Uacj Corp Stock

Let me introduce our representatives for today. Representative Director and President, Shinji Tanaka.

I'm Tanaka. Thank you.

Director, Senior Managing Executive Officer and Chief Executive of Corporate Strategy Division, Joji Kumamoto.

I'm Kumamoto. Thank you.

Director, Executive Officer and Chief Executive of Finance and Accounting Division, Kozo Okada.

I am Okada. Thank you.

Executive Vice President and Chief Executive of Flat Rolled Products Division, Keizo Hashimoto.

I'm Hashimoto. Thank you.

Executive Officer and Chief Executive of Corporate Communications Division, Kaoru Ueda.

I am Ueda. Thank you.

I am Sudo, General Manager of IR and PR Department, Corporate Communications Division and will moderate today's session. Thank you for your cooperation. Mr. Okada, Chief Executive of Finance and Accounting Division, will explain our Q1 fiscal 2026 results announced today. Please refer to the presentation materials as you listen.

Mr. Okada, please start.

This is Okada. I will explain the details of our Q1 fiscal 2026 results. The page numbers are shown on the bottom right, so I will read them out as I go. The main points of today's explanation are written on Page 2. I will mainly explain the financial results on point 1 through 3. First, Page 3 is an overview of our financial results for Q1 fiscal 2026. We responded steadily to favorable demand environment and saw significant contribution to profit increase from start of operation of our recycling facility.

The income statement is shown on the lower right. Sales volume totaled 342,000 tons, up by 8,000 tons year-on-year. As a result, revenue was JPY 377.4 billion, up by JPY 115.4 billion year-on-year. Our company's KPI, business profit was JPY 25.7 billion, up by JPY 17.8 billion year-on-year. Operating profit was JPY 53.8 billion, up by JPY 45.3 billion year-on-year, and net profit was JPY 35.9 billion, up by JPY 34.6 billion year-on-year. In any case, we ended the year with very strong performance compared to Q1 fiscal 2025.

The general situation is described on the left. First, as we have explained before, global aluminum demand is growing steadily. In Japan, sales of thick plates for semiconductor production equipment have been very strong since February of this year. The effect of price revisions implemented since last year remains strong. Furthermore, profit growth is driven by the U.S. aluminum market conditions and the increase in our recycled raw material processing capacity. Finally, due to the situation in the Middle East, the prices for raw material and secondary materials have been gradually rising since around the middle of Q1.

Page 4 is on the full year forecast for FY 2026. Income statement is on the right side again, and the middle column shows our full year forecast back in May. I will now explain the key differences between that and the current forecast. Sales volume reached 1,375,000 tonnes, an increase of 10,000 tonnes compared to May. Revenue is projected at JPY 1.4 trillion, up by JPY 100 billion. Business profit is projected at JPY 86 billion, up by JPY 21 billion compared to May. Net profit is projected at JPY 42 billion, up by JPY 14 billion compared to the May forecast.

The key points are listed on the left. The aluminum demand is growing steadily. In Japan, demand for thick plates for semiconductor production equipment and for IP and data centers is expected to expand. Furthermore, we plan to increase business profit and net profit by expanding our processing capacity for recycled materials as well as capturing demand and revising prices.

Regarding the latest impact from the Middle East situation, as shown in the waterfall projection later, we started from a very uncertain point in May and projected an impact of JPY 15 billion. It is not mentioned here, but at the time of the results briefing in May, we estimated the risk based on the assumption that the situation will be resolved around December. We now expect this impact to continue through the end of FY 2026 until March of next year, but revised to JPY 12 billion, up by JPY 3 billion. Based on this P&L outlook, we are planning an annual dividend of JPY 70, an increase of JPY 15 year-on-year. That concludes the summary of the financial results.

Next, Page 6 shows our Q1 results and full year outlook. First, let me explain the key points regarding the business environment. Japan is on the left, North America in the middle and Southeast Asia and other regions on the right. We summarized some key points regarding demand trends, sales and profit, the impact of Middle East situation and U.S. tariffs. First, in Japan, demand for can stock is expected to remain flat or decrease slightly. On the other hand, demand for semiconductor production equipment is recovering steadily and turning positive.

Demand for IT and data center related is expected to expand over the long term and for aerospace and defense as well against the backdrop of geopolitical risks. Regarding sales and profit, Firstly, in terms of demand, we are seeing an increase in can stock exports from Japan to Europe. Product mix has flipped to positive, thanks to the increase in thick plates for use in semiconductor production equipment. Furthermore, the continued impact of price revisions from FY 2025 is expected to continue in FY '26.

Next, regarding the impact of Middle East situation, raw material, secondary material prices and energy prices are beginning to rise, price revisions are coming into effect to reflect these increases from July 2026 shipments. Additionally, the situation is affecting procurement of some secondary materials, but we are coordinating with our customers to ensure stable supply. Next, North America in the middle, we expect demand for can stock to remain at an annual growth rate of 3%.

As for automotive parts, we anticipate a significant slowdown toward next year, but we'll continue to monitor future demand trends and proceed while reducing costs, including in Whitehall. Regarding sales and profit, we have mostly acquired contracts for can stock out to 2030. Investments to increase hot rolling capacity have raised production capacity. Furthermore, we will start recycling facility operations and believe that the benefits of this recycling will become apparent as it enhances flexibility of raw material procurement and increases processing capacity. The impact of Middle East situation is limited at this point in time.

Regarding the impact of U.S. tariffs, U.S. aluminum market is expected to remain at a high level for the time being, but we will closely monitor the situation from Q4 onward. Regarding Southeast Asia and other regions, demand for can stock, in particular, is expected to expand in Europe as a substitution of glass bottles. As for UATH's sales and profit, new shipments from UATH to Europe will begin in the second half of FY 2026 and shipments of heat exchanger materials for automobiles to North America continues to be strong. As for the impact of Middle East situation, some can stock materials are shipped to the Middle East, similar to Japan, but the impact is expected to be small. In addition, raw material, secondary materials and energy prices are rising.

Taking those circumstances into account, Page 7 summarizes our Q1 results and full year forecast. The middle column Q1 FY '26. As I briefly explained earlier, business profit was JPY 25.7 billion, up by JPY 17.8 billion year-on-year. Net profit was JPY 35.9 billion, up by JPY 34.6 billion year-on-year. Right side, FY '26 full year forecast current. Business profit is JPY 86 billion, up by JPY 21 billion from the announcement in May. Net profit forecast is JPY 42 billion, up by JPY 14 billion from the May forecast. The assumptions are listed at the bottom of the slide. The key point is that LME soared in Q1, up by $1,129 year-on-year. The exchange rate is JPY 160 to the dollar, which is JPY 15 weaker year-on-year. And Dubai crude oil average price for Q1 was $96, which is $29 higher than last year.

Based on the external environment as of this past May and our latest full year forecast, we anticipate a slight decline in the price of bot. However, we assume that Dubai crude oil will rise by about $9 compared to May. Next, Page 8 shows the sales volume of flat-rolled products. For Q1, sales were 342,000 tonnes, an increase of 8,000 tonnes year-on-year. As you can see from the change column on the right, sales of beverage can stock were up 2,000 tonnes, automotive materials were down 1,000 tonnes and thick plates up by 6,000 tonnes. Comparing FY 2025 and FY 2026 on a full year basis, we project sales of 1,375,000 tonnes for FY 2026, up by 58,000 tonnes compared to FY '25. The breakdown is hand stock, 21,000 tonnes, automotive materials, 4,000 tonnes; thick plates, 17,000 tonnes and other general purpose materials, 15,000 tonnes. We expect sales increase across all applications compared to FY '25.

Now on Page 9. This slide shows a waterfall chart analyzing the business profit variances between the first quarters of the previous fiscal year and the current fiscal year 2026. While business profit for the previous fiscal year was JPY 7.9 billion, this fiscal year is JPY 4.9 billion increase primarily from the difference related to sales. As shown in the call out, this includes a JPY 2.1 billion increase in the domestic flat rolled product business, JPY 1.6 billion increase at PAA and JPY 2.3 billion loss at UATH. Additionally, other group companies showed growth, contributing about JPY 1.6 billion, resulting in a total sales-related difference of JPY 4.9 billion.

As for manufacturing costs, there was JPY 17.2 billion positive impact, as shown in the right callout, mainly driven by increases of JPY 4.7 billion and domestic JPY 10.2 billion from PAA and JPY 1 billion from UATH. There were no other major changes. However, I want to draw your attention to the impact of Middle East situation shown on the right. It is a decrease of JPY 2.4 billion, reflecting a negative impact of JPY 2.4 billion year-on-year, primarily due to rising cost for raw materials and secondary materials. Based on these factors, business profit came in at JPY 25.7 billion and adjusted EBITDA, JPY 36.4 billion, a significant increase in earnings. Page 10 shows the waterfall chart compares the business profit between the full year forecast as of May and today's latest forecast.

Regarding business profit, we initially projected JPY 65 billion for the full year in May, but we now see a positive variance of JPY 4.6 billion in sales-related factors. As indicated in the call out, while the domestic TAA and UATH is equals 0. Other group companies other than core companies have seen demand rise significantly beyond the initial expectations starting in May, contributing to that JPY 4.6 billion increase. Manufacturing costs show a positive variance of JPY 13.2 billion.

The primary driver here is a big upward revision of JPY 11.8 billion in the TAA forecast. Energy and Additive Metals show a negative variance of JPY 4.5 billion. However, since the surcharge system is in place, so I'd like you to take this as a reporting time lag. As for surcharges, while back in May, we anticipated the situation stabilized by December. We now expect the impact of the Middle East situation to persist through next March, leading us to expect further reporting timing lag for some surcharges.

Foreign exchange and other items show a positive variance of JPY 4.7 billion, primarily driven by currency translation effects. The Middle East impact shows a positive JPY 3 billion variance. We reduced our risk estimate from the initial JPY 15 billion to JPY 12 billion, resulting in a JPY 3 billion positive contribution, bringing our final business profit forecast to JPY 86 billion.

Next, please refer to the balance sheet on Page 11. There is an overall increase of JPY 96.3 billion, which is mainly due to an increase in working capital. Page 12 shows the cash flow statement. For the first quarter of FY 2026, the profit before tax was JPY 51 billion. Depreciation expense was JPY 10.7 billion. The change in inventory was a decrease of JPY 39.5 billion and the change in accounts receivables and payables was a decrease of JPY 25.6 billion after paying corporate tax, operating cash flow resulted in negative JPY 7.2 billion.

Additionally, with capital investment of JPY 15.9 billion, free cash flow was negative JPY 23.1 billion. As a result, interest-bearing debt increased by JPY 21.6 billion. As shown in the center of the bar graph on the right, interest-bearing debt balance as of the first quarter of FY 2026 was JPY 410.3 billion. However, strong profitability led to a significant accumulation of capital. And in line with the plan, the D/E ratio came in at 0.9x, contributing to a strengthening of our financial position.

Next, starting on Page 13, we have summarized the business highlights. On Page 14, the situation of domestic flat rolled products business. To reiterate, a key highlight is the continued strong sales performance driven by recovery in demand for thick blades used in semiconductor manufacturing equipment, resulting in sales figures ahead of plan. As shown in the lower left chart, sales volume for the first quarter was 151,000 tons. Looking at historical trends, this represents a very strong start to the first quarter. In the first quarter, and as previously mentioned, we are seeing various costs begin to rise due to the impact of the Middle East situation.

Below that, regarding FY 2026 forecast, supported by semiconductor-related demand and advances in digital technology, data center and IT-related material demand has been trending strongly. A key focus for this fiscal year is our initiative to revise product prices starting this July, driven by rising costs across the board from the situation in the Middle East.

Page 15 shows the current status of TAA in the U.S. Our outlook remains unchanged. Demand for cast stock in North America will grow at an average annual rate of 2% until FY 2030. As noted in the third point under the market environment on the right, we anticipate a gradual easing of the supply-demand balance within the U.S. this fiscal year, driven by the gradual acceleration of restart of existing mills and ramp-up of new mills. We expect this to lead to a decline in inputs from overseas and the market within the U.S. will gradually reach a supply and demand balance.

Next, regarding production and sales in the first quarter, I would repeat that the hot rolling capacity expansion invested in last fiscal year is contributing significantly to volume growth. Furthermore, the operation of recycling facilities is expected to enhance our flexibility in raw material procurement and processing capacity. And we expect the benefits of using recycled materials will continue to be realized. With long-term contracts through FY 2030 have already or largely begun and majority of them have been secured, we feel quite confident that this underpins the projected 3% market growth through FY 2030.

Finally, regarding FY 2026 forecast, we anticipate the U.S. aluminum market to remain at high levels for the time being. though we will closely monitor the situation starting in the fourth quarter. Financial performance is benefiting strongly from historically favorable environment for the recycled material prices. We recognize the need to keep a close eye on this going forward from the fourth quarter and onwards. Page 16 covers the situation in Thailand regarding UATH. To reiterate the market situation, supply and demand for can stock remains tight, particularly in Europe and the U.S., while demand in Southeast Asian markets remains very strong. Demand for can stock in India is also robust, meaning that overall market continues to be very vibrant.

Regarding production and sales in the first quarter, we have established an optimal production cost balance by expanding our UVC's procurement channels. Building on this, we intend to fully realize the benefits of these measures from the second quarter onwards. As for the full year forecast for FY 2026, we will begin shipping can stock to Europe and continue shipments of automotive heat exchanger materials to North America. We will also continue supplying support cores to TAA until FY 2028. In view of this, we intend to focus our efforts even more intensively on these areas.

Next, I will move to the topic of toward management conscious of the cost of capital and stock price. Page 18 covers shareholder returns. Again, we plan to revise upward our dividend forecast for FY 2026, increasing annual dividend to JPY 70, and this represents a JPY 15 increase compared to the actual dividend for FY 2025 and a JPY 12 increase from our previous plan we had last May. Page 19 outlines key points regarding our efforts to improve return on capital and manage the company with a focus on stock price performance.

With regard to corporate value creation shown on the left, we intend to actively pursue growth investments, specifically active capacity expansion in high-growth sectors. We plan to make substantial investments in areas such as AI and semiconductors, aerospace and defense, can stock in the U.S. and recycling. At the bottom left, trends in ROE and ROIC are shown. For the current FY 2026, though still based on our full year forecast, we are projecting both ROE and ROIC coincidentally at 11.5%. We are committed to generating ROE that exceeds our cost of capital, thereby ensuring a positive equity spread.

Next page. Page 20 is a chart showing our stock price trends for your reference. Next, Page 21 highlights some recent topics. We will be creating new value through cross-industry co-creation with JR West. Through this frontline-driven co-creation, we aim to build growth sectors that address social issues and take on the challenge of creating new businesses. Page 22, please. And topics related to our social contribution activities. On the left, we highlight our support for wheelchair tennis play at Tokito Oda. We wish to support activities that align with the concept of curiosity and challenge. On the right, we started our sponsorship of hot air balloon, balloon the field. And this demonstrates our firm commitment to engaging in this field as well.

Finally Page 23, introducing upcoming events. We are planning a business information session in the afternoon as for now of Monday, October 19. The session will feature the theme of forging ahead with the formation of a circular economy for aluminum, and we hope you will join us and look forward to your participation.

That concludes the presentation from Okada. That is all for the presentation from the company. We will now take questions. Please understand that we may refrain from answering questions that could potentially affect our business activities. [Operator Instructions]

Now let me introduce our first questioner, Mr. Yamaguchi from SMBC Nikko Securities.

Thank you for the presentation. So let me ask you a few questions. UACJ does not have a forecast for the first half. So we cannot see the bridge between Q1, Q2, Q3 and Q4. I would appreciate it if you could give us some hints, even just qualitative about the quarterly trends we can expect in business profit, not operating profit. In other words, I would like to get the image of the graph you had in the past.

Second question, I think the strong metal benefits in the U.S. are contributing to profits. But the market is very worried right now. And I think the reason your stock price is weak today is largely because there is a view that this may be the peak. And due to your significant profit growth in this area, the U.S. Midwest premium does not seem likely to fall anytime soon. So I'd like to hear your assessment of the current market environment. I understand that the production increase in domestic flat-rolled products is driven by supply and demand, but procuring ingot in the U.S. seems extremely difficult. So how do you view the situation now?

Also, with many ongoing discussions on ingot production increase, I'd like to hear your thoughts on whether prices will fall if the market eases. The U.S. government mentioned the possibility of lowering tariffs slightly or not after the July holidays in order to establish smelting operations in the U.S. The market is actually having trouble interpreting what kind of impact it will have. And despite the announcement, the U.S. Midwest has not been affected at all. Could you please share UACJ's perspective on this, taking all that into account? Finally, UATH's current business profit is not strong. Could you explain the reasons behind this and your projection? That's all.

Thank you for maybe your 2 questions. First question is UACJ's view on what the overall trend centering on business profit will be for the first half and the full year now that Q1 is closed. The second question is regarding our forecast on metal benefit, while some say that it may be at its peak now and U.S. government's recent announcement on preferential treatment regarding U.S. tariffs. These are the questions we received. Mr. Okada will answer the first question, and Mr. Hashimoto will answer the second question on metal benefit and the U.S. government. Okada will explain the forecast for business profit for the upcoming quarters.

We achieved record quarterly profits of JPY 25.7 billion in Q1 and expect this trend to continue. We anticipate a similar level of business profits in Q2, but a slight slowdown due to seasonality in the second half. We anticipate the demand to remain quite strong and plan to thoroughly maintain and upgrade our plans. So we currently expect operating expenses and other costs to increase slightly. Therefore, while there are uncertainties about how risks may materialize in the future, we expect the full year to follow Q1 performance.

So you expect a decline in the second half. Is that right?

There is some seasonality, mainly in the can stock market in Japan. So I think there will be a slight impact, but we expect the strong performance to continue throughout the second half in other sectors.

Mr. Hashimoto will answer your second question on metal benefit and on Thailand.

Firstly, metal benefit in the U.S. was quite high in Q1, as you know, which I think was partly due to the Middle East risk, but has started to decline a bit. It depends on the Middle East situation, but the basic view is that it will stabilize. On the other hand, demand for aluminum is very strong. The situation remains strong globally. So I do not think it will decline too much. Based on what I have been hearing, there is a view that the U.S. 50% tariffs on steel and aluminum are unlikely to be revised. So we expect the Midwest premium to remain at a certain level. However, we are taking a slightly conservative view, including the possibility of a slight decline, which is the background to these figures.

In Thailand, production volume was slightly lower in Q1 due to the Songkran festival. There was also the impact of a sudden increase in MJP. MJP is partly based on spot transactions and partly on quarterly contracts like our -- some customers use spot prices instead of quarterly contracts to adjust prices, and this had a slight impact in Q1. Since we are keeping the current approach while transitioning some customers to a quarterly contract, the impact of that difference is reflected slightly in Q1 results. However, this issue will be resolving going forward. The box appreciation is easing. The production is currently proceeding smoothly.

As mentioned earlier, shipments to Europe will begin in October, which will further improve our portfolio. We are also negotiating price increases for the Middle East market, which has been partially applied. So I hope you could understand that things will improve going forward.

Understood. Can Mr. Kumamoto provide any additional explanation on the U.S. government's tariffs that were mentioned earlier?

Yes. I have some doubts about how successful this measure will be. There are 2 main reasons for this. First, potential beneficiaries would be non-U.S. producers who already supply products in the U.S. There are 2 companies that come to mind, one of which is Russian. So it's unlikely that the U.S. government would support the construction of a Russian smelter in the U.S. The second issue is electricity. In the U.S., there is a shortage of electricity for everything and the Japanese government's JPY 80 trillion funding is reported to be used to build 2 or 3 power plants. However, even if they spend that much money to build power plants, data centers will probably take up most of that electricity.

So a gigawatt level power supply will be needed. You need more than 1 gigawatt to run a smelter. But there are technical and fundamental challenges in managing the electricity. So I am not saying it's impossible, but I think it will be difficult for the government to make a move.

Regarding what Mr. Kumamoto just said, your question is about the upcoming smelting process, specifically the preferential treatment of reducing the tariff from 50% to 25%.

Yes, that's right.

We are still not sure about that point. What has been proposed so far is that investments in the smelting process will be subject to a provisional 25% tariff until the smelting process is completed. At this stage, we do not think it will directly affect us. The current proposal is to offer preferential treatment to the exporters to the U.S. who plan to build smelters in the U.S.

It is not a proposal to lower tariffs on all ingot imports into the U.S. Is it?

Right. That's not the case. Tariffs are lowered selectively. Selective tariff reduction. But the problem is they're stuck at the point of whether the smelters will actually be constructed in the first place. That's right. That's what Mr. Kumamoto mentioned earlier.

That's why the market is calm, right?

A plan, if any, remains a relatively small portion of total ingot imports. It probably will not have a big impact. And that is the view we will have for the time being.

Also, this is not a question, but I think many overseas investors are saying, it seems the end is near with the U.S. rapidly increasing its flat-rolled products capacity, we're likely to end up with an oversupply.

So I think it would be a good idea to prepare some materials to counter those arguments. Thank you.

The next questioner is Mr. Matsumoto of Nomura Securities.

This is Matsumoto from Nomura Securities. I have 2 questions. First, regarding the metal benefit in the U.S. I believe Mr. Okada mentioned at the briefing in May that the impacts are usually delayed and that the first half of the year was already in sight. At this point, in the new forecast, you can already see projections up to Q3. What assumptions are being used for Q4 based on Q3? Also, regarding the contracts up to 2030, am I correct to understand that the base price and conditions have already been decided to some extent?

My second question is on UATH. Given what Mr. Hashimoto said earlier about the sudden rise in the Japan premium and how it is rising even further, I feel that Q2 results may not improve much. Could you give us insights on how we should think about Q2 or the second half?

Thank you for your questions. You have 2 questions or 3 in total. First, Mr. Okada will explain the metal benefit. And Mr. Hashimoto will answer the question on the contract until 2030 and additional comments on UATH. Okada will respond.

Regarding the outlook for the metal benefit, as you rightly said, we have incorporated this into our plan based on the assumption that figures up to Q3 are almost finalized. However, since contracts for Q4 and beyond have yet to be finalized, the situation will likely remain uncertain. Therefore, we have provisionally set the projections at a slightly different level than Q3. We're taking a more cautious approach on UVC pricing.

Next, Mr. Hashimoto will answer your second question.

This is a contract in the U.S. And as you know, in the U.S., we tend to sign contracts well into the future for 3 years or even 4 or 5 years in some cases. We have contracts with most of them until 2030 and set a base price. The quantity and base price are fixed. And then there are annual escalations, price and cost adjustments. There is an overall framework in place where we apply the previous year's PPI to the following year's prices.

To your other question, MJP remains high, as you rightly said. I mentioned Q1 earlier because there is a time lag. The impact of the deterioration is appearing in Q1 due to a time lag, and we expect it to improve from Q2 onwards. Also, since the spot prices differ considerably from quarter-to-quarter this time, we are asking some customers to adjust their contracts to align with the quarter. We expect improvements in all these areas as well.

Does that answer your question?

Yes.

We'd like to take next question from Morgan Stanley MUFG Securities, Mr. Shirakawa.

This is Shirakawa from Morgan Stanley. I have essentially one main question, though it will likely cover a few subpoints regarding the domestic business. First, domestic business profit for the first quarter, by calculation, it appears to be around JPY 9 billion or so. On Q-on-Q basis, this is a significant increase. And you mentioned that shipments of take place for semiconductor manufacturing equipment have started to pick up. Could you explain the background behind this much strong performance?

Also, on Page 10, focusing solely on the figures for differences related to sales and manufacturing cost differences for domestic plates seem to show a decline. Could you help me understand the details regarding the JPY 4.6 billion sales related difference? As I'm afraid I didn't quite get the breakdown in the domestic business, how they changed last time and this time.

And finally, sorry, this is my third point. Based on the figures, it appears that domestic profit is projected to decrease after the first quarter. Though it will be profitable, the outlook seems to show a decline from the second quarter and onwards. Is this understanding correct as for the background for this? I assume it involves rising energy and commodity prices that haven't been fully passed on due to timing lag. I would like to know if these costs can be properly recovered in the next fiscal year and onwards. Those are the 3 points I'd like you to address.

Thank you. Regarding your questions focused on the domestic business, first, will explain the background behind the improved situation and the status of each sector. Then as shown on Page 10, regarding the point about the projected profit decline slightly after the first quarter and the clarification regarding the JPY 4.6 billion figure, which was a bit difficult to understand. Okada will follow up with further explanation.

First, Mr. Hashimoto, could you please explain the situation in our domestic business by sector.

For the strong first quarter performance, there are several reasons, but the primary one is a quite large increase in sales volume. We saw strong volume right from the start of the Q1. And on Page 8, which is year-over-year comparisons, we see growth across various areas. And on a different page, if you also look at Page 14, you can see that volumes are quite high. This covers a range of products, including thick plate for semiconductor industry as well as data center-related items like disks for stock and casings and also home appliance related such as air conditioner fins increased, resulting in very high overall volume.

One key factor was that we were shipping at full capacity throughout the first quarter. Related to that, regarding the product mix, thick plates with better profitability accounted for a larger share of sales. Also, price revisions also played a role. We negotiated this throughout last year and the price increases that began taking effect in the second half of the previous year were fully implemented starting in April, contributing positively to our results. Additionally, though somewhat specific to this first quarter, the ingot price rose sharply from late March through April. This had some positive impact on the first quarter results. As we saw that impact in number, but from Q2, it will stabilize and the impact will be absent. So from the second quarter and onwards, we expect the situation to somewhat normalize. That is all from me.

