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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning. I'm Kenichi Hori, CEO. Thank you for joining us today. I will begin by giving a summary of the first half operating results and yearly forecast as well as us reviewing progress on the areas of strategic focus outlined in our medium-term management plan. I will then hand over to our Global Controller, Tetsuya Shigeta, for details of our operating results.
The overall global economy continued to rebound during the second quarter despite a slowing in the pace of recovery in the U.S., China and elsewhere due to factors such as the spread of the COVID-19 delta variant and supply issues like for semiconductors, auto parts, et cetera.
Our operating results for the first half are significantly higher compared to the same period of the previous year, which was impacted by COVID-19 largely by steadily capturing economic recovery in a wide range of business areas and represents high progress compared to the previous forecast announced in August. We will continue to pursue, transform and grow while optimizing our portfolio and accelerating our engagement in growth areas. Please turn to Page 3, and I will summarize our operating results for the first half of the year.
Core Operating Cash Flow, COCF, for the period increased by JPY 252.8 billion, JPY 526.9 billion, and profit for the period increased by JPY 294.6 billion to JPY 404.6 billion year-on-year. Both results represent a historically high record for the first half of the year and represents high progress compared to the previous forecast announced at the time of financial results for the first quarter following our continued strong performance.
In light of these progresses, we are upwardly revising our yearly forecast with COCF forecast increasing by JPY 20 billion to JPY 920 billion, and profit forecast for the year increasing by JPY 80 billion to JPY 720 billion. As previously announced, although the interim dividend for the first half of the year is JPY 45 per share, the year-end dividend is increased to JPY 50 per share and the total annual dividend forecast for the year has increased by JPY 5 per share to JPY 95 per share.
Please turn to Page 4. We expect good performance in all segments, and we achieved progress of 59% and 63%, respectively, against previous forecast for COCF and profit. Trading businesses in chemicals, steel products and food was steady, and there were also contributions from pent-up demand in automotive business recovering in number of patients and COVID-19-related services, such as PCR testing in the health care and hospital business, recovery in shipping business following market conditions of bulker and container vessel and FVTPL profits.
In Energy, while progress rate is low because of recognizing accounting valuation gain loss related to derivative transactions to hedge LNG trading in advance during the first half of the year, concentration of dividend income in the second half of the year and delayed effect of oil and gas prices, we expect to be good through the full year. Please turn to Page 5, where I will discuss progress during the first half and the outlook for the second half of the year.
Let me firstly explain on continuous capturing of global recovery demand. Looking ahead to the second half of the year, we expect to maintain steady profitability, although we need to pay careful attention to impact of a supply chain issues in semiconductors and other areas. We see continued steady demand in materials-related business such as chemicals and steel products and steady automotive and fuel production businesses, although demand for certain products may slow in some business areas and regions.
In Mineral & Metal Resources, our balanced and highly cost competitive portfolio has positioned us to maintain strong earnings despite the impact of falling iron ore prices since August this year. In energy, recent rise in oil and gas prices will be reflected in the second half of the year and expected to contribute to full year profit.
With respect to strengthening our earnings base for sustainable growth, we have been progressing steadily with project implementation and portfolio transformation. Project progress examples in the first half of the year included: developing new mineral deposits in our Australian iron ore business. While in the oil and gas business, our activities have included executing loan agreements for the Waitsia project and beginning new FPSO operations.
We have also made considerable progress with business portfolio optimization, including in the Mineral & Metal Resources and the lifestyle segments. Our intention is to achieve sustainable growth through continuously strengthening and expanding our high-quality business clusters and establishing a strong business base.
Please turn to Page 6. I will now explain progress on the business areas of strategic focus that are defined in the current medium-term management plan. In Energy Solutions, we are organically building ties with areas adjacent to our existing core businesses with the aim of playing a leading role in energy transition. During the first half of the year, we reached agreement on a CCS feasibility study for ammonia production in Waitsia, invested in a green hydrogen refueling station business in New Zealand and invested in a biomass supply chain management company in India.
We also participated in a carbon solution business in Australia. Turning to Healthcare/Nutrition. We made further progress implementing the growth strategies for our existing businesses and through portfolio transformation, accelerated activities aimed at creating a foundation for growth.
