Status Update

May 22, 2020

Slides

My name is Keita Kato, president of Sekisui Chemical Company Limited. Thank you for joining us today amidst your busy schedule. First, we would like to extend our deepest condolences to all those affected by COVID 19. We wish you a quick recovery and hope for normalization at the earliest phase possible. We will continue to make every effort to prevent the spread of infection. Due to our utmost to maintain social infrastructure, we vitalize and develop the economy. I was appointed to my position on March 1st this year and have served as president for about 3 months. During my first press conference, upon being named the new president, we discussed the long term vision of doubling our business by 2030, implementing the new medium term management plan as the 1st step and the refinement of ESG management to achieve our goals. I define 3 key phrases: drive for growth, innovation and a vibrant and good company. The long term vision and medium term management plan announced today have been formulated over a year and were initially scheduled to be announced in early April. While we engage in overcoming COVID 19, we firmly intend to grow strongly through innovation over the next 10 years. Drive growth and become a good company that is genuinely needed by stakeholders in society. From this perspective, we revisited the content and figures necessary to our vision and plan. Changes in society and companies were encouraged by behavior modification, such as the acceleration of digitalization and the crucial recognition of hygiene management. In response to these changes in the demand structure, we have reviewed our management practices from a different perspective. Although we revised the target value of the new medium term plan in consideration of the influence of COVID-nineteen, we recognized a direct and initiatives necessary for sustainable growth. Based on this understanding, we are here to announce our new vision in medium term management plan. We at Sekisui Chemical Group want to meet the challenge of change, flexibly and boldly, while contributing to society. We appreciate your support and cooperation. I will now review the presentation material. First, I would like to share the long term vision, vision 2030, which aims to double the business volume in 2030. I would like to explain why we are introducing the new long term vision at this time, the vision's background and significance. Summarizing the last 20 years, we implemented a divisional company system while being suffered with a deficient and achieved reverse and growth and evolution. Over the next 10 years, we must be prepared to face an ever increasingly challenging and unpredictable business environment. There will be a change in demand structure post COVID 19. Amidst this situation, To meet the demands and expectations of all stakeholders, we need to uphold a new vision and direct the entire group to unite make changes and realize our goals. Here is the overview of the long term vision, innovation for the years. This statement encapsulates our intention to continue to innovate and contribute to society. We aim to double our business volume in 2030 with business growth, reform, and creation centered on ESG Management. By strengthening the organizational capabilities, shown at the base of the figure, we will expand business in the 4 domains and create new fields to enhance ESG management. This page shows the gross image by domain. The residential domain is included, partially within the current housing company, the Advanced Lifeline domain, partly included in the current urban infrastructure and environmental products company, the innovative mobility domain, primarily included We will continue to innovate by growing sales in each field by 1.5 to 3 times and enhancing various gross engines. The core growth is driven by existing business domains shown in blue, but it is necessary to cultivate new fields shown in orange to double the business volume. However, we will aggressively develop new fields in the peripheral areas of our current business, not unrelated fields, allowing us to leverage our strengths through innovation. We will now explain the management concept and the long term vision. In addition to providing products that contribute to society and generating sales and profits, we will reinforce our management capability to sustain the business as indicated by the red arrow. Such capability has 2 elements: efficiency and preparing the organization for long term sustainability. We will clarify the significance of strengthening management capability to sustain the business, introduce ROIC as an index of efficiency and work toward capital cost conscious management. 3 axes, which combine sales and profits with the ability to contribute to solving social issues and the ability to create profits. And management capability to sustain the business from the core of our ESG management. And strengthening these 3 axis will enhance corporate value. This slide shows our image for gross toward 2030. Currently, the overseas sales ratio is about 25%. But we will accelerate growth in overseas frontiers and aim for growth by expanding to 50% against net sales by 2030. Reaching the possible target of JPY 1,000,000,000,000. The annual average gross rate CAGR of overseas sales grew by 11% from 2002 when we introduced the divisional company system to last year. We believe our 2030 target of JPY 1,000,000,000,000 is possible by driving overseas sales growth. We will proactively invest management resources to double our business. In the new medium term plan