Good morning. I'm Kenichi Hori, CEO. Thank you for joining us today. I will begin by giving a summary of the first half operating results and yearly forecasts, as well as reviewing progress on the areas of strategic focus outlined in our medium-term management plan. I will then hand over to our global controller, Tetsuya Shigeta, for details of our operating results. The overall global economy continued to rebound during the second quarter, despite a slowing in the pace of recovering the U.S., China, and elsewhere due to factors such as the spread of the COVID-19 Delta variant and supply issues like for semiconductors, auto parts, et cetera.
Our operating results for the first half are significantly higher compared to the same period of the previous year, which was impacted by COVID-19 largely, by steadily capturing economic recovery in a wide range of business areas and represents high progress compared to the previous forecast announced in August. We will continue to pursue, transform, and grow while optimizing our portfolio and accelerating our engagement in growth areas. Please turn to page three, and I will summarize our operating results for the first half of the year. Core operating cash flow, COCF, for the period increased by JPY 252.8 billion, JPY 526.9 billion, and profit for the period increased by JPY 294.6 billion to JPY 404.6 billion year-on-year.
Both results represent a historically high record for the first half of the year and represents high progress compared to the previous forecast announced at the time of financial results for the first quarter, following our continuous strong performance. In light of these progresses, we are upwardly revising our yearly forecast with COCF forecast increasing by JPY 20 billion to JPY 920 billion, and profit forecast for the year increasing by JPY 80 billion to JPY 720 billion. As previously announced, although the interim dividend for the first half of the year is JPY 45 per share, the year-end dividend is increased to JPY 50 per share, and the total annual dividend forecast for the year is increased by JPY 5 per share to JPY 95 per share. Please turn to page 4.
We expect good performance in all segments, and we achieve progress of 59% and 63% respectively against previous forecast for COCF and profit. Trading businesses in chemicals, steel products, and food were steady, and there were also contributions from pent-up demand in automotive business, recovering in number of patients and COVID-19-related services such as PCR testing in the healthcare and hospital business, recovery in shipping business following market conditions of bulker and container vessel and FVTPL profits. In energy, while progress rate is low because of recognizing accounting valuation gain loss related to derivative transactions to hedge LNG trading in advance during the first half of the year, concentration of dividend income in the second half of the year and delayed effect of oil and gas prices, we expect to be good through the full year.
Please turn to page 5, where I will discuss progress during the first half and the outlook for the second half of the year. Let me first explain on continuous capturing of global recovery demand. Looking ahead to the second half of the year, we expect to maintain steady profitability, although we need to pay careful attention to impact of supply chain issues in semiconductors and other areas. We see continued steady demand in materials-related business, such as chemicals and steel products, and steady automotive and food production businesses, although demand for certain products may slow in some business areas and regions. In mineral and metal resources, our balanced and highly cost-competitive portfolio has positioned us to maintain strong earnings despite the impact of falling iron ore prices since August this year.
In energy, recent rise in oil and gas prices will be reflected in the second half of the year and expected to contribute to full-year profit. With respect to strengthening our earnings base for sustainable growth, we have been progressing steadily with project implementation and portfolio transformation. Project progress examples in the first half of the year included developing new mineral deposits in our Australian iron ore business, while in the oil and gas business, our activities have included executing loan agreements for the Waitsia project and beginning new FPSO operations. We have also made considerable progress with business portfolio optimization, including in the mineral and metal resources and the lifestyle segments. Our intention is to achieve sustainable growth through continuously strengthening and expanding our high-quality business clusters and establishing a strong business base. Please turn to page 6.
I will now explain progress on the business areas of strategic focus that are defined in the current Medium-term Management Plan. In Energy Solutions, we are organically building ties with areas adjacent to our existing core businesses with the aim of playing a leading role in energy transition. During the first half of the year, we reached agreement on a CCS feasibility study for ammonia production in Waitsia, invested in a green hydrogen refueling station business in New Zealand, and invested in a biomass supply chain management company in India.
