[Foreign language]
Ladies and gentlemen, thank you very much for joining us. For Mitsubishi Chemical Group's earnings briefing, we will begin the briefing for Q1 of FY 2025. We will begin with a presentation of the results by our CFO Minoru Kida. We will take questions from the participants after the presentation. We have allocated 60 minutes for the whole of the meeting. Before we begin, we have a message to the investors. Today's briefing may include forward-looking statements based on information available to the company at the current time. They are all subject to uncertainties and risks. Investors are advised that actual results may differ from such forecasts. Please also be aware that this briefing will be recorded and made publicly available later on our website, including the Q&A session. With that, we will begin the presentation and this is our CFO Minoru Kida.
[Foreign language]
Good afternoon. This is Kida speaking.
Let me present results for Q1 FY 2025. First on the summary slide. The business environment during the first quarter of fiscal 2025 generally remained weak due to the uncertain economic situation reflecting the impact of U.S. tariffs, while display-related business continued to be strong based on the effect of subsidy policy in China and businesses related to semiconductors, barrier packaging, and other applications also remained firm. Core operating income of chemicals for the first quarter of fiscal 2025 came to JPY 11.6 billion in profit despite the accumulation of cost reduction effects through structural reforms and rationalization efforts in each business as well as an improvement in volume even in an uncertain operating environment.
Core operating income decreased 28% year on year due mainly to a deterioration in price gap, a decline in market prices for MMA monomer in addition to the recording of an inventory valuation loss in tandem with lower naphtha prices. Net income attributable to owners of the parent for the group on the whole decreased 51% year on year due mainly to a decline in net income of the pharma segment at the discontinued operation. Core operating income of the chemicals for the first quarter of fiscal 2025 was 47% against the first half forecast, while market prices for MMA monomer remained lower than the initial forecast, display-related demand in specialty materials exceeded expectations and price gap improved in each business. Consequently, there has been a progress overall toward achieving the first half forecast announced at the beginning of the fiscal year for the group as a whole.
Proceeds from the transfer of Mitsubishi Tanabe Pharma Corporation or MTPC are expected to be recorded as scheduled in the second quarter. The forecast for the full year remains unchanged from the initial forecast. As for dividend forecast, we also maintain the initial forecast of mid-year dividend of JPY 16 per share and an annual dividend of JPY 32 per share. We will continue to rapidly implement initiatives aimed at portfolio transformation and profit improvement based on the three criteria for business selection and three disciplined approaches in business operations under the guiding principles for our business operations in the Medium-Term Management Plan 2029. Let me now explain the consolidated statements of operations. For Q1, the average exchange rate was JPY 143.8 to the dollar, with the yen stronger year on year. The price of naphtha averaged at JPY 66,600. That was down 16% year on year.
Sales revenue came to JPY 880.7 billion, down JPY 136.3 billion year on year. Of the decline, foreign exchange accounted for JPY 38 billion, sales prices JPY 23 billion, volume JPY 19 billion, and business restructuring JPY 56 billion. This was the largest contributor. Core operating income came to JPY 56.6 billion, down JPY 7 billion from a year before and 47% against the first half forecast that we presented in May. We'll come to this later. Special items came to a net + JPY 4.3 billion, up JPY 700 million from a year before. Operating income came to JPY 60.9 billion. Income before taxes JPY 50.2 billion. Net income attributable to owners of the parent came to JPY 19.6 billion, down JPY 20.1 billion from the same period last year. Let me now look at the revenues and core operating income by business segment. For specialty materials, revenue decreased 6% year on year, but core operating income increased 23%.
Revenues decreased JPY 16.2 billion year on year due to the sale of business and other factors. As a result of steady progress in structural reforms in addition to a decline in raw material prices, core operating income increased JPY 2.6 billion year on year. Strong demand for display-related and semiconductor-related products and barrier packaging applications led to a favorable start. This is led by advanced films and polymers and advanced solutions for advanced composites and shapes. We are expediting structural reforms in the loss-making carbon fiber related business for MMA and derivatives. Revenues was down 18% year on year. Core operating income down 65% reflecting the decline in MMA monomer market prices since the second half of the previous fiscal year. For basic materials and polymers, revenue was down 30%, but core operating loss narrowed by JPY 3.5 billion.