Next, Page 10, regarding the JPY 4.6 billion sales-related figure. The net total of the figures listed in the colors for domestic TAA and UATH segments is 0. On the other hand, compared to the forecast in May, group companies outside these 3 core companies, specifically the foil Manufacturing Group, Extrusion Processing division and Whitehall are trending toward better-than-expected results. Furthermore, sectors such as aerospace and defense as well as distribution are all outperforming the initial plan formulated in May. That aggregate figure comes to JPY 4.6 billion. That's all from Okada.

About changes from the first quarter?

Well, the change from the first quarter, the figures comparing the first quarter and first quarter stands at JPY 4.9 billion. Since the periods being compared differ, I cannot explain them in the same context. And I hope the information I provided regarding Page 10 covered this point. Does that seem acceptable to you?

Earlier, you mentioned that the sudden rise in input prices in March and April, which generated a positive impact in the first quarter, which would appear from the second quarter onwards. Roughly, how large is that?

Roughly we estimate it to be JPY 2 billion to JPY 3 billion.

That's clear now. Also regarding the others, you mentioned that everything is improving and totals around JPY 4 billion and white pole was also mentioned. However, looking at white wall business profit, apparently, the plan this time has been revised downward by JPY 100 million. Does this mean I should understand that areas like extrusion and foil manufacturing are performing significantly better than the original plan?

I guess the kind of image is just fine. But what I explained earlier, focused on the breakdown of sales-related differences. The final profit or loss for each business is determined by a combination of factors, including manufacturing cost reduces and energy-related costs. So I believe there was a slight difference in terms of perspective.

I see. What is the background behind the significant improvement in foil and extrusion compared to the start of the fiscal year?

First, regarding the outlook, the initial sales plan was likely conservative. That's one thing. But again, demand has been extremely strong, driven not only by storage batteries, but also by very solid robust demand from sectors like data centers. Additionally, the anticipated impact of price revisions is a major factor, particularly for the foil manufacturing business. I understand very well. And the price revisions as well, the price revision was the most significant factor. So the price increase was the biggest factor. I understand. Also regarding White hole, we raised the business profit forecast to JPY 400 million from the May projection, an upward revision of about JPY 500 million as a business. That is all.

Next, we have a question from Mr. Goroh at UBS Securities.

This is Goroh from UBS Securities. Broadly speaking, I feel that the underlying performance, specifically business profit has recently seek to function effectively as a true indicator of the underlying strength. With that in mind, I have 2 questions for qualification.

First, regarding the impact of the Middle East situation. At the start of the fiscal year, the projected JPY 15 billion impact was roughly split between demand side effects and cost increases. On the subsequent IR Day, the company explained that the cost increases would be passed on through role margin revisions starting in July for Japan and for the U.S. linked to the PPI, potentially in January, meaning that despite some time lag, the cost could be successfully passed on. Now as the situation is dragging on slightly longer, it now includes an additional 3 months of impact. However, if the cost increase portion can essentially be offset by price hikes, I wonder if that figure could be reduced a little bit more.

Regarding the JPY 7 billion negative impact on demand originally projected at around JPY 7.5 billion. Does this mean that the anticipated impact expected to account for half of the total has not yet fully materialized in the first quarter? I get the impression that there is a lack of conviction that this JPY 12 billion is merely a temporary non-underlying impact that will reverse and turn positive once the situation stabilizes. I would like to know if the price pass-through is perhaps not really proceeding as expected or simply, I appreciate more background on why you still estimate JPY 12 billion. That is my first point.

And other point concerns the sales-related difference and manufacturing cost difference. Why you explain this in the same way as before? It seems that the market perceives your company's profits as being driven simply by the fluctuation in aluminum prices and market conditions and ultimately leading to a peak in earnings. I believe it will be beneficial in the future to have an explanation that breaks down the specific impact of the strategic investments. For instance, regarding metal benefits, it would be helpful if you could see an analysis distinguishing the impact of increased scrap blend ratio and usage ratio from the impact of price differentials.

I would also like to see details on sales-related factors such as the benefits of improved product mix, including the semiconductor-related thick plates mentioned earlier. The increased sales of high-margin products such as heat-treated materials reflect the results of capacity enhancement. I hope to gain a clearer picture of those for profit growth factors that are expected to persist. In other words, I want to understand whether the current figures represent a peak or if the company's underlying earnings potential will continue to build upward. And the midterm management plan, now that you are past the halfway point, it feels as though the original targets have effectively lost their relevance. I would appreciate it if you could share your future direction and perspective on how you intend to develop the company's true earnings potential. Apologies for this lengthy question.

I appreciate your explanation on these points. Thank you for your question. The first concerns the impact of the situation in the Middle East, specifically the rationale behind revising the forecast from JPY 15 billion down to JPY 12 billion. The second point, almost as a way of advice given to us relates to how the effect of strategic investments are factored into these figures and how we should proceed from here. I will ask Hashimoto to explain our reasoning and how we have incorporated the Middle East situation impact into our projections.

As you pointed out, we are facing rising cost for secondary materials. Energy cost, of course, is another factor. Regarding the cost of secondary materials, we have seen a gradual rise since April. While prices have currently plateaued, it is unclear how they will move going forward. We have factored in certain increases seen to date and have begun implementing price revisions as we've been talking to our customers, and we have already secured a certain level of understanding and acceptance from about 80% of them, and we've begun implementing. Therefore, we anticipate being able to pass on some of these increased costs, though there is a possibility of further price increase ahead. So some have been factored in the previous forecast and also we included it this time as well. In that sense, our outlook might appear somewhat conservative, but I hope you understand that including the numbers factored in, we arrived at these figures.

Regarding your second point is that our actual performance level is becoming harder to grasp and there is uncertainty about how to interpret our business profit. You are quite right. Although we do explain our results in terms of actual performance and business profit and several factors are mixed into these figures, making it a little difficult for people outside to see the full picture clearly. From that perspective, -- and considering the point you raised about distinguish and for instance, the impact of strategic investments from other factors, and we may need to determine the extent of disclosure possible, though we aim to provide information that helps investors grasp the overall picture, and we plan to give further consideration to this matter for future presentations.

Thank you. Excuse me, may I clarify a little more regarding the impact of the Middle East. You did mention that the impact was split roughly 50-50 between demand and cost at the beginning of the year. May I confirm in the context of demand and cost under the new definition? What are the proportions between the 2? In that sense, for the demand this time, when we look around at the situation with our customers, management is handling quite properly, and we do not anticipate a significant drop in demand caused by the Middle East situation. We have excluded this factor from our current outlook. In that sense, should we view the remaining JPY 12 billion as a time lag issue regarding price pass-throughs that ought to be implemented? In other words, assuming that the situation stabilizes, should we regard this as something that will be resolved, acting as a factor for profit growth in the coming fiscal year? Could you please clarify the definition here.

As I said earlier, we have consulted with customers regarding the current cost increases and about 80% of them have agreed to the pass-through to a certain degree. What we will look into, however, is what if costs rise further. Asking customers again, particularly within the current fiscal year would likely be quite difficult. Therefore, we are viewing that potential as a risk.

Thank you for your questions and comments. We have reached the scheduled time to close. So we will conclude today's briefing session. This concludes the UACJ Corporation earnings briefing for the first quarter of the fiscal year ending March 31, 2026. Thank you for joining us today. Thank you very much.

[Interpreted] We are on time, so we will begin the briefing. Thank you very much for taking the time after your busy schedule to participate in UACJ Corporation's IR Day today. I am Motoyasu Sudo, General Manager of IR and PR Department, corporate Communications division. I will be moderating today's session. This briefing will be using the materials posted on our website. If you do not have the materials on hand, please check the shared screen on Zoom or visit our website.

Now I'd like to make a few points to note regarding the briefing. Some of the presentations today will be in English. Simultaneous interpretation will be available during the briefing, including the Q&A. If you'd like to hear the simultaneous interpretation audio, please select the Japanese channel from the Globe icon in the tours at the bottom of the screen or English, you'll be able to hear the audio of both the speaker and the interpreter. If you select mute original audio, you will only hear the interpreters audio.

This briefing session will be recorded for a record-keeping purpose. The content of the briefing will be published on our website at a later date. So please refrain from recording or filming this session.

Furthermore, while this briefing may include information that includes future projections. Please note that this information is merely our current forecast. Actual results may differ significantly from those projections due to various factors.

And finally, please make sure your microphone is on mute.

Let us begin today's program. First, our Representative Director and President, Shinji Tanaka will give an opening address, followed by a presentation titled looking ahead to the latter half of the fourth midterm management plan. Mr. Tanaka, the floor is yours.

[Interpreted] Good morning. Thank you very much for taking time out of your business scheduled to join UACJ Group IR Day today. This is the very first IR activities organized in this new building. And venue is a smaller and Henry is joining today, and he might be workaround a bit in this room, but please accept this size of the room. Now we are deeply grateful to investors and analysts for your continued support of the UACJ group's IR activities. The sincere appreciation, and we will continue to actively engage in IR programs, and we to your continued support.

Let me now announce today's program. Today's IR Day, I will first present the progress of the full midterm management plan and Hashimoto will then discuss the domestic for products business and UTH in Thailand and Henry will explain TAa in the United States and Okada will cover our financial strategy. First, I, Tanaka will present the progress of the first -- excuse me, the fourth mid-term management plan. This slide shows our current philosophy, which we refined and announced in February of 2020.

Our purpose is to contribute to city by using raw materials to manufacture products that enable prosperity and sustainability, which means the characteristics of the materials and the cultural and sustainable society will be realized through our activities, and this is to show our determination at UACJ Group to continue to help support the prosperity and the society and people's lives. And these philosophies are serving as a foundation of UACJ Group.

I now would like to summarize the first half of the fourth mid-term management bank. Looking back on the first half of the plan, we had faced by inflation that exceeded our initial assumptions and also geopolitical risks around the world. On the left, on the side, we show the priority policies of the fourth midterm management plan. On the right-hand side, we show key financial targets, the final year target of the plan actual results of FY '25 and the outlook of FY '26.

Overall, as you see on the left, well, although the progress varied by individual initiatives, but we generally advanced in line with the plan and some areas achieved results that exceeded the plan. And this is the result of the study implementing our measures over the first 2 years, taking near-term uncertainty in our account and we have kept the final target of the plan unchanged. However, in the second half, we will further strengthen our earnings capability.

Now this chart is towards the final year of the midterm plan, this is the progress of the financial targets and results. This is the target of the midterm plan. As you see in FY '26 for revenue, business profit of JPY 60 billion and adjusted EBITDA of JPY 100 billion, where we are going to increase the earnings quite extensively. And JPY 60 billion in our business profit is basing upon the uncertainties that we can project at this moment, and that's why we set out JPY 60 billion. But we believe that business profit is a real-term capability, and we'd like to generate this.

Regardless of the external impact, and we'd like to implement the continued and steady airports to be able to generate profit for sure and adjusted EBITDA of JPY 100 billion. And during the first half of midterm plan, we have completed 3 important seeds spreading initiatives. The first is to prepare a ground work for a circular aluminum economy. In all 3 regions: Japan, [indiscernible], United States, we successfully brought the all these efforts like the facility investment and the preparation for the further capacity. And the second 1 is to secure growth drivers for the period beyond fixed-term plan. We decided on the significant investment into the aerospace and defense area. And for TA, we've made further production expansion, and that will be covered by Henry in the later presentation.

The third is strengthening our operational foundation, including the interaction of the latest digital technologies such as generative AI. And all of these initiatives form a strong foundation for the second half of the plan for 2030 and for the years beyond.

And this slide shows the waterfall analysis of the business profit from FY '23 through FY '26 outlook. Now as shown here, business profit is expected to increase from JPY 43.4 billion to in FY '23 to JPY 65 billion in FY '26. The largest contributors to this growth are raw material effects and recycling volume effect. And the raw material effect includes unfavorable metal market conditions as well as the benefit derived from a diversified sourcing and procurement and the recycling volume effects include the increased scrap consumption resulting from higher recycling rates as well as contributions from new products such as the equal and other value-added offerings. In addition, we have responded to the recent inflationary pressures through appropriate pricing actions and price adjustment. There are some time lag, and therefore, there are some negative impact lagging continuing at this moment.

Through these initiatives, we are strengthening our earnings base, and this is the concept for UACJ Vision 2030.

As we move towards FY '27, we will continue to implement a range of measures to respond proactively to changes in the business environment. Beginning in FY '26, we will enter a phase in which the production expansion facilities and recycling facilities that we have invested thus far will begin a full-scale operation. In addition, we will continue to invest aggressively in new growth areas, including aerospace and defense and supported by these initiatives, we expect to generate a stable and sustainable earnings growth.

With respect to shareholder returns, we remain firmly committed to our dividend policy of a payout ratio of at least 30% through our midterm management plan, and we intend to continue to provide stable and consistent returns that meet the expectations of our investors and shareholders. This slide shows the investment amount that will give our strategy for the second half of the plan. we revised our initial investment plan in order to respond properly to the changing economic environment.

As you see on this slide, the JPY 160 billion was the initial plan, but the latest plan is JPY 165 billion, which is a minor increase. As you see in this slide, general investments such as safety measures and renewal of aging plant facilities have increased by JPY 18 billion due to inflation. At the same time, from the national and local governments, we secured strategic subsidies and other support so that we are optimizing overall investment efficiency and for environmental investments and DX investments, which will be the source of future competitiveness, we will maintain and execute the initial plan of JPY 5 billion each.

This slide shows the location reallocation of the JPY 85 billion improved investment, market changes surround us is changing beyond our assumptions. For instance, as you are fully aware in North America, the momentum to the proto and automakers development policies have also shifted as well. In response, we decided to reduce investment for automotive parts from the initial JPY 15 billion, quite significant to JPY 4 billion, much smaller and allocated the investment to the packaging and containers and allocate JPY 24 billion to aerospace and defense as well as semiconductor manufacturing equipment, which will become our next major growth pillar.

This slide provides an overview of our specific initiatives in the Aerospace and Defense Materials business. Our key challenge in this business is that our current heat treatment capacity and large-scale forging capacities are sufficient to fully meet the expected increase in demand. So to address this bottleneck we are making new investment at the Fukaya Works as well as casting forging works to expand the capacity to eliminate these constraints. Furthermore, as announced in our recent press release, we have entered into a strategic partnership with a global leader in aerospace and defense industry. Through this partnership, we aim to expand technical collaboration.

And this slide illustrates the vision for future business growth. As we transform from a material supplier into a provider of material materials plus added value. We will engage with customers from the earliest stage of product development and provide value-added solutions through our technical expertise, environmental value and other unique strengths. By combining our predominant market position and stable earnings in core businesses with strong growth in high value-added sectors, we aim to achieve sustainable enhancement of corporate value. To support our accelerating businesses, we need agility on the front lines and a robust corporate foundation to support it. And as such, we have reorganized the structure in '26. And first, we established a business process, the ex promotion division. After building a robust IT foundation, we will embed the company-wide use of generative AI. We also established the Corporate Communications division. We will deepen dialogue with in and outside stakeholders in a more strategic manner and strength in communication that accurately contains our appeal and true capabilities. We are also making clear progress in management transparency and governance that supports our business.

For the official structure after the ordinary General Meeting of Shareholders, we have submitted a proposal approximately 6 independent outside directors. Excuse me, we have submitted a proposal to appoint 6 independent outside directors out of a total of 11 board members, raising the outside director ratio to 54.5%, which exceeds a majority. If approved, the ratio of outside members of the nomination and Remuneration Advisory Committee will be 75% and the ratio of female officers will rise to 31.3%. By incorporating into management the rigorous perspective of diverse professionals with a wide range of skills. We will achieve the fourth midterm management plan. At present uncertainties remains high due to factors such as inflation and geopolitical risks. At the same time, rising environmental awareness, the growing need for more resilient supply chains and increasing demand for true management solutions all represent significant business opportunities where UACJ can privilege is technology and expertise. We hope that our shareholders and investors will recognize and appreciate the progress that we are making in strengthening our earnings power.

This concludes my presentation. But next, Mr. Hashimoto, will discuss our strategy for strengthening our earnings to drive future business growth. Thank you very much for your kind attention.

[Interpreted] Mr. Tanaka, thank you. Next, Mr. Hashimoto will discuss our strategy for strengthening earnings. Keizo Hashimoto will be discussing the topic.

[Interpreted] Hello. This is Hashimoto. I will talk about the strategies to bolster earnings capacity for our business growth. First is demand. So let me talk about the expanding growth -- global demand forecast for aluminum rolled products. In the 5 years from 2025, we expect 3.5% growth a year and further 4% growth towards 2030. And these are our locations or flat rolled products. We have 3 in Japan and Thailand and the U.S., and you can also see the products at the bottom of the slide. In Japan, we have broad products in Thailand, can stock. And in the U.S., we have the can and construction materials. -- and the sales volume on the left side, 1.2 million in FY '23, 1.32 million in FY '25, 1.4 million in FY '27 and 1.5 million in FY 2030. So we will prepare our structure to meet the demand increase.

Next is the growth potential. So core is the Japan business. As you see on the right side, we will increase production capacity for key products and then enhance portfolio and production compatibility and adjust prices to grow our profitability. In the overseas business, in the U.S., Henry will talk about the U.S. business later, but also including Thailand, these are the growth businesses. We will increase production capacity and also diversified products, end markets, regions, customers and adjust prices. In addition to these regional strategies, to enhance added value, we will provide value-added materials and enter new domains, enable greater recycling capacity to enhance our recycling rates and reduce product carbon footprints and expand sales of eco-friendly products. So we will enhance the regional capacity and enhanced also the volume and quality. So that is how we plan to grow our business. time line on the horizontal axis and business profit in the vertical axis. So we will add value to each region.

Next, this is the vision and where we stand. First, the triangle on the right side, demand will continue growing. So our base, customer base, production technologies, mono quality, aluminum properties, UACJ way, trust history and diversity will be enhanced. And in the middle, we will demonstrate our strength, which is broad product and region coverage and ability to create synergies among businesses. The comprehensive strength, including casting and forging, and you can see the environmental impact. So we will use our R&D and production capacity to broaden the mountain and make it higher. So that is what we want to achieve.

On the left side, you can see where we stand. We have high share in Japan and abroad. Adjusted EBITDA, JPY 88.3 billion in FY '25, we aim to achieve JPY 100 billion, JPY 100 billion in FY '27. We want to step this up. We are #2 in the world and want to become #1 and grow our business to achieve that goal. So this is the image. Now this is the progress in fourth midterm management plan are 3 key points. So first shift from quantity to quality. Second, shift from goods to services; and three, evolution of the 3 country supply system. As President Tanaka said, the demand environment is changing dramatically. So we need to be flexible to meet the changes. So first of all, the battery demand growth is slowing down. So we are trying to grow sales in other areas. In Europe, the can stock and in are growing. So last year, we established a new company and sky, thick-plate quenching is installed. And in shift from goods to services, the recycling capability will be enhanced and established the regional closed loop recycling and Almitas and Smart sales and evolution of 3 country support system, we will enhance the compatibility of SCJ and KH. And we think we are making progress, as you can see in the circle.

Next, this is the capital investment in Japan. I mentioned Fukui and Oyama -- sorry, Tanaka-san talked about the thick-plate quenching equipment introduction and the ring mill, the casting forging. In Fukui, the recycling system is being introduced, and this is already up and running from January this year. Right side, Oyama Works advanced casting system deployment. This is in operation from May this year. And the thick plate quenching equipment will be second half of next year and ring mill will be FY '29. So in Japan, in many areas, we are continuing to enhance.

This slide shows the sales volume and business profit in flat rolled products. The blue is Japan and TAA Thailand. 1.2 million in FY '23. We are growing year after year. This year is 1.36 million in this year and 1.4 million next year is the plan. Business profit in Japan, TAA and Thailand, due to FX, the profit is smaller in Thailand now, but we will improve this going forward. I will elaborate on this later.

Next, enhancing profitability of domestic flat rolled products. In Japan, the sales volume is growing against FY '23, FY '26 is 110%. FY '27 is planned at 115%. Growing areas are listed here, we can for Europe and PC mobile terminal, thick plate, memory disk and aerospace and defense. I will go by 1 later. As you see on the right side, in each product. The environment response needs is existing. The double circle are where we already have mass production. And the single circle is where we are developing and making progress. In each area, recycling needs is heightening. Now 4 growing areas listed here. First, the plate quench plate, AI related semiconductor production equipment demand is growing. Against FY '23, FY '26 is 160% in PC Mobile, the new models are now being adopted. So in FY '26, we expect it to double vis-a-vis FY '23 and the battery foil, battery cases, EV, the storage battery, ESS demand is growing. EV demand, battery demand is slowing down, but this ESS is growing. So this battery foil, battery cases is expected to grow by around 10% and exported can stock. In Europe, energy price is rising. So the shift from glass to aluminum is shifting, PET to aluminum is already progressing, and the supply is not keeping up. And so global customers are now requesting us and so we are working on that in Japan. So we expect FY '26 to be 4 to 5x bigger than FY '23.

Next, improvement of Thailand profitability. The can stock is growing globally and the number is up from 260 to 360 thousand. In Europe, not from Japan, but from Thailand, we are starting to ship. So we are now improving our portfolio to increase our shipment to Europe and expanding the procurement routes. To improve the portfolio and take these measures to improve the UATH profitability.

Now creating environmental value through value-added materials. As you see on the left side, we will work on smaller environmental footprint by making capital investment in recycling cans and new alloy and also the procurement of the green version aluminum. And right side, we will expand sales of eco-friendly products and tangible forms of environmental value and appeal the value. We will work on those 2 aspects to increase the value-added materials.

Almitas. As you see here, is now up to 30 in FY '26 compared to FY '23, we want to grow this further.

And this is my last slide. From FY '22 to '24, automobile can and construction material development were conducted, and we see a number of cases increasing in FY '25, thick plate and functional high-performance products and air conditioning and extrusion. Going forward, we have not press released yet, but automobile or PC, mobile terminal and cosmetics, infrastructure we are working on them. So as I mentioned earlier, we will first increase our capacity to capture the growing demand and not just volume, we will also work on reducing environmental footprint and expand our added value. So working on those 2 is our basic fact.

Thank you. That concludes my presentation. Thank you.

[Interpreted] Mr. Hashimoto, thank you very much for your presentation. Next is under the title of strengthening of our competitive position, CEO of Tri-Arrows Aluminum, Henry Gordinier is going to make presentation. He's going to make a presentation in English. And if you wash the simultaneous translation, if you click the growth mark the bottom of 2 of the screen and choose a Japanese, so that you would hear presenters as well as translated to audio. If you mute the original voice translations voice-only is going to be heard. So let's start the presentation. Henry.

Good morning. It's great to be here today. IR Day is always 1 of the days I look forward to with my UACJ colleagues, and it's nice to really start to see familiar faces now year-over-year. But it's a good day to tell our story at Trier, and we've got, I think, a really good story to tell. Today, we're going to talk about -- we've seen this strengthening our competitive position because that's exactly what we're doing. We're strengthening our competitive position.

So with the first slide -- do I have to do the slide? So Tri-Arrows, we're located in Louisville, Kentucky. Our manufacturing plant is in Southern Kentucky, so in the Midwest of the United States, poised to know about Tri-Arrows and Logan Aluminum is it's the low-cost producer in the industry. It's the most productive hot mill in the world. And something to know about Tri-Arrows is, we are 1 of the largest recyclers in all of North America. We service the can sheet industry. We've got about a 20% market share of the U.S. market. And we're a preferred supplier in that space. We sell to every brand and to every can maker that's buying sheet. And that is something that I don't think any of our competitors can say. So really well positioned on a great asset base. So positioning ourselves for long-term success, and that's really what I want to talk to you guys about today. And we're going to really focus in on 4 different things. One, I want to talk a bit about that low-cost position part around productivity and how productivity itself has been driving down our unit cost, but it's also enabling us to procure the most economically advantaged material inputs. And that's the system that we're designing and building.

So with that, there's a conversation that have to be had around scalability. It's been a focus for our business for over the last 10 years, which is designing an infrastructure and designing a business that can scale to do more, more at our footprint here more outside of our footprint, but it's really around not just capacity, it's around capability. And the reason we're focused on that is right for all businesses, we go through cycles. We go through strong cycles. With tailwinds, you've got cycles, with headwinds you've got the uncertainties. The question is, have you built the right asset base and the right company culture that you win in all market conditions. And that's what we've been focused on doing and putting in place. So we'll talk some about what that means to us.

But the net sum of all this is durable performance. It's about the results that we're able to post to our stakeholders. And the investments we've made in the past have certainly showed up and now it's about kind of continuing to build upon that and constantly increase. You'll hear me talking about what our earnings floor looks like. So how do we continue to increase the floor and then create more room for the potential, and that's what we've been doing.

And then lastly, okay, so what's next, right? What's the future for us? And where do we see the next set of opportunities. Next slide. So here's the can sheet market. And I apologize if I'm standing right in front of it, I'll walk through the side. Beverage container sales will start there, and that's in billions of units. But we've seen continued growth right now, a CAGR of around 3% on beverage containers in the U.S. So kind of an exciting, which is driving sheet sales, right? And 1 of the exciting things about -- from a product launch perspective, and this was almost the opposite 10 years ago. But there's now 75% of all new product launches today in the United States are being launched for beverages in an aluminum package over PET. It did not use to be the case. We were the minority a decade ago, but now it's 75%. And what gives me confidence in a number like that is when you -- when it's not attributable to 1 factor, it's attributable to multiple factors. I mean there's functional aspects to why it makes sense relative to just product protections that are in place or the ability to stack and manage a supply chain. But then on top of it, it's the ability for brands to create better branding space. And then you can lean into what consumers are actually preferring from a convenience perspective as well as the recyclability to it. So there's like -- it's a multidimensional kind of a tailwind we've got going from different aspects. It's why we've got confidence that this growth rate is going to continue. So when you think about billions of units growing at that rate, the sheet supply is moving and that same. We see demand moving in that same space. So it's a great space to be in.