We also participated in a carbon solution business in Australia. Turning to healthcare nutrition, we made further progress implementing the growth strategies for existing businesses, and through portfolio transformation, accelerated activities aimed at creating a foundation for growth. At IHH Healthcare, growth strategy initiatives included reviewing its portfolio, hospital portfolio, strengthening the management base by creating group synergies, and engaging more deeply in digital healthcare. In addition, we are bringing the investment to fruition through listing and partial sale of the shares in PHC Holdings, and realizing the gains in its corporate value, and listed Thorne. In Market Asia, in the first quarter, we completed subscription to a convertible bond issued by the holding company of CT Corp, a consumer-focused conglomerate in Indonesia.
In order to enhance its enterprise value, we are working on to strengthen its management base by dispatching director and secondees, expand its business in emerging Asian countries, and develop jointly businesses in a wide range of business areas. We will further engage in growing and evolving consumer markets of Asia by leveraging CT Group's strong business foundation and locally developed competitive advantages. Please turn to page 7. As I noted at the start of my presentation, we have upwardly revised our yearly forecast for COCF to JPY 920 billion.
Although we have downwardly revised our forecast by JPY 40 billion in mineral and metal resources due to a change in iron ore price assumptions since the second quarter, forecast increases of JPY 25 billion in chemicals, where market conditions are steady, JPY 20 billion in machinery and infrastructure, where dividends are increasing from automobile-related businesses, and Innovation & C orporate Development, and iron and steel products. As a result, we have upwardly revised our yearly forecast by JPY 20 billion against JPY 900 billion across the company. Please turn to page 8. We have upwardly revised our yearly profit forecast to JPY 720 billion. In machinery and infrastructure, the automobile and shipping businesses are performing well. In lifestyle, we're benefiting from a partial sale of our stake in PHC Holdings and steady performance in the food business.
These segments have been upwardly revised by JPY 20 billion respectively. This time, we have upwardly revised our forecast in all segments except for mineral and metal resources, which was already significantly revised in the first quarter of this year. We will now move to page nine to review our cash flow allocation in the first half. Cash in for the period was JPY 660 billion, comprising core operating cash flow of JPY 525 billion and asset recycling of JPY 135 billion. Principal assets recycled included loan collection in the copper business and sale of the contract manufacturing business of MicroBioPharm Japan Co., Ltd. Cash out was JPY 415 billion, comprising investment in loans of JPY 235 billion and returns to shareholders of JPY 180 billion.
Main projects for investment and loans included subscribing to the convertible bond issued by the holding company of CT Corp, maintenance CapEx for existing oil and gas projects, LNG and power generation projects under development, Australian iron ore and coal operations, and real estate business. Please turn to page 10. Last but not least, I will discuss the shareholder returns. During the current fiscal year, we have implemented share buybacks of JPY 125 billion up to now. As I explained earlier, we have raised the annual dividend to 95 JPY per share, and this would be the minimum dividend. This is based on our expanded cash generation capabilities in a wide range of business areas, including machinery and infrastructure and chemicals. We will aim to enhance shareholder returns reflecting cash generation capability.
That completes my presentation today, so I'll now hand over to our global controller, Tetsuya Shigeta, for details of first half performance.
Thank you. I'm Tetsuya Shigeta, Global Controller, and I will now provide details of our operating results for the first half. Please turn to page 12. First, I will explain the main changes in core operating cash flow by segment year-over-year. Core operating cash flow for the period was JPY 526.9 billion, a year-over-year increase of JPY 252.8 billion. In Mineral and Metal Resources, core operating cash flow increased by JPY 143.4 billion to JPY 240.6 billion, mainly due to higher sales price of iron ore and coal operations in Australia, an increase in dividends from iron ore and copper operations.
In energy, core operating cash flow increased by JPY 26.9 billion to JPY 87.1 billion, mainly due to an increase in oil and gas prices and an increase in the LNG dividend. In machinery and infrastructure, core operating cash flow increased by JPY 50.8 billion to JPY 77.1 billion, mainly due to the increase in dividend from equity method affiliates. In chemicals, core operating cash flow increased by JPY 20.8 billion to JPY 43.5 billion, mainly due to steady performance of group companies and trading following favorable market conditions and steady demand, in spite of increased raw materials cost. In iron and steel products, core operating cash flow increased by JPY 5.9 billion to JPY 5.4 billion.