At IHH Healthcare, growth strategy initiatives included reviewing its portfolio, hospital portfolio, strengthening the management base by creating group synergies and engaging more deeply in digital health care. In addition, we are bringing the investment to fruition through listing and partial sale of the shares in PHC Holdings and realizing the gains in its corporate value and listing Thorne.
In Market Asia, in the first quarter, we completed subscription to a convertible bond issued by the holding company of CT Corp, a consumer-focused conglomerate in Indonesia. In order to enhance its enterprise value, we are working on to strengthen its management base by dispatching director and secondees, expand its business in emerging Asian countries and develop jointly businesses in a wide range of business areas. We will further engage in growing and evolving consumer markets of Asia by leveraging CT Group's strong business foundation and locally developed competitive advantages.
Please turn to Page 7. As I noted at the start of my presentation, we have upwardly revised our yearly forecast for COCF to JPY 920 billion. Although we have downly revised our forecast by JPY 40 billion in Mineral & Metal Resources due to a change in iron ore price assumptions since the second quarter, forecast increases of JPY 25 billion in Chemicals, where market conditions are steady; JPY 20 billion in Machinery & Infrastructure, where dividends are increasing from automobile-related businesses; and the innovation and corporate development and iron and steel products. As a result, we have upwardly revised our yearly forecast by JPY 20 billion against JPY 900 billion across the company.
Please turn to Page 8. We have upwardly revised our yearly profit forecast to JPY 720 billion. In Machinery & Infrastructure, the automobile and shipping businesses are performing well. And in Lifestyle, we're benefiting from a partial sale of our stake in PHC Holdings and steady performance in the food business. So these segments have been upwardly revised by JPY 20 billion, respectively.
This time, we have upwardly revised our forecast in all segments except for Mineral & Metal resources, which is already significantly revised in the first quarter of this year.
We will now move to Page 9 to review our cash flow allocation in the first half. Cash in for the period was JPY 660 billion, comprising core operating cash flow of JPY 525 billion and asset recycling of JPY 135 billion. Principal assets recycled included loan collection in the copper business and sale of the contracts manufacturing business of MicroBiopharm Japan Company Limited. Cash out was JPY 415 billion, comprising investment in loans of JPY 235 billion and returns to shareholders of JPY 180 billion. Main projects of our investment and loss loans included subscribing to the convertible bond issued by the holding company of CT Corp, maintenance CapEx for existing oil and gas projects, LNG and power generation projects under development, Australian iron ore and coal operations and real estate business.
Please turn to Page 10. Last but not least, I will discuss the shareholder returns. During the current fiscal year, we have implemented share buybacks of JPY 125 billion up to now. And as I explained earlier, we have raised the annual dividend to JPY 95 per share, and this would be the minimum dividend. This is based on our expanded cash generation capabilities in a wide range of business service, including Machinery & Infrastructure and Chemicals. We will aim to enhance shareholder returns, reflecting cash generation capability.
That completes my presentation today. So I'll now hand over to our Global Controller, Tetsuya Shigeta, for details of first half performance.
Thank you. I'm Tetsuya Shigeta, Global Controller; and I will now provide details of our operating results for the first half. Please turn to Page 12. First, I will explain the main changes in core operating cash flow by segment year-on-year.
Core operating cash flow for the period was JPY 526.9 billion, a year-on-year increase of JPY 252.8 billion. In Mineral & Metal Resources, core operating cash flow increased by JPY 143.4 billion to JPY 240.6 billion, mainly due to higher sales price of iron ore and coal operations in Australia, an increase in dividends from iron ore and copper operations.
In Energy, core operating cash flow increased by JPY 26.9 billion to JPY 87.1 billion, mainly due to the increase in oil and gas prices and an increase in the LNG dividend. In Machinery & Infrastructure, core operating cash flow increased by JPY 50.8 billion to JPY 77.1 billion, mainly due to the increase in dividend from equity method affiliates.
In Chemicals, core operating cash flow increased by JPY 20.8 to JPY 43.5 billion, mainly due to steady performance of group companies and trading following favorable market conditions and steady demand in spite of increased raw materials cost.
In Iron & Steel Products, core operating cash flow increased by JPY 5.9 billion to JPY 5.4 billion. In Lifestyle, core operating cash flow increased by JPY 20.8 billion to JPY 22.1 billion, mainly due to recovery of food production business, steady food trading, recovery of fashion business and sale of Colombia Asia's business in India.
