Rohm Aktie

Good morning, everyone. This is Azuma.

Allow us to deliver our presentation while seated. Let me start our financial results. First of all, our fiscal '25 full year results. Net sales ended 7.3% plus year-on-year at JPY 481.1 billion. We ended with a large operating loss last year. This year, we achieved an operating profit of JPY 10.8 billion. Since we posted big impairment losses, net profit ended in negative JPY 158.4 billion.

This fiscal plan for fiscal '26 is to achieve a 6% year-on-year growth of net sales, reaching JPY 510 billion. Operating profit to grow largely by 176.1% to a level of JPY 30 billion. Net profit is planned to turn positive to a level of JPY 29 billion. In fiscal '25, we saw the gold prices going up. Yet since we increased our sales and reduced our depreciation and fixed expenses, we were able to turn our operating profit into positive figures as we posted impairment losses mainly on fixed assets in the SiC business, the net loss widened significantly.

Now in fiscal '26, we are starting to see a positive impact from the structural reforms. But on the other hand, the impact is being limited due to tensions in the Middle East and the soaring gold prices. In line with the impairment loss in fiscal '25, we have been able to reduce our depreciation largely, but still due to these situations, our OP is planned at JPY 30 billion level.

Talking about inventory, which has always been told as high, we have been able to destock mainly the raw material inventories. We are targeting to bring the turnover to below 6 months by the end of fiscal '26. Now about dividends. We are planning to keep on paying JPY 25 per share for the term end. Together with the interim dividend, it will be an annual total of JPY 50 in fiscal '26 as well.

For business and management integration or let's call it the 3-party integration, the due diligence has kicked off, Mitsubishi Electric's power device business, Toshiba D&S's semi business, and we at ROHM are currently discussing for a possible power device business integration. This shows our previous fiscal '25 full year sales.

The Consumer market segment, mainly amusement, grew the most by 13% year-on-year. Automotive up by 5.8%, Industrial up 7%. Each market segment, except for communication has been growing. Although we are not seeing major changes, Computer and Storage market segment is an area we will have to grow more.

Going to the segment breakdown, LSI or the ICs went up 7% and Discrete up 9.7% year-on-year. We grew except for the modules. Our intention is to continuously grow both the IC and Discrete semi device businesses. Looking at the regional customer nationality split, Japan grew by 7.6%, which was big. Actually, Europe and other Asia showed a bigger growth rate. But in terms of the absolute value, Japan has been growing outstandingly. We still haven't achieved our target of having a 50% plus overseas business mix, and that's something we are wanting to do.

This shows how we were able to recover our operating loss of JPY 40 billion to an operating profit of JPY 10.8 billion. First, our sales increased by JPY 32.7 billion. Organic increase was JPY 35.6 billion, but we were negatively affected by the Forex by JPY 2.9 billion, thus becomes JPY 32.7 billion.

Automotive market segment grew by over 5%, equal to JPY 13.1 billion. Consumer up by JPY 12.1 billion. These 2 showed a large increase. Talking about the negative trend, in line with the increase in sales, the variable expenses increased. The other is the gold prices. Last fiscal, we were estimating a level of JPY 17,000. Currently, it is going beyond JPY 20,000. That's another factor burdening the variables.

For the SiC devices, due to the expanding adoption for automotive inverters, as we mentioned during the third quarter briefing, we posted quality assurance-related costs in the third and fourth quarters. These add up to a negative impact of JPY 10.9 billion. Moving to the fixed cost. We have organically reduced this by JPY 31.3 billion. Since we recorded an impairment loss, and we also changed the depreciation method from the declining balance method to the straight-line method, these have helped us reduce the depreciation largely.

Further, as the R&D spend for SiC has peaked out, we were able to shrink the fixed cost by JPY 29 billion. All in all, this leads to an operating profit of JPY 10.8 billion for fiscal '25.

Let me explain why we ended with a big net loss. First, the previous fiscal ended with a net loss of JPY 50 billion. We saw a positive impact of JPY 50.9 billion from the OP. From the -- for the nonoperating part, the previous fiscal, we had the dividend income, but this time, no, and thus ended with a negative JPY 2 billion impact. And on top of that, we recorded an impairment loss. And here, we see a negative impact of JPY 163.1 billion. And there is a positive JPY 5.8 billion impact from income taxes.

But in total, the full year net profit resulted in a loss of JPY 158.4 billion. This is more about the impairment losses on fixed assets. The left side describes the macroeconomic changes, touching on the slowing growth of battery EVs. The battery EV market forecast peaked out in 2023, and we have been revising down our forecast since then.

Recently, the U.S. market is shifting back to ICE or petro cars, and Japanese OEMs are delaying their battery EV developments. In the midterm plan we made in fiscal '25, we factored in these market situations and made our SiC business sales target to be more solid. Having this as a baseline, we -- when making a forecast on how the market will grow beyond 2028, we anticipate our investment return to be slower, thus decided to post an impairment loss.

