Lion Corp Aktie

Thank you very much for your consistent support. I'm Fukuda of Lion Corporation. I'm very grateful that so many of you participate in our briefing today despite your busy schedule.

There are 2 major topics today. First, sales and profit continued to increase in Q1 and the progress stayed in line with our full year plan. In the top priority oral health care business, shift to high value-added products and high growth were achieved and the integration of 2 companies in Vietnam and Australia into the portfolio improved margins.

Second point is related to policy in Q2 onward. As you know, business environment has been drastically changing compared to the initial forecast due to the Middle East situation. On the other hand, we announced the policy this year, the shift to a highly profitable business portfolio and the strengthening of mobility through management processes transformation. And these are exactly to build the resilient business foundation under such environmental changes.

We are currently considering and promoting additional measures to secure profit against the Middle East risks. And though the final impact level is still uncertain, we aim to achieve the initial full year target, absorbing the expected risks at this point. Accordingly, the earnings and dividend forecast remains unchanged. Two key messages are the progress in Q1 is steady, and we aim to achieve the initial target overcoming the impact of the Middle East situation assumed at this point.

Today's contents consists of these 3 points, and let me start with the financial results for the first quarter. Consolidated net sales in the Q1 was JPY 99.2 billion, up 5.3% year-on-year and year-on-year change at constant currency, excluding exchange rate fluctuation, was plus 1.7%. Core operating income was JPY 6 billion, up JPY 0.7 billion year-on-year or 13.8%. EBITDA margin was 11.1%, up 0.8 percentage points. Since the launch of the midterm plan, second stage in the previous year, the basic trend of sales and profit increase and the improvement of margin has been continuing and the progress in line with the plan.

Next, I will explain the breakdown of core operating income increase of JPY 0.7 billion year-on-year. Gross profit factors are on the left and SG&A factors on the right. Gross profit factors were plus JPY 3.7 billion and SG&A factors were minus JPY 3 billion. And the net impact was plus JPY 0.7 billion. Sales increase impact of JPY 3 billion in gross profit factors and changes in other expenses, minus JPY 2.1 billion in SG&A factors were larger than the usual Q1. These are due to the added profit and loss of the newly consolidated 2 companies as well as the acquisition-related expenses of PNB in Australia, which is booked in other expenses.

Raw material costs were not affected by the Middle East in the first quarter, and the cost increase was limited to JPY 0.3 billion. Changes in competition-related expenses was cost increase of JPY 0.9 billion due to the increased expenses for growth in Japan, mainly for Oral Healthcare.

Results by business segment. In Consumer Products, sales increased by 3.6%, but profit decreased by JPY 350 million. In addition to the increased advertising cost to enhance the growth of the key area, as mentioned earlier, there was a rebound from the controlled TV commercials in Q1 last year, and the results were almost in line with the plan.

Skipping one line, overseas business sales and profit increased, partly due to the consolidation of Vietnam and Australia businesses, margin improved 2 percentage points. In Industrial Products, sales declined due to the industrial Red, which is included in the Red brand transferred in the previous year as it is included in this segment, but profit was almost flat.

Consumer Products business net sales by product category. In oral health care, mainstay brands were robust in toothpaste and toothbrushes and high-end dent health reused last autumn also contributed. Sales of products sold through dental clinics continue to be strong, and they led to the strong growth of 9.8% in sales.

In Fabric Care, sales of laundry detergent were firm, achieving 1.9% sales growth. In pharmaceutical, acne products were strong, achieving 4.9% growth in sales. On the other hand, in Beauty Care and Living Care, we controlled the sales promotion in the first quarter as the product renewal is scheduled in Q2. And sales in Living Care decreased partly due to the impact of transferred Red brand.

Overseas business results by region. Southeast and South Asia and Oceania, which includes Australia, marked sales and profit increase based on the existing countries, but because of the addition of Vietnam and Australia, sales increased 18.8% and core operating income increased 58.6%, showing the prominent growth. On the other hand, in Northeast Asia centered on China, due to change in sales strategies and adjustment in distribution inventories in China, sales decreased, but we secured the increase in profit.

Status of business in 4 key countries. In Thailand, sales increased due to FX impact, but they decreased on local currency base. Exports to Cambodia did not recover and local consumption is slightly sluggish. But Oral Health care, which is being strengthened, began to deliver positive results. In Malaysia, price optimization in laundry detergent achieved substantial improvement in profitability and growth investment in Personal Care focusing on oral health care contributed to sustained increase in sales and profit.

In China, we continue the price improvement of white and white and optimization of distribution inventories, which was explained in February, progressed, and they led to substantial sales decrease in Q1. But the inventory reduction was mostly completed in Q1. We are fine-tuning strategies in China, and I'd like to explain it later. South Korea turned to sales growth trend.

I'll explain key measures of this fiscal year, their progress in Q1 and the policy in Q2 onward. I'll talk about the response to the Middle East risks. First, let me confirm key themes and progress this year. Regarding a shift to a highly profitable business portfolio shown on the left, we continue the growth and shift to value-added products, focusing on oral health care in Japan and overseas. From last year to this year, we have been promoting the restructuring of business portfolio in challenge for growth businesses and the structural reform businesses.

Currently, we are working on PMI P&B in Australia and preparing for closing of transfers of chemical product business scheduled in June. Regarding the enhancement of agility through the transformation management process is shown on the right, our primary objective has been to improve agility in business operations. To this end, since January this year, we have implemented significant organizational changes and delegated greater authority throughout the organization. As I will explain later, we believe these changes have already begun to demonstrate the effectiveness in responding to the current situations in the Middle East.