For materials and polymers, revenue decreased significantly due to the decline in naphtha prices as well as the impact of the transfer of terephthalic acid business in Indonesia in the previous year. Core operating income decreased only by JPY 1.8 billion. For the carbon products, revenue decreased by JPY 50.9 billion as a result of the decline in coking coal prices and the impact of the transfer of Kansai Coke and Chemicals in the previous fiscal year. The deficit narrowed by JPY 5.3 billion as inventory valuation improved by JPY 2 billion and the effects of structural reforms were realized. For chemicals business, core operating income decreased by 18%, or rather sales revenue was down by 18% and core operating income decreased by 28%. Year on year, carbon products and specialty materials business improved steadily. The chemicals business as a whole deteriorated due to the decline in the MMA market.
Industrial gases revenue decreased by 4% and core operating income decreased by 5% year on year. Let's look at the JPY 7 billion year on year decrease in core operating income. A price gap difference had a negative impact of JPY 4.3 billion. This includes a negative impact of foreign exchange by JPY 4.6 billion. Excluding the impact of foreign exchange, the price gap difference was negative for MMA and derivatives due to a decline in market prices while the difference was positive for polyolefins. Under basic materials and polymers, the year on year volume difference was positive by JPY 500 million. The impact was negative for industrial gases but positive for chemicals. There was improvement due to reduced scale of scheduled maintenance and repairs for basic materials and polymers and MMA. Cost reduction effect increased year on year by JPY 11.5 billion across businesses under both industrial gases and chemicals.
Others had a negative impact year on year by JPY 14.7 billion. Inventory valuation had a negative impact of JPY 11.3 billion mainly for materials and polymers due to the decline in naphtha prices. Let's now discuss further details by segment. For specialty materials, core operating income increased JPY 2.6 billion year on year. Sales volume had a negative impact of JPY 1.1 billion. For advanced solutions, the price gap factor improved as we managed to maintain or raise sales prices for semiconductor-related products and other products. However, that was not the case for advanced composites and shapes due to the change in sales mix and the continued deterioration in the competitive environment. For pressure vessel applications, volume had a positive impact of JPY 700 million. For advanced films and polymers, the volume factor improved mainly due to increased capacity utilization and sales of Soarnol for barrier packaging applications.
Demand for polyester film and OPLFILM for display-related applications remained strong as high capacity utilization was maintained at our users thanks to Chinese government subsidies for advanced solutions. The volume factor declined as demand came down for electrolytes for EVs mainly in Europe and the U.S. and decrease in sales volume for display-related materials for advanced composites and shapes. Sales volume was almost flat year on year in FY 2024. Carbon fiber and composite business posted core operating loss of JPY 10.2 billion. We are expediting the review of our production structure and sales portfolio to improve profitability. We have already decided to suspend operation of our large tow production facility in Hiroshima and to reduce production of regular tow in the U.S. in 2025, and we recorded associated impairment loss in FY 2024.
We will steadily improve profits by reducing production and sales of wind turbines and pressure vessels or applications thereof whose profitability has deteriorated and focusing on high value-added applications such as high-end sports, aircraft and defense, and on next-generation mobility businesses. At CPC in Italy, cost reduction benefits increased year on year by JPY 2.5 billion reflecting the effects of rationalization such as structural reforms and review of production sites in each business.
MMA and derivatives posted a year-on-year decrease in core operating income of JPY 7.1 billion. The price gap worsened by JPY 10.5 billion. Although the price gap for coating additives improved, the market price for MMA monomer fell significantly year-on-year and the spread narrowed. The sales volume resulted slightly by JPY 1.6 billion year-on-year due to factors such as the reduced impact of periodic repair of MMA monomer in the Asia region. Basic materials and polymers saw a JPY 3.5 billion year-on-year reduction in deficit. The price gap was a + JPY 11.5 billion in materials and polymers. The impact of the timing difference for revision of polyolefin sales price and the ability to maintain sales prices at a relatively high level during the naphtha price decline contributed to the profit improvement in the carbon products business.
The reduction of production capacity in Kagawa was completed and unprofitable transactions based on market price were reduced, resulting in an improvement in the price gap compared to the previous period. The sales volume in the materials and polymers was a + JPY 1.7 billion due to factors such as the reduced impact of regular maintenance. The impact of cost reduction was JPY 1.9 billion, reflecting the cumulative effect of fixed cost reductions in materials and polymers and the reduction of production capacity in the carbon products. The other difference of - JPY 11.6 billion includes a deterioration of JPY 11.5 billion in inventory valuation losses. Industrial gases posted a year-on-year profit decline of JPY 2.4 billion, although there were cost reduction effects from initiatives such as productivity improvements being promoted in each region. Profit decreased year-on-year due to the impact of foreign exchange and a decline in volume. These are special items.