Talking about business environment surrounding ROHM, it is true that excess upfront investment had been made. And at the same time, we are seeing the rise of Chinese SiC devices. In the past, our sales in China were big, but due to aggressive price down pressures, our share is declining.

Our SiC substrate business was having around an annual sales of JPY 10 billion, but now that the 6-inch substrates are not selling so much. Although we are continuously working on the 8-inch, we are seeing a shrink in the 6-inch business, and that is another reason why we decided to record impairment losses. This shows our fiscal '26 full year sales forecast.

We expect the Automotive market segment to grow by 5.6%, 5% with Industrial and 6.8% with Consumer and others. The Automotive production volume is pretty stable. Although the SiC substrate external sales business is shrinking, we expect the sales of SiC devices to grow largely amongst the European and Japanese customers. And that is why we guide this market to grow positively.

The Industrial market segment was slow for some time due to a prolonged inventory adjustment, but that has largely been solved. And we are seeing a recovery in the FA segment, thus we expect this market to grow too. Going to Consumer and others, there will be a slight decrease in the Chinese white goods market due to the end of subsidies.

On the other hand, sales in the amusement segment remain strong. The market is expanding and adoption in the server and storages is growing. And therefore, we expect a positive growth here, too. Fiscal '26 plan hasn't changed largely from fiscal '25. Left and shows the market breakdown. Computer and Storage is expected to grow largely by around 20%. Automotive and Industrial are to grow around 5% plus each.

Now into the segment breakdown, the Discrete semi devices are expected to go up by 8.4% and the ICs and Discrete are the 2 segments accounting for the major portion. Going to the customer nationality breakdown. I mentioned earlier that our target is to make our overseas sales to over 50%. For this fiscal, sales in Japan is to be 53.2% of total. Domestic sales are still higher. Other Asia, mainly Taiwan, is growing as well as the Americas. Yet Japan's sales mix is still accounting for more than half.

This waterfall chart shows how we plan to achieve JPY 30 billion of operating profit in fiscal '26. The starting point is JPY 10.8 billion. On the left hand, we expect our sales to increase by JPY 28.9 billion, including a positive impact from the Forex. Organic growth will be JPY 24 billion. And amongst different market segments, we expect growth in Automotive and Computer and Storage.

And Consumer segment, including Amusement is to grow, but Automotive and Computer and Storage are to be growing even bigger by over JPY 10 billion each. Now impact from material cost and inventory. We will see a negative impact of JPY 11 billion from material costs, while inventory adjustment has improved by JPY 1 billion and in total, a JPY 10 billion negative impact from the variables.

Impact from the fixed cost might appear to be not big enough where, in fact, we recorded an impairment loss. We only expect a JPY 300 million positive impact. In line with the impairment losses posted in fiscal '25, depreciation costs will go down significantly, but due to tensions in the Middle East, we estimate the materials and transportation costs to go up by over JPY 5 billion.

Thanks to the structural reforms we are doing, we expect a positive impact of around JPY 15 billion, yet we still see various expenses going up. And although we are improving our savings, these will unfortunately be offset by the soaring expenses. And thus, our efforts in reducing the fixed costs end up to be just around JPY 300 million. Based on these factors, we believe our JPY 10.8 billion of operating profit is to go up to JPY 30 billion.

This is about our CapEx. During our first midterm plan, we made excessive investments. Our CapEx spend reached to cumulative JPY 608.2 billion during the course of 5 years. The next midterm plan period is 3 years, and we plan to invest approximately JPY 150 billion in total. The initial year will be slightly high at a level of JPY 60 billion, but if we level the JPY 150 billion in 3 years, it will be roughly JPY 50 billion of CapEx spend every year.

Our inventory levels have been high for some time. The WIP or work in progress inventory level is still slightly high, but our intention is to bring down the finished goods level to 1.2 to 1 month level by the term end. And for the WIP, since we have been able to achieve a cost down, we are being able to reduce the absolute value, but not the turnover months.

We continue to destock and shorten the turnover months for the WIP. -- the raw material inventories were at a 3-month level during its peak, but we have been destocking to a level below 2 months. We believe we can bring it down to an adequate level.

Talking about shareholder return. Since our free cash flow has turned positive in fiscal '25 and same to be expected in fiscal '26, we intend to keep our annual dividend at JPY 50. Payout ratio is to be 67% this fiscal and same with the total return ratio. We have been able to continuously achieve our target of over 30% of payout ratio.

From this part, let me talk about our midterm management plan and structural reforms. The left side remains same. In the 3-year period, we target to achieve over JPY 500 billion of net sales, over 20% of OP margin and over 9% of ROE. The nonfinancial targets remain same, too. We keep on reducing GHG emissions and use more renewable energy. This shows how we plan to generate JPY 100 billion of operating profit in 3 years.

As the letters in bold described, we are reorganizing our manufacturing sites, discontinuing unprofitable products doing price hikes, switching from gold to copper wires. Our customers are reviewing these now. Thus, these initiatives will start to contribute from fiscal '27. The letters in red are levers that have been accomplished. We optimized power procurement costs and made a major improvement. Improvements in productivity and logistic costs are progressing too.