Let me now explain each initiative in a bit more detail. First, regarding our portfolio, oral health care, our top priority area. In Japan, from last year into this year, we have continued strengthening the periodontal disease segment, where the mix of premium-priced products is particularly high.

Following last year's dental health initiative, this year, we are focusing on strengthening SYSTEMA, Haguki Plus, which represents the volume zone within the premium price segment with the aim of improving the overall mix of value-added products. In addition, through the dental clinics channel, we launched new high value-added products last year and have been actively nurturing their growth. As shown here, we are already beginning to see encouraging results.

Turning to overseas oral healthcare business. Revenue in China declined in the first quarter. However, we are now focused on rebuilding the business and returning it to a trajectory of profitable growth. In April, alongside the launch of new products under the mid- to premium-priced brands such as Clinica, we implemented cross-brand campaigns and are working to improve promotional efficiency.

We are also reviewing our channel mix strategy. Rather than pursuing discriminate expansion in off-line channels, we are concentrating distribution on key retail channels. At the same time, for online channels, we intend to strengthen our presence on emerging platforms once again. Although revenue declined in the first quarter, sales have already returned to a growth trend since April. In Thailand, we have updated key elements such as branding target customers, channels and promotional strategies, while also defining concrete product actions for the second quarter onward.

At present, we are already beginning to see positive results from the renewal and repositioning of the local as brand. In Vietnam, we will launch a high value-added brand called [indiscernible]. Rather than distributing through the mass market channels, this brand will be developed under the business model centered on recommendations from the health care professionals through clinics and pharmacies.

Next, I would like to discuss the Beauty Care and the pharmaceutical businesses, which are positioned within our portfolio as challenge for growth businesses aimed primarily at driving overseas growth. As mentioned earlier in relation to all the health care, in Vietnam, we are also expanding into the sensitive skin care category.

Originally, Map Lion in Vietnam has operated under what we call professional recommendation model, and our intention is to broaden the product categories within this business model through the synergies with Lion. Therefore, rather than pursuing large-scale volume growth through mass market expansion in the short term, we aim to steadily nurture these businesses while maintaining profitability.

On the right-hand side is Australia, who joined us this fiscal year. The 100-day plan launched at the end of January has just been completed, and we believe PMI has progressed generally smoothly. Going forward, we will shift our focus towards strengthening the business and generating synergies. Within Australia, this includes reviewing promotional activities for the core Sukin business.

Since the company also operates on OEM business, we are additionally examining ways to improve production capacity efficiency. Furthermore, from a synergy perspective, PMB originally aimed to expand its business across Asian markets, and we are currently considering how the Lion Group can support that expansion strategy. Naturally, we also intend to accelerate discussions regarding introducing these businesses and products into Japan.

Next, I would like to discuss improvements to the profitability and structure of our domestic operations centered on the home care business, which we position within our portfolio as a structural reform business. This year as well, we will continue initiatives aimed at increasing product value-added content, reusing SKUs and improving promotional spending efficiency. In particular, for home care, we believe it is essential to increase the proportion of the products with the clear differentiation, including products utilizing our own proprietary and water-saving technologies.

Regarding supply chain management, we are also promoting more advanced supply chain operations by incorporating AI-based demand forecasting models ahead of the actual supply-demand adjustment and the production planning processes. That said, we are currently anticipating cost increase and potential product supply disruptions stemming from the risks in the Middle East. Accordingly, we recognize the need to further accelerate, strengthen and supplement these initiatives, and I will explain the situation in more details on the next slide.

Turning to the impact of the situation in the Middle East. We have already begun to see some effects from rising raw material costs and freight rates starting from the second quarter. At this stage, it is difficult to determine the ultimate scale or the duration of the impact. However, our current base case assumption is that crude oil prices, which we originally assumed at $70 per barrel at the beginning of the year, and they will remain at around the current level of about $1 per barrel. Under this assumption, we expect the cost increase impact on our raw materials will not subside within this year. And therefore, the entire company is implementing and evaluating countermeasures. These include revising sales plans by shifting the product mix toward items less affected by or consolidating or replacing products likely to face supply constraints and reviewing the product launch schedules and promotional timing.

In conjunction with these measures, we are also revising our marketing plans, including raising effective in-store prices through the changes to promotional programs and trading terms, improving advertising efficiency, implementing additional cost reduction initiatives and expense controls. These efforts are being promoted company-wide from many different angles. In preparation for the possibility that conditions worsen further, we are also preparing additional price pass-through measures as well as further structural reforms should the situations become prolonged.

As mentioned earlier, under the new organizational structure introduced in January, business units themselves are now responsible for evaluating decision making and executing countermeasures. This has enabled us to implement more proactive, flexible and autonomous initiatives than ever before, including scaling raw materials procurement routes, flexibly revising production plans and enforcing stricter cost management. By continuing to enhance our ability to respond to changes and increasing the speed of execution, we will strive to minimize the overall impact.

Based on these circumstances, let me now turn to our full year earnings forecast. We are making no changes to our consolidated earnings forecast from the guidance announced at the beginning of the year. We intend to respond swiftly and dynamically to changes in the business environment, including risk related to the middle situation and remain committed to achieving the earnings targets set at the start of the year.

Please note that our assumptions regarding the FX rates and raw materials prices and the composition of profit increase and decrease factors have already changed significantly from our initial assumptions at the beginning of the year. However, given the extremely fluid nature of the environment going forward, we have intentionally decided not to revise these underlying assumptions at this time, and we appreciate your understanding. There have also been no changes to our shareholders' return policy from the announcement made at the beginning of the year.

