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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
We now like to begin AGC Inc., the Financial Results Announcement Meeting for the First Quarter of FY 2022. I will be the moderator for this session. My name is Ogawa from the Corporate Communications and IR division.
We would like to introduce the speakers for today: Representative Director, Senior Executive Vice President, CFO, Shinji Miyaji. Senior Executive Officer, General Manager of Finance and Control Division, Toshiro Kasuya. So we have 2 speakers from AGC.
So first of all, our CFO, Miyaji, will give you the overview of the first quarter of FY 2022, after which we will proceed to Q&A.
We expect to close the meeting at 5:00 p.m. Tokyo time. So Mr. Miyaji, the floor is yours.
Good afternoon. This is Miyaji, the CFO. Please turn to Page 3, key points of today's presentation. In the first quarter of 2022, despite the impact of rising raw material and fuel prices, sales prices for caustic soda, polyvinyl chloride, PVC, and architectural glass rose and shipments of fluorochemical-related products increased as well as steady expansion of strategic businesses, resulting in net sales increase of JPY 79.1 billion year-on-year at JPY 472.7 billion, and operating income increase of JPY 13.6 billion year-on-year at JPY 57.8 billion.
Net income attributable to the owner of the parent was JPY 30.5 billion, up JPY 1.7 billion year-on-year. Both sales and operating income reached record highs for a first quarter. The full year forecast for 2022 remains unchanged since the announcement in February of this year in view of the current uncertain social and economic conditions.
Please turn to Page 5. And also for the first quarter in terms of sales, shipments of architectural class, fluorochemical-related products and electronic materials increased and sales prices of chlor-alkali products and architectural glass increased. In addition, due to the impact of the depreciation of the Japanese yen, sales increased by JPY 79.1 billion year-on-year. Operating income was up despite the rise in natural gas prices in Europe, the increase in depreciation costs associated with the launch of new equipment for LCD glass substrates and ectatic materials and the rise in display manufacturing costs due to the effect of exchange rates.
In addition to the factors mentioned earlier, the manufacturing cost was reduced due to the improvement in the operating rate of the fluorochemical-related manufacturing facilities, resulting in an increase in profit of JPY 13.6 billion. Income before income taxes increased by JPY 10.2 billion at JPY 54.4 billion, between the recording of business structural improvement expenses in the European automobile as other expenses and foreign exchange gains and other income. Net income attributable to owners of the parent was JPY 30.5 billion.
Next, the business performance by segment. Please turn to Page 6. In the first quarter of 2022, Electronics recorded higher sales and lower profit -- Glass and Electronics recorded higher sales and lower profit, while both sales and profit increased for Chemicals.
Please turn to Page 7. Variance analysis of the operating income, a year-on-year comparison. Sales volume and product mix was plus JPY 10.3 billion. Shipments of electronic materials, architectural glass, fluorochemical-related products and life science products increased. Selling price plus JPY 48 billion with a rise in sales prices for chlor-alkali products and architectural glass. Fuel and raw material cost, minus JPY 31.2 billion. In addition to rising natural gas prices in Europe, butylene and electricity prices were higher. Cost and others, minus JPY 13.6 billion. Although manufacturing costs were reduced due to the improvement in the operating rate of the fluorochemical-related manufacturing facilities, depreciation costs in electronics increased. As a result of the above profit increase by JPY 13.6 billion year-on-year to JPY 57.8 billion compared with JPY 44.2 billion in the previous year.
Please turn to Page 8. Next, the financial position comparing to the end of December 2021. I Total assets were JPY 2,821.2 billion, an increase of JPY 155.2 billion from the end of December 2021. The impact of foreign exchange was plus JPY 104 billion. The debt-to-equity ratio was 0.42.
Please turn to Page 9. I would like to explain our cash flow statement for the first quarter of FY 2022. Operating cash flow was JPY 60.3 billion and investing cash flow was JPY 30.5 billion. As a result, free cash flow was JPY 29.8 billion.
Please refer to Page 10. Capital expenditure, depreciation and R&D expenses are shown here. CapEx for the first quarter of FY '22 were JPY 40.4 billion. Depreciation expenses were JPY 42.7 billion, and R&D expenses were JPY 12 billion.