In the first quarter, special items amounted to JPY 4.3 billion, which is on par with the same period of the previous year. We recorded a gain on business transfer of JPY 8 billion from the transfer of the real estate business and property of service company Dia Rix Corporation to a party outside the group. On the other hand, we recorded a loss of JPY 1.8 billion from the implementation of structural reforms, including those related to the carbon fiber business in special retirement payments. In addition, we have recorded expenses of JPY 1 billion related to the transfer of the real estate businesses as well as various expenses related to the shutdown of common facilities. This is the cash flow statement. Net cash provided by operating activities was JPY 60.2 billion.
Cash flow from operating of receivables and variables was JPY 18.3 billion and cash flow inventory was -JPY 0.4 billion, resulting in a total working capital inflow of JPY 17.9 billion. We will continue to manage working capital to improve ROIC in its business. Net cash used in investing activities was JPY 35.8 billion. Cash flow from CapEx was -JPY 63.9 billion and growth investment projects and specialty materials are progressing smoothly, such as capacity increase of CBC and delay for carbon fiber composite materials and that of Soarnol in the U.K. for barrier packaging applications. Net cash provided by sales of assets was JPY 7.8 billion and investment loans etc. was + JPY 20.3 billion. In addition to income from the transfer of non-core business such as real estate related business of Dia Rix, we recorded income from the sale of cross shareholdings and non-residual assets. As a result, free cash flow was JPY 24.4 billion.
Financial cash flow was - JPY 38.7 billion. This is the consolidated statement of financial positions. Total assets amounted to JPY 5,840.6 billion, a decrease of JPY 54 billion from the end of the previous fiscal year. Compared to the end of March 2025, the yen depreciated against euro resulting in an increase of approximately JPY 34 billion due to foreign exchange. On the other hand, trade receivables decreased by approximately JPY 56 billion due to decline in naphtha prices and periodic repair in the first quarter and fixed assets decreased by approximately JPY 13 billion due to the sale of businesses including the sale of Kansai Coke and Chemicals Company . Net interest-bearing debt increased by JPY 65.8 billion from the end of the previous year, the net D/E ratio worsened by 0.05 points to 1.11 from 1.06 at the end of the previous fiscal year, partly due to a decrease in capital balance from the share buyback.
The funds from the transfer of Mitsubishi Tanabe Pharma are coming in as scheduled in the second quarter, so we expect to see an improvement toward the end of Q2. On this page we would like to supplement the trend of core operating income from the Q4 of FY 2024 to Q1 of FY 2024 and the direction toward Q2. Core operating income for the first quarter was JPY 56.6 billion, an increase of JPY 18 billion compared to the fourth quarter. The forecast for core operating income for the first half of the year announced in May is JPY 121 billion and the progress rate as of the first quarter is 47%.
Although the MMA market is weaker than initially expected, the group as a whole is progressing in line with the first half forecast of JPY 121 billion due to a stronger than expected demand for display-related products in specialty materials and improvements in the price gap in each business. Specialty materials improved by JPY 23.4 billion to JPY 14.1 billion in the first quarter from a loss of JPY 9.3 billion in the fourth quarter of the previous year. In the fourth quarter of the previous year there was a one-time loss of approximately JPY 16 billion including an impairment loss of JPY 12.9 billion, advanced solutions and the impact of year-end closing adjustments and advanced composites and shapes in addition to the elimination of these one-time factors at the end of the term.
Demand for polyester films and OPLFILM for displays remained firm in the first quarter and cost reduction effects from the progress of structural reforms in each business including carbon fiber also contributed to a significant improvement. Regarding the second quarter, the display market has entered an adjustment phase due to the backlash from the high operating rates and panel manufacturers that have continued since the previous year, and as a result demand for our display-related products including polyester films and OPLFILM is expected to soften on sale. Demand in the automotive sector has also softened due to the impact of U.S. trade policy and we expect profits to be weaker than the first quarter mainly in advanced films and polymers.
MMA and derivatives posted a profit increase of JPY 1.1 billion from JPY 2.8 billion in the fourth quarter of the previous year to JPY 3.9 billion in the first quarter of the current year. The Asian market price for MMA monomer fell from $1,582 in Q4 to $1,430 in Q1. However, some sales transactions in Q1 still reflected the market price of the previous year, so the price gap deterioration was not as severe as the market price decline. Also, reduced impact of regular maintenance resulted in slightly higher profit. Coating additives business also performed at the same level as in the fourth quarter, although performance varied by application. In Q2, we believe a decrease in profits is unavoidable due to the weak MMA monomer market.