Based on our progressive dividend policy, we plan to further increase the dividends from last year with the dividend going up JPY 4 to JPY 34 per share, and the payout ratio is going to be 37.6%. This concludes my formal presentation, but I would like to make one final comment regarding our view of the current environment and this year's positioning. Last year, we launched in the second stage of our midterm management plan, and this year marks its second year. In the current highly uncertain environment, we recognize that achieving our original earnings targets this year is extremely important in order to gain trust and confidence from you and the capital markets.

While the outlook for the current cost environment remains [ ensuring ], and there is certainly no room for optimism. We were able to deliver solid results in the first quarter and have also gained strong confidence in the effectiveness of our management reforms. Accordingly, we intend to respond with even greater flexibility and agility in order to achieve our targets.

This concludes my presentation. I would like to thank you again for your kind attention.

Now we will take questions. First, Ms. Kuwahara, over to you.

I'm Kuwahara of JPMorgan Securities. Let me ask 2 questions briefly. First, how shall we see the sales increase and the profit decrease of Consumer Products business in Japan? In the previous fiscal year, you talked about the objective of this year, and it was growth in Japan. Net sales increased, but would you comment on how you view the situation by category? And is the return from the competition-related expenses improving clearly? Would you comment on this? This is my first question.

Regarding sales increase and the profit decrease in Japan, profit decreased JPY 350 million in Japan. We increased advertising cost by JPY 700 million. And then the profit decline was limited to JPY 350 million. So it does not mean that promotion didn't deliver sufficient results. In Q1 last year, we canceled some TV commercials of JPY 300 million to JPY 400 million. So in addition to this increase, we are strengthening forecast expenses, and we see the expected growth. We achieved sales and profit increase in Q2 onward as planned. So you don't have to worry.

Understood. Second question is about the Middle East.

Thank you for your detailed explanation to that end. Please allow me to ask about the scale, though you are now in the consideration phase. In the previous management meeting, you said that with the crude oil price of around $80 to $90 per barrel, additional cost increase will be around JPY 1 billion or so. Then if the price goes up to $100 per barrel, will the cost increase simply be doubling? Or considering the procurement impact, do you need to prepare for more? With that in mind, do you make a plan? Can you give us any hint?

Quantitatively, we assume the impact would be around JPY 3 billion to JPY 4 billion. Impact of $10 difference was only for Japan business. But dependency on the Middle East varies by country in overseas business and their impact varies. So we need to scrutinize. We are considering countermeasures with the assumption of JPY 3 billion to JPY 4 billion impact by the sustained current crude oil prices at around $100. At this point, we think we'll be able to manage with this.

Next, Ms. Miyasako, over to you. I'm Miyasako of Mizuho Securities.

First question is about consumer products in Japan. Sales of some product categories seem to be strong as was the case with Oral Healthcare. Compared to your forecast, how did they perform in Q1? I think the last-minute demand happened from March. So how did you see its impact? And when it subsided, can you sustain the strong momentum in April and May, in particular in Oral Healthcare? Would you comment on this?

In Q4 last year, as we took product initiatives, in this Q1, we see their contribution. In this year also, we will strengthen mid- to high-end products like Haguki Plus. So combining these efforts, we will strive to sustain growth, focusing on key products. Then oral health care seemed to be strong, but is it not due to the last-minute demand? Right. No special demand spike was observed in March due to last-minute demand.

I thought there were some temporary demand anticipating future price hike. But is that not the case?

It was not the material impact. Holding, so to speak, did not happen.

Well, then oral health care robustness is due to the success of new products and the sales through dental clinics. Is that right?

Yes.

Then is it sustainable?

Yes. As it is positioned as a top priority in the company. Growth rate itself may go up and down quarterly, but we believe the growth and margin improvement are sustainable.

I'd also like to ask about the Middle East. Do you think that you'll be able to counter JPY 3 billion to JPY 4 billion with countermeasures that you described? And we'll be able to achieve JPY 40 billion target next year? And on price revision, we will be able to have additional pass-through.

Currently, we are considering countermeasures targeting the impact of JPY 3 billion to JPY 4 billion. If these countermeasures work successfully, we think we will be able to counter. Regardless of the condition of the straight of home moves, higher cost will continue next year onward. So by enhancing the structural reform in the next year onward, we will strive to achieve the midterm plan target.

What's your thought on price pass-through? Additional one.

We are currently increasing effective selling prices by adjusting terms and condition for sales promotion cost, which is used in reducing prices. And we'd like to continue this in Q2 onward. We will increase the number of products to increase effective prices in the second half. And monitoring the situation, we may accelerate the initiatives.

Mr. Miyazaki, over to you.

This is Miyazaki from Goldman Sachs. My first question is a follow-up question to Miyasako-san. I'd like to ask about the next year's target of JPY 40 billion. By taking the initiatives this year, do you foresee any upside next year? Are you exploring such a strategy? Or if the higher cost continues, do you aim to achieve JPY 40 billion? If I consider the time lag, then can I expect to see the upside next year after achieving this year's target? Would you clarify your thought for this year and the next?

Partly, it's up to the crude oil prices, but we consider internally that the current cost environment of our raw materials will continue for upcoming 2 or 3 years. It means that if the cost environment improves next year, it is possible to see the upside. In short term, we may need to curb the growth investment to secure profit. Then if cost environment improves, the initiatives which were originally planned for this year might be implemented next year. Through overall management, we'd like to achieve JPY 35 billion this year and JPY 40 billion next year.