And Innovation & Corporate Development, core operating cash flow declined by JPY 4.3 billion to JPY 26.6 billion. Other factors such as expenses, interest taxes, et cetera, which were not allocated to business segments, totaled JPY 24.5 billion.
Please turn to Page 13. I will now explain the main year-on-year changes in profit by segment. Profit for the period increased by JPY 294.6 billion to JPY 404.6 billion. In Mineral & Metal Resources, profits increased by JPY 199.7 billion to JPY 271.0 billion due to factors such as higher sales price at Australian iron ore and coal operations and copper operations as well as the increase in the dividend from Vale.
In Energy, profit decreased by JPY 1.1 billion to negative JPY 4.8 billion, mainly due to valuation gain loss related to derivative transactions to hedge LNG trading. In Machinery & Infrastructure, profits increased by JPY 29.5 billion to JPY 52.9 billion, mainly due to good automotive and commercial vehicles businesses, primarily in North America.
In Chemicals, profits increased by JPY 16.9 billion to JPY 27.6 billion, mainly due to steady performance of group companies and trading following favorable market conditions and steady demand in spite of increased raw material costs. In iron and steel products, profits increased by JPY 18.0 billion to JPY 12.2 billion, mainly due to the improvement in operational rate at group companies due to recovery in automotive production and steady trading.
In Lifestyle, profits increased by JPY 32.8 billion to JPY 20.9 billion due to factors including strong performance in health care and hospital business, recovery of fashion and food production businesses and steady food trading. In Innovation & Corporate Development, profits increased by JPY 6.8 billion to JPY 30.8 billion, mainly due to increased profit from the real estate business.
Other factors such as expenses, interest taxes, et cetera, which were not allocated to business segments, totaled negative JPY 6.0 billion.
Please turn to Page 14. This page shows the main factors influencing year-on-year changes in profit. Base profit increased by approximately JPY 150 billion, mainly due to increase in dividend received from Vale and Australian iron ore business and strong performance of several segments such as Machinery & Infrastructure, Chemicals & Lifestyle. Looking at the resource-related cost volume, profit decreased by approximately JPY 11 billion, due to increase of sales commission corresponding to increase in iron ore prices.
Asset recycling resulted in a decrease of approximately JPY 9 billion, mainly due to impairment loss accompanied with sale of Falcon Power Generation business. In commodity prices Forex, profit increased by approximately JPY 136 billion, commodities prices increased approximately JPY 81 billion, due to steady iron ore prices and JPY 21 billion due to oil and gas prices.
Finally, valuation gain loss and special factors contributed to increase of approximately JPY 29 billion, mainly due to the absence of the impairment loss at Mozambique coal mine business included in the same period of the previous year.
Please turn to Page 15. Now let's take a look at the balance sheet as of the end of the first half. Compared to the end of March 2021, the interest-bearing debt increased by approximately JPY 60 billion to JPY 3.4 trillion, while shareholders' equity increased by approximately JPY 170 billion to JPY 4.7 trillion. As a result, net DE ratio dropped to 0.71x.
That concludes my presentation. Thank you for your attention.
Now we'd like to start the Q&A session.
I'd like to ask 2 questions, please. My first question about shareholder returns. JPY 5 increase in the dividend was announced. How did you come to this decision? Of course, your game power has increased. But in the non-resources, [indiscernible] resources, we are seeing good performance. So we were hoping that there will be more when it comes to the increase. So can you talk about how you came to this decision?
My second question, Chemicals and also in Lifestyle, the performance has been improved. And you mentioned that you are expecting slowdown in the second half. From the first quarter, second quarter, chemicals and the iron has seen some slowdown. Is that something that you are foreseeing? In these areas, in those segments, looking at the forecast, you not really reflecting your assumptions. So do you think that the trading is going to continue to be at a good performance? Or is it going to falter?
Thank you very much for your question. Hori will answer your question.
Thank you very much for your question. As you mentioned, our shareholders' return policy has not changed. So we look at the capability of our company to [ stationally ] increase earnings power, and we will look at the improvements to reflect that in increasing the dividend.
And when it comes to market conditions and others and our cash allocation situation as a whole, we will continue to do share repurchase. So the combination of the 2, that has not changed. And we aimed at the midpoint of the year. And we have looked at all the segments and the stationery earnings power is increasing all of the segments. And that is why we have decided to increase the dividend by JPY 5.
