Azbil Corp Aktie

Thank you very much for joining Azbil Corporation's Fiscal Year 2025 Financial Results Briefing today. Although this session is being held online, I will strive to provide clear and thorough explanations. I appreciate your attention.

Let me begin with today's agenda. First, I will explain our consolidated financial results for fiscal 2025, followed by our consolidated financial plan for fiscal 2026. After that, I will cover shareholder returns, the progress of our Medium-Term Plan, and finally, introduce our Azbil Group's new purpose and vision.

Please note that the impact of the situation in the Middle East on our financial performance has been incorporated to the extent currently identifiable. Additionally, starting from fiscal 2026, we will voluntarily adopt the International Finance Reporting Standards or IFRS, and therefore, our consolidated financial plan for fiscal 2026 in this presentation is based on IFRS.

Let me highlight the key points for this briefing. For fiscal 2025, both the Building Automation and Advanced Automation businesses captured favorable market conditions, resulting in year-on-year increases from orders received through the segment profit. On the other hand, in the Life Automation Business, results decreased year-on-year due to the impact of the transfer of Azbil Telstar the previous year.

As a result, at the Group level, orders received and net sales decreased. However, operating income increased compared to the previous year, driven by profitability enhancement measures. Excluding the impact of the transfer, both orders received and net sales effectively increased. Net income attributable to owners of the parent decreased year-on-year, mainly because, in the previous year, a gain on the sale of Azbil Telstar amounting to JPY 7.6 billion had been recorded as extraordinary income.

Turning to our fiscal 2026 plan. We expect revenue growth across all businesses, with the Building Automation Business leading the growth supported by a strong order backlog. On the profit side, although an increase in expenses is anticipated, we aim to achieve growth in business profit through the effects of profitability enhancement measures.

Regarding shareholder returns, based on strengthened profitability of our business foundation achieved through fiscal 2025 and more efficient balance sheet management, we plan to increase the yearend dividend for fiscal 2025. For fiscal 2026, we plan not only a further dividend increase, but also a commemorative dividend to mark our 120th anniversary. In addition, we will expand the scale of share buybacks in fiscal 2026.

As for the progress of our Medium-Term Plan, although there are differences in progress among businesses, overall we have exceeded our initial targets. While the business environment remains uncertain due to factors such as the situation in the Middle East, we will respond swiftly and appropriately and continue to steadily implement our initiatives.

At this stage, we are not revising our fiscal 2027 targets, which represents the final year of the plan. However, we will consider a review once we gain clearer visibility on the current uncertainties, taking the progress of our medium-term plan into account. Furthermore, as the Azbil Group celebrates its 120th anniversary this year, we have newly defined our purpose and vision for further growth, which I will introduce later.

I will now explain our consolidated financial results for fiscal 2025. These are our financial results for fiscal 2025.

Orders received increased in the Building Automation Business. However, due to the impact of the transfer of Azbil Telstar in the Life Automation Business in the previous fiscal year, total orders received amounted to JPY 302.3 billion, representing a decrease of JPY 2.3 billion or 0.8% year-on-year.

Sales increased in the Building Automation and Advanced Automation businesses, but decreased overall to JPY 298.9 billion, down JPY 1.4 billion or 0.5% year-on-year, for the same reason as orders received. As mentioned earlier, excluding the impact of the transfer, both orders received and net sales increased effectively, and we achieved our plan.

Operating income improved significantly to JPY 47.3 billion despite higher personnel and other expenses, because of profitability enhancement measures, including cost pass-through. This represents an increase of JPY 5.8 billion or 14.0% year-on-year, exceeding our plan. Net income attributable to owners of the parent decreased to JPY 38.5 billion, down JPY 2.3 billion or 4.5% year-on-year, mainly due to the absence of the extraordinary gain from the Azbil Telstar sale recorded in the previous year. However, it still significantly exceeded our plan.

This is a summary of our results by segment. From here, I will explain each business in more detail.

First, the Building Automation Business. Market conditions remain favorable with continued robust demand in domestic urban redevelopment, renovation and services as well as energy saving solutions. Under these conditions, orders received increased year-on-year supported by solid market demand and contributions from large-scale projects.

Sales increased year-on-year and exceeded our plan. While sales for new buildings decreased, efforts to level workload led to growth in existing buildings and services, and overseas business also expanded. Segment profit increased significantly year-on-year, exceeding the plan as higher sales and profitability improvements more than offset cost increases.