So now investments that deliver. I'm going to focus a bit now and talk about the fourth midterm plan. We just finished FY '25. We're 2 years in. We're at the halfway point. So it's about what we expect to accomplish what we have accomplished this first half and then what we expect for the next 2 years in it. So let's move on to the next slide. First, FY '25, I have to stop in brag. It's been a magnificent year for us. When we look at FY '25, we broke records this year. We broke records in total revenue. We broke records in conversion revenue. We broke records in EBITDA and earnings that we produced. We broke records in coil production. We broke records in coil production, coil sales, and then we broke records and scrap consumed. That is 1 awesome year, but delivering $287 million in earnings. So really, really proud of it. But I think what that's kind of part of the story around how you kind of continue to leverage the investments you've made and grown.

What's really nice is we've had 3 very large projects underway in the fourth midterm plan. They only partially showed up in FY '25. So if we set aside market dynamics a bit, we'll get -- I'm sure we'll have questions around scrap prices and markets, et cetera. But when you just think fundamentally, what we're expanding. We've got 2 years left to show some performance on that.

So if you go to the next slide, I'll walk you through what we've been doing. So hot mill expansion $145 million commissioned in Q3 of last year, essentially upgrading motors on our finishing mills as well as other infrastructure in the plant that will create to create some efficiency, allowing a lot more capacity through the mill scaling the business.

On the material side, shared line improvements. So we added a new shred line into our fully integrated cash center, this red line has a different technology than the other 2 that are with it, which is allowing us 2 different angles. One is improved utilization overall just because you can run more units through it, more uptime. But the second thing is the type of units. So while we're processing UBC, we can also now process a larger range of material types. And it gives us the ability to make sure that when we're sourcing, we're running the math to say, what's the most economically advantaged way to get through the chemistry. It's what we're solving for, how do you get to the chemistry that you need with as cheaply as possible, right? So we can use off-grade scraps, we can use in blend and we can move in the markets and be agile in that way.

So that's what the shred line has been about. And that came online in Q4 of FY '25. And now when we look at over here, on the far left, we also started up a partnership this quarter in FY '26. And this is a partnership that's third-party processing. So it's different. It's rotary furnaces. It's meant to process a byproduct in our materials segment of the -- of our business called DROS and, but the rotary furnaces are actually going to give us capability to do more than have a shorter supply chain, a local supply chain for draws processing, reduces freight expense certainly by being colocated. But we can also process other scrap types through the rotary furnaces and we also have the ability to deliver multi aluminum to increase throughput and casting directly into our 3 other CAs centers.

So what we've built here is a system to widen our capability, increase our rolling widen the capability of what we're melting and then further add on to that a wider range of scrap types that we can be blending and use and then delivered in multiple forms, whether it's in multiple -- or whether it's in molten or RSI.

So what does that mean? We talked about having a our business being a business that is 1 that's cost advantaged. It's industry-leading and how productivity leads with it. Well, mean this is how the math kind of flows for you from FY '23 or the actual numbers we had and when we look at the end of this midterm plan with the investments that we've got, remember, we didn't have these even scaled in '24 and '25. They're now scaling for 26 and 27. But we're seeing a 17% increase in what our production looks like. And you're just spreading your overhead with those things. You're spreading all those fixed costs across more pounds. So your unit cost is actually going down at Logan by 6%. So for anyone in the room that gets concerned about inflation, that's how you beat inflation. Our unit costs are going down. They're not going up. We're widening margins and the widening that margin protects you in every market condition. I'll come back to that theme again and again, designing a system where you're advantaged regardless of the market conditions. It's exactly what's happening in this space by driving our unit costs lower.

Next slide. So that was just the rolling side, what's happening on the metal side with the 2 investments we made. On the metal side, scrap consumption between FY '23 are actuals and where we're going to end in FY '27, it's up 46% and which is a staggering number when you think about the metal value that we're able to pull into our business. I think this scrap is a true value add. We're taking scrap metal that has no purpose melting it and pulling it back into a form as a value add into a usable product, but a 46% increase. A real fun fact is if you look back to FY '16, we've increased scrap use by which is just phenomenal when you look at our earnings performance to layer on top an 8x growth for the amount of scrap were using. So -- but also casting production, it's given us 18% more ingot, and we need the ingot because we're growing the hot line. and we need to have the capacity to continue to move. And so the whole system is set up with eyes looking forward down the field. But what you're seeing here is we've got increased shredding capacity. We've got increased shredding capability for different units. That's giving us operational flexibility. And that's really, really important, so we can pivot to where the value is. And ultimately, we've got some more localized material flow that's going to improve operational efficiency. That is what we've been doing, and we have not yet realized a single full year of value from these investments.

So let's take a look at what that should look like with the next slide. This is MTP 4. So our expectation now is we will have fully scaled the investment you just saw for the next 2 years for FY '26 and FY '27. And then we've got some exceptional market conditions as well with FY '26 and FY '27. So when we think about that position of strength, my expectations are we'll have an exceptional year in FY '26. I said FY '25, we set records. FY '26, we're going to beat records. We're going to beat every 1 of those records that I stated. And when we look to the future in FY '27, we still have that robust system in place to capture the market.

So looking further forward. That's a pretty good playbook, right? It worked. We're seeing it drive down unit cost, you're seeing it drive earnings. Let's do it again. And that's the conversations we've been having with UACJ and our owners, and they backed us now for another $130 million investment to once again go with our hotline to improve coil performance. As we just talked about, we have ample material supply coming into it and ingot capacity. So we're drawing more metal value into it. But it's the same playbook. We're able to put 10% of growth with this project, which with some continuous improvement, we expect 12% when we look to FY '30, and that's driving down unit costs, again, another 3%. And costs are still going to a more advantaged space.

With that, our market share is preserved. A really, really important thing is to say how do we continue to grow maintain our market share in a growing market. And this is 1 of the reasons why all our customers want to retain us. And in fact, with so many of the reliability issues in North America, our customers now prefer us more and more so. The best compliment I am given by the CEOs of our customers is the fact that we show up, we do exactly what we say we're going to do. That's why they come back to us. And that's why they'll continue to come back to us, and that's why they want us to grow in this space. But as we contain our market share, then we're drawing more value all the way through the system from a materials perspective. And again, it's just shifting that earnings floor up.

So translate that forward looking beyond MTP 4. This is kind of the world that we look at. We're going to see a step change of production that's going to begin in FY '29. And so we will once again increase coil capacity in that space on a stronger cost profile with a system that is designed to absorb a wider range of scrap types and give us more flexibility. So what we really see right here is we've expanded our earnings potential. We expanded it going into MTP 4. You're now seeing it in '26 and '27 with the end of MTP 4, where we're going to set some new records. And then we've built the stage to go further when we get out to FY '29 MTP -- past MTP 4.

So in conclusion, I mean, it's really pretty simple story for us. I like that. It's easier for me. We have a healthy market. We have a growing market. And so it's a market that we can really lean into. We've got an advantaged position within that market. We've made the right investments. We did them at the right time. We weren't waiting for conditions to show up. We invested before those conditions showed up. I've got a son who's an athlete and the way we talk about it is the great athletes are in front of the play. You got -- if you're ice skating, you got to skate to the open space. And that's what we've been trying to do is make sure that we have the assets in place to take advantage of the conditions when they show up. So we have the capabilities now. We've got the infrastructure now to further grow. So those assets are yielding great results. We're seeing it prove out in our financials, and it gives us a chance with the cash that we're making with the balance sheet strength that we've got with the reduction in debt and the financial strength that we're in to go again and go further. And right now, we're extremely bullish about what the future looks like. And again, I appreciate your time today. Thank you.

Thank you, Henry. Next, Kozo Okada, Director, Executive Officer and Chief Executive, Finance and Accounting Division, will give a presentation titled Financial Strategy supporting future business strategy in the latter half of fourth MTP.

[Interpreted] I am Okada, Director of Finance and Accounting Division. I will speak in Japanese. So we just heard about the business growth from the earlier speakers. We will need to support that financially to ensure that we can grow continuously. So such resilient, robust financial structure needs to be built under my responsibility.

So let me explain the financial strategy for achieving our future business goals. First, fourth MTP. The business profit and adjusted EBITDA on the left side are expected to achieve 1 year ahead of schedule. The business profit and adjusted EBITDA will be achieved.

Regarding ROE and ROIC ROE. Last year, and FY '24 and '25, we had the positive from the metal price lag. We achieved high numbers and we still have more to do for FY '26. Business profit is growing for us to achieve 9% ROIC. But ROE because of the absence of the metal price lag and due to the situation in the Middle East, ROE 9% may not be met. We may fall slightly short of 9%. But for both ROE and ROIC, we will aim for 9%. The ratio, which is a measure of financial discipline management has been at 1 time from FY '23 and FY '26 will also maintain onetime. And in the final year of our MTP FY 2027, we will exceed 1 time.

Now this left one. This diagram shows the cash allocation initially envisioned for the plan. Operating cash flow, JPY 220 billion and JPY 160 billion investment and the reduction in the debt and dividend. Right side is the current position. The 4-year cash allocation, operating cash flow, JPY 210 billion plus alpha. And this impact is because of the increase in the working capital. I will talk about this later. Operating cash flow is being dragged because of this factor. So we will continue working on cash generation going forward. unfortunately, JPY 8 billion in financing, we cannot reduce the interest-bearing debt just yet. So we will focus on measures to generate cash, and I will elaborate on this later.

Next, is the continuous enhancement of the corporate value, financial measures to enhance our corporate value. TBR, onetime and above. ROE needs to exceed the cost of capital. Internally, ROIC analysis using DuPont method, the profitability and capital efficiency. We will manage week for these points. And for the financial soundness, we will manage DE ratio. So by enhancing these 2, we plan to enhance ROE and that is our key in the activity.

On the right side, the measures we are focusing on. First, the reduction in the working capital to improve ROIC and further management of capital investment. We will be doing investment further. So as we manage the capital expenditure amount, the criteria, the profitability will be watched closely. So that we will invest in the way that will ensure growth for us going forward. And the management of the financial position. We will issue corporate bond. So we will also focus on diversifying our financing.

Next is the reduction of the working capital to improve ROIC. From April 2024, we started fourth MTP from April 24. We got price sored and yen has been weak. So the working capital has increased radically. As you see on the right low right, in the past 3 years, increase of the working capital had been JPY 220 billion JPY 120 billion. CCC cash conversion cycle improvement project started in FY '25. To reduce working capital, we are reducing the inventory and also improving the cash conversion cycle.

Next is on the capital investment. I will skip the details as President Tanaka already explained them, but we will make sure we have good investment to generate cash to ensure growth going forward and stabilize our corporate activity. DE ratio. To strengthen our financial structure management, we are working on DE ratio. Right side is what I already mentioned. We are making progress in improving the ratio. Right side, net debt EBITDA will be tracked to look at the cash generation and the interest-bearing debt ratio to be 3x by FY '27. We will reduce the working capital but enhance the adjusted EBITDA to solidify our financial position.

Now this is our shareholder return policy. President Tanaka already mentioned this. Our basic policy is stable and continuous dividend. In our fourth MTP period, we aim to achieve target of 30% or more of net profit to return to the investors and shareholders.

Lastly, enhancement of capital efficiency. So to enhance the capital value, corporate value, we need to improve ROE and reduce the cost of capital to enhance the equity spread. Right now, risk-free rate is rising. As you see on the lower right, our beta value has improved quite significantly. We will watch data value and actively engage in dialogue with markets and focus on strengthening information disclosure as we move forward.

That concludes my explanation. Thank you very much.

[Interpreted] Mr. Okada. Thank you very much. We now would like to take a 10-minute break. Q&A session, we'll start at quarter to 11:00, 10.45. Thank you.

[Break]

[Interpreted] We will now start the Q&A session and take questions from everyone. Joji Kumamoto, Director, Senior Managing Executive Officer and Chief Executive Corporate Strategy Division; and [indiscernible], Executive Officer and Chief Executive, Corporate Communication division, will also join. Simultaneous interpretation will be available for the Q&A session as well.

[Operator Instructions] We will take the questions first from the room. SMBC Nikko, Yamaguchi-san please.

[Interpreted] Thank you very much for your presentation. May I speak in Japanese? And those of you who are joining the web, I strongly recommend to visit this company. It is a great view form the window. Now my question -- there are 2 questions. First question is the market condition is quite good, and as TAA is generating fantastic earnings. So financial results is superb. But what about organic area, where -- in regards to the outcome that the company has generated out of your organic efforts. And I think at the midpoint of the MTP by recycled materials and facility is now being installed, but the scrap is too expensive. The margin isn't performing and so forth. So what is your take on your efforts that is made through your organic efforts that far, what is the stage? For example, in parent [indiscernible], the U.S. foreign exchange rate is unfavorable, therefore, not being able to generate profits. And it is a complete opposite situation of TIA. And what is your take on your achievements that you are able to achieve so far?

And the second question, TAA, production capacity enhancement that was referred in the presentation. I recommend to the investors that it is okay. But the steel dynamics has been made. And when I hear everything used to be well scrapped is doing good. However, scrap is currently low value. However, it is -- the price is going to go up. So many of my investors are worried about the situation. So demand supply situation because the -- you asked for the further questions. So I would like to clarify on the your take on the scrap values prices going forward. And what are the debottleneck? And are there economic benefits that you can derive at? If you could answer to this question.

[Interpreted] Thank you very much for your question. 2 questions. First, the market is in favorable situation at this moment. But what is the progress of pure company's organic effort so far. And the second question regarding North American situation. Henry will refer to later. At the beginning, regardless of the market, what is our own initiative that has been made thus far. Could I plant the slide? Page 8, the lower rate of my presentation today, do you have handouts. So if screen out is not ready. So out of this slide, I'd like to further explain. First of all, in regard to our organic efforts. This waterfall is produced at it is item by item. And therefore, whether it is organic or not is really hard to see. But what are the points is for left, there are strong positive recycling. This is that the recycling ratio is going to be increased so that scrap usage is going to increase. This is 14.4. And the investment is progressing in a steady manner. And it is a midpoint of medium-term plan. And in fact, the impact was larger than what we initially expected.

In regard to the market prices, towards the right, the cost impact as well as the falling exchange rate impact, the metal practices included as well as the diversification of the sources -- procurement sources. Thus the Forex impact is also included. And it is not segregated completely. However, there is a tailwind or wind, and we are able to generate the great positive. The scrap facility investment has been made. And inclusive that the recycling volume impact as well as the sourcing impact is now being reflected in this way. Now out of this quarter fall, so materials processing is because of the automotive area and the market is plateaued at this moment. So we need to carefully wait and see the market situation. But there will be some time shift, but at some point in the future, there will be a BEV to take off. So we are carefully monitoring, but we need to be fully prepared so that if, once again, the momentum rises and we'd like to do the fast field aerospace and the semiconductor that I have referred to in my presentation, we are taking measures 1 after another in a steady manner. Time line is like FY '27 or perhaps it will be moving into the next midterm plan. And therefore, only 2.4% at this moment, but we are poised to grow this area. So on the whole, we hit the midpoint of our midterm plan. So we are able to observe the progress more so than expected. But of course, there will be many changes in the market or debt risk as well. There are so many changes that we need to expect to have. So we will be really careful.

[Interpreted] Any other executives to add?

[Interpreted] Kumamoto speaking. So material class processing we initially thought that automotive components area shall be grown more so that we can earn more profit. That was the original plan yet as is explained many times, automotive market is, well, particularly EV market and EV production in the United States. And of course, partly affected by the tariff issues as well and the market growth is rather struggling or plated and North American market, be it a Japanese market as well. OEMs in this market are trying to revisit the time line of investment or adjusting investment amount that so far declared the termination of this program. Therefore, we are adjusted our waterfall time line or the sequence of investment. And we have adjusted the priorities in investment as well. But of course, BEV or ACE cards. I think that lighter car will be a greater benefit for automakers as well. So we are waiting for strong headwinds to move away, and we are ready for sunshine to rise once again. Thank you very much.

[Interpreted] And I'd like to move on to the next point in regard to the business in North American market.

[Interpreted] So you'd like to ask market situation as well as the market conditions inclusive of the competitors. Henry, could you give us an update?

Sure. I believe, and correct me if I'm wrong -- sorry simultaneously, I believe your question was really around scrap and the healthiness that we're seeing today. in the scrap markets and kind of an outlook on that? Is that correct?

[indiscernible]

Yes, me too.

You said [indiscernible].

Well, yes, I mean the way I look at it is this way. We built the system. We are in an exceptional period right now. There's no way about it. I mean 2 years ago, you'd look at scrap spreads that were around 75%. It fell to about 70%. In the first part of this year, we've been buying at 45%, right? So you're seeing historically favorable markets in that sense. So the way I think about it though is, number one, we didn't build a system that is going to be dependent upon the current conditions. So we just we're able to build a system that's in place to capture these tailwinds that we've got. As long as the U.S. consumer continues to recycle even in our poultry 45% rates nationally, with the growth, we're still going to have access to those cans. I think the current spreads are going to remain favorable for this year, right. And that's independent of what may happen with changes in tariffs, et cetera. There's a lot of structural reasons right now where I think it's going to be a while before I see any significant change or tightening in scrap spreads. So very confident that those are going to kind of endure. And then the great thing about what we've been trying to do is in terms of kind of the scalability point, it's the fact that by raising the -- your overall throughput, number one, is even if you're making lower value on a unit basis, you're processing more units, so you're creating more earnings, number one. And number two, great defensive strategy in our ability to just diversify out and not be solely dependent upon a limited amount of scrap types, but getting much wider in terms of that. And we built for that matter, a pretty incredible, I think, supply chain on the front end where the networks from where we're procuring are from international to domestic sources. So I'm overall, very, very confident. I'm also fully recognizing the fact that we're in a historically strong market. I think that's going to stick with us for just a little bit. And then I think we've built the system to make sure we're going to optimize however these wherever spreads ultimately kind of settle in. Does that help?

Yes.

[Interpreted] So these 2 questions. Would that be answered quite sufficiently? We will take the next question. Nomura Securities, Matsumoto san, please.

[Interpreted] Nomura Securities, Matsumoto. First is on UATH. So in the briefing, you said that it will improve. You always see it will improve going forward, but it doesn't improve as quickly as we hope. This year, or maybe the next 3 years, could you share with us the volume and the price margin and cost. If you break them down into these factors, what do you think will improve going forward?

My second question is on -- to Henry. So the capacity building this time, why did you choose to take this format? If the demand is strong, then there may be other ways to increase the capacity by 20%, for example. There were there any other options? Why did you choose this type of investment in the capacity improvement, capacity increase. So if you have any thoughts on that, please.

[Interpreted] Thank you for the question. So 2 questions. First is on volume or margin forecast. And the other is the question to Henry. The method you used for the capacity building. First, UAH will be answered by Hashimoto-san and then Henry.

[Interpreted] So please turn to Page 11, the slide I use for my presentation. So volume, as you see on the lower left is growing year after year and demand can stock is growing globally. There is customer needs, and we are growing steadily. So that's the first point. In almost all areas, we are supplying and U.S. will continue for some time, and Europe is also starting price. As I always explain, our relationship with customers is strengthening and price is improving as a result of that. The biggest competitor is Chinese manufacturers. In the domestic demand, Chinese players are also facing cost increase, competitors are facing cost increase. And so we are improving year after year. But the profit is not growing as much as we want. As I mentioned earlier, FX boxes stronger than we thought. Maybe the same for Japan, in the past, Thailand is strong in export. So their currency tends to appreciate. And therefore, volume and price are rising raising the profit, but profit is lower because of FX. So how we see this is, first of all, on FX. We do not think about, we'll appreciate more and bot is now weakening gradually. So in this trend, we will grow our volume and price is improving as we speak. So these positive impacts will be reflected in our numbers going forward. In addition, as I alluded to earlier, our business for Europe thanks to the strong needs by customers is increasing. We cannot deal with everything from Japan. So we are starting from Thailand this year. And U.S. and Europe are better price-wise compared to Southeast Asia and Asia. So this will also improve. And as I mentioned in other parts of the slide, we are trying to do higher added value products in Thailand. One is the white and the general and foil and general products. We are trying to increase the product types to improve further. So that is our direction in Thailand. I hope this answers your question. About the sales portfolio improvement Europe was mainly sent from Japan, but there are inquiries from nontariff countries. So we think we will start seeing that in the second half of the year. We have high expectations. And we cannot control it. But last year, Bots appreciation was extraordinary, but now it's settling down. So from this fiscal year onward, we want to enjoy the positives going forward.

[Interpreted] Next, Henry, could you update us on the U.S. situation?

Sure. Absolutely. I would like to clarify 1 part of your question. You were asking kind of why we chose this approach from a capacity perspective. Was that a question that was talking about 1 step further inorganic versus organic? Was that what you meant by approach?

Yes. Probably, you have several kinds of options for [indiscernible].

Well -- no, that's okay. The simplest I can give you is cost efficiency, capital efficiency. So it's a pretty staggering number. If you think about it in context of, let's say, the new rolling mills that are being announced, right, all in. And those numbers are anywhere between $3 to $5 a ton when you think about the output pounds that have been put out there. And from a capital efficiency perspective, we're like cents on the dollar for these. So literally, because we have the downstream capacities already there and we've got the upstream capacity that's been built. The debottlenecking, it's -- the rates of return are just kind of silly and we're able to fund these things on operating cash. And so it's kind of yet, how can you not do something that it's $0.30, $0.40 to the dollar for the new output pound? So the first 1 was -- the answer is probably just it's the no-brainer approach.

[Interpreted] For example, if you increase the investment amount and increase the capacity by 20%, is that not economically effective? Or was that difficult -- physically difficult? Or -- what about those points?

Say it again, so which -- if we -- why we didn't go further, is that what you're saying?

Yes, that's right. That's right. You have any idea for example, 20% capacity increase is economically effective or reasonable?

There are definitely breakpoints. So when we were looking at the projects, you're looking at great points from capital efficiency. In this particular project, there was just a really clean breakpoint technically with what we're going to be doing that would allow us to create this capacity for the least amount of capital possible. There is or are other opportunities to increase further that are less capital efficient that we've looked at. But we knew this was the right 1 to go through today and for those reasons, it was kind of the no-brainer. And we still have options to go into Phase 2, if you will, that would deliver strong value as well. So just haven't pursued that yet. And I'd say relative to the North America market, it's something I talk about frequently with our colleagues with our balance sheet where it is today, we're also just monitoring the competitive position because there's other ways to expand as well inorganically.

[Interpreted] And 1 more point, Henry, so the competitors are now starting. And what is the market environment right now?

With that, I mean, yes, there are 2 new rolling mills 1 ADI's facility that is -- has coiled into the market and then another 1 that is our joint venture partner, their mill at Bay Monett and it is still in process in terms of building and coming along. But the important point to know is our market is structurally short right now. We have historically high imports right now to support demand. And if you talk to any of our customers right now, the issue is around getting metal. It's around getting coil to get product to market. So structurally short now, these new assets are going to take some time to commission and to ramp, right? And we know that. We've seen it. So we're going to -- I think it's going to be some time before they really leg into, I would say, the full run rates, but the market continues to grow. So we really do have confidence that things are going to be balanced out and that there's going to be some time for these ramps. And so what we saw customers initially do from a contracting perspective, customers were initially. At first a little bit standoffish in terms of cutting new longer-term deals. They were kind of wait and see what these new announcements meant relative to what leverage they might have in a supply negotiation. But then recently, they've really come to the table in '25 to say, hey, look, we recognize now that what we kind of already believe, which is the ramp times are long. And these are complicated industrial complexes that are being turned on. And the customer, what they really need is reliability, dependability. They need the coil now for product that they're trying to put on the shelf, which put us in an advantaged position. It's another reason why these investments we're doing makes sense because they are less complicated, right? And you're able to release that capacity and we're able to time the investments with sales agreements on the other side of them.

[Interpreted] Thank you very much. Next is SBI, Goroh-san.

[Interpreted] UBS, Goroh speaking. Two questions. First question, so the waterfall analysis, JPY 15 billion of Middle East and inflation JPY 2.5 billion. So cost impact is going to be reflected and that inflation risk is going to be incorporated in the midterm and in fact, because of that impact, there were negative impact expected. And IQF raised the prices and cost inflation precedes the price increase. So there was some negative impact. And the time lag of automatic recalculation of the sales price, and that is a time lag all the time and the time lag management is going to be really important. So when you expand the production rather than to increase the fixed costs and yet volume increases, so therefore, unit costs will be reduced by the marginal profit is going to be reduced, and that is a struggle that we have. So price increase efforts, in order to shorten the lead time or price increase, are you able to do so? What concerns me is the United States market. There's a once a year price increase is probably the common prevalent practices. But in the shortages of products, are there any trend to change this particular practices. For example, cost increase is going to be immediately reflected on the pricing. Are there any wait to reflect that. So if you could explain the margin, first of all.

And the second point is in regards to the scrap ratio increase. At the very stage, it is a rise from the low point the differences or the delta was really significant. But you're reaching nearly 80% of use of a scrap or all of the sites, how much margin to grow that you're going to improve scrap material -- diversified materials is going to be used for the scrap going forward. Would that be lesser energy area in the cost and the value app is something that we'd like to expect, but the recycling rate improvement versus the earnings increase or value up. Are there any good relationship that you have enjoyed so far?