So we are still in the interim in the midpoint. So our earnings power is going to increase steadily going forward. So we hope to be able to reflect that in our dividend payment. And that is something that has not changed. So we will continue with our policy.
And also, when it comes to the management or operational environment, of course, we need to look at the changes in the trends or ties. But currently, we believe that the good situation is continuing currently. And from the beginning, depending on the products and depending on the regions, there were good parts and weak parts. However, as we are seeing COVID-19 recovery in different regions of the world, the profit opportunities is seen in different parts of the world, and that is continuing.
But if we look at the growth rates of different countries, there has been downward revisions announced. So meeting some improvement capabilities, we are going to see improvements going forward, and we will make appropriate measures and initiatives in order to answer to the situations. But towards the second half, we will diligently face what we can do and we will continue to monitor and make decisions as to what to do.
And we are now starting to take a billion trips overseas, and I myself have grown overseas as well. So as a member of the leadership team, the monitoring and checking the situations elsewhere, we will continue to evaluate the COVID-19 situation and review our positions, whether we actually have the earnings power necessary, that is something that we need to continue to confirm.
But looking at the situation related to COVID-19, that is a kind of management operation we would like to continue to implement. Of course, we believe there is still an upside. So that will be confirmed, and that will lead to our decisions to be made in the second half. Thank you.
I have 2 questions. Firstly, relating to the previous question about the true earnings power. This time, the total core operating cash flow has been raised from JPY 900 billion to JPY 920 billion, by JPY 20 billion. And for non-resources, JPY 60 billion has been raised and JPY 20 billion for Machinery & Infrastructure and JPY 25 billion for Chemicals. So how did you see the earnings power increase for these 2 segments?
So the trading and other businesses, Machinery Infrastructure & Chemicals that are affected by the market prices, and in what areas have you obtained your earnings power? And how do you see the sustainability to the next fiscal year? And in what occasions do you feel that your earnings power has been actually in house? That's the first question.
And the second one is iron's ore, rather than your company-specific assumption and just a general view is something I wanted to see. The crude steel production in China in the second half and next fiscal year, how do you see that? And also, the iron ore demand and supply, how do you see that demand supply based on that production prospect?
Present to answer the questions. Thank you for the questions. Well, what you said, is the Machinery Infrastructure & Chemicals, the earnings capability enhancement, significant enhancement is something that we have assumed.
But what's common between these 2 segments is the following. The globally earnings power, global earning power has been latently there, but it has actually borne fruits. The Machinery & Infrastructure asset's portfolio has been well balanced and distributed universally around the world, and that has been generating profits. And we have been going through a restructuring of the assets, reshuffling of assets as we go along, and the things have come out as we had expected.
And in the North America, those businesses around the automotive industry has been performing well in South America. And in North America, there were significant changes in the levels that we have seen. And the new vehicles transactions volume and the used cars and rented cars services, we have been combining those services originally in the North America, but there have been many opportunities to increase under the pandemic. So the menu that are being offered have actually more fit -- become more fit in the market.
And even if the vehicles are the next-generation vehicles, those services will be continued as well. So we have been able to enhance our base power. And as for Chemicals, there have been the capturing of opportunities globally. And there are basic chemicals and also high-performance chemicals. We used to call this precision chemicals at the downstream. So we're doing both, and both have trading and businesses as a manufacturer.
So the basic chemicals that are now heated up, even if they settle down, there is an input cost that will be reduced for the downstream chemicals. So we will be able to maintain a well balance for the whole portfolio, and that is now being presented. And we can maintain the earnings power sustainably through those businesses.
And to answer your second question, the crude steel production in China in the second half, the environmental regulation will be the focal point. And the Chinese government authority is now beginning to apply control over the crude steel production and power demand has been now being as reported. So the crude steel production should be seen differently from the previous year.
But for the steel, the supply of the steel or iron ore, the production has not increased under the pandemic. So based on that, in the second half, we have come up with the forecast for the whole business plan. So the focus that we have come up with, this is based on those interpretations.
And as for the construction demand or there are steel demand for basic businesses in China, from the mid-term perspective, I think they will realize what they have planned originally. So there might -- the decline that we're seeing is just a tentative, but we would like to closely watch the situation as we go along. Thank you.