Next, I will move on to the explanation by segment. Please refer to Page 12. First, let's look at the Glass segment. In the first quarter of FY 2022, net sales was JPY 197.6 billion and operating income was JPY 4 billion, an increase of JPY 17.1 billion in sales, a decrease of JPY 5.6 billion in profit compared to the same period last year. Architectural Glass increased by JPY 14.7 billion to JPY 103.8 billion due to an increase in shipments in all regions, except South America, and higher sales prices in all regions, especially in Europe, despite a decrease in sales due to the transfer of the North American architectural glass business.
Automotive glass sales increased by JPY 2.8 billion to JPY 93.5 billion due to the sales mix and the weaker yen. Despite a decrease in shipments due to the impact of in an adequate components, including semiconductor shortages, operating income decreased compared with the same period of the previous year due to higher raw material and fuel costs such as natural gas in Europe and an increase in manufacturing costs for auto glass due to a decline in the utilization rate despite the factors contributing to the increase in sales mentioned above. The proportion of operating income of the Glass segment to total sales was 11% for architectural plus and minus 10% for auto glass.
Please refer to Page 13. With regard to the automotive glass profits is a pressing issue for our management. And we will take further measures to address this issue. Specifically, we would like to promote pricing policy, structural reforms and aim for more higher performance products. These are the major pillars of our measures.
In terms of pricing policy in response to the rising price of raw materials in fuel since September last year, we have been negotiating for price hikes in all regions of the world and have already achieved price hikes in some areas. However, the price hikes have not yet been sufficient to absorb the increase in raw materials and fuel prices. We are far from being able to ensure the sustainability of our business. We will make further efforts to revisit the pricing strategy and attempt to improve our profits further.
In structural reforms, we are promoting this probably, including the consolidation and elimination of product production bases in lines. And we will accelerate efforts in Europe in particular, where we have more issues. I would like to give you the details in the following pages. In terms of -- for adding for more high-performance products, which is expected to expand due to case and EVs. And we would like to market for head-up displays and also large-size dimmable roof classes, 5G antenna glass and other exterior glass products for autos. And we will also focus on interior glass products such as car display cover glass. By steadily implementing these ventures, we aim to achieve ROCE of 10% or higher by 2025.
Please refer to Page 14. I'd like to explain our efforts to improve the profitability of the automotive glass in Europe. In Europe, as explained in the previous page, we will implement the pricing policy and also seek for higher performance products. And as far as the structural reforms are concerned, we will conduct further consolidation. So in terms of the production capability by 2025 in comparison to 2021, we will reduce the capacity by approximately 30%. By secondly implementing these measures, we aim to make European automotive glass profitable by 2023.
Please turn to Page 15. Next is the Electronics segment. In the first quarter of 2022, sales totaled JPY 76 billion and operating profit totaled JPY 8 billion. Year-on-year, sales increased by JPY 6.4 billion, and profit was down JPY 700 million. As for display, shipments of LCD substrates and specialty glass for display decreased, resulting in JPY 1.1 billion decrease year-on-year at JPY 45 billion. Shipment of LCD glass substrates decreased by a lower single-digit percent quarter-on-quarter. The selling price was higher by a lower single-digit percent quarter-on-quarter due to tighter supply and demand.
Due to shipments in electronics materials, including semiconductor-related products such as EUV photo blanks and optoelectronic components and PCB increasing, sales increased by JPY 7.4 billion year-on-year at JPY 30.4 billion. As for operating income, despite the factors that increased sales, as mentioned earlier, due to the launch of new equipment for LCD glass substrates manufacturing as well as increasing depreciation and the effects of higher fuel and raw material prices and foreign exchange profit decreased by JPY 700 million year-on-year at JPY 8 billion. The operating income composition for the segment was 20% displays and 80% of electronics materials.
Please turn to Page 16. Chemicals segment. In the first quarter of 2022, net sales were JPY 192.2 billion, and operating income was JPY 45.2 billion, an increase of JPY 54.9 billion in sales and an increase of JPY 19.7 billion in profit. Sales of chlor-alkali, urethane increased by JPY 39.5 billion year-on-year to JPY 121.7 billion due to the rise in sales price of caustic soda and PVC. Fluorochemical and specialty sales increased by JPY 8.7 billion year-on-year to JPY 35.6 billion due to a big increase in shipments of fluorochemical-related products for semiconductors and automobiles. Life science sales increased by JPY 6.6 billion year-on-year to JPY 34.5 billion due to increasing contracts for synthetic medicine and agrochemicals and an increase in contracts for biopharmacy, including new coronavirus-related products.
