Toray Industries Stock

Thank you very much for joining us today despite your busy schedule. On behalf of Toray Group, I'd like to take this opportunity to extend my gratitude towards your continued understanding and your interest in our management and business activities.

Now, I'd like to report Toray's business results for the first quarter ended June 30, 2026.

Now, I would like to follow the table of contents shown on Page 1. This is a summary of the business performance and forecast. Operating income for the first quarter increased year-on-year marked a record high for any quarter, reflecting front-loaded demand arising from the situation in the Middle East and recovering demand across applications as well as efforts to pass on higher raw material and fuel prices to selling prices and cost improvement initiatives.

In terms of the consolidated business forecast for the first half of the fiscal year ending March 2027, Toray has revised upwards initial forecast announced on May 13, 2026, based on the first quarter results. The full year consolidated business forecast is planned to be reviewed as appropriate at the time of the announcement of second quarter business results. I will explain the details starting from the next page. I'd like to begin with an overview of business results for the first quarter ended June 30, 2026.

Please turn to Page 4. Consolidated revenue for the first quarter increased 14% compared with the same period a year earlier to JPY 679 billion. Core operating income increased 66.6% to JPY 48.4 billion and profit increased 82.3% to JPY 31.3 billion. Special items for the first quarter improved by JPY 0.5 billion to negative JPY 1.1 billion.

Page 5 is about assets, liabilities, equity and free cash flow. As for financial position at the end of June 2026, both assets and liabilities were affected by the increase in translated yen amount of overseas subsidiaries because of the depreciation of the yen. The total assets stood at JPY 3,492.1 billion, up JPY 16.1 billion from the end of the previous fiscal year due mainly to increases in trade and other receivables, property, plant and equipment and retirement benefit assets.

Total liabilities decreased JPY 5 billion from the end of the previous fiscal year to JPY 1,544.2 billion, owing mainly to decreases in borrowings and deferred tax liabilities. Total equity increased by JPY 20.1 billion from the end of the previous fiscal year to JPY 1,947.9 billion, primarily due to an increase in other components of equity. Owners' equity was JPY 1,817.1 billion. Interest-bearing liabilities was JPY 901.1 billion, and D/E ratio was 0.5. Free cash flow was positive at JPY 20.9 billion.

Page 6 explains about capital expenditures, depreciation and amortization and R&D expenditures. Capital expenditures for the first quarter decreased by JPY 11.2 billion to JPY 23.8 billion on a year-to-year comparison. Depreciation and amortization increased by JPY 2.1 billion to JPY 34.9 billion. R&D expenditures increased by JPY 0.1 billion to JPY 18.2 billion compared with the same period of the previous fiscal year.

The table on Page 7 describes revenue and core operating income by segment. In addition, the graph on this page shows the factor analysis of JPY 19.4 billion increase in core operating income for the current first quarter on a year-to-year comparison. Overall, the company was affected by soaring raw material and fuel prices resulting from the worsening situation in the Middle East, but responded through emergency measures, including passing these increases on to sales prices and improving costs.

By segment, a recovery trend was seen mainly in the automotive applications in the Fibers & Textiles and Performance Chemicals as well as the aircraft applications in the Carbon Fiber Composite Materials. As a result of capturing front loaded demand and recovering demand as well as promoting structural reforms and strategic pricing, core operating income increased 67% year-on-year, while core operating margin improved by 2.3 percentage points.

Using Page 8 and after, I'd like to explain the results of each segment. First, Fibers & Textiles. Revenue of the Fibers & Textiles segment increased 8% to JPY 259.9 billion compared with the same period a year earlier and core operating income increased 18% to JPY 18 billion. The apparel applications were affected by intensifying competition from overseas products but focused on capturing demand. The industrial applications were on a gradual recovery trend driven mainly by the automotive applications, et cetera.

Page 9 is the Performance Chemicals segment. Revenue increased 14% to JPY 251.1 billion compared with the same period a year earlier. Operating income increased 69% to JPY 23.1 billion. The Resins & Chemicals business were affected by soaring raw material prices resulting from the worsening situation in the Middle East, but sales remained firm owing to the capture of front-loaded demand while passing the cost increases on to the sales prices. Films business, sales of the electronic applications, including MLCC and optical applications remained steady.

In the Electronic & Information Materials business, OLED-related materials and circuit materials were affected by sluggish display panel demand in China and intensified competition, but sales for the power industrial application grew.

Page 10 is the Carbon Fiber Composite Materials segment. Revenue increased 34% to JPY 89.7 billion compared with the same period a year earlier, and this segment posted core operating income of JPY 7.9 billion, a 71% increase from the same period a year earlier.

In aircraft applications, sales for major customers was steadily expanded and sales in the space and defense application also grew. In the sports applications, inventory adjustment in general purpose products for outdoor leisure continued, but sales of high-end products were strong. The industrial applications were on a recovery trend, mainly in pressure vessel and wind turbine blade applications.

