Good afternoon, everyone. Thank you very much for joining the earnings presentation of Mitsubishi Chemical Group. We would like to start the meeting now. First, our CEO, Jean Marc Gilson, will give you greetings and the Executive Vice President, CFO, Yoko Nakahira, will give you operational summary for the first half of fiscal year 2022. We will have a Q and A session then and the total meeting will last about 60 minutes.
Before starting the presentation, please note that the presentation may contain forward looking statement, which are based on the expectations and information available now and are subject to risks and uncertainties. Actual results could differ materially from what is stated here. Today's conference call, including Q and A, will be posted on our website later. Now we start the conference. John Mark Gerson, please.
Hi, Arigato, Konbawa, Minasama. So good afternoon and good evening, and welcome to our Q2 of fiscal year 2022 earnings conference. So my name is Jean Marc Gilson. I'm the CEO of the Mitsubishi Chemical Group. And like As usual, let me make a few brief introductory comments before handing over to Naka Ira, Yes.
And she will follow-up with an in-depth review of our first half financial performance. A few comments first. So overall, the first half of fiscal year twenty twenty two delivered financial results in line with our forecast. But this was not Easy, and it was accomplished by our teams showing extreme discipline, A great ability to raise quickly prices and to react decisively to very difficult trading conditions. It must be noted that our teams delivered Best ever sales for the company in the first half of the twenty twenty two fiscal year.
Sales stood at 22,700 Pokuyen, about 20% higher than first half last year. It is worth noting that the sales Momentum from the Q1 continued in the 2nd quarter with a 5% Sequential growth versus the 1st quarter. All business segments recorded strong positive sales growth ranging from 28% For Industrial Gas segment, 2 7% for our Pharma business. The net Income attributable to the owners of the parent company was NOK 739 Ocu Yen. It was above our initial forecast, but was unfortunately 13% down compared to last year.
The difference Between record sales and the decline in net income was directly attributable to a combination of factors ranging from extremely high input cost, namely Energy and Raw Materials the continued lockdown in China A noticeable slowdown in our display segment, a very tough market and pricing environment for our MMA business and generally, cost inflations around the world. Despite our best efforts, we were not able to pass 100% of the cost increase to our customers. As we look Into the near future, we do not see many reasons for improved conditions in the second half. Accordingly, we have reduced our yearly forecast to a COI of 2,400 ocuyen. As you can imagine, we are doing everything in our control to push sales higher and our cost and expenditure down in the second part of the year.
We are also accelerating the implementation of our strategy forging the future and are confident in our ability to continue to deliver growth and to improve profitability when market conditions improve. Thanks for your attention, and I'd like to hand it over now to Nakaiya, CFO.
This is Nakahira from CFO. I would like to explain Operational summary for the first half of the fiscal year and the guidance for the year. Please jump to Page 4. In the Q2, the yen depreciation further advanced 139.4 to the dollar. In the first half, it's 100 and 35.3 yen Compared to last year, it is 23% cheaper compared to the initial rate, there is a difference of 14 yen The initial forecast was 120 5 So in the 2nd quarter, an after price was 81,400 yen the first quarter was 86 JPY1100 compared to that it's lower, but for the first half it is JPY 83,700 Year on year, it is higher by 65%.
Initial forecast of the price was 81,000 yen It's much higher than that, pressuring our operating income. In this business environment, in the Q2, we continued pricing activities. And as a result of that, sales revenue was 2,269,800,000,000 yen up 20% year on year. It was a record high for the 1st 6 months. Core operating income was 122,600,000,000 year on year, it was down 21%.
Material and fuel prices stay high, and we still maintain the initial forecast of 125,000,000,000 yen For the operating income, it was 118,400,000,000 yen down 23%. Income before tax with the financial positive income was 122,000,000,000 yen down 17%. Net income attributable to owners of the parent was 73,900,000,000 yen down 13% compared to the initial first half forecast of about 61,500,000,000 yen It is up 12,400,000,000 yen or 20%. Here is the sales revenue by business segment and core operating income. For the 2nd quarter compared to the 1st quarter, sales increased.
