Earnings Call: Q4 2018

Apr 26, 2018

I am Paige Colgate, president of 6 week Chemical. I'll explain fiscal year 2017 results. And our plans for fiscal 2018. For fiscal year 2017, net sales grew substantially. And operating profit as well as each level of profit achieved record highs. Based on the results, fiscal year end dividends have been increased by 2 yen a share from 19 yen to 21 yen. Adding up to 40 yen a share for the full year, up by 5 yen. Unfortunately, though, we were not able to achieve the revised plan that was announced in January. Each of the divisional companies will explain the reasons later. The HPP High Performance Plastics Company recorded record high earnings. Net sales and operating income increased due to sales expansion of high performance products, mainly in the automobiles and transportation field. However, In the electronics field due to the sudden slowdown in the smartphone market, especially since this year. Results were below the operating profit target by 1,200,000,000 yen. As for the housing company, due to the poor weather conditions during Q3, There was a concentration of sales, housing completions, and deliveries in Q4. But we were able to accomplish results that were broadly in line with plan despite weak renovation orders and sales weighing on results. The UIEP Urban Infrastructure And Environmental Products Company renewed its record high earnings with the expansion of prioritized products and achieving spreads. We fell short of operating income plans, though, due to the later than expected recovery of aircraft sheets that we assumed would pick up in the second half. Each divisional company president will provide details later. Incidentally, We actively invested in R&D in order to commercialize the themes we are working on. Here are the results for the 1st and second halves. On a total company basis, 1st half operating income increased by 2,300,000,000 yen, But the increase became a smaller 400,000,000 yen in the second half due to an upswing in raw material costs, a stronger yen, and deterioration in the business environment. We actively invested in R And D for commercialization. HPP and UIEP reached record high earnings in the second half as well. Here's an analysis of net sales and operating income fiscal 2017. Although there was business structural reform and new consolidation impact in fiscal 2017, Net sales grew by 32,400,000,000 yen, even when excluding these factors. Overall, sales lead 1,107,400,000,000 yen. Operating income went up by 2,800,000,000 reaching 99,200,000,000 yen. Adjusting product prices and cost reduction, minimized raw materials cost that went up by more than 8,000,000,000 yen. Sales quantity and composition made up for the increase in fixed costs. However, although we controlled fixed costs against the January outlook, sales quantity and composition went below plan. The breakdown of the underperformance is shown in the bubble. Now I will talk about our plans for fiscal year 2018. The foreign exchange rate assumptions are shown here with the yen at 100 yen to the dollar and 134 yen to the euro. We will strive to achieve higher net sales and earnings once again, with operating and net income achieving record highs for 6 years in a row. The outlook is 1,168,000,000,000 yen for net sales and 102,000,000,000 yen for operating income. We will work hard to achieve these numbers as we view this fiscal year as a core 2nd year of our medium term management plan. We plan to raise dividends for the 9th straight fiscal year at 42 yen a share. Here are the full year plans by a divisional company. All three divisional companies are planning for higher net sales and operating profits. We will continue to actively undertake group wide R and D investments for commercialization. Next, let me talk about the assumptions we have for market conditions. In the electronics field, demand that plunged during the fourth quarter of 2017 in the smartphone market is not expected to recover in the first quarter of fiscal 2018. A gradual recovery from the second quarter is anticipated. For automobile production, the situation is patchy, depending on region, but global growth is expected to be up by 2% year on year. For housing, we expect the market to gradually pick up from the second half, with the upcoming consumption tax hikes. We anticipate a plateau in NAFTA prices staying at the high level recorded in Q4 last fiscal year. Overall, the business environment is expected to continue to be challenging in the first half and improving in the second. For the first time, we are also announcing the full year plans by divisional company broken down into the 1st and second halves. Operating income for all three divisional companies are planned to be flat year on year for the first half. During the first half, A difficult business environment is expected to continue regarding high raw material prices, a stronger yen, and the market conditions I referred to earlier. Higher fixed cost, such as labor cost, is expected as well. For the second half, we are planning for higher earnings with a better business environment and a market pickup, as well as a positive impact from M and A synergies. Strategic investments for capacity expansion and structural reforms. The plan is relatively 2nd half heavy, but the details will be provided later. R and D spending will be conducted according to plan with many things reaching the final phases before