Page 11. In the Water Treatment and Healthcare segment, revenue increased 14% to JPY 40.7 billion compared with the same period a year earlier, and operating income increased 127% to JPY 3.1 billion. In the water treatment business, the impact of sluggish market conditions in China continued, the shipment of reverse osmosis membranes for major products in the Middle East and sales in the Americas, one of its key markets remained strong. In the Pharmaceuticals and Medical Products business, sales of pharmaceutical products stagnated, but efforts were made to shift towards higher value-added hemodialysis dialyzers and to reduce costs.

Page 12 shows business results of major subsidiaries and regions. In Japan, at Toray Engineering, shipment of electronics-related equipment was strong. At the subsidiaries in Southeast Asia, in the Fibers & Textiles and Performance Chemicals businesses, demand for the automotive applications in the industrial applications was steady. At our subsidiaries in China, the apparel applications in the Fibers & Textiles business were robust.

As for subsidiaries in the Republic of Korea, in the Fibers & Textiles business, scaling down of unprofitable applications and cost reductions were promoted. In the Performance Chemicals business, sales for power applications in the Electronic Materials business grew. Our subsidiaries in the U.S., Europe and others in the Performance Chemicals business, sales of high value-added products in the U.S. films business expanded. In addition, in the Carbon Fiber Composite Materials business, sales of aircraft space defense applications increased.

Next, I'd like to explain the consolidated business forecast for the first half of the fiscal year ending March 2027. Please turn to Page 14. The global economy is expected to continue with a gradual recovery phase. The Japanese economy is also expected to continue with its gradual recovery. However, downside risks remain, including escalating tensions in the Middle East and the resulting rising raw material prices and supply constraints as well as prolonged impacts that may weigh on the global economy. Further, the current economic conditions will be affected by the direction of the U.S. trade and foreign policies, together with the responses from other countries, trends in AI-related demand and slowdown in the Chinese economy. These factors may significantly affect supply chains and trade structures in the medium to long term.

Given the business performance for the first quarter and the business environment, Toray revised its consolidated forecast for the first 6 months announced on May 13, 2026. It now expects revenue of JPY 1,390 billion, core operating income of JPY 87 billion and profit attributable to owners of parent of JPY 45 billion. As for the full year consolidated business forecast, the company plans to review it as appropriate at the time of the announcement of second quarter business results, taking into account changes in the business environment. Assumed exchange rate from July to September is JPY 155 per U.S. dollar.

Page 15 shows the consolidated business forecast for the first half of the fiscal year ending March 2027 by segment. Given the first quarter business performance and other factors, the company revised the forecast for each business segment, specifically Performance Chemicals. Page 16 shows the comparison between the initial forecast and the new forecast for the first half of the fiscal year ending March 2027 and variance factors by segment.

This concludes my presentation. Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Thank you very much for joining us today despite your busy schedule. On behalf of Toray Group, I'd like to take this opportunity to extend my gratitude towards your continued understanding and your interest in our management and business activities. Now I'd like to report Toray's business results for the fiscal year ended March 2026 and the business forecast for the fiscal year ending March 2027.

Now I'd like to follow the table of content shown on Page 1. This is a summary of the business performance and forecast. Core operating income of FY 2025 slightly decreased year-on-year to JPY 141.9 billion due to effects from the stagnant market conditions and inventory adjustment despite the promotion of structural reform and strategic pricing. Core operating income of the fiscal year ending March 2027 is forecasted to increase year-on-year to JPY 160 billion, given the profit increase driven by business expansion in the growth business fields and promotion of the structural reform while factoring in the risks associated with the situation in the Middle East.

In terms of annual dividend, the company plans to pay JPY 26 per share of common stock, a JPY 6 increase compared with the previous fiscal year. This dividend includes a JPY 3 of commemorative dividend to mark its 100th anniversary as part of the interim dividend. I will explain the details starting from the next page.

I'd like to begin with an overview of business results for the fiscal year ended March 2026. Please turn to Page 4. Revenue for the fiscal year ended March 2026 increased 0.9% to JPY 2,585.1 trillion compared with the previous fiscal year, and core operating income decreased 0.6% to JPY 141.9 billion. Net income increased 2.1% to JPY 79.5 billion. ROIC was 4.7%, while ROE was 4.5%.

Page 5 is about Special Items. Special Items for the period worsened by JPY 29.4 billion compared with the previous fiscal year to negative JPY 44.7 billion. Toray recorded JPY 25.1 billion of impairment losses as profitability worsened in the battery separator film business and its subsidiary in the Republic of Korea due to the sluggish EV market, et cetera.