As for the crude steel production, there is a follow-up question. In the second half, if the environmental regulations and power shortage because of that crude steel production could be curved. But in the next fiscal year, the power shortage was more of a factor in the second half. So in the next fiscal year, do you think that things will be normalized?
Well, it's, I think, too early to predict what's going to happen in the next fiscal year. So they do have the steel supply responsibility that they have to fulfill as a steel manufacturer in China. And there are many data points. So we'd like to closely watch them in the second half as we -- when we get to the point where we have to have a business plan for the next fiscal year, there will be many, enough data points for us to do more prediction. Thank you.
I have 2 questions I'd like to ask. In the first half, the valuation on those -- the transient impact was very small. And with the base profit being enhanced, you were able to gain a lot of profit. So of course, it will depend on the external environment. But how would you be able to control this going forward? And how would you maneuver the future?
And the second one about the environment of energy demand, CO2 emissions, the GHG emission reduction, these are becoming more stricter every day. But in the existing business, do you need CCS responses? Or in the future, are you looking for a stricter restriction, so CCS responses? So what are the impact on your interest going forward?
Thank you very much. Hori will answer your question. .
Thank you very much for your question. As about the transient factors, in the first half, as you have mentioned, there were onetime factors and no one-time factors. And of course, this made everything very visible. So I think that was good. When it comes to valuation and impairment losses, these were not very favorable. So we like to minimize them as much as possible going forward. And we'd like to take measures before they happen so that they can be avoided. And that is something that we are going to continue to work on throughout the company.
And on the other hand, at the moment, we are making profits. But in the future, we want to move on to a different segment and maybe somebody else should own such businesses. So we will look at asset reallocation. So there are positive profits and also, we will work on switching or changing the portfolio allocation going forward.
So transient loss may be made, but we still need to exit such kind of businesses. So we will disclose the content going forward if we are to make such decisions going forward.
And FVTPL, we gave that name to all the results of the asset and the investments, the assets and capital and profits coming out of them. They look to be transient or one time. However, for us, it is just a part of our ordinary business. So as a company, there may be a portfolio and it may show certain results. And at the beginning of the year, it's very difficult to come up with a budget. We have to look at the market situation and strategy of the capital events by each divisions and companies, and that is something very difficult to forecast.
But in a long history, we have been working on this. So part of the earnings are being comprised by such operations and businesses. And how we are going to participate, how we try to show or make it visible I think they need to use some creativity, but they may be transient, but they are part of the ordinary profit, and that is something we like you to take into consideration.
And as for your question on energy, of course, energy transition, what we as a company like to create when it comes to business base going forward, I think that is an important part of business strategy or plan going forward. And our existing energy business, the GHG is quite low and base load is being made out of it. So it is very advantageous.
So we have limited time, but we hope that we can work as a bridge fuel going forward so that we can cater to the responsibility to supply energy. But when it comes to energy transition, renewable energy and we need to couple that with, for example, storage batteries and such new technologies so that we'll be able to adjust electric supply. That is something that we need to continue to work on.
And they -- we're working in regions where gas and oil is being produced. So carbon capture projects. These will be included in our operations going forward. And by doing so, you are focused on ammonia or hydrogen. And the next-generation energy in total, the gas to be [ emissioned ] is something that we need to think about. So we need to combine carbon capture risk, for example, ammonia production. So through verifications, we need to see tangible results. In order to utilize. For example, ammonia, we need to look at establishing infrastructure so that we will conduct projects in different areas in parallel, so that can be verified. I'm sorry to be taking long, but when it comes to fuel, mobility, et cetera, we will look at few Next-generation biofuel is something that we will look at with the other mobility industries, we will verify the situation and possibilities going forward. And we have an energy transition business in a company, which will further be established going forward. Thank you.
There are 2 questions. Firstly, it might be too early, but I'd like to ask about the business performance in the next fiscal year. At the beginning of the year, the fiscal year, the increasing profit trend is something that you are foreseeing. That's what he said. But the earnings power has been enhanced this much. And given that, ahead of the next fiscal year, what is your prospect?
Well, there could be an upside. That's what you said earlier. So the Mineral & Metal Resources even if there is a decline, you may be able to cover that. So can you explain more about that?
And second question is about profit in trading business, how you should look at that. In the first half, supply chain disruptions and confusions were there, and trading house resin [ detail ] was recognized and earnings may have increased because of that. But once the COVID-19 runs its course and subsides, can you maintain that trading profit? Or do you see the decline, the trading profit going forward? How are you looking at that? Those are the 2 questions.