Very clear. Second, I'd like to ask about Industrial Products. Due to business transfer, the business scale shrunk year-on-year. Compared to the pre-downsizing and considering the recent situation in the Middle East, can we assume that the downsizing has reduced the damage or impact? Also regarding the remaining business, is it still being affected to some extent by the situation in the Middle East? And are you considering countermeasures for this as well? Would you comment on the industrial product?

Industrial Products segment consists of 2 main areas: industrial detergent and Chemicals. Since chemical business is scheduled to be transferred at the end of June, its operation are currently continuing. So this part is almost flat. On the other hand, the sales decline in industrial sector is due to the sale of Red brand last year. The industrial use Red kitchen paper, cooking paper. So underlying sales are up. So the business transfer neither gives merit nor demerit to sales.

After the end of June, considering the impact of the Middle East, I wonder if the impact would have been greater if you had kept the business. And regarding the remaining industrial detergent business, do you need to counter for this part as well? Would you comment on this?

Got you, your question is about the future, right? The chemical business will certainly be significantly affected. But on the other hand, compared to B2C business, cost pass-through is easier. So although the impact on this business is significant, but it can be offset easily by nature. I do not think there is any particular gain or loss along with the absence of this business as of the end of June.

What about the remaining business?

Regarding industrial detergent, the cost environment is tough. But since this business engages with food processing plant and hotels, it is easier to pass the cost to price compared to B2C business. So we'll be able to mitigate the impact through price control.

Next, Mr. Hirozumi, over to you.

This is Hirozumi from Daiwa Securities. Let me ask 2 or 3 questions. First, JPY 3 billion to JPY 4 billion, is it additional one or not? Originally, you said JPY 1 billion of the merit per year. And are you saying additional JPY 3 billion to JPY 4 billion to it?

Yes. Initial JPY 1 billion was at the time of attack started in the Middle East. So it is additional one.

Got it. And you will counter this. I would like to ask about overseas business. existing and new parts. The growth of existing overseas business was somewhat disappointing, to be honest. Referring to Page 10, I was not fully satisfied with the sales of existing business, though you commented on many things. How should I see this? Is it unavoidable?

I think the past 3 months, it was unavoidable because our existing businesses in main markets, Thailand and China were weaker year-on-year. I think in Thailand, we need to strengthen domestic business again. In China, we had to reduce inventory. So I believe this March quarter weakness was unavoidable for the future recovery. As you said, April looks promising in China. Perhaps you can actually be looking forward to China going forward. We plan to rebuild our strategy to go back to a growth trajectory.

Then looking at the newly consolidated overseas business, profit was remarkable. And I was surprised, is it normal that profit is so good when you have new consolidation?

Existing business profit is also up with sales decrease. On local currency basis, sales are down, but profitability is up. As a margin of the 2 companies are higher than our entire business, by the addition of these companies, the profit was boosted.

Existing business also increased profit, though sales decreased, right?

Yes.

Is it because of the mix improvement as described, say, oral health care in Thailand was steady?

Yes.

In China, sales declined significantly, but we secured profit. So in addition to securing profit in existing businesses, with the addition of 2 high-margin companies, we showed such a significant profit increase.

Mr. [indiscernible], over to you.

First, my question is regarding cost increase due to the Middle East situation, as mentioned earlier, which is additional JPY 3 billion to JPY 4 billion. Now I'm referring to your materials for FY 2022. Back then, [indiscernible] crude oil price was $97 per barrel. And your raw material costs were JPY 14 billion. I'd like you to explain what has changed since then from your perspective? Is it because of portfolio change or your relationship with suppliers? Why can you manage with just JPY 3 billion to JPY 4 billion in addition? There may be various reasons such as palm oil prices, which has not increased or the product mix being different. So would you explain this?

Yes, costs did rise significantly in 2022, but that increase was JPY 14 billion year-on-year. It is not the case that cost then declined by 2025. What we are saying is that on top of these already elevated cost levels, we are now facing an additional JPY 3 billion to JPY 4 billion cost increase possibility. I see. So this is not a comparison between JPY 14 billion versus JPY 3 billion to JPY 4 billion, rather, compared with the level after the JPY 14 billion increase over those 2 years, we are expecting cost to further rise by JPY 3 billion to JPY 4 billion.

Yes, this time, unlike a gradual increase in crude oil prices, the rise was triggered suddenly by geopolitical issues. As a result, suppliers and others have moved proactively ahead of the market. And therefore, the impact is emerging with a shorter time lag than under normal cost increase conditions.

I see. Then regarding how you intend to absorb these additional costs, when looking at the earnings factors you presented at the beginning of the year, should we understand from the first quarter progress that the offset would mainly come from changes in sales mix and price increases or from cost reductions? I would appreciate if you could give us some guidance in this regard. Also, how much cost increase do you expect next year? And how do you expect to offset that while achieving JPY 40 billion in profit?

As for our measures, first and most, we are shifting the sales mix toward products that are more profitable and less affected by the current environment. Normally, we will not make such revisions during the fiscal year. But this time, we are implementing rather drastic revisions to our plans. As a result, the timing of product promotions and launches is also changing. Through these efforts, we aim to prevent deterioration in overall gross profit margins. In addition, we are reducing promotional and advertising expenses as well as the various other expenses in order to control cost at broad.

As for the next year, although the visibility remains limited, our current assumption is that the additional JPY 3 billion to JPY 4 billion cost burden this year will continue into next year. However, at this point, we are not assuming another incremental increase of tens of billions of yen on top of that level.

Does this JPY 3 billion to JPY 4 billion increase apply only to the second half? Or will costs begin rising additionally from the second quarter?

