Coca-cola Bottlers Japan Hol Aktie

[Interpreted] Good evening. This is Gomi, Head of Investor Relations at Coca-Cola Bottlers Holdings. Thank you for joining our first quarter 2026 earnings presentation for analysts and investors. Today, we are joined by President, Calin Dragan; and Vice President and CFO, Bjorn Ulgenes. Also with us are Vice President, President of the Food Service Company and the Chief Business Strategy Officer, Maki Kado; Officer and President of the retail company, Alex Gonzalez; and the Executive Officer, Chief Supply Chain Officer and the Chief Sustainability Officer, Andrew Ferrett.

Following prepared remarks, we will be happy to take your questions. Simultaneous interpretation in Japanese and English is available for both today's presentation and the Q&A.

Before we begin, please note that today's presentation contains forward-looking statements and should be considered together with cautionary statements contained in our presentation materials.

With that, I would like to turn the call over to Calin Dragan. Calin-san?

Good evening, everyone. This is Calin Dragan, and thank you for joining our earnings call. Today, I am honored to be able to open my prepared remarks by reminding everyone the next month on May 8, Coca-Cola brand celebrates the 140 anniversary. With that occasion, we want to wish Coca-Cola brand a warm Happy birthday. We are really proud that we are able to bring such an iconic global brand to consumers in Japan, and we remain committed to further enhancing its value in the market.

For the highlights of today's presentation, please turn to Slide 3. We are off to a very strong start in 2026. Business income for the first quarter exceeded our target, growing by JPY 3.8 billion versus the previous year. Already, we have achieved more than 1/3 of the full year business income target. This was primarily driven by a strong volume growth of 4% versus the previous year, gains in value share and improved profitability from price revisions, resulting in a solid profit growth. In vending, Top line trends are improving and showing positive momentum. Announced today, we will offer Japan's leading energy drink plant, Monster Energy through our vending machines starting this peak summer season, positioning us to further accelerate growth in our vending business.

In the first quarter, we successfully executed key initiatives to improve profitability, price revisions, one of our core profitability drivers. We've implemented as planned or green deep products in March and are steadily delivering results. Our transformation initiatives are also progressing smoothly, generating cost savings to strengthen operational foundation. Despite continued uncertainty in the current outlook, we have assessed the potential impact of the situation in the Middle East and we are confident in our ability to manage any resulting cost increases this year. By leveraging the strength of the global Coca-Cola system, which is one of our core strengths, we expect to mitigate these pressures to our procurement efforts.

In addition, by accelerating our profit growth momentum pursuing further cost savings and seriously considering harder price revisions, we will take all necessary actions, which are we are determined to achieve the full year business income target of JPY 35 billion.

Now our CFO, Bjorn Ulgenes, will provide a detailed explanation of our financial results.

Thank you, Calin, and good evening, everyone. This is Bjorn. Please turn to Slide 5 for the first quarter profit and loss.

In the first quarter, we achieved both revenue and profit growth that exceeded our targets. Despite the impact of changes to the channel mix, Revenue exceeded the target and achieved strong year-on-year growth of 3.6%, driven by higher-than-planned volume growth and improved wholesale revenue per case. Gross profit outpaced revenue growth and grew by 5.2%. In addition, the top line growth, this was supported by commodity cost management, including joint procurement across the Coca-Cola system and solid hedging strategies despite a challenging external environment marked by rising costs.

In addition, as the first year of our strategic business plan, Vision 2030, we reviewed the useful life of our manufacturing machinery and equipment in line with our policy of making selective capital investments to improve capital efficiency and deploy capital effectively over the long term. As a result, lower depreciation expenses totaling approximately JPY 0.5 billion contributed to profit growth. Business income increased by JPY 3.8 billion year-over-year, primarily driven by top line growth and cost savings achieved through transformation initiatives. Factors contributing to this profit change will be explained later. Operating income increased by JPY 9.8 billion year-over-year. In addition, the business income growing year-over-year. Gains on the sale of tangible fixed assets recorded as part of our efforts to optimize the balance sheet contributed.

Net income increased by JPY 5.5 billion from the previous year, primarily reflecting higher operating. EBITDA, a measure of cash generating profitability increased by JPY 0.6 billion year-over-year to JPY 5.4 billion. Slide 6 shows our financial results by segment. In the first quarter, a significant increase in the vending business profits drove overall profit growth. For the vending business, volume trends for existing machines improved and volume remained flat overall versus the previous year. While revenue for the business declined year-over-year, specifically Coca-Cola vending machine increased revenues due to improved wholesale revenue per case. In addition, driven by transformation benefits, improving rates. Segment profit increased significantly by JPY 4.6 billion year-over-year, returning the segment to profitability. While this includes the benefit of lower depreciation expenses following the prior year's impairment loss in the vending business, we also achieved solid organic profit growth.

In OTC, revenue outpaced volume and increased by 6.5% year-over-year, driven by robust top line growth and price revision benefit. Volume and revenue growth were driven primarily by online drugstores and discount. Through a rigorous focus on profitability-driven initiatives, segment profit increased by 25.6% year-over-year. In the Foodservice business, we achieved high growth with double-digit increases in both volume and revenue compared to the previous year, driven by an expanded product portfolio tailored to customer needs and successful efforts to secure new customers. To sustain this momentum, we are steadily executing investments to support mid- to long-term growth and are driving business expansion in line with our plans.

Please turn to Slide 7 for the factors behind the change in business income. Business income grew strongly, increased by JPY 3.8 billion compared to the previous year. Starting from the left, we can see the impact of volume, price and mix. Together, these factors reflect changes in marginal profits from our commercial activity and contributed a positive JPY 2.6 billion year-over-year. The main factors were a positive impact of JPY 2.3 billion from volume, including channel mix and a positive JPY 3.8 billion impact from pricing partially offset by a negative JPY 3.5 billion impact from other factors. Although adverse channel mix due to changing consumer trends remained a headwind, volume growth and improved wholesale revenue per case resulting from price revisions are steadily contributing to profit growth.

Transformation benefits totaled JPY 1.9 billion, in line with time. Savings were particularly significant in the commercial function where benefits from the transformation of the vending business continued to materialize steadily. In the supply chain and back office, we are building a foundation that contributes to mid- to long-term growth while also generating cost savings. Marketing expenses decreased by JPY 0.2 billion year-over-year. We continue to invest appropriately in marketing are carefully managing spending based on the return on investment philosophy and market conditions. Manufacturing costs increased by JPY 0.1 billion year-over-year. Although production volume rose in line with sales and manufacturing efficiency improved changes in product mix, including a higher proportion of outsourced production increased cost.

We continue to pursue cost savings in the production floor and strengthening our production structure ahead of the peak demand season. Other costs increased by JPY 1.6 billion, primarily due to higher IT-related investments and expenses to support future profit growth as well as increased labor and outsourcing costs. This increase includes the benefits of lower depreciation expenses resulting from the impairment cost recorded in the vending business in the previous year. Commodity and utility costs decreased by JPY 0.8 billion, thanks to successful hedging strategies and our procurement function, leveraging the Coca-Cola system's global network, one of our companies [indiscernible]. Net cost improvements from commodities and foreign exchange amounted to JPY 0.4 billion. Utility costs also achieved a decrease of JPY 0.4 billion.

On the next slide, Alex will give an overview of our commercial activity. Over to you, Alex.

Good evening, everyone. This is Alex. Slide 8 shows sales volume by channel and by category. Although price revisions negatively impacted demand, our effective commercial activities and contributions from core categories meant that Q1 sales volume grew 4% year-over-year, exceeding both the overall market and our plan. Additionally, because of the series of price revisions, wholesale revenue per case continued to improve across most channels. First, by channel, vending volume trends improved and remained flat year-over-year supported by a strong performance from core products and existing vending machines.

In Supermarkets, drugstores and discounters, sales volume increased as well as we successfully expanded shelf space through campaigns tied to the FIFA World Cup. In Convenience Stores, where price revisions impacted volume wholesale revenue per case improved significantly, leading to improved profitability. In online, volume grew by 20%, driving overall growth despite a decline in wholesale revenue per case due to a higher mix of large PET water. In Foodservice, volume grew by 12% supported by an expanded product lineup, including customer-exclusive launches and stronger sales of a sparkling pressure products and restaurants. By category, in sparkling, Coca-Cola and Coca-Cola Zero contributed to a 10% increase in volume. In tea, products such as [indiscernible] contributed while Ayataka continued to perform well. Although the March price revisions impacted Green Tea products, volume levels in Q1 were comparable to the previous years. Sports, water and coffee declined due to price revision impact.

Slide 9 shows the status of market share and OTC retail prices. This year, through profitability focused commercial activities, we achieved balanced growth in both value and volume share. Our total channel value share increased by 1.1 percentage points. Despite a challenging market, volume outperformed the market and the year-over-year increase in volume share has contributed to value share growth. inventing, growth in volume share drove an increase in value share. Growth initiatives in the vending business, including profit focus assortment optimization using our AI-based assortment system and targeted promotions through Coke ON have delivered strong results. We successfully captured demand while improving wholesale revenue per case through price revisions.

In the LTC channel, despite the impact of lower volumes resulting from price revisions and channel mix changes, we have enhanced our competitiveness through expanded shelf space and targeted commercial activities, achieving balanced market share growth. In the first quarter, we effectively capture increased demand, improved value share by 0.3 percentage points year-over-year. Our OTC retail prices have continued to maintain a price premium relative to industry averages. As a result of the series of price revisions, OTC retail prices for a small PET products continue to exceed those of the previous year. For large PET, although affected by channel and packaging mix shifts, we have maintained the elevated price level.

In March of this year, we implemented the green tea product price revision as planned, market [indiscernible] such provisions since 2022 and we expect further improvement in trends during the second quarter. Slide 10 highlights key topics for our quarter 1 commercial activities. We have successfully translated robust volume growth and improved profitability into solid profit growth. initiatives aimed at enhancing competitiveness have driven volume growth in the core categories driving overall volumes such as sparkling MT marketing campaigns highlight in drinking occasions have proven effective. To expand shelf space, we are focused on maximizing unique Coca-Cola assets such as the FIFA World Cup and rolling out exclusive products for our customers, thereby accelerating efforts to improve competitiveness.

In vending, Positive signs are emerging in volume trends. Growth strategies such as further leveraging of Coke ON and revising product assortments with our assortment system are proving successful. In particular, volume trends for existing machines have improved and vending channel value share has increased. At restaurants, we promoted perfect serve to ensure consumers can enjoy Coca-Cola assets at its best, and aim to enhance the dining experience through proposals such as effectively utilizing bottle, Coke and Glassware. Our efforts to improve profitability are making steady progress. We've implemented price revisions for green tea products such as plan, effective for shipments starting March 1. At the same time, we're focused on maximizing the impact of price revisions and wholesale revenue per case continues to show an upward trend.

In addition, we have proceeded as planned with the rationalization of rebates and promotional expenses, implementing marketing activities that are flexible and focused on ROI in accordance with market conditions. Furthermore, to improve our product mix, we have to strengthen our efforts by rolling out products and packaging tailored to each customer's profitability. Our prioritization of profitability in commercial activities remains unchanged this year. We're implementing optimal growth strategies for each business unit, while rigorously enforcing detailed data-driven performance management.

On the next slide, Maki will go over our first quarter commercial selective marketing activities. Maki, please?

[Interpreted] Good evening. This is Maki Kado. On Slide 12, I will review our marketing activities for the first quarter. In Q1, we achieved strong growth in revenue and value share through powerful campaign activation. To strengthen our core category, in February, we launched limited addition, Coca-Cola FIFA World Cup bottles. We maximize in-store visibility by implementing effective campaign that leverages Coca-Cola's unique assets, including dedicated self displays. These efforts proved successful, further accelerating Coca-Cola's growth trend from the previous year.

Volume in the sparkling category, including Coca-Cola, increased by 10% year-over-year. Additionally, for Georgia, we revamped our core products in parallel with a new campaign launched in March, aiming to enhance the brand's appeal. For Ayataka, we continued and the strength in the last year's campaign that successfully highlighted its bearing with Onigiri and worked to expand Ayataka drinking occasions. In particular, China Ayataka under rental price revision this March, we are thoroughly implementing in-store displays that emphasizes values.

Regarding new products, Minute Maid fruit juice brand. In March, we launched Minute Maid Zero Sugar Peach Lemonade as an addition to the Minute Maid Zero Sugar Lemonade lineup, which has been well received and seen steady sales growth since its launch last month part. We will continue to strengthen sales efforts from the second quarter onwards, aiming for further growth and expanded consumption occasions. In terms of experiential marketing, we have launched campaign for users of the Coke ON app, which serve as 70 million downloads cumulatively by the end of 2025. The campaign will run throughout the year to celebrate the app tenth anniversary, and the first wave has already begun.

For the FIFA World Cup '26. We have organized a trophy tour and launched a promotion where consumers can enter code found on the outer side of caps from purchased products via Coke ON to enter a draw for regional merchandise based on the number of points earned. By building excitement for the FIFA World Cup '26, even before the tournament begins, we aim to maximize exposure on the sales of our products. Slide 13 highlights our marketing activities for the second quarter. To strengthen core category, Coca-Cola is releasing the second installment of its limited edition FIFA World Cup packaging for a limited time starting April 20, featuring a selection of design inspired by the uniforms and flags of popular participating nations.

In April, Fanta relaunched this core flavors. For the first time in the Coca-Cola Japan product, we utilize global AI technology to create a pace that goes beyond the boundaries of traditional fruits for regard sparkling liberties. As for new products, we are launching [indiscernible] from the [indiscernible] line this week. With zero sugar and n0 calories, it provides superior hydration compared to water. By introducing this innovation product, we aim to revitalize the sports drink market. For Ayataka, we are launching for new products and revamping existing ones. In April, we launched [indiscernible], a functional food designed to meet health needs.

In May, we will introduce Ayataka Mineral Green Tea, the first mineral and green tea in the brand's history. By expanding our product lineup to address diversified consumer needs, we aim to achieve further growth for the Ayataka brand. For experiential marketing, in addition to launching the second phase of the Coca-Cola FIFA World Cup '26 promotion, we implemented initiatives leverage in bottled Coke and launch certification program called Coca-Cola Fruit [indiscernible]. For restaurants where consumers can enjoy delicious meals paired with the ultimate Coca-Cola experience. Through these efforts, we aim to enhance the experience of value sold in today's dining out.

Next, Calin will share our outlook. Calin-san, please?

Calin again. Slide 15 outlines our outlook to ensure we achieve our full year business income target of JPY 35 billion, we will carry forward the positive trends we have seen so far in implementing additional measures and maximize profit. And as we enter the second quarter, all initiatives continue to progress smoothly. In April, sales volume achieved a robust growth of more than 2% year-over-year while improving wholesale revenue per case. In addition, we are implementing further cost saving measures to help offset anticipated cost increases.

Furthermore, while we are seriously considering further price divisions, we will ensure that we met this year profit target and drive mid- to long-term profit growth by offering Monster Energy in our vending machines. With regards to the impact of the situation in the Middle East, assuming that conditions stabilized during the second quarter and that oil prices, exchange rates and other factors will improve towards the year-end. We expect the additional cost increase for this year to be limited. Our hedging strategy provides a clear visibility in the near term, and we expect usually no impact on first half earnings. For the full year, we anticipate additional cost increases of approximately JPY 2 billion to JPY 4 billion. And as discussed earlier, we plan to absorb these costs across the business by accelerating our positive earnings trend and implementing further measures.

And accordingly, there is no change to our full year business income target. We will work closely with the global Coca-Cola system to leverage scale advantages for competitive procurement, helping us to maintain and to contain the cost increases and ensure a stable supply of material. Given our strong underlying performance momentum and the resilient business foundation we have built, I'm confident in our ability to achieve our targets. Slide 16 is about Monster Energy, as mentioned earlier. Starting from this summer, our peak demand season we will begin offering Japan's #1 energy drink brand, Monster Energy through the industry's largest vending machine network. This is an exciting initiative that will bring about significant change for us. This was made possible through the agreement between Coca-Cola Bottles Japan, Monster Energy Japan and Asahi beverage.

By sourcing products from Asahi beverage, we will leverage the strength of both parties, namely the leading energy drink brands, Monster Energy and our industry-leading vending machine network to create synergies and maximize value for our consumers. We aim to expand consumer choice and purchasing opportunities for vending machines while further improving sales and profitability in the vending business. We plan to introduce product to core [indiscernible] vending machines in our business area by this summer, which is the peak season with the aim of driving immediate sales growth and improving profitability. The products to be introduced, Monster Energy comes in at 355-milliliter can with the manufacturer suggested retail price of JPY 230, including tax. We anticipate that strengthening the energy category was significant growth, we will significantly boost vending machine transactions. This product will be in the highest price brackets within our vending machine product portfolio, we also have high expectations for improving wholesale revenue per case to product mix improvement.

And under our Vision 2030 strategic business plan, we are striving to improve profitability and capital efficiency while aiming to achieve ambitious goals. And to realize this vision we are exploring every opportunity for growth. And in this context, we are very pleased with the introduction of Monster Energy has paved the way for us to strengthen the energy drink category which holds significant growth potential for our company. Also, as explained today, the vending business is aiming for an increase in segment profit of over JPY 9 billion this year. We achieved a steady profit growth in the first quarter and current sales volume trends are showing signs of improvement. Now offering Monster Energy will build on this positive momentum and further accelerate profit growth in the vending business. Furthermore successful execution of these initiatives will further strengthen our thought towards achieving Vision 2030.

And finally, here is today's summary. Please turn to Slide 7. As the first year of our strategic business plan Vision 2030, we delivered a strong first quarter performance. Business income exceeded our plan, and we have already achieved more than 1/3 of our full year profit growth target. We achieved strong growth across all KPIs, including sales, volume, value share wholesale revenue per case and profit, and we are very pleased that this has led to improved competitiveness and profitability. As a result, business income surpass our targets. And as we move into the second quarter and beyond, we will prepare totally for the peak demand season. We will also build on our positive underlying momentum and steadily implement additional measures with strong discipline. And by doing so, we will mitigate the impact of the situation in the Middle East and deliver our full year business income target of JPY 35 billion.

I would also like to reiterate that our short- and medium-term targets remain unchanged. The measures discussed today, including the potential for further price revision, and the introduction of Monster Energy to our vending machines are important initiatives that will support mid- to long-term profit growth. And by further advancing this lead long-term initiatives and fundamental transformations while continuing to strengthen our business foundation, we will accelerate our profit growth trajectory towards achieving Vision 2030. That concludes today's presentation. thank you for your attention. And now we'll move on to the question-and-answer session. Gomi-san, please take it from here.