Operating income increased by JPY 19.7 billion year-on-year at JPY 45.2 billion. The operating income composition of the Chemicals segment was 70% chlor-alkali and urethane, 20% fluorochemicals and specialty and 10% of life sciences roughly. Life sciences profit margin declined year-on-year. This was due to a large increase in profits in the Chemical segment as a whole due to factors such as the reaction to the concentration of high-margin projects in the first quarter of last year and the timing of the cost that was generated in relation to the facilities. The life sciences business itself continued to perform strongly, and there are no concerns. So the profit contribution percentage-wise decreased, but the business itself is continuing to grow. So we have no reason to be worried into the future.
Please turn to Page 17. Let me supplement the market conditions for caustic soda and PVC in Southeast Asia. In the first quarter of 2022, caustic soda market remained high. PVC prices peaked in the first quarter of last year -- or the fourth quarter of last year, then softened. In addition, PVC spread shrank slightly due to the rise in ethylene prices, but the favorable market conditions continue for chlor-alkali overall.
Please turn to Page 18. Performance of the strategic businesses. Overall, strategic businesses sales for the first quarter were JPY 71.3 billion, and operating income was JPY 14.1 billion, up JPY 15.8 billion in sales and up JPY 2.8 billion in profit. We are steadily expanding our businesses, centering on Electronics and life sciences.
Please turn to Page 19. I will now explain the results by region compared to the first quarter of 2022 with the same period of the previous year. In Japan and Asia, although shipments of glass for automotive and glass substrates for LCDs decreased, sales and income increased due to higher sales prices of caustic soda and PBC and increased shipments of semiconductor-related products such as parts for optoelectronics, architectural glass and mass plants for EUV lithography.
In the Americas, despite a decrease in sales due to the transfer of the architectural glass business in North America, sales prices of architectural glass and South America increased. And the CMDO (sic) [ CDMO ] business, the biopharmaceutical products increased. On the other hand, fixed income -- or fixed cost increased due to capacity expansion of biopharmaceuticals, resulting in an increase in sales and decrease in profit. Europe sales and earnings increased due to higher prices for raw materials and fuel, despite higher sales prices and increased shipments of architectural glass.
Please turn to Page 21. I would now like to explain the full year forecast for the year ending December 31, 2022. Although the first quarter results were favorable, we have not changed our forecast for operating results and dividends, which were announced in February 2022. In light of the current international and economic situation, raw materials and fuel prices, foreign exchange rate trends and other factors that make the outlook for the future, extremely uncertain. We forecast net sales of JPY 1.8 trillion, operating income of JPY 210 billion, and net income attributable to owners of the parent of JPY 115 billion. No changes have been made to the assumptions for ForEx and crude oil prices.
Please refer to Page 22. Full year forecast by segment for FY 2022 remain unchanged from the initial forecast.
Please refer to Page 23. Outlook by business segment. Likewise, no change from the initial forecast.
Please refer to Page 24. Also there is no change in the initial forecast for our strategic businesses. We see a steady increase in the performance. We expect net sales of JPY 310 billion, operating income of JPY 65 billion for FY '22.
Please refer to Page 25. CapEx, depreciation, R&D expenses, unchanged from the initial forecast. CapEx for the full year is expected to be JPY 280 billion depreciation expenses, JPY 180 billion, R&D expenses expected to be JPY 54 billion. There has been a significant increase in CapEx in comparison to the previous year. And I would like to make additional explanation.
Please turn to Page 26. This is the last slide. On May 6, we announced a major enhancement of the capacity of our chlor-alkali business in Thailand. I would like to give you an overview for this expansion. AGC has decided to increase the capacity of its 2 bases in Thailand through AGC Vinythai, a new company integrating its chlor-alkali business in the Indonesia and Indochina Peninsula. The total investment is expected to exceed JPY 100 billion, making this the largest ever investment by the AGC Group. As a result of this enhancement, our caustic soda production capacity in Southeast Asia will be increased by 15% and our PVC monomer and PVC resin production capacity will increase by more than 30%. The group share of caustic soda and PVC resin production capacity in the region will increase from approximately 50% to a higher and more of a solid position as a market leader.
In Southeast Asia, demand for caustic soda and PVC is expected to grow at an annual rate of about 4% as the region's economy grows and infrastructure investment expense. In this growing market, we will leverage our strong market presence to steadily capture growing demand.
This concludes my presentation. Thank you very much.
