It's time to start. We start IR Day 2023, Mitsubishi Chemical Group. My name is Shimizu from Corporate Communications. Today's schedule is shown here. First, our CEO, Jean-Marc Gilson, will give you an update of MCG's 2025 goals, followed by Frank Randall Queen, executive vice president Specialty Materials growth strategy. Jean-Marc Gilson will give you a wrap-up. After the break, we will entertain your questions. Lastly, our CFO, Nakahira, will give you closing remarks. Let me remind you first that the presentation may include future-looking statement based on the current prediction and outlook, which may contain risk and uncertainties. Actual results may materially different from what is stated here. Those who participate online, please use the interpretation button. You can select original Japanese or English. Today's video recording will be posted later at our website, including Q&A.
Those who are here in this room, you can use the receiver channel one into Japanese. You can use it if you need. Let's start. CEO Jean-Marc Gilson will start his presentation. Jean-Marc Gilson, please.
Welcome to our October IR Day, and welcome to everyone in the room, and then to everyone who's joining us online, and I know that there are many participants joining us today. Today, we're going to give you an update on our Mitsubishi Chemical Group ambition towards 2025. More importantly, we will spend the bulk of the presentation on our Specialty Materials Growth Strategy. After my relatively quick introduction, I'm going to hand it over to Randy to walk you through the updated Specialty Materials Strategy. I really hope today that you're going to come; you're going to leave the room with a really good view of the depth of the transformation that we are currently undertaking in our group and that we started several years ago.
I think that I really hope also that you will leave this room with an understanding on how necessary it is to transform our company, as this has been pretty difficult year for the chemical industry. Frankly, I think there is no other way than for the chemical industry, in Japan and outside Japan, to go through a deep transformation if it wants to continue to attract investment in the future. Let me shift now and really spend the next 20 minutes on giving you updates on our ambitions and the progress we are making towards 2025. I will spend time on reviewing every key initiatives that we put together in Forging the future. First and foremost, we are committed to the financial targets that we shared with you in February. It is really important for us.
We remain committed to delivering JPY 6,100 million of EBITDA in FY 2025. When you look at that slide, we are really aiming, and you see the strategy of the company, which is fix to grow. Sometimes shrink to grow; that's an absolutely necessary step to build the company of the future. It is not possible to grow a company unless you fix it. That's where most of our attention has been focused on in the past, this is where it will continue to stay, in combination with a renewed growth strategy. On the right-hand side, that's really for your reference. On the third one from the left, you see JPY 6,000 and the revenue and the EBITDA margin that we are aiming to achieve and the return on invested capital.
On the right-hand side, that number is as if, as we shared in February, we were going to set up a 50/50 joint venture. The negotiation are proceeding really well. Just for your reference, on the right-hand side, we also put if nothing happened, this is how it would look like. Our goal, please be reassured, is for a deconsolidation of the petrochemical industry in the not too distant future. We are not only as a company, I shared that in February, we are not only focusing on financial targets. Delivering financial targets is the result of a lot of other work. We are living in an environment, especially for the chemical industry, where there is tremendous pressure on sustainability and others. We are making real good progress on our GHG reduction.
We have established now, I think it was announced on October 1st, we have now established a company-wide office of sustainability that is tracking, implementing all GHG-related projects in the company. So far, we have seen a reduction of 14% versus 2019. We are on track; everything indicates that we will meet our goal of GHG reduction for scope one and two of 30% by 2030. In terms of customer satisfaction, that is really at the core of who we are. We continue to improve; we have made really good progress on this one. It's very important for us because as we transform the company, we cannot lose sight of continuing to focus and on serving our customers the right way.
Likewise, for employee engagement, you cannot succeed in a company if your employees are not engaged, if your employees are not supporting. Despite the transformation, our employee engagement is inching up, and we've seen an improvement of three points compared to 2020. The last point there is about diversity among management. As you know, we are, at our leadership team, one of the most diverse management team in the chemical industry in Japan. We are continuing to focus and really implementing that at every level of the company. We truly believe that diversity is absolutely indispensable to change the way we operate and to bring value to our company and to our shareholders in the longer term. Before I cover the progress on our five key initiatives, let me remind you why our transformation is so important.
Over the last 18 months, certainly, there has been tremendous headwinds in the economy and in the chemical industry. We have seen this complete separation between a service industry doing really well and a goods industry not doing so well. People are spending. You can go here in Tokyo, anywhere you want. Full restaurant, people taking vacation, taking holidays. There is spending going on, but people buy actually very few goods. There has been this real dichotomy happening in the marketplace, not only in Japan but all across the world. The economy is tough. We have seen slowing demand, and as a global company selling all across the world, we see that. Demand has slowed in automotive construction, and the rate of growth is predicted to be slower than anticipated.
The industry has been destocking for many months, and we are starting to see maybe the end of it and are hopeful that the beginning of next year, we'll start seeing some restocking in what we think are very depleted supply chains. The decline in raw material price, certainly in the commodity industry, has driven also price decrease. When you put all of that together, you've seen a lot of chemical companies globally issuing profit warnings and facing real challenges. We have not issued a profit warning. It is important for all of us to understand that the industry is starting to really realize what's happening. I predict that there will be a very large wave of restructuring of the chemical industry with very large workforce reduction happening in many large chemical companies, certainly in Europe and in the U.S. in the coming months.
You will see, I think, a lot of announcement supporting what I'm saying now. We must prepare our industry and retool it for the future. Now, hopefully, as a company, we started our own deep transformation a few years ago. I think that was really good for us because we are coming into this transformation, I think, better prepared than others. We have put together our Forging the Future strategy about close to two years ago now, and since then, we've been working on all five pillars very diligently. I'm going to give you an update now on pillar by pillar, point by point, initiative by initiative, and tell you where I think we are on each of them. Let me start with leaner, digital, empowered. We have really simplified the organization in our company. We have reorganized the businesses, the way we operate outside Japan.
We are now really starting to change the way we operate, and all to facilitate and improve decision-making in order to react much faster to what's happening in the economy. We have made tremendous progress on our digital initiative. We are really aiming now for a common ERP system. We are laying the foundation. The pilots are ongoing, and we are starting to roll out that initiative. We have a new HR system also, global HR system being rolled out in January. Very new financial reporting, business finance reporting also, that's providing a lot more intelligence to our business leaders to make appropriate decisions. Really a lot of progress on digital too. Last, we have new HR policies that are focusing heavily on leadership development and on preparing leaders in this company to really face and react quickly to the realities of a changing environment.
On this one, leaner, digital, empowered, I think we are 70% down the path, and we've made really tremendous progress. Let me address next strategic cost transformation. We initially announced about JPY 100 billion reduction, then we upgraded it to JPY 135 billion . On this one, we will achieve our goal. The question is, should we go beyond? We can go beyond delivering that goal. We are on track to delivering the cost that we announced for this year. On this one, also, at a minimum, we are 70% progress. Everyone understands that we absolutely need to improve the productivity in our company and that our cost structure in the past was untenable in the light of the business conditions. The third one is business to exit. On this one, we are on track, and we are still aiming to seal a deal before the end of this calendar year.
We will announce it in a lot more details in due time when everything is set and done. That's about the petrochemical industry. It's a complex deal, but everything indicates that the deal is on track. In terms of carbon chemicals, we are also hopeful that we'll be able to announce a deal before the end of this fiscal year. It's also something we've been working very diligently and in a very hard way for the last 18 months, probably. It really got complicated by the commodity nature of that business and the fluctuation in prices for coke over the last 18 months. We are making really good progress now. On strategic capital allocation, on the first one also, I think we are 70% where we need to be. On strategic capital allocation, there's been a lot of work internally.
One, to be a lot stricter into where we spend CapEx, on which project, what kind of return are we aiming? Being very conscious about the fact that CapEx is a very important tool in the business to support growth initiative, and must be looked at and must be directed only to growth initiatives on behalf of normal maintenance. We have also implemented a very strict cash flow management, and in difficult time, we look at this as one of the most important measure and initiative in the company, is delivering positive cash flow even in difficult times. We have been working very hard and continue to do so on working capital management, and specifically on inventory, in order to liberate a significant amount of cash that has been trapped in the system for a long time.
We have also been selling some businesses, and Randy's going to talk about some we sold recently at very high multiples. Very, very good prices. That is also helping us to strengthen our financial position. We have announced and are standing by our increase in dividend for this year, and we'll continue over time to review our dividend policy with an aim to increasing it further above 35% payout of net income. Last but not least, this also is helping us to generate cash in case we want to do some very targeted M&A, and Randy will talk about that. I'm very satisfied with what we are doing there. The discipline in the company is an order of magnitude higher in terms of capital management, and everyone across every business is participating in that effort. Leaner, I think we are well on track.
Strategic cost transformation—we are well on track. Business to exit, we are well on track. Strategic capital allocation and all the discipline—we are well on track. Having all of these four initiatives well on track makes it that now we are spending most of our efforts going forward on growth and performance of the businesses. As I said it many times before, you cannot grow a business if you don't fix it first. That's what we've done. The four pillars that I talked about before were about aiming to fixing the business, putting it in a better shape. Now, as I explained before, once we are well on our way, we are now shifting really all of our attention onto growth. We find and we think that we have now built a good foundation onto which we can build.