[Interpreted] Two questions. So as inflation progresses and the timing of price increase, what about the time lag are you able to secure sufficient margin? That's the first point. And the second scrap rate increase. So far, we were able to see benefits and what about going forward? So for the first point, Hashimoto-san will explain that. For the second point, I will be explaining.

[Interpreted] Now time lag versus the cost increase versus the price increase. Cost increase comes from 2 points, first labor costs, and the second is energy. For domestic market, for example, for energy, we apply surcharges, therefore 3-month or 6-month delay cannot be avoided. However, in a certain time interval, we are able to increase the price. For the labor costs so far until 3 years ago, it wasn't a price increase of every year. But starting 2 years ago or last year, labor cost is rising like 4% to 5% per annum. And therefore, we have no way but to increase the prices. So therefore, customer is accepting. And therefore, even for the labor cost increase, it is annual negotiation. So wage increase has been carefully monitored and taking an evidence of the wage increase, and we are negotiated with the customer. So every year, we are raising prices with our customer.

Now in regard to the Middle East issue, Friday last week, like we have announced and we started negotiation already, application will start in July. Customers fully understand our situation. So with a sort of degree of speediness, they are accepting cost increase is actually happening from April. But probably, fulgently, the our procurement department says that the cost increase will be applied for forged in July. And therefore, we are able to pass on the cost to the customers sufficiently, which we are going to do from now. So as you are aware, we are trying to manage the time lag as much as possible. But of course, there's no way to do so, and we are able to do so far.

In regard to the United States, could you comment on that, Henry? For U.S. portion of the same points. Inflation and cost price increase.

Yes, I was -- Yes, so in the United States, the way we operate mostly under long-term contracts. So I think the shortest contract we have in place is 3 years, and we've several at 5 and then a couple that span out to 8 years. So we've got a range of them. They all have price adjustments in them, really that are triggered around inflation. So when we think about like producer price index, for example. So there's methodologies we have that would help us against just kind of core inflation from a pass-through perspective. And then so that ultimately, between that and the productivity gains, which you saw help us drive our actual cost down lower, that helps kind of protect where our margins are from that perspective. We don't go back and renegotiate conversion prices mid-cycle. So they happen with the term of the agreement.

I mentioned -- what I missed was you have that once a year -- I mean product price adjustment opportunity you have, but I'm just wondering the condition is getting in the supply shortage position, if there is a chance to make it shorter, the timing wise, it is better for to get the leasable month going forward. Once the area is kind of too risky for that.

In the event of a shock -- like in the event of a price hike. So we talk about the Middle East, for example, we have had no direct impacts at all from an operational supplies perspective. And so -- but the question, I think, might be read as if we had supply shocks that would come in, how would we address those. And we would address those, and we have in the past historically, approaching with surcharges under -- when you're in unique times. We just haven't been in a space where that's effectively kicked in. So -- and we do have a pass-through model relative to freight as well. So we're insulated on the freight component of it as well.

[Interpreted] So price increase started recently and the JPY 15 billion of negative impact needs to be recovered and activities to start JPY 15 billion is kicking in and the company is trying to reduce this cost increase?

[Interpreted] Yes. we are taking such actions and efforts. In regard to the second question, the scrap rate further increased. Well, so far, as is planned, we have increased the recycling rate, as you said, we started out with a low point. And going forward, the focusing on more of UBC to be -- which means that we will be able to use easy-to-process scripts. And going forward, like U.S. is doing diversification of the types of used materials. So we will be able to formulate and combine the different kinds of used materials and which means that the recycled materials need to be diversified more. And on top of that, we are requesting customers more -- for example, when we mingle the different type of recycled materials, the formulation will be complicated. And can we suggest something? Or can customers use ingenuity to make it simple and alloys could be combined to some extent, and we would like to do so. So gaining understanding from the customers and try to target at 80% at this moment.

[Interpreted] Next question, please. Next question is from Morgan Stanley, MUFG Securities. Shirakawa-san.

[Interpreted] This Morgan Stanley Securities, Shirakawa. I have 2 questions. First, the U.S. Thank you for updating us on the situation. In the short term and medium term, I want to know your forecast. So Section 232 tariffs, 50% tariff is opposed U.S. is a net importing country. So in the Midwest premium is pushed up in the short term. But is this structure sustainable or not? What is your view on that? So that's my first question. Second question. Regarding ROIC. So working capital, JPY 120 billion compared to FY '24, it's up by JPY 120 billion. And so I was on a declining trend. This year, you expect this to improve significantly. You mentioned CCC, you said you will work on improving CCC. So what will change? Why will work be so good this year? If you could elaborate?

[Interpreted] Thank you for the question. So 2 questions. First is on U.S. So short term and medium term, including Section 232, what will be the trend going forward? Section 232 trend, I think it's difficult for anyone to answer but Henry, if you could enlighten us. And second, working capital. Okada-san said earlier, so we will elaborate on that later. So Henry, could you please?

Sure. No, I appreciate the question. It's certainly 1 that we talk about a lot inside our business as well. has served for 2 years as Chairman of the U.S. Aluminum Association, so had a fair amount of time in Washington, D.C., helping policy talk policy on exactly these things. I do think -- I think a couple of things. But first, Yes, the structure can endure. The reality is, I believe we've shown that we can operate in the environment of high tariffs. Now Will, it's a different question, right? And I think and with whom and with rich partners, right? So I think you're going to see tariffs now become part of trade policy with the U.S. that sticks for a while even. And at this point in time, I'm just telling you what I feel, administration to administration. But I also believe you've got things like the USMCA agreement that by statute, will start negotiations in July. And I don't think that's going to be trilaterally negotiated. It's probably more bilaterally negotiated between U.S. and Mexico and Canada. I would say that 1 of the largest concerns is if you begin having preferential rates with 1 country versus another country, you create all sorts of opportunities for market distortions and trade flows that don't quite make a lot of sense. So a lot of the work being done right now, I know from association from my counterparts and competitors. We're trying to make sure what we don't create is a world of unintended consequences that makes it harder on our industry to compete. But I think there's great opportunity on the other side of USMCA to strength in North America and maintain what's really important for us, which is truly, it's about having our borders protected, and not just our borders, Canada's and Mexico's borders protected against unfairly subsidized metal coming out of China and Russia. So we're focused pretty intensely on that. I do think the tariffs can exist. I think the levels will be adjusted, and it's really a function of how those bilateral trade agreements come about and when they happen. I certainly believe that at this point in time, it's -- there's a lot on the government's plate. So I think that we are going to see these extended negotiations with the USMCA take place over a longer term. So I'm not looking for anything over the summer or in the fall, I think. Is that helpful?

Yes.

[Interpreted] Thank you. So the second point on the working capital increase and the financial KPIs. Okada-san?

[Interpreted] Thank you. I will answer the question. The working capital increase is leading to deteriorating cash. So first, our way of thinking on ROIC, first numerator, so JPY 65 billion business profit this year. So JPY 65 billion profit, the numerator will turn around. And the working capital is worsening. We will try to accelerate collection. That is the key measure, including finance scheme. We are trying to generate cash. to reduce the working capital, of course, including inventory. And we will work on this in the overall price. But right now, our businesses are including this in our budget to conduct the measures. It used to be volume-based, but now it is price-based budget, and it's visualized and the business units report on a monthly basis and discuss on what we do next. So this is centering on the President President's order, and we have shifted to that direction. So we will do this further. We've been doing this from FY '25, but now we are on track. So we think Rick will continue improving. Well, Middle East situation is aggravating and probably you're adjusting the procurement origins. And while you're doing so reducing the inventory that will be beneficial for CCC, but what do you think about the risks? Perhaps my explanation wasn't sufficient rather than to reduce, it will be optimal be managed. So that's the benchmark. We will not sacrifice any production. It is an optimum. The inventory is going to go up and down. And when we have excess stock and we are going to adjust at the appropriate level. So that's the approach to the inventory.

[Interpreted] The next question, Shibata-san of SBI Securities.

Thank you very much for your opportunity for the presentation. One question. On Page 12 of Hashimoto-san's presentation, now the reducing the man burden and as such, the environmental value of a smaller footprint is pursued. In this box, there are many points raised in environmental actions. So I was able to imagine what you're doing. But towards the right, trying environmental into economic value. It is really hard to quantify from outside. And it is really reflected into our forecast. So I would like to hear more about the right-hand side of the slide, where -- which are the particular item that we should be paying attention to? Hashimoto. As you pointed out, it is a bit complicated. Of course, environment deal need to be scale in some way measured in some way and be able to quantify. And society at large, there are many trials that is made One way is to bring that to [indiscernible] value is the current tax for CO2. So current pricing is the one, for example, if the use of renewable energy electricity and then what is a value. So these are the available quantified value. At power companies, if renewable energy use and a CO2 reduction and this and that, and therefore, the per ton value is as such. And in Europe, per ton, value is like EUR 100 and so forth. So such a calculation is happening. So by reducing CO2 and copper footprints as well as carbon price, all these can be changed into the value and we refer to these numbers and try to calculate economic value. So if we are to make a role and 15 per ton. However, green energy will be 2/3 and if you scrap and further decrease is expected. So basis, but how much decline can we make reduction can we make, particularly when we think about the Scope 3 of CO2 reduction, that will create a very significant value. And as we reduce the CO2 and we will enjoy that economic value. And we have already started several years ago, and the customer understand this. Per ton value, of course, subject to discussion, but we will apply certain value so that we earn some premium and therefore, on the left, as you see investment development and we are allocating such premium to the investment. If you're not if this is not sustainable, we can't reflect that investment. But such a benchmark is available. We are starting out this initiative.

[Interpreted] Let me add some information. The customers' needs is diversified quite extensively based upon the customer, if price is rising, and then recycling rate doesn't have to be very, very high. But some of the customers want high recycling rate with high premium B2C mostly. And how much and the breakdown of the customers is not subject to disclosure at this point, but there are many customers who are willing to pay premium with the use of recycling. So when CO2 reduction will be monetized in the future. And we will be instead fast. It will not be a onetime blog. But we will be step-by-step and try to make the customers fully understood about the value. That's what we would like to do.

We will take the next question.

[Interpreted] We do not see any other questions. So -- just a moment, please. Next question is from Daiwa Securities, Ozaki-san from Zoom, please.

[Interpreted] Ozaki from Daiwa Securities. Just 1 question. U.S. TAA. So you utilize scrap, capital investment and recovery collection system is in place. using strap. I understand that very well. So compared to your U.S. competitors, what is your biggest differentiating point if you could show us. So TAA scrap business model. How easy is it for the competitors to copy your model? So that's why I'm asking this question.

[Interpreted] So the U.S., the comparison -- peer comparison. Where do we have the competitive advantage? So Henry, please?

Well, I think you've got the competitive advantage. We've got, I would say, a very large head start, if you -- just in terms of our assets that are in place today. And there's no question that I think that that's there. If you had to ask me about competitive advantage, I would probably stretch that a bit further to how we work with our suppliers, the network of suppliers that we get. It's really into how we conduct our business. We've got the right infrastructure. We've got the right capabilities. We've scaled that out. Now the question is how do we operate in that market? How do we think and how do we transact. We have a, for lack of a better term, our approach to the market is very sophisticated, savvy, I would say we're almost -- think of our procurement arm is not buying pencils, but trading so that we're very intentional about when we entered the market about how much we're entering the market for when we exit the market, trying to do as best we can to capture value, but offering us little predictability as we can which creates more opportunity for us. And that's something I think that is fairly unique relative to how our competitors are set up. That's 1 level. And the other part is the suppliers and the partners that we've got. We've got a broad range of suppliers that extend all the way from pure traders that we've got long-term relationships with to folks that actually have assets themselves, physical yards to folks that are importers. So and structuring each of those deals somewhat differently or the kinds of deals differently and it gives you these levers. It gives you these levers that I think are very, very difficult to recreate. And a lot of them are pretty relationship-based. So if you go take a look at the folks that we partner with these are decades old relationships. So the level of trust and how we interact almost on handshake agreements is something that I think is different and differentiates us in a way. So when opportunity shows itself, we typically see it first. when markets move in a way that where we don't want to chase it, we run our model and our system in a space where our production is not at risk. So we know when to use inventory. We know window lever up. We know when to draw it down. And so to me, the question you had about competitive advantage is really 1 around culture, and it's about how it is you approach working with your partners and the partners that you select. And then you got to complement that with having the right asset base. What I'm really proud of when you looked at the presentation earlier today was the fact that the assets that we put in place, they were here before the market showed up. And so it's about making sure that you're not reacting to something that's happened. It's about making sure you've got the operational abilities in place to take advantage of the markets and the market conditions. So I think we've executed on both of those fairly well. Hopefully, that helps answer your question.

[Interpreted] Yes, I understand well.

[Interpreted] Thank you very much for your question. Are there any further questions? Thank you very much. Now if there is no further question, I'd like to close the Q&A session. Now for the further contact, please contact the IR and Communications department.

With this, we'd like to conclude the IR Day of UACJ Group. We hope that to all of the stakeholders, including investors, would you are at cost efforts. And I hope that you could kindly help support our operations going forward as well. Through today's IR Day, if you could give us more feedback be appreciated. If you could log on to the URL or the chat boxes or if you scan the QR be appreciated. Once again, thank you all very much for joining despite your business schedule. This concludes the session.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

I will introduce company's attendees to this briefing session. Representative Director and President, Shinji Tanaka.

I'm Tanaka. Thank you.

Director, Senior Managing Executive Officer, Chief Executive of Corporate Strategy Division, Joji Kumamoto.

I'm Kumamoto. Thank you.

Director, Executive Officer, Chief Executive of Finance and Accounting Division, Kozo Okada.

I'm Okada. Thank you.

Executive Vice President, Chief Executive of Flat Rolled Products Division, Keizo Hashimoto.

I'm Hashimoto. Thank you.

I'm Kaoru Ueda, General Manager of IR in the Finance Department. I will serve as your MC today. Nice to see all of you. Now I will give the microphone to Mr. Okada, Chief Executive Finance and Accounting Division, to give presentation on the third quarter results for fiscal year 2025. Please follow the presentation materials.

Mr. Okada, the floor is yours.

I will explain the details of the financial results for the third quarter of fiscal 2025. At the lower right of the slide, you see the slide number. I will call out the slide numbers as I go. First is Slide 1. This is a summary of our financial results for the third quarter of fiscal 2025. I will explain the details in the following slides, but I would like to give you an overview here.

In the third quarter, global can stock demand grew steadily. Both sales, volume and revenue exceeded previous year figures. On the profit side, the company was able to reduce the cost by increasing scrap processing capacity in the U.S., and we saw effects of increasing exports from Japan and of price revisions.

On the other hand, there was an impact of foreign exchange rate fluctuations as well as surge in uncertainty in North American automotive industry. Because of this, the business profit was significantly down by JPY 13.1 billion for the first half year-on-year. In the cumulative results in the third quarter, there was an improvement year-on-year. We finished at negative JPY 7.8 billion.

Next is the full year forecast. Based on the assumption that current business environment in the Flat Rolled Products business would continue, the company will revise its forecast upward. Compared to the figures we announced in the last results briefing in November for business profit, we will add on JPY 2 billion, making it JPY 48 billion with a net profit of JPY 27 billion, up JPY 4 billion. Based on that, the company will also increase the forecast for annual dividend by JPY 3 compared to the announcement in November, which would make dividend JPY 45 per share. Now let me give you the details of the financial results.

On Slide 2, you see the contents for today. I will first explain about the results for the third quarter, followed by full year forecast and then our view on enhancing corporate value. On Slide 3, I will begin with third quarter results. On Slide 4, you see the details of the financial results. Revenue was JPY 841.6 billion, up JPY 103.2 billion year-on-year. Business profit was JPY 34 billion, down JPY 7.8 billion year-on-year. Net profit was JPY 24.9 billion, including inventory assets and operating profit, which was on par with previous year figures. Adjusted EBITDA was JPY 63.7 billion, down JPY 6.4 billion from the previous year. Please turn to Slide 5.

I mentioned that the business profit was JPY 34 billion. This slide shows the waterfall comparison to last year. On the right of the slide, there is a chart that shows the evolution of business profit by quarter in fiscal '25. First half was very difficult. First and second quarters posted only a small amount of growth.

However, in the third quarter, business profit increased just as we assumed at the beginning of this year. I would like to use the left waterfall to explain what changed from the first half results briefing. You see that TAA was down JPY 900 million versus last year. However, in the first half, the figure was negative JPY 5.6 billion. This means that TAA has grown significantly. Difference related to sales was down JPY 700 million year-on-year in the first half, but it is now up JPY 1.1 billion year-on-year. We see slight improvement. With regards to cost and utilization ratio, it deteriorated slightly. What was negative JPY 4.7 billion is now negative JPY 5.1 billion. Third quarter business profit was JPY 17.1 billion, which was huge growth.

On Slide 6, analysis made on the business profit in the third quarter of fiscal '24 as well as that of fiscal '25. The key is that TAA was positive JPY 4.7 billion. Especially to note was increase in the sales volume as well as positive impact from the use of recycled materials. Significant growth was made possible because of these factors.

Next, there was a JPY 1.8 billion positive from differences related to sales. In addition to the mix and sales of the sales volume, the company is seeing the positive impact of price revisions, that led to a total of positive JPY 1.8 billion. Cost and utilization ratio was negative JPY 400 million. We are seeing improvement in the Flat Rolled Products business, but the Other businesses as well as group companies decline in profitability led to a negative effect here.

Negative JPY 1 billion from Others was due to inflation in the labor cost compared to the previous year.

Next is Slide 7, and here, I will explain about the sales volume by types of Flat Rolled Products for the cumulative 3 quarters. Cumulative amount as of the third quarter is 993,000 tons. Compared to the previous year, there was an increase by 48,000 tons. If you look at the differences year-on-year on the right, can stock has grown by 51,000 tons. That was followed by increase in IT and automotive materials, which were 3,000 tons and 1,000 tons, respectively. Thick plates are still lagging behind year-on-year by 5,000 tons.

On Slide 8, you see consolidated statement of financial position. Total of our assets was JPY 1.093 trillion. This is a growth by JPY 123 billion year-on-year. This includes foreign exchange impact of JPY 40 billion. Aside from that, there was an impact from inventory assets. Aluminum ingot prices had gone up, which led to increase in operating capital by JPY 44 billion.

Tangible fixed assets were JPY 25.3 billion. As of the end of the first half, it was JPY 12.2 billion. As you can see on the right, there were major capital investment at Fukui for expansion of UBC treating and processing equipment, expansion of thick plate quenching furnaces in Fukaya and expansion of scrapping processing line at TAA. Those are reasons behind increase in the tangible fixed assets to JPY 25.3 billion.

Total liabilities and equity increased by JPY 41.4 billion due to increase in the borrowing due to increase in working capital.

I will explain about the cash flow on Slide 9. This shows consolidated statement of cash flow. On the left, our results in profit before taxes, depreciation and amortization, change in payables and receivables, which led to operating cash flow of JPY 27.7 billion. Capital expenditures totaled JPY 44.5 billion, and free cash flow was negative JPY 16.8 billion.

Financing schemes, dividends decrease and increase in cash and deposits as well as conversion losses and gains on foreign currency-denominated borrowings results led to increase in interest-bearing debt by JPY 41.4 billion.

On the far right, you see our status of financial strength. Interest-bearing debt increased by JPY 41.4 billion. Interest-bearing debt total is now JPY 382.1 billion. However, due to increase in capital, consolidated D/E ratio was less than 1x in the third quarter.

Next is Slide 10. You see here the third quarter performance for each entity. First is Thailand or UATH. Here, the title says sales are growing. Focus is on price revisions to improve profitability. On the upper right, you see the quarterly evolution from fiscal year '24 on sales volume and business profit.

Sales volume is steadily increasing, but the business profit is still struggling severely. Due to appreciation in Thai Baht against the dollar, roll margin is shrinking. The company will work to secure appropriate level of roll margins, including an option of revision in pricing.

Next is Slide 11, which shows results at TAA. TAA is seeing robust demand. It is maintaining high level of production, utilization and sales. As we have forecasted, we expect TAA to grow with a CAGR of 3%. No change is anticipated in the demand trends. With regards to production and sales, hot-rolling capacity was increased and investment in new shredder line became fully operational. This has contributed in reducing overall cost.

TAA has strong relationship of trust with customers. The company expects to see high level of sales. The new shredder line became fully operational, and you see pictures of the line on the bottom right. By expanding the shredding capacity, use of recycled materials increased. Because of this, even with the impact of tariffs on prices in the United States, TAA is ready to achieve economy of scale, which would create further value. The company would focus on the business, including strategic procurement of recycled raw materials.

On Slide 12, you see the situation of UWH in North America. There was a sudden change in the automotive market in North America. UWH was focused on securing profitability under such severe business environment. Bottom right bar chart shows the evolution of sales of BEV in North America.

As you can see, there was a huge drop in the third quarter. At the end of September, tax break program based on IRA ended. There were last-minute demands until September, but starting from the third quarter, the situation became very difficult. The company would work to thoroughly manage the cost through improvement and reduction. That will be all for the explanation of the third quarter results.

I will continue to explain our forecast for FY 2025, starting on Page 13. On Page 14, bottom right, we start with the business profit forecast. Based on the current sales situation, we have revised our full year business profit forecast upward to JPY 48 billion. In terms of the business environment, we expect the impact of the North American tariff policy to continue in Q4. In addition, there are some signs of a slight recovery in thick plates for semiconductor equipment.

Also, we are seeing a slight decline in demand for extruded and processed products, et cetera. Other than that, the Flat Rolled Product business, with regard to exchange rate fluctuations, the impact of the baht-dollar continues to require close monitoring. As for measures to be taken from Q4 onward, we will continue price revision measures in response to rising costs and in order to alleviate the supply chain disruption, occurring in North America, the UACJ Group intends to respond by shipping from Japan and Thailand.

With regard to the Aerospace and Defense Materials business, we will continue to work in the area of strengthening our activities. The left-hand side shows the progress by quarter. And for Q4, we expect a slight decrease from the JPY 17.1 billion in Q3. The business environment has not changed, but I would like to introduce a few transient processes that are manifesting themselves.

We expect business profits to fall by about JPY 3 billion. And one of the factors of this is that the timing of property taxes has been adjusted to Q4 in accordance with IFRS accounting standards. Also, all groups conduct year-end and new year's repairs, and these repair costs will emerge in Q4. So there will be a slight decrease in profit related to manufacturing. In addition, each group company has been struggling a bit in business profits other than for the Flat Rolled Products business, and we expect to see some decline. And that the business profits for Q4 will not be as high as those of Q3.

Next, Page 15 presents our full year forecast. First, revenue for FY 2025 is projected at JPY 1.14 trillion, representing an upward revision of JPY 40 billion from the November forecast. Business profit is expected to be JPY 48 billion, up JPY 2 billion from the November forecast. In addition, the impact from metal price lag, et cetera, is now estimated at JPY 18 billion, an improvement of JPY 9 billion. As a result, operating profit is projected at JPY 66 billion, up JPY 11 billion from the November forecast. Profit attributable to owners of the parent is expected to be JPY 27 billion, representing an upward revision of JPY 4 billion from the November forecast. In line with these revisions, as I will explain later, we have set the annual dividend at JPY 45 per share, an increase of JPY 3 from the November forecast.

Next, on Page 16, we present an analysis of the projected business profit of JPY 48 billion compared to the November forecast. Starting from the previous forecast of JPY 46 billion in business profit, UATH is expected to have a negative impact of JPY 0.8 billion, reflecting a modest appreciation of the Thai Baht.

For TAA, we expect a positive impact of JPY 2 billion, driven by stronger-than-expected benefits from recycled raw materials as well as favorable effect from currency translation. Regarding the differences related to sales, while sales volume of Flat Rolled Products have been very strong and the effects of price revisions have materialized, sales outside the Flat Rolled Products business have been somewhat weak. Taking this negative factor into account, we estimate a net positive impact of JPY 1.3 billion in the differences related to sales.

For the cost and utilization ratio variance, we project a positive impact of JPY 1 billion, reflecting slightly higher production volume than initially assumed, which is expected to improve cost and utilization. Other factors are expected to have a negative impact of JPY 1.4 billion, mainly due to inflationary pressures on indirect costs. As a result, business profit is now projected at JPY 48 billion, representing an upward revision of JPY 2 billion.

Next, Page 17 shows the comparison with the previous fiscal year. The full year forecast stands at JPY 48 billion, representing an increase of JPY 2.1 billion from JPY 45.9 billion in the previous fiscal year. The breakdown is broadly in line with the factors discussed earlier. For UATH, we expect a negative impact of JPY 2.2 billion year-on-year, mainly due to foreign exchange effects and higher costs for recycled raw materials.

For TAA, we project an increase of JPY 4.5 billion, driven by higher sales volumes and the benefits of recycled raw materials.

As for UWH, we expect a very challenging environment from the fourth quarter onward and therefore, project a year-on-year decline of JPY 0.6 billion. Regarding the differences related to sales, the Flat Rolled Products business has recorded a significant positive impact, price revisions affecting all businesses have contributed positively. However, there has been some negative impact from lower sales in businesses other than Flat Rolled Products. Taking these factors together, differences related to sales is estimated at a positive JPY 3.6 billion.

As for the cost and utilization differences, while we are facing considerable inflationary pressures, we are making every effort to implement cost reductions and expect to limit the negative impact to JPY 3.7 billion. Which we anticipate will be offset by the positive differences related to sales.