However, core operating income was down in all the segment excluding the sub segment In Performance Products, especially in chemical business, the demand slowed down Pet deteriorated and inventory valuation was much lower, especially petrochemical and carbon Contribution of inventory valuation compared to the Q1 was down 34,000,000,000 yen For the first half as a whole, ODR segment achieved an increase in sales revenue for the core operating income for the performance product. It was down 8% year on year Chemicals, down 63% Industrial Gases, up 12%. Healthcare was also up about 200%. Core operating income was down 33,500,000,000 yen year on year, and you can see the breakdown analysis here. Price difference was minus 4,000,000,000 yen.
As you can see on the right, Performance Products In this area, we promoted price transfer, and we achieved 17,300,000,000 yen price difference. But in price in Health Care, there was minus 3,500,000,000 yen because of MHI price revision. And Chemicals spread deteriorated, and we could not offset all the declines. Volume difference was minus 18,500,000,000 yen Especially in Chemicals, demand for MMA sharply dropped in demand. Petrochemicals demand also declined.
And the size of maintenance area impacted to give significant decrease, cost reduction is 15,700,000,000 yen For the year, we expect 32,000,000,000 yen and that is a 49% achievement. In the 1st quarter, The progress was 19%. So this is a big improvement. We optimized repair cost and business Exit and scale down and production line restructuring, those activities are in line with the plan. Already, we announced exit from melting fiber business and API Corporation stock transfer in Healthcare, all those activities are progressing According to the plan, they will be reflected in the second half.
And because of the lack of visibility of business environment, we need to further and make efforts to reduce cost. Adders, a decline of 26,700,000,000 yen And this is related to last year's alumina fiber business transfer and the difference from repair and maintenance scale and labor cost increase including the bonus and overseas R and D cost and SCA cost and FX impact. For the Performance Products segment, we have a decline of 3,500,000,000 yen Amina business transfer excluded them, we are able to have an increase from last year. Pricing activities are ongoing, not only material cost, but fuel price also to secure margin. We have worked very well.
Volume difference is related to delayed recovery in automotive sector demand. And in Q2 display demand is significantly demand declined. However, U. S. Market is relatively good In Semiconductor and Food Applications, through those areas, we try to minimize the impact.
Others include the impact from alumina fiber business transfer. For Chemicals, profit went down By 39,500,000,000 yen year on year, MMA profit was down 20,400,000,000 yen Petrochemicals down 17,000,000,000 yen Carbon down 2,100,000,000 yen For price deference, Master price went up by 65%. And overall, we worked on formula and price negotiation to achieve price transfer. And Bisphenol A and MMA spread deteriorated to result in the decrease of 18,000,000,000 yen For MMA, market price declined sharply. In June, price was $2,100 for ISIS Asia, which went down in September to $1600 putting pressure on the first half results.
We think we are hitting the bottom now, but we don't have clear visibility of recovery going forward. For volume difference, M and A demand got worse more than expected, especially the acrylic sheets For Construction and Displays and Clear Versions for Home Appliances had a sharp drop in demand. There was a decline, particularly in Europe and Asia. We reduced utilization rate to less than 60% And now to adjust production so that we can maintain cost competitiveness by each plant, We also work on controlling investment in repair and other costs. The decision for North America's investment announced the other They also postponed, which was in line with this effort.
In Petrochemical, we don't see strong automotive sector recovery And sluggish demand in home appliance and displays and impact of repair and maintenance size all reduced our sales volume. Inventory by the Asian gain was 9,500,000,000 yen in the first half, but the second quarter was much lower than the Q1. For the second half, considering the naphtha price and coking coal price Trajectory, we expect inventory valuation to be going to the negative direction. And for industrial gases, we deal with a sharp fuel price hike in all regions to promote price transfer. High fuel price and inflationary pressure will continue going forward.
