As we have now reached its time to start, we would like to begin the meeting. To start, President and CEO, Mr. Manabu Chikumoto, will give the opening remarks, followed by a presentation on the fiscal year ending March 2026, second quarter financial results by CFO, Mr. Minoru Kida. After that, we will proceed to a question- and- answer sessions. It will, we're planning to have a meeting for 60 minutes. Before we begin the conference, we would like to share the following information with our investors. In the presentation of today, we may refer to forward-looking statements based on the current expectations. Please be advised that all such statements involves risks and uncertainties, and actual results may differ significantly from those projections.
Also, this conference is going to be posted in our website later, and I hope you understand. I would like to start the conference. Mr. Chikumoto , please.
Yes. Good afternoon. I am Chikumoto , President and CEO of Mitsubishi Chemical Group. Thank you very much for joining us for today's earnings call. Our CFO, Kida, will provide more detailed explanations later, but for FY 2025 results, core operating income is down 2% to JPY 225 billion. However, due to the substantial amount of non-recurring items totaling JPY 194.9 billion, operating income declined 79% to JPY 30.1 billion, and the profit attributable to owners of the parent fell 74% to JPY 11.8 billion, resulting in a extremely challenging result.
However, these results reflect our strong determination to fully carry out what must be done by FY 2025 for the company's future growth. As a result, we made decisive structural reforms such as Sustainable Growth, the withdrawal of the coke and carbon materials business, ethylene restructuring in Western Japan, dissolution of overseas MMA joint ventures, and voluntary retirement and the Next-stage Support Program. We also almost completed to recognize major impairment losses associated with the structural reform within the FY 2025. On the other hand, in our Soarnol business, which is one of the company's growth drivers, we recorded substantial impairment loss of approximately JPY 30 billion following the review of the plant construction in the U.K. Further, if more FY 2025 results fell short of our previous forecast. We take these matters very seriously.
We would like to sincerely apologize to our shareholders and all our stakeholders for the concerns that we have caused you. We recognize that this is quite exceptional in nature, and at this point, similar impairment risks have not materialized in any of our other investment projects. Going forward, management will implement even stricter oversight and monitoring than before to ensure the investment plans progress as scheduled. In addition, with regard to this matter, we determined that it was necessary to take responsibility for our failure to uphold the three disciplined approaches in business operations that we had pledged. Accordingly, Manabu Chikumoto, as the President and CEO, and Egawa, the Management Executive Officer responsible for the Soarnol business, is going to have a 20% voluntary decline in compensation for six months.
In 26, while continuing to pursue structural reform and cost reductions, we expect a significant growth in our Specialty Materials business. In Germany and in Europe, we have commenced operations of a large-scale investment project for the polyester film business and it will contribute on to earning contribution. In the semiconductor and battery business, we expect to continue existing businesses such as synthetic quartz and precision cleaning for semiconductors and anode materials, along with significant growth in the new projects. In the carbon fiber business, operations will begin in full scale for existing mobility applications, but also business related to robotaxis and a new type of mobility solution. In addition, we have aerospace industry to bear fruit.
By capturing a steady growth in our Specialty Materials businesses, the core operating income will increase substantially in operating income and a profit attributable to owners of the parent in FY 2026. We need to continue to closely monitor uncertainties in the external environment, including the one in Middle East, and we will carefully assess these potential impact. CFO Kida will provide more detailed explanation on this point later. A detailed explanation of the growth strategy for each business will be provided at the investor briefing on May 25th. Now, CFO Kida will explain FY 2025 financial results and FY 2026 earnings forecast. Now, Mr. Kida, CFO, please.
I am Kida of CFO. First of all, I would like to summarize the results of FY 2025. Business conditions in Specialty Materials remained generally solid.
However, MMA and Basic Materials & Polymers continued to face challenging conditions. Market is soft, since March, uncertainty have also increased due to the rising geopolitical risk, particularly in the Middle East. Core operating income in the Chemicals segment was positive, JPY 24.3 billion. In addition to earnings growth driven mainly by improved margins and higher volumes in Specialty Materials, we also benefited from better margins and cost reductions resulting from structural reform in the coke business. On the other hand, worsening MMA monomer market conditions together with impairment loss related to Soarnol assets in the U.K. had a significant impact, resulting in a 43% decline year-on-year. Supported by solid performance in industrial gases, however, the group as a whole limited the decline to 2% year-on-year. Profit attributable owners of the parent decreased 74% year-on-year.