Next, the Advanced Automation Business. The process automation market remained healthy, particularly in Japan. Meanwhile, the factory automation market has shown signs of recovery recently, although overall recovery has been gradual. Orders received remained at the same level as the previous year. Overseas process automation decreased due to large orders booked at the end of the previous year, but domestic process automation and factory automation increased.

Sales increased year-on-year in domestic and overseas process automation market as well as factory automation market, although slightly below the plan. Segment profit increased significantly year-on-year and met the plan, driven by higher sales, profitability enhancement measures and factors such as favorable product mix, despite rising costs.

Turning to the Life Automation Business. Market conditions include steady replacement demand for gas and water meters required by law, with expected growth in demand for smart meters. On the other hand, in the residential central air conditioning systems field, rising construction costs have affected demand for detached housing.

Both orders received and sales decreased significantly year-on-year due to the transfer of Azbil Telstar in the previous year. While sales fell short of the plan, excluding the transfer impact, both orders received and sales effectively increased year-on-year. Segment profit decreased year-on-year and fell short of the plan due to the transfer impact as well as rising material costs and higher personnel expenses.

This slide shows overseas sales by region. Although overall sales decreased year-on-year due to the impact of the Azbil Telstar transfer, the Building Automation Business grew mainly in Southeast Asia and the Advanced Automation Business expanded primarily in North America.

Next, I will explain our financial position. Regarding assets, total assets increased, mainly due to increases in cash and deposits as well as investment securities.

On the liability side, current liabilities decreased, primarily because the first grant under the revised restricted stock-based compensation plan for employees was made to those in service. However, long-term borrowings increased as we raised funds from external financial institutions through a trust scheme to acquire our shares in connection with the reintroduction of the employee stock ownership incentive plan. As a result, total liabilities increased.

Net assets decreased due to share buybacks and dividend payments. However, overall net assets increased, supported by the recording of net income attributable to owners of the parent and an increase in valuation differences on available-for-sale securities.

This slide shows our cash flow situation. Free cash flow decreased year-on-year. This was due to a decrease in cash flow from operating activities, mainly reflecting higher income tax payments as well as the cash used in investing activities becoming JPY 6.4 billion. While the previous fiscal year included proceeds from the sale of equity interest in affiliates, such as Azbil Telstar, this fiscal year saw a continuous capital investment.

Cash flow from financing activities remained at roughly the same level as the previous year. Although the previous fiscal year included cash outflows from the repayment of short-term borrowings at some overseas subsidiaries, this fiscal year saw an increase in dividend payments.

From here, I will explain our consolidated financial plan for fiscal 2026. As mentioned earlier, this plan reflects the currently identifiable impacts of the situation in the Middle East and is based on IFRS. For details on the impact of IFRS adoption, please refer to Page 36 of this presentation material.

First, our fiscal 2026 financial plan is shown here. We expect the business environment surrounding the Building Automation Business to remain strong. In the Advanced Automation Business, we anticipate a continued recovery in the factory automation market from the end of the previous fiscal year.

Against this backdrop, we plan revenue growth across all business segments. We project revenue of JPY 315.0 billion, an increase of JPY 16.0 billion compared to fiscal 2025. On the profit side, although further inflation and increases in costs such as labor costs are expected, we will work on profitability enhancement measures, including cost pass-through as well as operational efficiency improvements through digital transformation. As a result, we aim to increase business profit by JPY 1.9 billion to JPY 48.2 billion.

While uncertainty is rising, our view of future business opportunities in the automation sector remains unchanged. We will continue to steadily execute our Medium-Term Plan, including investments in human capital development, strengthening product competitiveness and promoting DX to achieve sustainable growth.

These are our plans by segment. First, for the Building Automation Business, we expect revenue growth supported by a strong market environment and a large order backlog. Although increases in outsourcing costs and personnel expenses are anticipated, we plan profit growth driven by higher revenue, improved margin at the point of order receipt and cost pass-through.

Next, the Advanced Automation business. We expect revenue growth based on the recovery of the factory automation market. However, due to factors such as rising material costs, increased personnel expenses and a rebound from the favorable product mix in the previous year, profit is expected to remain at roughly the same level as the previous fiscal year.