We believe the increase will begin from the second quarter onward. And therefore, we intend to implement these countermeasures in Q2 as well.

If I may, I have a brief second question. Regarding the newly consolidated companies in Vietnam, Australia, which performed well this quarter, could you provide some indication of how much they contributed in terms of top line growth and margins?

I believe they are included in the JPY 2.2 billion sales increase in the earnings, as you explained in the outset. Broadly speaking, the contributions from the newly consolidated companies are included throughout the entire bar charts. This is one of the points I just wanted to get your attention to. However, the areas where the impact is relatively large are the JPY 3 billion item and JPY 2.1 billion in SG&A item. Roughly speaking, about 2/3 of those amounts can be attributable to the 2 newly consolidated companies.

Next, Mr. Ohana, please.

This is Ohana from Nomura Securities. First of all, apologies for returning again to the JPY 3 billion to JPY 4 billion raw materials cost increase question. When splitting that impact between domestic and overseas operations, how should we think about the breakdown?

Also regarding the various countermeasures you mentioned, should we understand that domestic operations will mainly offset domestic impacts, while overseas operations offset overseas impacts independently? I would appreciate if you could share your basic thoughts here.

Yes. We believe roughly 60% to 70% of the impact, 60% or so range will affect domestic operations. So the 60% domestic and 40% overseas. This is due to the factors such as FX impact and the differences in raw materials procurement contracts across countries. So it may be fair for me to say that 60% impact on the Japanese market and 40% on the overseas markets. As for the countermeasures, it all depends on the case by case within each region, but we are also considering broader responses such as sourcing raw materials or intermediate products in one country and reallocating them across other regions depending on the situation.

Understood. One more question regarding overseas markets. You explained about China in some details, but even in countries where revenue growth remains positive, growth still appears somewhat soft. I wonder if the domestic consumption being weakened by the Middle East situation. Also in Thailand, I believe some competitors are significantly lowering the detergent prices. Should we assume that such impacts could continue and that business conditions in Thailand may remain challenging for some time to come?

Fundamentally, while the Middle East situation may also be a factor, we believe the domestic consumption conditions in Thailand themselves are not particularly strong and that the economic fundamentals are not necessarily good. On top of that, when the cost environments are changing like now, competitors sometimes adopt very aggressive or extreme strategies. And therefore, we may experience some short-term impact from such actions. However, we believe increasing the proportion of the personal care business within our portfolio will also improve our resilience against these types of conditions. So while this is more of a medium- to long-term approach, we intend to continue working on those initiatives. Does that answer your question?

Yes. What about the other countries? Malaysia, for example, is growing, but only modestly. Could you comment on the other countries as well?

Regarding Malaysia, we believe that we are growing faster than the underlying organic growth rate of the domestic market. Because we hold a strong market position in detergents, it is relatively easier for us to implement price pass-through measures, and we believe performance has remained solid. In other countries, conditions differ depending on whether or not they maintain crude oil reserves. In countries without reserves, sudden disruptions to gasoline supply can temporarily affect economic activity and consumer behavior. So the situation varies country by country.

I see. So because Malaysia has domestic oil resources, although revenue growth was only 0.5%, should we interpret that as simply a somewhat weaker only in the first quarter?

Yes. Malaysian also posted revenue growth last year, and we believe that underlying growth trend remains intact. In Malaysia, the government implemented demand stimulation measures last year. As a result, there was a reactionary effect this year, which led to somewhat lower growth rates.

Next, Ms. Miyake, please.

This is Miyake from Morgan Stanley. I would like to ask once again about the sales in domestic consumer products business. The 10% growth rate in oral health care appears to be a very strong start compared with your full year plan of 4% to 5% growth. Although you mentioned there could be some ups and downs quarter-to-quarter, should we understand that the first quarter performance was generally tracking above the plan?

Also, were there any special factors included such as initial shipments or onetime items? I would appreciate if you could share your insights in this regard, particularly from the viewpoint of the progress of the midterm management plan. And if possible, I'd also like to ask you to actually share your thoughts in regard to other categories at the same time, please.

Yes. Since this is a comparison of the January through March period versus the same 3 months period last year. Oral Healthcare benefited from the fact that last year's new product initiatives, including dental health as well as the dental clinics channel initiatives were concentrated in the second half of the year. As a result, we had already planned for relatively strong growth in the fourth quarter and in the first half of the year. That again, you are right, actually, we had a rather strong first quarter performance above the original plan.

Meanwhile, in categories such as the beauty care and living care, we had planned new product launches and product renewal initiatives beginning in April and onward this year. Therefore, ahead of those transitions, we intentionally did not significantly increase retail inventory or conduct major promotions during the first quarter. As a result, performance appeared somewhat weak.

However, we do not believe the revenue decline reflects a competitive weakness. Well understood. Related to the earlier discussion on the measures to offset raw materials cost increases, there has also been news that some new product launches were postponed.

When thinking about the measures to build top line growth aside from the cost reductions, should we assume that suppressing promotional spending, which effectively functions as a price increase will have the greater impact? Or are there also the product-related initiatives that can still be strengthened even in this kind of environment?

Fundamentally speaking, to put it very bluntly, it boils down to the idea that we should sell more profitable products. Accordingly, we are reviewing the category and business area plans that were established at the beginning of the year as well as all related procurement and production plans.

The biggest lever in our view is to adjust the business and the product mix in order to offset the impact. In addition, for products where costs inevitably rise, we intend to suppress promotional spending as much as possible in order to effectively reduce the cost burden. In other words, in order to achieve effective price pass-through, we believe those are going to be quite important activities.