initiated this year, we set a target of JPY 300,000,000,000 as a maximum threshold for M and A investment as a measure to pursue more opportunities. We also anticipate a total investment of at least 2000000000000 by 2030. Next, I would like to explain the new medium term management plan, drive 2022. We'd start it this year and we'll end fy 2022. On April 27th, together with the financial results for FY 2019, We announced our forecast for this year after clarifying the assumptions regarding the influence of COVID 19. Regarding the impact of COVID-nineteen, we announced the guidance based on the assumption that the situation realized in mid April will continue until the end of June. And gradually recover. Therefore, the first half of the year will be significantly impacted. This outlook has not changed as of today. Regarding our new COVID 19 countermeasures, we continue to give top priority to the health of our employees and work on maintaining the supply chain. Let us start with an overview of the previous midterm plan. Although sales increased mainly in overseas markets, we will unable to reach our targets for sales and profits, leaving us with a problem in profitability. Although we are not able to reach the goal of fusion that we set as a keyword in the previous midterm, we were able to create a sales increase of approximately JPY 40,000,000,000 and strengthening the business base, including the full scale introduction and deployment of ESG management, we earned high acclaim from external evaluations and recognition as one of the top global 100 companies for the 3rd consecutive year. The next slide shows the overview of the midterm plan by the divisional company. We were able to ship sales to gross by steadily implementing necessary measures and investment for growth in the future and fusion in the previous midterm. On the other hand, in terms of profits, we were unable to achieve the plan, mainly due to the delay in obtaining returns from gross investment and the impact of COVID 19. The table on the bottom right shows the factors behind underachieving plans for each divisional company. We recognize that we have left a challenge for the speed of structural reforms as well as gaining returns on gross investments. This page shows the overview of the new medium term management plan, drive 2022. The policy and basic strategies are as described, and we will work on 3 drives as the 1st step in long term vision. The existing business drive is business growth and reform. The new business drive is preparations for long term growth and the business based drive is strengthening the ESG management base. The target values are net sales of JPY 1,222,000,000,000, and operating income of JPY 110,000,000,000. ROIC, which we introduced as a new KPI, will increase by about percent. And ROE is stable at a level above 10% at 10.6%. Details will be explained later. This slide is the overall picture of the medium term management plan strategy. We will promote ESG management and accelerate 3 drive globally. The first existing business drive will accelerate growth through investment expansion and early acquisition of returns while promoting structural reforms to prepare for change. Secondly, the new business drive requires preparation to achieve long term growth. We will accelerate the establishment of necessary foundations for new businesses and noble domains, and we'll also promote the acquisition of foundations through proactive M and As. The 3rd is the business based drive. We will incorporate ESG management into KPIs as a concrete initiative. We will promote these 3 drives with the keywords, future, and digital transformation. This slide reviews our assumptions or market conditions when formulating this medium term plan. In the electronics field, although there is a certain degree of demand expansion effect for smartphones due to the emergence of 5G demand, we do not anticipate significant growth in the medium term. Regarding global automobile production, Even after the subsiding of COVID-nineteen, market recovery is becoming more uncertain, and we do not anticipate any growth. Regarding housing starts, we believe the total number of starts will decrease by about 20% year on year compared to FY 2017. However, we think that the decrease rate is relatively low for detached houses for first time buyers, which is our priority target. Regarding nonresidential construction starts, we believe that the public budget related to national resilience will remain stable. The price of raw material NASA has fallen sharply recently. However, the medium term plan expects the pricing to be JPY 43,000 per kiloliter. Which is almost the same These are the details of our target values. Sales, operating income, ROIC and ROE on a consolidated basis are, as described before, Also, we aim for a net income of JPY 70,000,000,000 and set targets for overseas sales and EBITDA. Target values have also been set for each segment as described in each. The details will be explained later by the president of each divisional company. On this page, we will explain the details of the basic strategy for each of the three drives shown in the medium term strategy overview. First, let us talk about the 1st drive: business growth and reform. The top half of the page describes the growth strategy, We will earn incremental of more than JPY 90,000,000,000 in sales for over 3 years. We list the businesses driving growth for each domain, but the common point is to drive growth with product groups and businesses that help solve social issues. In addition, we will continue to work on strengthening