[Interpreted] This Q&A session is intended for analysts and investors. Members of the meter are kindly asked to refrain from asking questions at this time. As a separate session will be held later today. Due to interpretation, please ask only 1 question at a time. We will now begin the Q&A session.

[Operator Instructions] We will now unmute the first participant. UBS Securities, Ihara-san, please go ahead.

[Interpreted] Thank you very much for your presentation. This is Ihara from UBS Securities. I have 2 questions. Firstly, it is not just about this year. I would like to rather know what's your outlook for the next fiscal year because this year, you have our offset measures to offset the inflation, cost inflation this year. But if this trend or the market situation continues, then what's your expectation for the cost push next year? And you target for next year's BI is 45 or 50. Are you able to commit to that target? And what do you need to show your commitment to those targets for next fiscal year?

[Interpreted] Ihara-san, thank you very much for your question. So basically, he's asking your ideas about next year's business. So Calin can take this question.

For the question. And well, I decided to pick this question on purpose to try to reiterate on exactly what I mentioned in prepared remarks. I said a couple of things, which I'm going to repeat.

2026, it's a tough year. But as you can see, we were able to over deliver our first quarter and basically in the smallest quarter of the year we already have been able to deliver more than 1/3 of our profit targets. All the parameters of the year are going extremely well as we mentioned, so we are remaining confident for the year-end results, and I mentioned loud and clear that we are forward looking to absorb the costs of the crisis in the Middle East from our own transformation efforts as well initiatives in the market. Having said that, already that position in the very first year of our journey, the JPY 35 billion, I would say, it's a jump start for the lack of a better world, a jump start on a fantastic journey towards 2030.

With that in mind, I mentioned as well that we remain committed to our Vision 2030, including our targets communicated so far. We believe and we based all this on the resilience that we have been able, in our opinion, to build in our business over the last years. going through a number of crises as well fundamental transformation in our business. Nevertheless, through the crisis of Middle East that we are passing through, I just want to remind you that we are part of the worldwide consortium of Coca-Cola Company called [ CEPG ] of Coca-Cola system, I'm sorry. And it's just fair to assume that we are able to acquire at best prices probably in the world, leveraging the power of the entire Coca-Cola system worldwide as well availability of supply.

And nevertheless, I would add is the fact that we are having our company hedging policy which delivered very good results so far. It's helping us at this moment in time, and it's only fair and normal to assume that going on our hedging policy and pricing policy, it's going to deliver results as we deliver so far based on a clear track record. All this gives us confidence that we are going to be able to deliver the results, but primarily, we are very proud of the current trend that we were able to build, especially in the vending business, basically growing from all key performance indicators. Hope that answers your question. Thank you so much.

[Interpreted] Additional questions. And when there was a crane crisis, you utilize the power of our [indiscernible] system, but still you face the push cost increase. So if this trend continues into next year, what the size of the cost push you would expect for next year?

For your additional question, and Bjorn, please take this question.

Thank you, Ihara-san. As Calin price outlay already, we are very confident about our 2026 delivery. And we're also definitely maintaining our 2027 outlook even 2028 for that matter. Speculating today what costs will come in 2027 is not very meaningful for us. I think instead focus on what Calin tried to convey, we have probably the world's most powerful buying consortium for all the commodity baskets.

We have a very good hedging policy that you can see the effect of in the Q1 results. We are already taking proactive cost measures to manage the JPY 2 billion to JPY 4 billion that we included in the prepared remarks. And I think from a qualitative standpoint, you should also think about the flexibility, the agility that we have built into our business over the journey coming out of spending. That's ability to turn around to manage the situation because this is not the first crisis where experience gives us the comfort to believe in our targets and make sure that we will deliver. Hope that answers your question. Thank you.

[Interpreted] Let me quickly ask the second question. Monster Energy, up until now, I haven't seen many non-products in your vending machine up until now, but now you receive supply from your competitors, which is quite rare in the market. So what was the mindset change that you pursue this opportunity positively? And do you think there are any other routes to explore further collaboration with Asahi or...

[Interpreted] Thank you, Ihara-san. So we've just announced the sales of Monster Energy in the venue. So Calin, please take these questions.

This is a strategy question. He has clean back here on the mic. Thank you so much for the interest in our business. Well, very well known that Coca-Cola Company has a stake within Monster business and the collaboration worldwide. So there should not be made a surprise that we are leveraging and trying to exploit exactly in the same way all our all options that are available to us in order to grow our business.

So we believe that Monster Energy, it is a good brand. As you can see, it's a sizable market, and it's the leading brand in Japan. We are opposing to this our significant and basically the largest in the world, vending DASH retail business. and we are convinced through the combination of Monster Energy within our largest lending network outstanding results are going to come out over time. So we are going to look forward to strengthen this partnership and as well to use, as I mentioned in my prepared remarks, every possible opportunity for our business to grow and to build a solid base for our shareholders and their shareholders case. I hope that answers your question.

I will unmute the next person with the questions. SMBC Nikko Securities, Furuta-san.

[Interpreted] I have one question. Further price release, you are going to consider seriously the further price revision. So what is the time line for that? And what the target scope of the other price items have -- could you please tell us that uses price for the green tea category in March is will that be a target for the product price divisions, the kind of scope and further possibilities, I would like to ask.

Furuta-san, thank you very much for your question. The concern [indiscernible] Alex will take this question.

Furuta, Alex here. As you rightly pointed out, we are executing the wave of price revisions with [indiscernible] and that's progressing pretty much as planned. Now with what has been shared in the prepared remarks, if there's evidently a very fluid situation around Middle East and as Calin and Bjorn have shared, we're looking at every single option to make sure that we deliver the business income target.

So in that regard, we are seeing that the pressure is on cost is not only for CCA as a cost pressure for the entire industry. So we always, I think, have been walking the talk as seeing price increases as one of the levers to ensure that we are driving and protecting the margins of our business. So in that regard, we are seriously considering price regions at this point in time, nothing has been decided yet as with regards to the timing endoscope and we would come back when -- in due course to share more details. So that's it for now.

So under such circumstances for the Middle East crisis, the cost increase will further increase the cost. And under such circumstances, the price revision, you probably have to do the price revision at early timing and also green tea categories, you are -- competitors are not following up. And under that market conditions, do you think you are able to do the further price revision?

[Interpreted]Furuta-san, thank you for additional question. This will also -- Alex will answer this question.

Furuta-san, at this point in time, we will continue to evaluate the situation, and we will come in due course when the time is right to share with you more details.

I'll unmute the next person with a question. Nomura Securities, Morita.

[Interpreted] Morita from Nomura Securities. I have 2 questions. First question is regarding the Monster Energy. So EBITDA contract with CCJC within the contract with the CPTC -- or is it outside the contract with CCJC?

Thank you for the question. Regarding the Monster Energy, Calin will answer.

Calin, again, I'm just -- so we need to clearly understand the question to be able to answer precisely inside or outside the framework of our company. I just want to remind everyone, we are working on a franchise or franchisee framework with Coca-Cola Company. And of course, within that framework, there are, of course, certain rules of dozen ones. So of course, this is something that is aligned within the frame of operating in Japan as arrangements between the Coca-Cola Company and the Bottlers regarding this category are happening around the world.

In terms of monster for sale product supply, this is something that is happening between us, Monster and as well [indiscernible].

[Interpreted] Well, did we answer your question Morita-san?

[Interpreted] Sorry, I didn't understand very clearly. So basically, the marketing belongs to the CCJC? So will CCJC provide that market into the Monster? Or is it included in the [ concentrate ]?

Coming into that. So then we need to -- I'm sorry to slow down the answer, but we need to determine some basics and explain a couple of basics which might not be well known. So once the company, it's a stand-alone company as well as publicly listed a separate entity than Coca-Cola company, well, of course, Coca-Cola Company holds equity stake in it. But that's a matter of ownership in terms of marketing and the means of distribution, Monster, it's operating like a separate company. ends from that perspective, the marketing relationship between us and the brand owner happens between Coca-Cola Boto Japan and Monster as a company. I hope that answers the question.

[Interpreted] Additional question is the profit per case with -- compared with other products that must provide a more profit per case?

Morita-san, this Calin speaking again. I'm sorry, to drag these tests. But I'm not going to disclose at this moment in time, details like profit per case. However, we try to be as explicit for you to be able to model telling you that this is going to be in the range of JPY 230 bracket as a price point, one of the highest that you can find within the vending machines in Japan. And if you overlap that SKU at the highest price possible there over the highest number of vending machines in Japan, which is our Coca-Cola network, probably you can stimulate the size of the benefits that can bring to our business. I hope that answers the question.

[Interpreted] My second question is regarding the possibility of additional cost increase because of Middle East, you said that it's JPY 2 billion to JPY 4 billion. So could you explain the background of that calculation. So do you think that in the other hand this year, the will subside and improve. Is this [indiscernible].

Thank you, Morita-san. On the costs, as you heard in our prepared remarks, we estimate the net impact of this with 2026 to be in the range of JPY 2 billion to JPY 4 billion. We're not going to give details on how we arrive at that. That builds on the set of assumptions that in the foreseeable future, this is the impact. And it's within the range of what we will definitely manage. And again, remind yourself exactly what we also said to Ihara-san about the cost levels we are buying at the best prices most likely globally through our global procurement system of whole the commodities used in our beverages in Japan.

Secondly, we have a very strong hedging policy. As I also said to Ihara-san, as you can see that from the impact of Q1, which helps us manage the highs and the lows of commodity basket fluctuations for hedging currency, like I'm assuming is normal. And we have already, as we also said in the prepared remarks, we're taking additional measures already on the cost increase and you heard Alex comment on the on the strongly considering pricing increases into the future. So we believe we are managing this within this year. We are fully committed to delivering the profit for this year and definitely for next year, and we will continue to update you as we go through. Thank you.

I will unmute the next person. Next person is Miyake-san from Morgan Stanley.

[Interpreted] This is Miyake from Morgan Stanley. I would like to check on this current term that you just completed. First question is that with regards to the change in the useful year of your equipment, and then you have enjoyed the benefit of reducing the depreciation of about the tune of JPY 500 million. So it's annualized maybe about JPY 2 billion. Is this already factored in your business plan?

[Interpreted] Thank you, Miyake-san. So your question is about whether or not we are factoring in the benefits coming from the change of the useful life -- useful year of the life for the machinery. So Bjorn, would you like to answer this question?

Yes, correct. We have reevaluated the useful life of our manufacturing assets, again, part of the overall focus on ROIC and sensible uses of our capital. The impact will be JPY 1.5 billion to JPY 2 billion on a full year basis. It was not included in the initial plan, but it's not material enough at this point to revision anything up or down on a full year basis. We put this into the mix and again, remain strongly committed to deliver our JPY 35 million target for [indiscernible]. Thank you.

[Interpreted] So when you come up with the business plan at the beginning of the year that you already factored in you already have factored in this JPY 1.5 billion to JPY 2 billion on a full year basis. So you're not putting this on top? Just to follow up, this is not included at the beginning of the year. Okay. Understood. So if that's the case, you mentioned that you can commit to about JPY 35 billion target, right?

Yes, right.

Okay. One point or point. So against the first quarter plan, you have overperformed for the profit, right? So you have divided into these segments. And can you show me the each contribution breakdown, for example, vending versus last year, JPY 4.5 billion was the amount. And then because of the depreciation decline, there was about JPY 2 billion plus. But the sales, the revenue is not like on top of versus last year. So what are the benefits coming from? Is that the cost? And for the OTC, I know you have a better revenue than last year. But is there any cost increment behind that?

And also the vending, are you not factoring in the reduction in the depreciation, right? So anyway, by looking at the segment, what is the contribution factor for each segment that you can overperform versus the plan?

[Interpreted] Thank you, Miyake-san. So you would like to understand the background to why we could overperform the first quarter versus the plan. So Alex, would you like to answer this question.

I'll take that, Miyake-san. So as you know, we have started publishing the segment profitability. We're very happy with that. In your question, I think let me just go back a little bit again to August last year when we issued the Vision 2030 plan because it contains some very key elements of how we run the business. You remember, we talked about job tickets or job profiles by business unit. So therefore, you can't just correlate immediately volume and revenue and profitability by segment. You have to look at the role of that business unit.

Let me quickly take them, so we don't spend too much time on it. But the whole purpose of vending is to drive profitability and capital improvement. That's what you see happening in Q1 with a very, very strong improvement in cost and efficiency. That's the job ticket at the present one for vending, while we continue to maximize the revenue opportunities coming up in that channel or business unit. OTC, yes, there are expenses related to running OTC, but most of that is related to our work with the customers. and also, therefore, all the programs we're doing in supermarkets and online in convenience stores, et cetera. The role of food service business unit, albeit smaller than the 2 others is to drive both top line growth and profitable growth. And again, the expenses there are more related to customer activation in the model. So hopefully, that gives us a little bit of texture to your question.

[Interpreted] So maybe we shouldn't look by the segment. So at the end of the day, in the first quarter, you could gain more profit than the plan because you have overperforming in the volume. And also, you have more benefit coming from the transformation effects. So can I understand in that way? Or is there any other additional cost reduction activities that we should be fulfilling in here?

Correct a little bit. It might be the translation, but you said you should not be looking at the segment profit. Remember, the segment profit is again to give insight into how we run the business, going back to what I've said, the 3 business units have very distinct and clear topics, the objectives they're supposed to deliver. When it comes to transformation, a lot of the efforts you see coming through in vending improved profitability is the function of transformations. We're optimizing the routes. We're optimizing resources we're optimizing how we buy the products and the [indiscernible].

On top of that, remember, we're also driving a lot of revenue initiatives again pricing, but also the key elements of Alex, we have talked about earlier, on product assortment and how we optimize [indiscernible] profitability. So there are always a lot of activities happening in the big business unit like them. So you can't isolate in most cases, one single cost effect to explain the all profitability. My suggestion, look at the overall profitability, but also how the key drivers are manifested in the second disclosure, then you will have a good picture of what is actually happening.

[Interpreted] So when you look at the overall company base, I was just thinking, I believe that you have many transformation impact effects in every corner of your business and particularly in vending, it was very strong. That's what I understood.

[Interpreted] Thank you, Miyake-san. Since we are approaching the designated hours, we would like to pick up a couple more questions. But I hope that we can keep one question by person. Operator, please put to the next question.

I unmute our next speaker. Next, we have Saji-san from Misuho Securities.

[Interpreted] I have one question about Monster Energy. I would like to just double check. So I would like to understand this will be a wholesale apply from Asahi to VGI. And you say that Asahi is a flyer of Monster Energy to VGI. So VGI has no involvement in the manufacturing meaning that the -- financially, it's about margin. It's only about margin, no production cost because I would like to understand the nature of contribution -- financial contribution of this business.

Thank you Saji-san. So you would like to understand whether VGI is involved in the maturing and this is a pure wholesale business. So Alex can take this question.

Saji-san, Alex here. Yes, just probably building on your confirmation is the agreement with Asahi is we're buying product from them, and we're deploying into the largest network of many machines. So yes, we're not involved in the manufacturing of this product. I help this clarifies question.

[Interpreted] Then you will earn only the sales margin. Is that on the revenue from this business model?

[Interpreted] Yes, that is correct.

Fujiwara-san from JPMorgan Securities.

[Interpreted] Fujiwara-san from JPMorgan speaking. So I have a one question. Just simply would like to ask about the figures. Page 7, Slide 7, there's faster increased decrease. And I'd like to know the first volume price mix, and there is a breakdown number here. And volume other than volume and unit price. And there's other and that is a minus JPY 3.5 billion that's what I heard. I believe, and that is pretty big. I'd like to know the breakdown of that. And after the second quarter, what will happen to the others? What is the outlook for the other segment that also might hold?

Thank you for your questions. The waterfall chart, the volume price mix and there's other. And you would like to know the breakdown of other of the volume price mix. Bjorn can take this question.

It's inside the other, that is a collection of several items. So by selling more volume, and therefore, generating more revenue, which is good. you also incur additional sales costs the moving cost tensive, et cetera. So that will come as part of that because not always having sales that goes straight through overall. The commissions, which is also part of the vending business inside here, decreased a little bit in the quarter. And we also have the, what we call the variable transportation also the [indiscernible] also those again because we're moving more product in the quarter. So all of those mixed elements will come in that category.

[Interpreted] Okay. Then that means the variable promotion costs, the rebate or the kind of impact is coming from those impacted by that. And the negative amount is big for your other is something that is not negative. Is that correct understanding?

Absolutely, 100%. It's the cost of doing business.

Igarashi-san from Daiwa Securities.

Igarashi-san from Daiwa Securities speaking. So quickly, I have one question regarding the volume. So sustainability of the successful volume growth. So plus 4% is very good. In April, it's plus 2% in the first report. So is it slowing down or in the first quarter, so it was too good. So could you give us a comment regarding the growth in the volume?

Thank you for the question. Regarding the sustainability or the growth of the volume and also how to assess the 2% growth in April? Alex will answer.

Thank you. Alex, the preliminary report in April is plus 2% flash so far, we believe we continue to outperform the market, which is a positive thing. What we're seeing in the volume impact is, as you recall, we took the price increase of [indiscernible] that's negatively impacting the trend in the early part of the month. So nevertheless, I think what I want to call out is the fact that we believe to be outperforming the market, and we feel confident about the outlook that we have to deliver the JPY 35 billion profit for the full year.

Next person is Sumoge-san from BofA.

[Interpreted] This is Sumoge speaking from BofA. I know this has been repeating questions. I know this has been repeating questions. I would like to ask about the cost side of about the JPY 2 billion to JPY 4 billion cost push. In Slide 11, you mentioned about those plans. And then you mentioned that in the first half, you don't really have much impact. But then can I understand that you are expecting some kind of impact in the second half? And also, you mentioned about JPY 2 billion to JPY 4 billion is a potential one. They may not happen. But then as you know, if we see the price of the oil stabilize after the April, is that the kind of scenario that you assume in here?

[Interpreted] Thank you, Sumoge-san. Your question is about the cost pressure for this year. So I would like to ask Bjorn to pick up this question.

Again, we reiterated our belief that the net impact will be about JPY 2 billion to JPY 4 billion in our commodity and currency basket for this year. And again, speculating about the future is not very helpful here. We are, again, committed to deliver our JPY 35 billion, and we will manage towards that.