However, compared to past market crashes, we expect the price policy effect of the expanding cost-linked pricing formulas to provide a certain level of support. Basic materials and polymers remain generally flat with a loss of JPY 3.6 billion in Q1 compared to a loss of JPY 3.4 billion in Q4 of the previous year. Materials and polymers deteriorated by JPY 3.8 billion despite improvements in the price gap for polyolefins and elimination. The impact of the concentrated Iran expenses in Q4 was due to a worsening of inventory valuation losses and the impact of periodic repair at the Okayama plant. In Q1, carbon fiber products improved by JPY 3.6 billion due to the reduction of unprofitable transactions and cost reduction effects associated with the reduction of production capacity.
In the second quarter, we expect further profit improvement in materials and polymers due to the reduced impact of periodic repairs and in carbon fiber products due to further improvement in price gap. Industrial gases profit decreased by JPY 3.6 billion from JPY 48.6 billion in Q4 and FY 2024 to JPY 45 billion in the first quarter of the fiscal year. Due to the impact of foreign exchange rates and decrease in sales volume in the U.S., we expect the business to remain firm in the second quarter. This concludes my explanation.
[Foreign language]
Thank you. Kida-san. We will now take questions from the investors. Let's take the first question from Daiwa Securities . Umebayashi-san, please.
[Foreign language]
Good afternoon, this is Hidemitsu Umebayashi from Daiwa Securities . Thank you very much for the presentation. First, I'd like to ask a question about specialty materials. This is actually recovering more than I had expected. That's my impression. In Q2, if you do a subtraction, that would mean that the core operating income is down. It's probably just that Q1 is actually stronger and that the first half would probably go up. What about the films and automotive? There are some concerns. Sorry. Optical films and automotive could be a concern. If you could perhaps provide some additional details about those three sub segments.
[Foreign language]
Thank you very much for your question.
With regard to specialty materials, we will actually feel relieved to hear statements like that for specialty materials rather than stereo manual. For specialty materials, we do understand that it's still weak, but it's now on the growth track again. That's how we feel on the ground. With regards to Q1 to Q2, how things would change. With regards to specialty materials, we actually have quite good confidence also for display application. As I mentioned earlier, we are getting into an adjustment phase and panel inventory levels are high, so the flow of goods is slower. With regard to displays, when we were formulating the plan, we were anticipating that we would go into an adjustment phase. In that sense, Q1 results are actually stronger than initially expected. Going forward, we will probably come in line with the initial expectation.
For specialty materials as a whole, and particularly for advanced films and advanced solutions, we will probably trend as was indicated initially. If you think about carbon fiber and composites, we are actually seeing some benefits of rationalization measures from Q1. As is described in the material, there's some work left to do. With regard to price revision, we've been talking about this from before, but downstream, the balance between downstream and upstream capacity, there has been a gap and we may need to make sure that the upstream capacity is aligned with the downstream capacity. In that sense, we think we have made good progress and we will continue our efforts so that prices can be raised. Raising prices obviously involves improving the product mix, meaning shifting more to high-grade, high value-added products.
[Foreign language]
Thank you very much. My second question is about carbon products.
You may have touched on this, but from Q4 previous year to this quarter, I think your losses were almost halved. Could you explain why that happened? Q2 would probably turn profitable. Would that happen in Q2, and are there any particular measures you are taking to make sure that you turn profitable? Thank you.
[Foreign language]
With regard to Q4 to Q1 for carbon products, there is an improvement by JPY 3.6 billion, of which JPY 400 million would be inventory valuation. That was negative, so in reality there was an improvement by JPY 4 billion. As I mentioned, compared with the same period previous year, we have this improvement of JPY 5.3 billion. Excluding the inventory valuation, that's worth JPY 3.3 billion in improvement. That's probably because our measures are bearing fruit. We announced reducing the number of hook ovens and it takes some time.
Once in April, we were able to actually close down 100 ovens. The impact or the benefits will only really clearly be shown in numbers probably in the second half of this. On an apple-to-apple basis, we have actually improved quarter on quarter and we will also need to look at changing the price or terms of trade and price formula. We don't want to just sell against the Coke market price, but we would like to turn into a more tolling business model. We will charge for the coking operations and that would be our new business model. Are we getting the full fruit or benefits of those measures as initially expected? Maybe not 100% to be very honest. For example, the customers may have placed orders and then later canceled that.