And therefore, for the second half, we will prioritize making efforts in this area. For volume, especially Europe and HLC and Air Group contributing to increased core operating In income, cost reduction is also in line with the plan. On the other hand, in the U. S, labor costs and logistic costs increased Impacted by inflationary pressure, we need to make further effort for pricing and cost reduction. For Healthcare, it was an increase of 2,000,000,000 yen in income, NHI High price impacted and the air price difference was minus 3,500,000,000 yen For the volume There was contribution of 7,000,000,000 yen In North America, we launched Radicaba all of the formulation, which showed a great pickup more than expected.
And for domestic pharmaceutical product, key products, XERALA and DISPAL, those are showing good, good growth. Others in the negative territory is because of overseas R and D costing overseas due to The yen depreciation, the various litigation is still ongoing. Loyalty revenue is not included in our numbers. And for the Medi Cargo, we still have an issue for production and there is no contribution to the revenue and profit. Environment surrounding COVID-nineteen vaccine is changing, and the Medicago is having a new business plan.
And based on that, we will decide our future direction.
Consolidated special items amounted to net expense of 4,200,000,000 yen Loss and arbitration award in the U. S. 7.0 Ponsanto Holdings totaled 3,500,000,000 yen We also recorded several impairment losses related to health care and performance products. In terms of cash flow, Operating cash flow was net inflow of 93,200,000,000 yen Investing cash flow was net out Flow of 117,700,000,000 yen Free cash flow was net outflow of 24,500,000,000 yen Free cash flow improved quarter on quarter from net outflow of 39,100,000,000 yen in Q1. Still, cumulatively, for the first half, it resulted in a net outflow.
Negative impact of Cash flow from inventories largely came from the difference in inventory unit prices due to rising raw material costs. At present, we are working on the reduction of working capital, including operating receivables and payables as the most important management item toward the reduction target set for the end of the fiscal year. We are also implementing measures to improve cash flow, such as restraining capital investment and accelerating sale of assets. Financing cash flow was net inflow of 15,600,000,000 yen with effective foreign exchange changes totaling 16,800,000,000 yen Cash and cash equivalents amounted to 253,700,000,000 yen an increase of 7,900,000,000 yen from the beginning of the period.
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an increase of 430,300,000,000 yen year on year, of which 269,000,000,000 yen was the impact of exchange rates. Liabilities totaled 3,960,800,000,000 yen an increase of 231,200,000,000 yen Equity totaled 2,043,400,000,000 yen an increase of 199,100,000,000 yen Net debt to equity ratio declined to 1.34. Next, I will explain the revisions to the full year forecast for the fiscal year ending March 31, 2023. Assumptions for the second half are exchange rate of 145 yen to the U. S.
Dollar and naphtha price of yen 73,000 Core operating income in the first half was roughly in line with the previously announced forecast. For the second half, we are not likely to see recovery from the slowdown in display related demand in the Performance Products segment and the softening of market conditions and demand centered on MMA in the Chemicals segment. In addition, in the Healthcare segment, there are issues with the commercial production of COVID-nineteen vaccine. In light of these factors, we foresee that each level of profit and loss starting from core operating income to fall short of the previously announced forecast figures. Revenue said to be 2,455,200,000,000 yen in the second half and 4,725,000,000,000 yen for the full year.
This is an increase of 289,000,000,000 yen from the forecast announced in May. The weaker yen and the price pass through activities are the main drivers of the revision. Core operating income is revised to 1,117,400,000,000 yen for the second half at 240,000,000,000 yen for the full year, which is 35,000,000,000 yen lower than the May forecast and down 12% year on year. Operating income is 242,000,000,000 yen down 35,000,000,000 yen from the initial forecast and down 20% year on year. Earnings before taxes is revised to 234,000,000,000 yen down 32,000,000,000 yen from the initial forecast and down 19% year on year.
Net income attributable to owners of the parent has been revised downward from the initial forecast by 21,000,000,000 yen or down 26% year on year. This is the revised revenue and core operating income forecast by business segment. The segment with the largest revision in core operating income is Chemicals with 32,000,000,000 yen decrease, which includes the €30,000,000,000 revision in MMA. Under the continuing uncertain business environment, we will strive to improve our business performance through focused efforts on price pass through, cost reduction and reduction of working capital. We will also steadily progress on the growth of Performance Products, Portfolio Management, Petrochemical and carbon carve outs and cost structure reforms as set forth in forging the future.
