Earnings Call: Q4 2019

Apr 25, 2019

Thank you for today. I am Teji Koge, president of Sixie Chemical. I'd like to go straight into my presentation and talk about the results for fiscal year 2018 and plans for fiscal year 2019. 1st are the results for fiscal year 2018. The FX rate assumptions are shown here. Net sales increased, helped by new consolidations and the expansion of high performance products, in the automobile and transportation field. Increased sales of detached houses also contributed to the net sales increase. Operating income on the other hand decreased and fell short of the 100,000,000,000 yen plan announced in January due to advanced fixed costs and higher raw material cost, which couldn't be covered by higher sales volume and mix improvement. The bottom line, on the other hand, recorded record highs for the 6th fiscal year. Based on the results, we have decided to increase a period end dividend by 2 yen a share compared to plan. Hence, dividends per share for the year will be 44 yen a share, an increase by 4 yen. The next page shows results by divisional company. Profits increased in the housing and UIEP, Urban Infrastructure And Environmental Products Companies. The UIEP Company renewed record high earnings but operating income for the HPP, high performance plastics company decreased due to the impact from the smartphone and automobile markets. As shown on the right, all divisional companies fell short of plan. The HPP company was impacted by smartphone demand trends as well as the sudden deterioration of the automobile Although the renovation business was brisk, the new housing business was slightly affected by the concentration of construction at the end of the fiscal year. And thus, we were not able to achieve the plant unit sales of houses. In the UIEP business, domestic general purpose products did not perform well. Details will be explained later from each divisional company. Next, our 1st and second half results. Operating income decreased for the total company by 3,800,000,000 yen in the first half of the year. Owing to the impact of natural disasters. As for the second half, despite the challenging global market we were able to grow the number of houses sold, improve profitability of the renovation business for the housing business as well as grow sheet sales, in particular, in the UIEP overseas business. On a total company basis, operating income grew by 300,000,000, which was the highest ever for the second half. In the HPP business, although high performance product sales grew throughout the fiscal year, operating income declined year on year due to higher strategic fixed cost and high raw material prices that coincided with a sudden deterioration of the market. The housing and UIP companies went back to positive operating income growth in the second half. Here is the analysis of results. The main reason for the deviance against plan was the shortfall in sales quantity and composition. The breakdown is shown in the box at the top right. The sudden drop off in market conditions effective for HPP business and the number of houses sold fell short of plan slightly in housing due to the year end concentration. General purpose product sales struggled in Japan for UIEP. Steps to control fixed costs on a group wide basis were implemented but results fell short of plan. Next is the plan for fiscal year 2019. The assumptions for FX rates are 100 and 10 yen to the dollar and 125 yen to the euro. Fiscal year 2019 will be the final year and the year that we finish off the medium term management plan. We will strive for an increase in net sales and profits with all levels of profits reaching record highs. The plan for sales is JPY 1,175,000,000,000 and JPY 103,000,000,000 for operating income. We are planning for an increase in dividends too for the 10th consecutive year at 46 yen per share. This page shows the plans by divisional company. We are anticipating that the business environment will remain challenging overall. But we will plan to secure increases in sales and profits across all segments by steadily carrying out measures, which will be a elaborative leader. From this fiscal year, we will make the medical business independent from being a strategic field of a HPP company to a strategic field under the control of corporate headquarters. We will accelerate growth strategies so as to develop the business into a 4th divisional company, Corporate headquarters R and D spend will be concentrated on certain themes of focus, and we will also accelerate the commercialization of projects. Now I'd like to explain about the outlook for market conditions, which we've considered quite in detail. These are the assumptions that were applied for the fiscal year 2019 plan. On the top left is the outlook for the smartphone market. Our expectations are set slightly lower than market consensus by several percentage points. We expect the harsh market conditions to persist, But by focusing on non LCD and non smartphone fields of business, we will continue to transform our portfolio. The divisional company