But I think instead, I would remind you of what happened back in 2022 when the Ukraine crisis hit, again, the commodity and the currency market. You saw what we did and we manage that through probably 1 of the bigger impacts to the beverage business ever in Japan. And you heard also the termination of Alex saying we are seriously considering price increases, which is exactly what happened when that Ukraine crisis started flowing through into the commodity. So rest assured, we are on that, and we will manage towards our targets.

[Interpreted] Understood. What about the time line? Because in your presentation on Page 15, first half, you're not expecting any impact, but then you are saying about like maybe second half, you might be having APAC. So what do you think about the time line?

Thank you for your question. The first half and the second half assumption, I would Bjorn-san also to answer these questions.

Yes. Again, Sumoge-san, we're operating with different scenarios that we're managing, again with the purpose of delivering our profits. We estimate as we also said in the prepared remarks that in the foreseeable future, the effects of this event will start subsiding and that's what we're managing against. So I'll leave it at that. Thank you.

[Interpreted] Thank you very much. Thank you for your question. Since we are running over time, I would like to pick the final question.

[indiscernible] from Goldman Sachs.

[Interpreted] I also like to ask a question related to Middle East situation, and you've already explained the cost impact. So it's clear to me, but how about the procurement risk. correct to understand that you have no -- almost no risk in the procurement aspects such as PET, bot or packages how about the physical procurement risk. I'd like to understand how you see it.

[Interpreted] Thank you very much for your question. About the impact of Middle East situation, the risk of our procurement, Calin-san will take this question.

I'm Calin here. I'm jumping again here to take this last question. And to try to answer your question as well to make a comment about this continuous concern and questions directed to us of the company about the political situation in the Middle East as well. Well, I can answer very simply the first part of the question. Right now, we are not facing any shortage of product.

Second thing that I can say, in the foreseeable future, we don't foresee having any shortage of road. We can estimate some cost increases that we have measured because of the overall dynamic of the pricing because of the demand and supply situation, but we are confident that through our network, we are able to supply at least to what we have visibility the supply for our raw materials. And I hope that clarifies the overall situation.

Now let me go back to the Middle East situation, which concern everybody. With all due respect to the audience, I think, asking us about scenarios of product shortage and product pricing for 2027, it's at least unrealistic, meaning we are not geopolitical experts, and we are not having the call here to debate political trends, meaning what's going to happen in 2027, I can tell you right now, I don't know and nobody in our company knows what the impact would be, it describes is going to stay here for another 40, I don't know 24 months or 48 months, nobody can estimate it. But we are doing our best estimations for watching our control as well leveraging our power of purchasing in any conditions out there. We need to make sure that no matter the condition out here, we are buying at the best price in the market.

No matter the conditions out there, we need to make sure that we ensure supply as well, we need to make sure that we are as well best industry in ensuring supply. This is the only thing that I can tell you right now and the fact that we have created a very solid business in Japan over the years through our transformation. The fact that we are purchasing through the consortium, which is one of the biggest in the world. And third, we are having a very healthy hedging policy, which proved to work over the last years gives us confidence to believe that no matter the scenarios are we will manage above average within the industry in Japan and outside Japan in the world within the Coca-Cola system.

But more than that, going and giving granularity now for quarter 4 impact of costs in 2027, I think that's totally unrealistic to be questioned at this moment in time. And this is what I want to highlight. At this moment in time, we stay committed the results of this year through fantastic rents out there in the market for our company. And with all due respect, the way how I would suggest you read the numbers is that we have over delivered in all the KPIs in quarter 1, not only profitability. More than that, we stay committed for the year-end profit as well for step-by-step 2027, 2028 and 2030, Vision 2030 results.

Now I hope that, that concludes the answers today and as well try to set the scene for how we are looking at the crisis in the Middle East. Thank you very much for your questions and your interest in the business.

[Interpreted] Thank you very much for your questions. With that, we would like to conclude the Q&A session, and we are running over time, and thank you for your patience. And we will put the information in the presentation on our website. So if you have further questions, then please contact the IR team in our company. Thank you very much for your participation.

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

Good afternoon. This is Gomi, Head of Investor Relations at Coca-Cola Bottlers Japan Holdings. Thank you for joining our full year 2025 earnings presentation for analysts and investors. Today, we are joined by our President, Calin Dragan; and CFO, Bjorn Ulgenes. Also with us are Executive Officer and President of the retail company, Alex Gonzalez; Executive Officer, President of the Food Service Company and Chief Business Strategy Officer, Maki Kado; Executive Officer, Chief Supply Chain Officer and Chief Sustainability Officer, Andrew Ferrett; and Executive Officer and Chief Human Resources Officer, Yuki Higashi.

Following prepared remarks, we will be happy to take your questions. Simultaneous interpretation in Japanese and English is available for both today's presentation and the Q&A.

Before we begin, please note that today's presentation contains forward-looking statements and should be considered together with cautionary statements contained in our presentation materials.

With that, I'd like to turn the call over to Calin Dragan. Calin-san, please?

Good afternoon, everyone. This is Calin Dragan. Thank you for joining our earnings call. And first, I will go over the key highlights of today's presentation. Please turn to Slide 3. 2025 was a fantastic year that delivered many remarkable results, increasing our shareholders' value. Business income exceeded our forecast even after they were revised upward twice during the year and reached JPY 24.5 billion, more than doubled than the previous year. Despite the challenging cost environment, we maintained a robust profit growth trend. Over the past 3 years, cumulative business income growth totaled JPY 39 billion.

I would also like to highlight that this JPY 24.5 billion business income includes significant cost increases from external factors such as foreign exchange fluctuations and increased commodity prices. I would also like to emphasize that adjusted business income, excluding the cumulative impact of this factor since 2017 exceeded JPY 50 billion and reached a new record high. This clearly shows that our profitability improvement initiatives are delivering steady results.

Building on the strong earnings performance, we revised our strategic business plan upward in August and announced the new Vision 2030. We set ambitious targets for key metrics and continued our commitment to further increase shareholder value. In October, we also announced an expansion of our shareholder returns. We view this positive cycle where we have consistently improved performance and enhanced shareholder returns to be one of our major achievements for 2025.

In 2026, we will continue this positive momentum as a year of great progress towards achieving our ambitious long-term goals. This year, our business income target is JPY 35 billion. This marks the 4th consecutive year of earnings growth exceeding JPY 10 billion. At the same time, we will enhance shareholder returns, including a 20% year-on-year increase in dividends. And as the -- first year of Vision 2030, we will pursue profit growth and higher shareholder returns to further increase shareholder value.

Now our CFO, Bjorn Ulgenes, will walk you through our financial results in more details.

Thank you, Calin. Good afternoon, everyone. This is Bjorn. Please turn to Slide 5 for the full year profit and loss. In 2025, our profitability improvement measures and other initiatives proved successful. As a result, profits increased significantly following the previous year. Sales volume also performed well and outperformed in the market experiencing negative growth. Revenue remained broadly in line with the previous year and exceeded the revised plan announced in October. Price revisions improved wholesale revenue per case despite the impact of channel mix changes.

Gross profit decreased by JPY 3.1 billion year-over-year. This was mainly due to a weaker channel mix and higher external costs. It also includes a onetime revenue decline linked to changes in Coca-Cola Japan companies marketing investment method. Business income increased significantly by JPY 12.5 billion year-over-year. This was mainly driven by top line growth and cost savings from transformation initiatives.

Factors contributing to the profit increase will be explained shortly. Operating income and net income decreased from previous year. This was primarily due to an impairment loss of JPY 88.4 billion in the Vending business, recorded during the second quarter. EBITDA, a measure of cash generating profitability, rose by JPY 6.7 billion year-on-year to JPY 64.2 billion.

Slide 6 shows segment performance. In 2025, the OTC and Food Service businesses supported revenue growth while the Vending business drove profit growth. In Vending, revenue declined due to lower sales volume from ongoing market contraction and the impact of price revision. However, segment profit improved significantly by JPY 6.1 billion. This was mainly due to transformation benefits including lower depreciation expenses associated with impairments and higher route productivity.

In OTC, the market environment was challenging and volume declined due to price revision. However, growth in online and drugstores and discounters supported overall performance and full year volume remained in line with the previous year. Revenue increased by 1.7%, partially due to price revision. Changes in Coca-Cola Japan companies marketing investment methods had an impact which led to a decrease in segment profit.

The Foodservice business achieved strong sales volume and revenue growth and earnings growth rate that was even higher. This was supported by expanded product offerings, activities to acquire new customers and price revision.

Please turn to Slide 7 for the factors behind the change in business income. Starting from the left, we can see the impact of volume, price and mix. These reflect changes in marginal profit from commercial activities and contribute a positive JPY 8.8 billion year-over-year. The main factors were a negative impact of JPY 6 billion from volume effect, including channel mix, a positive impact of JPY 18.8 billion from pricing and a negative impact of JPY 4 billion from other factors.

While channel mix deteriorated due to shifts in consumer trends, improved wholesale revenue per case from price revisions is steadily supporting results. Transformation benefits exceeded initial projections by a significant margin and reached JPY 6.9 billion. Major contributions came from commercial and supply chain with vending transformation, particularly exceeding expectations. Promotional expenses increased by JPY 0.9 billion year-over-year. Spending increased due to intensified activities to capture peak season demand and secure shelf space ahead of the October price revision. However, the increase was well controlled versus the initial plan through appropriate marketing investments based on market conditions and ROI.

Manufacturing decreased by JPY 2.2 billion compared to the previous year due to cost savings at manufacturing sites and in the procurement process. Other costs increased by JPY 3.2 billion year-over-year. This was mainly due to higher outsourcing fees, logistics costs and vehicle and facility-related expenses, despite lower personnel expense. It also include special factors such as reduced depreciation following the vending business impairment and changes in Coca-Cola Japan companies marketing method.

Commodity and utility costs increased by JPY 1.3 billion. Of this increase, JPY 1.4 billion was attributable to commodity market and ForEx rates, while utility costs decreased by JPY 0.1 billion.

Next slide onwards is on commercial activities. Slide 8 shows sales volume performance by channel and category. Full year sales volume was flat year-over-year despite negative impacts from price revision. This was achieved by strengthening core categories, expanding sales space and executing effective marketplace. As a result, we outperformed declining markets. Wholesale revenue per case also improved across all channels following price revision benefits. By channel, sales volume for vending and convenience stores declined due to price revision. However, in Vending, wholesale revenue per case improved by JPY 90 year-over-year due to price revision.

In convenient stores, profitability improved through higher wholesale revenue per case, disciplined control of rebates and promotion. Supermarkets, drugstores and discounters face challenging conditions, especially for large PET buffers due to price revisions and the cycling of the previous year's special demand. However, in the fourth quarter, we captured increased demand opportunities and achieve positive volume growth.

Online and Food Service continued to perform well and supported overall volume growth. Online volume increased by 17%, driven by the channel exclusive labelless products and other initiatives. Food Service volume increased by 9%, supported by stronger Sparkling sales at restaurants and related initiatives.

In the Sparkling category, volume increased by 5%, led by Coca-Cola and Coca-Cola Zero. Tea volume grew by 1%, mainly driven by Ayataka, which delivered double-digit growth last year following its successful full product renewal. Ayataka further grew by 2% with the launch and renewal of multiple products, including Ayataka Koi Ryokucha, sports, water and coffee, so volume declines due to the impact of price revision.

Slide 9 shows market share and retail price trends. Our profitability focused commercial activities supported value share growth and maintain price premiums. Market share increased by 0.2 percentage points in total channel value share and 0.5 percentage points in volume share. Despite tough market conditions, our volume continued to outperform the market and contributed to positive value share growth.

In Vending, the market remained challenging and value share declined. However, effective demand capture measures, including Coke ON campaigns, supported volume share growth, while wholesale revenue per case improved through price revision.

In the OTC channel, value share declined due to volume decreases from price revisions and channel and package mix. However, in the fourth quarter, we capitalized on increased demand opportunities resulting in a 0.6 percentage point increase in value share, showing recent improvement. Our products continue to maintain the price premium relative to the industry average. In October last year, we implemented our 8th price revisions since 2022 and retail prices continue to show an improvement trend year-over-year.

Slide 10 covers key topics in our 2025 commercial activity. Despite continued challenging market conditions in 2025, we implemented price revisions to improve profitability while enhancing competitiveness and achieving volume growth performance of the market. In 2025, in line with our profitability focused strategy, we implemented price revisions twice in May and October and work to maintain and improve shipment prices after the revision. The effects of these price revisions have materialized as planned and contributed significantly to profitability.

Alongside price revisions, we flexibly controlled rebates and promotional costs. Through ROI-focused marketing activities, we work to contain costs and allocated resources to mid- to long-term growth investments. We have also announced ahead of the industry, our 9th price revision this March, targeting Green Tea products. This shows our strong commitment to further profitability improvements in an environment of rising industry costs. From a competitive perspective, we also delivered solid results. By strengthening core categories, expanding sales pace and executing effective marketing, our sales volume consistently outperformed the market experiencing negative growth throughout the year.

Implementing these growth strategies within clearly defined business units has led to a more effective business operations and performance management, contributing to enhanced competitiveness and improved results. We are confident this will form the foundation for our mid- to long-term growth.

Slide 11 explains our sustainability and human resource strategies for sustainable growth. For environmental and community initiatives, we invested in projects that reduce environmental impact in the future. This includes conducting road tests of large trucks using renewable diesel, a new generation biofuel contributing to decarbonization and demonstration projects that generate clean electricity from tea and coffee grounds, while using refurbished high purity CO2 as a manufacturing power source.

At the Osaka, Kansai Expo, we implemented horizontal PET bottle recycling through bottle-to-bottle and introduce groundbreaking initiatives, such as the world's first vending machine powered by hydrogen cartridge. To strengthen human capital, we focused on recruitment, development and retention to enhance the pipeline at each stage to increase the ratio of female manager.

As a result, we achieved our 2025 target of 10% female managers ahead of schedule. We also introduced initiatives to support dual-income households, shared parenting and flexible work style. These ESG initiatives have been highly recognized and our company has been selected for multiple indices. We will continue to advance our efforts towards achieving ESG initiatives, that supports sustainable growth.

From the next slide, Calin will explain our 2026 full year plan.

Thank you, Bjorn. This is Calin again. In our strategic business plan, Vision 2030 aimed at further increasing shareholder value, we have set ambitious shareholder return targets alongside profitability and capital efficiency goals, such as business income exceeding JPY 80 billion and ROIC exceeding 10%. We consider 2026 the first year towards achieving this Vision 2030 to be a crucial year. And as mentioned earlier, we positioned 2026 as a year of great progress towards achieving our ambitious long-term goals. We aim to further increase profits beyond the substantial growth achieved in 2025.

We will also enhance profitability and capital efficiency with a focus on ROIC while further expanding shareholder returns in line with our Vision 2030. Our 2030 targets are ambitious. However, we are confident that steady profit accumulation will allow us to achieve them. With this conviction, we will move ahead with determination in 2026.

Slide 14 outlines the strategic direction for 2026. In commercial, as a key initiative for achieving commercial excellence outlined in Vision 2030, we will further evolve the business operation structure for each business unit aiming to enhance competitiveness and profitability. We will strengthen our market execution through an optimized product portfolio and marketing plans while continuing to focus on profitability driven commercial activities, including price revisions throughout this year. We will also focus on further strengthening customer engagement, which is crucial for accelerating our growth strategy.

Furthermore, through transformation, we will generate an annual cost savings of JPY 6 billion, while building a solid growth foundation for the future. Within the supply chain domain, one of our key pillars, we will continue to focus on strategies that achieve further productivity gains through the local production for local consumption model in both manufacturing and logistics, while strengthening demand-driven agile responses.

Furthermore, in the back office and IT fields, we will further advance data-driven management. To strengthen our financial foundation, we will continue to strive for appropriate capital management and utilization aiming to improve capital efficiency, including optimizing our balance sheet. Through a steady advancement of these initiatives, we aim to achieve business income of JPY 35 billion, an increase of over JPY 10 billion from the previous year, with a ROIC of 4% or higher.

Regarding the shareholder returns, we will increase the annual dividend per share by 20% compared to the previous year and complete the second year of our JPY 30 billion share buyback program by October. While aiming to achieve this ambitious 2026 targets, we also intend to realize the year the positive cycle embodied in 2025, improving performance and expanding shareholder returns.

Now Bjorn will take you through the details of the 2026 earnings plan.

Thank you, Calin. This is Bjorn again. Slide 15 shows the P&L for the full year 2026 plan. For 2026, we plan to achieve revenue of JPY 902.7 billion, representing a 1% increase year-over-year. While we anticipate a 1.5% decrease in sales volume compared to the previous year, due to the continued challenging market environment and the impact of price revisions on volume, we plan to steadily implement profitability improvement measures, including price revisions to achieve a strong improvement in wholesale revenue per case.

Gross profit is targeted to grow by 4.3%, outpacing revenue growth driven by improvements in wholesale revenue per case from price revisions and other factors as well as controls and sales deductions such as rebates. For the 4th consecutive year, we aim to achieve business income growth exceeding JPY 10 billion, targeting JPY 35 billion. We will provide details on the factors driving changes in business income later.

Operating income and net income are projected to improve significantly year-over-year, driven by increased business income and the cycling effect of the impairment loss on the vending business recorded in the previous year. EBITDA is projected to reach JPY 70.1 billion, an increase of JPY 5.9 billion as we steadily enhance our profit-generating capability.

Slide 16 shows the P&L by segment. The Vending business is projected to achieve revenue similar to the previous year despite anticipating continued challenging volume trends across the overall market due to the impact of price revisions. On the other hand, we expect segment profit to increase significantly by JPY 9.3 billion as we accelerate the transformation of our Vending business, leveraging technology. This includes the effect of reduced depreciation expenses following the impairment of the vending business in the previous year, but even excluding this factor, we will achieve solid profit growth.

For the OTC business, volume is projected to decline year-on-year overall, impacted by the challenging market environment and volume declines due to price revision, despite anticipating growth in the robust online segment. In contrast, we anticipate a 2% increase in revenue driven by improved wholesale revenue per case resulting from the effect of price revision. Segment profit is targeted to grow by 5%, exceeding the revenue growth rate through price revision benefits and optimal promotional investments focused on ROI and cost control.