overseas business in all domains. The bottom describes the state of structural reforms. This year, which is the 1st year of the new medium term plan, in a severely affected environment by COVID-nineteen, We need to prioritize solidifying this foundation, strengthen the Constitution and promote structural reforms. We are already advancing cost innovation throughout the supply chain, but we must continuously make changes to support long term growth. We are aiming for an operating profit margin of 10%. We see aim of production reform and structural business reform. In April, we officially launched an organization for digital transformation, which accelerated efforts throughout the company. Dx is a means of transforming work, not an end. The goal is to improve productivity in all our operations. We will also actively invest. In particular, we believe in the realization of structural reform and speed is paramount. The 2nd drive. Preparations for long term growth. Starting from the innovation in Fusion based on technological prominence, describing the center, we will build a business foundation for the new fields described in each domain. As for strengthening the startup of new businesses, in the upper left, an environment contribution technology that converts waste into ethanol or the biorefinery business we constructed a 1 10th scale plant, proceeded with demonstrations and accelerated efforts toward commercialization. The 3rd drive is strengthening the ESG management base. We regard ESG management as our work itself. As we mentioned in the long term vision, in addition to the social problem solving contribution ability and profit creating ability that our sales and profits The 3 axes that combine the newly strengthened sustainable management capability are the basis of our ESG management. In this space, we will explain the concept of ROIC Improvement, which is newly introduced as a KPI. For efficiency to strengthen management ability to sustain the business. We use ROIC on an asset basis, because of its ease of use for the concrete improvement of our business. As you may be aware to improve ROIC, we need to enhance the profit margin and turnover rate. In each business, we will implement specific measures as described We will continue to make an aggressive investment in gross, but as a responsibility, in turn, we will strongly focus on improving the accuracy of returns. We will also use ROIC to transform our business portfolio. We display the company's efforts regarding long term sustainability on the left side. We will monitor how each approach controls capital costs in a broad sense. The ROIC spread is the difference between ROIC and the capital costs is defined as the Sekisui sustainable spread, which measures the enhancement of our corporate value. We believe in the importance of every employee's understanding of the fact that the work itself contributes to the control capital costs and consequently contributes to the improvement of our corporate value, which we will ultimately enhance our management capabilities to sustain the business. I would like to visit business sites and explain this concept carefully to disseminate this idea amongst employees when COVID 19 subsides. These are the concrete measures to reduce the cost of capital in a broad sense I just mentioned. Especially noteworthy is the risk reduction of safety compliance CS Quality. Once this occurs, it can damage the corporate value. We recognize that the suppression of risks in 5 major incident domains is most important. We will position and invest in long term initiatives such as digital transformation, environmental load reduction and work style reforms as ESG investment. The next slide explains our investment and financial strategies. Going forward, we will aggressively expand investment by utilizing debt as we aim for growth. The introduction of ROIC is a manifestation of responsible investment accommodated by returns. We will set a maximum limit of JPY 500,000,000,000, which is about double the actual amount of the previous midterm plan for the total investment. We will range a maximum budget of JPY 400,000,000,000 for strategic investment and anticipate preparation for growth through M and As. This page describes our shareholder policy. As introduced at the financial results briefing the other day, we will strengthen and clarify our commitment to shareholder returns in the new midterm plan. The dividend payout ratio increased to 35% or higher and DOE 3% or higher. And the standards for total payout ratio show and Treasury Stock Retirement were newly clarified. For your information, we have set up a share buyback limit of JPY 16,000,000,000 8,000,000 shares this year. And last week, on May 15, we already bought back 2.0926000000 shares. Which are equivalent to about a quarter of the shares at the price of 13.20 m per share. Finally, as I said at the beginning, the Sekisui Chemical Group aims to be a company necessary to society with employees who continue to take on challenges with pride. The 1st year of the new medium term plan will be significantly affected by COVID 19, and it will require a year to solidify our business foundation. We are determined to overcome this problematic situation and complete the measures and actions shared today to return to the growth trajectory from the next fiscal year onward and realize our long term vision. We look forward to your continued support in the future. I am Iguusuki Shimitsu, company president of High Performance's Plastics Company, Thank you for your time. First, here are the performance trends and the