president will elaborate later. Market consensus shows that global automobile production is going to be extremely challenging too, but we are setting even more cautious expectations. Although we account for somewhat of a recovery in Europe, from the latter half of the first half of the year, we assume a challenging market to persist in China. As for the environment for housing orders shown on the top right of the page, due to the consumption tax hikes, we anticipate that the business environment will become difficult going into the second half of the fiscal year. Having said that, we have set order plans that exceed the market forecast in our growth strategy. NASDAQ price assumptions are On the whole, we are expecting tough business conditions to persist throughout the fiscal year. Here are the plans by divisional company for the 1st and second half. For the first half, With the assumption that the harsh market conditions will continue for smartphones and automobiles, the profit plans for the HPP business is flat year on year. On the other hand, we expect growth in the number of houses sold due to the abundant order backlog in the first half and this is expected to be one of the main drivers of total company operating income growth of JPY 800,000,000. As for the second half, we think that there will be a certain degree of improvement in the external and business environments globally. The HPP company is projected to lead the way with the new interlayer film line in Europe, starting operations, and the realization of past strategic investments. All in all, all segments are forecasted for a profit increase contributing to the billion operating income increase overall. For the full fiscal year, we plan for record high earnings in the HPP UIEP And Medical Businesses. Later on, the divisional company presidents will walk you through in detail how we are planning to achieve higher earnings in fiscal 2019. Here's the analysis of net sales and operating income. Fixed costs will increase mainly due to labor and depreciation cost. We plan to offset the increase with a substantial increase in sales quantity and composition through the HPP And Housing businesses and will aim to achieve the JPY 7,300,000,000 profit increase reaching JPY 103,000,000,000. Raw materials are expected to contribute positively to by 1,000,000,000 yen. The next page shows shareholder return policies. We will continue to increase dividends steadily and implement measures designed to improve capital efficiencies as we have committed in our medium term management plan. We will increase dividends again and clear 2019 by 2 yen a share to 46 yen and conduct share buybacks once again. The share repurchases will be up to 8,000,000 shares or 1,000,000,000 yen. The acquisition of shares will be through the market, including Tastienet, and will be implemented over the course of the year. We will also retire the acquired 8,000,000 treasury stocks. Next is a progress update on the medium term management plan. This fiscal year is the final year of the plan. Looking at the plan for fiscal year 2019, despite net sales for the overseas business expected to grow in line with the medium term management plan, at 1,000,000,000, profit is expected to fall short. Main reasons are the shortfall of sales quantity and composition as well as high route material costs in the HPP business and slightly higher material costs in the housing business. In addition, growth in renovation and the Frontier businesses were delayed. One large factor for the deviation is that the medium term plan was calling for an increase of 1000 units of houses over the 3 year period, where, yes, the plan now is to increase sales by 700 units, instead which is below plan by 300. But UIEP company is struggling with general purpose product sales. Fiscal 2018 was the first time in the past 10 fiscal years that operating income decrease We will strive for a V shaped recovery in fiscal 2019 and aim for top line growth once again. And return to a earnings growth trajectory. Growth investments, structural reforms, fusion implementation, and M and A efforts are progressing steadily, as you can see here. The effects of these efforts will materialize from fiscal 2019 onwards and we will also continue to consider this fiscal year M and A opportunities that will lead to further growth. Here's an update on fusion measures. We aim to increase cumulative net sales by 50,000,000,000 yen through fusion. Which is progressing broadly in line with expectations. As part of the development and creation theme, sales of subdivision housing in the smart town of Saka Cytoma Prefecture has finally started from this fiscal year. Regarding the breakthrough, bio refinery technology that we announced last year, which is a technology that can convert trash into ethanol, we have plans to start building a POC plant that is a tenth of the plant size. Finally, I'd like to talk about use of cash. We are making steady progress on making strategic capital investments environmental contribution investments and work style reform investments. We