Talking about gold prices, so far, we have been able to improve by around JPY 4 billion. But compared to last year, prices keep on increasing, and we have seen it go up by JPY 13 billion. We are speaking to our customers and rather than asking to have the cost passed to price, we are negotiating with them to consider switching from gold to copper, so we can see a major improvement. We have been sending these samples using copper to our customers.

And therefore, we expect to improve the situation by switching to copper. Why? Now about sales growth. Previously, we forecasted our sales growth from AI servers to be very small, which disappointed our stakeholders. This time, we believe this will grow steadily. More will be explained later. This is about reorganization of the manufacturing sites. Before we reported about the closure of our IC plants in Kyoto and Okayama, -- and as you can see on the right end, this time, we have accomplished the agreement to transfer the equity of Dalian assembly plant. And this reorganization is not limited to Dalian.

We are working on other sites, too. But as I always mention, the most critical thing is to maintain stable production. So I hope you understand that we give you updates once things have been decided.

Let us now shift to SiC and AI topics. I will hand it over to Mr. Ino and Mr. Tateishi.

This is Ino. I will be covering our SiC business strategy topics. Here is the SiC sales trend. The black bars show the SiC business total, which includes the substrate sales. Fiscal '25 sales turned out to be most likely equal to what we forecasted and disclosed a year ago.

But there has been some changes in the mix. The substrate business declined both in volume and sales last year. And on the other hand, our device and module business grew. And in total, we achieved our forecasted sales.

The red bars show the sales trend for Automotive inverters. And our fiscal '25 figures grew as we had planned. In fiscal '26, we target to hit over JPY 50 billion of sales, and the breakdown is indicated on the right. We expect to see over 30% of SiC sales growth this year. And -- but the substrate business is to decline this year, too, whereas the device and module business to be growing more over 55%.

In total, including the substrate, we expect to see an over 30% growth. The red bars represent Automotive inverters, which is for sure driving the growth. In the SiC domain, we are starting to see growth for AI servers. And this fiscal, we plan to achieve 2.5x sales compared to the previous fiscal.

But the absolute value is still small. Thus, we will start to see its contribution towards 2030. Currently, the market is centered on silicon, but we believe the use of SiCs for AI servers is to be growing. As we issued a press release the other day, we have been subsidized by the NEDO for the 8-inch development and the project has been completed 2 years ahead of schedule, and we start its mass production this fiscal.

Although not written here, we will see the contribution of the mass production of the fifth generation products on a full-fledged basis from this year. This slide elaborates on the traction inverters. The left-hand chart shows the battery EV production volume market forecast, as we all know. And there was a peak from the end of 2023 up to around January to March 2024. And after that, as the red dotted line shows, the forecast has been declining recently. The current main market is China, but moving forward, we know that the EU and Americas will be ramping up.

And the right-hand shows not the markets where the products are sold, but a breakdown of where the OEMs are based in. And the arrows in the center show our customer volume forecast, based on the confirmed businesses that we have been awarded. Fiscal '25 was around 1 million units of inverters, and we forecast this volume to go up to a 3 million unit level in fiscal '28.

There will be some changes in the mix, but we indicated half year ago in our midterm plan that we expect the volume to triple. Lately, we still see this forecast to be maintained as it is. For fiscal '29 and onwards, as it says in the left-hand chart, the growth rate is to be dropping as we are considering the trend to be on the lower range.

For fiscal '26, the right side charts show China, EU and Americas and Japan, Korea. The current market is skewed towards China, let's say, around 65%. And up to fiscal '25, majority of sales came from China. From fiscal '26 and onwards, we expect the sales in non-China areas to start showing out. That will help us to sustain the business without depending on China.

And as of 2028, even excluding China, we will have our business being well established and still we'll be able to add the China business portion on top of it. And in that sense, 2026 will be a big turning point for us.

What is more important for us is to improve our profitability. Our target is to achieve breakeven and generate profit in fiscal '28.

Compared to what we showed in fiscal '25, we have come up with a much more detailed profitability improvement road map. The first is to improve the SiC substrate business. The 6-inch in-house production will be downsized so that we can concentrate on the development and production of the 8-inch. We will switch more from make to buy for substrates. For the in-sourced 8-inch production, we will concentrate on further improving cost competitiveness.

For the devices, there are 3 main initiatives. One is to improve yield, and this is important, as you can see on the right. Last fiscal during the third quarter, we saw a temporary decline due to quality-related issues. But then it recovered in the fourth quarter. And in line with our midterm plan, we intend to continuously improve the yield.

For the fifth generation MOS, development has been completed and a full-fledged mass production and shipment will begin this fiscal. By largely reviewing the way to build the device structure, we have been achieving better yield performance from the beginning compared to the fourth gen products. We will increase our mix of Gen 5 products as they show higher performance on smaller chips.

