Message from the CFO

In fiscal 2024, sales revenue reached ¥4,407.4 billion, an increase of ¥20.2 billion from the previous fiscal year. Despite failing to generate profits a year earlier, the Chemicals Business improved profits significantly in fiscal 2024, which resulted in core operating income increasing by a substantial ¥90.3 billion to ¥298.4 billion for the Group overall. While demand remained sluggish globally in markets such as EV/mobility and food packaging, higher market prices of MMA monomer, the favorable display market, and the recovery of the semiconductor market played a major role in our improved business performance.
It should also be noted that excluding the Pharma Business of Mitsubishi Tanabe Pharma Corporation,* of which all shares were transferred as of July 1, 2025, our fiscal 2024 results are sales revenue of ¥3,947.6 billion, core operating income of ¥228.8 billion, and net income attributable to owners of the parent of ¥45.0 billion.
For fiscal 2025, we project sales revenue of ¥3,740.0 billion and core operating income of ¥265.0 billion. While sales revenue is expected to decrease by around 5% from our fiscal 2024 results excluding the Pharma Business, core operating income is projected to increase by approximately 16%. Although net income attributable to owners of the parent is expected to total ¥145.0 billion in fiscal 2025, this figure includes approximately ¥94.0 billion in gains on the transfer of the Pharma Business and profits made prior to the transfer. Excluding this amount, net income attributable to owners of the parent, in actual terms, is expected to be at the same level as fiscal 2024.

In November 2024, we announced KAITEKI Vision 35 (KV35) for where we want the Group to be in 10 years, and Medium-Term Management Plan 2029, our new management plan outlining our approach for the next five years from fiscal 2025 to fiscal 2029 to achieve KV35. Under Medium-Term Management Plan 2029, we will transform our business portfolio based on our three criteria for business selection and enhance profitability by adhering to our three disciplined approaches in business operations. In doing so, we aim to increase core operating income to ¥460.0 billion* for the Group overall.

In the Chemicals Business, we aim to improve core operating income by a total of ¥140.0 billion over the five-year period by implementing measures in accordance with our three disciplined approaches in business operations. Two of these approaches are pricing policy, which involves minimizing the risk of volatility by expanding formula-based pricing in MMA, and asset optimization, which consists of promoting cost reductions and structural reforms across each business segment. Our third disciplined approach is investment decision-making. As part of our major growth investment plan, in fiscal 2025, we will expand the operation of large press molding machines for carbon fiber composite materials in Italy and begin operations of a new polyester film plant in Germany. We expect these investments to begin generating returns in fiscal 2026.

In fiscal 2024, we posted an extraordinary loss of ¥101.7 billion, including structural reform expenses. In fiscal 2025, we plan to record an extraordinary loss of approximately ¥63.0 billion due to additional restructuring costs.
Under New Medium-Term Management Plan 2029, we expect to incur restructuring costs equivalent to around ¥400.0 billion in sales revenue in the Chemicals Business, of which approximately ¥350.0 billion has already been determined as of August 1, 2025. We have undertaken several business restructuring measures, including reducing capacity by 40% at our steelmaking coke plant in Kagawa Prefecture, transferring all shares of Kansai Coke and Chemicals Company, Limited, closing down our plants in Hiroshima Prefecture for MMA monomer and acrylonitrile-related products, and withdrawing from the PET bottle business. Production at the Onahama Plant in Fukushima Prefecture will also be phased out by the end of March 2027.