For the Life Automation Business, we plan revenue growth, mainly driven by expansion in the Lifeline field. Although expenses such as personnel expenses are expected to rise, we anticipate profit growth through price revisions and other profitability enhancement measures.

Here are further details of the plan by segment. For the Building Automation Business, as mentioned earlier, revenue is expected to increase against the backdrop of robust market conditions and a large order backlog. Although there will be increases in outsourcing costs and personnel expenses, the plan anticipates increased profits resulting from revenue growth and such measures as increasing margins at the point of order receipt and cost pass-through.

For the Advanced Automation Business, the impact of geopolitical risks is a cause for concern, but we plan for increased revenue, thanks to the factory automation market recovery. We will continue implementing measures to strengthen profitability, but anticipate business profit on a par with fiscal 2025 owing to rising costs for parts and materials and increased personnel expenses and the effect of the fiscal 2025 product mix.

In the Life Automation Business, we plan to increase revenue primarily through growth in the Lifeline field. And while personnel and other expenses are expected to rise, we anticipate higher profits due to the success of measures to improve profitability, including price adjustments.

From here, I will explain shareholder returns. We plan to increase the yearend dividend for fiscal 2025. And for fiscal 2026, we plan both an increase in the ordinary dividend and a commemorative dividend for our 120th anniversary. In addition, we plan to expand the share buyback program in fiscal 2026 to a maximum of JPY 20.0 billion.

These decisions are based on several factors: the strengthening of our earnings base through the execution of our Medium-Term Plan, which enabled us to achieve results exceeding our initial targets in fiscal 2025; our assessment that we will be able to secure the funds necessary for future growth investments and to withstand potential deterioration in the business environment due to geopolitical risks such as those in the Middle East, including through the utilization of debt; and our commitment to enhancing shareholder returns and improving capital efficiency through disciplined capital management.

Here are the details of our dividend plan. For fiscal 2025, net income attributable to owners of the parent significantly exceeded the revised plan announced in October, and our earnings capacity improved steadily. Accordingly, we will increase the yearend dividend by JPY 6, resulting in an annual dividend of JPY 32 per share.

For fiscal 2026, we will further enhance shareholder returns and aim to achieve a higher and stable level of dividends. We plan to increase the ordinary dividend by JPY 6, resulting in an interim dividend of JPY 19 and a yearend dividend of JPY 19, for an annual total of JPY 38 per share. In addition, to commemorate the 120th anniversary of our founding and express our appreciation to our shareholders, we plan to pay a commemorative dividend of JPY 12 per share at the interim period. This will bring the total annual dividend for fiscal 2026 to JPY 50 per share. Our dividend on equity, which we use as a key indicator for dividends, is expected to be 6.7% for fiscal 2025 and 10.7% for fiscal 2026, exceeding the 6.0% target set in our Medium-Term Plan.

Next, let me explain our share buyback plan. For fiscal 2026, we plan to conduct share buybacks to a maximum of JPY 20.0 billion or 32 million shares. Based on our ROE targets, we will continue to pursue business expansion and profitability enhancement measures while implementing disciplined capital management. Through this, we aim to enhance capital efficiency and further strengthen shareholder returns.

Although uncertainty in the business environment is increasing, including geopolitical risks such as the situation in the Middle East, these buybacks, like dividends, will be funded based on the results we have achieved to date. Given our strengthened earnings base and the potential use of debt, we believe that further growth investments and enhanced shareholder returns will remain possible going forward. Please note that the shares to be acquired will not be immediately canceled. In light of the uncertain business environment, including the oil-related sector, we will retain flexibility and respond appropriately depending on future conditions.

This slide shows the trend in shareholder returns. As I explained earlier, for fiscal 2025, we increased the dividend by JPY 8 compared to fiscal 2024. And for fiscal 2026, we plan a further increase of JPY 18, including the commemorative dividend.

From here, I will explain the progress of our Medium-Term Plan to date. This slide outlines our Medium-Term Plan. Under the theme of evolution and co-creation and based on the Azbil Group's unique business model, we are advancing investments in human capital, strengthening product competitiveness, and promoting digital transformation with the aim of achieving both revenue growth and improved profitability.

In fiscal 2025, although there were differences among businesses, overall, both net sales and profits exceeded our initial plan. While uncertainty in the business environment is increasing, including developments in the Middle East, we will respond appropriately and steadily advance investments for growth, aiming to achieve continuous value creation and sustainable growth.