targets of the new medium term management plan. In the previous midterm, operating profit for FY2019 was JPY 37,200,000,000. The 2nd consecutive year of decline due to the sharp deterioration of global market conditions centered on the automobile market and the impact of COVID 19. On the other hand, we believe that there has been some progress in investment related to growth, such as strategic investment and M and As. In the new midterm, we will aim for an operating income of JPY 48,000,000,000 by enhancing our profitability through structural reforms, and realizing the effects of gross investment, thereby becoming a highly profitable divisional company again. As a summary of the previous midterm plan, FY2019 sales were up by JPY 29,600,000,000 compared to FY20 to reach 1,000,000,000. Below is a table of factors affecting operating income? In the phase of upfront fixed costs due to gross investment, sales volume and product mix only increased slightly due to the rapid deterioration of global market conditions. Raw materials increased as well, resulting in a profit decrease of 1,000,000,000. The table on the upper right shows the progress of the 3 strategic fields. Sales increased by 1,000,000,000 driven by automobiles and transportation. We executed priority implementation measures such as strategic capital investment, M and A's and structural reforms as planned. However, as mentioned, the realization of investment effects is a little behind due to the sudden deterioration of global market conditions. This page shows our medium term management policy, business innovation toward 2022, resolution and challenge, plus revolution are the key phrases. This policy means that everyone in the company results to face the challenges leading up to 2022 necessary to transform the business. Items for that purpose include profitability improvement, gross engines and global ESG Management. In particular, in the next three years, we will focus on strengthening profitability by driving our gross engines in a disciplined manner to return and revive to a highly profitable structure. And rebuild the growth base for the future. In ESG Management, we will work to improve our performance further and strengthen global expansion. The next slide is a divisional company overview relative to the new medium term plan. Net sales were increased year on year by 37.6 1000000000 to 1,000,000,000. We show the analysis of operating income on the right. The improvement in sales volume and product mix for the 3 strategic fields: the realization of gross investment such as Sekisui Aerospace Corporation And Supply Chain Innovation will grow the operating income by JPY 10,800,000,000, paving our way back to a highly profitable divisional company. These are the company strategies related to the midterm plan. To strength and profitability, in addition to cost innovation of the entire supply chain from purchasing to logistics, we will consolidate bases and save labor in Japan and overseas and review unprofitable businesses so that we can generate 8,000,000,000 of profits. Regarding gross engines, we will work to strengthen our portfolio in 3 strategic fields and to enhance the return of past investment projects. For new products and new business strategies, we will identify projects that can produce profits through selection and concentration. And prepare for the doubling of volume toward 2030. Regarding ESG Management, we will focus on developing global human resources and promoting DX. This page shows how we plan to augment the portfolio of 3 strategic fields. We will focus the most on innovating the cost for supply chain, determining the underperforming businesses, reorganizing the business spaces and stepping up procurement in order to boost our earnings capability. For the key expansion areas and next growth areas, The main issues have sort of indicated in blue letters. For electronics, we will focus on next generation display. Exterior parts and mechanism components, semiconductors in 5G among others. In mobility, We will strive to expand the sales of high performance Intellayo films, particularly the which angle type for head up display. Focusing our activities on promoting the autonomous driving and aircraft applications. For building an infrastructure, We'd like to push the sales expansion for thermal insulation and non flammable materials, particularly promoting the non flammable you're saying. We will also emphasize the labor saving features of our products in marketing activities. Next, let me give you more details on each of the 3 strategic fields, starting with electronics. Net sales is trending briskly, and the idea is that we secure profit with liquid crystal related business and pursue sales growth with non liquid crystal business. The graph on the right indicates our KPIs. In FY19, the non liquid crystal cell already accounted for half of the revenue and over the next 3 years, we would like to increase this to 64% or twothree so that we can diversify the earning stream. Under the new medium term management plan, we expect a significant sales contribution in the non liquid crystal field From heat resistant sulfur and heat release materials shown at the bottom right corner. We project high growth for these products. Next, moving on to the mobility field. The sales in FY19 was down due to the slowdown in the global auto market. And in the new medium term management plan, we are not assuming the market to recover. We'd like to augment the earnings capability for SXU Aerospace Corporation, so as to build this as the 2nd pillar of strong business in the mobility