Thank you. That was the presentation by CFO, Miyaji. We will now take questions.
[Operator Instructions] We'll first go over the questions that we received earlier.
The first question. Compared to your plan, what were the positives and negatives for the first quarter results?
CFO, Miyaji, will respond to that question.
Overall, the results were favorable. In fact, we set new highs for sales and profit. But by segment, there are positives and negatives. The results were mixed. For chlor-alkai, of course, we continue to enjoy stronger market prices for strategic businesses. As mentioned earlier, in life science compared to the previous year, slight decline in profit, but the business itself is growing. For Electronics and other strategic businesses, no issue. And therefore, the positives included strong performance in strategic businesses. In addition, for fluorochemicals and specialty, we saw strong growth.
Due to the shortage of capacity, we expanded our capacity, which affected the profit on a temporary basis, but we were still able to generate high profit, which is another positive. As for architectural glass in Europe, the natural gas prices in Europe were higher, which was a negative. But overall, I think we did pretty well. The fuel and raw materials increased rapidly, but we were able to generate the results as planned. So I think they were at the acceptable level.
The negatives are clear in the automobile -- automotive glass, we are still seeing the impact, especially in Europe, more so than we had expected. So that was a big negative. Another negative factor, the specialty glass for display in Korea, China and Taiwan, we are producing in those countries, but the depreciation of the yen are having an impact on our manufacturing cost directly. So that's another negative. Overall, positive. But from business to business, there were mixed results. That is all.
I would like to move on to the next question.
So is the crude oil and also natural gas and the coal price increase, what sort of impact would it pose on a full year performance?
So CFO, Miyaji, would like to answer that question.
What has been the most -- the largest impact so far in terms of the price increase is the natural gas price in Europe. So of course, we have a lot of large number of furnaces in Europe. And because of the rise in the natural gas price, it is directly hitting our performance. And therefore, the cost increase is immensely the largest here in Europe.
Now in terms of the architectural glass, since February this year onward, we have been introducing the energy surcharge. So if the gas price increases than certain level, automatically, those will be passed on, on top of the current price. So the majority or let's just say a large part of the price increase and the net gas has been somewhat compensated. So all in all, because we have seen an increase in the raw material price. But in any case, it is the glass business in Europe, that has been hit the most.
And as mentioned, in terms of the architectural class, we have the energy surcharge. So we have been able to offset somewhat. But in terms of automotive glass and others, we have not been able to introduce such a scheme. Therefore, another -- so in some ways, we have been directly hit. The impact is quite large. Also in terms of chemicals and so forth, so it's naphtha increase -- naphtha price increase. So that is definitely posing a negative impact, but the market continues to be tight. So we are able to offset somewhat with the pricing.
So let's just say where we have been directly hit is in the Glass business, specifically for the automotive glass, we would say that is where the impact has been the largest, and in terms of the gas business inherently. So in terms of crude oil in terms of sensitivity, 1 barrel, about JPY 300 million of the impact. That has been the sensitivity. And in terms of the European gas price, so for EUR 1 increase, it's JPY 700 million of impact. So that has been the impact so far. But we've been able to offset somewhat with the energy surcharge, and we have some hedging team to some extent as well. So we are not directly hit that full amount in terms of profit.
Moving on to the next question.
Was there an impact of hedging on crude oil and others in terms of the impact on the first quarter results?
Kasuya would answer.
As for hedging, as Miyaji explained earlier, natural gas within the heavy oil. We do have the hedging operation. And in some regions hedging operation is not easily done. So it is not the overall impact, just a partial impact, but we did record a positive impact of hedge operation in the first quarter results. Thank you.
We'll move on to the next question.
So if Russia will stop the supply of natural gas to Europe. What sort of impact would it pose to the Glass business in Europe?
So CFO, Miyaji, would answer this question.
So natural gas situation in Europe as already been seen through the media, and I'm pretty sure many of you are familiar with the current situation. So in terms of natural gas, for Russia, it is a very important source for revenue based on the foreign currency. On the other hand, for Europe, it is indeed part of a very important infrastructure to support everyday lives. So we believe the risk that the supply will be completely suspended, perhaps the risk will not be so high. So perhaps complete halting of the supply is not likely to happen. That is our current take.
But of course, in those rare cases that the natural gas would be suspended completely, in that kind of scenario, so long as it is a short duration of time, we can accommodate through alternative measures. But of course, if it is suspended for a long duration of time. And of course, some furnace are fully dependent on the gas supply through the pipeline. So about 1/3 of the furnace operation in Europe may be impacted if the gas supply is suspended for a long duration of time.