Thank you for the questions. The President will answer those questions.
Thank you for the questions. For the next fiscal year, well, we are at the midpoint. And talking about the business plan and budget for the next fiscal year is quite difficult. That's what I would like you to understand. I'm saying this because the COVID-19 and post COVID-19, there is pent-up demand. But there are not many examples we can refer to. And something might be going well. And this could lead to the network expansion, and it could increase the business. That is something for sure. But on the other hand, as you said, in this confusion status, of course, we would like to provide services, and we like to take whatever opportunities that we can capture, but we have to verify whether this would be sustainable.
The earnings power is on the increasing trend. But where is the power, there is no reproducibility. So that's what we need to do in a precise manner. And society changes. And if there is a distortion in supply chain, the business opportunities that have not been noticed have been now identified. And the people in the field are now making preparations for the next fiscal year. So this could lead to an upside.
So I look too closely what's that. And also trading in the market, the market itself cannot be controlled. So we have to closely watch that and then incorporate it into the budget. Even if you can't control the market prices, but the way you capture the businesses around the market could be improved. So that's what we're doing now.
For example, LNG in the U.S., there is a Cameron project in the Gulf region. And Cameron is an infrastructure type, toll conversion business model. So in that sense, it is highly affected by the market. But then at the same time, the LNG that we have purchased an off-stake, how you combine that LNG and the LNG from Cameron. And this could be a stable business. And these are the kind of things that we are doing on a day-to-day basis to see what sort of business opportunities that will be there in the next fiscal year.
And in so doing, we can come up with [ sabeous ] plan for the next fiscal year. We have just completed the first half. And the new message that we are communicating to the employees is to do such preparations that we have to focus on as a company ahead of the next fiscal year. So I hope that we will be able to talk about this more down the road.
And with regard to trading, Well, I think I partially answered the question already, but so we are going through trials and errors to see the new business opportunities and also how we can convert those new businesses into the sustainable businesses or business in sustainability. So we'd like to answer that question, combining those 2.
I would like to ask 2 questions, please. My first question, as was explained earlier, it's related to your energy strategy. I'd like to confirm, you talked about transition asset. We need to understand that. But in wide areas in wider regions, you'll be implementing that.
And of course, for harvesting, I think you will take the next 10 years, 20 years. So it is going to be a long-term investments, strategic focus, and that is something that I understood.
However, because it's a traditional asset, it does have risks involved as well. So not working out in general, I think you need to be able to narrow it down in some areas in some time points going forward.
So in order to leverage your strengths, what is the direction going forward in narrowing down on the focus when it comes to energy business going forward. Can you talk and give us hints in the midterm, please? And LNG is one part of it. In your company, of course, it's linked to the oil. So it is not really linked to LNG. But when it comes to oil production, that production is being suppressed. And of course, the tightening of supply and demand may continue. So is your perspective on demand and supply situation changing going forward?
And also in Mozambique, the forced majeure was talked about at the beginning of the year. Do you have any updates on that point, please? So I have questions -- I have asked questions on energy. And CT Group investment. So you have subscribed to convertible bonds. So would you be -- you've mentioned that you'll be focusing on making profits from that. But in order to gain benefits from that business, do you think that the investment opportunities will continue to surface going forward. So in the medium-term management plan, do you think the weight of that business is increasing. So can you talk about the future prospects, please?
Thank you very much for your question. And Hori will answer your question.
Thank you very much for the questions. So you have asked questions of energy in general and CT Group? Yes, is that correct?
Yes.
And when it comes to energy transition, we need to select and also focus, and I think that is something that you have indicated in your company transition fuel LNG is a core of the transition fuel and competitive projects with good reserves, they may be time-consuming, but that is something that we are working on. These numbers projects that we are working on, we need to make sure that we'll be able to complete them.
And in the world's energy transition that's being discussed, I believe that our projects will be useful as a bridging project. And when it comes to LNG operation itself, it is a print. We need to be effective, and that is going to be result in reduction in CO2 emissions.
So with capable operators, we'd like to continue with such projects and endeavors. And when it comes to coal, of course, we need to look at thermal coal. And of course, when it comes to Metallurgical coal and Thermal coal, I think they may be mixed together, but coal for energy, the assets in substance, I think we need to minimize. So that is a kind of focuses that we'll be giving with energy projects.