In the Food Service business, we anticipate strong volume growth of 3.5% driven by expanding product offerings to enhance customer proposals and the results of new business development activity. We aim to increase profit through top line growth.

Please turn to Slide 17 for the factors behind the change in business income. We aim for an increase of JPY 10.5 billion year-over-year, driven by top line growth and the realization of transformation benefits. Starting from the left, we can see the impact of volume, price and mix. We target JPY 10.2 billion improvement over the previous year, primarily driven by the positive impact of price revisions, improving wholesale revenue per case while factoring in the continued trends in volume and channel mix.

Cost savings through transformation will generate benefits across all areas; commercial, supply chain, back office and IT, aiming for a total profit contribution of JPY 6 billion. We will steadily advance this plan as outlined in Vision 2030. DME plans to increase its budget by JPY 1 billion from the previous year to further strengthen the growth foundation toward achieving Vision 2030, we will strategically execute marketing investments focused on ROI that drive mid- to long-term growth while taking market conditions into account. Regarding manufacturing, we expect to reduce costs by approximately JPY 0.2 billion through measures such as maximizing utilization rates and yield rates at manufacturing. Other costs are projected to increase by JPY 3.5 billion.

Overall costs are expected to rise as we implement necessary investments and expenditures at appropriate levels to achieve Vision 2030. This figure includes the reduced depreciation effect associated with the impairment of the vending business recorded in the previous year. The impact of commodity prices and utility costs is expected to deteriorate by JPY 1.4 billion compared to the previous year, primarily due to foreign exchange impact. While the upward trend in cost is expected to continue, we believe we have been able to mitigate some of the cost increases through collaboration with the Coca-Cola Systems global procurement organization and our own unique procurement strategy.

Now starting with the next slide, Alex will explain our 2026 commercial strategy.

Alex, please go ahead.

Thank you, Bjorn. Alex here. Slide 18 outlines our 2026 commercial strategy. In commercial, we will enhance competitiveness and profitability through business unit-specific operational framework. As pillars of our commercial strategy, we have established strengthened portfolio edge, ensure profitability focused commercial activities, strengthened relationship with customers and business unit-specific operations.

Now let's move on to the next slide for a detailed explanation. Slide 19. In collaboration with Coca-Cola Japan Company, we will strengthen our portfolio age centered on the 3 pillars you see here. Establishing our core involved strategically focused on our core brands, enabling Coca-Cola Trademark to achieve robust growth last year and deliver one of the highest volume growth rates within the global Coca-Cola system.

This year, we will continue implementing initiatives to expand our share in meal occasions and enhance our shelf presence. Additionally, Ayataka has achieved growth for 2 consecutive years since its full renewal 2 years ago. This year, its third year since renewal, we will implement price revisions while leveraging the competitiveness we have strengthened to capture demand. Starting this month, we have launched a campaign encouraging people to enjoy rice bowls with Ayataka. In Georgia, we will strengthen sales through campaigns at convenience stores and vending machines near workplaces, aiming to establish drinking habits in work settings and expand our customer base. For strategic new products, we will enhance sales by relaunching Karada Sukoyakacha W+ with a renewed focus on promoting its consumption during meals, responding to growing consumer demand for health and wellness.

Additionally, for Ayataka Koi Ryokucha, we will broaden consumer choices in daily life by offering a diverse range of package sizes, meeting a wide variety of drinking needs. Minute Maid Zero Sugar Lemonade was launched in March last year as a juice beverage offering zero sugar and zero calories, capturing the growing health consciousness trend. Since its launch, it has been well received and has contributed to the expansion of the growing thirst quenching juice market. We plan to introduce new products and aim for continued growth across the entire series. To deepen connection with consumers, Coca-Cola will leverage FIFA World Cup assets to maximize drinking occasions. Furthermore, the Coke ON app, a key digital engagement tool, has surpassed 65 million downloads, contributing to the growth of repeat users. We will continue to evolve this platform.

Slide 20 is on commercial activities focused on profitability. To maximize profits, pricing strategy will remain a key initiative this year. We will maintain disciplined commercial activities to generate the benefits from the series of price revisions we have implemented. Additionally, we will proceed as planned with the price revisions for green tea products effective for shipments starting March 1. This marks the 9th price revision for our products since 2022. Revision applies to approximately 10% of our total sales volume with the adjustment rate representing an increase of 6.3% to 12.1% of the manufacturer's suggested retail price. Price revisions remain a key measure for improving profitability and form the growth foundation supporting our sustainable profit growth.

We will leverage the gain from our series of price revisions to implement strategic pricing approaches that adapt to changing environments while continuing to explore further price revisions. We will also focus on mix improvement and strategic growth investments, implementing profitability focused commercial activities from a broader perspective.

We will strengthen sales of profitable small package products and high value-added products to strategically deploy optimal products and packages tailored to customer profiles and competitive environment and focus on ROI-driven marketing investments from a mid- to long-term perspective. By executing these initiatives, reliably under a strong partnership with our customers, we will achieve improved profitability.

From Slide 21, we will now explain business unit specific operations. In the Vending business, we will enhance profitability and capital efficiency through technology-driven transformation. This year, we will accelerate the placement of new profitable vending machines. This will be achieved by introducing new targeting tools for placement locations, building a digital platform that combines vast amounts of data to gain insights into locations with promising profitability and revamping our operational processes to enable efficient and effective new placements.

We will further enhance sales and operational efficiency by focusing on strategic assortment and flexible pricing and packaging strategy. Regarding assortments, we will improve the quality and precision of our initiatives. So just updating the AI engine of the assortment system introduced last year, while also sequentially rolling out measures to achieve optimal pricing and packaging tailored to each location, implementing this through ongoing testing.

Additionally, as part of our digital marketing efforts, we will continue to strengthen initiatives on the smartphone app, Coke ON. We will implement individualized strategies based on usage patterns and sales data to acquire new users and increase purchase frequency. Furthermore, to strengthen the foundation of the vending business, we will work to optimize costs and capital investment by reviewing operational route designs, revising transaction terms, effectively utilizing equipment and prioritizing system investments focused on return on investment.

Slide 22 covers the growth strategies for the OTC business and the Food Service business. In the OTC business, we will thoroughly execute market strategies tailored to each area and stores unique characteristics. We will focus on establishing core products as staples aligned with consumer needs, while aiming to expand shelf exposure, particularly for Sparkling and Tea.

In convenience stores, we will pursue the development of customer exclusive products. We will also appropriately manage and execute promotional investments, including rebates based on ROI. Investment will be directed to our initiatives aimed at fostering buying habits, such as implementing digital-driven promotions and integrating retail media with in-store activation. Furthermore, focus on enhancing proposal capabilities through AI and strengthening comprehensive collaboration with customers to build a foundational -- for sustainable, high-quality profit growth.

In Food Service business, we'll focus on expanding beverage consumption occasions by strengthening tailored proposals for each customers and building a strategic partnership with customers that leverage our strengths. We will optimize equipment and product assortment with a focus on profitability while also leveraging digital tools to stimulate demand. By concentrating on effective and efficient activities and creating drinking occasions, we will strive to expand business opportunities.

I will hand it back now to Bjorn.

Alex, thank you. This is Bjorn. Slide 23 outlines our initiatives in the supply chain and back-office IT. We will build a robust business foundation through a transformation to achieve Vision 2030. In supply chain, we will continue to enhance productivity by further promoting the local production for local consumption model in both manufacturing and logistics. This year, we will establish a new integrated logistics center, IDC, in the Kanto region, following last year's launch of such a center in the Kyushu area. Leveraging our accumulated knowledge, we will accelerate the reorganization of our logistics network, including the consolidation of product inventory and logistic hubs.

Additionally, we will fully implement the new supply planning platform introduced by the end of 2025 as the foundation for our SOP process. By leveraging AI and utilizing detailed data and analytical capability, we will strive to further improve the process. Additionally, in the second half of this year, we plan to commence operations for new aseptic production lines at our Saitama plant,, which involves modifying parts of the existing production line. This will enhance overall manufacturing capacity in the country region.

The back office and IT areas, we will further advance the standardization and streamlining of business process. We will also integrate various IT systems and data to drive data-driven management. Preparations for the future introduction of a new core system will also be undertaken. We will accelerate these initiatives by leveraging access to DX best practices within the global Coca-Cola system.

Please turn to Slide 24. I will outline our financial strategy and shareholder returns. Each business unit will manage and enhance not only profitability, but the ROIC as well, which will lead to an improvement in the company-wide ROIC. We will also focus on executing capital investments with an emphasis on ROIC and on initiatives to optimize the balance sheet. ROIC improved by 1.8 percentage points year-on-year in 2025, reaching 3%. This year, we aim to improve it by at least another percentage point targeting 4% or higher.

We will also focus on improving our cash generation capabilities, which serve as the foundation for expanding shareholder returns. While we have a JPY 60 billion corporate bond repayments due this September, we will consider borrowing and refinancing options while keeping an eye on mid- to long-term funding needs and considering balance sheet leverage. Our earnings power is steadily improving, and we will continue to allocate the generated cash appropriately between growth investments and shareholder returns.

Regarding shareholder returns, we will expand them as planned on the Vision 2030. The dividend, based on our progressive dividend policy, we plan to increase dividends for the third consecutive year. This year's annual dividend per share is planned to be JPY 72, a 20% increase from the previous year that grew 13%.

Furthermore, the share buyback program totaling JPY 30 billion. Now it is second consecutive year and implemented since last November, is progressing as planned and is scheduled for completion by the end of October. Whilst details for the 2027 program has not yet been decided, based on previous levels, we are considering a buyback equivalent of JPY 30 billion or more.

Now finally, for the summary. Maki, please take it.

Thank you, Bjorn. This is Maki. Allow me to conclude today's session. Please turn to Slide 25. Once again, 2025 delivered outstanding results and proved to be a remarkable year. The growth foundation we gained through transformation pursued even under challenging conditions, combined with profitability-focused business activities contributed to increased profits and enable us to achieve significant progress. The substantial improvement in performance we have realized thus far provides momentum and confidence toward achieving our ambitious Vision 2030 goals.

Furthermore, I would like to reiterate our strong commitment to enhancing shareholder returns and our track record of delivering results. To increase shareholder value, it is crucial to create a positive cycle by simultaneously improving profitability and capital efficiency while expanding shareholder returns. We believe that embodying this cycle represents a significant achievement contributing to the realization of Vision 2030.

Moreover, based on our track record to date, and the outlook for 2026 and beyond, we are now setting a new target for business income in 2027 at between JPY 45 billion and JPY 50 billion. While this is an ambitious target, we believe it is achievable, given our track record and the steady progress of key initiatives according to plan. This further strengthens our commitment to the Vision 2030 goal of over JPY 80 billion in business income. To ensure the growth trajectory towards 2030 outlined here, the success of 2026, the first year of Vision 2030 is of crucial importance. By executing the strategy explained today, with unwavering focus, we will firmly achieve our 2026 business income target of JPY 35 billion and launch Vision 2030 with a strong momentum, aiming to further increase shareholder value.

That concludes today's presentation. Thank you for your attention.

Now we will move on to the Q&A session. Gomi-san please take it from here.

Thank you, Kado-san. This Q&A session is intended for analysts and investors. Members of the media are kindly asked to refrain from asking questions at this time as a separate session will be held later today. [Operator Instructions] We will now begin the Q&A session. Operator, please proceed.

[Operator Instructions] Ihara-san from UBS Securities.

This is Ihara speaking. So I would like to ask one question. On Page 25, you were talking about like JPY 45 billion to JPY 50 billion for 2027, the return is also very strong in commitment in the tone. So I feel a confidence in the management here. But on the other hand, probably by looking through the length of the stock market, we were wondering the external environment is really harsh, but you have a very, very strong confidence. I feel that the communication is a little bit weak in here. So my question is when it comes to mid- to long-term plan, I know you are very confident, but what is the reason behind your confidence? I know there are something obvious to us, but there must be something that we are not yet realizing. I would like to understand where the confidence comes up from -- within your company?

Thank you, Ihara-san, for your question. From the midterm mid- to long-term perspective, you would like to understand why you are confident about this plan? So Bjorn-san, would you like to pick up this question, please?

Ihara-san, thank you for the question. So as you said, we are confident about the trajectory our business is on. And that's why we also thought it would be helpful for you to see a 2-year range so you can evaluate how we are progressing towards those strategic targets. And I think the root of your question, if I got the translation correct, is what's the source of the confidence? I think there are several things.

One, we have a clear vision where we're going. We know our targets, we know our KPIs and the whole purpose is executing against that. Everything will stand and fall on commercial execution. And every day, we're seeing the 3-legged business unit approach we have or segments, as we also call them, continue to perform very well according to the job ticket they have been assigned. So that's the overall commercial part. And if we have time, maybe Alex and Maki can build on that.

The second part is transformation. You saw very strong results for transformation in 2025, and we continue to build on that across the board, the Commercial business units, supply chain and back office. And three, you also see from the shareholder-related results that we're putting out there with the dividends, the share buybacks and the commitment to continue, so is the source of a very strong balance sheet. So overall, we believe these key fundamental elements will enable us to deliver our targets. Thank you.

Ihara-san, Alex here. Just to provide a little bit more color on the business unit. I think to begin with Vending, clearly, we have over the last 3 years and particularly last year, driven a significant profit growth back to the strategic role of this business unit in Vision 2030. And we will continue to accelerate beyond the learnings of what we have captured until now. And again, back to the track record of delivering in a very challenging environment, we have been able to grow ahead of the market, indeed, the market growth.

Particularly with Vending, we will move further into more granular growth looking at unlocking opportunities beyond the total Japan but really looking at where by subsegment closures and location level and unlocking and deploying the tools and the data-driven strategies back to placement back to how are we allocating the capital in the market and how are we driving assortment. But just to give you a color on Vending.

Thank you, Ihara-san. So I hope that answered your question. Operator, please put through the next question.

Next person with a question, SMBC Nikko Securities, Furuta-san, please go ahead.

SMBC Nikko Securities, Furuta speaking. So I have one question. So the concept behind the guidance for this term. So volume mix effect will be much higher than last year. So there is an impact of the price revision in last October and also deterioration of channel mix. And also -- so not many manufacturers announced the price division. So considering everything, how are you going to deliver on the plan for this term for 2026.

Furuta-san, thank you for your question. So in the guidance for 2026, so there is a tough situation in the volume price mix and how we can deliver on the high target. Bjorn will answer the question. Bjorn-san please.

Thank you, Furuta-san. So I think the essence of how we're going to deliver the plan is included in our waterfall. So let me try to put some context around it. One, we believe the Commercial profit will increase, which is a combination of what I said to Ihara-san's question around 3 business units executing their job ticket. And yes, as we also said, there are some challenges in the market with, for instance, Vending, not growing as fast as OTC and Food Service. But overall, we believe the combination of focused Commercial plans, price increases and a good management of our trade investments will deliver the commercial profit.

When it comes to transformation, I think you would agree with me that we have delivered on our promise to change the business, and we will continue to do so across the board. This is not one specific business unit or function carrying the transformation. It comes from all the significant functions in the company, including IT. We're managing our investments, as you saw from the waterfall.

Yes, there will be some increases in DME or marketing investments as we support the effect of the price increases and the channel mix. We are continuing the excellent track record in our manufacturing and our logistics to again, make sure we manage cost per case and in our investments. And we are offsetting a lot of the inflation we see coming through, especially on third-party outsourcing expenses and logistics in a good way to overall manage our performance. There is impact from a weaker yen that continues to hit the commodity basket. But overall, I think a very balanced way of achieving our 2026 guidance.

Operator, could you move on to the next person with a question?

Saji-san, from Mizuho Securities.

I have a question for Slide 25. For next year's guidance, thank you very much for the next year's guidance. And this year, the next 2026, except the depreciation is JPY 6 billion, JPY 7 billion, profit has increased. By 2027, in that sense, the depreciation -- because of the impairment, impact will be shorter or smaller and the performance amount, I believe the amount will be increased, that is the forecast, I think. But what I'd like to ask is that for 2027, comparing with 2026, the transformation initiatives or what will be the differences for the 2 years? So what is the driver for accelerating the growth? What is your thought?

Saji-san, thank you very much for your question. For next year, what are the factors that are going to increase the profit? And for this, I would like to ask Bjorn to take this question.

Thank you, Saji-san. Excellent question. Let me try to give a little bit of context to it. One, on the commercial arena, as we have said earlier, our main focus is to execute the commercial strategies across the 3 business units with 3 different job tickets. And as you heard earlier, we are surgically focusing on leading on price and therefore, positive price mix that would be one of the elements.

But secondly, also pick up the very important points that Alex had in his prepared remarks and also his answer to Ihara-san, data-driven profit growth. And as we keep on investing in Vending, but also an integrated finding, as you heard about earlier, and overall, in our tech-led transformation programs. All of this will start taking effect, we estimate, from 2027 onwards. So that will give us new insights that we either can't find today or will take a lot of time to develop. We will have them more at our fingertips. And that, again, will enable us to sell smarter and spend market.

So the major changes are going to be primarily internally driven that we can control, but of course, also working, as I said earlier, striving for positive pricing. Hope that gives a little texture to your question. Thank you.

So the transformation initiatives, the positive increment of the profit, so that will expand for 2027. Is that correct?

Correct.

Operator, please move on to the next person.

Daiwa Securities, Igarashi-san.

This is Igarashi from Daiwa Securities. I have a question on the business units. So I would like to hear more about the sales activities, especially Food Service. And I'm seeing that you are having a lot of outcomes and success in the Food Service. And looking at Page 16, it seems in terms of sales, volumes is going up. So you have a positive outcome in this area. And what I have heard so far, it seems that you have expanded lineup and you have new customers that you have achieved as well.

But to be more specific, what kind of success are you really seeing in the sales activities? And when we think about the Food Service right now, so the mix out of your total business is still small. But probably, if you have a great success here, you'll be able to expand it to other businesses? Would that be possible? That is my question.

So your question is about Food Service business, about volume, sales, why is it really strong? And are we able to use the learnings to the other business areas, was another question. And I would like to ask Kado-san to answer this question.

Well, thank you very much for the question. This is Kado-san from Food Service. I would like to mention 3 points. First of all, looking at the past 2 years or so, I would like to say, basically, the foundation part has changed. What I mean by that is, for example, in the past, Bjorn, Alex, they have explained this already, but let me repeat. So we are using more data. So it's data driven than the past, and we're getting all the insights from the data. So we're doing that. And also, our sales members have a stronger skill set. So the capabilities are really being stronger. So we have been really improving the base or the foundation of our business. And I think this is the foundation for success in the couple of past years.