As mentioned earlier, we will not revise our fiscal 2027 targets at this time due to the uncertain outlook. However, we will consider revisions once there is greater visibility, taking into account progress under the plan.

Let me explain the Azbil Group's unique business model. We define growth businesses as those in which customers make investments to address new challenges. By expanding our customer base through growth businesses and enhancing sustainability and profitability through our core businesses, we aim to create a continuous cycle, from growth business to core business and back again, thereby achieving sustainable business expansion. In today's uncertain business environment, we believe this model is highly effective in delivering value.

This slide summarizes the progress of each business and our overseas operations in fiscal 2025, the first year of the Medium-Term Plan. In the Building Automation Business, the business remained strong both in Japan and overseas, exceeding our initial plan. We expect favorable conditions to continue and we'll strive for sustainable long-term growth.

In the Advanced Automation Business, recovery in the factory automation market was slower than expected, but the process automation market expanded and favorable product mix contributed to higher profitability. In fiscal 2026, although there will be some rebound from last year's product mix, we will steadily capture the recovery in factory automation demand and aim to catch up to plan levels.

In the Life Automation Business, the expansion of the smart-metering-as-a-service business and the rollout of new products have taken longer than expected, and some initiatives have progressed more slowly than planned. Going forward, we will focus on cost pass-through, profitability-oriented sales strategies and expanding sales of new products to drive growth.

For overseas operations, we have been expanding our customer base in both the Building Automation and Advanced Automation businesses. We have also strengthened our operational structure, including the establishment of a sales base in Malaysia. As noted earlier, we will consider revising the fiscal 2027 plan once the outlook becomes clearer.

Let me explain our profitability improvement measures and progress. In fiscal 2025, we made steady progress in various measures aimed at improving business profitability, including improving business mix, reducing cost of products and services, and optimizing pricing levels through measures such as cost pass-through. In fiscal 2026, although cost increases exceeding initial expectations are anticipated due to the current business environment, we will continue to implement these initiatives, including improving business mix, reducing costs and optimizing pricing to further enhance profitability.

Let me explain the progress of investments to strengthen our business model. We are making focused investments in human capital, product competitiveness and digital transformation to reinforce the Azbil Group's unique business model. While investments in human capital and DX are progressing as planned, there has been slight delay in strengthening product competitiveness. We will accelerate this by reorganizing our development structure. We believe that making steady investments at this point is essential for sustainable growth.

This slide presents examples of collaborations and investments aimed at strengthening product capabilities and business development. To strengthen product competitiveness, which is essential for business growth, and to explore new business domains, we have engaged in collaborations with other companies, investments in venture capital and participation in various projects. In addition to internal investments in human capital, product development and DX, we will pursue further growth through strategic investments, including M&A.

This slide illustrates our future balance sheet approach with an eye on capital efficiency. Based on our strong financial stability and liquidity supported by solid performance, we will implement proactive shareholder returns under a disciplined capital management while also making growth investments, including the use of external debt, to expand our business.

Capital efficiency has steadily improved, with ROE reaching 15.7% in fiscal 2025. We will continue to work toward further improvement in capital efficiency. As mentioned earlier, we will consider revising our fiscal 2027 ROE target once the market outlook becomes clearer, taking into account progress under the Medium-Term Plan.

Finally, I would like to introduce our new corporate brand initiative. As the Azbil Group, we have newly defined our purpose and vision, which we announce today. Our purpose is "Expanding technological frontiers, Unlocking human potential." Our vision is "Connecting people and society through automation. From efficiency to innovation. From impossible to possible. Becoming a partner that opens up." These are the 2 key elements.

This slide illustrates the overall concept, including our purpose and vision. Our purpose, "Expanding technological frontiers, Unlocking human potential," represents the Azbil Group's commitment to unlocking the latent potential of people and society through a wide range of technologies, including automation and creating new value at customer sites, from efficiency to innovation, from impossible to possible. Our vision represents the concrete state we aim to achieve over the next 10 years through the pursuit of this purpose.

We have also established a brand statement: "Engineering the Impossible," which expresses our determination to realize both our purpose and vision.