In Lifestyle, core operating cash flow increased by JPY 20.8 billion to JPY 22.1 billion, mainly due to recovery of food production business, steady food trading, recovery of fashion business, and sale of Columbia Asia's business in India. In Innovation & Corporate Development, COCF declined by JPY 4.3 billion to JPY 26.6 billion. Other factors such as expenses, interest, taxes, et cetera, which were not allocated to business segments, total JPY 24.5 billion. Please turn to page 13. I will now explain the main year-on-year changes and profit by segment. Profit for the period increased by JPY 294.6 billion to JPY 404.6 billion. In Mineral & Metal Resources, profits increased by JPY 199.7 billion to JPY 271.0 billion due to factors such as higher sales price in Australian iron ore and coal operations and copper operations, as well as the increase in the dividend from Vale.
In Energy, profits decreased by JPY 1.1 billion to negative JPY 4.8 billion, mainly due to valuation gain loss related to derivative transactions to hedge LNG trading. In Machinery and Infrastructure, profits increased by JPY 29.5 billion to JPY 52.9 billion, mainly due to good automotive and commercial vehicles businesses, primarily in North America. In Chemicals, profits increased by JPY 16.9 billion to JPY 27.6 billion, mainly due to steady performance of group companies and trading following favorable market conditions and steady demand, in spite of increased raw material costs. In Iron and Steel Products, profits increased by JPY 18.0 billion to JPY 12.2 billion, mainly due to the improvement in operation rate at group companies due to recovery in automotive production and steady trading.
In Lifestyle, profits increased by JPY 32.8 billion to JPY 20.9 billion due to factors including strong performance in healthcare and hospital business, recovery of fashion and food production businesses, and steady food trading. In innovation and corporate development, profits increased by JPY 6.8 billion to JPY 30.8 billion, mainly due to increased profit from the real estate business. Other factors such as expenses, interest, taxes, et cetera, which were not allocated to business segments, total negative JPY 6.0 billion. Please turn to page fourteen. This page shows the main factors influencing year-on-year changes in profit. Base profit increased by approximately JPY 150 billion, mainly due to increase in dividend received from Vale and Australian iron ore business and strong performance of several segments, such as machinery and infrastructure, chemicals and lifestyle.
Looking at resource-related costs volume, profit decreased by approximately JPY 11 billion due to increase of sales commission corresponding to increase in iron ore prices. Asset recycling resulted in a decrease of approximately JPY 9 billion, mainly due to impairment loss accompanied with sale of Paiton power generation business. In commodity prices, forex, profit decreased by approximately JPY 136 billion. Commodity prices increased approximately JPY 81 billion due to steady iron ore prices and JPY 21 billion due to oil and gas prices. Finally, valuation gains/losses and special factors contributed to increase of approximately JPY 29 billion, mainly due to the absence of impairment loss at Mozambique coal mine business incurred in the same period of the previous year.
Please turn to page 15. Now let's take a look at the balance sheet as of the end of the first half. Compared to the end of March 2021, the interest-bearing debt increased by approximately JPY 60 billion to JPY 3.4 trillion, while shareholders' equity increased by approximately JPY 170 billion to JPY 4.7 trillion. As a result, net debt ratio dropped to 0.71 times. That concludes my presentation. Thank you for your attention.
Now we'd like to start the Q&A session. I'd like to ask two questions, please. My first question is about shareholder returns. A JPY 5 billion increase in the dividend was announced. How did you come to this decision? Of course, your earning power has increased, but in the non-resources, lifestyle, we are seeing good performance, so we were hoping that there'd be more when it comes to the increase. Can you talk about how you came to this decision? My second question, in chemicals and also in lifestyle, the performance has been improved. You mentioned that you are expecting slowdown in the second half. From the first quarter to second quarter, in chemicals and iron, there has been some slowdown. Is that something that you are foreseeing? In these areas, in those segments, looking at the forecast, you're not really reflecting your assumptions. Do you think that the trading is going to continue to be at a good performance, or is it going to falter?
Thank you very much for your question. Hori will answer your question.
Thank you very much for your question. As you mentioned, our shareholders' return policy has not changed. We look at the capability of our company to sustainably increase our earnings power, and we will look at the improvements to reflect that in increasing the dividend. When it comes to market conditions and others and our cash allocation situation as a whole, we will continue to do share repurchase. The combination of the two, that has not changed. We aimed at the midpoint of the year, and we have looked at all the segments, and the sustainable earnings power is increasing for all of the segments. That is why we have decided to increase the dividend by JPY 5.