commercialization. Here, we show an analysis of operating income for fiscal 2018. A stronger yen, higher raw materials cost, and higher fixed costs, such as labor and depreciation is accounted for in the fiscal 2018 plan. We plan for 102,000,000,000 yen operating income up by 2,800,000,000 this fiscal year. Making up for the negative factors are sales quantity and composition as well as cost reduction with the details to follow from the divisional companies regarding the substantial increase of 19,400,000,000 yen in sales quantity and Finally, let me touch upon shareholder return measures. We will continue to engage in measures So as to improve capital efficiency in order to achieve our commitments in our medium term plan that are steady dividends and a ROE of 12%. Dividends for fiscal 2018 are planned to be 2 yen higher year on year, at 42 yen a share. At the board meeting today, we have decided to do a share buyback this fiscal year as well. Which will be up to 8,000,000 shares or 16,000,000,000 yen at most. The cancellation of 8,000,000 shares has also been decided today. Next, I will talk about progress under the medium term management plan. In fiscal 2018, we will continue to focus on new products, new businesses, and new areas to grow top line, Accelerate earnings growth, and strive for higher operating income 10 years in a row, and record highs 6 years in a row. As you can see on the slide, measures regarding forward looking investments for the future, constant structural reform, and fusion, and M and A efforts are progressing steadily. The dark orange color shows when the benefits are going to be realized in earnest, and we believe the benefits will materialize steadily during fiscal 2018 19. Here are details about the 130,000,000,000 yen sales growth we are planning for during the midterm plan with existing businesses increasing by about 80,000,000,000 infusion measures expected to add on about 50,000,000,000 yen. Progress is steady with 19,000,000,000 already materialized in fiscal 2017. And we anticipate another 14,000,000,000 during fiscal 18. Development and creation themes are also proceeding well. Here, we show use of cash. We have been making strategic investments for our growth engine, interlayer film in Europe, for resin production and line expansion for the 3rd line as well as in other areas that were highlighted in orange in the previous slide. Environmental contribution investments are proceeding steadily as well. We will continue to consider investment opportunities for growth together with M and A options. This concludes my part. Thank you for your attention. I am Tetsuya Nishida, executive officer and head of the corporate finance and accounting department. I will explain the highlights of the fiscal 2017 results. The number of consolidated companies increased to 151. The influence of change in the number is as shown. I will give some comments regarding ordinary income and the lines below on this page. Ordinary income was 93,900,000,000 yen, which increased by about the same amount as operating income. Extraordinary items improved substantially this fiscal year, due to the absence of items from last fiscal year, such as gain on sales of investments in securities under extraordinary income, and evaluation losses of investments in securities and business structural reform related expenses that were recognized under extraordinary losses. As a result, Income before income taxes were 94,300,000,000 yen, up 11,500,000,000 year on year. And net income increased by 2,600,000,000 yen, reaching 63,500,000,000 yen. Next, our balance sheet items. Total assets increased by 55,500,000,000 yen. But after taking out the influence of change of consolidated companies and foreign exchange impact, assets grew by 25,300,000,000 on a underlying basis. Inventories were up by 16,900,000,000 yen due to an increase of land for sale and other factors. Tangible and intangible non current assets increased as well due to increased capital investments and M and A related goodwill and other factors. Investment in securities increased by 20,800,000,000 yen due to purchases and investments in securities, and the appreciation of stock prices of listed shares that we own. As for liabilities and net asset items, Retained earnings increased by 33,100,000,000 yen due to a rise in net income and dividend payments in retirement of treasury stock. During the fiscal year, 16,000,000,000 yen of treasury stock was purchased and 12,900,000,000 was retired. Regarding consolidated cash flow, operating cash flow was 82,300,000,000 yen. It went slightly below fiscal 2017 levels, due to an increase in working capital used for inventories, etcetera. And because of higher tax payments this year compared to last year, when taxable income and tax payments came in lower than profit levels on an accounting basis. And vesting cash flows were up year on year. Reaching a 60,900,000,000 yen cash out as capital investments and M and As increased this fiscal year. Financing cash flows were 36,000,000,000 yen, with the majority attributed to dividend payments and share buybacks. Free cash flow was a positive 2,300,000,000. Details of depreciation and capital expenditures are shown here. Depreciation is up in line with the increase in capital expenditures. Depreciation, capital expenditure, and R and D expenditure plan for fiscal 2018 are shown here. CapEx will increase as we will continue to invest for expansion leading to higher depreciation by about 40,000,000,000 yen. We also plan to increase R and D spending by about 40,000,000,000. Finally, here is a summary of our plans for fiscal 2018 again. This concludes my part. Hello. I am Katie Takato, company president of the HPP High Performance Plastics Company. 