With regard to the carbon products, it's a little difficult, tricky because one boat will have this load of 40,000 tons. It's not like the Kuroneko Yamato type of parcel delivery for the homes. If there's a sudden cancellation, you will have to find a destination in the market and then it will be priced at market prices. We are not getting 100% of the financial benefits we expected, but we are actually getting closer to that. The impact of repricing or switching to the formula based pricing, the benefits are really coming in and whether we can turn profitable in Q2, to be very honest, we probably won't be able to get a break even in Q2. We will probably have to wait until the second half.
By Q4 we would definitely be in profitable territory and we hope that at least in Q3 hopefully we can actually turn profitable.
[Foreign language]
Thank you very much for all that.
[Foreign language]
Next question. Morgan Stanley MUFG, please unmute yourself and ask your question.
[Foreign language]
I am Watabe from Morgan, thank you very much. Regarding MMA, earlier you said that it's not down, it's the market price and the reason is that you still have the price from the previous year remaining. Traditionally, the ISIS and quarter profitability I think showed some similar trends. Can I assume that formula link impact is starting to show? Also, you talked about the regular maintenance as one of the reasons as well. Because MMA market price is not really bottoming out, I wonder how you look at the market prospects going forward. Thank you very much.
[Foreign language]
In short, the cost link formula impact, fortunately, it's not as large as we hoped for. As you know, there might be some differences in the first quarter.
Compared with the first quarter previous year, MMA, last year ISIS was about $2,040 and this year in first quarter it's about $1,240 or so. I think that's a level meaning that there's a difference of about $800. On the other hand, the feedstock price is also coming down. In terms of spread, it's about like $300 or $700 less drop. If you calculate the amount that we are processing, you can calculate the impact of the spread, but honestly speaking, the impact of cost link formula would amount to about $1 billion because it's pretty much determined by ISIS still. In China, it's not even ISIS. We still need to negotiate on a case by case basis. In China, promoting cost link formula is not easy is my feeling. Asia, other than China, to what extent we can ask customers to accept cost link formula.
Even with ISIS, we want to set some kind of floors and how much we can do that is the key. In terms of how we look at the market, we believe it's quite difficult to be honest. Including petrochemical products, the chemicals in China, the trend is I think changing. For example, last year MMA manufacturers, when the prices go up, they will start running the plants. When there's an overflow of supply, they would stop the operations. Recently, those manufacturers in China are not really suspending operations. This does not go only for MMA, it goes for ethanol and other products as well. This is my personal view, but I think refinery crackers, we need to look at their operations overall and then I think they want to probably defend this.
[Foreign language]
I think state-run plants will probably try to run as much as they want, is kind of the feeling that I get. Based on this backdrop, I don't think the market will pick up so soon. What can we do in this kind of environment?
[Foreign language]
For us, market that is relatively attractive, like North America or India? We need to think about the global allocation. I think we need to really look at the global market and see where we should do our operations. That would be one of our kind of short-term measures that we can take on that point. In the second quarter, you said you cannot avoid the red ink considering the current market price. I'm not sure if we cannot avoid the loss. This is not something that I can say clearly at this point.
We believe that profits will go down versus the first quarter.
[Foreign language]
For materials and polymers. Aside from the impact of inventory, I think it's getting better because the spread of polyolefin is improving. Are there any other reasons?
[Foreign language]
The spread of polyolefins, we've been able to maintain that this quarter, I would say. How about from the second quarter onwards? In the first quarter, Okayama is in the midst of periodic maintenance and we believe that the utilization will go up. Basic materials and petrochemicals other than polyolefin, like C2 derivatives, C3 derivatives, you talked about MMA, but it's still kind of soft is what we feel. Of course, we're trying to come up with different measures like phenol. We could reduce the capacity next year. That's something that we could do and think about, you know, how much we can keep up with the polyolefin would be the key.
[Foreign language]
We just talked about China anti-evolution from government. How do you see this? This is my final question.
[Foreign language]
This is quite difficult. We are trying to also approach the government officials. I think the tide is starting to change. I don't think we can do just business as usual. We need to think about what we can do differently. I think we need to act quickly, not just thinking alone. We need to think about how we can reduce the time difference as well.
[Foreign language]
Thank you very much.
[Foreign language]
Thank you very much. Let's go to the next question from Mizuho Securities, Yamada-san, please.