When I look at the targets that we set for ourselves and for 2025, I'm optimistic, and the reasons are the following. I think, one, our fix and grow strategy is working. You will hear from Specialty Materials; I'm not going to go into too much detail about it because Randy's going to spend an hour with you on this one. Industrial Gases is really strong. We are well on track to achieve that target. Our healthcare business is another one that's going to show you that our fix and grow is really working. You're going to see strong growth and a very good turnaround in that business driven by really good sales combined with cost reduction.
Our attention in that business now is focusing on fixing the pipeline through different measures and probably also going beyond in terms of restructuring and eliminating further cost. As far as healthcare is concerned, I'm very optimistic about hitting these goals. I think there is no doubt in my mind that we're going to achieve these goals. M&A has bottomed out now. It was really a tough time. We are starting to see signs that our strategy, again, to fix to grow is working. We are shutting down assets. We will continue to shut down unprofitable assets, eliminating a lot of cost. We are now starting to see an uptick, slight uptick in prices. I think we have passed the point of break-even now and are on the upward also in MMA. Everything indicates that achieving the MMA goals are also in sight.
One more time, our attention has been focused on fixing first, growing after, and it's working. In the businesses that I talked about, I am pretty confident that we're going to be able to achieve these goals, barring any incredible event in the economy that we could not control. Basic materials there that you see highlighted on the right-hand side is the numbers that they've put together; the JPY 521 includes carbon chemical. The JPY 450 excludes carbon chemical because there is high probability that that business will be sold. Overall, the transformation that we have started about two years ago, we are well on our way towards our goal of refocusing the company more on specialty products and solutions. Are we completely there yet? No.
There is no possible further, as I explained before, there would be no possible further portfolio transformation and changes unless first we fix every part of the portfolio, because not doing so would basically be disadvantageous for our shareholders. We are becoming, and that might look a little bit strange to you, but we are becoming truly a global company, but with very strong local teams. Most of decision-making power and management is being now passed on to local teams and area responsibilities. Frankly, I think we are now well on our way to add value to customers everywhere and also, as indicated here, to society at large. We have taken most of the right decision to create value for our shareholders in the long term. Key to attaining the goals for us is to apply the same approach to Specialty Materials.
We need first to Specialty Materials in order to grow. The growth Specialty Materials is very, very important for us. This is where we have most of our employees. This is where we generate a lot of IP. This is where we invested into acquiring businesses over the last several years. This is also the place where we absolutely need to generate more value. Since taking over, Randy has been working night and day with his teams all around the world to come up with a strategy that is also a fix and grow strategy. We have a very strong position on all the major product lines that Randy's going to talk about. With number one, number two position in many of the product lines where we operate.
It's up to us now to implement the plan; we will implement the plan that he will be talking about. That's why when I look at the team in Specialty Materials, their focus and what they're doing now, and the deep transformation, I am optimistic about also delivering the 2025 targets that we have set for ourselves, and that include a significant EBITDA percent margin improvement and EBITDA in general. In terms of going from about JPY 110 billion to about double in terms of JPY 225 billion by 2025 horizon, and tremendously improving the return on invested capital. I'm not going to say more on Specialty Materials; I think it's time now for me to hand it over to Randy, who's going to walk you through in a lot more details about what's in the plan in Specialty Materials. Randy?
Thank you, Jean-Marc. Again, my name is Randy Queen. I took over this job for the Specialty Materials Group in April of this year. It's, I think, my first time to be able to present to this group, and it's my pleasure to be able to share with you a bit about the transformation that we're undergoing within Specialty Materials. Let's see. As Jean-Marc mentioned, and you saw from the graphs, Specialty Materials really is at the heart of what the transformation is about. As with other business groups and as with other functions, all of these five pillars of Forging the future, we have actually implemented or are in the process of going through a more specific transformation and initiatives in each of those areas.
Because of the importance of Specialty Materials, we're the tip of the spear, or the piloting and driving many of these individual efforts within our group. We're doing a lot in the cost transformation area, driving operational excellence into many of the manufacturing operations that we have around the world. This whole area of leaner and digital empowerment, our teams are actively involved, along with our digital team, on almost every initiative that we have there, especially on initiatives that are around customer-centric touch points of the customer. Today, what I really want to focus on, though, is this blue box. Most of the presentation that we're going to be talking about today is how are we going to grow? Not only grow, how are we going to deliver more value out of the specialty material business?
A big piece of that has to do with portfolio transformation. We're going to talk extensively about what we're doing in each of our target markets, and we're going to talk a little more specifically about where we operate in the value chain today and where we think we need to be in the value chain of these markets going forward. We're also going to spend a good bit of time talking about M&A. We obviously can't get super specific about that, but we want to share with you our plans to the degree that we can. Then I want to also touch on globalization. Jean-Marc mentioned that we have done a lot of things organizationally within the company to kind of decentralize so that we can expand and grow outside of the Japan market in particular.
One of the things about our business, I've been with the company for 30 years, and I've been part of the information electronics business. Having been here and have seen a lot, it goes without saying we have a lot of products in this Specialty Materials business. It's extremely wide portfolio. As Jean-Marc mentioned, for the last six months, we have been very intensely looking deeply at what products we have and what products we need to be able to address these markets that we have identified as core markets. I think after a lot of time, energy, and effort, it really comes down to four areas. Four, what I'll call product lines or product pillars. These are the areas of our business that we think we will build upon for the future.
It's the polymer compounds area, what we call Composite Solutions, and within Composite Solutions, it also includes our Shapes Business. Our Shapes Business is a really important piece of our strategy going forward because it's a little bit further downstream than just being a polymer compounder or a composite solution provider. You'll see more about that as I get into the strategy. Specialty Films is another area. We're extremely strong in this particular area around the world, and we feel like that's an area that touches many markets. It's one that we will build on. This final area is called Custom Solutions. That's not just a catch-all area. This is a particular area where we design solutions for individual applications or individual markets. As we get into custom solutions, there's really two areas there. It's around information and electronics, and it's around food.
That's the two big markets that we cover there. One of the things before I leave product lines, we are absolutely becoming much more market-focused. We're organizing around markets. We are designing solutions around markets. At the end of the day, we produce products. Products have to be aligned and aimed at these particular applications, growth applications in particular, in individual markets. We've spent a lot of time, and our intention in these product lines is to be able to go much deeper and add a lot more value and leverage what we're doing in each of these areas, unlike what we have done in the past. We have been fairly fragmented in the past. Too far and too wide. We want to narrow our focus from a product point of view and be much deeper in these particular areas.
We think we have a right to win in these particular areas. As has been presented in the past, the focus markets that we're pursuing are EV and mobility, also digital. Digital is a fairly wide one. We're going to do a little bit more deeper dive on each of these markets. New for this discussion, in comparison to what was presented last time, medical has been raised as one of the core markets. This is a business that it's not new to us. We touch the medical market already in our polymer compounds area. I'm going to share some of those applications, especially in our composite solutions area, where we produce a lot of materials that actually end up as implantable materials. You're going to see this. This medical area is not new. Okay. It's not new.
It's not a large business for us today, as we talk about portfolio reform, and we talk about making our portfolio more resilient to swings in the market, an area like medical is super important. When I look especially at what's happening in the market today, and I look at competitors that are not feeling as much pain in a downturn market have a substantially bigger space, usually in things like medical and defense. Medical, because we're already there, we know how to operate in that space, and we think we can leverage these product lines that are mentioned here more substantially. This is an important spot for us. Food is also going to continue to be a target market, not only in the packaging area for food, but in water purification and also in food ingredients. We'll talk a bit more about that.
As you can see with these product lines, these kind of core product areas that we will build on, we touch each and every one of these markets. I'd also like to note, these markets not only have been chosen because we operate in them today and because we have a right to win in those markets, they're also high-growth areas. You can see each one of these growth numbers actually exceed GDP by a factor of two or three. Again, high growth areas and well-aligned with the products that we have. As we've gone through and start to look deeply at our portfolio, there has been some changes based on how we see we get to the target that we have before us in 2025. The total revenue has not changed. The EBITDA and COI numbers have not changed for 2025.
We're still committed to those. Certainly, it's a big jump that we have to make, but I think that with the changes that we're talking about making in the portfolio and also growth, both organically and through M&A, this is still a realistic target for 2025. In the EV mobility area, you can see we're expecting to grow from a revenue point of view about 8%, but substantially in EBITDA. That's going to come from portfolio rationalization and adding back businesses that have higher value. I'm going to give you a good example of this. Okay? When we talk about portfolio rationalization, this is not only going to be product lines and businesses that are outside of these markets; it will also be certain products and categories inside the core markets.
Because even though it's a category that we're operating in today in a core market, it may not fit all of the criteria that we need for that product to stay. EV mobility we expect to grow, but certainly improving our margins. The digital area, again, high growth, both in terms of revenue and in terms of EBITDA. The medical business, as you can see, starts to become more substantial in our strategy going forward. The food business I want to touch on. It looks like extremely low growth, both in terms of margin and also our EBITDA and in terms of revenue, but there's a couple of anomalies in the food area. Number one, food packaging is included in this area. Today, we have a whole gamut of food packaging-related materials.