Of course, profitability too is better with Gen 5. And as shown on the bottom right chart, we will be increasing the 8-inch and amongst the 8-inch work more on the Gen 5 products to reduce cost. Another thing is to increase volume. And by putting focus on the profitable Gen 5 products and modules, we will improve our portfolio and profitability. And in this way, we plan to hit the breakeven and go further beyond.

From this part, I -- Tateishi, would like to talk about our AI server business and its progress. This is about the data center CapEx and demand forecast. As you may all know, the data center-related CapEx is growing at a very fast speed at a 40% CAGR level. It became double from last year to this year. And moving forward, it is forecasted to grow at a range of between 1.5x and 2x.

Looking at the demand of power devices used for AI servers, which also includes the DrMOS, which is a MOSFET, and I will elaborate on it later. Well, from 2025 up till 2030, we foresee a CAGR of 48%. That means the demand will become 1.5x bigger every year. Considering the power used for server racks, we calculated the volume of power devices needed, and that is how we at ROHM came up with this forecast.

This shows an existing server, a typical one from some time back in 2023. The power consumption is 13 kilowatts. And when we look at the next-gen AI servers, the power consumption becomes 1,000 kilowatts, which is 72x bigger. Based on this, we estimate the count of power devices and analog devices to be used.

And the amount of power devices used will be 36x more and 56x more with analog devices. Hereby, we expect this market to grow significantly.

When thinking about how to approach this market and about ROHM's path to success or competitive advantage, we have the silicon MOSFET. And as Mr. Ino mentioned earlier, we have the SiC coming into AI servers. And there is the GaN device and MOSFET -- as part of the controlling technology, there is the analog technology.

The nano technology has been promoted for some time. By combining the power and analog technologies, we at ROHM can offer all of the semiconductors that are needed for a power system. As Asia is only one-stop manufacturer, we collaborate with leading players in the AI server market.

As we have already announced, we collaborate with NVIDIA on the 800-volt power supply system. And as part of the actual implementation with Delta, we collaborate in developing and making the power supply system together.

This is about the DrMOS I mentioned earlier. It is also known as smart power devices. When we think how this grows back in 2023, the GPU was about 700 watts. This is expected to be 5.2x bigger in 2027 to a level of 3.6 kilowatts. The final power device to supply, this is the DrMOS. Currently, around 20 units are used, but this is to be increasing to around 50 units per GPU, that means 2.5x.

To sell the DrMOS, you need the NPC multiphase controller. Unless you combine this, you wouldn't be able to sell DrMOS. These always come in a combo. For the current GPUs, the solution does already exist and are being sold. Currently, we are developing the second-generation DrMOS. The device stand-alone performance appears to be minus 40%. Actually, the lower the resistance per area is the better. We have succeeded in improving the resistance by 40%. The evaluation results of performance are depicted on the right hand.

Compared to the first-generation products industry standard, we can improve the loss by 0.5%. This might sound like a small change, but actually means a huge thing. Today, a server rack consumes around 1 megawatt of power. And if we improve the loss by 0.1%, it means we save 1 kilowatt. Improving the loss by 0.5% means we save 5 kilowatts per server rack. This helps reduce power cost and on top of that helps reduce the cost for the systems to cool down the racks, even if the semi stand-alone might not have an outstanding performance.

There is a very strong requirement to improve the loss. Since we have most likely completed the development of this technology, the DrMOS part of the business has been included in our sales forecast this time. This shows the sales target for server businesses. Fiscal '25 was JPY 17 billion, and we plan to achieve around JPY 25 billion in fiscal '26. We intend to keep on growing to hit JPY 100 billion in fiscal 2030.

The mix by this time will be to have approximately 30% of DrMOS. Other than that, now that we see an increase in SiC sales, there is the SSD, which converts the AC power supply to DC. The trans will be reduced, whereas the node SiC devices will be used, and that is the trend we are seeing today.

SiC usage is growing due to its strong properties. When the power voltage eventually goes down to a level of 800 volts, that is when the GaN devices are needed. And when it goes slightly lower, the silicon devices, then finally, DrMOS and the power devices. In addition, the multiphase controllers to control these will be required. Combining all these will create a synergy in the sales amount. And thus, we have revised our target from the previous JPY 30 billion to a level of over JPY 100 billion.

We would like to move to the business and management integration topics. There was a share acquisition proposal from DENSO. And we, at ROHM, established a special committee composed of independent outside directors and others and discussions were carried out since then. Whilst a number of conversations were made with the DENSO management and business operation people, DENSO side informed us that they pull out their proposal of acquiring 100% share of ROHM.

And therefore, we at ROHM concluded and stopped the reviews at the special committee. DENSO mentioned that they decided to withdraw the proposal after a comprehensive review, but at the same time, mentioned that they are wanting to further advance the collaboration with ROHM in the analog devices.

They also stated that for them to roll out their analog technologies for the Automotive to other market segments like Consumer and Industrial, it is essential and effective for them to partner with ROHM. And that is why we would like to further progress our co-creation activities with them. We will continue discussions on the potential collaborations based on the existing strategic partnership.