As we are running short of time, I will take the one final question. Mr. Ogaki, please.

This is Ogaki from Okasan Securities. I would first like to ask about Fabric Care within the Consumer Products business. On Page 8, you mentioned that long detergents performed steadily. Regarding this year's price increase, fabric softener was highlighted as one of the key focal areas. I wonder if you could comment on how fabric softener sales have been performing. Also, given the product renewals discussed on Page 16, could you share what you can regarding the current situation, please?

Thank you very much. For the fabric softener, going forward, we plan to implement product initiatives as well as price pass-through measures in the second half of the year. On the other hand, for laundry detergents, the liquid detergent category as a whole returned to revenue growth in the first quarter. Therefore, we view the performance as solid overall.

Understood. I have one more question, if I may, regarding the pharmaceuticals business. You mentioned that acne medication performed well due to the inbound demand. However, I believe the number of Chinese visitors to Japan has been declining. Was there no impact from that? Also regarding antipyretic analgesics, you mentioned that the factory had resumed operations. How did that business perform? I appreciate if you could expand on those aspects.

First, regarding antipyretic analgesics, sales were slightly down this year. Again, since this is only a comparison of a 3-month period, we intend to focus upon strengthening the business again going forward. As for the acne medication and inbound demand, while the number of the Chinese visitors to Japan has indeed declined, we believe the inbound-related consumption overall has remained relatively solid, not necessarily limited only to the Chinese consumers, if I may say so. In particular, our acne treatment and brand PR apparently gained attention on social media, and we understand that this contributed to a very strong sales during the quarter.

You mentioned that social media helped the performance this quarter. Should we, therefore, be somewhat cautious regarding the next quarter and beyond?

Yes. Overall, rather than relying heavily on the volatile inbound-driven sales, we believe it is more important to strengthen our core categories such as antipartic analgesics and eye care products.

As we are now running out of time, we will now conclude the Q&A session here. Thank you all for many questions. This concludes the earnings presentation of Lion Corporation. Thank you indeed for your precious time and participation.

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

[Interpreted] Good afternoon. I understand that you have had a series of meetings today and must be quite busy and tired. Thank you indeed for your precious time to join us. I am Takemori, President and CEO. It is a pleasure to be with you.

Today, now I would like to speak along these 4 points shown here. First, the highlights. Let me begin with a summary of FY 2025 results. By [indiscernible] and executing our second stage strategy, we achieved growth both in revenue and profit and improved margin, marking the second consecutive year of meeting our guidance. In our Consumer Products Business, in addition to improving profitability, we reinvested in the profit generated into nurturing high value-added products. As a result, we believe we have created sustainable growth momentum. In our overseas business, despite increasingly and challenging country conditions and the business environment, we shifted our management focus toward profitability. As a result, we secured both revenue and profit growth.

FY 2026 this year will be a decisive year as we work toward achieving the targets of second stage. To enhance both the effectiveness and the speed of sales execution, we have reformed our management processes and shifted to a business unit structure centered on domestic and overseas operations, including the major portfolio actions announced today. I would like to walk you through these points step by step.

First, let me present the consolidated results for FY 2025. As mentioned earlier, net sales were JPY 422 billion, exceeding our guidance by JPY 2 billion. In terms of profit as well, we exceeded guidance in all items. We believe we have made a solid start toward strengthening profitability under the second stage theme. Core operating income reached JPY 30.7 billion, up JPY 4.4 billion year-on-year. The breakdown reflects results in line with our targets. I will elaborate shortly. Please also note that the increase in operating profit includes a gain on step acquisition associated with the consolidation of Vietnam's Merap Lion.

This slide shows one of the key charts for FY 2025 performance. The breakdown of the business profit changes. The plus and minus figures represent full year result. While the figures in brackets below, each box indicates the comparison between October through December periods. There are 2 key messages I would like to convey with this slide.

First, one year ago at this meeting, we stated that we will aim to generate JPY 5.2 billion in gross profit for FY 2025. The result was largely in line with what we committed. Second, we said that in the second half, particularly from October through December, we would focus on expanding key brands and priority areas. As a result, we made concentrated investments in competitive expenses, mainly in domestic oral health care and new products gross profit shown in the blue brackets increased by JPY 3.5 billion, more than offsetting those investments and achieved healthy growth. While there were various fluctuations during the year, we believe that on a full year basis, profitability strengthened steadily in the direction we had targeted.

Next, by segment. In Consumer Products, focused investments in high value-added products led to 1.6% increase in sales. Business profit margin improved by 1.4%, as shown on the far right of the table, driven by the efforts of structural profitability reforms. We believe that now sales and profit has been well balanced. In the overseas business, the effects of key initiatives in major countries materialized. In addition, with the consolidation of Merap Lion from July, both revenue and profitability improved. The specific numbers are indicated on the far right of the table.

Here is the breakdown of the Consumer Goods business. In Oral Healthcare, our top priority category, growth and premium toothpaste drove a 4.7% increase. While Public and Living Care recorded revenue declines, the arrows on the right side of the page indicate the trend in profitability. Profitability has improved.

This slide shows the changes for the most recent October through December period. Again, please focus on the arrows. Overall, we have been able to generate a momentum in sales growth. Living Care was affected by SKU reductions, but the product mix itself improved through the introduction of high value-added new products.

Next, overseas. As mentioned repeatedly, we achieved both revenue and profit growth. There are two tables here. Please look at the top one first. Malaysia, shown by the arrow in the lower table, continues to perform strongly in Southeast Asia. In addition to Malaysia, the consolidation of the high-profit Vietnam business from July also contributed result in revenue and profit growth.