are continuing to consider M and A opportunities. This concludes my part. Thank you for your attention. Hello. My name is Tetsuya Nishida, head of Corporate Finance And Accounting department. I will elaborate on fiscal year 2018 results. First is about the status of consolidated companies. The total number of consolidated subsidiaries now stands 153, which were up by 2 due to one acquisition and one establishment of a new subsidiary The influence of change in the number of consolidated companies is shown here. Here's a summary of profit and loss. I will give details from the ordinary income line and under. Ordinary income was 93,100,000,000 yen. Due to factors such as an improvement in FX gains and losses compared to last fiscal year, the decline in ordinary income year on year was not as much as operating income decline. Extra ordinary income and losses came in slightly better than last fiscal year. Corporate taxes and other items decreased due to changes in profit mix by region, which reduced the impact on pre tax profit. As a result, net income attributable to the owners of the parent increased by 1,000,000,000, reaching 1,000,000,000. Here's the balance sheet. Total assets increased by 29,600,000,000 yen, reaching 1,000,000,000,000 yen. Inventories increased by 1,000,000,000 yen during the year. As we have increased inventories of land for sale and work in progress houses. Tangible noncurrent assets were up by 29,700,000,000 yen, as we made capital investments that were approximately double the size of depreciation, As for decreased items, investments in securities decreased by 1,000,000,000, due to the sales of strategic stock holdings and a decrease in the market value of stock holdings. Here are the liabilities and net asset side of the balance sheet. Interest bearing liabilities increased by 1,000,000,000. Net interest bearing liabilities, which accounts for cash and deposits, were minus 6 1,000,000,000, as shown in the parenthesis. This means we were in a net cash position on a year on year basis but cash decreased by 1,000,000,000. Retained earnings and its breakdown are shown in detail with net income contributing positively, but dividends in retirement of treasury stocks weighing. We conducted another round of share purchases during the fiscal year under review, with the acquisition of retirement of 8,000,000 shares. Furthermore, due to the recognition of profit and an increase in total assets, the change in ROE and shareholder equity to total assets are as shown. The next page is about consolidated cash flows. There was an 85,200,000,000 yen inflow of operating cash flows which was better than last fiscal year. But this is due to brisk detached housing orders and the associated cash advances that offset the cash required for increasing land for sale and other inventory that I mentioned earlier. Another factor is slightly lower tax payments year on year, which you can see on the slide. Investing cash flow was a cash out of 1,000,000,000. As you can see in the graph, capital investments increased substantially year on year. Last year had higher purchases of investments in securities due to M and As. However, with the cash inflow associated with the withdrawal of net time deposits, investing cash flow came in broadly flat year on year. Free cash flow as a result was net positive by 2,000,000,000 year on year, which was about the same level as last year. This page shows depreciation and amortization, capital expenditures and EBITDA. Amortization, inclusive of goodwill, is increasing. For this fiscal year under review, capital expenditures were about double of depreciation. EBITDA, which is the source of our investments, is shown here too by divisional company. Overall, EBITDA is planned to be about the same as last fiscal year. Here are the fiscal year 2019 plans for depreciation and amortization, capital expenditures and R and D. Capital expenditures are lower than the peak in fiscal 2018, but depreciation is expected to rise as the investments made in the past starts operating. Fiscal year 2019 EBITDA is expected to increase by 11,100,000,000 yen. The last page of my part shows the plan for fiscal year 2019 once again. That is all from myself. Hello. I am Ikouskeshimizu, company president of the High Performance Plastics Company. I will cover the details of my company. 