1st are performance trends. We were able to report record high divisional company profits for fiscal year 2017, despite the impact from high raw material costs. But as we saw a slowdown during the fourth quarter last fiscal year, We would like to respond flexibly and swiftly to changes in the global economic environment and target a 6th consecutive fiscal year of record high profits in fiscal 2018. Looking at the performance trend, bar chart, during fiscal 2014 through 2016, That was the period for the previous midterm plan. Top line was flat as we engaged in structural reform efforts and portfolio strengthening. Under the current medium term management plan, we shifted our focus to growth by actively engaging in M and As and strategic investments. The fiscal year under review was the 1st year under the new medium term management plan, and we reached a record high for top line. At $386,200,000,000, and $57,800,000,000 in operating income. Maine M and As and strategic investments are shown under the graph, such as Palomatec in September 2017, Softland Wizz in December, and the 3rd line for interlayer film in Mexico also in December. With the addition of these new companies, in fiscal 2018, we are planning for net sales to reach 418,000,000,000 yen, Exceeding 400,000,000,000 for the first time, and operating profit of 59,500,000,000. I'll explain the breakdown of the outlook later. The operating margin outlook is 14.2%. But if newly consolidated companies are excluded, It would be more than 14.8%. So 14.2% is within expectations. As for investment and return on the right, we spent a substantial 78,000,000,000 for strategic investments and M and As during fiscal 2017. We believe that there is still capacity for us to invest in growth during fiscal 2018 and onwards when looking at the balance between investments and return, And thus, the plus alpha in the chart means that we will continue to consider M and A opportunities. An analysis of net sales and operating income is shown here. Sales quantity and composition contributed to result mainly due to automobiles and transportation field. However, due to a slowdown in demand in the electronics field, we were not able to reach the operating income plan set forth in January. We were also impacted by high raw material costs significantly, but were able to hedge a big portion of it due to cost reduction efforts made by the production division. Net sales increased by 28,600,000,000 yen year on year. If structural reform and new consolidations were excluded, Net sales increased by 16,900,000,000 yen. As for operating income, foreign exchange impact was plus 1,200,000,000 yen. Fixed cost weighed by minus 1,400,000,000. For marginal profit, sales quantity and composition was plus 5,000,000,000, With electronics and building it and infrastructure being about the same as last fiscal year, whilst automobiles and transportation and life science grew. The breakdown by 1st and second halves are shown at the bottom. The positive 2,000,000,000 in sales quantity and composition during the second half is attributed to the slowdown in electronics during the fourth quarter. We were originally assuming close to a positive 4,000,000,000 yen. Even under such circumstances, however, we think that we have set off to a good start for the 1st year of the medium term management plan as profits grew substantially during the second half year on year by 2,000,000,000 yen. Here's our plan for fiscal 2018. We are planning to secure a substantial increase in sales volume and composition in all four strategic areas this fiscal year. And will respond swiftly to deteriorating market conditions, reduce costs even more as well as engage in other measures so as to secure an appropriate spread. We plan for 31,800,000,000 yen higher net sales or 14,700,000,000 yen higher when excluding new consolidations. Looking at the analysis of operating income on the right, as we have been investing in M and As and also significant investment for a new line in Mexico, since fiscal 2017, fixed cost including goodwill amortization will increase. Foreign exchange will have a negative impact and raw materials cost is expected to continue to have an adverse impact. Cost reduction expectations are only 1,000,000,000 yen at this moment, despite the efforts made by the production division, but we hope to achieve a higher number by any means. The driver of earnings growth is expected to be sales quantity and composition under the current plan contributing by 11,400,000,000 yen. The details are shown in the bubble. More than 10,000,000,000 yen growth year on year in sales quantity and composition has been achieved in fiscal 2013 and 16 as well. And we believe it is not a stretch for fiscal 2018 as the new line in Mexico will contribute on a full year basis this fiscal year. That only contributed during q 4 last fiscal year. Looking at the breakout, between the first and second halves at the bottom, Sales quantity and composition is higher in the second half at plus 7,300,000,000. And we believe this is a fair balance Considering that the electronics, smartphone, and automobile markets are skewed towards