We plan to start to exit some of the consumer types of materials within food packaging. Also, there's an anomaly here in that one of the big sources of our, one of our strongest products and a big part of our portfolio is our EVOH material that's used as a barrier resin in food packaging. We're running at close to full capacity on that one today, so it's difficult to grow from 2022 to 2025, but we have capacity expansions planned for that, and it will start to take hold in 2026. If you look at, in reality, if you look at the food industry for us, it will continue to be a nice growth and high-value area going forward. We'll talk more about that as we get into each of these.
Part of what we've been working on is what I'll say progressing and also deepening what we need to do within the Specialty Materials portfolio. At IR Day this time last year, I think there was around JPY 100 billion of business that had been identified for exit within the Specialty Materials area. Quite honestly, as we have really dug into this in the course of the last six months, I think there's another JPY 100 billion-JPY 120 billion additional portfolio reform that we will be doing within Specialty Materials. Then, of course, growing back both organically but also through M&A. M&A is going to be a pretty relevant piece. If you look at what we've been doing to date, we've been progressing the exit of kind of non-core, non-strategic businesses, things that are not fitting the profile of what we need to have in Specialty Materials.
Some examples of those, we've exited the Qualicaps business. We've also announced exiting the agricultural film business, and we've also shut down our carbon fiber—I'm sorry, our acrylic fiber business as well. Those three alone are approaching the halfway mark of the first JPY 100 billion businesses that were originally identified. As said, of course, we can't give detail on the specifics, but we've got additional work to do in that particular space over the course of the next 18-24 months. On the ad back side, just this week, we announced the acquisition of the other half, roughly half, of the joint venture that we entered into in 2017. If you saw the press release, we will become subject to regulatory approval. We will become the owner of the CPC Group.
I'm going to talk a lot more in detail in the automotive section about this acquisition and why we think it's part of our strategy going forward. Again, before we leave this slide, the last three points that I want to make. Portfolio synergy: as we look at what we're going to reform and what we're going to try to bring in through M&A, it's all about a highly focused alignment within our portfolio of the product lines that we have. As we divest some of these businesses, and by the way, some of the businesses that we're talking about divesting are not necessarily bad businesses. As Jean-Marc mentioned, as we tighten up on what we do from a CapEx point of view, because we're so broad, we can't invest properly in all of the businesses that we're in today.
There's other owners that can do a better job of that. I think we've demonstrated actually how we've exited these businesses already, that we know how to do that in a good way that's good for all of the stakeholders that's involved, inclusive of employees. As I said before, we want to reinvest, and we want to diversify our exposure to various markets. Medical being the big one in there that we would like to have a much higher exposure to as we deepen this portfolio transformation. As we move through this strategy, I think we're starting to see that a larger portion of our revenue and also our margin is coming from these core products or these core markets rather. EV mobility, digital, medical, food in 2022 represented 57%. So far, at least through first quarter of this year, around 60%.
I think 70% personally is a fairly conservative number if we are successful in the M&A activity that we hope to achieve in the near term. I think that number could actually go 75% or 80%, but we're showing 70% in here today. Fairly optimistic that you will see us through transformation of the portfolio, starting to generate more and more of the value in the business coming from these core markets. Let's dig in a little bit. This is how we segment those markets, and I think this is super important. We talk about growth in food or medical or automotive EV, but really what's important is what are the segments that we're operating in today. You can look down; I won't go through each of these.
What we are gonna do is do a little bit of a drill in on each one of these markets and some of these more important segments to talk about where growth is coming from. I think the important thing here is to look at the growth in some of these segments because it exceeds the broader category. We think alignment, not only in the broad category, but within the sub-segments is super important. This is as an example: we're obviously active in the EV battery space, but structural carbon fiber materials with the new acquisition of CPC is also an extremely high growth area. We will be very active there. I want to dig in on semiconductor.
I think our semiconductor business is something that we don't talk a lot about, quite frankly, have a very strong portfolio and a high growth potential in this area as well. Again, as mentioned, we don't talk a lot about medical in the past, when you look at these areas that we already participate in these segments, it's pretty extensive. Food, as I mentioned, is a combination of packaging, water, and additives. Again, we'll look at that one in more detail as well. Before we do the drill in, I want to talk just a moment about one of the feedbacks that we get is we always ask within Specialty Materials. What's your growth drivers? What are the big areas of your business that's going to grow?
To be honest, if we do our job extremely well, yes, there'll be some products or some categories that are higher growth than others. Quite frankly, as a Specialty Materials business, it's going to be a lot of part numbers, a lot of unique products that are designed for individual high-value applications, and it's going to be the total that actually drives our business. When we talk about growth drivers, we're going to drill in and talk about some specifics. I really want to send the message that as we look at this business going forward, please, let's think about the range of the portfolio, the focus areas that we're driving products in, because we anticipate having a very wide portfolio and very specifically aimed at high-value applications going forward.
Growth in our category is probably going to have a fairly long tail in terms of the distribution of products that we expect to see over time. Okay. With that, what I want to do is spend a little bit of time on each of these core markets. I want to give you an an idea of breadth of range and the areas that we're participating in these markets today. This is EV mobility, again, just an overview slide talking about all of the products that we're commercialized in today and the general application. We're extensive in the interior of not only EVs, but automotive in general. We're actually moving into the engine area as we move into EV, which we haven't had a lot of business in the engine area before. That was not normally a kind of a plastics or composites area.
We're getting more and more applications showing up in that space. This EV battery material, of course, everyone knows we're active in there. We're also doing a lot of work around fuel cells, especially with our carbon fiber business, electrical components, and a number of exterior areas as well. Again, all commercial products, broad portfolio, generally all pretty high-value areas. When we look at kind of the value chain, and I think this is really important, as an important part of our strategy, where have we been operating and where are we going to operate in the future to extract more value out of this market? When we look at this, we have touch points or lots of areas within the value chain, mainly centered around Specialty Materials, what we call Specialty Materials for automotive.
When you start to combine materials to actually create a material solution, we're active in that space as well. Our carbon fiber materials, battery materials, coating and adhesives, compounds, films. We have, again, a broad range, but all very targeted in that sense. The area that I want to do a drill in on as one of these high-growth areas is this area around carbon fiber composites, and especially with the acquisition of CPC, since that's relatively new news, it's part of our growth strategy going forward. I want to do a little bit of drill in around what that will enable us to do going forward. Again, we have been active in this space in the past. It's not new in terms of selling composite materials into this area.
We've got a whole lineup of composite materials, one of the most complete lineups, I think, within the industry. For sure, we're one of the few companies now in the world that starts with basic chemicals that go into making carbon fiber that translates all the way into composite solutions and now having gone further down the value chain into the area of making complex high-value parts, mainly large parts. Going even one step beyond that with the acquisition of CPC, we actually have become kind of a solution provider because we not only make the large parts, we can attach them, we can assemble them, and we can become a kind of a one-stop shop for many of these high-end automakers. Okay? We're extremely excited about this. The margins on this business are very good.
We see this adding substantial EBITDA and also revenue from a growth point of view. The other thing that I think is really exciting about this acquisition is it will move us into a new area. We'll call this the emerging mobility area. You've seen a lot of things coming through around mobility as a service and the use of EV for transporting people, taxi services, this type of thing. Most of these solutions want a very lightweight, composite material infrastructure and also outside panels. With the acquisition of CPC, one of the key value propositions there is they are one of the best in the world at making very large, complex parts out of carbon fiber. We think this is a natural integration. It kind of helps us to monetize this carbon fiber business for us.
When asked about EV, if someone says. What's our big growth driver? If I had to pick one, this will be one of our big growth drivers. Again, we have many products that are active in that space, and I really want to send the message that it's not just one thing, but it's many. Let's switch gears and talk about digital. We touch, again, a lot of the digital area, starting with PCB manufacturing, display materials. I think everyone is aware that we're very active in the display area. We make many materials. We've just got one listed here that's a biobase that find their way into the casings and some of the plastics that surround various materials. Semiconductor manufacturing is kind of a core for us.
We do a lot of different products in semicon, and with that, I won't go through that on this slide, but I want to talk about the semicon supply chain, because for us, again, very important area and an area that we're very familiar with and have operated in for years. Our main spot in the semicon space is in this area that I would call Specialty Materials, those highlighted in blue. Most of our business today is in that kind of tier two material supplier into the semicon space. We also touch the semicon space in many other things. As I talked about having synergy within the product line, as an example, a number of our solutions that we have in the water area around filtration find their way into the semicon space. We're actually a supplier into the equipment makers as a component or subsystem.
A lot of people don't know that. When we look at this supply chain, we touch this spot in many areas. I think we're number one or number two in the world in precision cleaning, as an example. We touch the integrated device manufacturers in that area. Again, nice portfolio, extremely well targeted, well focused, synergy within there in terms of how we go to market and actually sell into this space. Again, an area that we want to focus on for the future. What I'd like to do is focus, do a little drill in, talk about a couple of the real important parts of our strategy going forward. We're already a leading producer of high-value semiconductor materials. Anybody that's tracking that market today, it's not a good spot to have a lot of exposure in semicon today.