And our focus with them will be the analog ICs, but we will not limit that to Automotive, but include Consumer and Industrial market segments and make an effective use of the IPs that both companies have. We will continuously sell to the Automotive industry, but at the same time, expand to other fields.

Although we had personal exchanges in the design review phases, we will further deepen this kind of personnel exchanges by sending our human assets to each other. Although it will not be 100% acquisition of shares, the business with DENSO will help both to widen the scope of business areas. And therefore, we will further strengthen and deepen our collaboration with them.

Regarding this topic, well, there are many things I can't easily mention. The due diligence just started off. And the 3 parties are working positively towards an integration. The key message here is that this possible integration is not at the opposing end of the DENSO's proposal. The reason is that the 3-party collaboration is focusing on the power devices. Toshiba and ROHM wanting to integrate overall because if we can complement each other and strengthen the power device, we can contribute to the DENSO and other Automotive parts manufacturers by offering quality power devices.

For analog devices, we collaborate with DENSO to expand our business beyond Japan and also to other domains like Industrial. Thus these 2 topics are something that can coexist. Some people might be thinking this 3-party integration to be an anti-takeover measure, but that is not the point, and that is what I would like to stress here.

Before the due diligence kicked off, I remember saying that we can get back to you with the progress and outcome by sometime in summer. Our overall target remains same, wanting to form a power device business that will be globally competitive.

But since we have to talk more about our human assets, plans and other topics, it might take some more time to be able to give you some updates. Yet, I will try to share with you more as early as possible. Last but not least, about our capital policy, let me hand it over to Mr. Kenevan.

I, Kenevan, would like to cover this topic. As President Azuma said, while the discussions for business integration with Toshiba and Mitsubishi are ongoing, at the end of the day, if we reach an agreement, we might have to slightly revise our capital policy.

Regarding cash generation, we will continue to recover our business performance, reduce working capital through cash conversion cycle improvement, optimize nonoperating assets and sell investment securities. These remain same as before. We will only use our capital for things needed for our business.

Looking at the strategic investments, if we realize a strategic investment opportunity, and see a necessity to do financing, we might expand the investment capacity. Having said that, in terms of shareholder return, we keep our target of maintaining over 30% of dividend payout ratio.

Talking about liquid funds, we were thinking of doing a buyback as part of the shareholder return. If we decide to use our cash for strategic investments, then the share buyback plan might be postponed slightly. We have a large asset of the LP investment in Toshiba.

Upon realization of returns, we will be revisiting our capital policy, including a possible shareholder return. When we get the returns, our cash levels will go up, we will consider a share buyback.

Regarding CapEx, it remains the same, meaning we will -- we control it to an appropriate level. And for financial discipline for us to promote the strategic investment projects, including a possible M&A, if we need additional financing, the D/E ratio will temporarily be over 0.5, yet we will keep it below 0.7.

Cash on hand will be kept to a level of 3 months' worth of sales, which remains same. And the chart on the right illustrates what I have mentioned. This was all from our slide deck. Our strong intention is to achieve a record high net sales of JPY 510 billion. We might aim to hit even higher than that.

Unfortunately, the operating profit that we guided is probably not as high as you expected. We are strongly intending to get rid of all the negative factors and make ROHM back to an even profitable company. Hereby, we continuously look forward to your ongoing support. Thank you.

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

Good morning, Azuma speaking. Starting from the structural reform that we've been working on since last year, let me give you some updates. We have been working on it steadily and the reform is progressing well. There are changes in the market, yet we are starting to see visibility in improving our profitability. Under the new organizational structure, today, we will announce our new 3-year midterm plan. We are determined to accomplish this as a team. Let us move to the earnings starting from our recent results. The first half net sales ended up 5.3% year-over-year at JPY 244.2 billion.

Operating profit was JPY 7.6 billion. We have turned it positive from the previous year's loss. In line with that, net profit resulted at JPY 10.3 billion, largely improving from the previous fiscal. To your right, you can find our revised full year guidance. Net sales have been revised up from JPY 440 billion to JPY 460 billion, up JPY 20 billion. We revised up the operating profit to JPY 5 billion and net profit to a level of JPY 9 billion. Numbers are positive versus the plan, but comparing it to our first half results, the forecast we made is slightly negative. These are results from the first half. Looking into the market mix, Automotive accounts for 46.7% and Industrial 12.6%. The table below shows the year-over-year variance. Consumer market grew the most, mainly from amusement, which was up 23.6%, a large jump. Automotive was more or less flat with a slight dip of 0.3%. For markets like industrial and computers and storage, our sales increased slightly.

Above all, the first half figures were largely driven by the amusement industry. By segment, ICs account for 46.8% and discrete semi devices 40.9%. Year-over-year growth of ICs were close to double digit, which was big. By customer nationality, Japan was around 53.1%. Since our amusement customer is Japanese, our sales grew 10.2% year-over-year in Japan. This is the operating profit waterfall chart. Last fiscal first half ended at an operating loss of JPY 900 million. Our OP improved by JPY 8.5 billion, resulting at JPY 7.6 billion. Our organic increase was JPY 17.6 billion. Since the exchange rates changed, there was a negative Forex impact of JPY 5.4 billion. Despite that, our sales increased by JPY 12.2 billion. Negative factors to the OP are the increased material costs and the impact from inventory as we had to destock.