Although we recorded gains related to the transfer of Mitsubishi Tanabe Pharma, this was outweighed by losses associated with the decline to withdraw from the coke and carbon material businesses, as well as special retirement payment related to the Next-stage Support Program at Mitsubishi Chemical Corporation. Now let me go to the 2026. The core operating income is expected to be JPY 305.0 billion. Core operating income in the chemicals segment is expected to increase JPY 75.7 billion year-on-year to JPY 100 billion. This reflects higher sales volume across products in specialty chemicals, continued cost reduction, and recovery in MMA monomer market conditions. Industrial gas is expected to be solid.
The core operating income is projected to be JPY 44.3 billion year-on-year to JPY 205 billion. This does not include the Middle East impact. Now we would like you to refer to page 20 for that. Profit attributable owners of the parent is forecasted to increase to JPY 115.2 billion year-on-year to JPY 127 billion compared with the previous year when we recorded substantial non-recurring losses related to asset optimization. As for shareholder returns, we forecast a dividend of JPY 60 and annual dividend of JPY 32 per share. We will thoroughly implement measures based on the three disciplined approaches in business operations, further concentrate management resources on next-generation and growth driver businesses, and steadily execute initiative for the chemical segment.
I will explain the results for the fiscal year ended March 2026. The average exchange rate for the full year was 151.1 per dollar, representing a 1% appreciation of the yen year-on-year. The naphtha price was JPY 65,200, down 14% from the previous fiscal year. Sales revenue was JPY 3,704 billion, a decrease of JPY 343.6 billion year-on-year. The main factors were a JPY 109 billion decrease in sales price, a JPY 106 billion decrease in volume, a JPY 66 billion decrease from business restructuring, and a JPY 37 billion increase from exchange rates. Core operating income was JPY 225 billion, down JPY 3.8 billion from the previous fiscal year.
This fell below our October full year forecast of JPY 250 billion, primarily due to the JPY 30.3 billion impairment loss following the review of our Soarnol investment plan in the U.K. Special items amounted to negative JPY 194.9 billion, worsening by JPY 107.7 billion year-on-year. Operating income was JPY 3.1 billion, income before taxes was JPY 0.7 billion, and net income from discontinued operation was JPY 94.8 billion, including gains from the transfer of Mitsubishi Tanabe Pharma Corporation. Net income attributable to owners of the parent was JPY 11.8 billion, down JPY 33.2 billion year-on-year. Next, I will explain the sales revenue and core operating income by business segment. In the chemicals business overall, sales revenue decreased 11% and profit decreased 43% year-on-year.
Sales revenue decreased by JPY 295 billion, due mainly to business divestitures resulting from steady progress in structural reforms as well as declines in market prices and raw material prices. Core Operating Income was supported by solid performance in Specialty Materials while carbon products steadily improved. For the chemicals business overall, profit decreased by JPY 18.4 billion, due mainly to the deterioration of the MMA monomer market and the recognition of impairment losses on Soarnol-related fixed assets. Details for each segment will be explained on the following pages. Industrial gases showed steady progress, with revenue up 4% and income up 8% year-on-year. Here is a breakdown of the JPY 3.8 billion year-on-year decrease in Core Operating Income. The price gap was a negative JPY 26.6 billion.
While price gap in MMA and derivatives deteriorated significantly due to falling market prices, Specialty Materials maintained and improved selling prices, and price gap improved for polyolefins and carbon products in Basic Materials & Polymers. Volume was a positive JPY 4.1 billion. While demand in Europe and the U.S. was generally weak, particularly in industrial gases, sales of carbon fiber composite parts mainly for robotaxis increased. Cost reduction contributed to a positive JPY 62.2 billion, with both industrial gases and chemicals accumulating savings across their respective businesses. Others resulted in a negative JPY 43.5 billion. This includes impairment losses on Soarnol-related fixed assets in U.K. and higher costs associated with inflation. I will provide details by segment. Core operating income for Specialty Materials increased by JPY 8.4 billion year-over-year.
The price gap improved by JPY 8.1 billion. Advanced Films and Polymers and Advanced Solutions saw price gap improvements by maintaining or raising prices for semiconductor-related and other products. The volume gap contributed a positive JPY 15.5 billion. In Advanced Solutions, semiconductor-related businesses, particularly precision cleaning services, saw higher sales volumes, but volume was negatively impacted by lower demand for EV electrolytes, mainly in Europe and U.S. Advanced Composites and Shapes volume improved due to increased sales of high-performance engineering plastics for semiconductor manufacturing equipment and carbon fiber composite parts mainly for robotaxis . Cost reductions added JPY 13.8 billion through structural reforms in businesses and rationalization impact from production-based optimization. The negative JPY 29 billion in others was due to the Soarnol fixed asset impairment loss in the U.K. and inflation-driven costs.