Page 6 about assets, liabilities, equity and free cash flow. As for financial condition at the end of March 2026, both assets and liabilities were affected by the increase in translated yen amount of overseas subsidiaries because of the depreciation of the yen. Total assets stood at JPY 3.477 trillion, up JPY 184.4 billion from the end of the previous fiscal year due primarily to increases in trade and other receivables, property, plant and equipment as well as retirement benefit assets. Total liabilities decreased JPY 77.1 billion from the end of the previous fiscal year to JPY 1,549.1 trillion, owing mainly to decreases in borrowings. Total equity increased by JPY 107.3 billion compared with the end of the previous fiscal year to JPY 1,927.8 billion, mainly owing to an increase in other components of equity despite a decline due to the purchase of treasury shares. Owners' equity was JPY 1,800.1 trillion. Interest-bearing liabilities was JPY 905.6 billion, and D/E ratio was 0.5. Free cash flow was positive at JPY 144.8 billion.

Now Page 7 shows the factor analysis of JPY 0.8 billion decrease in core operating income for the fiscal year ended March 2026 on a year-to-year comparison. The Fibers & Textiles segment remained strong, mainly in the apparel applications. Meanwhile, in the Performance Chemicals segment, core operating income decreased due to weak sales of battery separator film and lack of temporary factors, including reversal of allowance that increased profit in the previous fiscal year. In the Carbon Fiber Composite Materials segment, profit decreased due mainly to the impact of demand correction in the industrial applications, including businesses that fall under structural reform and Darwin project. As for the net change in price, strategic pricing has proceeded steadily. Core operating income decreased 0.6% year-on-year and core operating income margin fell 0.1 points.

Using Page 8 and after, I'd like to explain the results of each segment. First, Fibers & Textiles. Revenue of this segment exceeded JPY 1 trillion for 2 consecutive fiscal years. Revenue increased 4% to JPY 1,051.1 trillion compared with the previous fiscal year, and core operating income rose 6% to JPY 68 billion. The apparel applications were strong overall despite the stagnation in the European market and continued impact of the intensified competition with overseas products. In the industrial applications, amid the sense of stagnation in the markets, including the automotive applications, the group strived to reduce costs.

Page 9 is the Performance Chemicals segment. Revenue decreased 5.3% to JPY 894.4 billion compared with the previous fiscal year. Core operating income decreased 6.2% to JPY 56.3 billion. In the resins and chemicals businesses, the resins business stagnated due to the impact of the slowdown in the automotive applications, while the Chemicals business was also affected by the worsening market conditions. In the film business, demand for the electronic component-related applications and the automotive capacity applications grew, while sales of battery separator film stagnated. In the electronic and information materials business, sales of new products for the power inductor applications expanded, while OLED-related materials and circuit materials were affected by the slow demand for display panels and intensified competition in China.

Page 10 is the Carbon Fiber Composite Materials segment. Revenue was almost unchanged year-on-year, JPY 300.1 billion, and core operating income was JPY 17.6 billion, a 21.7% decrease from the previous fiscal year. In the aerospace applications, sales for major customers have steadily recovered accompanying the alleviation of inventory adjustment in supply chain. In the sports applications, sales of the high-end products for outdoor leisure were steady. However, inventory adjustment of the general purpose products continued. In the industrial applications, the pressure vessel applications entered an adjustment phase and recovery of the wind turbine blade applications were also delayed.

Page 11. In the Environment & Engineering segment, revenue increased 12.8% to JPY 266.9 billion compared with the previous fiscal year, and core operating income increased 11.2% to JPY 28.8 billion. In the water treatment business, reverse osmosis or RO membranes for the Middle East and plant construction projects in Japan remained solid. However, the business was affected by the stagnant market conditions in China and intensified competition. As for subsidiaries in Japan, sales of engineering and construction subsidiaries remained strong.

Page 12 is the Life Science segment. Revenue decreased 1.4% to JPY 52.4 billion compared with the previous fiscal year, and core operating income increased by JPY 0.7 billion to negative JPY 0.1 billion. In the Pharmaceutical Business, overseas sales grew mainly in China, but sales in Japan were affected by the penetration of generic versions. In the Medical Devices business, sales of hemodialysis dialyzers and catheters stagnated, but efforts were made to shift towards high value-added products and to reduce costs.

Page 13 shows the business results of major subsidiaries and regions. At Toray International, sales were strong mainly in the Fibers & Textiles, but affected by the cost increase. At the subsidiaries in Southeast Asia, in the Fibers & Textiles business, demand for the apparel applications and automotive applications in the industrial applications was weak. In the Performance Chemicals business, spread of ABS resins has improved. At the subsidiaries in China, in the Fibers & Textiles business, the apparel applications were steady. In the Performance Chemicals business, the Chemical business was impacted by the worsened market conditions. As for subsidiaries in the Republic of Korea, Fibers & Textiles business saw an increase in operating income due to the effect of structural reforms such as scaling down of unprofitable applications. In the Performance Chemicals business, sales of battery separator film was stagnant.