Finally, I would like to report on the relocation of our headquarters. This year marks the 120th anniversary of the Azbil Group. In conjunction with establishing our new purpose and vision, we have also been working to create an environment that enables us to realize this vision. As part of this effort, in May, we will relocate our headquarters to the Marunouchi Park Building, an office building in the same district as our current headquarters. At our new headquarters, we aim to foster a working environment where each employee can take on new challenges, thereby securing further growth.

This is the final slide. It shows the key visual that will serve as the foundation for our brand communications across various media. We will continue to promote this brand going forward, and we appreciate your continued support. This concludes my presentation. Thank you very much for your attention.

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

Thank you very much for joining Azbil's Fiscal Year 2025 Second Quarter Financial Results Briefing. We appreciate your time and interest. I am Yamamoto, President and CEO of Azbil Corporation. I will try to provide a clear and comprehensive explanation of our financial results and initiatives.

Let me begin by outlining the key points I will cover today. First, consolidated financial results for fiscal year 2025. Orders received and net sales declined year-on-year due to the impact of the divestiture of our subsidiary, Azbil Telstar, in the previous fiscal year. However, operating income saw a significant year-on-year increase driven by growth in the Building Automation and Advanced Automation businesses exceeding our initial plan. Excluding the impact of the divestiture, both orders received and net sales increased on a real basis.

Second, consolidated financial plan for fiscal year 2025. Based on the first half results and our outlook for the second half, we have revised our original consolidated financial plan upward. While net sales are expected to slightly decline due to the previous year's divestiture, operating income is projected to increase for the fifth consecutive year.

Third, shareholder returns and investments in human capital. There are no changes from our previously announced policy. We plan to increase dividends for the 11th consecutive year, targeting an annual dividend of JPY 26 per share and a DOE of 5.6%. In addition to acquiring and canceling treasury shares, we have also utilized treasury shares to invest in human capital.

Lastly, progress in implementing our medium-term plan. Under the theme of evolution and co-creation, we are actively investing in areas such as human capital to expand sales and improve profitability through our group's unique business model. We have made steady progress during the first half of the fiscal year.

Today's presentation will cover the topics shown here. To begin, I would like to present the consolidated financial results for the first half of fiscal year 2025. Orders received increased in the Building Automation business. However, due to the divestiture of Azbil Telstar in the previous fiscal year, orders received in the Life Automation business declined significantly, resulting in a total of JPY 165.0 billion, a year-on-year decrease.

Net sales increased in both the Building Automation and the Advanced Automation businesses. However, the decline in the Life Automation business led to a total of JPY 132.8 billion, also representing a year-on-year decrease. Excluding the impact of the divestiture, both orders received and net sales increased on a real basis.

Operating income reached JPY 17.7 billion, exceeding both the previous year and our initial plan, driven by initiatives to strengthen profitability, including cost pass-through measures. Ordinary income totaled JPY 18.3 billion, surpassing both the previous year and our plan, thanks to the increase in operating income and foreign exchange gains. Net income attributable to owners of the parent increased year-on-year to JPY 13.4 billion, also exceeding our plan despite the absence of gains from the sale of investment in our U.S. subsidiary.

Here is a summary of the financial results by segment. From the next section onward, I will provide a more detailed explanation of each business. Let me start with the Building Automation business. In Japan, demand for new office buildings and urban redevelopment projects has leveled off at present. However, the overall market outlook remains robust and demand is expected to continue at a high level.

Retrofit demand continues to be strong and overseas investment remains robust. Under these conditions, orders received increased to JPY 100.6 billion, a year-on-year rise. This was driven by growth in the existing buildings, an increase in overseas business thanks for large-scale projects and steady performance in the service business despite fewer multiyear service contract renewals.

Sales totaled JPY 64.5 billion, exceeding both the previous year and our plan. While overseas sales declined due to large projects recorded in the previous year, the new buildings segment maintained a high level and steady growth in existing buildings and services supported by load leveling initiatives contributed to the overall increase.

Segment profit reached JPY 8.3 billion, significantly exceeding the previous year in our plan. Although R&D expenses, personnel costs, DX-related expenses and outsourcing costs increased, the higher revenue and enhanced profitability measures, including cost pass-through, led to a substantial improvement.

Next, the Advanced Automation business. The process automation market in Japan continues to perform firmly, particularly in maintenance and refurbishment demand. In contrast, the factory automation market shows signs of recovery in some areas, but the pace remains subdued and varies by region and sector.