And the second point I want to mention is, again, I have mentioned this before, but we have customers that are winning at. So we want to have a closer collaboration, a very strong relationship with these customers, and that's working as well and that is another source of our growth.

And talking about the future, so how should we proceed in this way. I think what we have to do is we need to make sure that we have more customers that we can win with, we would need to have sales activities based on strong proposals. That will be our ultimate goal. So that's my third point. We have already been doing it; OTC, Vending team, we have been collaborating already. We have been changing information.

Of course, we are sharing our learnings to them, and vice versa, are the learnings from OTC and Vending. So they have a long history in their commercial activities. They have really achieved lots of success as well. So from those teams, we are gaining lots of insight information as well. So it is like it is a vice versa, mutual relationship that's really working. And we want to continue to do that. Thank you very much.

It is already time, but we would like to take one more question. Operator, please move on to the next question. This will be the last question. Thank you.

Sumoge-san from BOA.

Sumoge, from BOA. I would like to ask about the guidance. On Page 17 on your presentation, I would like to understand this. So in others, you said that you are factoring in the reduction of the depreciation from the Vending impairment. But I think other than that, we also have the cost elements here. So I would like to understand what are the other parts. And also, Kyoto has already put up some market investment because you have to secure the volumes since you have hiked the price. But I see your marketing expense is not going up that much. I believe that you are having very good control. So I know it's all in all a very positive trend. But is this feasible? My overlap to other questions, but I would like to understand about the marketing expenses? And also, what are the costs that are increasing?

So you would like to understand about the cost elements on the waterfall chart. I would like Bjorn-san to answer to that detail. Thank you.

Sumoge-san, let me try to give a little picture to you. First, let's start with the others part. So yes, correct, negative JPY 3.5 billion, but that includes the close to JPY 5 billion of the positive impact of the depreciation, correct. So what is happening inside here, we are having inflation as most other companies in Japan, for instance, of logistics and outsourced expenses and overall inflation in general. That's one element, sort of the cost increase part.

The second part, we are also investing, as you heard me said a couple of times today and also Alex talked about in Vending, we are investing ahead of the curve to again reset of how we work with data and using technology level transformations going forward. And you've also heard in our prepared remarks late last year and for this year, we went live with an integrated end-to-end planning system, which again, demands investments for us to be able to reap the benefits later back to my answer to Saji-san earlier about what the future benefits that we're going to see from all of this.

So, net-net, we're seeing cost increases but also investments ahead of the curve in others. When it comes to DME, we are surgically focused, Sumoge-san, on having an ROI when we invest in the marketing activities together with the Coca-Cola company, as you know. So this will depend on the customer landscape. It will depend on the channel and also the competitive environment where we commit to managing these expenses just like we do with every other expense in our P&L. Hopefully, that added a little texture.

We have run over time. So we would like to close the Q&A session for today. All these materials will be uploaded to our corporate website. If you have any questions or feedback, please reach out to IR team. Thank you very much for your participation.

Good evening. This is Gomi, Head of Investor Relations for Coca-Cola Bottlers Japan Holdings. Thank you for joining us today for our third quarter 2025 earnings presentation for analysts and investors.

Today, we have our President, Calin Dragan; and CFO, Bjorn Ulgenes. We are also joined by Executive Officer and President of the Retail Company, Alex Gonzalez; Executive Officer, President of the Food Service Company and Chief Business Strategy Officer, Maki Kado; Executive Officer, Chief Supply Chain Officer and Chief Sustainability Officer, Andrew Ferrett.

Following prepared remarks, we will be happy to take questions. Simultaneous interpretation is both -- in both Japanese and English is being provided for both today's call and the Q&A.

Before we begin, let me remind you that today's presentation contains forward-looking statements and should be considered together with cautionary statements contained in our presentation.

With that, I'd like to turn the call over to Calin Dragan, Calin-san, please.

Good evening, everyone. This is Calin Dragan. And thank you for joining our earnings call. Before I share details of our financial results, this time, we are announcing earnings about 1 week earlier than before and compared to any other major company in the domestic beverage industry. This progress reflects our efforts to standardize and streamline our operations through process reengineering and digitalization. It shows that our transformation initiatives are delivering positive results in this area as well.

Now, let's move on to the financial results. First, I would like to explain the positive trend in our current performance improvement. Please turn to Slide 3. Over the past 4 years, we achieved a robust increase in business income of JPY 39 billion. We highly value this and are very satisfied with this trend of profit growth.

Now looking back in 2021 under the severe business environment, our business income was at a loss of approximately JPY 15 billion. Since then, we focused on profitability-driven commercial activities and transformation of our business, achieving significant results and remarkable performance improvement.

Regarding price revisions, one measure for improving our profitability, we have implemented 8 revisions since 2022, driven by our strong commitment to enhancing profitability. And as a result, this year's business income is expected to reach JPY 24 billion following this upward revision. This JPY 24 billion business income includes the impact of significant cost increases due to external factors not in our control, such as ForEx and commodities.

If would be to exclude this impact, the adjusted business income would exceed JPY 50 billion, reaching the highest level in the history of our company. Overall, business restructuring has led to this very strong performance.

We achieved this business growth together with our customers and partners. In our customer survey satisfaction survey conducted by Advantage, we are recognized as the most highly valued partner within the consumer goods industry and the domestic beverage industry, which includes many local and global companies. This demonstrates that we have built a solid growth foundation and a great partnership.

Our achievement of improved performance based on this robust growth foundation proves the correctness of our strategic direction and gives us great confidence in achieving our upcoming strategic business plan, Vision 2030.

Slide 4 details the largest shareholder return program in our company history announced in Vision 2030. Alongside ambitious growth in business income, we plan to significantly accelerate the pace of expanding shareholder returns in line with our Vision 2030. The JPY 150 billion planned for share buybacks announced in Vision 2030 represents approximately 35% of our market capitalization.

We are pleased to note that, this represents one of the largest buyback amounts relative to market capitalization in the Japan market. Our company has thus created a positive cycle linking improved performance with enhanced shareholder returns, and this announcement is consistent with that approach.

Now, let's turn to today's highlights. Please take a look at Slide 5. I'm very pleased to share another set of strong results with you all. This year, third quarter delivered financial results that demonstrate the steady success of our ongoing initiatives. The third quarter year-to-date business income reached JPY 24.5 billion, 1.7x higher than last year, exceeding the plan that had been revised upwards in August. This strong performance was the solid result of profitability-focused commercial activities and cost savings achieved through transformation and other measures during the peak demand third quarter delivering above plan.

Sales volume also stayed strong in the third quarter, exceeding the growth rate of the overall market. So based on this strong performance, we have decided to further raise our full year business income forecast once again. We are now targeting JPY 24 billion in business income for the full year. This is double of the last year results and 20% above our original plan.

Along with this upward revision, we are enhancing shareholder returns in line with our shareholder value enhancement policy outlined in Vision 2030. Further details will be provided later, but as part of the initiatives, we will implement the cancellation of treasury shares equivalent to 6.5% of the total share issues and increase the year-on-year dividend by 10% compared to the initial plan. Additionally, as previously announced, we will continue to share buyback program starting in November, targeting JPY 30 billion to further enhance shareholder value.

Now, our CFO, Bjorn Ulgenes, will walk you through our financial results in more details.

Thank you, Calin. Good evening, everyone. This is Bjorn. Slide 7 shows the P&L statement for the third quarter year-to-date. Revenue continued to grow and business income gained momentum, resulting in a larger profit increase.

Revenue increased by 1% year-on-year. This was driven by higher wholesale revenue per case of the price revisions despite lower sales volume and weaker channel mix. Gross profit increased by JPY 2.4 billion year-on-year, driven by the benefit of price revisions despite being affected by deteriorating channel mix and rising costs due to external factors.

Business income rose by JPY 9.8 billion year-on-year, driven by higher revenues and cost savings from our transformation initiatives. The third quarter profit increase was the largest among the year's quarters, accelerating the trend of quarterly profit growth. The next slide explains the main factors behind this change in business income.

Operating income and net income decreased year-on-year due to the recording of an impairment loss of JPY 88.1 billion in the vending business during the second quarter, as previously explained.

Now please turn to Slide 8 for factors behind the change in business income. Starting from the left, we can see the impact of volume, price and mix. These reflect changes in marginal profit from our commercial activities, contributing a positive JPY 6.9 billion year-on-year.

The main factors were a negative impact of JPY 6.3 billion from volume, including channel mix and a positive impact of JPY 15.1 billion from unit price and a negative impact of JPY 1.9 billion from other factors. Although, lower volume and an unfavorable channel mix affected results due to changing consumption trends, improved wholesale revenue per case from price revisions made a strong positive contribution.

Transformation benefits totaled JPY 4.6 billion. This is mainly driven by strong results from vending transformation and improved efficiency in our supply chain network. In particular, the vending transformation is progressing ahead of our original plan.

Marketing expenses increased by JPY 1.2 billion compared to the previous year. This increase reflected strengthening activities in the third quarter to capture peak season demand and secure shelf space ahead of price revisions in October. However, spending remained below the initial plan, thanks to careful investments based on return on investments and market conditions.

Manufacturing costs fell by JPY 1.7 billion compared to the previous year. This was the result of cost-saving measures implemented at our production sites and through more efficient procurement processes.

Other costs increased by JPY 700 million year-on-year. This was mainly due to higher outsource fees, logistics costs and vehicle and facility expenses despite reduced personnel costs. This figure also reflects special factors, including lower depreciation expenses following the impairment loss of the vending business.

Commodity and utility costs increased by JPY 1.5 billion. Market conditions and exchange rate impacts accounted for JPY 1.4 billion of this increase, while higher energy costs added a further JPY 100 million.

Next is Slide 9, outlining sales volume performance by channel and category. Third quarter year-to-date sales volume was impacted by past price revisions. The cycling impact of last year's strong Ayataka renewal and the temporary surge in demand following the Nankai Trough emergency notice. However, contributions from strengthening core categories, expanded sales force base and effective marketing helped limit the decline to 1%, outperforming the overall market.

Wholesale revenue per case achieved a double-digit yen improvement year-on-year across all channels, reflecting the impact of price revisions.

Supermarket sales volume decreased by 4%, primarily due to lower volumes of tea beverages and large PET water bottles, influenced by price changes and the cycling of last year's performance. At drugstores and discounters, growth in medium-sized PET coffee bottles helped limit the volume decline to 1%.

At convenience stores, volume decreased by 5%, but profit rose, thanks to a profit-focused strategy that included optimization of promotions. In vending, market conditions remain tough with volume down 5%. However, price revisions continue to have a positive impact, improving wholesale revenue per case by JPY 98.

In Retail and Foodservice, volume increased by 6%, supporting by new customer acquisitions and stronger sales in the sparkling category. Online volume grew by 17%, driven by growth in the tea category and the launch of channel exclusive products.

By category, Sparkling grew 3%, driven by contributions from Coca-Cola and Coca-Cola Zero. Tea volume held was flat year-on-year, supported by Ayataka's solid sales after last year's successful renewal and the strong performance of KochaKaden.

Sports drinks and water saw a decline due to factors, including price revisions and cycling of the Nankai Trough emergency notice. Coffee volume remained at last year's levels, supported by contributions from medium-sized PET bottles despite tough competition.

Slide 10 shows market share and retail price trends. Profitability focused sales activities helped us grow our value share and maintain price premiums. Market share increased by 0.1 points in the total channel value share and by 0.4 points in volume share. We are very pleased that we achieved both higher volume share and positive value share growth even while implementing price revisions.

Vending volume share increased by 0.3 points even as the overall market continued to shrink. The strong growth in volume share compared to value share reflects the impact of product mix, while our wholesale revenue per case showing solid improvement, as mentioned earlier.

In the OTC channel, share declined due to lower volume and changes in channel and package mix. However, profitability is improving steadily here as well, supported by higher wholesale revenue per case.

Our retail prices maintained a premium relative to the industry average. We have applied price revisions with discipline and retail prices for both small and large PET bottles have improved compared to last year.

Now on the next slide, Alex will explain the status of our commercial activities. Alex, over to you.

Good evening. This is Alex. Slide 12 covers the status of our commercial activities. In the third quarter, we continued to execute our profitability-focused commercial strategy while also building a stronger foundation for future growth.

We are proud that our sales volume outperformed the overall market growth rate during the third quarter peak demand period while focusing on profitability. Our targeted summer sales initiatives helped boost volume.

By focusing on our core categories and leveraging marketing that connected with drinking occasions, along with effective digital promotions, we maximize in-store exposure. We also offset last year's cycling effect of the Ayataka renewal by introducing new products like Ayataka Koi Ryokucha was a key point.

In addition, we expanded sales opportunities by rolling out packaging tailored to consumer needs and by executing growth strategies aligned with each channel, supported volumes. Our efforts to build a foundation for further profit growth also moved forward steadily. Price revisions, which are key to profit growth are progressing smoothly.

We're maintaining improved shipment prices achieved through previous revisions, and these are contributing to improved profitability as planned. We have also been preparing for the price revisions that began in October.

Looking ahead, we aim to implement further price revisions for our green cheese products, market suggested retail price by up to JPY 20 per bottle by the first quarter of next year.

Tea leaf prices have continued to rise since the second half of this year and expected to reach a level of 3 to 5x from last year. We expect this trend to significantly impact the entire industry. We see this action as a necessary response to cost increases within the Coca-Cola system.

From the perspective of both growth investment and cost control, we made appropriate marketing investments during the third quarter peak season while keeping annual sales promotions expenses below plan.

We also focus on strengthening our growth foundation through customer engagement and vending transformation, further reinforcing the foundation for future expansion. As Calin explained earlier, our commercial capabilities are highly valued by our customers and represent a key strength of our company.

Moving forward, we will continue to enhance our market execution capabilities on this solid foundation of engagement and pursue further growth.

Slide 13 covers our third quarter marketing activities. To strengthen our core brand, we launched the CoChiLu campaign, encouraging consumers to enjoy Coca-Cola wood chicken through joint promotions that lever our strong partnership with McDonald's. We also partnered with Star Wars, releasing limited edition products and boosting in-store visibility using the campaign as a hook to successfully attract a wide range of consumers.

As for new products, we introduced FANTA Amazuppai Lemon and brought FANTA Fruit Punch, an iconic FANTA flavor from the 1980s and 1990s for a limited time to strengthen the sparkling beverage category.

As part of our experiential marketing, we ran a campaign where customers could enter a code found inside their bottle cap for a chance to win tickets to Coca-Cola X Fes 2025. We also rolled out vending machines across Japan set 2 degrees colder than usual to capture demand during the intense summer heat.

Next is highlights of our fourth quarter marketing activities. Coca-Cola launched its winter campaign in October, featuring promotions with exclusive Coca-Cola gifts to boost brand engagement. Georgia will also run gift campaigns, including invitations to live concerts by our brand ambassador, Adam.

As for new products, this month, we have launched Kochakaden CRAFTEA Grape mix tea from the popular Kochakaden series. In November, we will release FANTA Golden Apple, a flavor loved across generations and highly requested by consumers.

As part of our experiential marketing, we will partner with Japan's national baseball team, Samurai Japan for a campaign on the Coke ON app. Users will have the chance to win tickets to the WBSC Premier 12 tournament as well as original Samurai Japan merchandise. Additionally, for the consistently strong Ayataka brand, we will also launch a winter campaign to further boost engagement and sales.

Now for the further future outlook, I'll hand back to Bjorn.

Thank you, Alex. This is Bjorn again. From here, we will cover the revised full year earnings forecast for 2025 and the expansion of shareholder returns. So please turn to slide 16. This is our second upward revision of the full year earnings forecast this year. Business income has been revised upward once again, showing robust progress in our core performance. This revision reflects the fact that year-to-date business income exceeded the plan, supported by profitability-focused commercial activities and transformation benefits. As a result, we are raising the full year business income target to JPY 24 billion, which is 20% above the initial plan and double the previous year's figure.

Regarding sales volume and revenue, the previous revision was made prior to the peak demand period, and so detailed updates were not provided. This time, we are revising our plans based on the latest market conditions. In the fourth quarter, we will focus on achieving the revised full year business income target of JPY 24 billion, while continuing to strengthen our foundation for profit growth beyond 2026. This includes implementing price revisions in October, making mid- to long-term marketing investments and driving further transformation.

As Alex mentioned, we are also preparing additional price revision for green tea products in the first quarter of 2026. Our October sales volume showed mid-single-digit growth, maintaining a strong trend. We will leverage this momentum to achieve our full year business income target of JPY 24 billion.

Slide 17 shows the revised full year 2025 profit and loss plan following the upward revision. Full year revenue is now projected at JPY 887.9 billion, a 0.5% decrease year-on-year. While we expect the positive effects of price revisions as planned, revenue will be impacted by volume declines and channel mix.

Reflecting the current market environment, sales volumes is expected to decrease by 1.4% year-on-year. Full year business income is targeted at JPY 24 billion, double the previous year's figures, driven by profitability-focused commercial activities and transformation benefits. This represents an even more ambitious target and is a JPY 4 billion upward revision from the initial plan.

Key factors affecting business income will be explained on the next slide. The main factors contributing to lower operating income and net income remain largely the same as in the previous revision, such as the impairment loss of the vending business recorded in the second quarter. However, this time, we have newly factored in the additional impact from the revised timing on fixed asset sales.

Slide 18 explains the factors behind the change in business income under the revised plan. For the fiscal year 2025, we are targeting a significant increase of JPY 12 billion in business income compared to last year. This growth will be driven by profitability-focused commercial activities and cost savings from transformation.

On the left side, under volume price/mix, we expect a positive impact of JPY 8.7 billion, driven by increased profit from improved wholesale revenue per case following price revisions. This also reflects the impact of volume declines and channel mix trends in the current market environment.

Transformation-led cost savings aim to contribute JPY 6.7 billion to profit. Transformation benefits have exceeded expectations and initiatives in other areas are also progressing smoothly. This represents an additional JPY 1.5 billion benefit compared to the initial plan.

Marketing expenses are expected to rise by JPY 800 million as we optimize spending in line with marketing market conditions. However, this still represents an improvement of JPY 3.7 billion compared to the initial plan. Manufacturing efficiency has progressed beyond expectations. Cost-saving measures at our manufacturing sites and in procurement are delivering results, contributing JPY 1.3 billion in profit.