The measures we have implemented are making steady progress. The numerical effects of these measures will soon begin to truly appear, and our business portfolio reform is steadily proceeding in the right direction. While we have focused primarily on restructuring the Basic Materials & Polymers segment and MMA subsegment, we will also implement reforms in the Specialty Materials segment going forward. Due to the Group’s extensive product lineup, shareholders and investors have expressed the hope that we further clarify our core businesses and growth areas. Going forward, we will provide a clearer distinction between businesses that we have identified as our focus areas for KV35 and will actively invest in, and those that are not. For businesses outside our focus areas, we will seek to transfer them to the best partners or reorganize and restructure them as necessary and promote selection and concentration throughout the Chemicals Business.
As we transform our business portfolio, we are currently in a transitional period toward our vision of where we want the Group to be 10 years from now. While there will be some difficulties and hardships during this period due to structural reforms, we expect a significant growth in profits as a result and will be able to fully meet the expectations of shareholders and investors. By clearly and thoroughly disclosing our management policies and performance, particularly profit growth during this transitional period, we will strive to strengthen our relationship of trust with shareholders and investors.

With regard to the recent transfer of the Pharma Business, we have received questions as to why we would relinquish a business with such growth potential and profitability. The main reason for this transfer is that, as bioprocess-based pharmaceutical development became mainstream and it became increasingly difficult to identify synergies with our core chemical business, we determined that the Pharma Business would grow much further under the management of an even better owner than the Group. To continue to grow the Pharma Business, a significant amount of R&D investment was needed to expand its pipeline. Given our emphasis on investing in the focus areas of KV35, we felt it would be best if the Pharma Business was managed by an owner with a high-risk tolerance and the ability to continuously invest capital.
While this transfer generated approximately ¥510.0 billion in funds, we believe the actual additional cash inflow is approximately ¥180.0 billion, as the remaining ¥330.0 billion is seen as an advance on the cash flow that the Pharma Business was expected to generate over the next five years.
Of the approximately ¥510.0 billion in consideration for the transfer, ¥200.0 billion to ¥250.0 billion (“A” in the chart) will be allocated to new growth investments, debt repayments to improve our financial position and secure borrowing capacity for future strategic investments, and shareholder returns through treasury share acquisitions.* The remaining ¥250.0 billion to ¥300.0 billion (“B” in the chart) will be used for concentrated capital and financial investments in the five business focus areas of KV35 necessary for the growth of the Chemicals Business, as set forth in Medium-Term Management Plan 2029.

Our balance sheet as of the end of fiscal 2024 showed steady improvement from a year ago. The advancement of business restructuring and other measures resulted in a reduction in total assets of approximately ¥210.0 billion from fiscal 2023. The net debt-to-equity ratio also improved to 1.06 times from 1.16 times in fiscal 2023.
At present, we believe a net debt-to-equity ratio of 0.8 times to be a sound and appropriate level for the Group. In fiscal 2025, we expect our net debt-to-equity ratio to approach this level, improving to 0.83 times through the acquisition of treasury shares and debt repayments. Sustaining this level through to fiscal 2029—the final year of Medium-Term Management Plan 2029—is one of our financial goals. We will utilize borrowings as appropriate while keeping our cost of capital in mind and maintain an optimal asset size commensurate with revenue and profits. We believe that striking a balance between debt and equity will lay the foundation for sustainable management.

Results are also starting to steadily appear in the reduction of working capital. Under the current management structure established in fiscal 2024, we have been strengthening our efforts in this area with the utmost priority. In addition to steadily taking disciplined approaches in our daily operations, we have successfully implemented structural reforms, such as business restructuring and downsizing, including inventory reductions due to the downsizing of the coke business, contributing to cash inflows of ¥30.7 billion in trade receivables and ¥13.4 billion in inventories in fiscal 2024. However, we must continuously work to manage our working capital. Thorough ongoing monitoring in daily operations is essential to prevent inventory from increasing again once it has been reduced. While I understand that having a large inventory makes it easier to meet delivery deadlines and provides peace of mind, we need to be aware of the fact that inventory ties up funds. We must utilize the valuable funds entrusted to us by financial institutions, shareholders, and investors as effectively as possible and remain aware of this in our daily operations.