MMA & Derivatives saw a decrease in core operating income of JPY 37.2 billion. The price gap deteriorated by JPY 40.3 billion. While the price gap in coating and additives improved, the MMA monomer market fell sharply, narrowing spreads. Basic Materials & Polymers narrowed its loss by JPY 10.4 billion. The price gap was JPY 11.4 billion. In Materials and Polymers, profit improved due to the timing lag in polyolefin sales price adjustments and the ability to maintain sales prices at a relatively high level during the decline in naphtha prices. In the carbon business as well, the price gap improved year on year as the reduction of production capacity in Kagawa was completed and loss-making transactions based on market prices were reduced. Cost reductions added JPY 0.1 billion, primarily from structural reforms in carbon business.
The negative JPY 9 billion in others reflects impairment losses on ethylene oxide and glycols manufacturing equipments along with poor inventory valuation in Materials and Polymers.
Core operating income in industrial gases increased JPY 14.6 billion year on year. Although earnings margins were negatively impacted by higher electricity costs in the United States and sales volumes declined mainly in Europe and North America, earnings increased due to cost reductions driven by productivity improvement initiatives across each region. Next, specialty items. Total non specialty items for the full year amounted to negative of JPY 194.9 billion. In the fourth quarter, we recognized an additional JPY 122.6 billion in specialty losses, specialty item losses. In the fourth quarter, we recorded a number of expenses, including JPY 59.2 billion in restructuring provisions, JPY 30.6 billion in impairment losses, and JPY 15.8 billion in specialty retirement payment.
These expenses mainly resulted from the promotion of various structural reform measures, including the withdrawal from the coke and the carbon material business. Although the full year total reached to a substantial amount of JPY 194.9 billion, we believe these structural reforms were necessary to support growth from 2026 and onward. Let me explain the cash flow. The operating cash flow totaled to inflow of JPY 436.3 billion. Cash flow from operating receivables and payables was an outflow of JPY 16.3 billion, mainly due to a decline in trade payables resulted from the lower naphtha prices. Investing cash flows resulted in inflow of JPY 124.5 billion. A cash flow related CapEx was outflow of JPY 292.1 billion.
Growth investment projects in Specialty Materials continue to progress, including capacity expansion for carbon fiber composites in Italy and capacity expansion at Soarnol in the U.K. for barrier packaging applications. Cash flow from asset sales was positive JPY 141.6 billion. As a part of ongoing portfolio review, we recorded proceeds from sales of shares in affiliates, mainly Mitsubishi Tanabe Pharma, as well as proceeds from the sales of cross-shareholdings and strategic holding. Other investment and financial activities resulted in the outflow of JPY 125 billion. This includes expenditures related to the acquisition of subsidiaries in Australia and New Zealand Industrial Gases segments. As a result, cash flow was positive JPY 560.8 billion. Financial cash flow was outflow JPY 375.2 billion, mainly due to debt repayment and dividend payments and share buyback. Next is the consolidated statement.
Total assets were JPY 5,876.6 billion, down JPY 18 billion from the end of previous fiscal year. This mainly reflects a decrease of approximately JPY 630 billion due to the business restructuring centered on the sales of the MTPC. On the other hand, assets increased due to cash proceeds remaining on hand at the end of March from the MTPC sale, as well as the impact of foreign exchange movement. Netting these factors, total assets decreased to approximately JPY 18 billion overall. Net interest-bearing debt decreased to JPY 387.5 billion from the end of the previous year, and the net D/E ratio, debt-to-equity ratio, improved significantly to 0.83 from 1.06 at the end of the last year. This page provides additional details on the changes in core operating income from the third quarter to the fourth quarter of FY 2025.
Cash operating income in the fourth quarter was JPY 39.4 billion, down JPY 20.1 billion from the third quarter. Specialty Materials recorded a loss of JPY 12.9 billion in the fourth quarter, a decline of JPY 25 billion from the JPY 12.1 billion of profit recorded in the third quarter. Although results benefited from the end-of-winter holiday impacts in Europe and North America, improved performance in the composite parts business, mainly for robotaxis and rationalization efforts, and effects from the partial suspension of general purpose carbon fiber production lines, earnings declined significantly due to the impairment losses related to Soarnol assets.