[Foreign language]
Hi, Yamada speaking. Thank you very much for the briefing. We were talking about basic materials and polymers based on Watabe-san's questions and my question was mostly answered. With regard to materials and polymers, you talked about inventory valuation and that in Q2 the negative factor will be gone. In Q2 you are not actually so positive about the outlook for operating income increase excluding the cost-linked pricing formulas of polyolefins and C2, C3 derivatives. If you're assuming that that will continue to be weak, in addition, do you have any other downside views? With regard to carbon products, we understand that you still have. It's difficult, but with regard to materials and polymers, they are doing well. Would that make up for carbon products' negative part? How do you actually see the total coming? Thank you very much.
[Foreign language]
I heard you sneeze. I hope you don't have a bad cold. Please take care. Now, with regard to basic materials, we're still not at a place where we can say we are safe and confident. With regard to carbon products, we are implementing various measures and the measures are actually bearing positive fruit at a very high probability. One target is to turn this profitable by the end of this year. This is also a requirement for this business to survive for us. In Q2 and Q3, as time goes by, we would obviously closely monitor the situation. If we cannot see the likelihood of the business turning profitable by the end of this year, we will probably need to make more difficult decisions. With regard to basic materials, polyolefins are currently doing well.
They are performing okay, and this will probably be able to hang in there for a while. With regard to C2, C3 derivatives or acrylic, etc., naturals, we will need to look at those products and how much recovery we can see. Recovery appears to be quite challenging given the situation around the Chinese crackers. It's not really about domestic demand, but it's more about derivatives coming in from the outside markets. If that's the case, we will probably need to think about additional measures. Towards the second half, we are expecting some weakness. The question is how much we can make up for that by other measures like cost control. Looking at our capacity, production capacity, or maybe being cleverer about the production process, et cetera, we are looking at all aspects. That's the situation we are in currently.
[Foreign language]
With regard to C2, C3 derivatives, assuming the situation doesn't change for them in Q1, the inventory valuation loss is - JPY 8.1 billion for materials and polymers. Half of that would be actually resolved by formula pricing and the time difference, but then there will probably be about JPY 4 billion. If the market is flat, you probably wouldn't have to worry too much. Do you actually have other worries or do you not have any other downside factors?
[Foreign language]
I don't think there's anything else. For materials and polymers, we had some maintenance scheduled. Maintenance and repair will be gone, so that means Q2 can go up for that. Therefore, we can be quite confident about Q2 being higher than Q1. This is Kashima and that would probably account for JPY 3 billion. Okay. Oh, actually Okayama. Oh, it's Okayama. Oh, so that's actually larger. Thank you. Sorry about that.
[Foreign language]
Actually, I have another question. Advanced composites and shapes. In Q1 you posted a lot larger than I had expected. Earlier you mentioned carbon fiber and composites and you talked about production capacity. Right. Sizing in addition to the CPC operations, trying to realize more sales growth and business expansion. Would the first half come in line with all those measures? Additional follow-on question, if I may. The transfer of MTPC, was that as of 30th of June, or rather 1st of July?
[Foreign language]
1st of July.
[Foreign language]
Thank you. I will start with the easy question. It's the 1st of July for MTPC. Okay, thank you very much. I thought it was the end of July.
[Foreign language]
We discussed this as a cash flow for this JPY 510 billion that was not received as of the end of June.
With regard to carbon fiber for this year, we are seeing the benefit of personalization upstream. As I mentioned earlier, we talked about capacity that we are looking at. For example, in the U.S. we had four lines in two sites, but one for regular tow , we will stop it in full and another site will have some lines stopped. This was actually decided in the previous year, so we actually took some impairment in the year before. We may not have explicitly explained this here in an analyst briefing like this, but if you look at our report, securities' report in detail, we did discuss the impairment loss in the U.S. People who have read those, all the lines, may have actually expected that. In Q1, we've already had a benefit of fixed cost reduction in about the amount of JPY 1 billion.
The stoppage of the facility in Japan was only announced recently. For the time being, this large tow capacity will continue to run. In the U.S., we've already stopped the part of the capacity that we intend to stop. We are actually going to see the impact and are already seeing the impact in Q2 as well. We also talked about CPC. We also want to increase more about high-end cars, and that's a little slow, but some of the OEMs have actually given us some orders or order forecasts. Some of the makes that intended to use our products are not selling as expected, so we probably think about that. With regard to CPC, we will need to actually look at the existing businesses and see weaknesses.
[Foreign language]
All right, thank you very much for the answers.