When it comes to China, they have its own situation. And when it comes to coal, there has been supply disruptions. Therefore, coal market, I think we need to really deepen our understanding -- it may be related to geopolitical factors as well. But in energy, as a whole, in general, we are trying to make decisions on coal dependent on our understanding of the situation. And in such a situation, by combining different businesses and different projects, we need to create new projects in energy. And the earnings power that we have established, we want to grow, and that is a plan that we have.
And with that as a direction, going forward, we want to select and also expand the portfolio of verification further, and that will be combined going forward. And when it comes to CT Corp, we have had discussions with them, and they are looking at horizontal expansion from Indonesia to other regions. And including Japan and from U.S. and also from Europe, they want to import new materials. Products and services that the consumers need in Indonesia. That is the kind of expectation that they have for us, and that is their target.
So there are some businesses that we can lead, not only in Indonesia and in other areas as well. So there is a possibility that we make additional investments in the adjacent areas. So they are included in the potential menu, however, in the short term, in the CT Corp, we do not expect a new big investment to surface in the short term, but we are in the process of evaluating the possibilities and capabilities. If there are good prospects, we will disclose the information going forward.
And next on Mozambique. To update you on the situation in Mozambique, of course, to improve the security, Mozambique government has been taking a number of measures. And the President of Mozambique has made a declarations of what they can do, and they have completed their implementation. And of course, when it comes to security improvement, that has shown great improvement. However, with the security improvement we believe that in the areas where we are implementing our projects, we need to have long-term steady lifestyle security for the people living there. So long term, big projects is going to restart in those areas that we are involved in.
We would like to confirm the security of those areas. So with that, operator, we would like to discuss the situation with Total so that we'll be able to continue with the projects and restart the projects. The commitment to our project has not changed. So start-up production, weather is going to be delayed. I think the hurdle is higher. However, we like to analyze the scenarios well to make the decision necessary. Thank you very much.
There are 2 questions. Firstly, about returns to the shareholders. In this fiscal year, to the core operating cash flow, the total shareholder return is 30% sharp at the moment. And in your case, the mid -- the 33% is the 3-year target for the medium-term management initiative. If you look at the single year, the ratio could change significantly. . So about additional return, especially the share buyback. Is there any possibility that we can expect more? So can you share with us your thoughts on the shareholder return at the moment? That's the first question.
And second question. In the medium-term management initiative, the ROIC has been introduced as an internal index. So what are the targets of ROIC? ROIC, it's not clear to us who are in outside of the company. So probably, this is linked to the assessment of the performance of employees. So what has changed with the introduction of ROIC. That's not clear to us externally. So if there are any examples that you can share with us, that will be appreciated. Those are the 2 questions.
President, Hori, will answer those questions.
Thank you for the questions. As for the return -- shareholder return, the base earnings part is the determinant for dividend. And also, if you look at the characteristics of the market prices and portfolio reshuffling and total cash allocation, we are agilely in agile manner, conducting a share buyback that basic policy has not changed.
And with that policy, this currently running medium-term management initiative. In this 3-year period, the 33% of core operating cash flow, that's what I said the other day. Looking at that target, we are proceeding with the shareholder return, and there's no change in that. So in that sense, we are still in the midpoint of the one fiscal year. And going forward, what timing are we going to consider and execute share buyback. And in what way, well, that is something that we'll continuously verify and examine and verify. And once we are ready, we are going to execute that.
With regard to the shareholder return, as you can see on the page of return to the shareholders, in this fiscal year, we have done JPY 125 billion in share buyback already. And that has us led to the improvement in capital efficiency. And as I said last time, the cash flow per share that is owned by shareholders or what is the size of the cash flow? And then shareholder return is linked with the promotion of capital efficiency because that would made it easier for us to look at that. And then a combination of dividend and share buyback is considered to further enhance the returns to the shareholders, and that is what we are going to continue to do.
So in the second half, various progress is in businesses and business environment is something that we're going to watch to make decisions on shareholder returns. That has not changed yet at all. And what I wanted to say more is that the investments may seem to be somewhat inactive. But once COVID-19 is going to over we're going outside and look at the pipeline for investments that is becoming richer. So we are being selective. So we're not going to do this lightly.