We are still in the interim, in the midpoint. Our earnings power is going to increase steadily going forward. We hope to be able to reflect that in our dividend payment. That is something that has not changed, so we will continue with our policy. Also, when it comes to the management or operational environment, of course, we need to look at the changes in the trends or tides. Currently, we believe that a good situation is continuing currently. From the beginning, depending on the products and depending on the regions, there were good parts and weak parts. However, as we are seeing COVID-19 recovery in different regions of the world, the profit opportunities is seen in different parts of the world, and that is continuing.
If we look at the growth rates of different countries, there has been downward revisions announced. We are going to see improvements going forward, and we will make appropriate measures and initiatives in order to answer to those situations. Toward the second half, we will diligently face what we can do, and we will continue to monitor and then make decisions as to what to do. We are now starting to take business trips overseas, and I myself have gone overseas as well. As a member of the leadership team, we are monitoring and checking the situations elsewhere. We will continue to evaluate the COVID-19 situation and review our positions, whether we actually have the earnings power necessary.
That is, something that we need to continue to confirm. Looking at the situation, related to COVID-19, that is a kind of management operation we would like to continue to implement. Of course, we believe there is still an upside. That will be confirmed, and that will lead to our decisions to be made in the second half. Thank you.
Thank you very much for the presentation. I have two questions. Firstly, relating to the previous question about the true earnings power. This time, the total operating cash flow has been raised from JPY 900 billion to JPY 920 billion, by JPY 20 billion. For non-resources, JPY 60 billion has been raised, and JPY 20 billion for machinery infrastructure and JPY 20 billion-JPY 25 billion for chemicals. How did you see the earnings power increase for these two segments? The trading and other businesses, machinery, infrastructure, and chemicals that are affected by the market prices, and in what areas have you obtained your earnings power? How do you see the sustainability to the next fiscal year? In what occasions do you feel that your earnings power has been actually enhanced? That's the first question.
Second one is the iron ore. Rather than your company's specific assumption, just a general view is something I wanted to see. The crude steel production in China in the second half and next fiscal year, how do you see that? Also the iron ore demand and supply, how do you see that, demand supply based on that production prospect?
I'll proceed to answer the questions. Thank you for the questions. Well, what you said is the Machinery, Infrastructure, and Chemicals. The earnings capability enhancement, significant enhancement, is something that we have assumed. What's common between these two segments is the following. The global earning power has been latent there, but it has actually borne fruit.
The machinery & infrastructure assets portfolio has been well-balanced and distributed universally around the world, and that has been generating profits. We have been going through restructuring of the assets, or reshuffling of the assets, as we go along. The things have come out as we had expected. In North America, those businesses around the automotive industry has been performing well in South America. In North America, there were significant changes in the levels that we have seen. The new vehicles transactions of volume and the used cars and rented cars services, we have been combining those services originally in North America, but there have been many opportunities increased under the pandemic.
The menu that are being offered have actually become more fit in the market. Even if the vehicles are the next generation vehicles, those services will be continued as well. We have been able to enhance our base power. As for chemicals, there have been the capturing of opportunities globally. There are basic chemicals and also high-performance chemicals. We used to call this precision chemicals at the downstream. We're doing both, and both have trading and businesses as a manufacturer. The basic chemicals that are now heated up, even if they settle down, there's an input cost that will be reduced for the downstream chemicals.
We will be able to maintain the well balance for the whole portfolio. That is now being presented, and we can maintain the earnings power sustainably through those businesses. To answer your second question, the crude steel production in China. In the second half, the environmental regulation will be the focal point. Chinese government, the authority, is now beginning to apply control over the crude steel production, and power demand has now been reported. The crude steel production should be seen differently from the previous year. From the steel, the supply of the steel or iron ore, the production has not increased under the pandemic.
Based on that, in the second half, we have come up with the forecast for the whole business plan. The forecast that we have come up with is based on those interpretations. As for the construction demand or the steel demand for basic businesses in China, from the mid-term perspective, I think they will realize what they have planned originally. There might be the decline that we're seeing is just a temporary, but we would like to closely watch the situation as we go along. Thank you. As for the crude steel production, there is a follow-up question. In the second half, if the environmental regulations and power shortage, because of that, crude steel production could be curbed.