[Foreign language]
Next question. SMBC Nikko Securities, Miyamoto-san, please unmute yourself.
[Foreign language]
I am Miyamoto from SMBC Nikko. I have two questions as well. First question regarding your management policy measures. Three months ago you said that you have three discipline approaches for business operations. You said that you expect profit increase of JPY 5 billion, so JPY 29 billion from the policy, pricing policy and so forth. You said that the impact is not really generated in the first quarter so much, but now MMA , carbon fiber and so forth. I want to understand the current progress against this plan.
If you are behind this plan and on page three you talked about MMA market is down but the price gap in each business is improving and that is one of the drivers for achieving the forecast, so can I assume that the price gap is progressing more than planned in each business and I want to understand which products they are. Thank you very much.
[Foreign language]
So JPY 27 billion, JPY 29 billion. Yes, we talked about that. In terms of the progress, starting with the cost at the start of the year, maybe at the business explanation meeting, we said JPY 27 billion is for the asset optimization and this includes cost reduction is what we explained. Earlier in my presentation we showed you this graph and overall cost portion JPY 11.5 billion improvement is what we showed you. So JPY 5.2, JPY 5.3 billion. So chemicals and industrial gases.
That is a mix, half, half, and out of JPY 27 billion, JPY 5.2, JPY 5.3 billion has already been captured. I would say that it's pretty much in line with the timeline for the first quarter. I think we were able to progress. On the other hand, when it comes to prices, we said that we will try to do JPY 29 billion. This does not include market price and to what extent we've been able to do this in total cost. We also have some cost-linked pricing formula versions and also the carbon products sales portfolio and we also have others for each business for this fiscal year. All in all it's going to be about less than JPY 5 billion.
Or JPY 5 billion would be the amount I think and against the JPY 29 billion total, we haven't achieved a quarter yet. We need to expand the cost-linked pricing formula as I mentioned. This is something that we will continue to focus on. So, JPY 5 billion. You might think that we're just saying this, but I don't mean to make excuses, but earlier we showed you the graph for each business and the price gap seems to be all in the negative, but there are multiple factors. For example, specialty materials, it's - JPY 1.1 billion for the price gap. That's on page eight. This is due to the foreign exchange negative impact. Also, the carbon fiber price in the first quarter of last year was not as low as this. If you compare first quarter year on year, the price reduction or lowering price of the carbon fiber is there.
It's like more than JPY 1 billion. There are some negative factors other than the price correction, mainly the foreign exchange. Therefore, we have not been able to really show all our efforts to improve the price gap in this slide. I am trying to answer your question in a qualitative and quantitative manner as much as possible.
[Foreign language]
Thank you very much. First quarter, JPY 5 billion progress, how is it compared to your original plan?
[Foreign language]
This is quite difficult, but we wanted to do a little more than a little bit more than this. MMA formula, changing the MMA formula is something that we could not do as much as we wanted. This is something that we will continue to focus on.
Non-MMA like high value add specialty materials products, we want to make sure that our customers would accept its value and we wanted to appeal to the customers who haven't yet.
[Foreign language]
Page three. You talked about improving the price gap in each business after the display thing is showing up more than the plan. Are you talking about other than MMA? You said that MMA is one of the downward factors and also display-related demand is going up. Is this price gap helping to achieve the numbers versus the plan?
[Foreign language]
Yes, I think it's pretty much in line with what we had imagined. On the other hand, for specialty materials, the feedstock prices are coming down and that also helped improve price gap. The feedstock prices came down but we did not reduce the sales price. That's also part of the price gap.
Other than MMA, I think we were able to achieve as what we had planned for.
[Foreign language]
Thank you. My second question is regarding the shareholder return. Transfer of MTPC was successful and in the fourth quarter you talked about share buyback of JPY 5 billion. I think that was pretty much completed by the end of July. I was wondering if you have additional plans to do share buyback. I want to understand what are your shareholder return policy going forward.
[Foreign language]
This is something that we've been saying. In order to improve our enterprise value, we need to really make growth investments. That's important. Of course we need to really think about total shareholder return or shareholder value. Since we are expecting large funds coming in and accumulating cash more than what we need is not a good situation. We think it's bad. It's not something that should be the case.
We acknowledge that. We will consider all different elements of the balance and try to reinforce shareholder return.
[Foreign language]
Thank you very much.
[Foreign language]
Okay, the next question will be from Okasan Securities. Nishihira -san.