To improve return on invested capital (ROIC), we must focus on reducing our invested capital (denominator) and, more importantly, increasing profit (numerator). In fiscal 2024, ROIC improved significantly to 4.7% from 3.4% in the previous fiscal year. The Industrial Gases and Pharma businesses have maintained stable profitability for some time, so this improvement can be attributed primarily to increased profitability in the Chemicals Business. Going forward, we will further increase profitability centered on the Chemicals Business, which has had a relatively low level of profitability within the Group, aiming to improve ROIC for the Group overall to 7% or more.

The largest component of the denominator is fixed assets. However, it is difficult to adjust fixed assets in the course of daily operations because they are already determined at the stage of investment decision-making. For this reason, our frontline operations focus primarily on improving working capital. In fiscal 2024, we designated three business departments as pilots and promoted activities to improve ROIC. Through cooperation between the finance division and business divisions, we identified areas for improvement and issues by conducting detailed data-based analyses and developed, implemented, and monitored specific activities, leading to steady improvements to ROIC. Based on this success, we will expand these activities to seven more business departments in fiscal 2025 as well as to subsidiaries, including those overseas. We will also establish KPIs for each business department and company and continuously monitor the progress of targets to further strengthen these activities and achieve sustainable increases in corporate value.
The Group is also focused on reducing fixed costs. To steadily reap the benefits of the 2017 integration of the former Mitsubishi Chemical Corporation, Mitsubishi Plastics, Inc., and Mitsubishi Rayon Co., Ltd., we will strive to reduce fixed costs, particularly by streamlining indirect functions, and consistently raise our profit levels.
Furthermore, to improve ROIC, we must address underperforming businesses. The Carbon Products subsegment, in particular, continues to incur significant losses, reporting a core operating loss of ¥27.5 billion in fiscal 2024. In fiscal 2024, we took measures such as cutting production, and fiscal 2025 will be a critical period in which the effectiveness of these measures will be tested. We will do everything in our power, including optimizing our sales portfolio and implementing thorough cost reductions, to restore profitability as quickly as possible.

We believe that dividends are the basis of shareholder returns, and our basic policy is to maintain a dividend payout ratio of 35%. In addition, we place importance on maintaining our current annual dividend per share of ¥32. While net income attributable to owners of the parent was ¥45.0 billion in fiscal 2024, paying ¥32 per share in dividends required approximately ¥45.6 billion in funds. Although our dividend payout ratio was 101.3% as a result, we maintained stable shareholder returns without reducing the dividend.
In fiscal 2025, we expect net income attributable to owners of the parent to amount to ¥145.0 billion. While this should lead to a dividend payout ratio of 31.4%, we believe the figures are in line with our shareholder return policy, given that fiscal 2025 profits include a one-time gain on the transfer of the Pharma Business.

Furthermore, we acquired treasury shares equivalent to around ¥50.0 billion, which combined with the dividend, would result in a total payout ratio of approximately 70%. We will continue to maintain a dividend payout ratio of 35% while striving to achieve stable and continuous shareholder returns.

As someone who engages with capital markets, shareholders, and investors, appropriately relaying messages from external stakeholders to those within the Group is essential to my role as the chief financial officer. We should know and understand ourselves better than anyone else. We should also be proud of ourselves for our past successes. However, this does not necessarily translate directly to current results. For that reason, we must always maintain an objective perspective and be able to flexibly adapt our management methods when necessary.
I believe it is my responsibility to continue to communicate such messages for change, encourage frank discussions, and deepen insights throughout the organization. I intend to make persistent efforts to continuously drive the Group’s transformation and growth going forward.
Approximately a year and a half* has passed under the current management structure, and we are approaching the halfway point of our initial goal of demonstrating results within three years. The Specialty Materials segment, an area of particular focus, is starting to show signs of sustainable growth. We will implement measures in an even timelier manner so that shareholders and investors can also gain a sense of this growth. Through these efforts, we will strive to communicate the certainty of the Group’s transformation and growth more clearly. We hope that our shareholders and investors will continue to observe the Group’s activities with great anticipation.