MMA & Derivatives recorded a loss of JPY 3.1 billion in the fourth quarter, largely unchanged from JPY 2.6 billion in the third quarter. Basic Materials & Polymers recorded a loss of JPY 1.3 billion in the fourth quarter, a decline of JPY 0.8 billion from the JPY 0.5 billion loss in the third quarter. In the carbon, earnings returned to profitability due to improvement in inventory valuation gains and losses. On the other hand, Materials and Polymers losses widened, mainly due to impairment losses related to ethylene oxide and ethylene glycol production facilities. Industrial gases increased from ¥51.4 billion in the third quarter to ¥56.3 billion in the fourth quarter, an improvement of ¥4.9 billion, driven by pricing management and productivity improvement initiatives.
Under our current Medium-Term Management Plan, we have set the three disciplined approaches in business operations to improve profitability: pricing policy, strict investment decisions, and asset optimization. In FY 2025, the impact of measures based on these three disciplined approaches in business operations amounted to ¥58 billion. The impact of pricing policy was ¥29 billion. In carbon, this was driven by reducing loss-making export sales and shifting to cost-linked pricing formulas.
In MMA, the expansion of cost-linked pricing formulas also contribute to the improvement. In other businesses as well, pricing increase initiatives were promoted mainly in Specialty Materials, resulting in a full-year impact of JPY 29 billion. Asset Optimization delivered an effect of JPY 29 billion. This was driven by cost reductions from capacity reductions in carbon business, as well as a number of structural reforms across businesses, including the withdraw from unprofitable operations. Regarding the selection of concentration in chemicals business, we have made decisive equivalent to approximately JPY 490 billion over the past two years against the JPY 400 billion targeted for the business restructuring and investment and divestment set out in the medium-term management plan, thereby establishing a foundation of growth.
Next, I will discuss the full year forecast for fiscal year ending March 2027. Before the forecast details, I will explain the changes in reporting segments. Following the reorganization on April first, 2026, our reporting segments will change from the fiscal year ending March 2027, as shown on this slide.
Specialty Materials will be divided into five segments: Films and Performance Materials, Composites and Shapes, Information Electronics, Polymer Compounds, and Water & Infrastructure. Films and Performance Materials mainly consists of businesses formerly under Advanced Films and Polymers. Composites & Shapes mainly includes businesses from the former Advanced Composites & Shapes. Information Electronics focuses on semiconductor and battery and electronics businesses previously in Advanced Solutions. Polymer Compounds combines performance polymers previously included in Advanced Films and Polymers with engineering plastics and polypropylene compounds from the Materials and Polymers. Water & Infrastructure includes water and environmental and infrastructure businesses from the former Advanced Solutions. MMA & Derivatives remains largely unchanged and mainly consists of businesses previously included in MMA & Derivatives. Basic Materials mainly consists of businesses from the former Basic Materials & Polymers.
We reorganized these groups to enable management to more directly oversee each business and achieve the goals of KAITEKI Vision 35 and our mid-term management plan. We apologize for any inconveniences to investors and analysts and appreciate your understanding. I will now present the four-year forecast for the fiscal year ending March 31, 2027. Our forecast assumes an exchange rate of JPY 150 to the USD and an oil price of JPY 63,000. Sales revenue is forecast at JPY 3,800 billion, an increase of JPY 96 billion from FY 2025. Core operating income is expected to reach JPY 305 billion, up JPY 80 billion. Operating income is forecast at JPY 300 billion, income before taxes at JPY 270 billion, and net income from continuing operations at JPY 200 billion.
Net income attributable to owners of the parent is expected to be JPY 227 billion, an increase of JPY 115.2 billion. This forecast does not include the impact of Middle East tensions, such as the potential closure of the Strait of Hormuz. If the current situation persists through September, we estimate a downside impact of approximately JPY 18 billion on forecast core operating income for the FY 2026. In FY 2026, we expect the benefits from the measures based on the three disciplined approaches in business operations to be JPY 48 billion. As part of our pricing policy, we will continue promoting price increases centered on Specialty Materials. Regarding investment benefits, we expect profit contributions from the full-scale shipment of carbon fiber composite parts for robotaxis.
As for asset optimization, we expect benefits from fixed cost reduction through the Next-stage Support Program implemented in FY 2025, as well as from our unit efforts to promote cost reductions and structural reforms in each business. Here is the forecast by business segment. Although Specialty Materials will be affected by higher costs associated with inflation, we expect increased sales in businesses positioned as growth drivers, including polyester film for MLCCs, Soarnol for barrier packaging applications, semiconductor-related businesses, and composite parts mainly for robotaxis, in addition to the absence of impairment losses on Soarnol-related fixed assets. MMA & Derivatives is expected to turn profitable through higher volume and a gradual recovery in the MMA monomer market.