Next, I'd like to explain the consolidated business forecast for the fiscal year ending March 2027. Please turn to Page 15. The global economy is expected to continue with a gradual recovery phase. The Japanese economy is also expected to continue with its gradual recovery. However, downside risks remain, including escalating tensions in the Middle East and the resulting rising raw material prices and supply constraints as well as prolonged impacts that may weigh on the global economy. Further, the current economic conditions will be affected by the direction of the U.S. trade and falling policies together with responses from other countries, trends in AI-related demand and slowdown in the Chinese economy.

These factors may significantly affect supply chains and trade structures in the medium to long term. For the fiscal year ending March 2027, Toray expects revenue of JPY 2,830 trillion, core operating income of JPY 160 billion and the profit attributable to owners of parent of JPY 90 billion, taking into consideration anticipated business expansion in growth fields and the profit increase through promotion of structural reforms while factoring in the risks associated with the situation in the Middle East.

Page 16 shows our semiannual forecast by segment. Revenue and core operating income are expected to increase across all segments, driven by capturing demand expansion in the Fibers & Textiles, Performance Chemicals and Carbon Fiber Composite Materials segment as well as the effects of strategic pricing and profitability improvement projects.

Page 17 shows the comparison of core operating income between the actual results for the fiscal year ended March 2026 and forecast for the fiscal year ending March 2027 with breakdowns into segments.

Page 18 explains the trends in capital expenditures, depreciation and amortization and R&D expenditures. Capital expenditures for the fiscal year ending March 2027 are expected to be JPY 160 billion; depreciation and amortization, JPY 140 billion; and R&D expenditures, JPY 86 billion.

Page 19 shows shareholders' return. Toray has maintained a basic policy of stable continuous dividends while providing shareholders' return in line with business performance growth. Under IGNITION 2028, the company will maintain this approach as its foundation while pursuing progressive dividends driven by profit growth as well as flexible share buybacks, taking into account the company's financial position and capital structure. In terms of interim dividend in the fiscal year ending March 2027, Toray expects to pay JPY 13 per share of common stock. This includes a JPY 3 of 100th anniversary commemorative dividend. The company plans JPY 30 of year-end dividend. Consequently, the annual dividend per share for the fiscal year will be JPY 26, an increase of JPY 6 from the previous fiscal year.

This concludes my presentation. Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Thank you very much for joining us despite your busy schedule. Today, I'd like to explain about Toray's vision from the medium- to long-term perspective and the Medium-Term Management Program, IGNITION 2028, our initiatives to realize our vision. Now I would like to follow the index shown on this page. I'll begin by sharing our overall view of the key issues, then explain our long-term vision and management strategy as well as our medium-term management program. First, reviewing the current Medium-term Management Program, AP-G 2025.

I'd like to summarize the achievements over the past 3 years and clarify the challenges that have emerged for the next stage. This slide presents the consolidated progress on AP-G 2025 target. The left side shows the trends in Revenue and Core Operating Income, on the right side, ROIC and ROE. Revenue and Core Operating Income are forecasted to increase significantly compared with FY 2022, reflecting Strategic Pricing and Structural Reform. Compared with AP-G 2025, however, we fell short of the target as lower sales volumes caused by delays in business expansion, particularly in Performance Chemicals and Carbon Fiber Composite Materials.

By advancing Management with ROIC as our Core Management Principle, we expect to reach the ROIC Target of around 5%. Meanwhile, ROE is expected to be below the target. Next, the progress on target by segment. This slide shows the trends in each segment's Revenue growth rate, Core Operating Income growth rate and ROIC. Core Operating Income increased and ROIC improved across all segments, except for the Life Science segment under Structural Reform. The graph on the right shows trends of Core Operating Income by segment.

The segment with the largest increase in Core Operating Income was Performance Chemicals, while the utilization rate increased in the Resins and Films businesses supplying related materials due to the recovery of the automobile market, effects of Structural Reform were also seen. While profit improvement progressed across the Group, increase in Core Operating Income of the Carbon Fiber Composite Materials segment was limited to JPY 4.1 billion.

In terms of harvesting returns on invested capital, challenges remain going forward. This slide analyzes improvements in Core Operating Income by initiative. Under AP-G 2025, in response to changes in the Business Environment and rising Geopolitical Risks, we have pursued Profit-Improvement Initiatives through Darwin Project, targeting businesses and companies with the greatest impact. Specifically at Soltec, we reduced fixed costs by reviewing the Production Structure and achieved significant improvement in Profitability.

In the PET Film business in the U.S. and Europe, we promoted a review of the Production Structure and Strategic Pricing. We are also proceeding to review the product mix and to reduce Fixed Costs in the PP spunbond, ABS Resin and Polyester Staple Fiber businesses. Through these initiatives, we expect JPY 27 billion of improvement in Core Operating Income compared with FY 2023. In addition, Strategic Pricing has delivered about JPY 30 billion of effect as we expected. Next is an overview of progress towards Sustainability Targets.