Last but not the least, some comments on dividends. The company's policy is to pay stable dividends targeting a consolidated dividend payout ratio of 30% of the medium term profit level. In accordance with this policy, the Board of Directors resolved today on November 8 to pay an interim dividend of 15 yen per share, the same as the previously announced forecast for the fiscal year ending March 31, 2023. We are forecasting a year end dividend of 15 yen per share. We will continue
Now let's start Q and A session. Morgan Stanley, MFG. Watabe from Morgan Stanley. Thank you very much for your presentation. First, The question to Jean Marc Jolson.
This is a great opportunity. The first half you showed in line performance in spite Of the challenging business environment, you have made effort for cost reduction and price transfer. On the other hand, December last year, you explained forging the future and you have Strong against wind, including inflation pressure and you are accelerating structural reforms. You mentioned What are to be further accelerated cost reduction or exiting some businesses? Can you explain that first?
Thank you.
Thank you for the question, Watabe san. Yes, as you mentioned, We had 5 elements in forging the future last year. The first one to simplify the The organization has been done. You were asking specific question about cost And divestiture, I think both are really important for us. And in the upcoming meeting in February, we will detail into a lot more granularity The cost cutting that we are looking at and the status of the divestiture.
And on the latter, on divestiture, I really do not have anything to report today.
Thank you. The second question is Performance Products in the Q1 and the Q2, the profit is Flat and you must have worked very hard to achieve that sub segment 1 to 2, Q1 to Q2. And from the first Half to the second half, what are your assumptions? Can you explain that? This is a question to CFO Nakahira san.
First, from Q1 to Q2, The biggest negative factor includes display business, mainly films and molding subsegment, there was a negative impact. Additionally, a significant factor includes carbon business And the coal coking coal price went up compared to the Q1. In the Q2, the price went down significantly, and that is about minus yen 10,000,000,000 impact. For Petrochemical Business, there is a difference in inventory valuation, and those are some of the major Regarding the performance products, What are the positive change and negative changes from Q1 to Q2 in Performance Products? Okay.
So for the performance product area, displays, that's the biggest The factor films and moldings mainly that was much pressured. And regarding First half to the second half, we think recovery in display business would be rather challenging in this fiscal year, so we that's negative result for that. But outside that compared to the initial forecast, performance business would not have a significant negative results. So overall, it's not going to be much impacted. That is our forecast.
Thank you. Lastly, about Healthcare, maybe cargo was mentioned. And when there is a new business [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Plan, you will consider further directions you mentioned, but for the annual plan, the vaccine contribution is not included at all. And when do you expect to have their new business plan? When can you announce that?
1st, COVID-nineteen vaccine revenue contribution for this fiscal year Well, in the revised forecast, it's not included. The cause of the issue is being investigably gased, so the revenue contribution is Excluded from the second half and for the business plan revised business plan, we hope to have soon. But latest, sometime So in this fiscal year, we hope to share that information. Thank you very much.
Thank you, Mr. Watabe. Next, From Mizuho Securities, Mr. Yamada, please. Thank you.
Two questions. And I can ask another question on Healthcare, right? Yes. Okay. So it's 2 plus 1.
My first question Regarding MMA in the U. S, you decided to postpone that investment. The new alpha method to be implemented in the U. S, Does that include long term possibility of scrap and build? I think you were talking about improving the productivity over long term.
So has that thinking in itself changed? And would MMA be part of Carve out and maybe that is the reason why for that decision to postpone. Is there that strategic reason in the background? And under the current situation, you cannot you can't tell whether this could be profitable or not. Is that the reason?
So over a short term, I don't think construction cost is going up. So I would like to know the background to your decision to postpone this. Thank you. This M and A Investment timing, we decided to postpone this. This is in relation to Demand.
We just decided to just postpone it. It's not that we changed the strategy. The new alpha method that we have for MMA, we will continue to In order to maintain our leadership in MMA, we believe that is really needed. But looking at the Current demand is very weak. And looking at the overall supply and demand balance, we see oversupply.