Other costs are projected to increase by JPY 2.6 billion as we continue to make strategic investments for future profit growth. This figure also includes factors such as the approximate JPY 5 billion reduction in depreciation expenses from the vending business impairment in the second quarter and the profit impact associated with changes in Coca-Cola Japan's marketing methods.

Commodity and utility costs are expected to worsen by JPY 1.3 billion due to the impact of higher raw material prices. These are the main factors affecting business income in the revised plan.

On the next slide, Maki will explain the expansion of shareholder returns. Maki?

Hello. This is Maki Kado. Please turn to Slide 19. From here, I will provide the explanations. Along with the upward revision of our full year earnings forecast, we have also decided to enhance shareholder returns in line with the shareholder value enhancement policy outlined in Vision 2030.

As new additional measures, we are announcing the cancellation of treasury shares and an upward revision of the dividend forecast. First, regarding the cancellation of treasury shares, we will cancel 12 million shares in November, equivalent to 6.5% of total shares outstanding. This represents nearly all of the treasury stock acquired over the past year. We believe that appropriately canceling treasury shares is an important action that enhances shareholder value. While our Vision 2030 plan calls for cumulative share buyback totaling JPY 150 billion, we will continue to cancel acquired treasury shares at appropriate times going forward.

Next, regarding the upward revision of dividend forecast, we have raised the year-end dividend per share by 10% from the initial plan, revising the full year dividend forecast for 2025 to JPY 60 per share, representing a JPY 7 increase from last year. We will also continue our share buyback program. The JPY 30 billion share buyback announced last November was completed yesterday as planned and another JPY 30 billion buyback will begin this November. By implementing this comprehensive shareholder return program, we aim to further enhance shareholder value.

Regarding shareholder returns, over the past 2 years, we have significantly accelerated efforts to strengthen shareholder returns. This includes our comprehensive shareholder returns announced in November last year and our largest ever shareholder return program included in Vision 2030 this August.

We see it as a major achievement that improved performance and has enabled us to expand shareholder returns, creating a positive cycle. We will continue to build on this positive momentum going forward.

Finally, let me summarize today's presentation. Please turn to Slide 20. This year, we have pursued both profit growth and strengthening foundations for sustainable profit growth, positioning the year as a year to achieve both profit growth and strengthening foundation.

I am very pleased to share this strong update with you today. We have achieved business income growth that exceeded the upward revision announced in August. As a result, we are announcing our second upward revision of the business income plan this year.

Furthermore, we have decided to enhance shareholder returns based on these improved results. I firmly believe this success reflects our ongoing profit focused activities even in a challenging environment and our commitment to the shareholder value enhancement policy outlined in Vision 2030.

We will maintain this positive momentum through the fourth quarter and beyond, working to achieve our full year business income target of JPY 24 billion, double of last year's result. At the same time, we will diligently strengthen our foundation for future growth, including preparations for further price revisions on green tea products to ensure a strong start in 2026.

Next year marks the launch of our ambitious Vision 2030. Building on our solid business momentum and strong track record, we will continue to commit to further improvement performance and expand shareholder returns. We will also keep driving our key initiatives with a mid- to long-term perspective. This concludes today's presentation. Thank you very much for your attention.

With that, I will hand it over to Gomi-san for the Q&A session.

Thank you, Kado-san. This Q&A session is for analysts and investors. For members of the media, please refrain from asking questions as this time as we will have a separate session later today. Due to interpretation please ask only 1 question at a time.

Now, I would like to start the Q&A session. Operator, please begin.

[Interpreted] [Operator Instructions] From UBS Securities, this is Ihara-san.

[Interpreted] This is Ihara from UBS Securities. I have 2 questions I would like to ask. First question is about the third quarter performance. I want to know more details. So, I thought the profitability, you might be struggling a bit more -- a little bit more. So, I was really surprised for the really strong performance. Looking at the third quarter, it seems that the volume is negative for the third quarter actually. And if you go into the details, the manufacturing cost, maybe that is really showing a strong impact. So, what is the background of seeing a drop in the manufacturing cost because it seems that, that is one of the drivers for the good Q3 performance.

Thank you Ihara-san. So, the third quarter profit, you thought that it will be very tough, but it actually seems that we're enjoying lots of profit in the manufacturing side. And what is the background? So Bjorn-san, would you like to answer this question?

Thank you, Ihara-san, for the question. We are, as you heard from the prepared remarks, extremely pleased with the Q3 performance, where we are, as we also heard, outperforming the market. And when it comes to the details behind it, I think it's very important to see we had -- if you look at the waterfall that we provided, we have a very balanced and I think very strong performance delivery across all the levers of the business.

First and foremost, we're growing commercial profits, which is important. We continue to drive transformation savings in the business, again, pushing -- changing how we work and investing in future digitization. You also mentioned the manufacturing cost, which, of course, helps, which also includes procurement benefits that we have implemented in the quarter, and also how we utilize utilities, for instance, inside manufacturing. So overall, very pleased with the quarter and the overall performance of our profit delivery.

[Interpreted] And I want to focus on the manufacturing cost actually. More details there will be helpful. So looking at the full year number, the manufacturing cost reduction, there was a certain number. But is this like a onetime thing? Or are you going to expect more savings in the manufacturing area next fiscal year?

So Ihara-san, thank you very much for the additional question. So, you are wondering about Q4. And if you calculate backwards from the full year number, it seems that Q4 will be a little bit shy in the numbers. So, you're wondering about the background for that. Bjorn-san, do you want to answer again?

Thank you, Ihara-san. Bjorn again. Manufacturing cost, remember, is a function of several things. One is the volume that supply chain is producing and putting through our network. And secondly, you have the impacts of how they utilize the resources, as I said earlier, for instance, water and energy. And then you have the procurement part.

So you always see variations in manufacturing costs going up and down basically daily, weekly, monthly and quarterly. However, when it comes to transformations, the supply chain is really pushing forward. And as you heard in my earlier parts of the prepared remarks, supply chain is the second driver of our transformation savings year-to-date, and it will continue to be so as we go into the future.

So we're very pleased, as we said earlier, with the transformation efforts, you will see these continue to flow through into the P&L, including manufacturing, but also vending and back office as we have talked about earlier. So, thank you for that.

[Interpreted] So, if I could move on to my second question. So, the price revision from October, I want to know more details. So, in the third quarter, looking at the revenue per case compared to the second quarter, I think the impact is smaller. In the fourth quarter, looking at your plan, the revenue per case, it seems that it's getting deteriorated by like 3% or so. You mentioned that you have mid-single-digit growth in October, but I'm not really sure if that is the case. So, I'm just wondering what is going to be the situation after October after you fully kick in the price revision?

Well, thank you very much. So, we have revised the price from October. So, I would like Alex-san to provide a little bit more detail on that.

This is Alex. First and foremost, I think it's clear, we evaluate the series of price revisions positively overall contributing to profitability. The price revisions are being implemented as scheduled starting October 1. It's too early to evaluate as they have been implemented. I think it's important we're strategically raising the shipment prices in consideration of the market conditions with implementation expected to be mostly completed within this year.

I think also just want to reiterate what I also said in the prepared remarks, looking ahead, we aim to implement additional price increases of up to JPY 20 per bottle for green tea as by the first quarter of 2026. The increasing costs are putting pressure on the beverage industry, make it urgently for the industry to secure profitability. And this decision to implement additional price revisions proves again that we at CCBI, we walk the talk, and we lead the industry towards more rational pricing in order to shape healthier industry dynamics.

Operator, we would like to move on to the next question.

[Interpreted] Next person is Morita-san from Nomura Securities.

[Interpreted] This is Morita from Nomura Securities. I have 2 questions. First is about the tea leaves costs. So, with regard to this cost increase, is this more to do with the lower cost that CCJC should bear? Am I understanding it right? Because if the inflation happens for the tea leaves, it means that the cost is going up as in like you are going to pay more to the CCJC -- or are you paying more to the outsiders?

Thank you, Morita-san, for your question. If we see further increase in tea leaves cost, I would like to ask Bjorn-san to take this question.

Thank you, Morita-san. So first and foremost, yes, we're seeing market movements in the cost of green tea leaves, which are quite significant. And you also heard Alex and Maki in the prepared remarks underscoring the opportunity for the industry to take price across as we have done now in October, and also for specifically the green tea business.

So we believe this is something that's going to hit the industry overall. And again, it's a great opportunity to again look at pricing. we're not seeing any changes in the incidence model you're referring to with CCJC. But as, of course, we take up price in the market, a percentage of that will naturally go to CCJC. But overall, very confident with the price increases we're pulling through and looking forward to see it happening in the marketplace.

[Interpreted] So going forward, do you -- are you -- is there any potential that you will see this incidence-based model will change over time?

Thank you for your question. Your question is, is there any possibility that the CCJC will revise the pricing for the incidence pricing model? So Bjorn-san, would you like to answer this question?

Thank you, Morita-san. There is no indications of anything like that happening. We are on an incidence-based pricing model with the Coca-Cola Company as we have spoken about many times, and we do not expect any changes to that. So, the answer is no.

[Interpreted] So, my second question is, so you are going to stock up JPY 1 billion on the BI, so it's wonderful. So, I was just understanding that SG&A is going to be reduced by JPY 18.1 billion. So, when it comes to this reduction of JPY 18.1 billion in SG&A, what is the factors behind it?

Thank you, Morita-san, for your question. So, within our revision on the BI, your question is how we reduce the SG&A to the tune of 18.8%. Bjorn-san, would you like to answer this question, please?

Thank you, Morita-san. In our P&L management, first and foremost, very happy again to report the second increase in our profit target for this year. When you look at the overall SG&A for our business, I think it's very important to look at it from many angles.

One, we continue the transformation efforts across the board in our business. I mentioned that both in the prepared remarks and in the prior question from Ihara-san. That is impacting everything that we do in this business, as we said, across the 3 business units and in the functions that I referred to.

Secondly, we are also doing heavy cost control, again, across the business units and the different functions. And overall, by doing that, we are able to deliver good cost trajectories while we improve the commercial profit in our business. Therefore, we're able to deliver the strong results you saw in Q3. and we continue or plan to continue that into the full year. Thank you.

[Interpreted] So what are the breakdown? Is this going to be a marketing or any other item? So, what are the plan? And what are the planned items inside that reduction plan?

Thank you, Morita-san, for your follow-up question. So, your question is about the specific items that we are looking to reduce the cost. So Bjorn-san, would you like to follow up, please?

Thank you, Morita-san. There's many elements coming into it. And I think you will appreciate that I can't give you all of the details there in our management accounts. But think of it as overall in the enterprise, as I said earlier, we're cutting back and using return on investments, as we said earlier, as a measure for all our spend.

Secondly, as I said, we're focusing on optimization. That includes people costs, for instance, and other budgetary elements. We also have the effect of the depreciation that is reduced from the vending impairment. You remember, we posted in Q2 and overall, a very, very strong budget and cost control regime that we have in the company. So overall, that gives us a very good trajectory on the cost management side.

Thank you very much, Morita-san. Operator, proceed with the next question.

[Interpreted] Next, we have Miyake-san from Morgan Stanley MUFG.

[Interpreted] This is Miyake from Morgan Stanley. And may be overlapping with the previous questions, but let me ask my question. Up to Q3, BI progress Q3 YTD versus your initial plan, how you can compare? How much is the upside compared to the initial plan? And when you announced your first half results, -- from the initial plan, you said that most of the items in your financial reporting are almost in line with the initial plan. That's what you said at the end of Q2. But you mentioned the effect from vending transformations and so on. So from Q2 to Q3, why you were able to accelerate the performance or how did you accelerate outperformance versus in Japan?

Thank you very much, Miyake-san, for your question. So as for the upward revision you announced this time from Q2 to Q3, how you were able to accelerate the change -- positive change? That was the question. That led to the -- another upward revision. Bjorn-san, please take this question.

Thank you, Miyake-san. So we are, as we said in the prepared remarks, extremely pleased with our Q3 performance. And when we announced back, as you said, in Q2, our performance, we were still ahead of the -- or entering into our peak season, which is the summer period.

During the summer period, as you can see from the Q3 performance and then as I also said earlier, we delivered a very, very balanced and strong profit improvement across all the levers that we can control in the business. We had good commercial growth in the period, even though at certain points, there were some weather challenges, et cetera, and cycling of the Nankai Trough as of last year that you all remember. We continued the transformation. We managed our marketing spend, and we also start flowing through, as you know, the impact of the depreciation of the vending and all the other cost measures we are doing. So therefore, we accelerated into Q3, which, as I said, we're very pleased with. Thank you.

[Interpreted] And you mentioned the depreciation of lending business and the payment to the Coca-Cola Japan company are included in others. And you also mentioned the DME or depreciation. So, what are the major changes from Q2 to Q3 that led to the upward revision this time?

Thank you for your additional questions. From Q2 to Q3, transformation, DME, what exactly have changed from Q2 to Q3? Bjorn-san, please take this question.

Miyake-san, I'll probably repeat some of the items that I answered to your first question because they're very, very much linked. So, inside the cost part that I mentioned, leading to the excellent performance in Q3, we continued the transformation and accelerated it. You saw that also flowing through very nicely in Q3 and the full year. We are also seeing other cost measures that I referenced earlier, both to Ihara-san, Morita-san and yourself, therefore, coming out of the strong cost control. And overall, we're also seeing the benefits then, as I said, of the depreciation flowing through. So overall, that delivers very, very strong performance for the quarter.

I'm sorry -- if I may continue with a little bit of stressing a little bit more, if I may, on the tones of the questions today. I am Calin Dragan trying to add here, just a bit of nuance. My colleagues here are trying to answer about almost any questions since the beginning of the call, all related to our performance.

And I cannot say anything else other than we are extremely pleased with our performance over the quarter 3 and as well year-to-date. But I'm -- as I said earlier, I'm a bit surprised about the tone of the questions that are coming. And it's referring to the start of -- and the reason why I put it at the beginning of the deck today, the first 2 slides and primarily the first slide, which reminds everyone the transformation and the swing in performance of this company.

By now, I was expecting that it is going to drive way more confidence in what we are doing. We are coming out of 9 or 10 quarters, successive quarters of overdelivering our performance. we are producing a swing of almost JPY 40 billion in performance over 36 months or 40 months or so in total. And pretty much we were discussing in this -- in the meetings in the same forum here with all of us, meaning after 3 or 4 years of overdelivering quarter-over-quarter, meaning I'm a little bit surprised about the tone of the question and the misbelief in the performance.

So -- and I'm sorry to say that bluntly at this moment in time. I was thinking that by now, after we led about 8 wave of price increases and every time they were concerned, so is it going to be able to do another one? Well, I always answer, I don't know, but we are going to drive it, and we drove it 8 times so far. and we always overdelivered.

What I'm trying to say here, I think it is a moment of a reset in evaluation of Coca-Cola Bottlers Japan performance. It is quarter-after-quarter delivery, leading industry in initiatives like digitalization, like transformation, cost savings, if you measure our cost savings in one company compared with the entire beverage industry, I think you would be really surprised about the outcomes that will come there.

If you measure our performance in terms of pricing in the market over the last years and the moments when we took price, I think you understand as well that we are leading the industry. And of course, in the circumstances on which we are operating exclusively in Japan, and we are not an integrated company like all the other players in the Japan industry. I think the performance needs to be evaluated in a way more positive way and should be less surprised when Coca-Cola Bottlers Japan deliver performance, especially in a very big quarter like quarter 3.

So the numbers that you are seeing are significant because we are generating a lot of our profitability in quarter 3 every year historically. So that's why probably JPY 1 billion up or down shouldn't be that much of a surprise. I hope that I'm not going to shock you with my very bold statements today. Apologize if I do that. And I'm very happy to take questions if something of what I said is not clear. If everything is okay, I'm happy to continue to take questions and answers on topics that you might be interested in. Thank you so much.

[Interpreted] So as Coca-Cola Bottlers Japan, so you said that you were able to deliver a very strong result by Q3 YTD and you were able to deliver very strong profits even after price revision. So, I'd like to understand why or exactly why that is why we are repeating the similar question.

So, my second question is also referring to the price revisions. And you said that, you are thinking about the ninth wave by the end of Q1. That why are you considering another price increase? And of course, other beverage companies are increasing their prices as well. But -- when we look at other channels except from CVS or vending, I've observed your Ayataka prices are relatively lower priced than your suggested price. So, I understand that price revisions, if there is a justification is a good thing for the industry. But it seems -- so I'd like to understand what is the right approach because when I look at the actual selling prices in the market, it may not be fully reflected. And what are the premises needed for another price hike? As for the green tea price division, that was mentioned in the prepared remarks. So, what is the situation now?

Miyake-san, Alex here. Just probably repeating myself, price revisions, we see it as one of the key levers in driving overall contribution to profitable growth. I think when you step back and look why price increases, the fact is the cost of doing business, the cost of commodities is -- we need to see the Japanese yen to the dollar exchange rate depreciation and with U.S. dollar-denominated commodities, it's natural that the cost, not only for CCBJI but for the industry in general is pressed for price increases to help offset commodities. So, what we're doing here is we are essentially driving price increases to capture the value from the market and creating that value to consumers and customers. And that's what we will continue to be doing. We are growing our consumer base -- we are delivering on our profitability targets sustained quarter-over-quarter. And we are working to continue to earn the right to price by creating and adding that value to consumers. So that is at the essence of what we need to do to win in the long term in Japan.

[Interpreted] So, you continue to observe how the October Wave 8 will be responded or reacted in the market. So, you continue to look at the market reaction of Wave X and make the final decision about Wave 9, understood.

And our scheduled time has already passed, but we still have some people waiting in the queue. So, I'd like to put through the next question.

[Interpreted] Saji-san from Mizuho Securities.

[Interpreted] So I would like to ask a question about the gross profit. For the third quarter, July to September, it's almost flat. And accumulative is minus 0.3% drop and the gross profit rate is about JPY 200 billion increase. So mostly is the S&GA drop. and the channel mix decline, I think this will continue for the future. But this gross profit improvement, how are you planning to improve the gross profit? Cost inflation is continuing and the price hike or price revision is continuing, but the gross profit rate estimate for the future, I would like to ask your estimate for the gross profit.

Saji-san, thank you for your question. The plans for the future for the gross profit. Bjorn-san like to answer this question.

Thank you for the question. Overall, remember for the Q3 that we delivered a very strong profit overall, including the commercial profit, which is, of course, heavily impacted by the gross profit. Inside gross profit, there's many parts that we can influence directly when it comes to improvement.

