S. segment. Basically, business will mainly be in the U.S., but Latin America, including Latin America. Are you intending to expand business in Latin America? Are you intending to expand geographic footprint for the U.S. business?
Thank you for the question. Our company, we are a global company. We are starting to be recognized as a global company in that sense. Industrial gas, we want to be able to offer it as long as there is demand, regardless of geographic region. That is our concept. There are some regions where we have not yet advanced. Constantly, we want to pursue opportunity. Nippon Sanso Holdings will constantly pursue opportunity. Setting up the ASU from one and the cylinder filling plant, that is one way to expand.
The current situation is such that geographic areas that we do not have business in locally, we want to tie up with local gas companies or global gas companies. If they are already engaged in the business, we want to collaborate with such companies to do something. Another option would be to acquire such local or global companies. These are the global possibilities we are constantly pursuing. Latin America or Central America, what specifically do we have in mind?
[inaudible] I think I should mention the plans of Nippon Sanso Holdings. At the moment, we do not have any specific plans, but information network we have in North America. North America is, of course, geographically close to Central and Latin America, and there is a lot going on by the U.S. government at the moment. Just having that aside, physically, Latin and Central America happen to be close to North America, so we have to broaden our information collection network to constantly pursue possible opportunities there. That is what I want to mention. For example, not just in the United States, but Central or Latin America, the language used is Spanish or Portuguese.
In that sense, we need a human-to-human connection. Our European business is headquartered in Spain, so this connection, we think, is also important. The right timing to enter into a new geographic market, the quality of business, and what specific place we should enter into. We need to be able to constantly have information network to collect all of this appropriate information. These are the comments I have. Thank you.
I have one follow-up question to Mr. Hamada. Middle East. Do you have a similar concept visiting Middle East?
Thank you for the question. This once again, is a very difficult question. We say Middle East, but frankly speaking, petroleum, we think is the strongest impression we have when it comes to Middle East. There are issues in the Middle East, we hear a lot of news about them at least recently. There are various kinds of industries existing in Middle East related to petroleum. First of all, on-site gas can be supplied.
There is that opportunity, and there are industrial gas manufacturers already conducting business in the Middle East. Frankly speaking, at this point in time, 10 or 20 years or 30 years ahead, when we take a look at the distant future, should we enter into the Middle Eastern market? As of the end of the previous midterm plan, that I was responsible, including ASU and industrial gas, so it was difficult for us to consider the Middle East as a market to enter into. However, maybe on an export and import basis. Various chemical companies that are conducting business in the Middle East, meaning that standard gas. Various analysis that becomes necessary, that kind of business, we think constantly exists. For that, we have what we call standard gas business. One by one, the vessel or container business to be sold one by one, that kind of business.
With the more sophisticated level of chemical companies' business, they need higher quality standard gas. This is an area we want to continue to focus on, but it is not that we will be immediately entering into the Middle East. That seems difficult. The new midterm plan just started, and towards the end of the new midterm plan, it depends on what happens to the Middle Eastern conflict, but there might be some new developments on the horizon. This concludes my remarks.
Thank you very much.
Thank you very much. Mr. Watanabe, thank you for your questions. Next, SMBC Nikko Securities, Mr. Shintani. Once again, please.
Thank you very much. Just one point I would like to ask you. Earlier, Alan-san explained about the U.S. aerospace is the area that you would like to expand. That was the comment. Aerospace is indeed an industry with very large added value, but the entry, the barrier is also quite challenging. I know that is the area where the gas companies are trying to enter into. There may be a little bit of a business related to the aerospace. How big it is compared to the total revenue? In order to expand into the aerospace, if you have specific strategy to enter into aerospace, I appreciate. We would like to hear.
Well, if Alan happens to have the numbers, then I will ask Alan to respond for that part. When it comes to aerospace, naturally in Japan, we have aerospace business. For rocket launch, a space chamber to reproduce the outerspace environment and how the rocket performs in that environment. The oxygen or the hydrogen are also used for combustion. The aerospace is the area which uses a wide range of gases. Technology to make gas, to make the outerspace environment is a highly vacuum environment is needed. Not the regular level of a vacuum intensity. It has to be highly vacuum. To make the vessel for that, a container or to create the vacuum state. Not only to the airspace, but to create the cryogenic or the extremely low temperature environment. That is a potential related to air separation unit.
It is a part of the potential related to ASU, which is the vacuum. This is the side story, but Thermos and the vacuum. The Thermos is also based upon this technology. Considering this point, the U.S. and the aerospace industry may use the helium or oxygen or nitrogen. These are the well-known industrial gases. Other than that, to make the environment, the equipment and the installation, high level, the equipment installation is also needed.