field. On the right, you will find the KPIs. We aim to grow the sales for high performance interlayer film, particularly which angle type for the head up displays. Although the sales growth is expected to be moderate, we plan to steadily grow the profit. For Secoo Aerospace, we will work to improve the product mix by downsizing the underperforming interior business while growing the High Valley added 18 components business. The company also has medical related products in the portfolio. Currently, the top line is not that big, but by collaborating with the Life Science related business within Sekasui Group, we'd like to expand Sekisui Aerospace's Medical business on a full fledged basis. This will be part of an initiative to strike synergy as quickly as possible. Lastly, we will streamline the business by enhancing our productivity. This is the last page for HPP. In building an infrastructure, we enjoy steady sales trend. Under the new medium term management plan, we will focus on thermal insulation and non combustible material and aim to grow the domestic cells with fire resistant products. As you can see with the KPIs on the right, We will accelerate the growth for the adoption of non combustible ear thing for which the demand is rapidly growing and strengthen the global expansion of thermal insulation materials. We will also strive to grow the new products, such as the heat release products, and particularly work to grow the insulation material for semiconductor's on a full scale. Recently, we made an announcement on piezo electric sensor for nursing care services. Does this one of the seeds we are planting now to prepare ourselves to double the business in 2030? We will make steady progress on these initiatives as well. This will conclude my presentation. Thank you for your attention. This is Toshiyuki Kamayoshi, the company president of the housing company. Let me start my presentation. This page shows the trend of the performance and the targets under the new medium term management plan. In the final year of the previous midterm management plan, our profit declined for the first time in 4 years due to COVID 19 but we were able to turn around the cells to a growth trajectory. As indicated by the order trend graphs on the right, The orders for new housing and renovation were on a growth trajectory since the Duke we saw after the consumption tax hike in 2014. However, in FY 2019, we were hit by the most recent tax hike as well as COVID 19 resulting in falling short of the plan to grow year on year. Under the new medium term management plan for fiscal 2022, we are projecting order book growth of 4% for new housing and 11% for innovation compared against fiscal 'nineteen. As a result, in fiscal 2022, the final year under the New Media Term Management Plan we expect point 2,000,000,000 to 44,000,000,000, which will be a new record high profit for the housing company. This page illustrates the positioning of the new medium tour management plan as well as the development of group wide policies. Secacy Group has a long term vision to double the sales volume in fiscal 2030. Housing company positions the new medium term management plan as the first step towards achieving the group's long term vision. Although we anticipate that domestic market to contract, our strategy is to win a strong position in that market by referring the Modular House business, and by growing the market share with the first time buyers. We'll also be active in preparing ourselves with other initiatives to realize the long term vision and our policies are indicated at the bottom of this page. Following the group policy of Drive 2022, Under the new medium term management plan, we will refine the core domains as part of growth and reform initiative and address the challenges or frontier domains in preparing for long term growth. We have reorganized EBITDA's portfolio into 5 subsegments under the new midterm management plan as opposed to having categorized the business portfolio into core business and frontier business in the previous medium term management plan. In sum, we have decided on the president's policy for housing company, which is to realize both the customer value and business value to advocate ESG oriented business management. To that end, we will capitalize on our competitive advantage of smart and resilience as well as prominence and synergy of housing business, which is managed with the manufacturer's production approach. This strength will be maximized by the group as customer value and growth in management infrastructure will be the core in building the business value. With EFT position as a core focus in business management, we will solve the challenges in the housing industry and aim to complete a sustainable and highly profitable business model, realizing both of the aforementioned values. Next, I'd like to touch upon the new business portfolio and income and expenditure plan. As I stated earlier, we have reclassified the business portfolio under the new medium term management plan, and there are 2 major changes. One change is that we have integrated the renovation in real estate business at stock or recurring business so that we can transform our organization to be able to more closely follow-up on the home owner's needs. The second change is positioning the town and community development business, which we started from the previous Metro Management Plan, as a new business pillar. With this new business portfolio, we will implement specific measures indicated on this page for both the court and financial domains and develop the business. We