[Foreign language]
Nishihira from Okasan Securities. I have one question. For Q1 you talked about semiconductor materials. Year on year an d quarter on quarter , how did they perform and what do you expect for Q2? My question is about semiconductor materials.
[Foreign language]
Thank you for the question. Let's see, maybe start with year on year. Compared with the same period last year.
Relatively speaking, the numbers. Okay. If you look at the overall market prices, and if you look at the supply chain and the inventory levels, some materials had higher inventory levels, but that is now normalizing. AI-related demand, as you all know, is strong, but for automotives and industrial applications, we do feel that things have bottomed out. If you just focus on semiconductor-related, on a year-on-year income basis, it's probably doubled. It's up quite significantly on a quarter-on-quarter basis. I can't, I don't really want to give you specific figures, but we do see recovery, and things are in line with what we had expected. Income levels are coming up, and I talked about the market situation. For Q2, we expect this current trend to continue. For semiconductor-related products, I don't want to overstate that, but there could be actually a situation where we beat the forecast.
There's some expectation to that effect. Thank you very much. That's all from me.
[Foreign language]
The next question, Goldman Sachs Ikeda-san, please unmute yourself and ask your question.
[Foreign language]
I'm Ikeda from Goldman Sachs. For advanced films and polymers, I have an additional question. So, barrier packaging materials, the demand is increasing, you said, and if possible, can you give us quantitative improvements that have been made? I think that trade term is quite difficult, but I wonder how things are now this year and also for the second half of the year, especially in Europe. There are recycling regulations being strengthened and also any potential increase in the demand in the U.S. Thank you very much.
[Foreign language]
Regarding the barrier packaging materials, I think it did bottom out when it comes to demand, especially in Europe, but do we expect the demand or the inventory to really increase and sales volume increasing? No, especially on a year-over-year basis, how much has it increased?
I would say between 5% - 10% growth rate. If you hear that, you might feel like it's increasing, but there are many factors involved. For example, the same period last year, there were troubles in the plant in Europe and we were not able to ship products, but now it's recovered this year. With that, we have this kind of rate of growth, and we believe that the demand is probably going to recover from now. First quarter, it's not that the recovery has fully picked up, and in the second quarter onwards, after it bottomed out, I think it's going to start to pick up, hopefully.
[Foreign language]
Regarding the trading terms or price increase, any thoughts you can share with us? Is there growing momentum around it or is it going to be further out?
[Foreign language]
We are negotiating with customers because the manufacturing cost is going up, and basically we are negotiating on this with our customers. However, when it comes to sornal barrier packaging materials, since last year, we have already been raising prices ahead of other products. To what extent we can additionally raise prices this year, that could be somewhat challenging, I would say. Thank you very much.
[Foreign language]
This will be the final question from Morgan Stanley MUFG , Watabe-san, please.
[Foreign language]
Earlier there was a question about carbon fiber and you talked about America and Otake, and what impact would there be on the full year? This JPY 15- billion , to make up for that, you will need more maybe. You see you had CPC. You also talked about aerospace. Do you have any good stories there?
[Foreign language]
Thank you very much for the question. To be very honest, you can't really make up for the JPY 15 billion just by improving on fixed costs. I'm probably not supposed to give you too specific numbers, so I'll try to stay away. Maybe in the early half of several billion yen range. That would be the benefit from reduction in fixed expenses. It's really important to really change the sales mix. Again, it's very difficult to be specific here.
It's not just aerospace, but defense is another promising application and we do get some inquiries. For such applications there are some restrictions and it's not just cost, performance, or just price. There are some considerations you can't purchase from this country or that country just because they are providing at lower prices. Aerospace and defense, and particularly with regard to defense, have a wide range of applications and sometimes there are applications that we can't speak about, but probably would surprise you, but there are a lot. We look forward to some good results coming in, maybe in the long term.
[Foreign language]
Closing remarks.
[Foreign language]
Thank you for asking many questions.
As usual.
Thank you for taking time to attend the financial results briefing today. The business environment is far from perfect due to economic uncertainty, but the effects of the structural reform that we have been promoting since last year are gradually emerging. As we've been saying, we will continue to work together as one team to implement the measures and do with a sense of speed. Of course we're trying to do as quickly as possible. We will come together with one team so that we can implement this, so that we can meet the expectations of stakeholders and we will continue to make our efforts. We look forward to your continued support. Thank you very much.
[Foreign language]
Today's conference will be streamlined as an archive. With that, we like to end today's conference. Thank you very much.