In the next fiscal year, the power shortage was more of a factor in the second half. In the next fiscal year, do you think that the things will be normalized? Well, it's, I think, too early to predict what's going to happen in the next fiscal year. They do have the steel supply responsibility that they have to fulfill as a steel manufacturer in China. There are many data points, so we'd like to closely watch them in the second half. When we get to the point where we have to have a business plan for the next fiscal year, there will be many enough data points for us to do more prediction. Thank you.
Thank you very much. I have two questions I'd like to ask. In the first half, the valuation loss, the transient impact was very small. With the base profit being enhanced, you are able to gain a lot of profit. Of course it will depend on the external environment, but how will you be able to control this going forward, and how would you maneuver the future? The second one, about the environment of energy demand. CO2 emissions, the GHG emission reduction, these are becoming more stricter every day. In the existing business, do you need CCS responses? Or in the future, are you looking for stricter restrictions or CCS responses? What are the impact on your interest going forward? Thank you.
Thank you very much.
Hori will answer your question.
Thank you very much for your question. As for the transitory factors in the first half, as you had mentioned, there were one-time factors and non-one-time factors. Of course, this made everything very visible, so I think that was good. When it comes to valuation and impairment losses, these were not very favorable, so we'd like to minimize them as much as possible going forward. We like to take measures before they happen so that they can be avoided. That is something that we are going to continue to work on throughout the company. On the other hand, at the moment we are making profits, but in the future, we want to move on to a different segment, and maybe somebody else should own such businesses.
We will look at asset reallocation. There are positive profits, and also we will work on switching or changing the portfolio allocation going forward. A transient loss may be made, but we still need to exit such kind of businesses. We'll disclose the content going forward if we are to make such decisions going forward. FVTPL, we give that name to all the results of the asset and the investments. They are assets and capitals and profits coming out of them. They look to be transient or one time. However, for us, it is just a part of our ordinary business. As a company, there may be a portfolio, and it may show certain results. At the beginning of the year, it's very difficult to come up with a budget.
We have to look at the market situation and strategy of the capital investments by each divisions and companies, and that is something very difficult to forecast. In a long history, we have been working on this. Part of the earnings are being comprised by such operations and businesses. How we are going to participate, how we try to show or make it visible, I think there needs to be some creativity, but they may be transient, but they are part of the ordinary profit, and that is something we'd like you to take into consideration.
As for your question on energy, of course, energy transition, what we as a company like to create when it comes to business base going forward, I think that is an important or part of our business, strategy or plan going forward. Our existing energy business, the GHG is quite low, and our base load is being made out of it, so it is very advantageous. We have limited time, but we hope that we can work as a bridge fuel going forward so that we can cater to the responsibility to supply energy. When it comes to energy transition, renewable energy, we need to couple that with, for example, storage, batteries and such new technologies, so that we'll be able to adjust electric supply.
That is something that we need to continue to work on. We work in regions where gas and oil is being produced. Carbon capture projects, these will be included in our operations going forward. By doing so, you are focused on ammonia or hydrogen. The next generation energy, in total, the gas emissions is something that we need to think about. We need to combine carbon capture with, for example, ammonia production. Through verifications, we need to see tangible results. In order to utilize, for example, ammonia, we need to look at establishing infrastructure so that we will conduct our projects in different areas in parallel, so that can be verified.
I'm sorry to be taking long, but when it comes to fuel, mobility, et cetera, we will look at the fuel. Next generation biofuel is something that we will look at. With other mobility industries, we will verify the situation and possibilities going forward. We have an energy transition business in our company, which will further be established going forward. Thank you.
There are two questions. Thank you for the presentation. Firstly, it might be too early, but.
I would like to ask about the business performance in the next fiscal year. At the beginning of the year, the fiscal year, the increasing profit trend is something that you are foreseeing. That's what you said. The earnings power has been enhanced this much, and given that, ahead of the next fiscal year, what is your prospect? Well, there could be an upside, that's what you said earlier. The mineral and metal resources, even if there is a decline, you may be able to cover that. Can you say more about that? Second question is about profit in trading business, how you should look at that. In the first half, supply chain disruptions and confusions were there, and trading house resident rental was recognized, and earnings may have increased because of that. Once the COVID-19 runs its course and subsides, can you maintain that trading profit, or do you see the decline, the trading profit going forward? How are you looking at that? Those are the two questions.