will roll out initial tips listed on this page in our earnings plan for respective businesses with their particular focus on housing, stock based recurring business, and talent and community development. Now let's move on to the strategies for respective sub segments starting with the housing business. While the domestic housing market will contract, we will have a focus on detached housing and aim for top market share and achieve growth. Main strategies are listed at top left. In the detached housing market for sales with strong underlying demand, we will leverage on our strongest competitiveness, which is building houses with a manufacturer's production approach and achieve the number one share in the market. Compared to the affordable housing ratio in the detached housing market, the same ratio in our product mix is still half that of the industry. Implying that there is a sizable room for further growth. For further growth, we intend to grow the number of detached houses sold by 1120 Houses out of which 800 will be ready built houses. For that call, we will continue and augment the 3 growth strategies that we are currently rolling out indicated on the right. Specifically, we will increase the sales personnel to 2900 people and increase the experience based showrooms to four locations nationwide. For product strategy, we will be persistent on evolving the concept of smart and resilience to the next level. As part of the land procurement strategy, we will increase the inventory of land for sale by 1000 lots and inventory of ready built houses for sale by 500 lots in order to have a base for growing the number of houses sold by 1120 houses. In accordance with the change in the product mix, we will also fortify the business structure to improve the profit by over 5,000,000,000 yen. We have 2 specific measures as indicated on this page. The first point is maximizing the mass production benefit and minimizing the losses with which we plan to improve the profit by 3,000,000,000. To achieve this, effective April this year, we integrated all the production companies across Japan except for the base in Hokkaido. By executing the outlined measures with speed, we intend to smooth out sales and production swings and step up the profitability of the business. The 2nd major is achieving low cost operation for the ready built housing business. We will achieve zero activity benefit, not just on a product cost itself, but also work on the total supply chain from development to construction. With the increased number of houses sold, we will improve the profit per house by 1,000,000 and achieve a profit contribution of roughly 1,000,000,000 in total. Next is on the stock business strategy. In the stock based recurring business, We have integrated renovation in real estate business, which will enable us to focus on the existing sexy homeowners of 550,000 and aim to further maximize our value of the existing customer base. For the renovation business, The dedicated team will conduct a regular home inspection in order to strengthen the contact point and just like the new housing business, we will expand the sales of smart products, smooth the sales fluctuation, and roll out the experience oriented showrooms across Japan. The Real Estate business on the right will collaborate more closely with the renovation business to increase the number of dwelling units under management. Whilst through the collaboration, we aim to expand our apartment invasion orders as well. Under the theme of fusion, we will capitalize on the Famiest Gallery to develop the buyback and resale model brand. Last slide is on the account and community development, residential services and overseas business strategy. In the town and community development business, we aim to further evolve the Asaka project and further grow the prominent Town And Community Building Business at Secoo Chemical Group's new business. Specifically, over the next 3 years, under the new midterm management plan, we are shooting through net sales of 12,000,000,000 yen. We have already completed high projects in preparation to achieve that goal. For residential services and overseas business, We are reflecting on the measures taken under the previous medium term management plan to rebuild the business platform and bring back the business to growth. In the residential services for the elderly, in particular, we will enhance productivity through digitalization and collaborate more waste down and communicate development business. For the overseas business in Thailand, We will promote already built houses by subdivision land just like we are doing in Japan to double the speed of growth. This will conclude my presentation on the housing company. Thank you very much for your attention. This is Yoshiyuki Hirahi, company president of Urban Infrastructure And Environmental Products Company, or UIEP. Let me start my presentation on the medium term management plan. This page shows the performance trend. Net sales did not grow during the previous Metro management plan due to the structure reform under business. But thanks to that, we were able to continue to renew the record high operating income, both in terms of absolute yen amount and operating margin. In the new medium term management plan, we will continue to focus on improving the profitability while growing the sales of our prioritized products and expanding the overseas business so that we can reach an operating income of 1,000,000,000 for the first time as UIEP. This is the summary of the previous medium term management plan. Domestic net sales were down