I think, as everyone knows, that's going to be a short-term blip. This thing is going to come back and probably come back at a much faster rate than any of the companies are going to be prepared to respond to. If you look at the Specialty Materials that we offer into that space today, they're very substantial for us. We're the number one global supplier of silica that's used to make crucible linings. We're one of the leading material makers for, I'm sorry if I'm missing that, for the antistat. Also a very strong supplier of epoxy resin. In this whole area of photosensitive polymer, this is a core technology of Mitsubishi Chemical. These are all areas, and when this market recovers, these are high-growth areas.
I know we will be growing in these areas because we're at capacity on many of these products, and we are working on capacity expansions for them. That alone is going to drive growth in this space. I think the thing that's most exciting about this space for us is, again, moving down the value chain one step. Today, we don't supply as a tier one into the fabs, but with the recent announcement for our dry photoresist for EUV lithography, we have partnered with Lam Research, and that, by default, is going to push us into kind of a tier one position going forward. In that position within the value chain, it opens a lot of doors to be able to sell many other precursors or other types of products in a direct mode. That's a very substantial part of our growth going forward.
New innovations. Still working on commercializing our GaN wafer, and again, puts us in a strong position as we move down the value chain in this space. On medical. Already doing business in medical. We do a lot of business in the implant area. Specialty polymers. We do single-use types of products through our polymer business and then a number of medical packaging applications. Again, in the value chain, you can kind of see where we fit. Mainly as a material solutions provider and some component production that we do, especially in the shapes business. A little bit of service that we do as well. We do some assembly and some packaging. The main business is, again, in material solutions and in components. These are, again, a couple that I'll do a drill in on.
This is a business that has grown for us this year. Even in a tough market, we've generated nice growth and nice margin out of this particular business. Again, kind of a leading implantable resin and shapes supplier into medical. Long-term implantable resins, we do some customized resins that's used in catheters and other types of devices. We do long-term implantable shapes, both in the area of knee and hip replacements, as well as in spinal cage materials as well. Again, we want to leverage our ability in each of these markets. One of the new innovations that we think we should be a lot more proactive in is in this area of single-use culture bags. This is an area that requires multilayer film. It requires unique coatings to be put on it. It's a high-value segment.
It's an easy place for us to move from food packaging into medical, to be able to leverage assets that we have into a much higher value space. When we talk about moving into higher-value applications, this is the type of thing that we can find synergy with the medical business and the contacts that we have, and also leverage assets in a much better way going forward. All right. In the food area, as I mentioned, we segment the food area into a few areas, but you can kind of see where we're active today from a commercial point of view. It's in food additives, it's in films related to packaging, it's in materials related to packaging, primarily from the compounded polymers area. In this food solutions area, this is where our water business falls.
This is primarily business around filtration of potable water. Again, we think that this is a nice growth area for us. In the food additives area, the one area as we've really dug into that, we have a fairly, I would say, semi-broad portfolio of food additives. As we start to really focus our business going forward, one of the main areas that we're very strong in globally is in this specialized emulsifier area, sugar ester business. We've got capacity expansion coming there. If you look over to the right, one of the areas that we're really focusing on is the know-how that we have on how to formulate sugar ester. As we utilize that know-how, it opens new markets for us on things like non-dairy milk or plant-based meats—those types of things. Sugar ester is a perfect fit.
A lot of people don't understand how to formulate sugar ester all that well, and that's a core competency that we have. Using that know-how, we think will open new markets for us in the future. Again, high -performance films—we're really strong in the coatings area, as I mentioned already, especially our SoarnoL EVOH business. We have capacity expansion coming that's beyond 2025, in the 2026 range. Again, we see good synergy and nice opportunity as it relates to the food business. That's the four markets. I did want to also just touch on, from a sustainability point of view. We look at sustainability in three areas. We have products that enable a more sustainable solution, things like semiconductor or light-weighting vehicles. Those are all enabling technologies that all of our core products fit toward.
In addition to that, we have a fairly broad offering of both recyclable and bio-based products. As Jean-Marc mentioned, we have a new organization that's being put in place that will help to drive and knit together the sustainable solutions that we have across all categories going forward. This is just to kind of highlight a few of the key areas that we have already that's in the either bio-based, recyclable areas in particular. As we've talked a little bit about growth drivers, about markets, about the product areas, there are structural things that we're doing also within the organization and within the business processes that's happening within Specialty Materials. You may know, our business historically has been made up of a lot of small, fragmented businesses.
As we have started to consolidate, centralize, and organize in a different way, a lot of the purpose in doing that is so that we can start to drive best practices from a commercial point of view into the organization. You can imagine how difficult that has been in the past, where things have been highly fragmented. As we have changed the organization, we had started to drive methodology, especially on things like pricing and how do we improve margins, and starting to see some of the results of that already. This is just an example of margin uplift, around JPY 5 billion , that we've already realized through some of these efforts. It really is improvements in how we equip our salespeople with a much more data-driven approach and also how to value some of the things that we're doing within that space.
We've got really deeply understanding how our products impact the manufacturing operation of those that we're selling to and just understanding the value proposition of what we're actually selling. I think in many of our smaller businesses, they didn't have that methodology or that know-how. As we start to educate, we can do that in a much more efficient way based on how we're organized today. Also, things like service. Many of our competitors, they charge or they get paid for the services that they provide from a logistics point of view, inventory point of view, technical service point of view, and they segment customer base based on these types of things. We just have not done a good job of that in the past. The exciting thing for me is there's upside in this area, right?
There's absolute upside for us to be able to generate more value in that space. Again, that's all lining up. We're starting to see results coming from that, and those things are all enablement for making our salespeople more efficient and more effective as they walk into the marketplace and try to compete. I said I would mention a little on growth outside of Japan. Not only growth, but value delivery outside of Japan. If you were to look back a few years ago, even before 2021, I think these numbers were even higher. As I said, I've been around for a long time, and I can remember when our Japan business represented an extremely large part of the total sales. We're making progress here. If you look at Japan's contribution in 2021, it was 47%.
It's dropped to 42% in 2022, and by 2025, we think it's going to be down around 37%. That's not to say that we're not focusing on the Japan market, but a lot of the growth in many of these segments are happening outside of Japan. I think we've had an unhealthy regional mix. I think Jean-Marc mentioned that in previous presentations as well. Again, a lot of the refocus that we're doing is to empower and to better organize outside of Japan through many of the subsidiaries that have operated kind of independently. With our new organization, we have disseminated a lot of the decision-making within Specialty Materials down into the regions and trying to support them in a much stronger way from a strategy and a product line point of view coming out of Japan.
That's starting to pay dividend, and I think we will continue to see that, and it's a big part of our growth strategy going forward as well. This is the same slide that I started with. Again, we sell products into these markets. We are trying our best to align those products in a much better way, where we have synergy, becoming much more focused in terms of the portfolio that we're supplying into those markets. We're changing our organization structure to be able to grow in all parts of the world. Again, as I mentioned, we have not changed the projections. They're aggressive, but again, we think this is doable with the reform that we're trying to bring and also, again, with targeted M&A for the future. With that, I'll use this last slide just to kind of summarize in this growth area.
I think you've seen kind of a deep focus on core markets. We talked about growing outside of Japan. We talked about market-facing. We've been in the middle of the strategic cost transformation that the overall company is going through. We spent a lot of time over the last 45 minutes or so talking about portfolio transformation. This whole digital enablement, we didn't talk as much about that specifically, but there are a number of things that we're doing in this space, again, aimed primarily at growth and equipping our salespeople with information on the spot and helping us to manage the pipeline of opportunities that they're bringing in. Lots of work going on there. We have flattened our structure pretty substantially over the last year that we have within Specialty Materials.
Again, a lot more rigor in the total company around where we invest going forward. That same rigor will certainly be applied to any new M&A that we're looking at going forward, just as it was applied from a CPC point of view recently. With that's my presentation for today. Thank you very much.
Thank you, Randy, for the extensive review. As I said, the industry has headwinds, but there are also lots of opportunities. We are slowly transforming this company also as far as also sustainability, driving to an enabler, into being more of a Specialty Materials solution provider. Very importantly, we have been focusing our efforts to placing and transforming the company to be one of the winner in the long term. A company that can face headwinds because it has the appropriate cost structure, but also a company that has the right focus to grow and the right discipline to grow in the future. We are, frankly, on track with pretty much every initiative that we have started. The five key initiatives are progressing well. Again, we are committed to our financial and non-financial performance by 2025.
The carve-out of petrochemical and carbon and the sale of carbon product is progressing and is planned as per schedule. As Randy said, the focus of this presentation was really on Specialty Materials, but in February, we're going to talk more about the rest and the whole company. Specialty Materials is at the core. There is a lot of value in it, but the way to extract the value and make that business grow is to transform it. We are a lot more focused. We are focused on four key product lines. For each and every one of them, we have a tremendous competitive advantage. We are well-positioned as one of the key players in the world in each and every one of these four product lines. We are attacking four key markets where these product lines are ideally suited.
We don't have time to really dig deep into our innovation, but we have realigned completely our R&D to support that innovation. The R&D is now completely embedded into Specialty Materials Business Group and aligned with all of the initiatives that Randy talked about. Last but not least, and we only talked a little bit about it, this is about mindset change into how we do business and how we create value in Specialty Materials. Commercial excellence, the way you approach customers, the way you do pricing, we needed really to update our practices, and this is ongoing. We haven't had too much time to talk about it, but needless to say that everything around supply chain management and operational excellence is receiving exactly the same attention. Overall, this is a long-term transformation of the company. We knew that it wasn't going to happen overnight.