1st are the performance trends. Fiscal year 2018 net sales increased and profits were down. Net sales were 1,000,000,000, and operating income was 1,000,000,000. Due to the sudden deterioration in the smartphone and automobile market conditions, as well as high costs of raw materials, we experienced the decline in profits for the first time in 7 fiscal years. The plan for fiscal year 2019 is growth in both net sales and profits. The plan excludes the medical business and is 1,000,000,000 for net sales and 1,000,000,000 for operating income. We will strive to grow profits by increasing high performance product sales and market share as well as full fledged realization of the effects of strategic investments. Here's an analysis of fiscal year 2018 results. Net sales were 1,000,000,000, up by 1,000,000,000. As for operating income, please refer to the analysis shown on the right. Operating income declined by 1,000,000,000 year on year. As we were in an advanced investment phase for a fixed cost, more than half of the spend was for strategic investments. Raw materials also had negative impact, and the increase in sales quantity and composition was not as much as we hoped to grow. With the sudden market deterioration from the third quarter onwards, sales quantity decreased mainly in the electronics automobile and transportation fields. Compared to the outlook of plus 8,500,000,000 that we reported in January, Results were 2,400,000,000 yen lower. However, please refer to the bottom of the slide where we show the breakout between the 1st and second half. We have been able and the expansion of high performance products. Here are the plans for fiscal year 2019. Net sales excluding the medical business are projected to be up by 1,000,000,000 to 1,000,000,000. Operating income going to the right is forecasted to be up by 1,000,000,000. As we expect raw materials to have a positive impact on income, We will strive to grow sales quantity and composition by 1,000,000,000, mainly around our electronics and automobile and transportation businesses. This is because the effects of strategic investments are materializing in an earnest. However, looking at the bottom where the breakdown between the 1st and second halves are shown, We are not expecting the market to recover that much during the first half, so the plan is to grow sales into 2nd half. We will also strive to keep fixed costs down, so as to grow operating income. This page shows the status of our 4 strategic fields. Despite extremely difficult business conditions in fiscal 2018, all four fields were able to increase sales. We continue to plan for an increase in sales for the 3 remaining business fields in the segment, which excludes the impact from partial withdrawal. The electronics fields faced difficulties since the latter part of the third quarter last fiscal year due to the greater than expected slump in the smartphone market. However, for fiscal year 2019, we will strive to win new applications, increase market share, and generate higher sales in the non LCD business areas, which I will explain in detail later on. Regarding automobiles and transportation, despite being hit by the deterioration in market conditions in Europe and China, sales volume increased. As for fiscal year 2019, A new interlayer film line will start operations in Europe from the second half. We hope to further accelerate the expansion of high performance film. In Building And Infrastructure, the CPVC business was sluggish in fiscal year 2018, mainly in the Middle East and India, Our plans for fiscal year 2019 are to increase sales of fire resistant materials, mainly non flammable urethane, as well as grow CPV sales in the US from the second half of the fiscal year. Here's the page on growth enhancement areas. Net sales are growing mainly due to growth in semiconductor materials and electronics. Please look at the bottom bar chart under electronics. Because we are focusing on expanding the non LCD business, you can tell how non LCD sales are steadily increasing. The sales ratio was 43% in fiscal year 2018, and the plan is to reach 48% in fiscal year 2019. In the past, sales were skewed extremely towards smartphone and LCD sales, but we are in the process of diversifying this risk to transform our portfolio. In the automobiles and transportation area, we are focusing on the expansion of high performance interlayer film. Sales grew by 8% year on year in fiscal year 2018, and the plan is to grow by another 8% in fiscal year 2019, which will be substantial growth. Building and infrastructure struggled somewhat due to the intensification of price competition. But our plan is to grow sales mainly through thermal insulation and non combustible materials. We will pursue synergies with sexy soft on wiz that we acquired last fiscal year, as well as focus on global opportunities in order to grow sales in this area. As for new product sales, which are shown on the right hand side graph, sales rebounded in fiscal year 2018 compared to the previous fiscal year. We would like to ensure that we steadily increase sales of new products in the next medium term business plan. Let me dive deeper into the plan for fiscal 2019. For the electronics segment, we will focus on the non smartphone market. Namely Semiconductor and joining person materials. The graph on top left illustrates the market environment and their sales forecast. The dotted line indicates a smartphone market for fiscal 2019. It is expected to decline year on year, so accordingly, we put together an extremely conservative sales plan for the related materials. On the other hand, the semiconductor market is expected to recover from the midpoint of COVID 19. We would like to be active in trying to grow the sales for this application. The graph at bottom left shows the quarterly sales trend