The margin in Southeast Asia also improved by 1.5 percentage points. As shown in the percentage of the far right of the upper table, the margin improvement from 2023 to 2024 was 0.5 points. Therefore, since entering the second stage, margin have been improved steadily. One of the key drivers behind this has been the growth of Personal Care. Although the figures are not shown here, allow me to explain this probably.

Thailand Personal Care and sales grew 106% year-on-year. In Malaysia, they rose to 109%. We are clearly seeing and achieving profitable growth. In Northeast Asia, China recorded revenue growth, while South Korea declined year-on-year, resulting in lower revenue and profit. For overseas operations as a whole, as shown in the total row of the upper table, net sales increased by 1.5% on a real basis. Previously, as we had shifted our focus toward growth, it has been rather difficult to improve margins as much as we would have liked. However, by firmly pursuing profitable growth, margins improved by 0.8 percentage points. Even under various challenging circumstances, we believe we were able to achieve both growth and profitability.

Similar to the domestic business, this slide shows the changes for the most recent October-December period across the 4 key countries. Please focus on the arrows. In Thailand, product performance declined due to the continued decrease in export business caused by geopolitical issues. However, we strengthened personal care, particularly oral health care. As a result, domestic demand in Thailand grew steadily. In Malaysia, growth continued centered on renewed liquid detergent product. In addition, as in Thailand, Personal Care expanded significantly.

In China, amid an increasing polarization of consumption, we set our brand strategy, at the same time, by strengthening channel management. Offline brick-and-mortar sales grew, enabling us to secure growth both in revenue and profit. Although South Korea was affected by the decline in exports to neighboring countries, the impact of recovery measures helped narrow the decreases in revenue in the October to December period.

Next, I would like to discuss the results of the first year of our medium-term management plan. Before that, however, allow me here to briefly revisit our basic policy. Based on our core policy of strengthening profitability, we are implementing measures at achieving the management indicators shown on the right. In particular, I will now elaborate on the result of our key initiatives to enhance business portfolio management, the very first point.

Accelerating growth in oral health care. Let me begin with conclusion. We are gaining solid traction. We have been focusing on priority development, both domestically and overseas, and the results are already visible in various countries. On the left in Japan, we successfully nurtured new products in the premium toothpaste segment, result in increased market share and total sales growth of 105% year-on-year. In China, we strengthened high value-added brands and implemented focused offline channel initiatives, as mentioned earlier. These efforts are steadily the bearing fruit with sales reaching 103% year-on-year.

Moving on to the right-hand side. In Thailand, where we fundamentally reviewed our brand and channel strategies last year. Close collaboration with the local partners drove strong growth in October through December, resulting in full year sales growth of 114%, achieving double-digit expansion. In Malaysia, growth has continued to recover strongly, reaching 120%, driven mainly by the local brand, Fresh & White. Even in the markets where the global brand, Colgate is indeed present, we have demonstrated solid growth in both countries. We believe this momentum will continue into FY 2026. As mentioned at the beginning of the slide, group-wide oral healthcare growth came in at 5.2% compared with our initial assumption of 5% to 6%, which we view as a reasonably solid result.

Reform of the profit structure in the Consumer Goods business. The initiative is also progressing steadily. We have achieved the KPIs for our key measures. This was not simply about cutting costs. It was the combination of upward price revision, a shift toward higher value-added products, and the focused strategic investments and competitive expenses that contributed to the result. The impact of these measures is also reflected in the improvements in the top line performance in the second half, as explained earlier.

Summary of first year results and the key themes for this year. In overseas markets, the environment has been changing rapidly since the launch of midterm plan. In FY 2025 last year, we're able to respond to those changes and secure profit growth. However, we expect the challenging conditions to persist in FY 2026. Therefore, across the entire group, we will once again focus on nurturing high profit businesses and achieving growth accompanied by the improved profitability. I will outline the specific initiatives shortly.

Moving on to this year's initiatives. First, as I mentioned [ premise ], the markets in which we operate are showing a clear trend toward polarization and consumption. In particular, high functionality, high-end products continue to grow. Across many categories, growth in high-end segment is exceeding overall market growth as evidenced by the data. The key question is how we adjust to this trend?

In line with the portfolio strategy set out in our current medium-term plan, we will further strengthen our focus on high value-added products and increase investment in branding development. At the same time, we will enhance capital efficiency. Through these efforts, we will further advance the core theme of our second stage, strengthening profitability. As President, I am committed to driving profitable growth.

This slide illustrates our ideal approach to portfolio management. In the current medium-term plan, we have clarified the role of each business, and we are implementing strategies aligned with those roles. In the upper right is Oral Healthcare, our highest priority business, both domestically and overseas. It will continue to serve as the main driver of revenue and profit growth, and we will pursue further expansion. To the left is our challenge business. With the acquisition of PNB in Australia announced in January, we have secured a new business platform. I will further expand on details later.

In the lower left is the structural reform business. Today, we announced the transfer of shares in two chemical business subsidiaries. In the home care field, we have steadily advanced profitability and improvement measures and have already achieved a certain level of success in building a stable earnings structure. Accordingly, the arrows are now pointing upward. Today's presentation will proceed in line with this portfolio framework.

Let me start with our top priority business, Oral Healthcare. In Japan, the periodontal care market is expected to continue expanding in line with rising health care consciousness as shown on the left. The key message of this slide is shown on the right. As a leading company in oral health care, we will promote these measures. We will strengthen functionality of mainstay brands, utilize new technologies in products for the dental clinic route, and penetrate services for professional and self-care to create a positive loop between them.