Inventory impact was negative JPY 11.6 billion. Adding the increase in material costs, we saw a negative impact of JPY 19.1 billion. Now some positive factors. We reduced our fixed expenses by JPY 15.5 billion with a positive ForEx impact of JPY 200 million. Anyway, it was JPY 15.5 billion. And in total, we converted our JPY 900 million operating loss to JPY 7.6 billion of operating profit. Here, we have ROHM's full year sales forecast with first half and second half weather forecast icons. For automotive, we ended with a slight dip in the first half, and we believe it will turn to a slight positive growth in the second half, leading to a full year growth too. The strong SiC devices in Europe contributed to this.

Industrial market for a long time was in an inventory adjustment phase, but these have mostly been solved. In the first half, some growth, but the second half is expected to be plus 1.5%, more or less flat. The SiC devices for energy applications were strong. Consumer and others were extremely strong in the first half with 2 contributing factors. One was home appliances, mainly air conditioners and the amusement. Amusement peaked out between July and September. So we wouldn't be able to expect the same kind of growth in the second half. Air conditioners too are to be slowing down from October. Although it was pretty strong in the first half, full year expected growth will be at a level of 6%. This is the full year figures. We have guided up our full year sales from JPY 440 billion to JPY 460 billion. Automotive was slightly negative in the first half, but we will be able to bring it to a year-over-year positive in full year.

Consumer market is to be plus 14%. Looking to the segment breakdown, ICs were strong in the first half. But with the adjustment of the amusement, we keep it at 4% plus. On the other hand, we believe that discrete semi devices will be growing in the second half so around 4% plus here, too. Now to the customer nationality breakdown. What will be outstanding here is that Europe will increase by around 10%. This is due to the strong SiC business in automotive and solar panel sectors. This shows the full year operating profit ups and downs. We ended with a loss of JPY 40 billion, but this fiscal, we plan to end with an OP of JPY 5 billion. Let's look into the factors behind this. Sales increased JPY 11.6 billion. Since there is a minus JPY 17 billion of ForEx impact, the actual contribution from sales will be about JPY 30 billion.

Moving to the material costs and inventory impact. We have a reversal impact from the previous fiscal's inventory write-down. This contributes to a positive JPY 14.7 billion. As described on top, the gold price hike has been bigger than expected. That is why the materials, which are mainly gold wires is to cause a negative material cost impact of JPY 13.3 billion. Looking at the fixed cost impact. Depreciation is to shrink by JPY 20.4 billion. And talking about the R&D cost, up to the previous year, we were using the Green Innovation Fund to do our research. We completed the research and we'll be entering into the next phase, which is to submit the samples to our customers. This helps us to mitigate R&D spend. In total, we will be shrinking our fixed cost by JPY 32 billion and achieve a JPY 5 billion OP this fiscal.

This shows our CapEx trend. It was on an increased trend in the past. This fiscal, we brought it down to JPY 85 billion in our initial plan. From fiscal '26 and onwards, since we have finished making upfront investments, investments to be made will be in line with the probability of order intakes. CapEx will be on a decreased trend. Now our inventory. The left-hand chart indicates the finished goods. We have been destocking gradually and the absolute value will remain same. But since we view our second half sales negatively, turnover months will increase slightly, but overall, we are controlling the levels. For the work in progress inventory, we see the necessity to adjust further, mainly the power devices. The WIP will be destocked further. In terms of the raw material inventory, there are some excess inventories due to the LTA. These will be continuously adjusted.

Raw material levels will be controlled moving forward. This is about shareholder returns. The far right shows the fiscal -- this fiscal, and we paid out a JPY 25 per share interim dividend. We plan to pay out JPY 25 for the year-end 2, which will make it JPY 50 annually, a total of JPY 19.2 billion. Dividend payout ratio will be over 200% and same with the total return ratio. From this part, we will talk about the midterm management plan. ROHM's company mission remains the same. So let me skip this. Fiscal 2025 is the final year of our first midterm plan. We were expecting to expand our corporate scale. Towards 2028, spending 3 years, we want to shift to a company that generates profit. Rather than increasing the top line, we will focus on improving our profitability. This is the background of our new midterm plan.

What we have for our 2035 company vision is to become a company which will be highly recognized globally for its semi technology, both for power and analog. This is something that remains same. Looking at our management goals, 2028 net sales target is over JPY 500 billion, OP margin of over 20% and an ROE of over 9%. We have our nonfinancial target simplified. Our target is to reduce GHG by 50.5% from the base year 2018 to 2030. We continuously work on this as well as to achieve 100% usage of renewables by fiscal 2050. The zero waste emission target is another thing we keep on working for. For the human resources strategy and sustainable growth, we target to achieve a 300% succession plan fulfillment. That means to each division, we will assign 3 next-gen young staff, educate and train them so that they can improve their skills and career. That's what we mean by 300%.