the second half of the year as shown on page 9. I'd like to explain the 4 strategic fields in light of how we are progressing against the midterm business plan. Automobile And Transportation And Life Sciences securing steady top line and profit growth. The projection for the electronics business does not assume a strong market recovery, especially for the first half. But if it does, we may enjoy some upside. For all the 4 strategic fields, we hope to recoup the benefit of strategic investment, namely the production ramp up and synergy as soon as possible. The light bluebird in the graphs represents incremental revenues stemming from the M and A activities. As you can see, with the exception of life science, other 3 strategic businesses have realized revenue growth in an extremely timely manner. Thanks to the acquisitions, and we'd like to expedite the synergy for profit as well. Now, let's look at each of the strategic fields 1 by 1. The electronics business was heavily impacted by the smartphone market in the second half of fiscal 'seventeen. With that as a background, we intend to further accelerate our initiatives to make a shift to non LCD applications and augment the business portfolio. With existing products, we aim to increase your market share capture new customers and grow sales. For applications that have started to butt and show some good prospects in semiconductor and OLED, we will consider increasing the capacity during this fiscal year. For automobile and transportation, the full year contribution of the new production line in Mexico operating at full capacity should propel sales and profit growth. In the current electronics applications, we will leverage on the synergy from the acquisition of Polymath, and expedite the business development with a particular focus on the heat dissipation products. For building an infrastructure, We will work to grow our market share with amazing products and grow the business overseas. Looking at the different markets for CPBC, Competition in India is intensifying. Marketing Middle East is showing some gradual recovery. And in North America, we were able to win a new project that required us to meet the client's demanding specification. Our strategy is to grow in the Americas. For fire resistant materials, we plan to strike synergy with soft lung wiz. Our top market share company in Japan was spray type heat insulation building material to expand the cells of fire porphyry retained. We are already starting to realize synergy. Being able to engage in businesses and have our products as standard option with some of the major general contractors. In Life Science, we expect the main diagnostics business in the developed market to remain upbeat, and we'd like to achieve further growth in the emerging market. In addition, with the acquisition of a diagnostics company in Singapore, we hope to create synergy and found into the frontier and peripheral businesses. This slide illustrates the work we are putting into the growth enhancement and other business areas beyond the current midterm business plan. The growth enhancement areas indicated in the upper half of the slide are the businesses that we have focused on order to strengthen the business portfolio under the current midterm business plan. The respective product offerings are also listed. Thanks to your initiatives to nurture these new opportunities over the last 2 or 3 years, revenue growth for all of the first strategic fields is now on the horizon. The bottom half are what we call the corporation enhancement areas for which we expect the opportunities to materialize during the next midterm business plan and beyond. We have a particular focus on the current electronics segment and we are now at a juncture where we can anticipate tremendous opportunity leveraging on the synergy development with Polymatic. As I commented earlier, the synergy between air fryer resistant materials business and soft lawn wiz is showing good progress. For health care, the timeline is slightly longer. With the establishment of 50 star, The manufacturing capability for peptide pharmaceutical ingredients was built out, and we are striving to establish the business to be a new pillar for the future. In Automobile And Transportation, we are collaborating with UIEP's aircraft shoot team to paper ways into the aircraft industry as HPP company, and the collaboration is enjoying good progress. We have the information on our new products and new businesses on the right hand side. Thanks to the reform at the R&D Center over the last 4 years or so, the quality of the chosen theme and the research progress have improved. With that, the declining trend sales for the new product and new businesses has finally come to a halt. And starting from fiscal 'eighteen, we can expect sales growth with the new products. Furthermore, there will be more advancement on the themes that we are working on, allowing us to hold good growth expectation for fiscal 19 and beyond. Although the sales for new businesses is growing, it is slightly below our expectation, so we need to step up the development work and further acceleration is necessary. This will conclude my presentation on HPP. Thank you very much for your attention. I am Shuniti Sekiguchi, the company president for the housing company. Before I present the business plan for the housing company, let me quickly review fiscal 17. As indicated by the 3rd group of buyers from