What I promise you is that we would be steady, focused, and we would be delivering all along the way. I think what I shared with you is that we're pretty confident business by business that we'll achieve their goal. When you put everything together, that provides me comfort to say that we are committed to our financial performance for fiscal year 2025. [Non-English content ], and looking forward to your questions. Thank you very much.
We would like to take your questions. This is a hybrid meeting, face-to-face and online. We take questions who are here face-to-face. After that, we take questions who are connected online. We will bring you a microphone when you want to ask a question. For the online participant, you can ask a question orally or you can enter your question in Q&A box. Please mention your company name and your own name, please. We will answer to your question one by one. You can raise your hand, or you can use your raise hand button for those online.
Thank you very much for the presentation. Before I ask you a question, the stock price today is 3% lower. That is unfortunate, but the petrochemical business details will be disclosed. That was our expectation, which was absent in the 2025 goals, and you said it's very positive, and there are some question marks attached to that viewpoint. I think that may be a factor. First, about petrochemical and carbon, especially carbon out of petrochemical. I understand you can't disclose details about JV of 50/50 within this calendar year. That was mentioned. Then exit, and option includes an IPO in the petrochemical, pure petrochemical company. How do you attract investors for IPO for the midterm? Can you state that, please? Thank you.
Thank you very much. Chikumoto from petrochemical and carbon business. As for petrochemical and exit and reorganization, we are working on it. As Jean-Marc mentioned, we are on track, close to our plan. As of today, as for details of exact time schedule, we can't tell you because there are partners involved. Discussion is now at the very core, and each company has their respective situations. It's not easy to reach an agreement and conclusion. To our shareholders and to our employees, we need to maintain our accountability. We need to have agreement based on that with the joint venture and IPO to be supported by those stakeholders. That is really the prerequisite before we reach an agreement.
One big factor here is including the Cracker business. We consider consolidation of business and the product growth and recycle and others. We need to have rationalization before we can actually achieve divestiture. Big purpose for the consolidation: people, money, and time.
We want to have a favorable condition for that, especially in R&D, carbon neutral, or circular economy. In those areas, there's lack of manpower resources. That is a situation we need to accelerate the process quickly. This is an issue for the chemical industry in Japan. In Korea and Middle East, there are investment and conventional petrochemical products, as some of them are trying to expand. In order to protect the industry in Japan, including the national security, we need to address circular economy and carbon neutral. We need to accelerate our effort there and make investment actively there for that purpose. In that background, we are trying to achieve what we wanted to achieve. Thank you.
Thank you very much. I have expectation. Regarding Specialty Materials, I have a question. There are various factors that I want to consider. Lithium battery. For battery materials, you are focusing. It is red ocean, in my understanding. What is your view on this? As for carbon fiber business, CPC is acquired and it's working well in Italy. Some of the companies are not really showing good result in this category. How do you expect good business? How do you develop carbon fiber business without having airline business, aerospace business, PET business, and molding materials? What are your viewpoints? Thank you.
I'll address the battery business first. Yes, battery business is a difficult business. The good news about battery business for us is that we have been one of the leading electrolyte suppliers in the world for many years. Our technology is solid in that way. The question becomes, over time, can we continue to operate at a fairly high level in that space? I think, as of right now, there's lots of things changing from a regulatory point of view in Europe and in the U.S. as it relates to battery materials. A positive thing that we have going on is we have a global footprint. As of last year and also this year, we have made investment in the battery business to be able to expand capacity both in Europe and in the U.S. It's a tough spot.
Much like every other part of our portfolio, we've not made any final decision yet on battery. Like other parts of our portfolio, if it becomes an area where we can't add value and it's in a better position for someone else to do that, we will consider it. It's no different than any of the rest of the portfolio. As of right now, we haven't made any announcements about battery business. We have invested to add capacity, and we continue to have a strong top-tier position. I'll say another area for us around battery, we're not competing at the low end of that spot. We're looking and working with people that are looking for the best they can get, and I think our product is still one of the top ones in the market in that space. That's our comment on battery.
The other thing that you mentioned was carbon fiber. A lot of the companies, a lot of the competitors, if you look at where they're competing, the types of parts that they're making, they're commodity-type parts on carbon fiber. The unique thing about CPC is their ability to do complex structures and to do extremely large parts. The area of the automotive space that we operate within CPC is not the broad market; it's the high end of that space again. I think you will never see us in specialty material wanting to compete on high-volume, non-high-value applications. That's not our intention with that strategy. You also mentioned about aerospace. We think that there's a nice adjacent business related to that.
With the technology that they have, we think it positions us in the future to be able to expand into other markets, aerospace being one of those. I think we didn't buy this to become a tier two part maker for the masses. This is about technology, about know-how, about integration, and about doing things that other people can't do from a complexity point of view. That's our take on why we think this is an important acquisition. I think with our knowledge on the material side coupled with that knowledge that they have on the part production side, it's a really nice combination, and we can go after high-end applications in that way. What was your final question? I apologize, you had a third one.
PET film asset is abundant; this is a mature market. What is your outlook? PET film.
As you know, we're one of the top producers of PET film in the world. That industry, I think you'll see some consolidation in that space over time. We think we have a right to win in that spot because of our ability to produce high optical grades, also to handle thin versions of the film. We still see growth in the display market. I think the display market is projected to still grow at about 4% per year over the next several years. We don't see that backing off. The good thing about polyester film, many different types of applications that you can do. It's a super versatile film. One part of our strategy is to start, and we're already looking at what types of other functional things can we do to that film that will open up new applications for us in the future.
That's a big component of our pipeline and things that we're working on. If you look back at the polyester film, years ago, when I was in this industry, polyester film, one of the big applications was making floppy disk, right? It evolved into many different things. I think you'll see that same thing happen with polyester film as new applications are opened up. I think it involves functionalizing the film with coatings or surface treatment, and those are important parts of our strategy going forward.
The first question is about petrochemical and carbon exit. The outlook on the exit. In Q2 presentation, you mentioned the timing. Is there any delay from that timing? Have you changed? Also, in the invitation for this meeting, there were two themes, agenda items. The first is the exit update of the petrochemical and the carbon. On the other hand, in your presentation, you didn't mention it so much. What is the reason you didn't mention it so much in this presentation, although it was one of the agenda items? On page four, regarding petrochemical EBITDA, it seems that it is still remaining. That's how the material is shown. In the previous material, previous meeting, carbon with petrochemical, EBITDA, it was N/A. This time, are you keeping this business? Or maybe on page eight, it's easier.
Basic material, it says 450, but in the previous meeting it was N/A. You indicated the number here today. For the exit of carbon business, in the August briefing, you said within Q3, that means within this calendar year, you can announce the buyer. You said within this fiscal year, you said today. That's what I heard. Was there any change? For the exit of petrochemical and carbon business, please give us the details.
As you can imagine, the petrochemical, as Chikumoto-san said, it's a long negotiation, and you can imagine that when we announce it, we're going to get all sorts of details about exactly in detail, everything. We're making a lot of progress. There is a lot of agreement on many things. We have not yet sorted out all the details that would allow us to make announcement with people, with everything and all that. That's the only reason. We're making a lot of progress, but as Chikumoto-san said, the day we announce it, we're going to have question about everything in detail. Some of these details, including exactly percentage of ownership, things like that, we have not yet completely finalized some of these. That's all. That's what I said; there is a lot of work ongoing right now.
Still, December is our target, and we will see. It's more important to do the work to come to this into an agreement to set up a JV that is a long-term future and that will generate value. There was a question at the beginning about what are you trying to do? The goal is still create that JV, start that JV. From the moment you start that JV, the clock starts ticking, and you have three years before you can do an IPO. You don't really have a choice because you need to generate three years data before you can do an IPO. Over the next three years, from whenever we start, which we really hope is fiscal year 2024, there will be somehow a transition period where it's not going to be IPO'd.
Our goal in that period is to reduce our share until the time where we deconsolidate. That's what we shared. This is still our goal, and our goal is still by the horizon of whenever we start +3% to do an IPO. In that time period, the team will have one responsibility, is to rationalize assets, is to put it back onto a path where it can make money, is to attract additional investors, is to work with the government to find subsidies because it's a matter of Japan needs a profitable petrochemical industry that is probably smaller than it is now. All the steps are taking place, and we're doing this very seriously, and we are really committed. To answer your question also, Watanabe-san, stock went down 3%, okay. It pains me that it went down 3%.
It doesn't mean to me because people are expecting a name and everything. We are absolutely doing the work. We are confident with what we are doing. The right information will come at the right time. We are fully dedicated to achieving our goal. In terms of carbon chemical, you are correct. We had said more like Q3, we would probably find. It takes time because there are JVs involved; there are things involved. There are long-term agreements. We have the same thing. We are going very meticulously through everything, and we are fully dedicated to achieving it the fastest possible. There are steps that we cannot bypass because there are customers involved, there are people involved, there are long-term agreement that we need to sort out. There is a myriad of things.
We are talking here about between these two businesses of divesting or creating a JV for more than JPY 1,000 billion . This is not an afternoon work. It takes a lot of time and a lot of precision. That is what we are doing, and we are fully committing to do both.