We are seeing steady progress across key indicators, including revenue growth of Sustainability-Related Products, CO2 emissions avoided in value chain and water usage per unit of revenue in production activities. Next, we will summarize the achievement and the challenges of the current Medium-Term Management Program, AP-G 2025. After I became the President, in response to changes in the business environment, I defined Toray's vision for the future, identified issues, and steps to take towards the vision.

Furthermore, we set out 7 Management Initiatives and 18 Priority Issues by structuring them along the time-axis. This page summarizes the achievement and the remaining challenges of the 7 Key Management Measures. Through the internal penetration of Toray-style ROIC Management, Strategic Pricing and Darwin Project, we have gained a certain level of confidence in improving our Structure of Profitability. In addition, we implemented several Business Divestments and Asset Optimization by reducing cross-shareholdings by JPY 150 billion while acquiring Treasury Stock of the same amount.

On the other hand, further improvements are still required in Profitability and Asset Efficiency, and there remain areas where our efforts in Business Growth Capability, creation of Next-generation Businesses, Sustainability and Human Capital Management have yet to be fully translated into competitive strength. As shown on the right, we recognize the remaining challenges as follows: further improvement of Profitability and Asset Efficiency, promoting and accelerating Structural Reform, creating a Next-generation Business, Sustainability Measures, enhancing Management Foundation and Dialogue with Capital Market.

From the next slide, while taking these challenges into account, I will explain our Long-Term Management Strategy defined from a long-term perspective, as well as Toray's vision. Using this page and after, I will explain the direction of Toray's long-term management. First, I'd like to explain Toray's Philosophy and its vision. Toray has an unwavering Philosophy Framework anchored by our Corporate Philosophy positioned at the highest level, contributing to society through the creation of new value with innovative ideas, technologies, and products.

We newly defined the world we aim to achieve by 2050 as TORAY VISION 2050, evolving from the Toray Group Sustainability Vision and systematically clarified its relationship with our Philosophy. We aspire to realize the following Worlds: a world where people live in harmony with planet, resources are recycled and nature regenerates. A world where prosperity is created and shared in safe and secure societies, a world where everyone lives in health and comfort. To realize this vision, we have positioned TORAY Challenges 2035 as a long-term management strategy and IGNITION 2028 as a medium-term management program.

These strategies are summed up in the phrase Weaving Science into Society, which reflects our commitment to Weaving Science into the future of Society. As a material manufacturer, we can create value for Society only by implementing our technologies in real-world applications. Science is used as a comprehensive concept that encompasses not only Materials, but also Chemistry, Physics, Engineering, Expertise, Processes, Data and Marketing. Into Society reflects our determination to deliver Toray's products and technologies in diverse forms amid an increasingly uncertain world. This slide outlines Toray's vision for the future from the perspective of Business and Value Creation.

We will drive our growth by leveraging the Toray Group's strengths, including Advanced Material Development capabilities, High Quality and Stable Supply, and capabilities to build Global Value Chains, and Solution Proposal capabilities based on materials. Through these efforts, we aim to create Economic Value and Social Value simultaneously and achieve sustainable growth in corporate value. Next, we turn to our Business Portfolio. In pursuit of realizing the 3 worlds envisioned in TORAY VISION 2050, the Toray Group operates a diverse range of products and business fields.

We address a wide range of social challenges through a broad portfolio of businesses, including Fibers & Textiles, Resins & Chemicals, Films, Electronic & Information Materials, Carbon Fiber Composite Materials, Water Treatment, Pharmaceuticals and Medical Products and Comfortable Materials. This slide presents our Management Materiality. We have redefined our previous CSR Materiality as Materiality fully integrated with our Management Strategy. In the environmental field, our focus areas are decarbonization, recycling and air.

In the social field, they include Semiconductors, Space and Defense and Mobility. In the human field, our priorities center on health care and comfort. By combining the strengths of Toray's businesses with data and engineering, we aim to turn risks into opportunities and create both Economic and Social Value in addressing these social issues. This page presents our Long-Term Management Policy. The left side shows the major changes in the Business Environment and Business Trends anticipated over the next decade, as well as the long-term impact on the Toray Group.

The right side outlines 5 long-term management policies in response to these changes. While uncertainty is increasing, it is essential to transform these risks into opportunities through Business Transformation and to create value by fully leveraging the global assets that the Toray Group has built up for years. This mindset is embodied in the phrase Weaving Science into Society, which I mentioned earlier. We bring the products we create into widespread use in society. This slide shows our targets toward around 2035.