for the electronics business. We would like to grow the non LCD sales, particularly with the joining parts and materials and semiconductor related product. By expanding into new applications and increasing new products so that in fourth quarter of fiscal 2019, the non LCD sales would account for 50% of the sales for electronics. On the right are examples of the non LCD related products. Heat resistant sulfur is a semiconductor processing material for the production of compact, large capacity semiconductor chips, for which the demand is increasing recently. It is highly resistant to heat and will easily peel off using our proprietary technology. The product is highly appreciated by the customers as it helps to improve the productivity. The bottom diagram shows elastic adhesive one of the major products for joining person materials. Conventionally, tapes were used to bind the cover glass in the body. However, with the parts becoming more compact, adhesives are used as alternatives to tapes. For Elastic Adhesive is highly appreciated by the customers for its ease of use with great functionality of keeping the intended form and strong adhesive property. It achieves the benefit of tapes, which is the ease of use, whilst providing a strong adhesive function of adhesive materials. Some number of companies have already given us quality approval and you're moving into a phase or full scale adoption in fiscal 'nineteen. In the Automobile And Transportation business, we would like to drive the growth with the interlayer film. On the left, you will find in fiscal 'eighteen was in an extremely tough environment with the total volume cutting down year on year, we grew ourselves in volume mainly with the high performance interlayer film. In fiscal 'nineteen, we will continue to make effort in increasing the contents per vehicle focusing on the high performance interlei film to achieve volume growth. Europe and China, illustrative by the bottom graph, were greatly impacted. The sales plan for fiscal 'nineteen is shown on the right. We have an ambitious outlook for Europe with a new production line coming on streams in the second half and making full fledged contribution. We remain cautious on China. This will conclude my presentation. Thank you for your attention. Hi. I'm Toshiaki Kamiyoshi, company president for the housing company. My first slide is on business performance. In fiscal 'eighteen, we continued the streak of top line and profit growth for the 3rd year, with net sales marking 1000000000 and 0.39000000000. As illustrative by the graphs at bottom right, New housing orders continued to grow in fiscal 'eighteen, increasing by 4% and renovation orders turned to positive growth of 3% year on year. With this, we have secured the backlog for fiscal 2019. We aim to achieve 4 consecutive years of sales and profit growth in fiscal 2019. By continuing with the growth strategy and smoothing the fluctuation of the construction. As indicated by the graph on the right, We project 1% growth for new housing and flat growth for renovation. Next, let me offer you our analysis of the fiscal 18 results. OP grew year on year by 1,000,000,000, but it was slightly short of our business plan. The overall sales indicated by the graph on the left grew in all the segments, achieving an 1,000,000,000 aggregate growth to 1000000000. On the right, you can see our analysis by subsegments and the OP grew by 1,100,000,000 year on year. For new housing, the sales undershot a plant by 88 houses due to the impact of concentrating at the end of the fiscal year, but we were still able to achieve a year on year growth of 174 houses. We made some front loaded investment for securing the order for fiscal 'nineteen. So despite the fixed cost reduction efforts, The profit was down by 1,000,000,000. For the renovation business, we augmented our earnings power by improving the efficiency of the indirect cost and increased the profit by 1,400,000,000. Frontier business is mainly real estate business. The core business of rental housing is progressing steadily, but the sub segment fell short of the plan due to some delay in the new business launch. This is your plan for fiscal 2019. We aim for another year of top line and profit growth for fiscal 2019, mainly driven by the new housing business. Furthermore we will also continue to execute our growth strategy. As shown by the graph on the left, Each business is projected to grow to generate a total sales of 1,000,000,000, an year on year increase of 1,000,000,000. On the right, we show our OP projection achieving an year on year growth of 1,000,000,000. Let me offer you the breakdown by subsegments. 