With regard to orders received, while the domestic process automation market remains strong, the recovery of the factory automation market was delayed. In addition, large overseas orders had already been recorded at the end of the previous fiscal year. As a result, orders received declined to JPY 47.0 billion, representing a year-on-year decrease.

Sales increased to JPY 52.9 billion year-on-year driven by growth in process automation both in Japan and overseas. However, due to the delay in the recovery of the factory automation market, results fell short of the plan.

Segment profit increased significantly to JPY 9.0 billion, achieving our plan. Despite the increased R&D expenses, personnel costs, other expenses and investments in overseas market and DX, profitability measures including cost pass-through contributed to the improvement.

Let me conclude with an overview of the Life Automation business. In the Lifeline field, which includes gas and water meters, stable demand is expected to continue in Japan, mainly driven by legally mandated meter replacements. In addition, demand for smart meters and data utilization is expected to grow.

In July, we reached an agreement to collaborate with Kamstrup, a Denmark-based company known for its expertise and a strong track record in leak detection cloud services. In the residential central air-conditioning systems field, rising construction costs have had a negative impact on new housing starts.

Orders received declined to JPY 18.1 billion due to the divestiture of Azbil Telstar. Sales also decreased year-on-year to JPY 16.0 billion and fell short of the plan. While water meter sales increased, gas meter sales did not meet expectations.

Segment profit was JPY 0.3 billion, a year-on-year decline. Despite efforts to strengthen profitability and reduce costs, the impact of the divestiture, rising personnel costs and higher material prices led to a decrease, and results fell short of the plan even excluding the impact of the divestiture.

I will touch on overseas sales by region. In the Building Automation business, sales declined in Asia due to the absence of large projects recorded in the previous year. In the Advanced Automation business, sales decreased in Asia and China but increased significantly in North America, resulting in overall growth. In the Life Automation business, sales declined due to the divestiture of Azbil Telstar.

As a result, the overseas sales ratio stood at 18.2%. Please note that the graph and tables in this slide exclude Azbil Telstar to clearly show the impact of the divestiture on overseas sales.

As shown here, this is our current consolidated financial position. Assets decreased because net sales concentrated in the fourth quarter of the previous fiscal year and subsequent collections progressed during the first half, resulting in a reduction in accounts receivable and related items.

Liabilities increased due to the re-adoption of the trust-type employee shareholding incentive plan as part of our investment in human capital and employee welfare measures, leading to an increase in long-term borrowings. On the other hand, current liabilities such as income taxes payable and provision for bonuses decreased.

Net assets declined due to the acquisition of treasury shares and dividend payments despite the recording of net income attributable to owners of the parent.

Next, I would like to explain our consolidated cash flow status. Cash flow from operating activities remained at the same level as the previous year. Cash flow from investing activities decreased by JPY 3.7 billion year-on-year and free cash flow decreased by JPY 4.2 billion. This was mainly because we recorded proceeds last year from the sale of some investment securities and equity in our U.S. subsidiary while there are no such major proceeds this fiscal year. Cash flow from financing activities decreased by JPY 12.4 billion, primarily due to increased expenditures for the acquisition of treasury shares.

Now I will explain our full year consolidated financial plan for fiscal year 2025. As announced on October 30, we have revised our initial financial plan upward. Here is our consolidated financial plan. Based on strong first half results and a robust market outlook supported by a healthy backlog of orders, we have revised our full year financial plan upward. Net sales are expected to decline year-on-year to JPY 298.0 billion, but operating income is projected to increase for the fifth consecutive year, reaching JPY 45.5 billion.

Despite ongoing uncertainties such as inflation and rising costs, the business environment surrounding the Building Automation business remains solid. In the Advanced Automation business, recovery in the factory automation market has been slow, but a gradual recovery is expected in the second half. While we anticipate increased costs from inflation and personnel expenses, we plan to achieve profit growth through strengthened profitability measures and improved operational efficiency via DX initiatives.

Net income attributable to owners of the parent is expected to decline compared with the previous year, which included a JPY 7.6 billion gain from the sale of Azbil Telstar.

This slide illustrates our financial plan by segment. In the Building Automation business, following strong first half results and a robust market outlook supported by a healthy backlog of orders, we expect second half sales and segment profit to remain in line with our initial plan and have revised our full year financial plan upward. We now expect sales of JPY 154.0 billion and segment profit of JPY 27.0 billion.