One is the element you heard us talking about at [ OCM ], which is pricing. We are now executing our eighth price increase and the gross margins, of course, include the effects of the prior 7 ones. That is the major determinant.

The other parts that we are also impacting, again, the controllable elements is how we execute in the marketplace. And you have seen us running the business in 3 business units or 3 segments, which is a major ability to focus and deliver targeted activities to our customers and our consumers. So therefore, how we balance the mix between the business units and the subchannels is also an important way to improve gross margin.

Overall, you also have what we call revenue growth management, which is a very, very important part for any consumer goods company. It includes pure pricing increases, but it's also about how you manage, for instance, terms and conditions with your customers. So overall, going forward, we will continue, just as you heard Calin mentioned earlier, we are continuing to drive price in the industry. We are continuing to execute revenue growth management. We are continuing to have BU and channel-focused execution and brand programs, and we will continue the transformation. So hopefully, that gives you some comfort how we will work on it. Thank you.

[Interpreted] So the mix improvement, you are going to -- the gross profit margin is going to be improved, and that is how we are paying attention to. And in the future, if you -- if we can confirm that in some of the opportunities, I'd like to know that.

Thank you for your question. Operator, please move on to the next question.

[Interpreted] So this is Igarashi-san from Daiwa Securities.

[Interpreted] This is Igarashi from Daiwa Securities. So, I would like to ask about the sales trend from October on. I want to check once again actually. And from October, you have revised the price is executed. And on the other hand, the sales has gone up as a downward revision. So, I'm just wondering about the sales like volume, et cetera, from October on. So, the upside potential downside risk, which is going to be stronger in the fourth quarter? And are you going to invest strongly for the following year as well? This is another question.

Well, thank you very much for the question. So, the sales trend after October is one of the questions. So, I would like to ask Alex-san to answer, please.

Alex here, the October, although it's preliminary sales figures, October volumes is in the mid-single digits, although it's very preliminary, we have preliminary indications that we're outpacing the market, but we will continue to observe and monitor the trends as the retail prices in the market are materialized and we continue to increase our wholesale price in an agile and monitor and flex all the muscles behind our revenue growth management algorithm.

[Interpreted] In November and December, is it going to be negative? Is that your plan?

Well, thank you for the additional question. So, November and December, our volume, is it negative or not? Alex-san, please?

At this point, the numbers that we have reflected in the guidance is our best estimate of what the quarter 4 figures will do, and we will continue to monitor the situation as it progresses.

And we would like to move on to the next question. Next question will be the last question.

[Interpreted] Sumoge-san from BofA Securities.

[Interpreted] This is Sumoge speaking. I hope I'm audible.

Yes, you are. So please go ahead with your question.

[Interpreted] So, I would like to look into more to the midterm vision. So, you mentioned about like JPY 50 billion to JPY 55 billion as a target for 2028.

Sorry, you are very intermittent and sound. Can you repeat that?

[Interpreted] I would like to question about how your vision about the midterm plan. So, in 2028 target, you mentioned about like JPY 50 billion to JPY 55 billion, right? So, every year, you have to stock up like JPY 10 billion and above. So, in the previous quarter, you mentioned about the business unit separation, right? So, you have a vending, OTC and food service. And you mentioned about how you're going to execute separately in this segment. But what is your vision in each segment? For example, OTC and foodservice, they have a high profitability. So, are you going to hike the pricing there? Or are you going to improve the profitability in the vending because they have a lower profitability? So, what would be the approach going forward in each segment in midterm? And maybe the projection of each profitability in 3 segments?

Thank you, Sumoge-san, for your question. Your question is about the growth trajectory and the forecast of our 3 segments going forward. So, Bjorn, would you like to take this question, please?

Thank you, Sumoge-san. Very good, a more long-term question. Very happy to answer that. First and foremost, we are very confident that we can deliver these targets, whether it's the 2028 that we revised up or the 2030. And you can see that confidence coming through in the revisions we have done for this year.

Going into more specifics of your question, yes, overall, the performance will be driven by, first, the 3 business units or segments as we also call them. And secondly, they will be supported by transformation initiatives in supply chain and back office. If we take or step back, if you remember what we spoke about in our update in August, sorry, late July. We said the different business units have different job tickets. So, OTC clearly will be delivering top line growth and profit growth, and that is by far our biggest channel and segment. And the pricing you heard about in the prepared remarks and the comments by Alex earlier are paramount inside that.

Foodservice remains a growth engine, both for top line and for profitability. And you also heard in the prepared remarks that we're doing exceedingly well in this business unit, capturing new customers while driving profitability and pricing.

Vending, the higher focus will be on profitability because as you also mentioned, the profitability or relative profitability there is lower than the other segments. And overall, all of them coming back to my question about supply chain and back office will support through efficiency programs, digital programs, et cetera, to improve the overall profitability for the company. So that's why we're saying with confidence, we believe in our plan, and we're executing it right on the mark on how we envision it. Thank you.

[Interpreted] With regard to the vending business, I would like to dig a little bit deeper here. I know the marginal profit is really high in here, but the -- I know the volumes are kind of struggling in here in this business segment, and you don't really expect it to jump so easily. So, if the volume goes down, maybe you can think about the price hike or reducing the fixed costs to secure the profitability. But is that the kind of idea that you have with the vending business right now?

Thank you for the follow-up question. So, your question is about more detail about the vending business. So, we have a high GP in vending business, but what are our forecast on how we are going to generate the profit in vending business. So Bjorn, would you like to take this question, please?

Love to take it. Thank you, Sumoge-san. You kind of answered your question. So, I'll try to just say it a little bit different words. Yes, the marginal profit is the highest in vending, but also it has the highest operating cost given the nature of this retail business. So, when it comes to balancing volume and profitable growth, we will balance definitely how we execute in vending, which you have heard about in earlier investment calls, we have said we're getting more and more data-driven. It's a key element on how we're going to improve vending performance overall and by machine.

We are also focusing a lot on operating efficiencies in vending, again, with the nature of the retail business. And pricing, as you also mentioned, will, of course, play a part in that retail landscape. So, in the end, you summarized it well. It's a balance of initiatives that we are in control of that we will execute across the board for vending. So, looking forward to the next steps. Thank you.

Thank you , Sumoge-san for your question. Sorry for running over time. I would like to now close the Q&A session for today.

So, today's materials will be posted on our website. So, if there is any follow-up question that you would like to ask, please get in touch with the IR team. Thank you very much for your participation.

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

Good evening. This is Gomi, Head of Investor Relations for Coca-Cola Bottlers Japan Holdings. Thank you for joining us today for our second quarter 2025 earnings presentation for analysts and investors.

Today, we have our President, Calin Dragan; and CFO, Bjorn Ulgenes. We are also joined by Executive Officer and President of the retail company, Alex Gonzalez; Executive Officer, President of the Food Service Company and Chief Business Strategy Officer, Maki Kado; and Executive Officer, Chief Supply Chain Officer and Chief Sustainability Officer, Andrew Ferret; and Executive Officer and Chief Human Resources Officer, Yuki Higashi. Following prepared remarks, we will be happy to take questions. Simultaneous interpretation in both Japanese and English is being provided for both today's call and the Q&A.

Before we begin, let me remind you that today's presentation contains forward-looking statements and should be considered together with cautionary statements in our presentation. With that, I'd like to turn the call over to Calin Dragan, Calin-san, please.

Good evening, everyone. This is Calin Dragan. And thank you for joining our earnings call. Today, in addition to our first half financial results, we will also be presenting our newly revised strategic business plan, Vision 2030, and upward revision of the current Vision 2028.

First, let's begin by looking at today's highlights on Slide 3. I am very pleased to report another strong set of results. Business income for the first half saw a solid increase with the profit trend accelerating in the second quarter, resulting in a strong year-on-year gain of JPY 4.3 billion. Business income is progressing ahead of plan. Our initiatives, including price revisions and transformation efforts are also progressing ahead of plan and we are steadily building a foundation for further growth in the future.

In the Vending Business, we have revalued fixed assets to optimize future capital allocation and as a result we have recorded a non-cash impairment loss. Considering this impairment and the strong earnings trend of the first half, we have revised our full year forecast. We now expect business income to reach JPY 23 billion, 15% above the original plan. We will continue to give our fullest efforts during the peak summer season. And if favorable business conditions persist, we see potential for further upside in business income till year end.

Furthermore, as the most important point of this announcement, we have decided to revise upward our current strategic business plan, Vision 2028, and to launch a new vision, Vision 2030, aimed at further increasing shareholder value. The plan aims to achieve ambitious targets for 2030, including business income of over JPY 80 billion and ROIC of approximately double the capital cost. We will explain in more detail later. Vision 2030 incorporates new elements such as further collaboration with Coca-Cola Japan Company, including the joint formulation of long-term growth plans, business operations by business units with clear accountability and the rebuilding of the profit base of the Vending Business.

Vision 2030 also includes shareholders return programs such as the largest share buyback programs in our history, totaling JPY 150 billion and an ambitious dividend increase plan with the aim to further increasing shareholders value.

Now our CFO, Bjorn Ulgenes, will take you through our first half results.

Thank you, Calin. Good evening, everyone. This is Bjorn.

Slide 5 shows our first half P&L statements. Revenue for the first half increased and business income also improved, indicating solid progress in our core performance. Sales volume remained at minus 1%, exceeding the markets, despite the impact of price revisions and other factors. Revenue rose by 1.6% year-on-year, driven by an increase in wholesale revenue per case, thanks to price revisions. Gross profits benefited from pricing but was partially offset by rising costs due to external factors and an unfavorable channel mix. Business income saw a significant year-on-year improvement of JPY 4.3 billion, supported by top line growth and cost savings from transformation initiatives. This mark's first half profitability for the first time since 2019. Details on the drivers of business income changes will be explained on the next slide.

Operating income declined significantly year-on-year while business income improved. We recorded a non-cash impairment loss of JPY 88.1 billion in quarter 2 for fixed assets in the Vending Business to optimize future capital allocation. Additionally, we booked JPY 3.2 billion in expenses related to volunteer retirement program implemented as part of our transformation efforts. Net income also declined by JPY 65.6 billion year-on-year, mainly due to the drop in operating income. EBITDA grew by 20.3% year-on-year to JPY 24.2 billion, reflecting the increase in business income.

Now please turn to Slide 6, which outlines the key drivers behind the changes in business income. Starting from the left, we see the impact of volume, price, and mix. These reflect changes in marginal profits from commercial activities contributing a positive JPY 4.8 billion year-on-year. Main drivers were volume impact, including channel mix, was a negative JPY 3.8 billion. Price impact was a strong positive at JPY 9.5 billion. Other factors contributing to a negative JPY 0.9 billion.

While channel mix deteriorated due to shifting consumer trends, the improvement in wholesale revenue per case from price revisions made a significant positive contribution. Notably, rebates on items including in other reduced in quarter 2 due to tighter controls. Transformation initiatives contributed JPY 2.6 billion in benefits, driven by Vending transformation in the commercial field and supply chain network optimization. These initiatives are progressing as planned across all areas.

Marketing expense decreased by JPY 0.8 billion year-on-year. While we reinforce sales activities ahead of the peak season, we also maintain strict cost discipline through a return-on-the-investment-focused marketing, resulting in overall cost savings.

Manufacturing costs increased by JPY 0.2 billion year-on-year. Although cost saving measures at production sites delivered benefits, the declining in production volume led to an increase of manufacturing costs per case. Other costs rose by JPY 2 billion mainly from higher logistics costs, excluding transformation effects as well as increased fleet and facility related expenses. Finally, commodity and utility costs increased by JPY 1.7 billion amid a persistently challenging cost environment. This includes JPY 1.4 billion from higher raw material and packaging costs driven by markets and foreign exchange factors, and JPY 0.3 billion from increased utility costs.

Now let's move on to Slide 7, outlining sales volume performance by channel and category. In the first half, despite volume declines due to the price revision implemented in October last year and cycling effect following the renewal of Ayataka in quarter 2 last year, we successfully limited the overall volume decline to minus 1%, outperforming the markets. This was achieved through strengthened focus on core categories, expanded shelf space and effective marketing initiatives. Wholesale revenue per case improved by double digit yen across all channels driven by the price revision.

Supermarkets saw a 2% decline in volume, mainly due to reduced sales in large PET bottles following the price revision. Drug stores and discounters recorded a 1% increase, supported by growth in mid-size PET coffee products. Convenience stores experienced a 5% decline, impacted by the price revision, the cycling of last year's new product launches and increased discipline in promotional investments this year.

In Vending, volume declined 5%, reflecting both a challenging market environment and the significant impact of the price revision. However, the price revisions show strong improvements in wholesale revenue per case with quarter 2 again exceeding JPY 100 per case following quarter 1. Retail and Food Service volumes rose 3%, supported by recovering demand in restaurants and tourist areas as well as growth in commercial juice products. Online sales grew 15%, driven by strong performance in the tea category and dedicated offerings such as labelless products.

By category, sparkling beverages grew 1% led by Coca-Cola and Coca-Cola Zero. Tea grew 2% with strong contributions from Ayataka and Kocha Kaden. While Ayataka faced the cycling impact in quarter 2 following last year's renewal, performance were made within expectations and first half volume was up by 4%. Sports drinks, water and coffee declined primarily due to the impact of price revision.

Now let's turn to Slide 8 where I will explain our revised full year earnings forecast. This revised full year earnings forecast reflects several key factors, the impact of the recently announced fixed asset impairments, refinement in Coca-Cola, Japan's marketing investments due to the evolving market dynamics and its implications for our business and the continued strong momentum in business income. There are no changes to our full-year revenue or volume plans. However, we are now targeting a full-year business income of JPY 23 billion, 15% above our original plan. From operating income and below, we expect a net loss due to the impairment, but this is a non-cash item and will not result in any cash outflow.

The impairment of fixed assets in the Vending Business will contribute positively to earnings in the second half through reduced depreciation. On the other hand, the refinement in Coca-Cola Japan's marketing investments will have an adverse impact on profitability. We are currently in the peak summer season and the entire organization is working as one team. July sales volumes have already exceeded last year's levels. If favorable business conditions, including the effects of the price revision continue, we believe there is potential for further earnings improvements. For now, our focus is to ensure we deliver on the newly revised targets with discipline and determination.

With that, I will now hand back to Calin, who will walk you through our newly announced strategic business plan, Vision 2030.

Thank you, Bjorn. And this is Calin again. Now let me take you through our new strategic business plan, Vision 2030. Please turn to slide 10.

We are happy to announce Vision 2030, an ambitious upgrade to our previous plan, Vision 2028, which was announced just 2 years ago. Before diving into Vision 2030, I would like to briefly touch on the progress we have made towards Vision 2028 since its launch in August 2023.

We are very satisfied with the steady progress of Vision 2028. Since its launch in 2023, we have fundamentally improved our performance, consistently exceeding business income targets each year. Looking at business income, we have achieved a remarkable turnaround of over JPY 26 billion in just 2 years, going from JPY 14.4 billion loss in 2022 to JPY 12 billion business income in 2024. Key initiatives under Vision 2028 have also advanced steadily, delivering real results. Through a profitability focused commercial strategy, we have grown volume while leading the industry by successfully executing multiple price revisions. On the transformation front, we have achieved about JPY 10 billion in cost savings over 2 years. We have also made significant progress in strengthening our foundation for future growth, including investments in technology and the development of strategic partnerships.

In November 2024, we announced a comprehensive shareholder return program aligned with our Vision 2028. This marked a major step forward not only in earnings recovery, but also in expanding shareholders returns and improving capital efficiency. And in 2025, as Bjorn just explained, our business income continues to trend ahead of plan, prompting us to revise our full year forecast upward. Given the strong progress in both performance and strategic execution, we believe the foundation is firmly in place to pursue even more ambitious goals.

Please refer to Slide 11. As mentioned, we have identified further opportunities and challenges along our trajectory for Vision 2028. In driving transformation, we see significant opportunities to further leverage data and technology. Our close collaboration with Coca-Cola Japan has deepened, enabling us to jointly develop a long-term growth strategy that extends beyond 2028. Through this partnership, we have recovered numerous avenues for growth. To further accelerate business growth, we have established a new organizational structure centered around multiple business units. This approach emphasizes clear delegation of autonomy and accountability to each unit. By redefining the strategic direction of each business unit, we aim to position the organization to deliver world-class returns in the future.

In November 2024, we announced a comprehensive shareholder return program aligned with Vision 2028. However, we believe there is still opportunity to expand shareholder returns as we consider our needs to long-term performance targets, we are actively exploring additional opportunities to enhance shareholder value. These efforts, along with the lessons learned and achievements delivered to date, have strengthened our positive outlook for the future for our business operation. Reflecting our commitment to set ambitious targets and achieve them, we have decided to significantly revise up and elevate our current Vision 2028 strategy. And as a result, we are launching a new strategic business plan, Vision 2030, to guide us towards even greater aspirations.

Please turn to Slide 12 for the trajectory and outlook for the enhanced shareholders return. At CCBJH, we put strong emphasis on shareholders' value creation. Since 2023, alongside significant improvement in business performance, we have accelerated the pace of shareholder returns. Thanks to our solid balance sheet and strong cash flow generation, we can now deliver robust shareholder returns. In November 2024, under the framework of Vision 2028, we updated our dividend policy centered on progressive dividends and announced our plan to increase dividends with a target payout ratio of 40% and a dividend on equity of 2.5%. At the same time, we launched a JPY 30 billion share buyback program which is progressing as planned.

With the launch of the Vision 2030, we are further accelerating the efforts to enhance shareholder value. In addition to driving strong business growth, we will implement the largest shareholder return program in our corporate history. For dividends, we are raising our 2028 targets from JPY 74 per share to a new range of JPY 90 to JPY 100. By 2030, we aim to reach JPY 140 to JPY 150 per share, more than double to the this year's guidance, reflecting our strong ambition.

Regarding the share buybacks, we are now announcing an additional JPY 30 billion share buyback. Over the 5 years through 2030, we plan to execute a cumulative share buyback of up to JPY 150 billion. Vision 2030 places shareholder value creation at the center of our strategy. Building on our proven track record of expanding shareholder returns, we are now embedding the largest return program in our history into our new strategic business plan.