1st for housing, we project a sales increase of 330 houses backed by the robust backlog in smoothing out the fluctuation in the construction work. At the same time, We will incur some fixed costs related to growth investment, but it should be offset to achieve a 1,000,000 profit growth in new housing. In home renovation, we will aim for sales growth of JPY 2,500,000,000 by taking in the last minute spike in demand before the tax hike in the first half. And by marketing and growing the sales for our smart innovation offering. With these measures, we plan to grow the OPE for innovation by 400,000,000 young, At the bottom, you can find a breakdown between the first half and the second half. We expect the market to turn tough from the second quarter, so the profit projection is front end loaded in the first half. Next, let me touch upon the specific initiatives for each of the businesses. For new housing, We will augment the 3 growth strategies that we have carried out through date, namely the Salesforce strategy, product strategy, and the land and subdivision strategy to grow our market share. The table at top left illustrates the market outlook. Despite the government measures, we intend to mitigate the impact the consumption tax hike. We expect a certain level of reactionary drop in demand after the tax hike. We expect the market to decline by 5% in the first half and by 7% in the second half. The government measures will be more generous for the first time buyers so that demand from that customer segment should be firm, mainly for the ready built houses. The table below shows the breakdown of our outlook. In the first half, we expect some reactionary drop in the rebuilding of the attach houses in construction of the apartment buildings, but expect firm trend when they already do with houses as the current consumption tax will still apply the handover to the customer is completed before October. In the second half, the details rebuilding and apartment building business will continue to decline. However, we expect a certain level of good demand for new housing which should benefit from the government measures to mitigate the impact of the tax hike and subdivision housing sold with land, both of which will be for the volume zone. As the graph on the top right indicates, we expect the new housing order for the full year to grow by 1%. In the first half, we are determined to capture the last met spike in demand for the built 2 order houses in April and May as well as the demand for the subdivision housing in order to achieve a 2% order book growth. The market will be very tough in the second half, but we'd like to stable Fed adversity by augmenting the free growth strategies that I mentioned earlier. So that we can maintain a flat For strengthening the sales force, we've been able to increase the number of model house galleries and head counts. We now have the largest sales force in the last 10 years of operation. To maintain and improve the capability of the individual salespersonnels, we rolled out experience related showrooms as a means to differentiate. Below is the strategy on products, New products highlighted by the yellow line were launched in April to complete a product portfolio that will enable us to cover a broad spectrum of customers. Smart Power Station Urban will be a product that is aimed at capturing the volume zone demand after the attack site. It is a still frame SPS with affordable price range with a land size of roughly 100 square meters. The storage battery is provided as a standard plan and the price will be around 1,000,000. We will leverage on the strategic product to offset the weakness in the market. For the land strategy, We have secured enough land bank for the first time buyers who are the volumes on customers, and the land inventory is actually largest ever for the company. We would like to capitalize on these strategies to capture the orders with Smart House offering and products for the first time buyers as indicated on the right. My last slide is on our initiatives on renovation frontier and overseas business. The top left table shows the renovation business. In the first half, we still expect to see some demand spike prior to the tax hike. So we will prepare new products while also focusing on large scale management and renovation orders. Throughout the year, we will focus on the Smart House offering emphasizing the storage battery as the demand is increasing with the end of the feeding tariff system and with more individuals showing their desire to be prepared for natural catastrophe We reorganized the sales force to those focusing on regular home diagnosis and others focusing on pure sales activities. Now aim is to enhance the quality of after service to increase the sales for our strategic product and smart home offerings. Top right is our domestic frontier business, mainly the real estate business. As a new initiative, we want to augment the second hand housing business. For the overseas strategies, We will augment the Salesforce just as we are doing for the domestic subdivision housing business to aim for a full fledged growth. This will conclude my presentation. I am Ayoshiuki Hirahi, company president for Urban Infrastructure And Environmental Products Company, or UIEP. Let me start my presentation. Please take a look at the bottom graph for the business performance trend. We acknowledge that our challenges are stagnant revenue growth over the last few years. In fiscal 2019, We'd like to