And therefore, we decided that this is not the right time to make that investment. That is the biggest reason. Having said that, looking at the very current situation, the new alpha method, Your investments in Saudi Arabia, joint venture in 20142017, the operation started. So it took more than 3 years Before you could start the operation, so in terms of trying to fundamentally change the strategic Position of the U. S, I think you need to invest now.
So are you saying that in terms of the strategic advantage, you Are confident, but you decided to postpone anyway. Yes, that is correct. There are many uncertainties regarding the external factors. So by slightly postponing this, we thought it made a better sense management wise. Is it related to the fact that your leverage is not going down?
Or is it just a pure Business strategy decision, of course, we are looking at the overall financial position as well. I see. Thank you. My second question, Carbon. The coking coal price has gone down.
And so you are recording the loss on inventory valuation gain and loss. I'm afraid that can't be helped, but 6 point 4,000,000,000 yen difference, and you are recording the 800,000,000 yen loss. Still carve out, spin out possibility is still being pursued. Is that really feasible? I personally think that maybe you should postpone that a little bit.
What do you think? Well, regarding the carbon chemical business, The coking coal price has plummeted, worsening the price spread for us. We are impacted by that. But several years ago, we changed the strategic direction and decided to export And not kept it, but supplied to particular customers or rather make sure that we would not be affected by the changes in the Market prices fluctuations in the market prices. And as a result, we feel that our profitability is less affected by the fluctuations in the price market price as well.
In In other words, in terms of considering the carve out, we believe that this strategy makes sense. Looking at the results for the first half, there was almost no difference in Inventory valuation gain or loss. So return on asset seems to be low given the segment asset. But you don't see a problem there, correct? Yes, That is correct.
I see. Thank you. Thank you for those response. My third question on Healthcare Radikava Sales projection has been revised upward. ALS, the oral formulation being launched.
I understand do I understand that this is going very smoothly? And about inventory, do you understand correctly that there is no inventory building up in the market? In which case, what will be the growth rate projection for next fiscal year? This is about Radikava ORS. Thank you for your question.
The Radikava Oral formulation, of course, will contribute to improved quality of life of the patients. So we had been really expecting a lot from this. And in fact, it is doing much better than our anticipation, our forecast, resulting in our upward revision. Of course, There are patients who have been waiting for the launch of this product. So we cannot expect this momentum to continue.
But overall, we believe We can expect good growth. And Kobayashi san, I think, can add some comments on that. Thank you. Kobayashi from pharma. Thank you.
Injection versus oral formulation. Given that this is being administered every day, this convenience is resulting in acquiring more patients and 120 1,000,000 yen for this year and 200,000,000 yen not yen, but dollars. These are the growth that We are projecting. Okay, dollars 120,000,000 for oral formulation this year. So when we subtract that from last year's actual figures, it means that no decline in injection even considering the exchange rate factors.
So am I correct to understand that the injection is not going to be declined? Well, patients that are using the injection type will continue to use injection, whereas Those that will be using the oral formulation will be an increment. So over a long term, there will be a replacement. And we are expecting an increase in patients on oral formulation. So as a total, the sales are to go up.
So 41,400,000,000 yen And using the current exchange rates, I think we're talking about an increment of around 100,000,000. And so for this year, you're expecting this momentum to continue. Yes. Thank you.
Thank you very much, Mr. Yamada, next question? From Daiwa Securities, Ummebayashi san, go ahead. Thank you very much. From Daiwa Securities, I'm Ummebayashi.
My first question is pharma business. On Page 28, You have the comparison from the previous forecast. Sales has not changed very much and the core operating Impact of core operating is JPY 8,000,000,000 difference. And when I look At the numbers, the development sorry, development cost increased by 8 1,000,000,000 yen and that is pushing down the profit. It looks like that's the case.