In Basic Materials, although price gap is expected to deteriorate due to timing differences in polyolefin price revisions, losses are expected to narrow due to improvements in inventory valuation gains and losses and the absence of impairment losses on ethylene oxide and ethylene glycol production facilities. Industrial Gases is forecast to grow profits through pricing management and productivity improvement initiatives. I will now discuss the dividend forecast. The forecast year-end dividend per share for FY 2025 remains unchanged at 16 JPY and is scheduled to be resolved at the Board of Directors meeting on May 20th. Regarding the dividend forecast for FY 2026, we plan to set both the interim and the year-end dividends at 16 JPY per share, the same amount as the year-end dividend for FY 2025. As a result, the forecast for the annual dividend for FY 2026 is 32 JPY per share.
This concludes my presentation.
Thank you very much, Mr. Kida, CFO. We would like to move on to the question and answer session. Now, first of all, Morgan Stanley MUFG, Watabe-san, please.
It's one question I would like to ask the impact of Middle East. It's JPY 18 billion, and that's a raw material. Inventory reevaluation is included in the net out. What is the situations of the raw materials and the raw materials from Thailand? How about the domestic naphtha? I think we have a good report about other raw materials, other than naphtha is a procurement. What's the inventory evaluation? Can you elaborate on the Middle East situations more in detail?
Thank you very much for your question. The Middle East situations, I gave you JPY 18 billion and also-
As you can see on this page, this is a segment-by-segment details. As you have asked, we have some receivables included. Also, let me give you the assumptions. For the, you know, we have to buy the higher price of naphtha, we will be able to transfer the cost to our customers. Naphtha procurement cost, if it goes substantially higher, it's not going to be just a cost increase that we have to bear, but we will transfer the cost to the customers. In addition, you know, if you cannot produce production because of a shortage of naphtha, I don't think that's the situation. We can now relax, but I don't think it's as, you know, serious as you cannot produce.
To the customers who we deliver the products, if there are other products that, you know, they get from other suppliers, there might be, you know, reduced orders to us because of supply chain issues. If there are small quantity amount that we have to, you know, procure from inside, there might be some shortage in the supply chain issues. As you have seen, MMA derivatives is JPY 10 billion. It's more than half of JPY 18 billion. As you know, our core facilities in the Middle East, in the middle of Middle East is, you know, supply chain disruptions or issues, is the biggest issue in the Middle East. I think this is only hypothetical. MMA is approximately a loss of JPY 10 million, going down by JPY 10 million.
Other than that, you think that it depends on the situations, but it's going to fare quite well. Naphtha assumption is JPY 60,000 or so. In the basic chemicals in the first half, it's going to be the losses, but it is going to be substantially positive. What do you think? Thank you very much. You know it very well. In the month of April alone, naphtha was higher in the prices. On a monthly basis, there are some payment, you know, increase. As it comes down, it will profit. Net in net, there is no not so much impact. It is offsetting each other and some will remain in the next fiscal, next quarter or next year. We are now going to positively benefit much. Thank you very much.
Watanabe-san, thank you very much. Next, we'll move on to Miyamoto-san from SMBC Nikko Securities.
I am Miyamoto from SMBC Nikko Securities. I would like to ask you about page 27, Specialty Materials. The reason for the increase in profit in the new year. JPY 44.1 billion increase. Soarnol impairment loss is deducted. It's about JPY 15 million or so. Can you give me the details on this point? Especially the Composites and Shapes, the profit increase is quite large. I think it's a full-fledged shipment for the robotaxis. The number of shipments for robotaxis has tripled or maybe increased by 4x . To that extent, can we share what's the numbers and what is the increase in the process costs? I would like to ask you mainly the reasons for the increase in profits for the Specialty Materials for the new year, including Composites and Shapes.
Yes. For page 27, I did make some comments in the variances page. What is not shown there, maybe I can verbalize what is kind of shown between the lines. Regarding the composite engine shapes, regarding robotaxis, unfortunately, we are not able to give you the details of the number of shipments because of the contractual terms. As you just mentioned, I think you're pretty much, you're right in your direction. We started to ship from the latter half of this year, but next year I think it's gonna maybe triple or maybe 4 x next fiscal year. Going forward, we will be able to make profits based on the previous upfront investment for composites.