Energy-related factors are expected to contribute a positive JPY 1.8 billion, reflecting improved conditions in electricity, fuel and added metals compared with the previous year.

The next Page 18 shows the sales volume plan by product category. The full year forecast for FY 2025 is 1,334,000 tons, a decrease of 13,000 tons from the November forecast. For can stock, we expect sales volumes to decline slightly by around 12,000 tons, while automotive materials and thick plates are expected to contribute modestly on the upside. This reflects the current outlook for the full year.

Compared with the FY 2024 results, this represents an increase of 68,000 tons year-on-year, indicating significant growth. The increase is driven primarily by beverage can materials, which are expected to rise by 64,000 tons.

Next, Page 19 outlines our shareholder return policy. We will increase the dividend by JPY 3 from the level announced in November, revising the annual dividend to JPY 45 per share. At JPY 45 per share for the full year, the dividend payout ratio will be approximately 30.2%. We will continue to target payout ratio of at least 30% of net profit and remain firmly committed to this policy.

On Page 21, amid the recent strong share price performance, our price-to-book ratio has risen above 1x. However, we will continue to focus on reducing our cost of capital and improving ROE in order to generate positive equity spread.

Page 22 presents a topic on strengthening our initiatives in the growth areas of Aerospace and Defense Materials. In the Aerospace and Defense field, we have decided on total capital investments of JPY 23 billion for this fiscal year. On the left, we announced on February 10, the installation of Japan's largest ring material manufacturing facility. We will invest approximately JPY 12 billion at the foundry and forging works in Oyama-shi with a particular focus on ring materials for space-related applications, including the H3 rocket. This project has been selected as a technology development theme by JAXA, and we intend to proceed steadily while utilizing support from the Space Strategy Fund.

On the right is the thick plate quenching facility, which we announced on May 13 last year. This involves expanding quenching capacity for materials used in aerospace and defense as well as for semiconductor manufacturing equipment. At the Fukaya works, we will install one of the largest and most efficient facilities of its kind in Japan, and we are committed to ensuring that these two major investments translate firmly into earnings growth.

Finally, on Page 23, we obtained an A- score for both climate change and water security in the CDP 2025 scores for the second consecutive year. In this area as well, we will continue working to enhance our corporate value on a sustainable basis.

Page 24 shows the trends in business profit and EBITDA. We aim to increase EBITDA from the FY 2025 forecast of JPY 88 billion to JPY 100 billion and business profit from JPY 48 billion to JPY 60 billion by FY 2027. Toward these targets, we will focus on generating solid profit growth in FY 2026.

Finally, Page 25 provides information on upcoming events. We plan to disclose the FY 2025 full year results at 2:00 p.m. on May 14, 2026, and the IR Day is scheduled for the morning of May 29. That concludes Okada's presentation.

That will be all for our presentation. We will take your questions now. Depending on the details of your question, if we see a possibility that it may impact our business activities, we may refrain from giving a response. [Operator Instructions]. I will now introduce the first person to ask a question. Mr. Yamaguchi from SMBC Nikko Securities. You have the floor. [Operator Instructions].

I'm looking at the movement of business profit in each unit on a quarterly basis. TAA in the previous quarter was over JPY 5 billion. But in the third quarter, the profit has risen to JPY 10 billion. Domestic business has seen an uplift as well from what was over JPY 2 billion to over JPY 6 billion. These 2 businesses have seen quarterly increase in the profit. I believe that there was metal benefit incurred in the United States. I would like to know whether the yield has been increasing or not?

And I ask for your further explanation.

With regards to the domestic business, due to Asahi Beer incident, the aluminum cans are not selling well. I took a look at the statistics released by the Japan Aluminum Association, and I saw that the numbers were severe. On the other hand, your company has seen increase in business profit this quarter. I would like to know what is going on?

You said you're planning to aim at achieving JPY 60 billion in business profit. With the business profit you have seen in the third quarter and putting aside the seasonality factor in the fourth quarter, if we multiply the business profit by numbers by 4, it is JPY 68 billion. If we multiply the second half figures by 2, it is JPY 61 billion, which would exceed the midterm target. Do you still see the risk of not being able to achieve the target?

Do you expect negative factors to materialize next year that would bring down the profit?

Also, I assume that TAA did not include the metal benefit in the beginning of the year numbers. Because of that, at the onset, we see numbers which would negatively surprise us. With that also in mind, I would like to know whether the profitability level that we see in the second half is sustainable. Could you explain whether you expect to reach JPY 60 billion? Those are two questions that I have.

We received two questions. In the first question, you pointed out that when quarterly financial results are considered, TAA and Domestic businesses are growing. You would like to know the contents of that growth, especially the domestic business. In addition, you brought up the statistics from Japan Aluminum Association for the Domestic business. You would like to know how the Flat Rolled business is doing.

Your second question was that when you take a look at the second half business profit and multiply it by 4, it would reach a certain number. You would like to know how we expect the second half business would be, whether we see no risk or we still see risk. The first question will be answered by Mr. Hashimoto, and the second question will be answered by Mr. Okada.

This is Hashimoto. Let me respond to your question. Your first question pointed to the improvement in profit at TAA in the third quarter. The company explained in the first half that the main reason is the realization of the benefit of using recycled materials.

We provided an explanation in the first half. There is a time lag for materializing the benefit. Now we are in the second half, and we are seeing concrete benefits to a certain extent where we can buy cheaper raw materials. That is the biggest factor. As we have explained in the briefing material, we have enhanced our recycling facility. Volume has enabled us to reap more benefit, and we are seeing the effect of the initiatives that we have taken.

For the domestic business, you mentioned about the incident at Asahi Beer. Asahi had worked hard to ship beers nearly on plan. Because of this, their incident did not significantly impact us. To your point about our improvement in the domestic business profitability, first thing is that export volume for Europe is expanding relatively well. We see trend of further increase.

In addition, there was an issue at a mill in the United States. To help cover the shortage, we exported can stock and automotive materials from Japan that contributed to the positive results.

With regards to the thick plates, the second quarter was the bottom. From the third quarter, we are seeing gradual recovery. The fourth quarter is on the positive side. The low level numbers are now slightly improving in the fourth quarter, that led to overall improvement. That is all.

The second question relating to business profit in the second half will be answered by Mr. Okada.

Let me respond. I think your question is whether we will get to JPY 60 billion threshold in fiscal '26. As we have indicated on Slide 14, past records show that the business profit results are not always at its peak. We tend to be impacted by a variety of external factors. As you have rightly mentioned, we do get impacted by seasonality factors.

However, if the tariff impacts continue into 2026, because TAA is operating at full capacity in terms of production, I believe it would give us a basis for having high expectations.

As for UATH, the company expects it to continue to operate in full capacity. Because of that, if the ForEx rate between baht and the dollar goes toward baht depreciation, then we can expect more profit. As for Domestic business, as I have mentioned in my presentation earlier, situation varies by businesses.

However, as Mr. Hashimoto mentioned, there is a sign of recovery in the semiconductor production equipment. Because of this, we have high expectations. That is all.

Thank you. That concludes our response to the two questions. I would like to comment on the first point about the impact from the incident at Asahi Beer. As Mr. Hashimoto mentioned, even though it is not that we were not at all impacted because Asahi Beer had shipped their main product as much as possible. The impact that we suffered was very small.

To your second point about whether the second half profit level will continue for the full year next year, what would impact us the most is North American tariffs. We do not have visibility to what would happen next fiscal year on that point. We will continue to closely monitor the situation to figure out what kind of impact there would be on us. That's all.

It would be a significant event if tariff comes down to 25%, right?

Well, this is an area which is hard for us to predict what would happen tomorrow. We will continue to thoroughly monitor the situation. I would say because U.S. is not on friendly terms with Canada, I think you are on the safe side. My understanding is that there were a lot of discussions in the Congress yesterday, so we will continue to monitor the situation.

[Operator Instructions] I would like to go to the next question. Mr. Shirakawa from Morgan Stanley MUFG Securities. [Operator Instructions].

This is Shirakawa from Morgan Stanley. I would like to ask two questions. My first question is regarding Slide 16 of the presentation. Differences related to sales are indicated as positive JPY 1.3 billion. I believe this includes things like upward price revision you made, but I would like to know more.

Also, I would like to know how your price increase has been received under the lackluster market environment? Asking from a different angle, what I'm interested in is whether you still have upside after next fiscal year on. Another point is the item Others. Its negative JPY 1.4 billion, which is quite big. I would like to know the breakdown of that. This is my first question.

My second question is related to Thailand. In the next fiscal year, I assume that there would still be certain volume that would go to the United States, and I hope that would happen. But what should we expect here? Because your contract period is based on years, I don't think you have been affected by tariffs so much this year. Do you expect any impact next fiscal year?

Also, because you're concluding contract on a calendar year basis, I would assume you have your agreements already concluded, but I want to know what would happen to the price increase in various regions you operate, including the United States.

Thank you for your two questions. Your first question is regarding the analysis of business profit. You would like to know specifics of differences related to sales as well as about the price increase. The second question is related to outlook of business in Thailand for the next fiscal year. The first question regarding the difference related to sales would be answered by Mr. Okada. Mr. Hashimoto will respond to your question about price increase and outlook of Thailand for next fiscal year.

Let me elaborate on the JPY 1.3 billion in the differences related to sales. I explained earlier that improvement of mix of rolled products volume and price revisions would start to show. But because the demands in extruded products and metal components are slightly declining, the total would be JPY 1.3 billion. Roughly speaking, there is approximately JPY 2 billion increase from flat-rolled products.

However, even though there are price increase efforts being conducted for extruded products, there is a bigger decline in sales volume. The impact from that is approximately JPY 700 million. To explain about the breakdown of negative JPY 1.4 billion in Others, it is the impact of inflation. The company assumes that it would be impacted by inflation going forward in overhead costs, and we expect it to be negative JPY 1.4 billion.

That is all. Next, Mr. Hashimoto will explain about the upward price revision in the domestic business as well as outlook for Thailand next fiscal year.

First, I would like to touch upon price increase in the domestic business. I have been repeatedly saying this, but the cost increase related to labor is very clear. This is not just about us, and it is a challenge society as a whole is facing. We are asking our customers for their understanding on this matter, and they are accepting it. We need to absorb the impact of this within the supply chain. For customers, this means that they would see increase in the cost. However, they do understand that it is necessary to absorb this within the supply chain. And because of their understanding of our need to pass on the cost, we have been able to revise the price this year.

Let me turn to Thailand. I mentioned earlier about the products, which are exported to the United States. Currently, the U.S. market is facing impact of issues at certain mills, and we are increasing the volume to the U.S. based on requests we received. The situation is expected to continue for a while. The supply and demand in the U.S. continue to be tight, so we expect exports to be made from Thailand up to some point in the next fiscal year. That is the situation for the U.S. market.

With regards to price increase, the ingot prices in Shanghai is significantly increasing, and there has been increase in our competitors' prices in Chinese products in Asia. Because of this, we have asked for increase in price, and we have been able to revise the price upward to a certain extent. That is all.

Is it okay to understand that you have already finished raising the prices for the domestic market?

Yes. We have been able to conclude all of the contracts for the second half, which we had expected at the time of the release. We believe inflation would continue. We need to carefully monitor the situation and work with the customers in gaining their support for appropriate pricing of our products.

We will now move to the next question. Mr. Matsumoto from Nomura Securities. [Operator Instructions].

This is Matsumoto from Nomura Securities. My first question is on Page 14. Regarding the fourth quarter, Mr. Okada mentioned earlier that profits would decline due to some -- one-off factors, and I understand that part. However, looking at the text in red and blue, there also seem to be some factors suggesting improvement in the fourth quarter. And based on Mr. Hashimoto's earlier comments, it appears that price increases are being implemented in places like Thailand. Also, the metal benefit in the U.S. does not seem to be deteriorating significantly. So how should we think about these factors? It seems that there are also some positive elements heading into the fourth quarter. So could you share your thinking?

My second question is on regional margins. While margins in the U.S. appear to be solid in Asia, we have heard that UBC and premiums are declining, putting pressure on margins. Could you explain your assumptions regarding market conditions, including scrap price increases and the decline in premiums?

And my third question, I saw a news article suggesting that magnesium exports from China may have been suspended. Should we be concerned about this? Or is it not an issue?

Thank you for your question. Regarding your first question, it was rather difficult to hear, but I understand that you are asking about the progress and outlook from the fourth quarter through next year. Your second question concerns how margins in Asia are expected to develop. And your third question is about the recent situation regarding magnesium. Mr. Okada will address the first question. Mr. Hashimoto will respond to the second question on Asian margins, and Mr. Kumamoto will take the third on magnesium.

This is Okada. As Mr. Matsumoto mentioned earlier, I believe the key points are positive and negative factors. First, as you are aware, we expect the current business environment to continue into the fourth quarter. Under these conditions, we believe we can secure earnings, particularly for TAA. As for the extrusion-related business, as we explained earlier, demand will decline, and this remains a key concern for us. We are, therefore, focusing on expanding sales of higher-margin extrusion products and are implementing measures to improve. We expect to see tangible results from these efforts heading into next year.

As for foreign exchange, we believe volatility will likely continue. At UATH, we will, therefore, press ahead with measures to improve profitability, including price increases, as Mr. Hashimoto mentioned earlier, and we will work to strengthen our operations until the baht foreign exchange rate improves. Regarding the blue text for the fourth quarter, including the price revisions, Mr. Hashimoto has already explained, so I will not repeat.

Also with regard to supply chain conditions in the United States, we are currently facing some disruptions in North America. We have received requests for support, particularly from our Japanese customers. So we intend to work to address the situation by coordinating deliveries from Japan and Thailand as needed. While it is unclear how far these supply chain issues will extend, we intend to respond carefully and appropriately to the situation.

We will now move to your second question regarding margins in Asia. Regarding margins in Asia, our main competitors are Chinese materials. However, following the value-added tax revisions 2 years ago, export products have also become subject to value-added tax. And as mentioned earlier, bullion prices in Shanghai have remained very high. As a result, competing products prices have risen significantly. Against this backdrop, we have been able to raise roll margins for Asia-bound at each contract revision, once a year for annual contracts and every 2 or 3 years for longer-term contracts, leading to steady improvements.

Regarding your earlier question about high costs due to increase in recycled raw material prices. It is true that premiums were very low in the third quarter, which narrowed the price gap between recycled materials and virgin aluminum. However, this situation has improved in the fourth quarter. In addition, the rise in recycled material prices have begun to stabilize. So overall, we believe the situation is now moving in a positive direction. Finally, Mr. Kumamoto will address the question regarding magnesium procurement.

I may not recall the exact details, but I believe that in 2021, there was also a situation where magnesium exports from China were disrupted, leading not only to sharp price increases, but also to actual shortages in supply. Since then, we have reviewed how we should approach procurement. We have secured non-China sources of magnesium. And as a user of additive metals, we have also increased our inventory levels of magnesium compared with the past. This may already have been reported, but industry bodies such as the Aluminum Association, and there is also a Magnesium Association, they have brought together magnesium users to discuss possible countermeasures. These discussions include benchmarking among companies, joint inventory strategies and potential steps to be taken for the future.

While I cannot go into too much detail, we are taking various measures to mitigate the impact as much as possible. As for magnesium, at this point, we are not facing any immediate or direct issues. We are maintaining an adequate level of inventory. And while we will continue to monitor developments carefully, there is no cause for concern at this stage. That's it.

The next question comes from Mr. Goroh of UBS Securities. [Operator Instructions].

This is Goroh from UBS Securities. I have three questions as well. First, you mentioned that the medium-term management plan target of JPY 60 billion in business profit is now in sight. Looking at the business environment and earnings over the past year, it seems that the response has been somewhat reactive, focusing on countermeasures against cost increases and weak volume demand.

There is also an impression that margin improvements in various areas have been somewhat delayed. During the previous structural reforms, the company appeared to take proactive measures against rising costs. While the contribution from metal benefits have been significant this time, I hope to see the company fully execute the original scenario envisioned in the medium-term plan and begin harvesting those results from next year.

For example, in Thailand, while there has been much discussion about margins, there should also be opportunities to drive volume growth through productivity improvements. In North America, while the hot rolling operations starting this year, you should also be able to address volume expansion. In addition, for areas such as thick plate as well as the recently highlighted aerospace, defense and aviation sector, can we expect to see the results of the investments made so far begin to materialize in terms of volume in FY 2026?

There is also a concern that once operations begin, depreciation and fixed costs may hit first, which could result in not meeting the expectation. So for my question, could you share your thinking on this point? Specifically, can we expect meaningful volume growth and proper harvest of the initiatives in the midterm plan?

My second question relates to the value of recycling in the medium-term plan. So far, the discussion seems to have focused mainly on the cost advantages of using recycled materials. However, I believe the real objective should be value enhancement. It seems that the investment cycle has largely been completed, and you are now entering the phase of harvesting.

My second question, therefore, is whether there is still room within the medium-term plan period for additional initiatives that create value through the use of recycled raw materials beyond the cost benefit?

My third question is to confirm the numerical assumptions. While metal benefits have been moving significantly, you have previously explained that we should not focus solely on spot. In the latest earnings revision, what level of improvement in metal benefits have you factored in? I assume you have not fully reflected the current levels, and you have also mentioned time lags in the past. You also noted that tariff developments could pose a risk for next year. And if the current levels were fully factored in, that could become a risk. So could you share to the extent possible, the level or assumptions you are using? Those are my three questions.

Thank you very much. We received three questions. First, you asked about the outlook and the approach toward achieving the FY 2027 medium-term plan target of JPY 60 billion in business profit. Second, how we view the value of recycling within the medium-term plan and how we intend to expand it. Third, how we have factored in the benefits from recycled materials.

I will address the first and second questions, and Mr. Okada will respond to the third. Regarding the first point, progress toward JPY 60 billion target under the medium-term plan has been uneven. As we explained earlier, varying by country, region and application. Fundamentally, we will continue to focus on improving overall productivity and implementing price revisions as we have been doing.

At the same time, we will steadily enhance productivity at each of our sites. In addition, in growth areas such as aerospace and defense, we have only recently begun various initiatives. So some of the benefits are expected to emerge in the latter half of the current medium-term plan period. Accordingly, we intend to grow these areas and achieve the JPY 60 billion target under the medium-term plan as early as possible.

Turning to the second point, how we view the value of recycling within the medium-term plan. We have been making steady progress in expanding our capacity to use recycled raw materials. On the other hand, from the perspective of customer adoption, the benefits and value of recycling have gradually been recognized by our customers. Some customers have come to understand this value, and we have been able to reflect it in our pricing. We will continue to communicate these benefits clearly and aim to further enhance the value of recycled raw materials.

Now regarding your third question on how the effects of recycled raw materials have been factored in, I would like to ask Mr. Okada to comment.

It is rather difficult to answer to this question. But compared with the previous year, the first half was challenging this year, and the effects emerged rapidly in the second half. I understand your question as asking what exactly has improved year-on-year since it is not really visible. Inflation is rising in the U.S.

And at present, we present TAA's profit and loss using a single bar in the waterfall chart. So it may be difficult to see from the outside, and we would like to improve our disclosure in this area going forward.

For FY 2025, we expect a year-on-year increase in profit of JPY 4.5 billion, and the main driver is the greater contribution from the recycled raw materials compared with last year. From our perspective, however, at TAA, we are expanding the shredder lines, which will significantly increase the use of recycled raw materials going forward. We, therefore, expect profit to grow even further beyond the current fiscal year.

As we are approaching the scheduled end time, we will take the next question as the final one. Mr. Ozaki from Daiwa Securities.

This is Ozaki from Daiwa Securities. Referring to the quarterly trend table on Page 31, TAA's business profit increased from JPY 5.3 billion in the second quarter to JPY 10 billion in the third quarter. Was this mainly due to metal benefits? I would like to confirm this point.

Also, if we exclude UATH, TAA and UWH from the total, the Domestic business appeared to have improved significantly from the second to the third quarter. Is this mainly the result of price increases? And can we assume that this improvement is sustainable going forward?

It is Page 32, the numbers on Page 31. The numbers, Mr. Okada will address. And Mr. Hashimoto will comment on the changes in the domestic business from the second to third quarter.

Regarding the approximately JPY 5 billion increase in TAA's business profit from the second to the third quarter, as you suggested, this was mainly due to the effects of metal benefits. That's all.

As for the domestic business, as I briefly mentioned earlier, the main factor is volume. They include shipments of can stocks to Europe, automotive-related support as well as IT and data center related. In addition, thick plate shipments began to increase gradually from the third quarter. Currently, our domestic operations are running at almost full capacity, and that is one key factor. In addition, many customers implemented price revisions starting in the second half, and those effects are now being reflected.

For TAA, the fourth quarter would be about JPY 9.2 billion based on your figures. Metal benefits also appear to be rising again gradually. So is there any particular reason why the fourth quarter would be weaker?

We are not assuming any major deterioration. Our plan reflects not only the impact of recycled materials, but also factors such as sales volumes and product mix. So it is not based solely on the effects of recycled materials.

Thank you for your question. As we have reached the scheduled end time, this concludes today's briefing. For any further inquiries, please contact the IR department. This concludes UACJ Corporation's FY 2025 Third Quarter Earnings Presentation. Thank you very much for your participation.

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

Good morning again. I am Tanaka. Thank you very much for taking the time out of your busy schedule today to attend UACJ Group Sustainability Briefing. Today, I would like to explain how UACJ pursues both economic and social value and aims to continuously improve our corporate value. I'd like to explain in terms of our philosophy, vision and strategy.

Let me begin by explaining the theme of role of aluminum and UACJ's contribution. This is the corporate philosophy of the UACJ Group, which we have presented to you many times. Under our corporate philosophy of "contribute to a prosperous sustainable society with technologies that brings out innate power of materials," we have defined our vision and values as follows.

Regarding our values, we have established the UACJ way shown here as a guideline for our actions toward our philosophy. This is the long-term vision for 2030 that we have announced in May 2021. We aim to make the 4 contributions shown on the right side of this slide towards the year 2030. This is to provide products that contribute to the societal development by capturing demand in growing industries and markets. We also will enhance aluminum materials to bring economic benefits to communities worldwide. And we will develop all new products and business models that offer solutions for challenges facing society and reduce environment impact throughout product life cycles. We will work to maximize the power of aluminum in the areas of mobility, lifestyle, health care and environment and energy.

Based on our vision of passing down a lighter world over the next century, we have established the basic sustainability policy as a foundation of our activities, and the entire company is working together to implement them. We compared the light world that we -- the UACJ Group should aim for to the north and south of the compass. We have identified 3 important materialities, 3 environmental issues and 2, social issues that must be resolved in order for the UACJ Group to remain sustainable with the society. By placing them to the north and the south of the compass, respectively, we indicate the direction that the UACJ Group should aim for.

Today, Ms. Narita, Chief Executive of the Corporate Sustainability Division; as well as Mr. Urayoshi, Executive Officer of the Business Support Division, will explain our initiatives focusing on the environment and people. Of the 3 environment-related materials, the central one is regarding a circular economy and aluminum. The promotion of the circular economy, which also contributes to the climate change countermediates and nature positivity aims to achieve recycling rate of 80% by fiscal year 2030. Using the UACJ recycling rate as an indicator, UACJ recycling rate for FY '24 reached 73.9%, and we are making good progress in this area.

We are accelerating our efforts throughout the supply chain, including the establishment of new recycling facilities in Japan and overseas, the expansion of environmentally friendly products such as a general purpose aluminum sheet using new green ingots and the development of the branding activities under ALmitas+ SMART brand. Next, I will discuss national policy trend and UACJ's strategy.

June 2025, the Japanese government's cabinet approved the basic policy for economic and fiscal management and reform the so-called but just an outline policy. In this context, the promotion of GX and expansion of the circular economy are positioned as national strategies. Aluminum was introduced for the first time as an important material for solving social issues. This is a significant big turning point for us at UACJ, and we are encouraged that it is a strong tailwind.

Aluminum is truly a sustainable material, combining lightweight, high strength and high recyclability. With technology that maximizes the power of this material, we at UACJ are in the position to contribute even more deeply to solving social issues with the support of the government's policy.

Specifically, it is expected to examine recycling system, provide various types of support for the recycling of aluminum and other metals and promote international cooperation and rulemaking. These developments will further accelerate our efforts to build a recycling-oriented society for aluminum.

UACJ work with this policy more than ever to contribute to the realization of a sustainable society from both production and recycling point of view.

Aluminum is a material with infinite possibilities to be reborn over and over again. While taking advantage of these characteristics, we aim to make circle of circular economy thicker and larger. Therefore, UACJ will go beyond being a mere materials manufacturer. Rather, we aim to both maximize environmental value and create economic value. We will always drive the realization of recycling-oriented society for aluminum, keeping in mind of domestic and international policy trends.

We will now explain UACJ's approach to human capital. We believe that the source of our corporate value is in our people. In the face of dramatic changes in the external environment, the UACJ Group has once again become keenly aware of the importance of engagement and well-being.

Based on this recognition, we have redefined our fundamental approach to human capital and the ideal form of human capital management. And we have formulated a People Statement to guide us. This will promote the concept of human capital on a full-scale company-wide basis.

Through teamwork, we empower our people to create a lighter future. This phrase embodies our strong conviction that every employee who shares the UACJ Group's philosophy is a key player in shaping the future and that their collective strengths is the source of our company's sustainable growth.

We have been working honestly on initiatives related to people and have now compiled the UACJ's People Statement and overall vision of human capital management as the group aspirations.

On the left is the UACJ People Statement, which summarizes the UACJ Group's approach to human capital. The source of creating the future is in people. And the first step is to embrace the well-being of those who work for us and to become the best team possible. To this end, it is a declaration that we will promote organizational development, human resource development and creation of a working environment through management that draws out the strengths of each and every employee. We will constantly create a lighter future.