So Page 29, Overseas, the sales, well, VAVI cover was covered already, And you have increased, but vaccine is lower. So this is how you end up with thinking. But Vaccine, COVID-nineteen vaccine is gone and this development cost increase And the profit is like this is down 8,000,000,000 yen Can you explain the relationship of those factors? So your question is for the second half and the forecast for the second half and what are our assumptions. Is that it?
No. May 13, you announced your plan shown on Page 28, And you have the guidance for the year announced today. The sales has not changed very much, but for overseas, Radikaba increased and reduced amount for COVID-nineteen. Therefore, the sales revenue number does not change very much. On the other hand, R and D cost increased by 8,000,000,000 yen and that is The impact in core operating income, this is a negative factor.
So the sales mix is not much influenced in the because of the increased R and D cost, it is pushing down the profit. Is that due to ForEx? Can you explain that relationship? Okay. First, as for the Healthcare business, We revised our performance revision and the biggest factor is COVID-nineteen vaccine.
That revenue is excluded from our thinking. That's the biggest factor. Totally, minus €8,000,000,000 but the expectation to vaccine was much larger than that amount. So the COVID-nineteen vaccine was excluded From our plan and Radigaba or domestic products, Priority products or key products are covering that decline or deficit. That is the overall relationship I see.
I understand that, but R and D cost increased by 8,000,000,000 yen Can you explain that? For R and D cost, As you know, there are overseas activities, and the FX impact Is a factor here like neuroderma and medical, those developments are overseas, so that Portion is increased. I see. Thank you very much. The second question Its Performance Products area, Polymers and Compounds.
In the first half, you had good result. In the second half, you have only 10,000,000,000 yen and You have 9,300,000,000 yen in Q2, but the second half profit is not going up. What's the reason here? Yes. 1st, Polymers and Compounds Business.
In the 3rd Quarter, there is concentration of scheduled maintenance and repair and volume was that is a very big negative factor That is included in this plan. And also polycarbonate spread Is there another factor? Those are negative factors in polymers and compounds. The difference between the first half and the second half can be explained by those factors. I see.
Thank you very much. And last question About performance of decision making of MMA, well, we can't say. Nobody can predict how the market price goes going forward. But for construction cost, while there are some inflationary pressures, and I Personally, you think construction costs are going to go up going forward? And maybe the Increasing cost may be more than you had thought.
Isn't that true? Well, for CapEx, maybe you try to Carry this out by borrowings and how do you do that? I wonder if you borrow some money and there's interest going up, you will have heavier burden. And so you are revisiting this plan or how the situation, can you explain a bit more? Yes.
Construction costs and so forth, yes, There will be some impact from inflationary trends. And on the yen base, of course, it is inflated. And how we fund this project? Basically, it would be done on local basis. And the important point for performance of decision making is For the short term, there is a change in demand supply.
And regarding visibility of recovery, we want to Be more confident for projections, and we hope to have flexibility financially. That's the biggest reason. Market prices and that those factors you mentioned, I don't think they are very much related. As Yamada san asked, the actual construction or the operation would be much far ahead in future. Sorry for my persistence in asking questions.
Well, that may be true, but maybe we can make investment where we can have quick return by phosphoning. So considering overall situation, we Decided Phosphon IC. Thank you very much.
Thank you. Next Question from SMBC Nikko Securities, Mr. Miyamoto. Thank you for the presentation. Minamoto from SMBC Nikko.
I have a question on MMA. Q2 market price and the operating rates, the utilization rates and what are the assumptions for the second half. And from Q1 to Q2, market price plummeted, but you were able to maintain the profit, which I think reflects your capability. So why is it that you did better than the market? And regarding 600,000,000 yen for the second half, can you talk about that as well?
First, about the market price. In Q1, dollars 2,100 from July, It continued to decline and in September, down to $1600 And then From there, we see a bottoming out partly due to seasonality. So 1600, we believe, was the bottom. So for Q3, the projection is $1700 Q4, dollars 1800 are our projections assumptions. And we would like to secure profitability in that environment.