In the Advanced Automation business, supported by solid demand in the process automation market and a gradual recovery expected in factory automation during the second half, we aim to achieve our initial sales plan. Segment profit is expected to reach JPY 17.5 billion, revised upward because of profitability enhancement measures despite rising personnel costs.

In the Life Automation business, although full year results are expected to show a year-on-year decline in both sales and segment profit, we anticipate achieving our initial plans of JPY 34.5 billion in net sales and JPY 1.0 billion in segment profit, mainly driven by growth in the Lifeline field.

This slide provides a detailed financial plan by segment. It provides further details on the business environment of each segment discussed earlier. It would be appreciated if you could take a look at your convenience.

Next, I would like to explain our approach to shareholder returns and investment in human capital. Based on our basic policy of enhancing shareholder returns, investing in growth and maintaining a sound financial base, we continue to operate our business and make investments, conscious of the cost of capital. We are actively investing in business development, R&D, capital expenditures and promoting DX and human capital.

Regarding dividends, there is no change to our plan announced in May to increase dividends for the 11th consecutive year. We will proceed with the interim dividend for fiscal year 2025 as planned at JPY 13 per share. In terms of share buyback, we repurchased our own stock with a value of JPY 14.9 billion and canceled treasury shares worth JPY 20.0 billion.

As part of our investment in human capital, we readopted the trust-type employee shareholding incentive plan, utilizing the treasury shares worth approximately JPY 6.5 billion acquired from the market. This graph illustrates the trend in shareholder returns. The dividend on equity, or DOE, is expected to reach 5.6% by the end of fiscal year 2025.

Now I will explain the progress in implementing our medium-term plan. Our medium-term plan for fiscal year 2025 through 2027 is built around the theme of evolution and co-creation. Through the Azbil Group's unique business model, we aim to achieve both sales growth and improve profitability while actively investing in human capital and other key areas. Our ultimate goal is to contribute to the well-being of society and our employees through sustainable growth.

Building on the results of our profitability enhancement initiatives in the previous medium-term plan and leveraging our long-standing relationships with customers, we will pursue further growth by investing in new business domains and proactively allocating resources to strengthen human capital, product competitiveness and promoting digital transformation. As mentioned earlier, the strong performance in the first half of fiscal year 2025 has led us to revise our full year consolidated financial plan upward, marking a solid start to the first year of the medium-term plan.

This slide explains the unique business model of the Azbil Group. We aim to expand our business through two pillars: in our core businesses, built on strong relationships with a broad customer base established over many years; and the growth businesses, which address emerging societal challenges such as carbon neutrality and leverage technological advances in areas of semiconductors.

In our growth businesses, we are focusing on strengthening product competitiveness to expand into overseas market and enhance our competitiveness. By expanding our customer base through the growth businesses and improving sustainability and profitability in the core businesses, we aim to create a cycle of continuous expansion, cycling from the growth businesses to the core businesses and back to the growth businesses again.

This slide outlines the business strategies and performance targets for each segment. We are implementing tailored measures based on the business environments and characteristics of each business and region with the goal of achieving sustainable growth.

Here, we introduced initiatives related to product development and business expansion that were announced via news releases earlier this fiscal year. Progress has been made in both the growth and the core businesses, including the launch of new products and increased customer adoption. We are also advancing collaborations with other companies. The following slides provide highlights and examples of these announcements. For more details, please refer to the News Release section on our corporate website.

This slide highlights a recent news release introducing a new series of control valves, an area of strength for the Azbil Group.

This slide showcases examples of our recent product installations at customer sites. In the Building Automation business, green transformation, one of our key initiatives, is showing solid results particularly through our energy service company, or ESCO projects.

This slide highlights our efforts in business development initiatives through business alliances and investments. As mentioned earlier in the financial results section, we have agreed to collaborate with Denmark-based Kamstrup in the Life Automation business. Through this collaboration, we aim to contribute to addressing Japan's water infrastructure challenges and drive business growth.

Finally, I would like to briefly introduce our exhibition activities. We have participated and will continue to participate in various exhibitions both in Japan and overseas, where we showcase the Azbil Group's products, services and distinctive solutions. While some events have already concluded, we warmly invite you to visit us at future exhibitions to gain a deeper understanding of our company.

That concludes my presentation. Thank you very much for your attention.

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