The purpose of our business activities does not mirror the pursuit of economic profit. We aim to continuously create economic value by solving social issues, maximizing environmental value and contributing to society through environmental consideration, strategic investment in human resources and social contribution.

UACJ is a company that embodies value creation through its business activities themselves. We will promote social, environmental and economic growth as a trinity.

We will achieve sustainable growth while creating social value by integrating activities that address societal challenges such as climate change, resource constraints and demographic shifts into our business operations. This includes researching and developing low environmental impact products, procuring environmentally conscious raw materials, establishing collection and recycling systems for the used products and fostering long-term human resource development.

A company where employees can be proud to work for UACJ and continue our efforts to be a company that our customers and society trust saying that they are happy to do business with UACJ and to work towards a lighter world 100 years from now.

That is all for my explanation, and thank you very much.

I'm Narita, Chief Executive of the Corporate Sustainability Division. Thank you for your time today.

I will talk about the company's initiatives to counter climate change, which is one of the social issues that needs to be overcome. I will touch upon UACJ's activities that would enable the realization of a lighter world 100 years from now, a world that UACJ's companies character, you may me dreams of.

UACJ Group's 3 materialities, which the company believes are critical issues that must be solved in the environmental field are shown on this slide. Leading a circular economy in aluminum, taking measures to address climate change and supporting environmental health and nature, nature positive. These are not standing in isolation. They are mutually connected, supporting and merging with each other. This all leads to UACJ Group's environmental concept, which is we are focused on creating a more sustainable society through loving care for a lush blue earth and realizing the full potential of aluminum.

We have targets for elements of each materiality, such as UACJ recycle ratio and reduction in Scopes 1, 2 and 3. We strive to reduce the environmental burden. Here are the topics to highlight from 2024 to 2025.

In the upper part of the slide, you see initiatives to promote reduction of environmental burden. As Mr. Tanaka mentioned earlier, UACJ's target for recycle ratio in fiscal year 2030 is 80%. As of fiscal year 2024, we have reached 73.9%. We are working to secure recycled raw materials and enhancing our facility to accommodate those materials.

We have completed the development of vertical high-speed twin rolled casting experimental machine for which we had the support of NEDO. We are working on experiments to get ready for the actual rollout of the machine.

In the lower part of the slide, you see information on ASI certification. ASI requires renewal every 3 years. Review for renewal are completed for both PS certification and CoC certification.

Nagoya Works has also gone through the review as a new facility. In addition, TAA and Logan Aluminum Inc. in the U.S. as well as Whitehall or UWH's Mexican plant have been reviewed for ASI certification. and they have been certified. As you can see on the bottom right, the volume of sales for ASI-certified material grew approximately 20x compared to 2022. This shows that UACJ is now considered a trusted supplier for clients who would like to purchase environmentally friendly materials.

With regards to carbon neutrality, as you can see on this graph, we are moving steadily towards achieving the goal in fiscal year 2030 for all Scopes 1, 2 and 3.

Scope 1 and 2 have been reduced significantly in 2024 due to production volume and product mix. Scope 3 has also been reduced due to increase in recycle ratio. The reduction rate is 20.1% in fiscal year 2024. As we work on carbon neutrality, it would also contribute in areas other than climate change. As you can see on the slide, financial impact will be increasing. It is because of the progress made in fossil fuel levy or the so-called carbon tax, CBAM, as well as emissions trading in Japan.

From the next page on, I will explain about each initiative. First is fossil fuel levy. The company believes that its impact is quite big on the business. Levy is determined by the amount of CO2 emission contained in the fossil fuel. If we use more, the monetary value will also increase. However, when Scope 1 and 2 targets are achieved, we would be able to reduce JPY 7.2 billion in financial impact in 2030. And in 2050, we would be able to reduce the risk by more than JPY 50 billion. This information can be found in the integrated report as part of the information disclosure based on TCFD recommendation. Please do take a look.

Products exported to Europe would be subject to CBAM from 2026. This is a payment that is required of European customers on the products that they purchase from outside Europe based on the difference of carbon prices in that region against prices within Europe. European customers ask UACJ to make calculation, and UACJ is providing emissions information together with the products. Currently, European Commission is considering calculation methodologies and mode of declaration.

By developing and manufacturing low environmental burden products, we believe we can reduce our customers' burden. We will continue to develop and manufacture these kinds of products, so the customers around the world, including Europe, will continue to choose us over others. Next is emissions trading in Japan. Going forward, emissions trading would become obligatory. Since 2023, GX League has been promoting emissions trading. Based on the outcomes of the pilot emissions trading, emissions trading would become obligatory from next fiscal year.

Subject to this obligation are companies which are annually emitting 100,000 tons or more in Scope 1. There are multiple aluminum companies included, and UACJ is one of the companies within the scope for emissions trading. To reduce emissions, the government has set a quota for emissions. If emissions exceed the quota, the excessive portion must be dealt with by purchasing emissions allowances. That would incur costs.

We manufacture many products at Nagoya Works and Fukui Works, and we fit into these criteria. However, METI doesn't envision reduction of emissions that would reduce the competitiveness of industries. For industries with higher emission, benchmark is set by industry. Reduction would be pursued based on the benchmark. This applies to steel and cement industries where emission level is very high.

Aluminum was not included at first, but aluminum industry agreed that if we work together as one , we could be recognized as being eligible for the benchmarking and initiatives are being taken to that end. We will know more in December, such as free of charge quota or whether a reduction ratio can be carried over. Once we get the information, we will identify how we will proceed going forward, such as buying credits in advance or invest more to reduce Scope 1.

Emissions trading system will be implemented fully going forward. Until now, environmental value was not recognized. However, the emissions trading would enable investment in value-added and improvement of environmental value, which would lead to improvement in the economic value. We are hoping to spiral up in value.

UACJ recycle ratio was 65% in fiscal year 2019. We are working to achieve our target set for fiscal year 2030. And in fiscal year 2024, we achieved 73.9%. We will continue to monitor the usage rate of recycled materials and collect scrap from the market. We will also promote the development of new products using PCR.

Customers are recognizing our effort in developing recyclable materials. Customers are buying those products. And through that, they can further pursue environmental value.

In the future, we would like to continue to secure sufficient amount of scrap and promote recycling through lobbying activities through industry organizations.

As Tanaka mentioned earlier, the beauty of aluminum is that it can be recycled permanently over and over again. To fully leverage this strength, we believe the UACJ Group must make efforts across the entire supply chain. The strength of the UACJ Group lies in its linear approach, handling aluminum from casting to finished products, including alloy design and the development of environmentally friendly products.

Furthermore, our diligent technological development in aluminum and our long-standing relationships with customers enable us to collaborate closely with customers on product design. We can work together with customers to propose product designs such as how to incorporate recycled materials into their products or to design products that are easy to separate and sort for recycling. Such collaborative approach is our greatest strength.

Also, by leveraging our connections with suppliers we have worked with in the past, we can promote the development of advanced scrap sorting technologies and procurement of new resources. Utilizing the UACJ Group's strengths, alloy design proposals to customers and connections with suppliers, we will strive to be the heart of the aluminum cycle.

We will contribute to the creation of a sustainable society with loving care for our lush blue earth through exploring further potential of aluminum. We believe this will help us develop a sustainable society by solving social issues, and we will also lead to the enhancement of the UACJ Group's corporate value.

That is all I have to say from Narita. Thank you very much.

I am Urayoshi, Chief Executive of the Business Support Division. Thank you for this opportunity today. I would like to present on enhancing the well-being of employees, UACJ Group's human capital strategies.

First, the UACJ Group focuses on 3 pillars: my mind and body well-being, my work well-being and our work well-being with the aim to realize our corporate philosophy and corporate value by creating a virtuous cycle that enhances the well-being of each employee while promoting the development of our people and organization.

This is the UACJ People Statement and the overall framework of human capital management, as explained by Tanaka at the beginning of the presentation. First, on the left is the People Statement outlining the UACJ Group's approach to human capital.

The source of creating the future is people. First, we must enhance the well-being of our employees and then become the best team possible. To this end, we declared to promote the development of the organization, people and the workplace environment.

The image on the right shows the overall picture of human capital management of the UACJ Group. By promoting 3 human capital strategies, organization building, people development and workplace environment enhancement and also by enhancing the 3 aspects on the left side, my mind and body well-being, my work well-being and our work well-being, and by creating a virtuous cycle, we aim to realize our People Statement. This ultimately leads to the realization of our corporate philosophy and the enhancement of corporate value. That is our human capital management of the UACJ Group.

This illustrates the overall framework of human capital management and its relationship to the sustainability compass. The sustainability compass outlines 2 desired futures in the North and the South, aiming to pass down a lighter world over the next century, as explained by Tanaka earlier. We believe that enhancing well-being will lead to the realization of the vision for the South, a healthy and harmonious society where everyone can feel their well-being.

UACJ Group's human capital management is driven by the belief that promoting initiatives for people and organizational development and striving to realize the well-being of each and every employee working at UACJ ultimately contributes to the realization of a healthy and harmonious society where everyone can feel their well-being.

This page illustrates the alignment between our business strategy and human capital strategy under the fourth midterm management plan.

In coordination with our business strategy, we are implementing initiatives under the 3 pillars of the human capital strategy, organization building, people development and workplace environment enhancement to realize UACJ Vision 2030. This page outlines the HR initiatives we will implement and their objectives for the 3 pillars of our human capital strategy, organization building, people development and workplace environment enhancement.

For organization building, we focus on cultivating and expanding leadership, improving employee engagement and promoting DE&I. For people development, we focus on talent acquisition and retention, training programs and evaluation and allocation. For workplace environment enhancement, we will be enhancing our remuneration and benefits, promoting health management and improving the workplace environment. We are striving to achieve respective goals.

This page summarizes major KPIs related to our human capital strategy, along with our FY 2027 targets and the status of initiatives in FY 2024. As an example, we are addressing each challenge by focusing on improving engagement for organization building, talent development for people development and enhancing the remuneration and benefits program for workplace environment enhancement.

As we have reported, we have now formulated the People Statement and the overall framework for human capital management, recognizing our new goal of enhancing the well-being of every individual working for the UACJ Group. We are currently analyzing the relationship between our various human capital strategy initiatives and the 3 pillars of well-being, my mind and body well-being, my work well-being and our work well-being with cooperation from Kyoto University.

We believe it is crucial to clarify how the promotion of people and organizational development contributes to a virtuous cycle of improving the well-being of individual employee and ultimately how this contributes to improving financial metrics and creating corporate value. This enables us to formulate and execute even more effective human capital strategies. We already have identified correlations with some of the HR initiatives. Moving forward, we plan to expand our analysis to other well-being areas and consider focus areas for human capital strategy. Furthermore, we will continue analyzing how these HR initiatives ultimately impact financial performance.

Here's a brief update on our recent achievements. Our efforts to improve the work and environment have resulted in our Platinum Kurumin certification. Also, our company was featured at the Workstyle Reform Expo as a best practice for actively promoting paternity leave. This is just an introduction. As explained so far, we will steadily advance our human capital strategy to contribute to the sustainable development of our group from a people perspective.

By executing this strategy, we will realize individual well-being and the virtuous cycle of people and organization development. This will foster the well-being of every UACJ Group employee who are at the center of well-being. And then we extend that individual well-being to their colleagues, family, business partners and the wider community and society. This is the ultimate well wave. That concludes my explanation. Thank you.

Thank you for this opportunity today. Please don't be too hard on me.

At the beginning of the briefing today, you explained where UACJ Group was headed to and what it would accomplish in the mid- to long term. That was followed by the explanation of 2 important initiatives for generating economic, social and environmental values, which are initiatives related to environment and human capital, which were presented by Ms. Narita and Mr. Urayoshi, who are executive officers.

Based on the presentations given, I would like to have the opportunity to deep dive on those themes among Mr. Tanaka, Ms. Akabane and myself. I hope our frank dialogue would enable those gathered here today to have deeper understanding of what UACJ Group is doing and have more confidence in us.

First, I will turn to you, Mr. Tanaka. It has been 1.5 years since you have assumed the role of the President. You had kicked off working on Vision 2030, and you have implemented the fourth midterm plan up to this point. In last year's sustainability briefing, Mr. Ikeda, who is an external Board member, had said that our CEO is not just a Chief Executive Officer, but also a Chief Circular Economy Officer.

After 1.5 years, how do you frankly feel about being a CEO, if you could briefly comment?

Thank you for a very straightforward question. It has been 1.5 years since I assumed the role of the President last April. 1.5 years flew past is what I can say about those days.

Since I assumed the role of the President in April of last year, the environment surrounding the company has drastically changed, and I feel the variety of changes that are going on. For example, there have been geopolitical issues. Since the beginning of this year, there have been things like change in the policy due to change in the administration in the U.S. Due to these changes, our initiatives on sustainability have significantly evolved.

We have been working very hard on sustainability, but we also need to be mindful of the environmental changes. We need to sense the change and determine what must be done. May I talk a bit more?

Please.

I just mentioned about the environmental changes. Since April of last year, the fourth medium-term plan has been implemented. The key to the fourth midterm plan, which are growth strategy and value-added strategy, have at its core promotion of recycling. Promotion of recycling involves identifying UACJ recycling ratio and bring up recycling benchmark of 65% to 80% in the long term.

Aluminum as a material has environmental value, and it is a metal that can contribute to solving societal issues. We would like to capitalize on this to improve recycling ratio. Currently, we have gotten to the point where recycle ratio is on plan. However, the only field where we have been able to achieve improvement in the recycle ratio is beverage cans, which are in front of us. Because of cooperation from various parties, beverage can recycle system is already in place. Because of that, recycle ratio is going up. Long life cycle aluminum, such as cars have 5- to 7-year life and sometimes 10 years. Construction materials have longer life cycle, 10 to 30 years. We do not have system to accommodate this longer life cycle aluminum. I feel that we need to work with stakeholders within the supply chain to build a system that would enable us to recycle better.

Sorry, I talked too long.

No problem. Thank you for your input. You need to adapt to the change in the business environment, holding your antenna high to sun it. Our priority is promotion of recycling. Potential of aluminum materials would grow even further. Beverage cans have better rate of recycling now. Though progress is made, longer life cycle products such as cars and construction materials still have room for improvement. I think this brings us more opportunities.

I would like to ask one more question to Mr. Tanaka. Change in the business environment is not just in Japan. It's occurring in the U.S., China and Asia overall. We have 3 region structure, and the company has offices in Japan, Thailand and in the United States. Changes in the business environment sometimes were a tailwind for us. And in some cases, it posed a risk as a headwind. In your view, do you see opportunities overall? Or is it a significant risk that would force the company to move more carefully? How do you feel?

It is a very difficult question. I feel that situation differs depending on the time lines and areas.

In the longer term, basically, the challenges regarding environment would remain. However, I think the situation varies by area because each area faces different situations that changes the environment surrounding them.

For the coming 5 to 10 years, I think there would be a time when sustainability response to issues in the environment and climate change would be required of us. Because of that, in the longer term, it would work in our favor.

Thank you. Now I would like to turn to Mr. Akabane. I would like to hear from you as an external director on how you felt about what Mr. Tanaka said.

The company is aiming to get to 80% recycle ratio by 2030. I think the company has reached the point where it can aim for the achievement of that goal. If things go as is, 80% can be reached. However, as an external director, I cannot help but feel that the company can do better by setting up a stretch goal.

In raising the growth in the rate, there are some challenges that the company must overcome, such as construction materials and cars, which have longer life cycles. There was a mention of promotion of lobbying activities. But is it also related to boosting the rate? In addition, I think Thailand is getting business inquiries from Europe, Middle East as well as Africa in raising the gradient of the growth of recycle ratio, what are the bottlenecks? I would like to know.

I think what is being said here is that recycle ratio is probably going to reach 80% in 2030. So you would like to see stretch goals being realized. So how do you respond, Mr. Tanaka?

I think it is a very good point. Raising the recycle ratio is going as planned as of fiscal year 2024. However, going beyond 75% and then 78% and on to 80%, it would become more difficult. We not only need to collect the materials but also utilize them in an optimal manner. That is the difficult part. Going forward, we would, of course, consider raising the target. However, at this point in time, we want to make reaching 80% certain.

So what do you say, Ms. Akabane?

I myself have experience working for a B2C company. It was very difficult to collect what is being distributed in the market, transport it and recycle it. Because of this, I understand that the difficulty is quite different from collecting leftover materials from plants. However, what you are trying to do would require consensus from the society as well as improvement of people's understanding on these matters. I think you need to consider where you would like to go at it alone and where you create a societal movement.

I think you are right. You need to consider to what extent the company would go at it alone and where you would work with the society to be more friendly to earth for the creation of sustainable earth. You use the term societal movement, but I think that is necessary.

You have talked about B2C. We need to have B2C customers understand more about the attributes of aluminum. They need to know what kind of metal aluminum is and that by recycling it, energy use can be reduced by 97%. I think the company must communicate more about this.

Thank you for your comment.

I would like to talk about branding. In the earlier slides, there was a mention about focusing on branding. There are brandings for B2B business. And even if consumables are out of the scope for the company, there are ways to appeal to consumers. So I would like to know what kind of branding you are envisioning currently.

I would like to talk further about recycling. We established a brand called ALmitas+, and we have developed ALmitas+ SMART, which has significantly high recycle ratio. I mentioned about UACJ recycle ratio of 80%. 80% will be the average. For aluminum for specific users, it may be able to aim at 80%. A customer may ask 80% recycle ratio or 90%. There are even customers who say they need 100% recycle ratio.

We can supply ALmitas+ SMART 80%, 90% or 100%. The customers can understand that UACJ's products have high recycle ratio. We will build various brands considering those characteristics in mind.

When customers give the company such requests, we would be able to prove our technology development capabilities. I think the fact that the customer is making such inquiries makes me believe that the social movement is being created.

Yes, we are seeing inquiries from customers. At the start, though we try very hard on our sales activities, no one bought our idea. Our customers seem to think that our product was just more expensive. However, our B2C customers who are facing end users and our B2B customers who interact with -- can appeal that our products are contributing to the reduction of CO2.

I think it's a win-win for our customers and end consumers because it becomes a tool to make themselves more appealing. I think that's where we need to pay more attention.

I would like to also comment about the business. For environmental matters and human capital, a compass has been set forth to reach Vision 2030 and materiality activities can be thoroughly monitored. I believe that because now we finally have the platform for moving the organization forward in place, we have more work to do. I need to thoroughly monitor what is being done, and that is the job of us outside directors.

May I? I would like to ask you, Ms. Nagata, looking from outside or as external director, how do you see our recycling activities?

I'm frankly happy to hear that ALmitas+ SMART has had a great start. However, from the perspective of a general consumer, the recognition level is not so high. We still have a long way to go. I think you can advertise more proactively, and I think it's worth investing in that.

I'm hoping some projects would be generated together with our customers and such initiatives would expand further to others. Thank you. In that sense, it would be important to make strategy and implement it or strategy and capability to be aligned with each other under the current environment where changes are occurring very rapidly.

Mr. Tanaka, you talked about the strategy. But how do you see the company's potential in terms of capability to execute and achieve desired results?

In general?

Yes, in general.

We are a comprehensive aluminum manufacturer. And so far, we have been able to determine where we want to head to with regards to sustainability and materiality. What's left for us to do is to execute. Our biggest near-term target is achieving the goals we have set for the fourth midterm plan. And in the near future, we will start deliberating the specifics of the fifth midterm plan, which runs up to 2030. I believe through execution of the plan would enable us to achieve what we intend to accomplish.

Environment surrounding the company is changing. Speed in adjusting to the change is critical. I have been saying this in the Board meetings. But even though the company is working to create a lighter world, it seems that the speed at which the company is moving is still slow, heavy footed, so to speak. What is your take on this comment?

We are frequently told we are moving too slow. We don't jump and embrace the change right away when it occurs. There are cases in which with careful observation, it would be wiser not to change. Currently, there are many moving parts. However, our materiality in sustainability would remain unchanged. This may be regarded as sustainability gone too far, but I don't believe it is.

This is something that would change into economic value. Environmental issues would eventually lead to social issues. If we are able to solve those issues, the society would recognize it. They would want to come to us. There are various opinions about how that translates to economic value. However, it is a fact that there is an increasing number of customers who want to work with us.

It is true that when surrounding environment changes and everyone is looking at the right, we wonder whether we can continue to look left. However, we want to be carefully think ourselves and decide.

Thank you. I think it's very important to carefully consider and decide. I completely agree with you on that point. However, please bear in mind that you need to take a stand that you will change when it's necessary. Ms. Akabane, can we go to the next topic?

Before moving on, I would like to touch on the point you said about not changing. What I said earlier does not mean that we would not change. Well, I feel that the company is two faced. Back when I had just assumed the role of the External Director, I had an opportunity to make a comment. I cannot elaborate on the specifics, but it was about an item that I considered was associated with certain risks. I commented that the company should work to reduce that risk. Based on that comment, the company took very speedy measures.

The company may be slow in some ways. But what I felt when I saw those speedy measures being taken was that the company is accepting and sincere. So I wanted to tell you that.

Thank you, Ms. Akabane. I hope the audience would see that at times, the company seemed slow to move, but it does have capability to make speedy and timely responses. Thank you for having your back.

I would like to move on to the next topic. Today, in the first part, there were presentations on environmental visions and talent strategy. In order for the market to understand us better, I think information disclosure is very important along with branding. Disclosure of financial information on sustainability has greatly improved in terms of quality, volume and timing.

It's been 3 years since I have come on Board, and I really feel that progress. This year's integrated report is very different from how it used to be, and I think people can learn about our company and feel affinity to it. I also think it is a good trend that third parties regard it highly.

On the other hand, there are changes globally in how people view sustainability topics such as the environment and diversity. Regarding diversity, there have been movements in the U.S. and North America in general that slowed down in the progress. In the area of environment, COP meeting was recently held, but it was difficult for the parties to agree on one direction. How do you view this, Ms. Akabane? Under the circumstances, what actions should we take? Or conversely, should we not take any action and wait and see instead?

Sustainability is my area of expertise. So it might be a difficult request, but the global trend is moving toward climate change, of course, as well as biodiversity, harmony with nature and TNFD. These are all emerging priorities.

And there's TISFD, the Task Force on Inequality and Social-related Financial Disclosure also started last year. While it focuses on disclosure regarding the past companies should take concerning sociality, people and disparity, we should keep this trend in our mind. That said, I believe our current disclosures are very comprehensive. And thanks to this, we have been honored to receive the Disclosure Award for 2 years in a row. However, there are companies that are even more advanced. While we may have become a leading company, there is still much more we need to do.

For example, even though edited, there are several companies in Japan that stream video of their Board meetings. And I also think there's room for greater disclosure around governance transparency. Also, the integrated reports we are currently publishing are for investors. But when we ask them, investors, they say there are too many pages. They often tell us that ideally, it should be within 50 pages long or about 18 pages at best. That is what they often tell us.

I understand the desire to include as much information as possible in an integrated report. But since this pertains to sustainability-related financial information, I believe our company should focus on presenting sustainability content that contributes to our financial information within this report. Therefore, I also think we should consider reducing the number of pages.

One more thing I'd say regarding disclosure is digital reporting. Now that financial information is available in formats like XBRL, discussions are starting globally about whether sustainability information should also be disclosed in this format. This would enable analysts to perform their own cross comparisons. With that direction in mind, I see this as a good opportunity for us to consider how we can integrate sustainability into our core business.

I believe our current level of disclosure is fairly adequate, as you said. But if you look at the world, there are many others who are ahead of us. So we should continue studying them and also consider investor feedback. For instance, some of them suggested there may be room for improvement in the amount of information provided in our integrated reports.

Mr. Tanaka, since becoming President, I imagine your opportunities to engage directly with institutional or individual investors through IR and SR meetings have increased significantly. I think most of the dialogues are financial in nature, but sustainability-related matters probably come up as well. How would you describe the tone of these discussions?

Yes. regarding dialogues. To be honest, before becoming President, I never had many opportunities to speak with stakeholders, especially with general investors. I started to have more conversation with them. And what shocked me most was that when I explained UACJ, they didn't even know the name, UACJ. They don't know our name. That is a serious big problem. Yes, this is a big problem. And when I continue and say we're an aluminum company, people don't know where or how aluminum is used. They might recognize this is aluminum. But beyond that, they don't know anymore. If I say it's used in cars, exterior panels and here and there, they'll just respond, oh, yes, I think I know that.

So over the past 1.5 years, I've come to recognize just how crucial it is for us to explain much more about aluminum, that's a material with tremendous potential for reducing environmental impact and that UACJ handles precisely that metal, addressing it as a sustainability materiality. We need to ensure our stakeholders understand such aspect.

I see. Did this start with the company's name?

Well, it was probably last April or May. In one of those meetings when I attended the first time, I asked the attendees if they knew the company name UACJ, then only a few of them raised their hands. But at this year's briefing for general investors, about half the attendees raised their hands. While some likely came because they already knew about us, I got a slight sense that others were becoming more familiar with our name and showing interest.

That is very important, and it's a favorable change that's happened over the past 1.5 years, indeed. We must promote the UACJ name outside the company and both internally and externally, we need to communicate what aluminum is used for and where you can find it in your daily lives.

That's right. We still have a lot of work to do, not only externally, but also internally. Since I became President last year, I've been holding Tsunagu Dialogue Meetings. I sit down with a few members and we discuss things like what kind of company are we? What are the users of aluminum? What significance does it hold? We cover these topics in a quiz format and through conversations all while explaining the content of our fourth midterm plan.