But as you know, from Samak in Saudi Arabia To Europe, we are exporting to maximize the price spread. And overall utilization rates is as low as below 60%. But if you look closer, you will find that the utilization rate differs greatly from plant to plant. For example,
MKSO
hasn't resumed the operation yet for the lowest cost or the lowest productivity place, we have not yet resumed. Okay. Utilization rate for Q2 and projection for 2 second half. And so $1800 would be the average for the second half? Yes, or a little below that, I think.
How about the utilization rate? Right. Q2, 68 percent for second half projection is 63% Follow-up question. In Europe, Energy prices are soaring, affecting MMA market. And Castle is not operating, as you said, and the same is true for 2 other plants.
So over a medium to long term, the non operating period has extended. So I think the restart cost is going to be rather high. So is there a possibility that you're going to shut down the Castile plant? In the U. S, we are to make the investment.
So including that, We will take a global view in optimizing our production capacity. So it's not just CASEL. We'll be looking at our other plants to see what will be the optimal production scheme. We have not made any final decisions on anything at this point in time. But of course, We are looking at different possibilities.
The major items would be in terms of the production process method, ACH method to ethylene, that shift is taking place. So we would like to make decision along that shift. I see. My second question is on petrochemical, 2,800,000,000 yen 2nd quarter. And for second half, you're expecting 15,500,000,000 yen in core operating income.
So looks like this jump up is going to be a rather challenging factor. So what will be the factors that give you confidence that you can make an improvement towards the second half. First, for petrochemicals, The scheduled maintenance and repair in the first half, especially in the second half or the second quarter, There were many projects and So change in that would make a lot of difference. And in terms of the inventory valuation In loss, Q3 negative is being projected. But In terms of volume, we expect improvement.
And for some There is, especially in relation to polyolefin, we are expecting improvement in price spread. I see. So maintenance and repair, lots of concentration in Q2 or Q1, I think. Am I not right? You are correct.
It was concentrated in the Q1. So I don't think that will be a factor for improvement in second half. So do I understand That polyolefin recovery will be the major factor. Yes, for the maintenance and repair, there were some factors remaining in July as well, But price spread difference is a major factor for polyolefin. I think that will be the biggest factor.
I see. Thank you.
Thank you very much. Miyamoto san. Next question? From Nomura Securities, Okazaki san. Go ahead.
Okazaki from Nomura Securities. I have two questions. The first question related to the prior questions. Polymers and compounds, Q1 to Q2, the profit increased and there is upside to the forecast what's the background is So in all, or EVOH maybe is related, can you explain that in the second half? Because of the scheduled maintenance, the number will be lower.
But can you explain the demand trend for key products? Yes. For polymers and compounds increased profit projection, our performance polymers price Difference will improve in solenol last year. We had a trouble from North American supplier, but that's not a factor this year. So the volume improved.
That is a significant factor. Especially for Sonal, The volume of sales In the second quarter, Compared to the same period last year, there was an increase of more than 10%. So there was a significant improvement. So now in the second half, we'll continue to be good business wise. Yes, We expect the Q2 to be very good.
The second question, Performance Products and for the key products, what's the outlook for the second half and OPL and also carbon fiber and battery materials. Regarding those 3, what are volume trends for Q2 and the second half? Can you For OBL Film, We have we think it could be challenging, especially in the second half Compared to the prior year, maybe there is a decrease of about 20%. On the other hand, for Carbon Fibers, In the first half, it was very good. We had good growth.
And in the second half, we Think there will be an increase of about 20%. About battery materials. Yes, for battery materials, it would be flat from last year. That was also the trend in the Q2. Yes, that's right.
Thank you.
Thank you very much. That was Okazaki san. That concludes our Q and A session. And now I give the floor to Nakahira san for the closing remarks. Yes.
Q2, We are focused on implementing the Forging the Future measures. There were some external factors That negatively affected us. But in terms of price, we had discipline and capability being strengthened. And regarding the cost control, we were able to make a progress as well. For second half, external Environments are expected to continue to be challenging, but we will focus on what we can control.
I ask for your continued support and understanding, and thank you very much for participating today. Thank you. We will be archiving today's conference call, So you can visit and watch them repeatedly. Thank you for your participation.