So of course, in that case, depending on the demand, we may need to optimize the operation of the furnace in Europe as a whole. But of course, these are -- and those rare cases and under those contingency, if it is completely stopped, then perhaps 1/3 of the furnace in Europe may be impacted. That will be my answer.
Moving on to the next question.
Since the Russian invasion in Ukraine, do you see the economy slowing down in Europe? On a related note, the demand in Europe regarding the Glass business, what is your current view?
Miyaji will respond.
Currently, we don't see signs of economic slowdown, at least in our business, the Ukraine situation is not really impacting the business. For the Glass business, going forward, nobody knows what's going to happen to this conflict itself. It's not likely that this is going to be -- see an end in a near future. There are possibility of some favorable win for us. The energy issue, especially the gas supply situation in Europe is attracting a lot of attention. So people are feeling that they need to reduce the consumption of gas.
That is widely spread recognition. Which means that the heat insulation of the buildings are going to become more important. Innovation rail has been undergoing in Europe, and we believe that, that innovation is going to be accelerated. So high function, high performance class with the thermal insulation performance features will be appreciated. So over long term, that will be a good news for us.
Next question relates to the current state of business in Russia and the outlook going forward. And also, are there any changes related to the positioning within your business portfolio, if you can explain to us?
Sorry, could you repeat that question again?
So the current state of business in Russia, the outlook and also changes, for instance, inclusive of withdrawal of the business and the positioning within the business portfolio. So Miyaji will explain.
So Russia. So we have architectural glass and automotive glass. Those are the 2 major businesses in Russia. Architectural glass is larger in terms of the business size in Russia. Automotive glass on the Western side, so the western -- excuse me, the OEMs have suspended their production. So accordingly, needless to say, our business has basically disappeared. So in terms of the business towards OEMs and the Western Europe has been -- or West in general has been suspended. So it is under fairly low utilization. That's for automotive.
Now in terms of architectural glass, as we speak, it hasn't really dropped out significantly. It is still under operation. Now the outlook going forward, that is a very challenging question to answer. It really depends on how the Russian situation may progress. And also we would need to monitor the international situation as well. So we do receive certain amount of risk continuing the business in Russia. So accordingly, we would like to take measures appropriately.
Next question.
The pricing policy on automotive glass. What is your assumption regarding the pricing changes? And are you already seeing the effects of such measures?
Miyaji will respond.
Well, so far, the -- there are some unique situation, unique practices in the automotive industry. So given that special relationship that we have with our customers in the automotive industry, we haven't been able to raise prices that much. But the current situation is, as was explained earlier, in the first quarter, the baseline was in the red. Costs are rapidly increasing. The prices of fuel and raw materials are increasing. So we have no choice but to raise our price as well.
And we're talking about entirely different level from the previous time. I cannot say where and how much, but the pricing policy in the past. We are going to depart completely from the conventional approach. Well, partially, I mentioned in the presentation that already starting September of last year, we have adjusted prices, especially in Europe, but that's not enough at all. We are seeing some effects, but it's limited. We would like to pursue further impact. So we will be revisiting their prices strongly for the remainder of the year.
Next question. This relates to China.
Could you please share with us the current state of revenue and supply chain in China? Also, have you have been impacted by the recent lockdown in China?
Answer to that. China accounts for approximately 10% of the group-wide sales. And our core main business is display glass and also for automotive glass. Those are the major business in China. So so far, we haven't seen any significant impact to the overall performance. So of course, we have seen lockdown in Shanghai and some of the factories nearby have been impacted.
So definitely, we have seen some confusion within the supply chain. However, the impact was not so large. So the business is trending as expected. And for automotive glass in comparison to the previous year, in fact, the sales have been on the increase. So the lockdown in China centered in Shanghai, right now, it is not impacting the main business.
Next question, Electronics.
The peak out of the semiconductor cycle. Would that be a matter of concern for the business of Asahi of AGC is the question?
No, we don't consider that to be a concern. Looking at our main business area, the products. Many are the high-end products. For example, EUV mask blanks included CMP and other semiconductor-related products that we supply our high-end products, and we don't see signs of demand softening. So we're not concerned at all.
Make relates to EUV mask blanks.
If you can tell us the growth year-on-year and also quarter-on-quarter? So this is the growth for EUV mask blank.