as we discontinued the unprofitable products. On the other hand, we were able to grow the sales prioritize products by 9% every year. Although we enjoyed net sales growth overseas, Sales were stagnant from fiscal 2018 to 2019 as our market turned very weak. As for the factors behind the changes in operating income, Sales volume and product mix had a positive impact of JPY 4,900,000,000, thanks to the prioritized products in overseas sales. And spread between the selling price and material costs had a positive impact as well. Fixed cost, mainly depreciation was up as we made investment for growth as well as for solidifying the business spaces including reorganizing the plants as indicated on the right hand side. We see 2 major challenges in front of us. We need to further improve the profitability of a general product for which we anticipate demand decline as housing starts come down. Another challenge is accelerating growth overseas. Next, let me talk about the president's policy which is contributing to the SDGs with our UIP Excellence. The policy embraces your desire to become a Tmoor Professionals to help solve social issues at a sophisticated level from coming up with ideas for product development, sales proposals for monozukuri or manufacturing. And leading the way for construction work. We have 3 priority measures. 1st, expanding the total addressable market through strong marketing and forming a winning pattern. 2nd, set ROIC management as a new standard and improve efficiency by implementing digital transformation. 3rd, build a sustainable management base. We also set the KPIs outlined on this page. Here is a closer look at our numerical targets under the new midterm management plan. Although sales of core products, which is mainly the general products, have projected to come down as a consequence of the decline in the future housing starts. We aim for the company net sales to grow, driven by prioritized products and overseas business. On operating income, we expect the following impact. Positive six point 4,000,000,000 due to sales volume and product mix. Tentatively neutral impact from spread as a reflection of our strong results to secure the spread no matter how the raw material environment plays out. Another positive impact of 1,500,000,000 as savings from CR Activities by promoting investment for efficiency and digital transformation. We will also keep a fixed cost excluding depreciation. Now Let me dive into the details of the priority measures, starting with how we intend to expand the addressable market. Social challenges such as labor shortage, easing infrastructure and climate change are becoming more serious and complicated. And will strive to help provide solutions with the prioritized products for growth, which integrate our core technologies. The bottom of this page illustrates some of those products. Many of these products available in the market today were developed from ideas which stems from the headaches at the construction sites. Going forward, we'd also like to focus on marketing activities and address the social issues with more advanced new products to expand the addressable market and establish your waiting pattern. For instance, the 3rd footer from the left is the material for SBR project which was originally developed to simply rehabilitate age storage pipes. The fact that this method does not require excavating the road is ebook making but we came up with something new last year. The new material enables the pipe renewal work to be conducted over shorter period with relatively less work They won't be impacted by weather and the noise level can be significantly reduced. This is already used at 7 sites across Japan and is well received by the customers. By addressing 2 or 3 challenges that are intertwined in a complicated way with a single product, We hope to make higher value proposition and enhance customer satisfaction level. Next, let me also talk about our strategy to grow overseas. In the past, we were in China for water infrastructure and construction project. But unfortunately ended up pulling out from the market. Going forward, we'd like to capitalize on our success in Japan to offer various applications for high value added product and penetrate deeper in certain geographies. Although we have to change the course with the US Sheets business during the aircraft market due to COVID 19, We believe the demand for railway sleepers in pipeline renewal in the overseas market would be stable as these are backed by safety investment to protect human lives and active investment for infrastructure. As shown on the right, we will explore the growing medical and hygiene market to the sheets business. For Advanced Materials or FSU, We will start to build production base in Europe. Our collaboration with TP Corporation in Vietnam is making a good progress. And we'd like to expand our activities to the ASEAN market. As is the case in Japan, For all the businesses, collaborating with partners for distribution channel, processing and construction is extremely critical and by establishing a win win relationship, we'd like to cultivate more demand. Next, on the 2nd priority measure of setting ROIC management as a new standard. During the previous medium term management plan, we reorganized the production basis on the back of anticipated demand decline. Previously, We had optimized 10 small scale plants separately, and these were integrated into 3 core plants and shifted to holistic optimization. Which enabled us to more easily coordinate between production and logistics. Under the new medium term management