the right, we achieved 2 consecutive years of revenue and profit growth. With sales raising $497,800,000,000 and operating income $37,900,000,000 for fiscal 'seventeen. For the new housing business, orders for Grand 2 U5, which was a volume zone product launched in April 2017, was extremely brisk and the subsegment enjoyed sales and profit growth. On the other hand, The order for renovation business fell short of the plan in last year's performance, resulting in both sales and profit decline. We need to transform the business model in fiscal 2018, and I will talk in more details later. The frontier business, namely the domestic real estate business as well as the business in Thailand, is enjoying relatively steady profit. This slide shows analysis of changes in net sales and operating income. On the left is the revenue which grew by 12.8000000000 year on year. Sales for housing and Frontier grew, but, unfortunately, not for the renovation business. On the right is the analysis of operating income. For the housing business, Operating income grew by 800,000,000 yen year, offsetting the adversity arising still in construction material prices by volume growth. Which was positive to the operating income by 2,600,000,000 yen and also with fixed cost savings. For the renovation business, Martional profit was small due to the sales falling short of the projection. Fixed costs increased by 400,000,000 yen year, and as a result, The renovation business posted a big year on year operating income decline of 1,100,000,000 yen. Frontier business pretty much on par with her plan, brought for the domestic and the overseas business. In the comment about the housing business at the top of the slide, we have disclosed that the housing orders and unit base were up by 1% year on year. This was a result of the new detached housing orders growing by 3% and the condos declining by 17%. Despite a very tough market environment, we feared we'll interview as we were able to grow that it has housing orders by 3% underpinned by the new product offerings. Now, let's move on to the plan for fiscal 2018. As indicated by the bullet point in both letters, there are two key points for fiscal 'eighteen. One is to achieve 3 consecutive years of sales and profit growth. 2nd point is to secure growth in order backlog for new housing business. To aim for a strong performance in fiscal 'nineteen. With the consumption tax scheduled to go up from 8% to 10% in October 2019. The last month for us to receive the order under the current 8% consumption tax for the bill to order housing will be April 2019, which means there's less than 1 year left. For the innovation business, we will transform the current business model which relies on sales and merchant profit growth. We will reset ourselves through a fresh new start in order to re even the business model so that we could go back to the growth trajectory from fiscal 19 and beyond. For both sales and profit. On the left, you can see the sales projection, which is calling for a growth of 18,200,000,000 yen, driven by the housing and real estate business growth. We anticipate the sales for renovation business to decline. On the right is a profit projection. The operating income for the housing business is expected to increase by 500,000,000 yen. For the housing materials in fiscal 'eighteen, the cost impact for timber would be greater than that of a steel and this will be a pressure on the profit. However, we plan to compensate for that by increasing the number of housing units sold. Fixed cost is expected to go up due to the headcount increase by approximately 500 in aggregate, for the housing business and at the factory. Out of that, roughly 300 will be the additional head counts for the sales team. In the plan, we budgeted sales decline for the renovation business, and therefore, the marginal profit will also be down. However, we will make efforts to cover that by strategically reducing the fixed cost. I will elaborate how we will achieve that later, but basically, we will focus on the labor cost to go with a fixed cost by redeploying the people to the new housing team in real estate team. You can also see the plan for the Frontier business in Japan and abroad on this page. One thing worth noting is they often have split shown at the bottom of the slide. The first half operating income is expected to be flat year on year at 17,800,000,000 yen, in the second half, We are projecting a 1,600,000,000 increase to 21,700,000,000. In projecting the first half, The order backlog at the beginning of the year has not increased much compared to last year. The order backlog for renovation in the first quarter is very small, and with the lead time from order 2 booking sales for the business being relatively short, 1st quarter in particular will be extremely challenging. However, we would like to achieve a flat to operating income in the first half versus fiscal 'seventeen by securing the orders in Q1. In the second half, we expect a certain level of orders stemming from the last minute demand before the tax hike. In addition, the structural reform for the renovation business model should be completed, after which we want to grow the profit. The critical part of the strategy is how we plan to capture more customized and orders for the new housing business. But before I dive into that, let me share the outlook for the housing market. Starting from the second half, We expect to see