We currently are implementing the transformative execution training. We aim to have 100% of the core personnel to participate in these trainings. Today, our stock-based compensation is for the directors and executives, but we plan to expand the scope to ordinary employees. What are ROHM's strengths? This is something we have covered too before. We will evolve and deepen the strengths we have cultivated since the beginning of our business and continue to grow them. We are customer-oriented and have the cutting-edge technology. The advancing technology does not only refer to our products, it also refers to our monozukuri manufacturing technology, which is unique to ROHM. These are areas that we will further enhance. As the foundation to uphold these, we have the IDM, which is our strength to the integral technologies that we align with our customers. We have our specialists that are growing and the integrator personnel who have different sets of skills and technology who will discuss with our customers to design and adjust the products.

Again, the core will be the power and analog technology. With this supporting foundation, we will make ROHM stronger. This shows our growth strategy, things to grow, evolve and to create. We have 3 categories from top to bottom. And horizontally, we have automotive, industrial and consumer market segments. I will not touch on each detail. But just to pick up what is new, we have included VCSEL, laser diode, photonic crystal and the optoelectronic device technologies to make them as a new growth pillar. This page shows our sales composition. Our fiscal '28 target is JPY 500 billion. This fiscal's plan is JPY 460 billion. Thus, the growth we intend to make might appear small. It is because in between the period to respond to the loss-making businesses, we will downsize or continue them. That means we expect the top line to decrease temporarily yet the power device sales is planned to grow from JPY 127.8 billion to JPY 175 billion, which will grow largely.

The bar chart on right is same, but showing the market split by automotive and industrial, consumer others. Automotive mix will be 55%, which is a bit too much. That is why we are now strengthening our development for industrial and consumer market segments. Here's our road map to achieve JPY 100 billion operating profit. We are currently driving a company-wide change with cross-functional teams to drastically improve our revenue structure. With these changes, we aim to achieve JPY 100 billion operating profit. The biggest improvement we will make is listed on the top, which is to improve our SiC business profitability. This includes improving our yield and transitioning to 8-inch. On top of that, we will increase our net sales. This is the biggest theme on our road map. The second one is to reorganize our manufacturing sites and to shrink and discontinue the loss-making businesses.

This is the second biggest initiative in improving our profit. The third is to reduce manufacturing and procurement costs. This is something we always work on. The point here is that we will put more effort to bring a bigger impact. The fourth is something we at ROHM had not been able to do in the past. It is to optimize the prices and revisit our pricing strategy. We will implement DX to optimize our fixed costs. At the bottom, we have our sales growth initiative. Earlier, I mentioned about our intention to improve our SiC profitability. For other areas, not only for automotive, but for the AI servers and consumers, we will put focus to grow more and increase our sales to fulfill or fill up the gap from shrinking and stopping the loss-making businesses. Kenevan would like to explain about our capital policy.

Mr. Azuma earlier mentioned about how we plan to improve our business and operating profit. In line with that, we aim to achieve an ROE of over 9%. For us to fulfill this, we must work on our capital policy and maintain a healthy balance sheet. Our concept is to efficiently make use of the cash we need for our business growth. We will not retain unnecessary cash instead try to return this to our shareholders. Key points are listed above. First is cash generation. Together with the recovery of our business performance, we are improving the cash conversion cycle and reducing the working capital. Further, we are optimizing the nonoperational assets and selling investment securities. In terms of shareholder returns, we will pay stable dividends and do share buybacks to achieve a dividend payout ratio of over 30% and a total return ratio of over 100%.

For CapEx, we will control this to an appropriate level. As mentioned earlier, for reorganizing the manufacturing sites and for our R&D, we will spend as needed. But the CapEx spend will be much smaller than the past 3 years. Moving to the financial discipline. We believe that D/E ratio should be at 0.5 level. We will optimize the assets to reduce liabilities and pay back our debt accordingly. Last part about cash on hand. We benchmarked our peers in the industry and believe that the cash on hand should be at a level equivalent to a 3-month sale. Our current cash level is a bit too high, thus, we will be reducing it. You can see the cash in and cash out details. Our cash in will be over JPY 300 billion of operating cash flow as a 3-year cumulative figure. For investment cash flow, part of the investment securities will be redeemed and sold. And with that, it will be at around JPY 120 billion. Further, the current cash on hand is approximately JPY 310 billion.

Moving to the cash outside. Our plan is around JPY 50 billion of CapEx every year on average and a total of JPY 150 billion. We assume around JPY 100 billion of debt payment. Shareholder return will be roughly JPY 200 billion during the midterm plan period. This is how we will control the cash on hand to a level of JPY 150 billion. As needed for any possible M&As, we might temporarily have a high amount of cash on hand. This will depend on the M&A situation. Otherwise, it could be used for shareholder return. Capital structure is described on the right hand. Both shareholder equity and liabilities will be reduced. And in this way, by the end of fiscal '28, we believe that our balance sheet will be pretty much optimized to achieve an ROE of over 9%. These are our nonfinancial goals.