plan, We will implement digital transformation to go ahead with further consolidation of the plants and promote automation to actively pursue low cost operation. In the future, we aim to realize automated production at night. On the right, you will see how we plan to optimize the invested capital. In addition to the production reform that I just mentioned, We will continue to innovate the business portfolio and mainly on the south front, collaborate with the distributors to implement IT for inventory management to more efficient logistics. Lastly, on the 3 strategic fields. Piping And Infrastructure is a matured market. Yet as I stated earlier, if we can accurately understand the essence of the social challenges that are becoming ever more complicated and serious. We can offer our prioritized products and by solving these issues at a high level, believe this market still has the potential to grow. We cannot avoid the demand decline in building and living environment, but we'll focus on profitability and offer new products to cope with climate changes or to mitigate the burden of providing care for the old delays. We see overseas opportunities in the Advanced Materials business and position this as a growing market. In addition, we will accelerate measures to diversify the application for high value added products. This will conclude my presentation. Thank you for your attention. This is fitoshi Kamiwaki, senior management executive officer and head of business strategy department. I will walk you through the medium term management plan for the medical business. This page illustrates the performance trend. Under the previous medium term management plan, Medical business achieved steady growth, both for net sales and operating income. In the new midterm management plan, We will aim for further growth as a core business in Life Science, which is one of the 4 business domains explained earlier in the presentation. We will target an operating income of 12,500,000,000 and net sales of 85,000,000,000 yen, by fortifying development and making active investment. Here is a summary of the previous medium term management plan. You can see in the waterfall chart that we enjoyed significant growth in sales and operating income for the overseas diagnostics business. This was mainly driven by sales of our main products in Europe, US, and China. The domestic diagnostics business was also firm, but the growth rates started to flatten. So in the next medium term management plan, Our challenge is to aim for another level The growth for the pharmaceutical science business was limited with customers reducing order placement due to their circumstances. A challenge in this business is how we can secure the orders for new pharmaceutical ingredient. One achievement that I should note for the Medical business is that we completed the acquisition of various laboratories under the previous medium term management plan. And with that, you are able to establish vessel footprints in Southeast Asia. Now let's talk about the new medium term management plan and the growth strategy, starting with our expansion plan for each of the sub segments. On our mainstay diagnostic business, we will actively launch new products in Japan and expand the sales of romaine products in Europe and U. S by capitalizing on the alliances with major partners. In China, we will expand the blood coagulants business, which is a growing market and set up various laboratories that we acquired as a base for business in ACM market. With these measures in place, we will strive to grow the domestic and overseas diagnostic business combined by 10,000,000,000 yen in the new medium term management plan. For the pharmaceutical Science business, capturing the opportunity for new pharmaceutical ingredients is a major challenge for us. Having said that, we have an order from a major pharmaceutical company that is nearly finalized. So we will similarly configure the production process and grow the pharmaceutical science business as shown by the slide. For your reference, we have illustrated our strong therapeutic areas for the diagnostic business, and these are the areas that we will focus to grow. As our growth strategy looking further into the future, we will actively invest in development activities and new products. Under the new medium term management plan, we will increase our R And D investment by 30% compared to the previous medium term management plan and exploit your opportunities in these prioritized areas. 1 of the focus will be high sensitive immunoassay as we see big markets in Japan and China. We will make a full fledged entry into this area including the development of the new measurement equipment. In the U S, the molecule PLC market is growing substantially. To address this market, we have built a development center last fiscal year, and we will leverage on this capability to explore the area of multi diagnostics. We aim to acquire new biomarker to expand the market business domain with their particular focus on oncology. For pharmaceutical science, we will seek business opportunity going beyond our conventional low market pharmaceutical science. What I mean is that we will express synthetic technology for middle and high molecule drug compound in technology for supporting drug discovery. With an eye on M And A opportunity. On the right, we have illustrated our gross projection for net sales of new products. In the new medium term management plan, we plan to achieve a big leap in growing the sales of new products. This will conclude my presentation. Thank you for your attention.