some last minute demand before the tax hike, mainly in the Metropolitan market, but expect the magnitude to be less than the previous cycle when the tax was raised from 5 to 8 percent. The graph at the top right compares the impact from the previous tax hike and what we expect this time. Last time, the order book grew by 9% for the period from 12 month to 6 month prior to the last order date before the new and higher tax became applicable and 14% from 6 month to that last order date. This time, we are estimating the impact to be 1 third, so 3% and 6% order increase for the corresponding period and 4% growth when annualized. In spite of our expectation for the last minute spike in demand, we anticipate the impact of a tax hike to be somewhat subdued. This assumption is baked into your business plan. As for the measures for order taking, we will continue to pursue the 3 existing strategies: strategy on product, london subdivision housing, and sales. We launched 3 new products in 2017, which have all contributed to order book growth. In 2018, we have 2 plans for the main steel frame flat roof based product since we have not done anything new with this series in 17. This year, we launched a new steel frame product in April and will renew the existing model looking into the 2nd half with which we aim to grow the order intake. The subdivision housing business was strong in fiscal 'seventeen, And in April, at the outset of the new fiscal year, we have secured more land than we did in fiscal 'seventeen. And the Salesforce was increased by 120 people or by 5% year on year as of April 1st. So, the key strategy is going to be centered around the land bank, salespeople, and product offering. The major challenge lies with the renovation business. We will roll out countermeasures in terms of product salesforce and cost control. And the most critical one will be the cost control indicated at the bottom of the table. We will make the indirect functions more efficient. In our efforts to win big renovation orders, we beefed up to support functions, such as configuration and design, so that staff installed expertise would be able to join the salesperson on their customer visit. This resulted in higher fixed cost but the cells did not grow as expected. Therefore, we will once again streamline these indirect functions and make sure that the salespeople will be able to talk and market to the customers on their own. As shown by the graph at the bottom left, We will continue to offer existing strategic products, but we'll also aim to grow the revenue with other important product like the maintenance related offerings and ultimately make sure that we can grow the sales in fiscal 'nineteen. For the Frontier business, which is centered around the real estate business, we will increase the number of dwelling units under management by 2 1000 units from 45,000 in fiscal 'seventeen to 47,000 in fiscal 'eighteen. The sales of new condo unit is around 4 to 5000, so our plan is to manage roughly half of that ourselves. This would result in sales growth of 1,500,000,000 to 1,600,000,000 yen. We will also increase the offering in the second hand market. The Thainess in fiscal 'seventeen was quiet impacted by the mourning period of the deceased king, but since January this year, the order trend is recovering. We are projecting sales to increase 280 units from 148 units in fiscal 'seventeen and secure good profit. That progress is slow against the midterm business plan, but we will try to overcome a very tough market environment by shedding light to the prominence unique to 6 Sehain to move forward in fiscal 18. I am Hajima Kubo, company president of the Urban Infrastructure And Environmental Products Company, or UIEP. This slide illustrates the business performance of the last few years. Although the operating income for fiscal 'seventeen was short of the plan by 200,000,000 yen, the overall profitability improved, and we achieved better operating margin in renewed the previous record high profit. In fiscal 'eighteen, we will improve the profitability further by growing the top line and aim for another record high profit. Here is the performance analysis for fiscal 'seventeen. The net sales in fiscal 'seventeen were down by 1,100,000,000 year But with shipping out the impact of the business structure reform of negative 5,100,000,000 yen, revenue was effectively higher by 4,000,000,000 yen, as indicated by the footnote at the bottom. The operating income grew by 2,000,000,000 yen. Domestic business grew by 2,700,000,000 and overseas business marked a 700,000,000 decline. For the business in Japan, we were able to offset the impact of the rising material cost by raising a selling price in with CR or cost reduction activities. We also improved in terms of sales quantity and composition. Thanks to the initiative intended to improve the business mix, by focusing on a prioritized products with higher profitability. The efforts for fruits and we enjoyed profit contribution from the sales quantity and competition element. In the overseas business, One of the clients for the aircraft shoot business that we have explained a number of times in the past was involved in a M and A transaction as a target. And hence, from the outset of a year, the sales became pretty much flattered by fiscal 16. After the first half of fiscal 17, We detected a slight recovery and for a moment thought that it could lead to a city