Italian CPC, we've been doing a lot of reorganizations and restructuring, they've been producing unprofitable composite parts, now we're consolidating the production sites into one place. We're starting to change our customers for both government and commercials. Drones, we're getting new inquiries for the aviation and space related projects, that is also starting to shape up. For Films and Performance Materials, I think the biggest one is where we have JPY 33 billion in impairment losses. That is going to resolve. That is a big factor. In Germany, we are expecting a new line for the polyester film and MMA monomer. Previously, it took some time to get the certification for new customers, now we're starting to make shipments for those. Also for the Soarnol, we are seeing steady increase in the sales as well.
All these factors are included. Regarding Information Electronics, this is an area next year we are going to see the launch of the new product with new investments for synthetic quartz or rigid photoresists.
This year, we've seen a lot of inquiries regarding the synthetic quartz, and we are currently expecting to sell to the extent we can in our current capacity. We do see a lot of inquiries related to semiconductor business. These are something that we are expecting. As we explained in the previous conference call, composite, sort of semiconductor related, and also gallium nitride. This is something that we expect for the next generation. I don't think it's going to really drive the sales next fiscal year for gallium nitride, but these are the areas where we can expect quite a lot of increase in the volume for the next fiscal year. Thank you very much.
Regarding the impact from the Middle East, Specialty, you said about JPY 6 billion. Is that mainly related to the raw materials? Can you tell me which products have difficulty passing on the cost? Are there any raw materials that are facing the shortage because of Middle East? Yes, thank you very much. We are not seeing any shortage of the materials in a material way. Special items, the ones that we do not really think about too much, there are some concerns related to some of the materials. The majority of the impact from the Middle East is not so much about the price transfer or cost transfer, as I mentioned earlier.
Materials, raw materials. There are some shortage of the raw materials that we do not necessarily relay to the customers. There are some shortage of those materials that lead to the reduction of utilization rate on the part of the customers, and that is part of the supply chain issues. This is not something that we are considering to pass on the cost. It's not so much on our part. On the customer side, some of the auxiliary materials and other materials are in shortage, and that resulted in the lower sales of our products. Understood. Thank you very much.
Thank you very much, Miyamoto-san. Okazaki-san, I think you have raised your hand. Nomura Securities, Okazaki-san, please.
I'm Okazaki, Nomura Securities. Thank you very much. The Middle East situation covers the petrochemical area. If this continues till September, it is going to be JPY 2 billion negative impact in the basic chemicals basic materials area. In the basic materials it's going to be JPY 2 billion, right? Can you explain more in detail? I think utilization it was 90% before the conflict. In the first half, what's going to be the situation, and how about the other derivatives on the market impact?
Thank you very much for the question. First of all, cracker utilization. For example, before the war in Japan, in general, cracker utilization was approximately 75% or so. Compared to that, our co-cracker utilization due to the, you know, support from the customers, we were able to continue at the higher level. Now, this time, our commodity market is quite difficult and softening. No, we have the regular maintenance starting from the 9th of May in the some plants in Okayama. We will be able to continue approximately 80% of utilization. After the regular maintenance, we don't know what's going to be utilization level. At this moment, we are not really seeing any deep, big drop of the utilization.
However, we have to watch the situations and we cannot be relaxed and be vigilant. However, because a shortage of raw material could lead to reduced production in some materials and products, so we have to, you know, watch the situation. However, especially for the JPY 2 billion negative, is not really based on the big reduction in the production at this moment. Now, as for the reduced production or supply chain concerns of the customers, were no concern, but we can change the transportation routes, and we can diversify and have a multiple procurement. We are already working on that for the petrochemical and Basic Materials & Polymers. I don't think that, no, we don't have much problem. No, it's very difficult to forecast what's going on and whether our actions are completely right.
As far as we continue to have this concern, we cannot be relaxed and, therefore we are going to be vigilant and watch the situations. If there are any movements or development, we are going to be agile and, take a very quick actions.
In the total amount of yen, it's not going to be a large amount. It's going to be mainly due to the reduced production. Is that a right understanding? As you have pointed out, you do have a regular maintenance, so that is going to, of course, would, you know, be already discounted and included in your original plan. Is that right?
Yes, your understanding is completely right. Of course, there are some reduced production expected. However, rather than that, it's the, you know, current development that we watch very carefully. There was a previous question that naphtha currently continues to be weak and difficult till the end of September. Are you going to have separate numbers for the first half impact? Yes. If the naphtha, you know, is higher, we have to pay higher prices. If it goes to go higher, you know, it might, you know, stay at flat at some point. If it comes down, it's going to be opposite impact. It's very difficult to, you know, have the impact of the volatility.
There are profit and losses, but off and off, I think net it's not going to be much impact. Thank you very much.