We cannot disclose the details right now, but we have been saying 40% will be the growth of the sales, and that has been the case in the past. And this year, that pace would not change. So we are steadily growing in terms of the EUV mask blanks plants business. So if you look at on a quarter-on-quarter basis, it really depends on the customers. So it is not as if we are consistently growing by 40%. But on an annualized basis, yes, we are steadily growing by 40% or so. So we are not overly concerned about the business right now.
Next question on life science.
Could you kind of explain why life science margin is lower? And how is the current utilization rates of CDMO business?
Earlier, I did briefly touched on this subject. Year-on-year, during the first quarter of last year, the highly profitable product shipments were concentrated during that period. And so the first quarter of last year had a remarkable increase in profits on a yearly basis. That's one factor. So there was a reaction to that very good first quarter of last year.
Another factor is, especially in the U.S., we are increasing the capacity, which entails costs, but they are not operating yet. So we are only seeing the cost. And another factor is in the U.S. The periodic maintenance turnaround had been conducted, which also entailed increased costs. So year-on-year, it appears as if the profit decreased slightly. But as I mentioned earlier, the business itself is back to the normal level, and we are not concerned at all. It's very strong.
With regards to the utilization rate, we do not disclose that, but in Colorado, there was major acquisition and capacity increase, and they are to come online. And also in Europe, we are expanding capacity there as well. So when facilities are launched, it takes some time before the utilization rate to go up. So if you're just focused on the existing facilities, utilization rate is high, but it will take some time before the new ones will catch up.
The capacity enhancement in Thailand for chlor-alkaline. So that's in 2016 for ASC, the Phase 6 capacity expansion with the same level of bucket capacity enhancements. However, the investment amount is almost doubled. Why is that the case in comparison to ASC Phase 6 capacity expansion?
Answer to that in Indonesia, Phase 6 had been conducted was quite a significant level of capacity enhancement. So I believe the question was addressed to the fact that our investment amount is far larger. So -- but actually, it is not quite equivalent. So back then, the Phase 6 back then as opposed to the capacity enhancement of chlor-alkali, it is related to PVC. So Phase 6 was 250,000 tonnage, but unit time is 400,000. So different size in terms of the capacity enhancement and also caustic soda is also large as well. VCM is pretty much the same. So in any case, PVC plant in general, in comparison to caustic soda, the investment amount is larger. So that is definitely one of the reasons.
Also, in comparison to before in 2016, the FX is different. Yen is weaker. That is another impact. Also personnel cost has been on the rise. Also investment in Indonesia was related to this big company in Indonesia. And we have been enhancing the funds. And again, as a number of notes, it is a sixth round of the investment. But this time, this is Vinythai Company and AGC Chemical Thailand, these 2 bases is the under scope.
And Vinythai, we have acquired them back in 2017. And even prior to the acquisition, they have been very much focusing on the sales. However, also, there has been interest in conducting more environmental measures, environmental-friendly measure that is. So that is why the reason for the investment this time around. So the capacity, of course, will be at enhance, but there are some incremental costs in tail because of the measures related to environment. And also, Vinythai, they had interest in conducting those measures. That is why the investment amount is large this time around.
Next questions, regarding the chlor-alkali market price. PCB, caustic soda market price going forward? What is your view, is the question?
Again, I showed you a slide on that subject earlier. Is it on the screen? Yes. As you can see on the slide. And as I explained earlier, the peak for PCV (sic) [ PVC ] and ethylene price spread-wise, it has peaked out, but caustic soda price remains high. So the market situation, we expect this market price to moderate gradually going forward. But we don't see any factors for major decline in the market price. So even if the price is to go down, we expect that to be on a moderate matter. And there are environmental regulations in China as well as the impact of COVID-19. There are such uncertainties. So it's very difficult to predict, but our gut feeling is that we can rule out a big drop. If it's going to go down, it will be a moderate decline. I'm afraid that's all I can say for now.
You can share with us the profit for Q2. The outlook for profit for Q2, if you can give us the breakdown, that would be helpful.
Well, we've -- it's very difficult to comment on this because, as you know, we haven't changed the full year forecast. Let me start off by saying on a full year basis, we did not actually conduct any revisiting. We didn't change our outlook. That is why we didn't change the guidance. So given the current trend for the overall business, JPY 95 billion for the first half of the year, Q1, JPY 57.8 billion. So it's about 60% progress, right, so far. So it is quite favorable after Q1. Whether this would drop or not, we're not seeing any -- expecting negative factors going forward. So in any case, we didn't actually change the guidance.