Regarding carbon, you said by Q3, you said you were going to announce the buyer. Are you modifying that announcement?
Did it a little bit because I do not want to stand up here three months from now. Maybe yes, maybe no. We are really doing everything we can to, at least before the end of the year, to have the fiscal year, that is one of the semester, trimester, or quarter, to make sure we have everything correct. Again, we are aiming for that. We are doing everything. We have been working a lot on this with the same people. It just takes time.
Thank you. The second question is about EVOH. This is, I think, a potential growth area. In the previous briefing about the functional materials, 5% CAGR was announced, but have you changed that outlook? There was a capacity shortage for a while, you said, and because of the tight demand supply, I think that the margin has been expanding, but is there a chance for you to further expand the margin? Also the new plant in Europe, they will be put into operation. The original plan was 2025 July. I think there is some delay. Maybe today you said 2025 or 2026. When exactly are you planning to put it into operation? There is a high precision and food package material market is tough, but you have a good performance. What is the growth potential outlook on EVOH once again?
Yeah. Good question. If you look back at the data from EVOH in that business, we came out of 2020 with a lot of pent-up demand in 2021, 2022, very tight market. Prices were extremely high. Right? Extremely high. In the presentation I showed today, it looks like minimal growth. I mentioned EVOH being a big contributor because it's a large business for us. What's happening in that market today with everything that's happening from an economic point of view, the overall food business, much like many other parts of the market today, is down. We're seeing some price erosion on the EVOH material, but I would say not substantial. What's in the 2025 forecast is pretty conservative. Okay? That also is contributing to what looks like not a lot of growth.
I think it's probably more conservative than reality, but our business team has been pretty conservative in that response. I don't have the specific dates. We can get those for you on the new plant startup. Certainly, from a relevant contribution point of view, more of the relevant contribution from that capacity expansion would happen in 2026. That's why I mentioned that in the slide. We still think we have a really nice position in EVOH. It's a core part of our strategy going forward. I think we don't see the bottom dropping out of the pricing. We're probably a bit conservative in the 2025 forecast. We hope that it's actually better than that but still a very good business for us going forward. Yeah.
Thank you.
Thanks very much for the elaborations as well as explanations. I have two questions regarding the strategies. Number one, page eight. I have some difficulty to reconcile those numbers, and I'd like to have some confirmation, elaborations regarding the several things. Number one, first, Specialty Materials. According to this graph, there is approximately JPY 113 billion improvements in the EBITDA, whereas if we add up those four areas, that's only JPY 90 billion. Are we expecting some other growth areas, which is basically quite diverse within specialty areas? Within the Basic Materials, this is basically a standalone basis.
If you take a look at the area number, which basically has a gap of JPY 450 [Non-English content] or JPY 45 billion between the as is standalone number and the divestiture number, which means that number does not include the equity income, which should be a part of EBITDA, according to the IFRS regulations. How do you treat the petroleum corporations' sales revenue and equity income in those both cases? I'd like to confirm about the divestiture as well. According to our conversation back in December 2021, Mr. Gilson clearly said that you are confident to divest those businesses without recognition of any major extraordinary items or losses. Is this position still remain the same, or are you changing something? Could you please elaborate those things?
I think you said that through divestiture of petrochemical operations and NOA carbon operations, you do not expect any major extraordinary loss recognitions. That's first question.
On that one, we are not communicating anything. The market condition in 2020 versus 2021, I think, is fundamentally different, especially for carbon chemicals.
Yes.
Was very fast. The value that we were seeing at that time was really high. Time has changed; that's why we didn't do any fire sale either. When we have the data, we will communicate it. We are dedicated to selling the carbon chemical business.
For extraordinary loss recognition as well as cash inflow, as of today, no comment.
No comment. No.
No comment. It's basically override our competition back in December 2021.
The market conditions are different. If the market had been different, we're dealing with the current situation right now, and we will communicate with current situation when we are ready to communicate.
Other questions from Yamada-san. Regarding Specialty Materials, four of them together, and that doesn't amount to this total, and that is true. There is others. What they are?
That is general industrial construction materials, and we explained product line today. We have more sales through distributors, and all that is included into this number here. Therefore, the gap, the difference, is coming from others. As for basic materials, for 50, our operation and our earnings from the joint venture and our portion of 100 is included here. Carbon is excluded. On page four, EBITDA JPY 6,000 , revenue JPY 3 trillion—JPY 3.375 trillion. This is the same as the number in February. At that time, the assumption was petrochemical is equity earnings, and that is JPY 3.375 trillion .
Well, you follow IFRS; therefore, equity earnings should be included, but there is a gap of JPY 450. Why is it not included there?
As a standalone, EBITDA JPY 6,000 includes equity, and that is the only portion. On the right-hand side, on the right, joint venture, our portion supposing it's in consolidation, 100% owned. That's the assumption. In the end, we will finish as somewhere in between those. With 100%, that's JPY 450 EBITDA.
Why equity earnings and you have lower numbers? Why is that?
Two different things there. There is JPY 415 EBITDA. What you see is that it's the COI line is where you really need to look into. At the COI line, what it says is that in the line which you see JPY 6,000 going down to JPY 3,600, there is about JPY 100 in COI included. On the right-hand side, there is about JPY 200 that's included. It's treated the right way. We are mixing up two things between EBITDA and earnings. The EBITDA, the depreciation is not part of the rest of the reconciliation, so it's done correctly. What it means is that we are looking at a business that's about JPY 200 COI. Right now, the way we are looking at it right now, and generates about JPY 450 in EBITDA. You are correct on this one.
Okay. May I understand that on after-tax basis, the petrochemical operations profit is ignorable in 2025 in your assumption?
What is ignorable?
The petrochemical operations' net income after tax.
It's included in both.
No, not both.
Okay.
Okay. I don't want to take too much time.
Yeah. Let's talk about it.
Yeah. Let's talk about it later.
Yeah.
Thanks very much. I'd like to ask you one more question regarding the specialty chemical. I'm sorry for taking time. I think the four growth areas have decent risk. For example, in digital, according to your number, you are aiming approximately 15% growth from 2022 to 2025. However, according to SEMI wafer segment number forecast, SEMI, they're expecting approximately 3%-4% volume growth in the wafer during the same period. You are aiming much faster growth than SEMI's wafer area growth expectations. Are you expecting any major share gains during those period, and what's the risk associated with that? On top of that, I would like to ask you two more things. In medical, you are saying that you're expanding in implants, which is hated by Shin-Etsu Chemical and some other companies because of the risk of litigations.
What's your game plan to manage the litigation risk and also geographical expansions? From 2021 to 2022, the ex-Japan portion has increased simply because of the Japanese yen depreciation against U.S. dollars as well as EUR. How are you confident to expand those overseas operations?
Sure. All good questions.
Thanks very much.
Yep. On the electronic semicon side. A couple of things that's different. The growth that we're projecting is not just growth with the market. There's new applications coming. As I mentioned, we're moving downstream, into more formulated solutions in the semicon space. That's business that we don't have today, so that will be totally incremental.
I see.
Yeah. That's a substantial piece. I'll also say we have some M&A aspiration in this area. Okay? I think both organically, because of new application that we don't have today and any M&A work that we do in that space, that's the main driver behind the growth piece.
Understood.
Okay. On that one.
Yeah.
As it relates to medical and implants, we've been doing medical implant shapes for a long time, and lots of risk mitigation that's being looked there. One thing that we will not do, we will not go downstream to a point where we're actually producing devices.
Understood.
That's where the risk threshold happens. We're very cognizant of that. As I said before, this is not a new business for us. Lots of legal work that has been done on clearly understanding the risk and where to stop, basically, in that regard. As it relates to geographical expansion, I think a lot of that is coming through what we're doing organizationally.
As I said before, I came from the Americas region. I used to run the Americas region. Super fragmented. Really fragmented. I think with the organizational change that we're making to bring together and be able to leverage within the region, just simple things like Jean-Marc mentioned commercial excellence. Simple things like how we manage the sales operation. By default, some of that stuff, some of the bigger companies that really know how to do this well, and leveraging those resources to help some of the smaller subsidiaries that we have had, and as we bring those subsidiaries together under one management, that makes a huge difference just in our sales organization capability. Then beyond that, we're also looking at how we do application development closer to the customer. A lot of times in the past, decisions had to come all the way back to Japan.
It took forever. We lose a business opportunity. We're setting a structure up where we can be much more responsive. I think in a Specialty Materials area, the key thing is you have to solve customer problems quickly, and our team are highly focused on that. That's, I'd say, some of the operational capability types of things that we're setting up in the region to drive that growth. Yeah.
Thanks very much for the elaborations. As far as the implant is concerned, I believe Mr. Gilson has a very deep understanding regarding the potential financial difficulties, so I do expect great risk management. Thanks very much.
Thank you very much. I have two. First, petrochemical and carbon for petrochemical, especially. Am I right in understanding as follows? In this meeting, now there was a September announcement about this meeting and the exit. If you talk about that, and then most of investors expect that in this meeting you will talk about the details. I think the result, the negative surprise was reflected on the stock price today. Given that, when you announced about this meeting in September, as of today, October 20th, you thought that you can share us with some details, but because of the progress in the negotiation, as Jean-Marc alluded earlier, you didn't have all the details worked out as you had expected by today. Also, there are some uncertainties. We appreciate that, what is the current plan? Let me understand.