Omura-san from UBS Securities.
I am Omura from UBS Securities. Can you hear me?
Yes.
Thank you very much. It's a little detailed question. I'd like to ask about the Materials and Polymers. In the fourth quarter, from the third to fourth quarter, I just wanted to confirm the changes. From March, naphtha on a spot basis, the prices have been going up. Domestic naphtha on a converted basis, it's not really going up that much. Such impact in March alone, what was the impact? Inventory levels seems to be a little bit lower than usual, and I was wondering what was the numerical impact from that. In the first half, forecast. From the first quarter to second quarter, how are you going to switch? Any ideas that you can share with us at this moment? Thank you very much.
Petrochemicals, especially in the third to fourth quarter changes, I know it's not easy to see and understand. Ethylene oxide , impairment loss was JPY 5.2 billion. That's one area that is the one data that you need to understand. For 2025, it's minus JPY 1 billion on we believe. Utilization regards went down, but on a full year basis, that did not have a big impact. We had a higher material cost in the end. For 2025, as I mentioned already, and for first half of 2026, for 526. If you divide it into quarters, it's very difficult to explain. For example, if you look at just April month, you know, the numbers were very good. Because of the naphtha received cost, we saw a lot of gains.
How long this is going to continue is not really clear, and we need to wait until things come to an end. It is difficult for us to give you the detailed forecast of what is going to happen for each quarter. Therefore, unfortunately, we are not able to really share any detailed numbers. Understood. Thank you very much. However, if you look at April month alone, as you just said, you have enjoyed a lot of gains. Yes. If you look at the receipts, inventory receipts, we did see a lot of gains in April. Is it because you raised prices earlier than usual, and that is the reason for this big gain? I am just talking about inventory receipt. We had been discussing with our customers, and when it comes to petrol chemicals. For each quarter, we had a lot of rebuy.
We refer to the previous quarter. In the for second quarter, we refer to the price in the previous quarter, which is first quarter, and deliver to the customers based on that. If we cannot produce the products, it's gonna be a big issue. We need to discuss with customers. For example, we could refer to the previous month so that we can kind of shorten the time lag of which month we're going to refer to. There are certain customers like that.
Understood.
Thank you very much, Omura-san.
JP Morgan. Nakada-san, please.
JP Morgan, Nakada. Can you hear me?
Yes, we can. Go ahead, please.
Once again, in the naphtha impact, I'm sorry to be repetitive, but there is a big benefit in the receipts and issues and in and out. How about the polyolefin as a business in April? There is a gain in the in and out, and the spread, you know, negative impact is more than offset by the price differences of in and out. Thank you very much. For the month of April, we haven't closed, and we don't have detailed numbers yet. We had a Golden Week of consecutive holidays and in operating days, it's not a monthly timing.
According to the qualitative hearings, in the receipts and issues, I think we have more benefit and gains in the receipts. However, as for the details that Nakada-san questioned, we have to calculate very closely, and we also need analysis. Is that due to the inflow and outflow, or is that actually we have taken the entire spread? We haven't closed the numbers for the month of April yet. We have to be able to wait on the results and also what we are going to do in May. However, for the month of April, for the receipts and issues, I think it's positive because of the inventory received.
Yes. It's a major gain that you have already identified.
Okay.
In Omura's question, the price reference was changed to the previous month reference. You're talking with the customers. What is the timeframe that customers will accept the price increase, and how you decide the price with the customers? In MMA, I think you are going to change how you charge the customers. Is that going to advance the price negotiation substantially? We have no idea at this moment yet. You know, we are saying that every time, you know, every time when we ship, we are going to have the market price increase to be accepted. For the longer term customers, you know, you know, the situation could be different in petrochemical and for MMA is different.
For other products, formula, I think sales, is also negotiating with the customers. At this moment, what's the percentage of the customers, what's the percentage of revenue that can accept the price increase is not yet fully identified yet.
Thank you very much. Sorry for the long question. Thank you very much.
Next, Watabe-san, your second round of question from Morgan Stanley.
If you look back at FY 2025, JPY 25 billion missed target, is it because of the impairment loss of ethylene and EOG, and that's JPY 35 billion, and gas was +JPY 4 or 5 billion. These are the main reasons. Is this understanding correct? Also, on page 19, three basic approaches to business operations, disciplined approaches. Asset optimization JPY 35 billion. Next-stage is about JPY 15 billion or so. I wonder what the rest of JPY 20 billion. Looking back on FY 2025, it's a little bit like a math issue, but as you just mentioned, we're JPY 30.3 billion in EO, EOG or ethylene and ethylene glycol. We also do other ethylenes, JPY 5.2 billion for the impairment losses. That totals JPY 35.5 billion of impairment losses.