Now the outlook for Q2 if we continue as is, if you were to subtract that, JPY 37.2 billion will be the remainder. So in comparison to Q1, there will be a Q-on-Q decrease by JPY 20 billion. That is probably not going to happen. So that is why we didn't actually change our outlook. Now in terms of the outlook by business and segments, we expect the same trend as Q1 to continue for the rest -- for Q2. For the Chemicals, for instance, we expect to see -- continue to see strong numbers. Also for Glass in Electronics, we shall see the same trend continue. Perhaps for Glass, of course, we would hope that we would make stronger performance for automotive glass, but all in all, perhaps no major change.
Next. Do you have the target IRR for chlor-alkali investments? Are you expecting a return that would exceed the lowering of the share price valuation.
Miyaji will respond.
Well, we have been commenting on this for quite some time. At AGC, we use ROCE and others to manage our overall operation for chlor-alkali business. Regarding ROCE, it's a very good business, very good growth rate. We do not disclose specific IRR targets, but by making investment in this particular business, the ROCE of AGC overall would improve, of course, for Chemicals and for AGC overall. So as you can see here, ROCE for Chemicals, 21.5% it says, and for chlor-alkali, very high ROCE is being exhibited. So investments in that particular business will push up the ROCE overall. So we're not concerned about the investment in chlor-alkali business.
Next, related to Electronics segment. So by product, the profitability, 11.3% was display this quarter, it's down to 3.6%. There's been a sudden decline. Why is that the case? Also for the Electronic components, it has been increased from 15% to 21%. So if you can give us the reason behind that.
So in terms of the actual profit amount year-on-year, not much difference, as you can tell. But of course, the mix composition has changed for electronic components, electronic materials. So we have semiconductors and optoelectronics were the main driver. So because of that, electronic materials have been quite strong. Now for display, glass substrates for display, this is a yen-denominated business. So the production is conducted in Korea and China and Taiwan. So weaker yen has posed a very negative impact on our performance.
So one of the reasons why we are making large investments in China is precisely this because we have now we have larger size substrates. And because of that, the transportation. So especially for 11G size of substrates, we have been actually making use of different furnace. So that is why we have seen impact in the China business. So for display, that is why we see some of a weaker trend. So of course, it is hard to tell what will become of the ForEx, but for G11, depending on G11 operation, we may deploy more highly productive furnace in that way until lowering of the cost, if we were to do so. So in fact, we would have -- we wanted to make last year at the bottom. But in fact, perhaps even this year, we will continue to be -- it will continue to be challenging, but we shall see some recovery after that.
Next is LCD glass substrates. At [ AGC ] the shipments increased by higher single-digit percent year-on-year. In AGC, display glass, 1.7% decline in sales quarter-over-quarter. What was the situation? And what is the outlook for the second quarter?
Regarding the price, I already commented on that. Although on a slight basis, the price did go up partly in relation to the price mix -- the product mix. As for volume, the shipments, we are not following the shipment volume. That is not our target, and that's why we see some slight decline in shipment volume. So the difference in customer bit town and the types of products that we supply to accommodate that need, we had to reduce the volume to a certain extent, which has an impact. And quarter-on-quarter, we see a slight decline. But in the second quarter, the lower single-digit percent growth is expected to be in line with our peers. That's our expectation.
This will be the last question. So on a net profit basis, when was the record high in the past?
So Miyaji-san, please.
So you're talking about the Q1 net income? Well, it is for Q1, do we have that number, a record number in the past, the previous record high. I think it was 2010 or 2011, could have been the Q1 of 2011 -- 2010, 2011. So this is net income, net profit, this is. We don't have that number right now. So this is Q1. So if it's for the first quarter, I believe it was either 2010 or 2011. I'm not quite sure which 2011? 2011 it is, Q1, that was the previous record high. How much was that? Do you know the number? JPY 38.4 billion. Okay. Great. Thank you.
So it is time. With that, we would like to conclude the Q&A session.
So for the questions we couldn't address today, IR division will respond to them afterwards. Thank you very much for coming to this online briefing amidst your busy schedule. With that, we would like to conclude the financial results announcement meeting for Q1 for FY 2022.
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[Statements in English on this transcript were spoken by an interpreter present on the live call.]