But if there are any good deals, then we will work on that. So in the overall cash earnings power, we are going to maintain the return to the balance of return to the shareholders. That has -- that will not change, but at the same time, how the investments are becoming more substantive, that's what we're going to continue to see because this will be important in enterprise value enhancement in the longer term. And that balanced policy will not change.
And with regard to ROIC, the effect of introduction of ROIC, there is -- there are multiple, whether the base earnings power has enhanced or not, I think this is related to, cost related to that questions at all. And the crisis of pandemic has actually pushed us forward. And globally, some companies may think that they have to enhance organizational efficiency and those are seen in our overseas affiliates as well. And breakeven point in various companies has -- may have been lowered slightly because you have to survive in pandemic. That was the crisis situation.
In order to enhance ROIC, you have to reduce breakeven point. And those are the 2 positive factors to push us forward. And this could become a leverage in the future. And also, there has been already effect that has been seen and the changes in the level of earnings power is now being felt by us because of that.
And also IHH, the business management data of the hospital is -- can be seen in a centralized manner because we have a broad geographic area to cover. And best practices could be applied in various hospitals so that we can reduce the expenses in investments, with the centralized investments. And M&A roll-ups should be done, and we have now the means to do that.
Enhancing operational leverage has become possible, and that is a big factor. It's not applied to everything. But with the ROIC more in mind, these are more seen in various businesses units. And how much we can -- we were able to enhance the business earnings power, that is something that we're going to continue to see in the next fiscal year. And that's -- I hope I was able to communicate the current status with this message. Well, CFO would like to add that.
Well, with the introduction of ROIC, in order to make it the internal indices, if there is a volatility, then the principal could change. And so there are some technical issues. But in each of the business areas, how much growth potential, that is the vertical axis and the profitability by ROIC is in the horizontal axis and 4 quadrant analysis is done in the portfolio committee meetings, and then we talk to the business units in the field to see how you can measure with ROIC whether this can lead to the enhancement of profitability.
And what's different most is that as we add up the business plans rather than just talking to see business unit head. Well, this is the expectation level that you need to fulfill. That is something that has penetrated into the field, not just to the top management. And that is a big factor.
So in the strategic meetings and in meetings with the management team, quantitative discussions have enhanced this meaning now because of ROIC. And this -- what has been done from the past, the enhancement of the quality of the existing businesses where we are seeing the tangible results that has become clearer and more visible.
Now we have a question coming through the system. I'd like to read out the question. This is a question on the forecast for the profit in the second half. For iron and steel products and also for Innovation & Corporate Development, excluding the transient profit in the July to September period. So net profit times 2. Will that be less than the second half '21 profit? What are the factors for reduction in the profit? Is there any factors that is involved?
And Methionine and Methanol, the market is improving. The second half chemicals profit projection compared to the second half of '21, is the factors the same? Or is there different factors involved? That is a question that we have received. CFO Uchida, will answer your question.
So this is about iron and also steel products, yes. When it comes to iron steel products and also chemicals, the second quarter because of reduction in automobile production and supply shortages of semiconductors, activities is going to go down. And in the -- after the second quarter, the performance did not really reflect the situations in a strong manner. The movements that we have seen, whether the margin is going to continue, we have taken a conservative position. And how much of an impact we are going to see in the third quarter and fourth quarter, that is something we will continue to monitor closely.
In the second quarter, we may have seen a platform model. However, maybe it is going to be stable, but we believe that the performance may have room to grow. And when it comes to Innovation & Corporate Development, FVTPL in the first half, that was recorded and the ratio was quite big.
In the third quarter, in fourth quarter, the market and also the stock price, that is something that we are looking from a conservative position. And when it comes to chemicals, as I mentioned earlier, there are some trading impacts, but so looking at the current market condition, we are seeing strength. And that will continue, and that is our projection. And the margin, when we look at the raw materials prices and other product prices, we believe that we'll be able to secure certain degree profit. So we hope it will continue to be flat. Thank you.
If there are no other questions, then we would like to conclude the briefing and also Q&A. Last but not least, I would like to give you the announcement. By the end of the PowerPoint presentation, you can see the ESG Day that will be held at December 3.
For details, there will be invitation letter to you via e-mail, and I hope everybody will participate.
With that, I would like to conclude this earnings conference. Thank you very much for joining us despite your busy schedule today. Thank you.