Surprisingly, even within the company, people are very knowledgeable about their own specialized areas, but they often don't know much about aluminum in general or they hear about certain activities for the first time. So I think we need to step up our promotional efforts, not only externally but also internally.

You're absolutely right. This really makes us want to relearn -- it is a material with tremendous potential, and it even transforms. The fact that it can transform multiple times is truly amazing. Thank you.

Sustainability can sound serious and somewhat distant from everyday life. Yet it is something we need to feel very connected to. I realized while listening to your talk that aluminum could be the link holding together companies, society and individuals. Opportunities are expanding.

We need to expand them further.

Yes, we actually can expand them further. In the fourth midterm plan, there is also discussion about new businesses and expanding our domain beyond our current territory. So is there a story here that reflects your vision, Mr. Tanaka?

Well, I won't go into a concrete story, but there are still plenty of things that can be replaced with aluminum or that will be better replaced with aluminum. By better communicating the significant benefits of switching to aluminum, we can connect it to business. Therefore, we will expand aluminum applications while promoting recycling.

Increasing recycling rate requires expanding the range of applications for recycled materials. Therefore, expanding applications while boosting recycling rate to build a circular society is precisely what we should do.

Just yesterday, I, together with Ms. Akabane and the other outside directors visited the production facility. It was a very large factory, and we had some talk there. Ms. Akabane, what did you think? We were at Oyama Works yesterday.

Yesterday, I visited Oyama Works and saw the briquette press machine running. It's a recycling machine born from an in-house innovation. A briquette press collects shavings and compresses them tightly into a size of about 800 grams each very tightly. That machine was popping and moving. Seeing it in action was truly great. Even from an outside perspective, seeing young people on the shop floor working with energy really made me feel they're creating a truly great workplace.

Yes, I truly felt that it was an enormous factory with massive equipment, which was quite impressive. But what struck me even more was seeing firsthand and confirming that recycling within the factory was effectively linked to the products. It's truly reassuring to see such young people working hard and they presented well. It was very reassuring to see how well people are being developed here.

As outside directors were all members with backgrounds completely unrelated to aluminum. So we are truly grateful to have such opportunities. It also serves as a forum for exchanging opinions among the outside directors, which I believe was highly effective.

From that perspective, it's also very valuable for us inside the company to have people from outside actually see and experience it for themselves. What kind of factory is this? What kind of people work here? What's the workplace atmosphere like? Seeing this firsthand will be extremely useful in various discussions to come. So I'd like to arrange similar tours again.

I agree with you as an outside director, being able to verify on-site whether the explanations provided by management are truly accurate is highly effective in terms of enhancing our monitoring level.

So we're in the second half of our time approaching the final summary. I'd like to have some dialogue with Mr. Tanaka and Ms. Akabane regarding governance.

We hold several exchange sessions with Mr. Tanaka and outside directors each year. Mr. Tanaka, how have you been handling these sessions alone?

Since it's one against many, it always feels like I'm the outsider. In those situations, I'm able to discuss a wide variety of topics, and I find it extremely helpful. Even among outside directors, depending on their background, you often find that while their opinions are similar, the process they take is somehow different. With us too, the final target is probably the same, but how we get there, that's where the difference lies.

So as we listen to such discussions, we always tend to want to take a linear straight approach. We understand the situation inside. So we want to go straight without detours. But sometimes when viewed from the outside, we receive opinions questioning whether that approach isn't risky. At such times, it gives us much to consider, including whether our approach is truly right. I think such feedback is extremely valuable.

Now that you mentioned it, the opposite is also true.

Yes.

When Mr. Tanaka suggests taking the long way around or rather a specific direction he wants to pursue, I think some people have argued that since other companies can take more straight path, shouldn't we do the same?

Yes, it's hard to pinpoint exactly what the right answer is. So among all the different opinions, we need to figure out how to proceed, whether to go this way, that way or somewhere in between. We're getting various perspectives on that point. So I think the current situation is that we'll work through it by discussing also with the executive members.

It's not a stress interview, but still it is one against many. So it's quite demanding, though the atmosphere is warm. I really do think you are putting in a tremendous effort.

I do receive harsh criticism, but I feel your support. Thank you.

That's a model answer. Thank you. Ms. Akabane, what do you think about the opinion exchange meetings?

I've been able to participate in opinion exchange sessions with Mr. Tanaka and also in Board meetings and the Nomination and Compensation Committee. And I always feel that psychological safety is consistently guaranteed throughout. I truly appreciate that.

And when I say something, as I mentioned earlier, my comments are not just brushed aside. It's not an atmosphere where if the Board meetings for 2 hours, you just endure listening and that's it. Sometimes I receive feedback confirming that what I suggested is actually being properly considered within the company. I can truly see that they take the opinions expressed by outside directors quite seriously.

Thank you. And I echo what you've just said under this title, promoting transparent management, it's not just the successes that come up from the executive team. The challenges are also properly brought up from the monitoring perspective. While various critical opinions are voiced, I believe we can speak up because we trust this leads to enhancing corporate value. And I think this is also because the executive team listens and takes our opinion seriously.

Now time is up. Finally, if there's something you'd like to share with the audience today, Ms. Akabane?

I imagine many of you are concerned about how we are addressing competitors and what is the competitive landscape. Initially, I too thought that might be a valid concern and asked various questions about it. Of course, we are aware of the competition. But as mentioned earlier, we want to promote aluminum itself as a material with our own effort.

The give and take with competitors is a huge factor in the material sector. When I was in consumer goods, I was extremely conscious of competitors' moves, always striving to stay ahead and avoid falling behind. But with materials, it's not about outpacing others. It's more about advancing the materials themselves. I realize every day how crucial that is for society. Yes, that is my comment.

Thank you. That is a PR of aluminum. I think the perspective of the entire industry working together is also important.

What I would like to convey to the audience here today is we discussed human capital strategy. And as Chair of the Nomination and Compensation Advisory Committee, CEO succession planning is a very significant topic. In this context, I believe it is crucial that the list of candidates considered for succession planning continues to expand. I expect that we'll see more people on the list or people across generations joining the list, thus getting increasingly diverse.

Last but not least, Mr. Tanaka, could you wrap up in about 1 minute, please?

Thank you very much for today. I believe we were able to have a discussion just as we always do. As I mentioned earlier today, we need to ensure our customers and stakeholders understand more about aluminum and about UACJ.

This isn't just about us. As Ms. Akabane alluded to, it's about the entire aluminum industry working together to effectively communicate how aluminum is an outstanding metal, a metal with such excellent properties. However, this is not something we can accomplish alone. It requires the entire supply chain. We must work together, sharing these efforts among individual aluminum companies, the aluminum industry as a whole and also our customers and end users.

Mechanisms and such aren't something you can establish overnight. But even with beverage cans like this, we spent a long time carefully building a robust system, and now we've reached a 99.7% collection rate. So step by step, we want to steadily build a mechanism to encourage even greater use of aluminum.

Thank you, Mr. Tanaka. We appreciate you closing our discussion with your strong statement.

With that, we will conclude our roundtable discussion. Thank you.

It is time to start the Q&A session. The two following individuals will also participate in the Q&A session. Joji Kumamoto, Chief Executive Corporate Strategy Division Director, Senior Managing Executive Officer.

I am Kumamoto, Great to meet you.

Chief Executive, Finance and Accounting Division Director, Executive Officer, Kuozo Okada.

I am Okada, Great to meet you.

Now we'd like to entertain questions from you all. [Operator Instructions] Are there any questions? First question. Mr. Yamaguchi with SMBC Nikko Securities.

I am Yamaguchi with SMBC Nikko Securities. I feel that it was quite productive. In the previous midterm plan, it was rather clear what is reduced and what's added, and cost will be reduced and also capacity utilization rate will be improved. And also, there was an additional factors such as price raising. And therefore, it was quite clear. But this time around, for the first time that I heard about the current midterm plan, I honestly do not quite understood how to achieve both recycling and growth. And I wasn't quite clear what is going to happen. However, I visited Thailand works and this spring, I was able to see site well furnaces and other equipment actually, and I was able to feel firsthand that what is the direction of the company. And once again, I heard about the recycling, and I was able to understand quite well. So I believe that communication and information dissemination is very important. And if there is still somebody who couldn't understand, please bring them to the works and take a look, and it is just a suggestion.

And as for the question, about the recycling, there seems to be no problem with the cans. However, in regard to the alloys, there are different type and different metals are included. And therefore, there might be some challenges. But when I look at the chart, it seems that 30% of GHG emission reduction target for Scope 3 could be achieved by 2030. But what issues do you recognize? From my point of view, scrap cost is rising and be it Japan and Thailand, perhaps the margin -- margin improvement is a bit stagnating. And making your customer recognize the value and try to increase the prices, I believe that the budget seems to be achieved in the second half, and that's why stock price is rising, but how you would try to realize the profitability improvement?

Other point is regarding governance. It's been over a little bit over 10 years since your company became a listed entity in the stock market. And it seems that other analysts are saying the different things and directors are saying different things time to time. And it seems that the financial discipline has been really stringent in the past yet. 2019 and onwards, the things dramatically changed in your company. I feel that it is a great time, and you have presented the status as is about your company. In regard to the disclosure, I am in charge of the Security Analysts Association that your disclosure was superb, and it is just my impression, not a question.

Well, thank you very much for your question. First of all, well, thank you very much for sharing your feeling and impressions from the Securities Analyst Association. Now at the outset, you said that is just a comment, but thank you very much for visiting our scrap melting furnace at the Thai work. And in Thailand, sculp melting furnaces used. And also in Japan, UBC processing facility in Fukui will start operation at the beginning of the next year. And at U.S. TAA, UPC traders are going to be introduced. So therefore, in the 3 regions, Japan, U.S. and Thailand, all the 3 locations will start to operate the recycling facilities, which, of course, which is one of the major pillar in our midterm plans and plan, and we are progressing as we plan.

Now in regard to your first question, what about the beverage cans, I believe. And in regard to the collection rate is 99.7% according to the last fiscal year. Now what about can-to-can recycling ratio, which is about 75%? There's still a 25% of discrepancy, which conversely means that there's so much room for improvement.

In regard to the second point regarding the scrap prices, as you're fully aware, by area, there are big differences in scrap prices. In Japan and in Thailand, scrap prices is rising tremendously and the procurement cost is also increasing as well. On the other hand, well, scrap price in the United States is stable. However, LME plus premium becomes larger, and it is depending on the scrap. So there are some benefits in some regions vice versa, there are some disadvantages as well, but the scrap price is from a long-term point of view will rise steadily. So key here will be how can we collect the scrap and successfully increase the recycling rate in this context. I believe these are the key for long term. So we are also in the process of increasing our scrap throughput, and we'd like to respond to these issues as we develop in this area.

Now your third point is regarding governance. It has been over 10 years since this company was established. And as a matter of fact, as for the members working at the head office, well, former Sumitomo employees or former Furkabwa employees or new employees, it is 1/3 each, to be honest, equally distributed.

At the time that we were integrated at the time, although the targets were truly shared, however, the way which we work was slightly different and some people may felt a bit uncomfortable. However, now, others are harmonized quite well, and no one is feeling uncomfortableness any longer. And there's a new people, 1/3 of the people joining the company. And therefore, we are creating a new UACJ culture on their own. Are there any comments from the outside directors?

In fact, I've joined this company without feeling anything. And therefore, over 10 years, I wouldn't know who's coming from which company.

Ms. Akabane, what do you feel?

Unless I was told that who's from where I wouldn't notice the difference at all. Did I cover all the 3 topics?

Full covered.

Next is Mr. Matsumoto from Nomura Securities.

I am Matsumoto of Nomura Securities. First is Ms. Nagata. It seems that the changes are not fast enough. And I cannot see that clearly from outside. So if you could elaborate more on this point would be appreciated.

And the second point is People Statement is something that I got interested in a lot. Now President, at the beginning, you emphasized that the company have recognized the importance of the human resources, human capital. What made you to renew this awareness, if you could elaborate?

Now we'd like to ask Ms. Nagata to respond to the first point.

Once again, it is Nagata. Perhaps changes are not fast enough. And I made such remarks, and I understood that you want further clarification on this point. For instance, in the global market, something that I recognized as a fast-moving area is the trend in electric vehicles and automotive area, where it used to be considered as a fast-growing area, but the growth is slowing down.

Against such a backdrop, toward the automotive OEMs, what we provide to EV areas where our sales is not growing that tremendously. And if this area doesn't work and what else should we do in order to grow our business, what we can do. We need to stretch our strategy.

Now in regard to the outlook, well, we can't change the course of actions right away because we can anticipate the sales and transactions in the future. But if in the near-term future, the business seems to be struggling, and then we would need to provide more options, and we need to improve how we can provide the options. And that's the area where we still see some improvement.

Now in regard to the second question, what made us to issue the People Statement? Mr. Urayoshi, please.

Well, the reason that the company decided to declare the People Statement is such that declining birth rates and shortages and human resources is widely talked about in the society at large. And of course, human resources is quite an important capital for the company to increase the corporate value. And once again, we wanted to have all the key senior executives to be clear on this point. And we wanted to compile all this concept, and we sorted out the concept and put together in one statement. And that's why we issued this People Statement.

This is Tanaka. I will supplement some information. Well, what we call career track generalist corporate staff members, mostly comprised of college graduates, the willing people to work and manufacturers are actually declining, and that's one reason. And what we call the skilled workers, engineers who work on the shop floor and manufacturing floor, problem with the night shifts and working over weekends, we recognize that the current situation is that the people who wish to work in such circumstances becoming less and less.

Of course, it is a bit difficult to accommodate with all types of question and needs, but we need to accommodate that to some extent. Otherwise, for the people who are working, some of the staff and workers may recognize issues in the company and maybe decides to change the company that they work. So we need to be really careful and detailed in responding to their request as much as possible. And that was actually the trigger of us to think about. And of course, we've been doing this in the past as well, but we needed to do more systematically, and that's why we decided to announce the People Statement.

Moving on to the next question from UBS Securities, Mr. Go, please. I am Goroh with UBS Securities.

What sets your company apart from others is that you have set your capital cost targets and tried to reduce them. You have actually made a declaration and demonstrated in your results. Regarding the sustainability initiatives, from a financial point of view, what initiatives were resulting in which financial results and such relationship was demonstrated. And in fact, cost of capital is also a factor that directly affects shareholders' value. So positive impact. need to be verified, and we want to hear the ultimate results of a positive contribution ultimately.

Now my question is related to the question from Yamaguchi-san at the outset, well, sensibility efforts will result in the shareholders' value. There are some reality versus ideal plan versus actual. There is some gap between the two. I think that it is -- there is a gap because of the time lag. It will be cost increase that realizes the first, and we have to wait for a certain period of time to see the financial results and how the company will augment the differences is quite important.

So you should just do an initiative once and for all is not sufficient. You need to dispatch the second initiative as well. And there might be some supporting or complementing efforts as well. For example, initiative for the closed loop that users and industries are shifting to a one trend versus reversing back once again. And society may sometimes see a setback. And when you look at the holistic picture, in order to demonstrate your results for a continuous way, how would you like to do going forward? Of course, the Director Nagata is well versed in the beverage industries. So I'd like to ask also from her what the bot trends are at this moment.

And the second point is the CBAM or GX-ETS that none of the metal company have been making a proactive direct comment on this at this moment. So you are quite unique and if you are to buy carbon credit and perhaps the society will not generously accept that because you are putting out the sustainability quite clearly. So what is your position in the position of the selling credits and GX-ETS? If you could have your analysis, could you share with us?

I'd like to invite Ms. Nagata to take the first part of the question in regard to the beverage industry.

In fact, in the last year's sustainability briefing, I've talked about EcoEnd. And this time around, as Mr. Tanaka mentioned, the recycling ratio of Can to Can is only 70%. And thus, in the course of the technical development, there will be new and easy-to-recycle can to be produced and the company is prepared to work with the customer, and that will actually expand the potential for further recycling.

Well, this company is the material manufacturers. And therefore, we have to work with the end user, which is our customer to work with. But what type of a proposal that company can bring about is really key. Well, correct me if I'm wrong. Well, option that is already completed should not be simply suggested one way to the end users. At the earlier stages, you need to partner with the end users to provide the options. I know that you are working with the customers to develop together. It may not be as serious as alliances, but the company in this nature should not consider on your own, but you need to join hands with other players so that you can come up with better output.

Ms. Akabane mentioned earlier that we should not be considered as a competitor, but the whole industry in aluminum has to think as an industry-wide initiative. But I believe that the beverage industry is something that is required to do in a similar way. EcoEnd is something that is adopted by the beverage industry on the whole. But such an effort needs to be expanded so that the probability of successful second initiative, the third initiative to end in great success will evolve further going forward.

On top of that, I'd like to talk that cost will start to incur ahead of the results. But in fact, in the fourth medium-term growth strategy, the core lies in development strategy, and that is about recycling. It will take 4 years to improve the recycling ratio, and it will be continued beyond 2027. And it's not just a can, but material itself will have a premium. I don't expect that the old customer will change their mindsets and start to buy a premium products. And yet a number of customers who are buying a premium products are actually increasing.

And what we are working as we speak is as a part of the fourth medium-term plan, and there's an investment plan that the recycling facility has to be deployed in all 3 regions. And that is actually easier for end users to understand. And that's what customers are looking for. And therefore, that will be the initiative that we are implementing ahead of the others. And gradually, we are making a systematic approach to the recycling one after another. And we need to be really strenuous in doing such efforts. When we start up to begin with, do we really secure a premium? No, that's not the case, but we will be able to make a progress in a steadfast manner.

Now in regard to the second question regarding CBAM, we would like to invite Ms. Narita to take that question.

Regarding CBAM or GX-ETS, your point exactly, we are the leading company in this area and try to buy or purchase some rights using such scheme that we'd like to avoid as much as possible. There are some energy saving efforts that we've been accumulated over the years, and we will continue to accumulate this area. That's one point.

And the second point is what optimum energy mix that are we going to procure. For example, the emission trading system, depending on the conditions and terms, the proportion of optimum energy mix is going to be different, but we need to coordinate that in the company going forward.

And the third -- there are various types of aluminum manufacturing processes. In this context, for example, like I mentioned earlier briefly, the vertical twin-roll casting equipment can produce energy-saving products with a higher marginal energy efficiency than normal processes. So we'd like to consider new production processes as well.

Furthermore, we believe by increasing our production volume, we could secure some emission quarters for our industry as a whole. And if we continue to communicate with other customers, we'd like to secure some quarter for the whole industry. So we try not to buy quarters as much as possible as we consult with the finance department.

Well, as for the emissions trading system, it is just starting to establish the mechanism itself. And therefore, we and the aluminum industry, we would like to reach consensus, and we'd like to respond any initiative well going forward.

Now it is time. Therefore, we would like to now conclude the UACJ Corporation sustainability briefing. We will continue to strive to meet the expectations of our shareholders and our stakeholders. And therefore, we look forward to your continued support and engagement of our company. Thank you very much.

Let me introduce today's attendees from the company, Shinji Tanaka, Representative Director, President.

My name is Tanaka.

Joji Kumamoto, Chief Executive, Corporate Strategy Division Director, Senior Managing Executive Officer.

My name is Joji Kumamoto.

Kozo Okada, Chief Executive, Finance and Accounting Division Director, Executive Officer.

My name is Okada.

Keizo Hashimoto, Chief Executive, flat-rolled Products Division, Executive Vice President.

My name is Hashimoto. Flat Rolled Products Division, Executive Vice President. My name is Hashimoto.

I am Kaoru Ueda, General Manager, IR, Finance Department, and I will be moderating today. Tanaka, Representative Director, President and Chief Executive Officer, will now explain the results for Q2 of FY 2025, which were announced today. Please join us while reviewing the presentation materials. Mr. Tanaka, please.

I am Tanaka. I would like to present our financial results for the second quarter and the first half of fiscal year 2025. I will explain using the PowerPoint slides. First, on Page 1, I will explain the key points of the first half results.

The left-hand side shows the first half results and the right side shows the full year forecast. Starting with the first half results, please refer to the bottom section below the table on the left. This section shows the changes in the business environment during the first half, particularly in this first half, persistently high raw material prices globally in Japan, Thailand and the U.S. impacted the profits.

Additionally, exchange rate fluctuations, especially the strong baht and weak dollar weighed on the profits. On the other hand, as mentioned during the first quarter results briefing, recovery trend, including resolution of one-off factors began in the second quarter.

Overall, global demand for can stock, particularly in North America remained strong. Reflecting this, our results show sales volume increase of 30,000 tons to 660,000 tonnes. Revenue increased by JPY 53 billion to JPY 540 billion and business profit decreased by JPY 13.1 billion to JPY 16.9 billion, and net profit was JPY 7.4 billion.

The right-hand side shows the full year forecast. Please refer to the section below the table. The business environment for the second half is outlined. On the second half environment, domestically, price revisions will continue from the first half. Some were concluded in the first half, while others will take effect in the second half, meaning price revision effects will materialize in the second half.

On the other hand, as we will explain later, changes in product mix will occur due to factors such as a slightly delayed recovery in thick plates. Meanwhile, on TAA in the U.S., the cost advantages from procuring recycled raw materials will significantly contribute starting in the second half.

In Thailand, the effects of price revisions will also materialize. However, factors like the strong baht and exchange rate fluctuations are expected to carry over somewhat into the second half. Considering these changes in the business environment, the upper section shows the projected sales volume, revenue, business profit and other figures. For sales volume, we expect approximately 1,347,000 tons, which is largely in line with the forecast announced in May.

On revenue, we project to reach JPY 1.1 trillion, an increase of JPY 60 billion, while maintaining the business profit forecast at JPY 46 billion. Net profit is revised upward by JPY 3 billion to JPY 23 billion. Based on these results and forecast revisions, we plan to revise our annual dividend upward by JPY 2 from the JPY 40 announced in May to JPY 42. Now let me proceed to the specific explanation for the first half and the full year.

First, regarding the first half results. As mentioned earlier, revenue increased by JPY 53 billion to JPY 540.1 billion. Business profit was JPY 16.9 billion, and net profit was JPY 7.4 billion. Regarding business profit, specifically, factors such as the rise in prices for recycled raw materials, which saw global price increases contributed. Also, the appreciation of the Thai baht particularly has compressed the business profit. Later, I will present a flow chart to illustrate some points in which I will explain the details more concretely.

Page 5 shows the sales volume of flat-rolled products by type. The left-hand side shows the first half of fiscal year 2024 and the right side shows the first half of fiscal year 2025 for a comparison. Looking at the total, we achieved 660,000 tonnes, an increase of 30,000 tonnes compared to FY '24. Please see the lines below the total. Here, we show the volume changes in the Japanese and overseas markets.

In the Japanese market, there was a decrease of 12,000 tonnes, while in the overseas markets, there was an increase of 42,000 tonnes. This means the decrease in the Japanese market was offset by the increase in the overseas market.

Looking at the breakdown by product, the increase of 30,000 tonnes was primarily driven by can stock accounting for 28,000 tonnes of the total increase. Sales of can stock were robust in the U.S. and Thailand contributing to the overall sales growth. Other categories such as foil and IT materials remained largely at last year's level.

Automotive materials also decreased by 2,000 tonnes, but remained near last year's levels. On the other hand, while we had anticipated a recovery in thick plates around the middle of the first half, unfortunately, the recovery is still somewhat delayed. Overall, we achieved a volume of 660,000 tonnes, an increase of 30,000 tonnes.

Next, let's look at the changes in business profit and adjusted EBITDA from the first half of last fiscal year to the first half of this fiscal year. The change is from JPY 30 billion to JPY 16.9 billion. Starting from the left, this is the performance of UATH in Thailand. I will also explain in the individual segment section that in Thailand, while we have secured solid sales volumes, the impact of exchange rates and the persistent high cost of raw materials, particularly recycled raw materials, resulted in a negative impact of JPY 2.5 billion.

For TAA in the U.S., inflation, rising costs and high costs of recycled raw materials were the factors. The effect of recycled raw materials costs will begin to contribute positively in the second half in the U.S. But in the first half, it had a negative impact, resulting in a decrease compared to the previous year, including other factors such as the impact of exchange rates, the result was a decrease of JPY 5.6 billion year-over-year.

Another significant factor was a JPY 4.7 billion negative impact from cost and utilization ratio differences. This was within Japan, primarily due to rising cost of recycled materials and inflation-driven increases in logistics and auxiliary materials cost, resulting in a JPY 4.7 billion decrease. Adjusted EBITDA was JPY 36.2 billion.

The next page shows the consolidated statement of financial positions. Total assets amounted to JPY 1,055 billion, an increase of JPY 35.5 billion. Notably, inventories increased by JPY 14.1 billion.

This reflects the impact of rising prices for aluminum ingots and other materials. Additionally, property, plant and equipment increased by JPY 12.2 billion. This increase in fixed assets is due to the smooth progress of planned projects such as the expansion of UBC treating and processing equipment at Fukui, the thick plate of Quenching furnace at Fukuya and the scrap processing line at TAA. Total assets reached JPY 1,055 billion. On the other hand, borrowings increased by JPY 25.1 billion, resulting in a total of JPY 365.8 billion.

Page 8 shows the consolidated cash flow statement. The left side is the consolidated cash flow. In the first half of fiscal 2025, pretax profit was JPY 14.5 billion. Depreciation and amortization was JPY 19.3 billion, resulting in operating cash flow of JPY 28.1 billion.