Thank you for the questions. The President will answer those questions.
Thank you for the questions. For the next fiscal year, well, we are at the midpoint, and talking about the business plan and budget for the next fiscal year is quite difficult. That's what I would like you to understand. I'm saying this because the COVID-19 and post-COVID-19, there is pent-up demand, but there are not many examples we can refer to. Something might be going well, and this could lead to the network expansion, and it could increase the business. That is something for sure. But on the other hand, as you said, in this confusion status, the
Of course, we would like to provide services, and we like to take whatever opportunities that we can capture, but we have to verify whether this would be sustainable. The earnings bar is on the increasing trend, but where is the part there is no repeatability? That's what we need to do in a precise manner. Society changes, and if there is a distortion in supply chain, the business opportunities that had not been noticed have now been identified. The people in the field are now making preparations for the next fiscal year, so this could lead to an upside. I'd like to closely watch that. Also trading the market. The market itself cannot be controlled, so we have to closely watch that and then incorporate it into the budget.
Even if you can't control the market prices, the way you capture the businesses around the market could be improved. That's what we're doing now. For example, LNG in the U.S., there is a Cameron LNG project in the Gulf region, and Cameron LNG is an infrastructure type, totally toll conversion business model. In that sense, it is highly affected by the market. At the same time, the LNG that we have purchase and offtake, how you combine that LNG and the LNG from Cameron. This could be a stable business. These are the kind of things that we're doing on a day-to-day basis to see what sort of business opportunities that will be there in the next fiscal year.
In so doing, we can come up with the business plan for the next fiscal year. We have just completed the first half, and the new message that we are communicating to the employees is to do such preparations that we have to focus on as a company ahead of the next fiscal year. I hope that we will be able to talk about this more down the road. Thank you. With regard to trading, I think I partially answered the question already, but we are going through trials and errors to see the new business opportunities and also how we can convert those new businesses into the sustainable businesses or business sustainability. We'd like to answer the question combining those two. Thank you.
I would like to ask two questions, please. My first question, as was explained earlier, it's related to your energy strategy. I'd like to confirm. You talked about transition asset. We need to understand that. In wide areas, in wider regions, you'll be implementing that. Of course, for harvesting, I think you'll take the next 10 years, 20 years. It is going to be a long-term investments strategic focus, and that is something I understood. However, because it's a transition asset, it does have risks involved as well. Not working out in general, I think you need to be able to narrow it down in some areas in some time points going forward. In order to leverage your strengths, what is the direction going forward in narrowing down on the focus when it comes to energy business going forward? Can you talk and give us hints?
In the midterm, please. LNG is one part of it. In your company, of course, it's linked to the oil, so it is not really linked to LNG. When it comes to oil production, that production is being suppressed, and of course, the tightening of supply and demand may continue. Is your perspective on demand and supply situation changing going forward? Also in Mozambique, the fourth module was talked about at the beginning of the year. Do you have any updates on that point, please? I have asked questions on energy. CT Corp investment, so you have subscribed to convertible bonds. Will you be. You mentioned that you'd be focusing on making profits from that.
In order to gain benefits from that business, do you think that the investment opportunities will continue to surface going forward? In the Medium-term Management Plan, do you think the weight of that business is increasing? Can you talk about the future prospects, please?
Thank you very much for your question. Hori will answer your question.
Thank you very much for the questions. You have asked questions of energy in general and CT Corp. Yes. Is that correct?
Yes.
When it comes to energy transition, we need to select and also focus. I think that is something that you have indicated. In your company, transition fuel, LNG is a core of that transition fuel. Competitive projects with good reserves, they may be time-consuming, but that is something that we are working on. This number of projects that we are working on, we need to make sure that we'll be able to complete them. In the world's energy transition that's being discussed, I believe that our projects will be useful as a bridging project. When it comes to LNG operation itself, it is a plus. We need to be effective, and that is going to result in reduction in CO2 emissions. With capable operators, we'd like to continue with such projects and endeavors. When it comes to coal, of course, we need to look at thermal coal.