Within the year, 50/50 JV is going to be set up, and you will be announcing that. Is that the correct understanding? Oh, you are saying no. Okay. Could you answer my question so far?
Your point is correct. As I said, and I repeat it, these are very long and difficult negotiations. Otherwise, everybody would have done it by now. We took the lead in doing that because it's absolutely necessary to do that. We have a team that has been working really hard to do that. We are not yet at the point where we're going to communicate, as I communicated now. We are making progress, but like in every deal, until it's signed, it's not signed. We hope that we're going to be able to do that, and that's all I can say. In terms of the 50/50, that was an assumption we made. I'm not sure that this is reality.
I think that the plan that I communicated is still what I said before in terms of first create that JV, that's a vehicle that will be used, create that JV, have partners. After that, the clock starts. We're going to try to bring other people in, to bring other investors, make money, turn it around, and then do an IPO. It's possible that we will continue for a while to consolidate a larger petrochemical business into our business. Over time, our goal is to go below the 50, deconsolidate, and then to exit. The reason why we're not saying precisely what you would want to see is because we don't have the final details, and we don't want to communicate something that is not sure.
I think we are serious into what we do, and when we will have the data, we will communicate the data.
Thank you very much. The future deadline itself is difficult to announce. In terms of the establishment of the JV, it's hard to anticipate when exactly you are likely to do that. This is about the probability
I think , as I said, I cannot repeat more myself; we are making really good progress. I don't want to say something, and I know that you said, in September we would announce, and we've made a lot of progress all along. Again, lots of things have been done. I think we don't want to go into a discussion about details now; we're not all the details. I know once we announce, we're going to get so deep in details about everything that we're not yet ready to do that right now.
It's been a long time to attend this meeting. Maybe you have this discussion already before. My first question, 2025, towards the 2025 goals, you are explaining the progress. Exit is possible, and I don't think by 2025 it would be the final format. I want to know your vision beyond 2025 as you try to reach 2025. Global chemical company, what is your envisioned company profile? It's easier for us to understand. Niche top in Specialty Materials, is that what your company want to be? Or are you a master in critical areas? How do you envision your future profile of the company?
I think we made it clear that this meeting was not about the overall company portfolio. I think we made it clear that that discussion is in February. We are working on portfolio at the corporate level also, a lot. I repeated many times over before, you cannot do, and we don't want, and I don't want us to do any sort of portfolio reform at the highest level until we have given ourselves the chance to fix every part of the business. If we do portfolio transformation at the corporate level beyond what we are doing at the business level, we got to do it in a position of strength. We're not going to do if we exit some business, exit on a fire sale, or do anything like that.
That is why I insist, and I re-insist this, our focus right now is to make every part of our company good, profitable, and at the same time, we are re-looking at what the business where we are the right owner for the future that is well-aligned with our long-term strategy. Today is not the day where we're going to talk about this. That discussion is ongoing, but that's a different discussion that we will address at a later time.
Thank you very much. In February, I understand you are talking of our corporate level, but for performance products, you have strengths, and you explained product lineup, and you would go downstream, you mentioned. You have front process, back process there, and here epoxy resin, and back process key trendsetter. I don't think exactly. You are going to focus more among the activities. For example, Shin-Etsu Chemical, a semiconductor, they have wafer, resist, and mask blank, and in the back process they are encapsulant, and it is closer to the customer, and they have key products. From various angles, they can collect information. But in you have epoxy resins. In cubicles. And if you want to have just very strong materials, maybe you have photosensitive materials, or you don't have resist, but you would be strong in polymer.
I think that kind of refocus can be a possibility. Is that direction that you want to go ahead?
Yeah. On the electronics material, as I mentioned, if you look at our past, where our strength has been is in what I would call tier two materials, various types of tier two materials. That will, I think, continue to be an area for us in the future. In fact, we would like to not only expand the types of tier two materials we have, but we want to increase that portfolio. That's kind of a sweet spot and has been a sweet spot for us for many, many years. That said, with the development that we have of the new technology through our acquisition a couple of years ago with Gelest, it's going to move us downstream into a tier one spot with tier one types of materials.
As a result of that, it should open up opportunity that we have not had in the past. You're right, we have not participated in that space. We've gone to market in a different way in that space. This is going to change the game a little bit for us, and it's coming through kind of a deep core technology that we acquired through the Gelest business, and we've been able to leverage that to be able to expand the space that we're operating in. I think our strong position as a tier two material supplier does nothing but enhance our ability to be able to operate in that space going forward. Yes, little different positioning than what we have historically had in the past, but we think there's good synergy between where we're coming from and where we're going in that regard.
Let me add one more thing here is, there are tremendous synergies that we will be exploring too between our Specialty Materials business and our gas business. We are exactly at the same place. We are going to be at the same place in tier one supplier, the same customers; there are a lot of synergies between our two businesses.
Thank you. Second question, page five. Employee engagement and the others are improving; this number seems low. How do you analyze the background here? My concern is like today's discussion regarding handling petrochemical and carbon business may be difficulties with outside parties; possibly inside, you may have difficulties within the organization. What are you doing to improve the numbers here for employee engagement?
We're doing every year a complete employee survey, addressing all the points and where we need to improve. As you know, when you bring a company through a change management and transformation, our numbers were not good before, even before transformation. The good point is that we are improving our numbers through this transformation. We are improving. Are we where we want to be? No. We want to continue to improve, absolutely. It's going to get better as the company's going to be more focused that we're going to improve our earnings. In my experience, employee engagement is strongly linked with employee performance, with the company performance. When a company performs well, employees are highly engaged and vice versa. They are linked. That's the goal. It's going to improve as we improve performance.
Having said that, it's tough because it is a major transformation and we are going through a major change management program in the company. I will repeat what I said before. We have no choice. The companies that will not do it will face very, very difficult conditions in the not-so-distant future. It is a necessary step for the health, longevity, and sustainability of our company, and we have a very keen eye on our employees. At the end of the day, they will make the difference.
On page 16, please. I have a question. At the time of Q1 analyst meeting, from that number, there seems to be some changes in the numbers. First, for mobility in Q1 material for 2025 sales was from JPY 2,800. Now it's down to JPY 2,500 from JPY 2,800. On the other hand, for EBITDA, it was JPY 310, but now you have JPY 340 this time instead of JPY 310. You increased EBITDA, although sales was downgraded. On next page, there was some information. With additional portfolio change, you have JPY 1,200. With additional portfolio change. In the EV mobility area, the downsizing of the business is included this time, but on the other hand, for profitability, you are exiting from nonprofitable areas, maybe it's improving. Is that the case? Or is it because CPC earnings to be added onto that? Is that why you have increased EBITDA?
That's my question. Similarly, for digital, for sales, there is no change to JPY 3,500. It's the same from Q1. EBITDA in Q1, it was JPY 770, but you downgraded it to JPY 750. Could you also explain that?
It is exactly right on the EV mobility. It's a reflection of looking more deeply into the portfolio on businesses that we need to exit or find better owners for. It also reflects, from a EBITDA point of view, not only CPC, but other applications that's being worked on that we think have higher value. One of the things that I want to stress is within our core business, all of our businesses, not just EV mobility, over the last six months, we've been taking an extremely deep look and challenging within each of the product lines: Is this a business that we need to be in? Can we win? Are we willing to invest in it? What's our competitive position? Through that kind of lens, we've been reshaping what the portfolio looks like.
What you see on this chart kind of reflects where we think we're at. There's lots of detail underneath that, and I think as we start to execute on that plan, just like we shared some of the more recent executions, you will start to see that over time. Everything that you see on that chart, it reflects those types of changes and that type of deep look into the portfolio. As I said before, within SMBG, when we think about reforming the portfolio, it's not just in that other category, right, that was mentioned, where we will grow in some of the other categories, as Nakahira-san mentioned. Within these strategic markets, it's a deep and kind of sober look at where we can grow profitably in the future. That's what's reflected in that number.
I apologize; we can't say more than that today, but you hit the nail on the head in terms of accuracy. I would say it's the same situation on the digital side. There's some parts of that business that some specific business areas that we will exit. Some of them you probably will not see because it may not involve divesting a particular business. It may involve walking away from a particular application within that business, and we move on to higher-value applications. It's portfolio reform, kind of grassroots, and some of it will result in divestiture, some of it may not.
[inaudible] . Yes. Just one clarification. For EV mobility, it seems that you are cutting non-profitable businesses so that you can increase the profit and margins. I can understand that. For digital, it seems that you haven't changed sales, but the profits are down, although the sales have not changed. In the sales as well, there were some additions and deletions as well. On net basis, it was unchanged. For the profit, you are divesting or exiting some of the business area. Is that the reason for the profit side? For the sales side, you had increased and also decreased at the same time, and the net result was the same. Is that correct?
It's also a kind of an updated look on margin projections and timing for bringing in new applications. There was a number of things that we looked at as we went through portfolio assessment. I think the EBITDA number you mentioned was it JPY 770 -JPY 750? Yeah. Not a huge change, but again, it's just reflecting an updated look at timing and new applications as we're looking at the portfolio. Yeah, I think nothing hugely relevant in the digital area, just an updated look at that.