Chemical, JPY 24.3 billion. Without this impairment losses, it would be JPY 59.8 billion. The guidance was of JPY 65.7 billion, Specialty Materials JPY 32 billion, the core operating income. Without the impairment losses, it would be JPY 62.6 billion. The guidance was JPY 65 billion. I think it was pretty much within the range of the guidance in our view. Of course, we're trying to pass on the cost to prices, and there's been a lot of initiatives and measures taken by our employees. One of them is Next-stage Support Program. Also we've been trying to reduce costs on the fixed cost level. The result of all these efforts to save cost, we've been able to see this impact. That is how we see it from the financial perspective.
For FY 2026, the breakdown of JPY 35 billion, what is included in this? Next-stage Support Program. That reduces the headcount to quite a large extent. That's a little bit more than JPY 10 billion. For each business, we've been saving cost, like consolidation production sites, and we're reducing not just the fixed cost but also variable costs. That's like JPY 10 billion plus. The logistics and procurement related cost saving is also there. We've been buying from different places, we try to centralize the procurement, which we should have done much earlier, and also the logistics. We've been shipping from different places, but we're trying to consolidate that.
That's like, you know, a few billion JPY. It's difficult to give you all the raw numbers, but 35 billion JPY breakdown on a high level will be what I just explained.
Thank you very much.
Thank you very much. We have five minutes, so we'll like to entertain one last question. This is going to a second round. Miyamoto-san of SMBC Nikko Securities, please.
It's not humorous questions and it's second round, sorry for that. Let me ask about MMA. In the new risk year, base case is a moderate recovery of the market. Is it going to be $1,500 as assumption? What's the, you know, demand, trend, and utilization? Also, you talked about a JPY 10 billion of a negative impact because of the Middle East. On the other hand, MMA market is going beyond $2,000. Methanol raw price is increasing. Considered margin-wise, it could be a positive impact. JPY 10 billion negative impact, what's the margin assumption of MMA?
Thank you very much for the question. First of all, as for the MMA market assumptions, originally, before the war, 1,400, or a little less than 1,400 was the assumptions. You know, in China, they said 1,100 as the price offered in the market. However, the, you know, operations of the players in the industry in China, also based on the cost assumptions, is going to be the level of 1,400. Spread is going to go back to the level that we can be profitable. However, at this moment in ICIS, you know, Southeast Asia, it's coming down, but it's around $2,000. That's the price index available.
As may have touched upon, naphtha is approximately 1,000 dollars, a little less than 1,000 dollars. Just simply put, just looking at the numbers, the spread seems to be widening in some perspective. If you look at actual prices in China, it's more difficult. MMA market-wise, it's very difficult to forecast, and that's the current situation. You know, MMA is going to be a large business and large impact, JPY 80 billion. Maybe JPY 10 billion is from MMA as I explained. It's not really because of the spread, but it's the volume impact, especially the products from Middle East. You know, you produce in Middle East and export to other countries is going to be slower.
It's getting more and more difficult compared to the time before the war. We have a quite conservative forecast that it's not coming out from Middle East, and that's going to be a negative impact of approximately JPY 10 billion. It's the volume impact mainly, and it's not really based on the spread widening or narrowing in the JPY 10 billion number. If this situation continues, for example, SAMAC, you know, because of the reduced production, it's going to be a JPY 10 billion, you know, negative impact. It's going to be upward, you know, because of that pricing of the market in indications. It's very difficult to forecast. If you look at April, MMA is slightly positive.
However, there are lot of reasons, complicated and intertwined each other, and therefore it's very difficult to understand what's going to take place in the coming months. Thank you very much, Miyamoto-san. With this, we'd like to close the Q&A session. Mr. Kida, please give us the word.
Thank you very much for joining our earnings presentation today. While FY 2025 results were challenging, we believe they reflect the implementation of structural reforms necessary for growth from FY 2026 onwards, and we've been able to implement in a very bold manner. In the new fiscal year, FY 2026, the outlook remains uncertain due to rising geopolitical risks centered on the Middle East. Having thoroughly completed our structural reforms over the past two years, and with the growth of Specialty Materials, we expect a significant increase in profits. We will continue working together across the entire group to meet the expectations of all stakeholders. Thank you for continued support. Thank you.
The recorded archive of today's conference will be available for on-demand playback at any time. Please feel free to access at your convenience. This concludes today's conference. Thank you very much.