As its long-term vision toward around 2035, the Toray Group targets about a 10% ROIC. As a milestone towards this goal under the next medium-term management program, we will pursue the Growth Strategy and Structural Reform as 2 wheels aiming to achieve a 7% ROIC. We aim to deliver Toray's value in society by integrating non-financial initiatives, Profitability Improvement, Strategic Pricing, Darwin Project and so on. From this page, I will explain our next 3-year Medium-Term Management Program, IGNITION 2028.

Based on the achievements and challenges of our current program, AP-G 2025, as well as our long-term management policies, we have positioned IGNITION 2028 as the first execution phase. The name IGNITION reflects our intention to reignite growth and step into the next stage. This slide explains a review of our business segments as IGNITION 2028 begins. This segment realignment is not merely a change in categories. It is intended to reflect the approach to value creation articulated in a Long-Term Management Strategy and TORAY VISION 2050 at Business Unit Management.

Specifically, we will integrate the Water Treatment business and the Pharmaceuticals and Medical Products business, which have previously been managed as separate segments and reorganize them into a single Water Treatment and Health care segment. This decision reflects our view that it is more effective to consider technologies, customers, and business opportunities in an integrated manner, and shared Value Axis of Healthy Lives for people and a Safe and Secure Society, thereby enabling us to more clearly define our medium- to long-term growth strategy.

In addition, the Engineering business plays an indispensable role in delivering materials in Society. Moreover, inspection equipment for the Semiconductor and Data Center fields, as well as Data Analysis, has become increasingly important, both directly and indirectly in realizing the Toray's vision. Going forward, we'll leverage the technical capabilities we have cultivated through internal-production process improvements to create new value. Through this Segment Realignment, we further enhance Strategy Formulation in line with the actual scale of our businesses, as well as advance the sophistication Resource Allocation and Growth Management.

In this slide, I will explain the Basic Policy of IGNITION 2028, our Medium-Term Management Program for the next 3 years. Through the current Medium-Term Management Program, AP-G 2025, we have achieved results such as improvements in our Profit Structure and the penetration of ROIC-based Management. However, while progress has been made, the recovery of our underlying Growth Capability and the transformation of our Business Portfolio remain ongoing. Against this backdrop and in light of the Future Vision set out in our Long-Term Management Strategy, we have set IGNITION 2028 for the next 3 years with a primary focus on reigniting growth.

The core of IGNITION 2028 is to reignite growth and to enhance the certainty of achieving it. We will further improve the quality and certainty of the Growth Strategy and Structural Reform pursued to date, while proceeding the transformation of our Business Structure and strengthening our Management Foundation. Through a review of our Business Portfolio and Segment Realignment, we will pursue Business Management with a clear focus on Growth Potential and Strategic Relevance, while further prioritizing the allocation of Management Resources to business fields that contribute to medium- to long-term growth.

At the same time, rather than pursuing growth through volume expansion alone, we will place emphasis on improving the quality and certainty of growth by simultaneously advancing Value Creation, strengthening Competitiveness and driving Business Reform through Human Resource and Digital Transformation. IGNITION 2028 is positioned as a 3-year period for stepping into the next stage of growth towards 2035 and beyond, looking ahead to 2050.

In this slide, we explain the Quantitative Targets for FY 2028 and IGNITION 2028. First, we aim to raise ROIC from about 5% in the FY 2025 Forecast to about 7% in FY 2028. ROE is also targeted to increase from about 5% to 8%. As the basis for these ROIC and ROE targets, we plan to increase revenue from JPY 2.6 trillion to JPY 3 trillion and Core Operating Income from JPY 150 billion to JPY 230 billion, pursuing both growth and Profitability Improvement.

The Core Operating Margin is also targeted to improve from about 5.8% to 8%. As for D/E Ratio, we will continue to maintain a Guideline of 0.7 or lower, although rising tensions in the Middle East could lead to significant changes in the Business Environment. IGNITION 2028 is formulated based on the Business Environment assumed as of the second half of FY 2025. Next, I will explain our Business Portfolio Strategy. As we have already presented at the Management Briefing, we will further clarify the positioning of each business based on perspectives that include Growth Potential, Profitability, Competitiveness and time-axis.

We will organize our businesses into 4 categories: Core Growth Businesses with high growth and high profit, Stable Profit Businesses, Structural Reform Businesses and Next-generation Businesses with investment in advance, and allocate Management Resources appropriately across our businesses. Based on this approach, we will continue to advance the evolution of our Business Portfolio. This slide outlines the specific direction of our Business Portfolio Review.

In addition to the Structural Reforms currently underway, we will reassess each business from the perspectives of whether it can fully fit into our Value Creation Model and whether we are the Best Owner. Comparing the FY 2025 Forecast with the FY 2028 Targets, we plan to increase the proportion of Core Growth Businesses and Stable Profit Businesses while gradually reducing the share of Structural Reform Businesses and Next-generation Businesses with investment in advance. Through these measures, we aim to achieve a balance between growth and profitability.