Please turn to Page 13. Let me walk you through our upgraded strategic business plan and the ambitious new targets we have set for 2030. Vision 2030 is our newly formulated 5-year strategic business plan covering the period from 2026 to 2030. In this plan, we have upwardly revised the key performance metrics of Vision 2028. Notably, we have raised our business income target by approximately JPY 5 billion.

On the right side of the slide you will see our key targets for 2030. For revenue, we aim to deliver top line growth of 2% to 3% CAGR, outpacing volume growth through a profitability-focused top line strategy. Our target is to exceed JPY 1 trillion in revenue by 2030. We are targeting a business income of over JPY 80 billion by 2030, approximately double of our 2017 historical peak. To support this, we will drive transformation across commercial, supply chain and back office and IT areas, targeting cumulative transformation cost savings of JPY 30 billion to JPY 35 billion yen over 5 years.

In parallel with profit growth, we will pursue capital efficiency improvements aiming to achieve ROIC of 10% or higher by 2030, approximately twice of our cost of capital. As noted on the previous slide, Vision 2030 also embeds the largest shareholder return programs in our history. We are targeting dividends of JPY 140 to JPY 150 per share by 2030 and a cumulative share buyback of JPY 150 billion over the 5-year period.

With that said, we will now hand it over to Bjorn, who will take you through the details of the Vision 2030

Bjorn again. Please refer to Slide 14, which outlines the key [ strategic vision ] of our strategic business plan, Vision 2030. To further enhance profitability and capital efficiency, we aim to improve market execution and profitability within our 3 business units, Vending, OTC and Food Service, while increasing performance transparency and clarifying accountability. Through these efforts, we are committed to achieving unified company-wide objectives. Additionally, the transformation initiatives in supply chain, back-office operations and IT, which were launched as part of Vision 2028, remains a critical pillar of our strategy. We will continue to accelerate these efforts moving forward.

Now let us walk you through the specific initiatives starting from the next slide. Please turn to Slide 15. Going forward, we will operate our Vending Business with a retail mindset. Measured by the number of consumer touch points, our Vending network represents one of the largest [ NERTD ] retail platforms in the world. We have been leading the industry in transforming the Vending Business. Through digitization, technology utilization and operation process redesign, we have driven significant productivity improvements such as vending route optimization.

Looking ahead to 2030, we will further leverage big data, our extensive consumer insights and the technology infrastructure we have built to date. This will enable data-driven, efficient and effective decision-making across all aspects of the business from location selection and product assortment to pricing optimization, maximizing the impact of each initiative. We will also enhance digital marketing through our proprietary digital asset, the Coke ON app, deepening consumer engagement and driving conversion at the point of sale. At the same time, we continue to improve vending machine usability.

In addition, based on individual machine-level profitability analytics, we will implement more precise profit management, allowing for better optimization of vending locations and refinement of proportional investments. While we have recorded a noncash impairment loss through a reevaluation of Vending assets to enable optimal future capital allocation, our commitment to the Vending Business remains totally unchanged. By combining our operational expertise, proprietary data assets and transformation capabilities, we will accelerate the rollout of high-impact initiatives with speed and efficiency, delivering early improvements -- yearly improvements in profitability.

If you turn to Slide 16, you will see an outline of our strategic initiatives for the OTC and Food Service channels. In both businesses, we are accelerating efforts by benchmarking against global bottlers to enhance returns in each channel. Starting with OTC, which we expect to be a key growth driver going forward, we will execute top line strategies focused on identifying and capturing high-growth opportunities. To drive top line growth, we will leverage data to precisely understand consumer trends and deploy targeted return-on-investment-focused marketing initiatives, particularly in densely populated urban areas where strong long-term growth potential is expected.

One of the key pillars of this strategy is the flexible pricing approach. Building on learnings from the past revision, we will evolve our pricing strategy by integrating it with category and packaging strategies. Additional price increases remain under consideration as a potential lever to support profitability improvements. We will also accelerate growth in core brands and core categories by leveraging digital tools to create new beverage consumption occasions, attractive in-store execution and strengthen strategic partnerships with key customers. In particular, we will continue to expand sales in high-growth areas such as the online channel.

Turning to Food Service. We will expand business opportunities by strengthening our proposal capabilities to customers and increasing consumption occasions. We will fully leverage our solid presence in the channel and the strength of the Coca-Cola system to deepen strategic partnerships with customers. We will also continue to proactively approach prospective growth channels to capture new demand while improving profitability and capital efficiency by optimizing equipment investments and reviewing commercial terms. To support these efforts, we will enhance organizational capabilities and frontline execution while leveraging technology to strengthen our competitive edge.

Let's move to Slide 17 now. In the areas of supply chain, back office and IT, we are accelerating digital-driven transformation to achieve cost reductions while strengthening our operational foundation. For supply chain, we have already delivered significant results through initiatives such as the launch of the automated logistics mega distribution centers, mega DCs, the implementation of the sales and operational planning process and the promotion of a local production for local consumption model. These efforts have enhanced our supply chain network, driving cost efficiencies and contributing to the establishment of a more resilient business foundation.

Looking ahead, we will continue to optimize end-to-end supply chain processes by fully leveraging digital capabilities. This includes further advancing the local production for local consumption model to reduce logistics costs and improve capital efficiency, enhancing the accuracy of the sales and operational planning processes to optimize and reduce product inventory levels and strengthening our network through the utilization of integrated distribution centers.

For back office and IT domains, we remain focused on advancing data-driven management by building a robust foundation. To reinforce our digital infrastructure over the medium to long term, we are integrating IT systems and data while accelerating efforts to fundamentally restructure workflows, standardize and automize processes through technology. By deepening collaboration with our partners, we aim to achieve world-class operations and further evolve data-driven decision-making across the organization.

Slide 18 focuses on our financial strategy and shareholder return measures. Under Vision 2030, we are prioritizing capital efficiency while driving performance improvements and executing the largest shareholder return program in our corporate history. To enhance capital efficiency, we are targeting ROIC of over 10% by 2030 and will implement a range of strategic measures to achieve this. Capital investments will be carefully selected based on the return on investment with a disciplined approach to ensure cash flow generation for shareholder returns.

Over the period leading up to 2030, we plan to maintain annual capital expenditures at an average level of JPY 30 billion to JPY 35 billion per year, within the range of depreciation expenses. To optimize our balance sheet, we will focus on divesting idle assets, selling cross-sell shares and improve product inventory turnover. From a capital deployment perspective, we will continue to evaluate opportunities to optimize financial leverage. Strengthening shareholder returns will be achieved through generation of stable cash flows and disciplined allocation of capital to ensure optimal returns.

Now let me ask Calin to come back for the summary.

Thank you, Bjorn. Finally, please refer to Slide 19, which provides a summary of today's presentation. With the newly announced Vision 2030, we aim to further enhance profitability and capital efficiency, targeting business income of over JPY 80 billion by 2030, approximately double of our company's record high and achieving a double-digit ROIC about twice of our cost of capital. We have also outlined plans to execute the largest shareholder return program in our corporate history.

And by 2030, we aim to increase dividends per share to JPY 140 to JPY 150, approximately 2.5x the forecasted dividend for this year, reflecting a robust commitment to dividend growth. Additionally, we plan to conduct aggressive share buybacks totaling JPY 150 billion over the next 5 years. This ambitious management goals represent an unprecedented level of aspiration for our company. And by achieving these targets, we will deliver significant increase in shareholder value.

Since 2023, we have achieved substantial performance improvements. In terms of business income, we have committed and consistently outperformed the target set at the beginning of the year. Furthermore, our efforts to strengthen the foundation for long-term growth through transformation initiatives have yielded significant outcomes. Achievements and the lessons we have learned along the way have given us the confidence to set and pursue this ambitious target. We are fully committed to achieving the targets outlined in this new strategic business plan, Vision 2030, and to drive further increases in shareholder value.

This concludes today's presentation. Thank you so much for your attention. With that, I will hand it over to Gomi-san for the question-and-answer session.

Thank you, Calin-san. This Q&A session is for analysts and investors. For members of the media, please refrain from asking questions at this time as we will have a separate Q&A session later today. Due to interpretation please ask only 1 question at a time. Now I would like to start the Q&A session. Operator, please begin.

[Interpreted] [Operator Instructions] From UBS Securities, this is Ihara-san.

[Interpreted] This is Ihara from UBS Securities. So my first question is, I want to confirm numbers. So the impairment loss is what you have adjusted and the depreciation negative number, what is going to be the negative number for the impairment loss? And due to this impairment, most of it is vending machine, I think. Is that correct? And looking at the securities report, it's about JPY 85 billion for selling the asset. So I think mostly it's vending machines. Is that the correct understanding? And another question is, will you have further impairment coming up?

Thank you, Ihara-san for the question. So you want to confirm some numbers. So this is about the impairment loss, and you want to check if it's mostly Vending or not. And after this, is there going to be any additional impairment or not? So Bjorn-san, please?

Thank you, Ihara-san. Yes, it's correct that most of this impairment impact recorded in Q2 is related to Vending. And with this onetime noncash impairment, we do not expect any further impairments of assets at this point in time. Thank you.

[Interpreted] I see. And the depreciation cost, what is going to be for the annual number?

Yes. So as for the depreciation number for the year, Bjorn-san would like to answer.

San, we estimate the impact for 2025 to be in the range of JPY 4 billion to JPY 5 billion positive. I hope that answered your question. Thank you.

[Interpreted] Okay. I see. So annually, it will be like JPY 8 billion to JPY 10 billion annually. Okay. Understood. So it's mostly vending machines that you have impaired. Understood. So I have another question. So 2030, the ROE, what is your target? I would like to know because JPY 80 billion is the business income, and you're going to have the dividend as well. And the ROE is like 13% or maybe 14% or so. I think that will be the number that you're aiming for based on my calculation. But looking at 2030 ROE target, what would it be?

So 2030 ROE target. This will be from Bjorn-san again, please.

Thank you, Ihara-san. Let me just first comment that our main focus is return on invested capital to double our cost of capital. That is the measure we're focusing on, as you saw from the prepared remarks. For the ROE, we would aim at around 12% plus as the target.

Operator, please put through the next question.

[Interpreted] Next question is from Saji-san from Mizuho Securities.

[Interpreted] I would like to ask about couple of things. One is the impairment with regard to the Vending Business. So you are saying that the reason of this is to enable the best capital allocation for the future. But why now this JPY 88 billion impairment have to be incurred now? And what is the background to having this at this point in time? And also another question is about the CCJC's change in their market investment method. So to be more -- can you be more specific in the background to the changes? What were the reason why they are changing? Which kind of process they went through to change this method?

Thank you for your question. The first question is about the impairment in the Vending Business unit area. Why now? And what's the background to us doing this to rational that for future optimization. So Bjorn, would you like to take it up, please?

Thank you, Saji-san, for the question. The impairment of the Vending assets comes from a couple of reasons. First, we have made the decision, as you've seen in the financial statements and the prepared remarks, to run our business in 3 segments: Vending, the OTC, over-the-counter, and the Food Service Business. Based on that, we were able to isolate the effect of the asset utilization on Vending, and that again led to the impairment adjustment. So it's very important to see this as a sequence.

Secondly, on the why-now question is also related to what we have talked about earlier. We are learning every day and getting more and more data-driven. And by using data, running the business in the 3 segments and really looking to reset Vending to capture the retail leadership that we believe this channel deserves, we decided to run the impairment for now. When it comes to the Coca-Cola Japan marketing investments, we see dynamic market changes, but that does not change the relationship with CCJC. And we have also, as you saw in the prepared remarks, done a long-term growth plan together with CCJC in strong collaboration, which we believe is a fundamental building block in our Vision 2030. I hope that answered your question. Thank you.

[Interpreted] In 2028, you mentioned that you are going to hit JPY 5 billion for 2028. That is to say you are going to have a JPY 10 billion plus, right? So is there any -- all these changes from the JC will be a negative impact, is it?

So your question is about the BI in 2028. With the depreciation, we have the upswing. So Bjorn, would you like to explain about that?

-- question, Saji-san. So yes, we are revising up the 2028 targets in the range of JPY 50 billion to JPY 55 billion. And as we said, when it comes to the impairment part, the annualized effect will be in the JPY 8 billion to JPY 10 billion going forward. But as you progress over the years, the effect will be diminished because we continue to invest in the marketplace for growth opportunities. And when it comes to revising up there for 2025, we are maintaining the revenue targets. We're maintaining our transformational deliveries. And therefore, we believe the JPY 5 billion uplift in 2028 is the appropriate number and target.

Operator, please put through the next question.

[Interpreted] JPMorgan Securities, Fujiwara-san.

[Interpreted] Fujiwara from JPMorgan speaking. I have a question. 2028 and 2030 profit target. Previously, under your leadership, you have used a driver as a price revision in the market. But still the share competition is very fierce and the PB is growing. In this tough business environment in 2028, 2028-'30, you have a really high target. Why are you so confident to be able to achieve? So JPY 45 billion to JPY 50 billion might be also difficult. So what is the source of your confidence about that? I'd like to know that.

Fujiwara-san, thank you for the question. So in the tough competitive environment and with the new target, how are you going to achieve the new high target? So from the commercial point of view, Alex will answer the question.

Thank you, Alex here. Essentially, the revised upward in the new strategic plan, it comes on the back of robust opportunity and consumer opportunity mapping of where the growth in Japan will be. And I think this on the back of our ability over the last 2 years to deliver on a very strong trajectory of business income growth, it gives us the confidence that on our ability to drive further growth in Japan. We have already delivered on our promises every quarter since coming out of COVID. And we are displaying a growth mindset. We have been leading the industry in price revisions. Over the last 3 years, we have executed and implemented with discipline our price revisions. We have -- are building on our capabilities of driving profitable top line growth with the focus on our core portfolio. And examples and evidence of that is our success with Ayataka and the renewal.

At the same time, we are delivering on a very strong transformation behind leveraging data and digital to transform our Vending Business for profitable growth. So in the back of this -- the evidence of our trajectory, again, over the last 2 years and our renewed partnership with the Coca-Cola Company to look at further opportunity pulls on, again, on a robust consumer opportunity and backing also the emergence of demographic shifts into the Japanese market gives us the confidence in our ability to drive a renewed Vision 2030.

Operator, please go to the next question.

[Interpreted] Next, we have Igarashi-san from Daiwa.

[Interpreted] This is Igarashi from Daiwa. My question is about BI. I'd like to understand the pace of growth on an annual basis. As you mentioned, you booked impairment that will lead to the reduced depreciation. But from '25 to '26, I think that will accelerate the growth pace in these 2 years. That's the first question. And towards '28 and 2030, is it an equal pace on an annual basis? Or will there be a certain acceleration in a certain year?

Igarashi-san, thank you very much for your question. So you would like to understand the growth pace of business income over the period of the vision. So Bjorn-san, please take this question.

Thank you, Igarashi-san. So yes, as we said, the impairment while driving a loss at the net income line will improve our business income, in other words, our recurring profit line. For this year, as I said earlier, we estimate an impact of positive JPY 4 billion to JPY 5 billion and therefore annualized next year around JPY 8 billion to JPY 10 billion. While we do not disclose yearly earnings, we have disclosed the 2028 and the 2030 targets for your consumption. But overall, we look for linear development in general, but we will come back with the 2026 targets in February according to the normal cycle.

[Interpreted] Could you please repeat, from '25 to '28, could you please, how you see the annual growth rate from '25 to '28 during the period of Vision 2028.

[Interpreted] So I will take this question. As for the profitability, in the first early part of Vision '28 from second half of this year, we will have the impact of impairment and depreciation, but we are not disclosing the annual plan. And '28 business income has been announced, but we are not disclosing the annual growth. So in February next year, we will share more detail.

Operator, please put the next question.

[Interpreted] From Nomura Securities, this is Morita-san.

[Interpreted] This is Morita-san from Nomura Securities. I have 2 questions. My first question is, so the shareholder return, you mentioned that this is going to be in a massive scale and JPY 30 billion share buyback is what you have communicated. And profit-wise, if you're going to get your profit as planned, probably there's no issues there. But let's say, for example, if you're not able to hit the profit that you have in your plan, what -- how are you going to control it? So is it net EBITDA or what are you going to control on the finance side? Is there any discipline that you're going to kick in if you're not able to hit the profit?

Morita-san, thank you for the question. And we have announced that the shareholder -- sorry, the shareholder return is going to be massive. And if there is anything that we can do financial-wise, if we can hit the profit target. This will be from Bjorn-san, please.

So first and foremost, our baseline profitability improvements of course is the foundation for delivering the biggest shareholder value program we have had in our company. And while we always have to look out for market dynamics and swings in consumption, pricing or inflation for that matter, we will always take measures to mitigate such impacts. And that we do through ongoing processes that we already have in place, and we will continue doing that going forward to again make sure that we can deliver the biggest shareholder value program in our company's history. I hope that answered your question. Thank you.

[Interpreted] So financial discipline, do you like monitor certain areas? So the additional question. So financial indicators, are there any special ones that you monitor and control?

Since I can give you one example that we have talked about several times in these calls, we have a very strict policy and process around capital allocation in the company. And by following that very stringently, we ensure that we always invest, one, for growth; and two, make sure that we can deliver on our commitments for dividends and share buybacks. In the end, these are ongoing management routines that we have in place. And of course we will continue to strengthen as we move into executing Vision 2030.

[Interpreted] Okay, understood. And my second question might be a similar question, but share buyback, you are very aggressive in your communication. So once again, why is it not dividend? And is it -- are you going to do the share buyback, not dividend? So if you do it in this amount, the liquidity will be low, I am guessing. So buying back shares and the dividend, how are you going to strike the balance between the 2? That's my question.

Thank you, Morita-san, for the question. So we have announced that we are going to do a massive share buyback and how we're going to balance the dividend versus the share buyback. So Bjorn-san, please?

Thank you, Morita-san, again. So yes, correct. We are doing both a dividend increase and share buybacks as part of our Vision 2030 program. And again, this is the biggest shareholder value program that we have executed and launched as a company. And by doing both, one, we're sticking to the concept of reaching the 40% payout ratio for the dividends. And therefore, we are increasing our dividend expectations for 2028, and you can see it going up also through 2030. We are using always different metrics back to your prior question about capital allocation and mitigation efforts. But to us, it's very important to, one, pay the annual dividends and two, with the right market conditions also continue buying back our stock at the right price. Thank you.

So that will be it for the request, and it is time, and we would like to finish the Q&A session. The contents of today's presentation will be available on our website from this presentation. If you have any questions or feedback, please contact the IR team. Thank you very much for joining the call today.

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