Since our President explained it earlier, I'll be brief. Starting from the environment initiatives, we have committed to reduce GHG by 50.5% from 2018 to 2030. There will be some ups and downs on its way to accomplish the target. Considering our current business environment, we will reduce the GHG emission in the most appropriate manner. Moving to the human resource initiatives. Our plan is to achieve a 300% succession plan fulfillment rate. Talking about the stock-based compensation system. This is currently available for the management, but we plan to expand it to our employees, too. So it will be expanded both horizontally and vertically. They are being planned currently. That was it for me.

We will move to the business strategies. IC business. Our fiscal '28 net sales target is over JPY 215 billion with an OP margin of over 23%. We will largely improve our profitability and convert it to drive the company's overall profit margin. Key initiatives for the midterm plan are indicated on the right side. We will optimize the portfolio, secure competitiveness through innovative tech development and improve our development efficiency. We will see how quickly we can make sales and offer attractive products. On top of that, we will work on productivity, consolidate the manufacturing sites, improve the yield and reduce both the variables and fixed costs. The key IC products. In the upcoming 3-year period, we will grow the isolated gate drivers for automotive, ICs for image processing and the IPD. All of these will be around 1.5x each bigger compared to the current fiscal year.

The right half shows part of the cutting-edge technology I've been mentioning. One of the ICs technology is the Solist-AI. It is capable of learning without a network. This is a smart AI, and we won the MONODZUKURI Innovative Parts and Component Awards. We think this can be rolled out to various areas. The other is the LASCA. The chiplet technology is used to economically integrate the analog and power. Talking about power devices, this includes both SiC and silicon. Our net sales target is JPY 175 billion plus, OP margin of over 14% -- we intend to expand mainly the IC -- excuse me, the SiC -- for xEV inverters. Expansion of modules and discrete is another thing. In the past, we were mainly selling the wafers alone. But this time, we will add value and increase the product lineup.

The third row from top says to accelerate the development. We will be mass producing the Gen 5 products from the next fiscal. We intend to move up the schedule of the Gen 6 product release and make proposals. SiC cost can be reduced through the shift to 8-inch. Yield can be improved, too. These are what we continuously work on. The 2 rows below refer to silicon power. These are now used for AI service so we will focus on that. We will secure enough sales from the automotive market, too. Diodes are included at the bottom row. We will revisit the product portfolio and consolidate these sites to further improve our business profit. This is part of the SiC business for the traction inverters. This will be our future business pillar.

Looking at the inverter order volume compared to fiscal '25, we expect this to be triple in fiscal '28. That is one thing. And the other is that currently, over half of the business is for Chinese OEMs. But in fiscal '28, European customers will be the majority, followed by Japan and South Korea. China might appear to be reduced largely, but this is because the customers haven't shown us their order volume for 3 years ahead. But if there are orders from China, we will continuously respond to them. We expect to have inverters equivalent to approximately 3 million cars in 2028. So far, we have got confirmed orders from 16 different OEMs. For the SiC bare chips, as it says in the last bullet, we will advance the launch of Gen 5 products. And as I mentioned previously, we are working to have these to be adopted in plug-in hybrids, PHEVs and hybrid vehicles, too.

As introduced before, the TRCDRIVE pack is being highly received. We already started delivering them to our customers, and our intention is to increase the mix of these products. Just for SiC, we came up with a profitability road map. We aim to hit the breakeven point in fiscal '28 and generate a full year profit. And the enablers are to improve the SiC substrate business, which mainly refers to shifting from 6-inch to 8-inch. At the same time, we will enhance the quality of 8-inch. The big contributor factor will be to improve the device. This includes the epi. And as described on the right top, the current epi make and buy ratio is around 1 against 1. We will shift to increase the in-house production ratio to reduce cost drastically. As you can see, it says Gen 4, Gen 5 on the right side. Gen 5 products will have a better yield. We will keep on working to improve the discrete yield.

The last contributing factor is to increase both the modules and the device sales. Through these levers, we make it a must achieve to generate profit in fiscal '28. Last part covers general purpose device and other businesses. These are areas where we maintain high market share to support the company as it serves as a cash cow. Our target is over JPY 110 billion of net sales over 22% of OP margin. The 2 rows at the bottom show our existing initiatives. What is new here is to evolve the optoelectronic technology for sensing and make it as our next-gen pillar. We didn't mention this so much before, but our intention is to further advance the Opto technology.

Last but not least, we understand that there is a high level of interest in AI service. Our current business scale here is around JPY 10 billion. We want to step up further. JPY 30 billion in fiscal '30 might be appearing negative. The market is asking us if we can accelerate. And in fact, we are planning to do that. We are not going to focus only on power supply, but we'll expose ourselves to the main board area from the power supply to main board and others, we make sure to expand our businesses. That was all from us. Thank you.

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