Next, I will explain our approach to improve Core Operating Income. Under IGNITION 2028, we aim to achieve high-quality business expansion, centering on Innovation Creation and Strategic Pricing. We will build effective mechanisms for profit-improvement by enhancing genba-ryoku or workplace competency of pricing, establishing Data Infrastructure and strengthening collaboration across the Group. In addition, we will review and replace businesses subject to Structural Reform to accelerate the pace of Profit Improvement.

This slide shows the Key Initiatives for continuous creation of High-profit Businesses. We focus on proactive engagement with markets, customers, and partners, the integrated implementation of R&D and business strategies, and expansion of Contribution Margins through the creation of new products and new value. We will strengthen our overall Value-creation Capability through close collaboration across Production, Quality Assurance, Sales, and R&D.

Next, I will explain the continued promotion of Structural Reform. Under IGNITION 2028, we will maintain our Structural Reform Framework and, for businesses with large invested capital and low ROIC, advance reforms from a company-wide perspective and a strong Top Management leadership. Through these efforts, we will steadily enhance the stability of our earnings base and reallocate resources to growth business fields.

Next slide outlines our initiatives for Next-generation Markets. To achieve Sustainable Growth, we will continue to broaden our product portfolio and invest in facilities and R&D in growth business fields such as AI Data Centers and AI Semiconductors, Separation Membranes, Space and Hydrogen. In particular, for AI Data Centers and AI Semiconductors, we will strengthen the development of next-generation technologies, including optoelectronic-integration technologies such as multicore optical fiber, and nurture these fields as new business clusters that will support our growth over the medium- to long-term.

By leveraging our comprehensive material capabilities, we will steadily capture growth opportunities in next-generation markets. From this page, I'll explain the specific initiatives by business under IGNITION 2028. I'd like to describe how the Quantitative Targets and Portfolio Strategy outlined in the previous slides will be executed in each business. Under IGNITION 2028, based on the characteristics of each business, we will seek to maximize business value under a company-wide, consistent strategic framework. Revenue and Core Operating Income are expected to grow across all segments under IGNITION 2028.

Among them, we anticipate particularly strong growth in 3 segments: Performance Chemicals, Carbon Fiber Composite Materials, and Water Treatment and Health care. In the Performance Chemicals segment, driven by expanding demand in growth markets such as xEVs and Semiconductors, together with a shift toward high-added-value products, we plan significant growth not only in Revenue, but also in Core Operating Income.

In the Carbon Fiber Composite Materials segment, supported by a recovery in demand, mainly in the Aircraft, Space, and Defense as well as expansion into Industrial and new applications. We expect strong growth in both Revenue and Profit. For the newly established Water Treatment and Health care segment, we expect it to play a key role as a high-growth segment, driven by expansion in water-related fields such as seawater desalination and wastewater reuse, as well as growth of high-added-value products in the Pharmaceuticals and Medical Products fields.

In the Fibers & Textiles segment, we aim to maintain stable growth and position the segment as a Foundation supporting overall performance, focusing on growth business fields such as Airbags Textiles as well as integrated businesses from Fibers & Textiles to garments. Under IGNITION 2028, we will execute strategies tailored to the characteristics of each segment. Page 29 and 30 describe Business Plans and Strategies for the major businesses within each segment. Further details are provided in the Reference. In the Fibers & Textiles business, enhancement in Core Operating Income will be driven by Profit Improvement in the Industrial Applications and sales expansion in the Apparel Applications.

In the Performance Chemicals segment, increase of Capacity Utilization in the Films business and the Electronic & Information Materials business will contribute to Profit Improvement. In the Carbon Fiber Composite Materials business, increase in Sales Volume in each application will drive higher earnings. Meanwhile, in the Water Treatment and Health care business, business expansion in Water Treatment is expected. These factors will be a key contributor to profit growth and the Medium-Term Management Program.

From Page 31 and after, I will explain our Capital Allocation at IGNITION 2028. This slide explains our Capital Allocation under IGNITION 2028 with ROIC Improvement positioned as the highest priority, we will advance business investment for deeper growth and structural reform as 2 wheels. Over the 3-year period from FY 2026 to FY 2028, we expect for cash-in about JPY 920 billion in Operating Cash Flow before deduction of R&D expenditure. Using this as a funding source, we plan to allocate JPY 400 billion to JPY 500 billion to Capital Expenditures and about JPY 250 billion to R&D, thereby advancing investment in growth fields and strengthening competitiveness.

In addition, to accelerate future growth, we will flexibly consider Strategic Investments, including M&A. At the same time, we will enhance our cash-generation capacity through measures such as Structural Reform and Asset Divestment, and continue to deliver Shareholder Returns on a consistent basis underpinned by profit growth. We aim to further enhance Capital Efficiency by maintaining an appropriate balance among Growth Investment, Financial Soundness, and Shareholder Returns.