Of course, when it comes to metallurgical coal and thermal coal, I think they may be mixed together. Coal for energy, the assets in substance, I think we need to minimize. That is a kind of focuses that we'll be giving with energy projects. When it comes to China, they have its own situation. When it comes to coal, there has been supply disruptions. Therefore, coal market, I think we need to really deepen our understanding. It may be related to geopolitical factors as well. In energy as a whole, in general, we are trying to make decisions on coal dependent on our understanding of the situation. In such a situation, by combining different businesses and different projects, we need to create new projects in energy.
The earnings power that we have established, we want to grow, and that is a plan that we have. With that, as a direction going forward, we want to select and also expand the portfolio of allocation further, and that will be combined going forward. When it comes to CT Corp, we have had discussions with them, and they are looking at horizontal expansion from Indonesia to other regions, and including Japan and from U.S. and also from Europe, they want to import new materials, products and services that the consumers need in Indonesia. That is the kind of expectation that they have for us, and that is their target. There are some businesses that we can lead, not only in Indonesia, in other areas as well.
There is a possibility that we make additional investments in the adjacent areas. They are included in the potential menu. However, in the short term, in the CT Corp, we do not expect a new big investment to surface in the short term. We are in the process of evaluating the possibilities and capabilities. If there are good prospects, we will disclose the information going forward. Next on Mozambique. To update you on the situation in Mozambique, of course, to improve the security, Mozambique government has been taking a number of measures. The President of Mozambique has made declarations of what they can do, and they have completed the implementation. Of course, when it comes to security improvement, that has shown great improvement.
However, with the security improvement, we believe that in the areas where we are implementing our projects, we need to have long-term, steady lifestyle security for the people living there. Long-term, big, projects is going to restart in those areas that we are involved in. We would like to confirm the security of those areas. With the operator, we would like to discuss the situation with TotalEnergies so that we'll be able to continue with their projects and restart the projects. The commitment to our project has not changed. Start of production, whether it's going to be delayed, I think the hurdle is higher. However, we would like to analyze the scenarios as well to make that decision necessary. Thank you very much.
Thank you for the presentation.
There are two questions. Firstly, about returns to the shareholders. In this fiscal year, to the core operating cash flow, the total shareholder return is 30% sharp at the moment. In your case, the 33% is the three-year target for the medium-term management initiative. If you look at the single year, the ratio could change significantly. About additional return, especially the share buyback, is there any possibility that we can expect more? Can you share with us your thoughts on the shareholder return at the moment? That's the first question. Second question, in the medium-term management initiative, the ROIC has been introduced as an internal index. What are the targets of ROIC?
ROIC, it's not clear to us who are outside of the company. Probably this is linked to the assessment of the performance of employees. What has changed with introduction of ROIC? That's not clear to us externally. If there are any examples that you can share with us, that would be appreciated. Those are the two questions. Thank you.
Thank you. President Hori will answer those questions.
Thank you for the questions. As for the return, shareholder return, the base earnings bar is the determinant for dividend. If you look at the characteristics of market prices and portfolio reshuffling and total cash allocation, we are agilely, in agile manner conducting the share buyback. That basic policy has not changed. With that policy, this currently running medium-term management initiative in this three-year period, the 33% of operating cash flow, that's what I said the other day. Looking at that target, we are proceeding with the shareholder return, and there's no change in that. In that sense, we are still in the midpoint of the one fiscal year. Going forward, at what timing are we going to consider and execute share buyback, and in what way?
Well, that is something that we'll continuously verify and examine and verify. Once we are ready, we are going to execute that. With regard to the shareholder return, as you can see on the page of return to the shareholders, in this fiscal year, we have done JPY 135 billion in share buyback already. This has led to the improvement in capital efficiency. As I said last time, the cash flow per share that is owned by shareholders or what is the size of the cash flow, and shareholder return is linked with the promotion of capital efficiency because that made it easier for us to look at that.
Combination of dividend and share buyback is considered to further enhance the returns to the shareholders, and that's what we are going to continue to do. In the second half, various progresses in businesses and business environment is something that we're going to watch to make decisions on shareholder returns. That has not changed yet at all. What I wanted to say more is that the investments may seem to be somewhat inactive, but once the COVID-19 is going to over, we're going outside and look at the pipeline for investments that is becoming richer. We are being selective, so we're not going to do this blindly. If there are any good deals, then we will work on that.