CapEx amounted to JPY 35.7 billion, resulting in negative cash flow of JPY 7.6 billion. To the right, we show the interest-bearing debt balance and D/E ratio. As mentioned earlier, interest-bearing debt balance was JPY 365.8 billion. The debt-to-equity ratio stood at 1.1x at the end of the first quarter of fiscal year '25, but was kept at 1x at the end of the second quarter.

Now, I will briefly explain the situation in each individual area. This is on Thailand UATH. As noted in the first half overview on the left, global demand for can stock is expanding as anticipated, as mentioned in the beginning.

Sales from Thailand to North America, the shipments are continuing as planned despite tariff impacts, which are partially borne by customers. In the ASEAN region, we are currently implementing price revisions, partly due to the abolition of China's value-add tax refunds.

Including these factors and the significant pressure from foreign exchange impacts on profitability, sales volume for the first half of fiscal year 2025 reached 157,000 tonnes, an increase of 8,000 tonnes year-over-year, and the revenue increased by JPY 4.5 billion to JPY 99.2 billion. Business profit was JPY 500 million. The right-hand side shows the quarterly trends for sales volume and business profit.

Next, I'd like to discuss the situation in the U.S. The U.S. market also showed the expected expansion trend in the first half. Production has continued at a high level. However, in the U.S. as well, the surge in recycled raw material prices had an impact during the first half.

While sales volume increased by 23,000 tonnes to 250,000 tonnes, business profit ultimately decreased by JPY 5.6 billion to JPY 10.3 billion. In particular, the surge in raw material prices had a squeezing impact in the first half, but this will fully recover during the second half. Moreover, in the United States, the sales conditions have been progressing favorably. And contracts have been secured through fiscal year 2028.

Next, regarding the U.S. on UWH, our automobile parts business. As stated in the first half overview under business environment, the shift in the U.S. tariff policy has increased uncertainty in the automobile industry to date. However, during the first half, there was rush demand before the termination of the tax incentive system for EV purchases at the end of September 2025. As a result, the first half ultimately achieved results comparable to the previous year.

Now moving on to Page 13. I'd like to discuss the business performance outlook for fiscal 2025. This represents our full year business forecast for fiscal 2025. First, on the right-hand side, we have outlined our assessment for the business environment.

As was mentioned earlier, global demand for aluminum cans continues to progress steadily. Additionally, the effects of price revisions in Thailand and Japan will gradually materialize from the middle of the first half through the second half. In Japan and Southeast Asia, we recognize that raw material prices remain high and that foreign exchange impact of the appreciation of the Thai baht.

Also regarding recent topics, I believe many of you are interested in this topic, U.S. tariff policy. While we need to monitor developments closely going forward at present, no major impact has emerged. Additionally, although some disruptions have occurred in the supply chain as a result, but the impact has been minimal so far.

On Page 14, we have provided a more detailed explanation of the key points and changes in the business environment. While I cannot cover all items listed here, please first refer to the top row regarding demand trends. From left to right, we have listed Japan, North America, Southeast Asia and others. For can materials, conditions remain steady, progressing favorably across all markets. On the far right, under beverage cans, it says that the European market is robust. This indicates that shipments to Europe are continuing in addition to the U.S., Japan and Southeast Asia. On the other hand, in Japan, semiconductor manufacturing equipment and construction materials continue to experience somewhat delayed recovery or show weaknesses, which is lingering at present.

Furthermore, regarding supply chain development, there have been reports of customer system failures in Japan, but the impact has been limited. Also regarding the production disruptions at North American rolling mills mentioned in the automobile materials or automobile-related materials, additional shipments of cans were made from Japan to the U.S. Moreover, for automotive-related materials, due to the impact of U.S. tariffs and concerns about semiconductor supply, there is an uncertainty in this area, so we need to monitor the situation closely.

Regarding revenue and profit, there are both positive and negative factors. In Japan, the effects of price revisions will materialize. In North America, for can materials, cost benefits from recycled raw materials will contribute significantly from the second half. In Southeast Asia, some positive effects will emerge through continued price revision negotiations. On the other hand, we need to continue monitoring the surging raw material prices and foreign exchange fluctuations going forward. Based on these circumstances, our full year forecast for fiscal 2025 is shown in column C.

Revenue is projected at JPY 1.1 trillion. The far right side represents a comparison to our May forecast showing an increase of JPY 60 billion. Business profit remains at JPY 46 billion as projected in May, and net profit is expected to be JPY 23 billion, an increase of JPY 3 billion. Based on this upward revision of JPY 3 billion, we plan to revise our annual dividend upward by JPY 2 per share from JPY 40 per share in May forecast to JPY 42 per share.

Next, let me explain sales volume by product type. The overall picture is roughly similar to the first half, with actual first half total volume reaching 1.347 million tonnes. The rightmost column shows changes compared to May. For care materials, foil, IT and automotive materials, results are generally as announced in the first half. However, regarding thick plate, while we have anticipated at the time of first half announcement that the segment would recover from the second half. Unfortunately, the recovery is still delayed. However, overall, the situation is almost in line with the forecast we made.

Next, let's look at the business profit analysis. This represents the latest full year outlook comparing fiscal years 2024 and 2025. Business profit remains unchanged at JPY 46 billion for the full year compared to last year's JPY 45.9 billion, though some slight changes have occurred in individual items. First, regarding UATH. Similar to the first half, while sales volume is increasing, recycled raw material prices remain high and the appreciation of the baht persists.

On the other hand, price revisions are helping recovering the performance, ultimately resulting in a decrease of JPY 1.4 billion. Regarding TAA, from this second half and onward, cost benefits from recycled raw material prices will take effect. However, on the other hand, there are cost increases due to inflation and foreign exchange losses from yen appreciation. For the second half, after incorporating these effects, we project an increase of JPY 2.5 billion.

Next is the sales-related variance, which shows a positive JPY 2.3 billion. This increase is resulting from price increase taking hold. As for cost and the utilization ratio, the cost increase from recycled raw materials in the first half remains. And there are also price increases due to inflation in logistics and subsidiary materials. We are conducting price negotiations with customers, both domestically and in Thailand. While these will gradually improve in the second half, but the full year result is a decrease of JPY 4.7 billion. Additionally, regarding energy and added alloys, there is an increase of JPY 1.8 billion due to unit price revisions. We continue revising prices while discussing these matters with our customers.

Page 18 regards our shareholder return policy. Our policy of stable and continuous dividends remains unchanged. This time, with the upward revision of the net profit to JPY 23 billion, we are revising our annual dividend upward to JPY 42 per share, an increase from last year. This revision of annual dividend to JPY 42 per share will result in the dividend payout ratio expected to be 33.1%.

The final section concerns corporate value enhancement. Please refer to Page 20. This covers the period from the first half to the second half. In fiscal 2025, we acquired an A credit rating and our beta value has shown improvement, resulting in reduced capital costs. The lower right shows the trends in stock price and PBR. The left-hand shows data from April 2022. At that time, our PBR was approximately 0.5x. But based on the stock price at the end of last month, October 31, 2025, PBR has grown to 1.21x. Going forward, we aim to achieve a further increase in PBR.

On Page 21, this fiscal year, following last year, we received the first place in the Excellence in Corporate Disclosure Award for the second consecutive year. Going forward, we will continue to create opportunities for dialogue with our stakeholders and maintain thorough information disclosures.

On Page 22, we have launched the ALmitas SMART brand. We provided information regarding the release of 100% green materials certified through the mass balance approach for general materials. Finally, regarding deepening human capital management, we are deploying activities to intensify our efforts in this area with the goal of fully utilizing the human capital of each and every employee.

The final page shows the trend in adjusted EBITDA up to this point. I have thus far discussed our first half results and full year outlook. As I mentioned earlier, due to the impact of U.S. tariffs on can materials and automotive materials as well as supply chain disruptions, uncertainty continues. However, we are committed to achieving a solid recovery in business profit in the second half and driving revenue growth.

Finally, we have summarized our upcoming IR events. We will be arranging a sustainability briefing on November 26 and business briefing on aerospace and defense materials on December 22. We cordially invite you to participate in these events. That concludes my presentation. That concludes the presentation from our company.

We will now take questions from the participants. Please note that we may refrain from answering questions if the content could potentially impact our business activities. [Operator Instructions] The first person to ask question is from SMBC Nikko Securities.

Thank you for this opportunity. I would like to confirm a very important point on Page 31. The TAA business profit excluding inventory effects is shown as JPY 27.4 billion. I think this should be JPY 21.4 billion, correct? This is the point I would like to verify it. Please check your calculation if you can confirm and get back to me later.

Looking at the calculations for the first and second halves, the figure derived by subtracting the disclosed TAA and UATH and UWH from total profits shows first half business profit at JPY 5.2 billion, second half at JPY 16.5 billion, resulting in a significant jump to JPY 21.7 billion. This significant jump from the first half to the second half profit is largely due to revenue growth outside, overseas subsidiaries.

However, based on your explanation, it seems you are referring to the effect of price increases gradually taking hold. And regarding the significant jump in the non-overseas subsidiary segment from the first to second half, I would like to ask for an explanation. The second point concerns the U.S. Looking at the premium in the Midwest, it appears very high, while the spot market for scrap hasn't risen much. So the margin looks extremely high at a glance. I was expecting the TAA metal benefit showing up a little more, but is that not the case? Or -- and finally, could you clarify your perspective? If you achieve the results for the second half of this year, I believe the business profit for the second half would be JPY 29 billion. Doubling that gives JPY 60 billion, is close to the midterm plan target. If this second half profit is realized, does it mean your company's actual capability is approaching the midterm plan target? So these are my 3 questions.

Thank you for your question. Regarding your first point, I believe your question was about the drivers of profit growth within Japan in the areas outside overseas operations. On this point, first, price negotiations have progressed significantly from the first half to the second half. The fact that major effects will emerge in the second half is likely the most significant factor. Additionally, changes in product mix such as shifting some product lines should also become major positive factors. On this point, Hashimoto will provide supplementary explanation.

Based on the calculation, that is the situation. Basically, domestically, we started price negotiations this January in response to cost increases from last year. The main impact will be reflected starting in the second half with some effects beginning midway through the first half, leading to increases heading into the second half. This applies to sheet products as well as extruded products and foils, and these are included here.

Additionally, for sheet products within the flat-rolled product division, we have operations in Thailand and the U.S. We are reviewing the overall plan while considering the outlook for these locations to determine the appropriate level.

Understood.

Moving on to your second question regarding the U.S. premium and TAA, the perspective is that focusing on these might yield higher profits. On this point, it's true that in North America, the premium increase has significantly widened the spread showing a large difference. However, if we look solely at spot prices now, the difference naturally appears much larger. The key is our purchasing approach. Our current situation involves a balanced approach encompassing long-term contracts, spot contracts and recycled materials returned by customers.

Our actual results suggest that the current spread alone doesn't fully explain the situation. However, starting in the second half, purchases will align with our procurement plan. So we expect profits in this area to increase significantly. However, looking at the business profit for the first and second halves, it appears flat or a slight increase.

If it is to JPY 21.4 billion, is it JPY 27.4 billion?

Full year, JPY 27.4 billion is the correct number.

There was a misprint in the operating profit. So JPY 33.9 billion is the correct figure.

I see. I was surprised because I thought this was a point where the stock price might drop. I understand now. Thank you. Please address my third point. It seems like you will reach JPY 60 billion.

It's true that the second half will see a significant improvement. As for whether we can double that amount for a full year result, since we've just entered the second half, we need to assess the results of the third quarter to assess how much business profit we can expect for the entire fiscal year next year. The deviation from the midterm plan breakdown is due to factors such as strong baht affecting UATH. You want to maintain overall balance, not just focusing on the U.S. market through pricing, but growth across all locations. There are various positive and negative factors. So we intend to carefully assess each one while maintaining a solid overall balance.

Next, we would like to take questions from Matsumoto-san of Nomura Securities.

This is Matsumoto of Nomura Securities Matsumoto of Nomura Securities. First, regarding the chart on Page 28, the downward revisions for sales-related differences and cost utilization ratio differences seem to be quite significant. Could you please provide a more detailed breakdown of these?

Second, regarding the Thailand issue, we always hear similar stories about exchange rates and such. Could you tell us what countermeasures you are planning to take?

Regarding the first point, sales-related and cost-related questions, Okada will provide a brief explanation.

Regarding the negative JPY 4.7 billion in sales-related differences, originally, as I mentioned earlier, our May forecast was heavily weighed toward the second half with high expectations for increased semiconductor demand. However, delays in this area have led to adjustments in profitability. The negative impact from product mix changes is significant, and we estimate this amount to be roughly JPY 3 billion.

Additionally, regarding affiliated companies and the group companies, we have domestic operations like extrusion and affiliated companies. The overall impact from these totals to just over JPY 1 billion, which is also a major factor. From May to the current sales situation, the role margin and price increase situation are progressing as originally planned. Therefore, we are not fundamentally anticipating any significant fluctuations in this area. Regarding cost and utilization ratio, as Tanaka explained in the earnings presentation materials at the beginning, it's primarily costs. Inflation has caused labor costs, auxiliary costs and various other prices to rise more than initially anticipated.

Please understand that over half of this approximately JPY 3 billion impact stems from this inflationary pressure.

This is Tanaka. Additionally, regarding the price increases due to inflation, we are currently proceeding by carefully consulting with our customers and incorporating these adjustments into future pricing. Did this answer your question?

This is fine. Thank you for my first point. The second point concerns how we will proceed with the Thailand operations going forward. It is true that currently, it is being pressured significantly by exchange rate impacts and raw material costs?

Regarding this point, the price we are implementing in the second half of the year will be a key pillar. Additionally, there is some room to increase volume. So we will focus on expanding volume while also steadily implementing price revisions. Furthermore, while immediate changes may not be feasible for long-term contracts, we believe there is still considerable room to review customer and product portfolio composition. We intend to advance our efforts to improve Thailand's business profitability by incorporating these aspects.

Next, we will take questions from Shirakawa-san of Morgan Stanley MUFG Securities.

This is Shirakawa of Morgan Stanley. I have 2 questions. Regarding the U.S. TAA on Page 28, JPY 8.6 billion improvement. Is this fully due to incorporating the improvement from the metal benefit? Also, given the current significant margin expansion, if it is JPY 8.6 billion, calculating based on 200,000 tonnes for the second half, it seems this might not fully reflect a $500 margin improvement to first and second half. Could you clarify the conditions used for this calculation?

Second point concerns the domestic price revisions while we hope to see effects materialize from the second half onward, please tell us how much of this will remain as net profit in the next fiscal year and beyond.

Regarding this year, on Page 17, the sales-related difference is a JPY 2.3 billion increase Y-o-Y. Is this entirely about pricing or is composition also a factor? I wonder how much of it is pricing and whether we should just multiply that by 2 for next fiscal year. Can you explain?

Regarding your first point about the composition of the metal benefit under the U.S. TAA, Okada will address.

Regarding your question on Page 28, whether JPY 8.6 billion is entirely from metal, raw material benefit. The answer is yes. While inflation and other factors certainly impact us, we have managed to generate this JPY 8.6 billion despite those challenges.

That said, as Tanaka mentioned, this year's arrangements for procuring such metals and raw materials are already largely finalized. There is a lag of about 3 to 5 months from purchase. Therefore, you can understand that this JPY 8.6 billion is largely included in this P&L. We do hope for a slightly higher positive outcome, but the volume figures are based on this understanding.

On this point, the timing mentioned by Okada of about 3 to 5 months lag in impact manifestation, the U.S. tariffs were announced to be 25% in early February and then increased to 50% in June. Around that time, the spread began to widen sharply. So the impact will manifest from the second half of the year. Therefore, the effect is only for half a year.

Conversely, this means the first half was based on higher raw material costs before the tariff impact. For this period, it is capped at JPY 8.6 billion. But going forward, it's likely to increase significantly.

Now regarding the second point about price revision, this will be included in the next fiscal year and beyond. Hashimoto will first explain the situation, and then Okada will give an estimate of the likely amount.

JPY 2.3 billion was mentioned. I think you were referring to Page 17.

Yes.

This represents the analysis of FY 2024 and the latest forecast for FY 2025. Since it pertains to sales-related factors, it incorporates not only the price increase component, but also changes in volume composition and other variables. This JPY 2.3 billion figure reflects the net effect of all sales-related pluses and minuses. It is not the exact amount of the price increase itself.

Basically, we plan to pass on the cost increases shown to the right to our customers. Considering how these cost increases will play out starting next April, we will also negotiate going forward. Therefore, it's difficult to give a specific figure for the net increase next year. That is the answer to your question.

Understood. Regarding the first point, as a potential future risk, I understand that U.S. scrap prices -- UBC scrap prices haven't risen yet. However, steel dynamics and others ramp up going forward should we not consider the risk of scrap supply and demand tightening and margins shrinking next fiscal year?

Regarding tariffs, to be honest, it's difficult to predict whether it will increase from 50% to another percentage. This remains uncertain. However, our long-term scrap procurement strategy involves more than just spot purchases. We combine long-term contracts with strategic spot sourcing. It's not the case that raw material prices suddenly spike just because another mill somewhere starts up. So that is our strategy.

Next, we have a question from Mr. Ozaki from Daiwa Securities.

This is Ozaki speaking from Daiwa Securities. My first question concerns your decision to maintain the business profit forecast at JPY 46 billion for this fiscal year. Could you clarify the positioning of this figure? Given that positive impacts such as middle benefits at TAA were expected, I'd like to understand the rationale behind maintaining this forecast.

Is it that you are maintaining JPY 46 billion on the premise of not changing the original figure while leaving some room for upside potential? Or is it positioned neutrally at JPY 46 billion because there are also stronger-than-expected negative factors in areas such as cost and sales-related variances? Does it actually contain some downside risk when considering the first half progress? Please explain the positioning of this JPY 46 billion forecast to the extent possible.

My second question pertains to UWH. I believe earnings will deteriorate somewhat in the second half. Could you please explain the background of this and future improvement measures? That's all.

Let me ask Okada-san to explain the first point regarding our view on the JPY 46 billion.

I believe you are asking about our sense of where things stand. We view that the JPY 46 billion is achievable, and we do have expectations for upside potential. However, on Page 14, where we have organized our environmental assessment covering the 3 regional situations, some uncertainty still remains in these areas. We believe that we must firmly achieve this JPY 46 billion target. That is a prevailing view. And personally, I believe that we have upside potential. Did we answer your question?

Yes.

Regarding the second point about UWH, Kumamoto-san will address your point.

Indeed, we view that the second half is somewhat weak. For example, media reports have it that automotive makers are reviewing production for EV-related matters. In reality, our inquiries are centered on EV-related business and request for vehicle lighting. We believe that this could become a headwind, although it hasn't materialized yet. And we have incorporated a possibility of some weakness. That is the reason why we have taken a slight caution for the second half.

As for countermeasures, we need to improve production efficiency and reduce production costs. There's no magic wand here. So we are discussing how to weather this by steadily accumulating these efforts. I hope that answers your question.

Next, we have a question from Mr. Goroh from UBS Securities.

This is Goroh from UBS Securities. I have 3 questions. The first is about volume changes. I believe you explained the areas where demand fell short of expectations such as thick plate. In previous briefings, you mentioned, for example, that exports from Japan to Europe are covering domestic weakness to some extent. Or alternatively, regarding shipments from Thailand to North America, you indicated that these can continue for the time being as long as they remain within the quarter limits. Although, there may be some adjustments next fiscal year with the start-up of upstream processes in North America.

Now that you have revised your outlook based on the current demand conditions, regarding the volume recovery and expansion scenarios for next fiscal year, for example, can we still view that the sales expansion scenario you originally envisioned for Thailand as achievable for our next fiscal year under the current conditions? I understand that volumes are difficult to predict, given the interregional shifts or variances. But could you confirm whether you need to change your previous outlook?

The second point is about the time lag in price pass-through this time. You mentioned that you have been able to anticipate cost fluctuations. Regarding your multiyear efforts and price revisions, I have the impression that you are taking the lead as an industry leader. I also sense that the agility to pass through costs flexibly in a timely manner, may not be as strong as initially. Beyond the annual price negotiations, is there any room to respond flexibly to prices, costs and risks and other moving parts? Could you clarify the pricing mechanism once more?

The last point is about your policy on CapEx and cash flow. This fiscal year, I believe that cash outflows are running ahead. I assume that this is because the CapEx plan for the midterm plan period are proceeding ahead of schedule. Could you please confirm whether my understanding is correct that as cash outflow subside in fiscal year's 2026 and 2027, financial conditions and free cash flow will improve? I believe that there may be also an impact from inflation. So please, could you please comment on these as well.

Thank you. Regarding the first point and second point. First, with the volume changes and whether we can maintain the same outlook as before. And second, regarding the price pass-through and the current timing situation, I'd like Hashimoto-san to address these points.

First, let me explain about Europe-bound shipments and Thailand regarding your first question. For Europe-bound shipments, the situation remains unchanged. As reported earlier or previously, glass bottle cost increases have an impact. And with can material shortages in Europe, we are receiving requests from European shipments from customers we are doing business with in Thailand and the U.S. to increase volumes. In response, we are directing spare domestic production capacity towards Europe.

We are also working to increase volumes by improving domestic productivity as much as possible. Prices have also improved considerably, so I can report that this trend remains unchanged.

Regarding Thailand, U.S.-bound shipments currently in place will basically continue through the first half of next year. Even after that, although, a new mill will be starting up, customers are being quite cautious given that there's the initial start-up phase. And depending on the situation, we are also hearing the discussions about continuing as is. In that sense, we expect a certain volume of U.S.-bound shipments to continue.

As for new developments, regarding Europe-bound shipments, the situation has changed so that the shipments from Thailand to the U.K. are now tariff-free. Contracts in this area are also progressing. Thus, even if U.S. bound shipments from UATH decreased somewhat, we don't expect that the portfolio to deteriorate due to securing European-bound volumes.

Regarding the second point about the agility of price revisions. We are actually receiving stern feedback from customers that the frequency of price revisions has increased. Since costs are rising significantly every year, we are monitoring the situation closely while making individual requests or requesting improvements based on productivity by product type. So we are proceeding by making requests when circumstances arise. And this takes place roughly once a year, and we'd like to continue that we've been proceeding -- we'd like to convey that we've been proceeding in this matter over the past several years.

Regarding first point about volumes, we are securing overall volumes that exceed last year. While thick plate and other products have declined domestically due to the product mix change, we are expanding exports to Europe as Hashimoto-san indicated earlier, to properly secure overall volumes. Although circumstances are changing in each region, North America, Southeast Asia and Japan, we intend to proceed by effectively coordinating among our 3 global bases to secure volumes and to ship to the right places at the right time.

Regarding the third point about CapEx, I'd like to ask Okada-san to address the question.

Regarding your question, in our original fourth midterm management plan, we plan to allocate JPY 160 billion from operating cash flow to CapEx. This is furthest on maintaining fiscal discipline. Within this framework, we believe that the business profit towards 2027 business expansion and advanced investments toward 2030 will be spread across 2024, 2025 and 2026. However, while monitoring our financial condition, we intend to proceed with a firm control on the financial side. That is our stance.

Additionally, regarding some climate change and environmental investments, these may be eligible for subsidies and other support. Therefore, we intend to utilize these subsidy programs while striving towards corporate value enhancement. I hope that answers your question.

Is it correct to view that free cash flow will improve? Can we expect that cash outflows to peak out and free cash flow to improve overall?

Yes, you can expect that direction.

As we are approaching our scheduled time, I'm afraid we will take one final question. Mr. Shibata from SBI Securities.

This is Shibata from SBI Securities. I have one question. It is about foreign exchange impacts. Based on your briefing materials, it gives the impression that you are basically neutral to the dollar, but I'd like to confirm whether you are truly neutral. For example, your exchange rate assumption is JPY 148 to the dollar, but what is the impact of a weaker yen?

To clarify your question, are you asking the impact -- what impact it will have if the yen weakens?

Yes. Currently, it stands at JPY 145. While, it is on the weaker side than your assumption currently, but what impact will it have if yen weakens.

I'd like to ask Okada-san to address that point.

Regarding our business, the depreciation of the yen favors our business. If we calculate based on favorable conditions, future fluctuation impacts could become significant. Therefore, we consider our business plan each time based on the current recent average as our baseline. As for whether JPY 140 or -- as for whether JPY 145 is solid since we have indeed exceeded JPY 150. Currently, the translational adjustment to the yen will work in our favor. I hope that addressed your question.

Additionally, regarding the foreign exchange, of course, yen dollar is certainly a factor, but baht dollar has a considerable impact, so we made the current assumption by looking at both together. I hope that addressed your question.

Thank you very much for your questions. As we have reached our scheduled time, we'd like to conclude today's briefing session. Thank you very much for participating today despite your busy schedule.

As I mentioned at the beginning, it appears that highly uncertain conditions will continue throughout the second half and full year. So we have developed this full year forecast while monitoring various aspects. The pace of environmental change around us has become quite intense. So we'd like to keep our antennas up to identify what environmental changes are occurring.

I don't believe that these are all risks, there should also be opportunities. So we intend to proceed in a manner that firmly converts these into earnings. Moreover, as members of the aluminum industry, we will continue to deploy our activities by leveraging the characteristics of aluminum to work towards the realization of a circular society and the resolution of social issues while firmly adding value to aluminum so that these efforts contribute to revenue and profit. That is our basic policy going forward.

Thank you very much for participating in today's earnings briefing over this extended period. That concludes UACJ Corporation's Q2 Financial Results Briefing for Fiscal Year ending March 2026. Thank you very much for your participation.

We will continue to strive meeting your expectations from our shareholders and all stakeholders. We look forward to your continued support and encouragement. Thank you very much for taking time out of your busy schedule to attend our briefing.