Next, I will explain Capital Expenditures by Segment. During the IGNITION 2028 period, we plan JPY 400 billion to JPY 500 billion of Capital Investment. The large-scale capital investments in Carbon Fiber Composite Materials business implemented under AP-G 2025 have largely long their course, and the next medium-term management program is positioned as the phase in which the effects will be seen. IGNITION 2028 represents Capital Investments for the subsequent 3-year period, with investments to be made in business fields and regions such as AI-data-center-related, Digital Transformation, Environmental Initiatives, and India in the Fibers & Textiles segment.

Next, this slide shows our Shareholder Return Policy. Under our previous Medium-Term Management Program, we have maintained a basic policy of stable and continuous dividends while providing Shareholders Return in line with business performance. Under IGNITION 2028, we will maintain this approach as a foundation while pursuing Progressive Dividends driven by profit growth, as well as flexible Share Buybacks, taking into account our financial position and capital structure. Specifically, we aim to achieve a DOE of 3% or higher by FY 2028.

While maintaining a balance with Growth Investments, we will enhance capital efficiency and steadily strengthen Shareholder Returns over the next 3 years. From this page, I will explain how the Toray Group is addressing Sustainability Challenges. At Toray, we position Sustainability as a foundation for Sustainable Growth and the enhancement of Corporate Value. From the 3 perspectives of Environment, Society and People, we strive to achieve both Economic Value and Social Value by addressing these challenges through our business activities.

This slide outlines the Basic Policy of our Sustainability Initiatives to realize TORAY VISION 2050. We will promote sustainability through our business activities with a focus on the 2 pillars: Environment and People. We aim to increase both Economic and Social Value through the expansion of Environmental and Human Contribution Businesses by balancing environmental contributions, such as the reduction of greenhouse gas emissions, with the enhancement of Human Value through the people-centric management approach.

This slide shows non-financial targets. In terms of KPIs for greenhouse gas emissions reduction, we will shift from revenue-based intensity metrics to absolute reduction amounts. In addition, from the perspective of Human Capital Management, employee engagement has been adopted as our KPI. Although Sustainability Innovation businesses have been positioned as a KPI to date, our products fundamentally contribute to society by delivering value to the environment, society and people, based on a belief that such value should be implemented across society.

As this concept, therefore, applies across our entire Business Portfolio, we have decided from a beyond-sustainability perspective to shift away from the Sustainability Innovation Business categorization and instead explain our strategy through Business Clusters. Even for items such as water usage that are no longer set as KPIs, we will continue to monitor them, set internal targets, and pursue ongoing reductions.

On this slide, I'd like to explain about our initiatives to reduce Greenhouse Gas Emissions. We aim to achieve our reduction targets for FY 2030 and FY 2035 by implementing steady and practical measures such as Energy Conservation and Fuel Conversion. At the same time, we will continue our efforts to reduce waste, water usage and Volatile Organic Compound or VOC emissions, and fulfill our social responsibilities as a manufacturer. This slide focuses on our People-centric Management.

At Toray, we define the following as the core pillars of our Human Capital Management, inclusion of diverse human resources and values, creating human resources and organization that adapt to change, empathy with Toray Philosophy and career development with rewarding and engaging work. We aim to achieve sustainable growth through encouraging employee autonomy, challenge, and co-creation, as well as by enhancing engagement. This slide presents a clear picture of how we address social issues through our businesses.

We leverage advanced materials and technologies to convert Social Value into Economic Value in areas such as Climate Change, Circular Economy, Water Resources, and Well and Comfort life. Next, I'll explain our initiatives related to the Circular Economy. Through initiatives such as promotions of fiber and film products made from recycled materials and the use of bio-based materials, we are expanding the share of used recycled and renewable resources. We will contribute to the realization of a Circular Economy by achieving targets of 20% by FY 2030 and 30% by FY 2035.

Lastly, I'd like to give you a summary of initiatives under IGNITION 2028. This slide summarizes how the discussed ideas are translated into concrete challenges within Toray, and how those challenges are addressed through specific initiatives under IGNITION 2028. Over the next 3 years, we will enhance the quality and certainty of our Growth Strategy and Structural Reforms, shift to a Business Structure that consistently delivers 7% ROIC, strengthen our Management Foundation, and ultimately become a truly Sustainable Enterprise.

From this page and after, detailed data by segment is provided as a Reference Material. In today's presentation, I have focused on the Overall Picture of IGNITION 2028, as well as its underlying thinking and direction. Therefore, I do not go into Detailed Strategies or Quantitative Targets for each segment. They will be covered in greater detail at our IR Day scheduled for June, where persons in charge of each business will present their respective Business Strategies and Growth Scenarios.

I hope this material will serve as advanced information and Reference Data to help deepen your understanding ahead of those discussions. I'd like you to have a clear understanding of IGNITION 2028, the Toray Group's long-term objectives, and our plans for execution over the next 3 years. This concludes my presentation. Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]