In the overall cash earnings power, we are going to maintain the return to the balance of return to the shareholder. That will not change. At the same time, how the investments are becoming more substantive, that's what we're going to continue to see because this will be important in enterprise value enhancement in the longer term. That balanced policy will not change. With regard to ROIC, the effect of introduction of ROIC, there are multiple. Whether the base earnings power has enhanced or not, I think this is related to, closely related to that question as well. The crisis of a pandemic has actually pushed us forward.
Globally, some companies may think that they have to enhance the organizational efficiency, and those are seen in our overseas affiliates as well. Break-even point in various companies may have been lowered slightly because you have to survive in pandemic. That was the crisis situation. In order to enhance ROIC, you have to reduce the break-even point. Those are the two positive factors to push us forward. This could become a leverage in the future. Also, the effect has already been seen. The changes in the level of earnings power is now being felt by us because of that.
IHH, the business management data of the hospital, can be seen in a centralized manner because we have a broad geographic area to cover. Best practices could be applied in various hospitals and so that we can reduce the expenses in investments with the centralized investments. M&A roll-ups should be done, and we have now the means to do that. Enhancing operational leverage has become possible, and that is a big factor. It's not applied to everything, but with the ROIC more in mind, these are more seen in various business units. How much we were able to enhance the business earnings power, that is something that we are going to continue to see in the next fiscal year.
That's, I hope, I was able to communicate the current status with this message. Well, CFO would like to add that. Well, with the introduction of ROIC, the in order to make it the internal indices, if there is a volatility, then the principal could change. There are some technical issues. In each of the business areas, how much growth potential that is the vertical axis, and the profitability by ROIC is in the horizontal axis. Four-quadrant analysis is done in the portfolio committee meetings, and then we talk to the business units in the field to see how you can measure with ROIC whether this can lead to the enhancement of the profitability.
What's different most is that as we add up the business plans, rather than just talking to the C business unit head, well, this is the expectation level that you need to fulfill. That is something that has penetrated into the field, not just to the top management. That is a big factor. In the strategic meetings and in the meetings with the management team, the quantitative discussions have enhanced this meaning now because of ROIC. This, what has been done from the past, the enhancement of the quality of the existing businesses, where we are seeing the tangible results, that has become clearer and more visible.
Now we have a question coming through the system. I'd like to read out the question. This is a question on the forecast for the profit in the second half. For Iron and Steel Products, and also for Innovation and Corporate Development, excluding the transient profit in the July to September period, so net profit times two, will that be less than the second half 2021 profit? What are the factors for reduction in the profit? Is there any factors that is involved? Methionine and methanol, the market is improving. The second half Chemicals profit projection compared to the second half of 2021, is the factors the same, or is there different factors involved? That is the question that we have received. CFO Shigeta will answer your question.
This is about iron and also steel products, yes? When it comes to iron and steel products and also chemicals, the second quarter
Because of reduction in automobile production and supply shortages of semiconductors, their activities is going to go down. Up to the second quarter, the performance did not really reflect the situations in a strong manner. The movements that we have seen, whether the margin is going to continue, we have taken a conservative position. How much of an impact we are going to see in the third quarter and fourth quarter, that is something we will continue to monitor closely. In the second quarter, we may have seen a platform model, however, maybe it is going to stabilize, but we believe that the performance may have room to grow. When it comes to innovation and corporate development, FVTPL in the first half that was recorded, and the ratio was quite big.
In the third quarter and fourth quarter, the market and also the stock price, that is something that we are looking from a conservative position. When it comes to chemicals, as I mentioned earlier, there are some trading impacts, but looking at the current market condition, we are seeing strengths, and that will continue, and that is our projection. The margin, when we look at the raw materials, the prices, and also product prices, we believe that we'll be able to secure a certain degree of profit, so we hope it will continue to be flat. Thank you.
If there are no other questions, then we'd like to conclude the briefing and also Q&A. Last but not least, I'd like to give you the announcement. At the end of the PowerPoint presentation, you can see the ESG day that will be held at December 3rd. For details, there will be an invitation letter to you via email, and I hope everybody will participate. With that, we'd like to conclude this earnings conference. Thank you very much for joining us despite your busy schedule today. Thank you.