In aerospace. For us to enter into aerospace business, that is the one technological edge that we can utilize. Of course, country by country, situation may be different. That is an area which is highly confidential. The U.S. operating companies, it is a U.S. company operating in U.S., but the owner is a Japanese company, Nippon Sanso Holdings. That part, how is it rated or evaluated in the U.S. business environment, particularly in aerospace? It is a little difficult to understand. Anyway, it is highly confidential, the business, but there are areas which are not that confidential, and we can take an initiative to make inroads into that part of the aerospace. That is one of the channels that we can explore going forward. Alan, if you happen to have the current information, please share that with us.
Thank you, Hamada-san. Yes, this is Alan Draper. Today, the aerospace business for Nippon Sanso Matheson is less than 2%, so less than 2% of our revenue. However, we already have customers in the space, three or four customers that you would recognize the name, are customers of ours. We obviously cannot discuss or communicate about who those customers are. Aerospace customers, they use nitrogen for blanketing, oxygen and hydrogen and helium for propellants, argon for welding.
They are using rare gases, so they are really a good industrial gas customer. In order to get closer to them, obviously, you have to have good relationships. We are always working with our salespeople, regional sales managers, and vice presidents to try to get into the customer to develop relationships. Then the key is really once you have the relationship, to show reliability, have good location, good ability to back up your location, and make sure that we are in the right location, because location means everything when it comes to rocket launches and also satellite launches. Thank you very much.
Thank you very much. I have been able to deepen my understanding.
Mr. Shintani, thank you very much. We are approaching the scheduled closing time, and we apologize. The next question should be the last question. We have received a question in chat. It is a question in English.
For Alan and Raoul. Volumes have been negative for three years now. Do you think this fiscal year we can see a cyclical recovery in volumes? What are you seeing so far in the last few months? Which industries and areas are you seeing green shoots? What are some areas that can still be drags?
Thank you for the question. In the short term, inclusive of the short-term situation, what we know so far, we would like to share with you. In the short term, it is difficult to forecast the short term as well. What to factor into or what not to factor into this fiscal year's guidance and mid-term plan, we had extensive discussion, as you mentioned before. The instinct, the sense that we have is, I will call upon Alan and Raoul to share with us the sense or instincts that they have.
This is Alan Draper. Thank you for the question. As you mentioned, volumes have been negative. In this upcoming fiscal year, industrial production, which is a better correlator than gross domestic product to our industrial gas sales, is supposed to be about 0.7% in that range this year, so a little bit less than 1%. That really should be something that we see on the manufacturing side. In the first month of the year, we are seeing a little bit of improvement in bulk business and also in the on-site, but we still see that the package and hard goods is weak. Then helium is showing a little bit of positive movement as well as a result of price increases. But overall, it's going to continue to be a tough year on the base business.
When you look at new projects that we brought online, we have two on-site businesses that are coming online or have come online recently. That would be the business in India, the hydrogen business, the HYCO business in NRL India, and also the business in 1PointFive, which is in Odessa, Texas. So that's going to help the on-site business have a pretty decent year. So that's going to give us some momentum, and then hopefully we'll do better on the bulk side as we did in the month of April. But overall, package and hard goods still remains relatively soft, and that's a large portion. That's 33% of our business. So package and hard goods still remain soft. Thank you very much for your question.
This is Raoul speaking from Europe. As far as concerned with the volume trend, what we are now seeing is a declining trend driven by macroeconomic scenario across most of the geographies and all lines of business, all industrial lines of business. On the other side, I'm glad to say that through applications, we've been investing pretty much in applications and also in terms of sales force and training our sales force. So through applications, we've been able to keep our volumes up, and we plan to do the same to be shoring our volumes across the new fiscal year by leveraging applications in the industrial business, referring to both bulk and package.
Where we see a growing trend, which we clearly want to leverage as much as possible, is, as I mentioned earlier, the medical business on one side, which is clearly driven by aging population and need for more services on one side, and on the other side, electronic business. There is where we see a growing trend, and last year we grew double- digit. We grew double digit in both medical and electronics, and we want to keep the same momentum also for the new fiscal year. So all in all, from a macroeconomic perspective, let me summarize. The trend in the market is negative, but we keep our volumes flat by shoring up demand through new applications while we see a pretty promising and growing trend in medical and in electronics. Thank you for your question.
[Non-English content] Thank you for the question [Non-English content]. Well, questions we were not able to take because of the limited time will be responded later. Now, we would like to welcome the closing remarks from CEO Hamada.
Yes, thank you very much for your participation. This is going to be the last earnings and the presentational meeting that I preside over. Thank you very much for your cooperation over the past five years. Thank you.
Thank you very much. With this, we would like to conclude today's earnings presentation meeting. Today's presentation will be made available on our corporate website IR page later this evening. If you have further questions, please feel free to contact with us. Thank you very much for taking the time to join us today. We appreciate your continued support.