focus on achieving OP growth by growing our sales. Next is analysis of fiscal 2018 results. As the lift graph indicates, the overall revenue growth was flat as the sales decline in the domestic business offset the sales growth achieved overseas. The impact was felt on the operating income as illustrated by the right graph. The operating income for the domestic business was down by 1,000,000,000, whereas for overseas, it increased by 1,100,000,000. In Japan, we struggled with a general product, both in terms of volume and selling price. In particular, salt quantity and composition factor pose a greater negative impact than what we had anticipated in January, mainly due to the delay in the CapEx funds for companies in the IT sector. Our piping products used in plants as strong in the semiconductor fab of Mungata The weakness in that sector, Press 1st, companies to postpone the CapEx and that directly hit our business. The construction work is also getting behind schedule, and your delivery timing was pushed back to dates that were later than expected. For overseas, although we were just slightly short of a January outlook, we can uphold good expectation as we can anticipate a sufficient recovery for the aircraft street application going forward. This is a plan for fiscal 19. We project both the domestic and overseas sales to grow. As demonstrated by the OPIA Analysis graph on the right, We want to achieve a solid OPE growth of 1,000,000,000 by the sales quantity and composition factor. This is the aggregate of Domestic And overseas business, and the breakdown is 2,400,000,000 increase in Japan by expanding the prioritized product sales and 1,400,000,000 overseas. The plan for Japan called for a spread improvement for the general products, not incorporating volume increase and making steady progress for cost reduction or Sierra activity by reorganizing the production facilities. The fixed cost, which essentially is depreciation cost, will be up due to the ramp up investments for the overseas aircraft street business and FSU, for which the railway sleeper demand is increasing in Japan. The depreciation will be higher, but we'd like to offset that by sales quantity and CR impact. Let me put our plan into context by also touching upon our market outlook. UIIEP's addressable markets can be basically broken down into 3 areas: public, private and overseas. For the public market, In addition to the budget for the National Resilience Plan, 3 year emergency measures were newly added in response to the natural disasters that hit Japan last year. As the graph indicates, the sales ratio of the prioritized products in the public sector business is extremely high. As shown on the right, these products include the materials for pipeline renewal and tools work application for tunnel construction, which is FFO. The same material used for sleepers, and we believe there's room for growth with these products. It's not shown on the slide, but in March, we obtained approval for a construction method that enables year round construction installation as well as construction in rain. This should mitigate the labor shortage issue for construction work, and we expect to enjoy strong growth. This expectation is baked into the projection. For the private sector, we can further divide the business into residential and nonresidential. The footnotes beside the left graph is plays the timing of when the demand for our products emerges. And this reflects the recent delay in the construction schedule, so extra 2, 3 months are added to the conventional cycle. The cycle is 6 months 12 months after the start of the construction for residential and nonresidential, respectively. We have put together the sales plan based on the past data. And as a bar graph in the middle indicates, the total revenue is not expected to grow significantly. However, the proportion of the prioritized product sales is increasing. Such as for shortening the construction work time and reinforcing climate measures against torrential rain, the applications that you find on the right. The left graph for overseas just illustrates the aircraft business in the U. S. The drop in fiscal 2017 recovered in fiscal 2018 and we project further growth for fiscal 2019. The bar graph in the middle shows the overall overseas sales trend The aircraft business alone is also trending in a similar growth rate. And for sleepers, we are seeing increasing number of projects adopting our products, so that is also reflected in the numbers. Let me elaborate on the 3 strategic fields. As the graph slash rate, We aim to expand the sales of the new products for piping and infrastructure and expect recovery over plant related demand which dropped in fiscal 'eighteen. We also embarked on reorganizing the production, are in the consumption tax hike. The graph at bottom left is building and living environment for which we are not projecting a material growth. We expect the demand to decline in the second half after the tax hike. Our focus will be on structural reform, so that we can secure profit. In Advanced