[inaudible] . Thank you very much. On the same page, I have another question from a different angle. For FY 2025, you have the updated 2025 expectation for sales and EBITDA, the balance in the increase in each one of them. EV, digital, and food—these are close to my understanding of the businesses. However, for medical, there is an increase in JPY 100 billion, and the profit is JPY 230, or, sorry, EBITDA is JPY 23 billion increase. For EBITDA, other than depreciation amortization, it seems that you have some increased costs because it's EBITDA. In this area, you have some R&D and development costs to be incurred. It seems that the marginal profit seems to be high. On the EBITDA basis, you are not adding so much earnings or profits. Is that the right way to describe this business?
Earlier, this is an area that we will grow organically. We will also grow in this area with our existing product line by focusing on new high-value applications. This is also an area where we expect some M&A activity. All of those things combined reflect the current forecast that you're looking at here.
I have just one question to Chikumoto-san. Petrochemical and carbon business and carve-out. That's my question. What is difficult in the order of most difficult? Can you mention that, for example, people issue or Kashima plant? There are not that many others in mind like [AOHL]. When other companies consider restructuring and your case of restructuring, you have Mizushima together with Asahi Kasei , so the backgrounds are different. What are difficult discussion points, possibly in the order of most difficult discussion points? I understand that you are trying to finalize; you have the progress. Is that financial-level money matter, or it's downstream issues like how to supply to customers? How far are you in terms of your negotiation of petrochemical and carbon business?
I should not talk details. Just very roughly, let me answer. What we value most is fairness. We need to ensure that the deal is fair. Otherwise, shareholders or employees would not really accept. You mentioned various possible discussion points, and fairness is the common ground for all of those. I hope this answers your question. Thank you.
Thank you very much. This time, you suddenly showed medical. Previously, in the product explanation, you showed in each portfolio how much is the sales and what is the breakdown, what is the growth. This time we didn't see the similar specifics. On page 30, you had major areas shown. Out of JPY 60 billion sales, what is the breakdown of the JPY 60 billion sales? What is growing is implant and the single-use products. Those are the two that I'm expecting. As a company, maybe three times growth is what you're expecting. Is it mostly coming from implant, or is it coming both from implant and single use, and the others are just growing along with the GDP? What is the current situation, and which one is growing?
Another question is the one which I included in others in the past, maybe you found some growing a lot. If there is such a thing, Jean-Marc , you showed from the beginning. You showed this time, but you didn't show in the previous meeting. That means that your understanding has changed dramatically this time, significantly. What kind of change did you see so that you can announce those sales this time, not the last time?
Good question on medical. First of all, we did not elevate medical out of other just based on having seen some growth in medical. Okay. As we're thinking deeply about this portfolio, as I mentioned, one of the things that we want to have when we finish with Specialty Materials, we need a more resilient portfolio. We need some businesses that, when the market's up and down, it's a bit more stable. Medical certainly is one of those. Medical also has attractive margins, right. It's an interesting business in that respect.
Probably the most important reason that we're elevating medical out of other has to do with the fact that we think with the product lines that we're going to be focusing on and building our business around in the future, they lend themselves very well to medical, and we have not taken advantage of that in the past. The implantable business is a spot where we're already very strong, actually, in that space. We have grown; I won't quote specifics, but it's been a growing business for us this year—substantial growing business for us this year. In light of the rest of the business, especially around electronics and some food packaging and some other areas that it's been tough, right. Making our portfolio more resilient was a strategic reason for bringing medical to the forefront.
I talked a lot about having synergy within the portfolio, and as we become a more market-facing organization, we can utilize these people that are reaching into these companies, into medical device to leverage what we're doing on polymers, to leverage what we're doing on films into new applications that we haven't had in the past. I don't want you to think that in the other category, did we just find something that was looking good? This was extremely intentional as we walked through the portfolio and try to figure out what this thing should look like going forward. We think we have a right to win based on our technologies to be able to operate in that space. We think it's good for every stakeholder that we have, that's the main reason for having brought that up.
Your other question was around others, right. I think it was similar to the question that Nakahira was asked earlier. Did we see some growth in others? A large part of our business, especially our shapes business, is driven through a distribution channel. They touch many different markets. Not necessarily ones that we're highly focused on, but there's still growth in some of those spaces, especially in the industrial channel. Even in some consumer products, we will expect to see some level of growth in the other category. That doesn't mean we're going to be elevating each one of those up the moment we see them. It has to be super strategic, and medical was one of those for us in that space.
Another point. Right now, for the four areas sales breakup, which one is the biggest? Maybe you can give us the order, or if you have the numbers specifically, or the breakdown number, that would be great. If not, just the sequence or order. In three years, for each product group, how are they growing , respectively, in three years? You mentioned about the implant; if that's the strongest growth area now, maybe it's strong in the Japanese market. Are you going to bring it to Europe or America? Is that another reason why you expect a lot of growth? For implant, maybe this is just hypothetical; maybe you can combine implant and other category products you can sell together, cross-sell. That's why you can also grow other products with the benefit of implant. Is that the reason?
What is the key driver, key products leading or driving the growth of these areas? With the numbers, please.
I would say today, implantable is an important part of the small medical business that we're doing today. I mentioned as an example another area that we were showing in our innovative products and one that we think we can leverage is this area of culture bags, for example. If you look at these culture bags, they're a film-based product primarily. They also have polymer that's used for making shapes. They also have tubing. There's many different parts of that particular market that is interesting. We make a lot of those materials today. Those types of applications, and there's others. That's just one example that we put into the presentation as an area where we can see new innovation coming in, where we think we have a right to win based on our product category.
If I stand back and look at what the space looks like for us today and which one is ranking, it's not a huge business for us, but implants is a sizable piece of that. I'll just leave it at that. We expect to grow in that space, but we expect to leverage our knowledge on how we do regulatory and also leverage the portfolio of polymers and films, especially, and even composites to some extent, to be able to grow in areas that we're not large in today. We've already started business development work in those spaces. I think it looks a lot different in 2025. Obviously, our numbers go up pretty substantially. That mix of products should look quite different. I won't say that implantables may not be the largest part by the time we get to 2025.
There's other types of materials that we hope to be able to bring into that space.
If that's the case, that growth during the midterm, it says more than 30% per year CAGR, but it's not going to be this year. The later years there will be more growth compared with this year. Is that the case? Also, any big M&A you are expecting in this area? Maybe not? This is the last question.
M&A—this is a target area for M&A, and it's in the assumption, and I can't say any more about that, but because of our product portfolio, we think an enabling M&A in this space would be quite interesting.
Page eight, portfolio. When I look at that basic materials direction and specialty growth, I understand that M&A and healthcare—that position seems a bit vague. I suppose it will be explained in February, but for M&A, Alpha technology is very competitive. I understand that, but market condition is not quite good, and ACH is getting obsolete, and you are the best owner, and I suppose there is discussion ongoing. What's the timeline? Go ahead. Also industrial gases and your ownership percentage. It's been a discussion, and it is in consolidated, and next year it's going to be the 10th year, and with respect to other M&A in semiconductor, maybe it's difficult in terms of funding, but can you give outlook on those points, please?
I mean, as you mentioned, these are discussions for February. We are deeply involved into re-looking at everything. As I shared before, our focus right now has been on improving the health of each and every one of these businesses. As I said, the gas business is a very strong business right now. We are really happy with the progress we've made on healthcare. We are putting a lot of attention now on Specialty Materials to also bring it to a much higher level of profitability and growth. MMA is more of a commodity business. We are taking a lot of measures, and there will be more about restructuring the activities and looking to invest into additional Alpha technology. This is ongoing also.
When you have all that and all these businesses are doing well or are well-positioned, there is still a question about, for which one are we the best owner and which one we need to probably exit, or should we even exit? These discussions are all taking place also internally and with our board of directors. That's the next clarification. We've been very rational into first fix the businesses. When they are fixed, you have options. When they are not fixed, you don't have any options. We've been very deliberate about first fixing, and then that discussion will take place when it needs to take place, under an auspice of we want to be more of a Specialty Materials going forward.
Thank you very much. I understand very well.
Thank you.
Thank you very much. CFO Nakahira will give you closing remarks.
Once again, thank you very much for participating in the IR Day of Mitsubishi Chemical Group today. Lastly, I would like to take you through Mitsubishi Chemical Group's corporate value enhancement approaches as a closing remark. The maximization of corporate value is a most important purpose for us. We pursued the expansion of the size, and now we achieved JPY 4 trillion in size of the total group. From FY 2021, enterprise value maximization is the new focus, and we changed the gear. Shareholder return will be enriched when we set the policy and the dividend payout, 35% for 2025 was set as a target. The profitability improvement is the imminent and most important issue. Pricing, cost reduction, and portfolio mix change are being promoted. On the other hand, on a continuous basis, in order for us to enhance corporate value, growth is essential.
Today, as growth drivers, one of them, we explained the details of Specialty Materials. The expansion of shareholder return and the profitability improvement and growth. Those three, we have to secure those three securely and with speed. We would like to express our commitment to that once again. On top of that, we would like to commit ourselves to the improvement of the quality of engagement and the communication with investors going forward. We hope that we will have continued support from investors and community. Thank you very much for participating in this event today.