recovery. However, that was not the case. And the business was stagnant throughout the year against our expectations. This caused a significant shortfall versus a plan. SPR and other products enjoyed growth overseas, but it was not enough to cover for the weakness already explained. And the operating income for the overseas business was down by 0.7000000000 yen. Under the business plan for fiscal 18, We aim to grow the net sales by 7.8 by a young. Operating income is expected to increase by 1.7 by a young. With 0.7000000000 coming from the domestic business and another 1,000,000,000 yen from the overseas business. For the domestic business, we will continue to undertake initiatives from fiscal 'seventeen. The rising raw material costs will be offset by selling price and Sierra activities. While we'll expand the profit in terms of sales quantity and composition, with growth in the proportion of the prioritized products. The fixed cost will rise mainly due to higher labor cost stemming from realigning the organization and investing activities. Overseas, The client with aircraft sheet that I explained earlier has completed the M and A process in March this year. The sales is starting to come back, so we project top line growth with the aircraft shake business and will also expand the sales other products in order to achieve profit growth. The first half second half balance was distorted in fiscal 'seventeen, as many of the deals originally scheduled for the second half was brought forward to the first half, making the first half look exceptionally high and that year on year profit growth in the second half of your subdued. For fiscal 'eighteen, the first half profit will be flat over last year. But that would still be at a relatively high level, giving what happened last fiscal year. We would consider the half on half split in fiscal 'eighteen to be the normal level. Now, let me go through each of the strategic fields. For the domestic business in piping and infrastructure, We will target the growing building and infrastructure demand, mainly in the Tokyo Metropolitan area in order to expand the sales of new products and prioritize products. Overseas, the plan is to roll out the industrial material, feeding and cash based in business to the Asiya market, and to augment the pipeline renewal business. We will aim to grow the revenue by a little less than 4,000,000,000 yen in this business field. In building and living environment, as we do not expect much revenue growth, we intend to grow the profit by improving the product mix with a particular focus on the new products with higher profitability that we launched last year. For advanced materials, we expect the recovery of the aircraft ship business, as I explained earlier. We started to take the initiative of new market development last year. We will continue with the strategy and we would like to grow the net sales by moving into new markets, such as the railway market and medical market. With FFU, we will expand the overseas will always sleeper application and capture the strong domestic demand for infrastructure projects. We also have the blow mold continuing business, and sterilization container is under development. We would like to capitalize on this new offering to expand to reach narrative medicine in electronic material market. For advanced materials, we plan to grow the cells by close to 4,000,000,000 yen. Let me quickly cover each step up our efforts for new product launches during fiscal 2017 and launched 27 new products last year. We plan to launch 30 new products in fiscal 'eighteen, and we would like to keep the space of having roughly 30 new product launches each year. The sales mix of the prioritized product is increasing and this year, we will grow the sales of the prioritized product by little over 5,000,000,000 yen. Overseas, they will accelerate their product strategy for their respective areas. As you can see with the table, the pipeline renovation business finally turned into profit in fiscal 17. With this as a base, we will reinforce the business development in Europe, US and Asia, with the main focus placed on the Australian market. For piping and infrastructure, we will leverage on the capital investment we made in the Vietnamese company last year. And using that as a hub, We will expand in the market. I will skip the aircraft sheet business as this was already explained. Last year, we obtained the approval from the German Federal Railway for our FFU. In fiscal 'seventeen, we were able to grow ourselves in Europe as well as build sales track records in the US and Asia. We will keep this momentum to grow further in go 18. In aggregate, we aim to grow the herbicide sales by little less than 5 playing a young, and plan to grow the sales by Tim Boyan Yang with the growth strategy and overseas strategy combined. For the strategic investments and investments for platform efficiency, please refer to the table at the bottom. The overarching theme for platform efficiency is to achieve better productivity as the current production structure of UIEP which is small scale and dispersed in different locations, hinges efficient operation. By establishing a common platform for the organization, We intend to achieve better operational efficiency and improve the profit. This slide offers some examples of our prioritized products and new products. Please take a look at your convenient time. Thank you very much for your attention.