Materials, we'd like to expand application for sheet beyond the aircraft demand And with a ramp up investment, there is ample room for sales growth. Similarly, we've made capacity increase investment for FFO as well. In fiscal 2018, we built track records in 29 countries. Now the focus of our activity will be on increasing the number of railway operators who will adopt our product in those markets. New product sales is growing steadily. In the last three years, it was very strong in terms of new product launch. The bar highlighted by the yellow line are the products suitable for addressing social issues so that the launch of this product is enjoying quick uptick. Last but not least, I'd like to make a few additional comments on prioritized product and overseas business. As you can see from the top right graph, sales of prioritized product is growing, but the overall sales is not. The challenge is how to cope with the declining salt trend of the general products. As shown on the right, We intend to execute the reorganization measures of the production structure. The 3 plants listed here will serve as the core plants where we will consolidate the production of our general products and pursue cost reduction with initiative, including automation. For the prioritized products, we will use a space freed up from the transfer of the general products production to ramp up the capacity. And to promote more collaboration between development and manufacturing at respective plants for further expansion. We intend to grow in all the areas for the overseas business. For pipeline renewal, We'd like to increase the number of partner companies for installation. For Piping And Industrial Piping, We will work to further tighten the collaboration with Tinfeng Group, a Vietnamese company that we took equity stake. For the Shoot business, we'd like to capitalize on the added capacity to tap new aircraft customers and expand in the medical application. For Advanced Materials FFO, we'd like to increase the customers adopting a product, mainly in Europe, so that we can take advantage of the production facility in Europe. This will conclude my presentation. Thank you for your attention. I am Keita Cato, Head of Business Strategy Department. We decided to carve out the medical vessels from the HPP company to be placed under the management of the corporate headquarters from fiscal 2019. The intention was to facilitate the growth strategy in order to nurture the business as a 4th group company. As the slide indicates, the performance of the Medical business have been driven by a series of M and As. The dent in fiscal 'eleven was due to the 1 off expense, namely the goodwill, which we incurred when we acquired the Diagnostic reagent business from the U. S. Genzyme. In fiscal 'eighteen, the business enjoyed both top line and profit growth, achieving sales of 1,000,000,000 and OP of 1,000,000,000. For fiscal 'nineteen, We expect to achieve both the sales and profit growth once again, projecting sales of 72,500,000,000 and 10,000,000,000 Reaching the Timber onion line for the first time. Let me give you a quick snapshot and a growth strategy for the medical business. There are 2 sub segments in medical. The first one is Diagnostic Business. Where we develop, manufacture and distribute the diagnostic creations for blood coagulation, diabetes, infectious diseases, among others, as well as the vacuum blood collection tubes. The 2nd subsegment is the pharmaceutical science business. We do consigned production of the active pharmaceutical ingredients such as amino assets and provide drug development solution service, which includes solutions such as pharmacokinetic study for the development of pharmaceutical drugs. The basic strategy is to augment these 2 core businesses. Furthermore, in order to achieve further business expansion, we will promote global initiative on cutting M and A's and expand into new areas such as special peptide and enzymes for which we made some strategic investment. The bottom right table lists up the 6 focus areas. So please have a look later to see the main product in each category. Let me also go through the fiscal 2019 guidance and the projection for each of the businesses. We will aim for sales of 1,000,000,000, a year on year increase of 1,800,000,000. Top rate is a diagnostic business for which we plan a 1,000,000,000 sales increase to 1,000,000,000 by expanding the new product sales and augmenting the business platforms in Europe, U. S. And Asia. For the pharmaceutical Science business, We are projecting sales decline due to demand coming down from some clients as they become more efficient in their usage. However, we will make efforts to grow the orders from new clients as well as the Direct Development Solutions business. The bottom left graph is analysis of the operating income. We aim to significantly increase the marginal profit by mainly growing the diagnostic creation business, and we'll aim to reach 10,000,000,000 EOP for the time in medical business. This will conclude my presentation. Thank you for your attention.