We will advance our 3-pronged strategy and drive market expansion. In the case when capabilities to accelerate these activities exist outside our organization, we will actively engage with companies, governments and academia, or pursue partnerships and acquisitions to materialize the plan.

This slide shows our measures to strengthen overseas business. As mentioned earlier, in Thailand and Malaysia, the toothpaste market is growing and our shipment also performing well. In China, the market is shrinking, and there is a risk that we might be absorbed in the trend, but we are still holding firm. The key message here is that there is still good room for us to grow. And with that in mind, what will we do this year?

In China, while market risks continue to be expected, we will not pursue excessive quantitative growth. Instead, we will continue and strengthen our high value-added strategies. We will focus on profitability in channel development in offline channels. We'll strengthen initiatives with priority retail outlet. And in online channels, we efficiently leverage emerging platforms in Thailand and Malaysia. We delivered results last year. Collaborative brand and channel strategies proved to be successful. We accelerate profitable growth through this work with JV partners.

Next, regarding our challenge for growth businesses, which include Beauty Care and Pharmaceutical products businesses. In this midterm plan, we aim to create new business opportunities and contribute to improve company-wide margin. Of course, Oral Healthcare remains our top priority business. But in our challenge for growth business, we have been exploring new business opportunities, primarily overseas while narrowing down investment target.

In Vietnam, where the company became a wholly-owned subsidiary, we launched Oral Healthcare business, leveraging our channel network, key source of high profitability. In countries where we hold the #1 market share brand, we will pursue stable profitable growth. In this way, the challenge for growth business plays a key role in strengthening profitability. However, we believe that we need to shift into a higher gear to capture further growth opportunities.

We decided to acquire 100% of shares of PNB in Australia. We received many questions, why Australia? Why Beauty Care and what are the synergies? This explanation will be a bit lengthy, but I'd like to provide a thorough response. Strategic aims are to establish and expand a new highly profitable business. We believe the Sukin business aligns with our strategy as it not only captures domestic demand in Australia, but also offers potential synergies with our operations in other countries, particularly in Southeast Asia.

First, regarding domestic demand, Australia's GDP growth remains stable. and market expansion is expected going forward. Australia is also geographically close to Asia and so many Asian immigrants reside there. For our company, which focuses its business development on Asia, Australia is a highly attractive and compatible country. Why Sukin? What synergies exist?

The Sukin brand has established a solid position as a natural beauty care brand in Australia and the company boasts high profitability. By extensively expanding the Sukin brand across the group, primarily in Southeast Asia and South Asia, we believe we can significantly grow our highly profitable personal care business. Actually, Singapore, one of our business area is included in the export destinations, and they already hold a certain market share there. We have high expectations of accelerating expansion in Asia. In Australia, we believe we can expand business in research, production and sales by teaming up with the local management and integrating our capabilities with PNB's business foundation.

Going forward, of course, the expansion of Oral Health Care is also within our scope. Reflecting on the past M&A transactions where we failed to fully leverage acquired brand value, this time, we emphasize the following 3 points. First, clarifying growth scenarios and synergies. Second, establishing an operational framework that respect brand uniqueness. And third, strengthening the execution structure and governance in post integration. We believe the acquisition of Sukin brand will serve as a major starting point for creating mid- to long-term value with challenge for growth business in the group.

Next, regarding the structural reform business aimed at achieving stable profitability. As announced today, we decided to transfer shares of two chemical product subsidiaries. We resolved to transfer shares of Lion Specialty Chemicals Company Limited, the core of our group's Chemical business and its subsidiary, IPPOSHA, Indonesia to AP88 supported by a fund serviced by Advantage Partners. Regarding our Chemical business, we continued operations while implementing measures to enhance business efficiency, including reorganizing group companies and improving profitability. However, amid the rapidly changing environment in recent years, we carefully reviewed the direction of this business, and that led to this conclusion.

Home Care business also belongs to structural reform business. Focusing on improving profitability, we have shifted it into a stable profit business. It achieved a certain level of success primarily in Japan, but the current level of profitability is still not satisfactory. We will continue to implement the measures shown here, both in Japan and overseas, striving for stable growth and further profitability improvement.

As mentioned earlier, the profit structure reform in consumer products is progressing steadily and the measures implemented in 2025 will show results in '26. This fiscal year, we continue to shift to high value-added products and supply chain optimization as well as delivering the effect of new measures to further strengthen profitability. Efforts to advance supply chain are progressing toward concrete materialization in particular, and we expect them to significantly contribute to EBITDA and ROIC as shown in our KPIs.

Forecast of consolidated results and capital policy. Financial forecast for this fiscal year is as follows. Sales and profit will increase with core operating income reaching JPY 35 billion. We are steadily advancing toward our second stage target and are largely on track for our FY 2027 target. Note that the difference between core operating income and operating profit, JPY 5 billion includes gains from the sale of share in chemical product subsidiaries. External sales forecast by business segment. We expect continued growth contribution from overseas business bolstered by contributions from our newly launched business in Vietnam and Australia. The decline in industrial product is as explained.

Year-on-year changes in core operating income. While business actions will bring changes, we expect an increase of JPY 9.8 billion in gross profit, driven by quantitative effects from overseas sales growth. Shift to higher added value products and upward price revisions mainly in Japan and cost reductions. On the other hand, an increase of SG&A, including competition-related expenses will result in a JPY 5.5 billion decrease, leading to a net growth of JPY 4.3 billion.

Second stage, capital allocation. Centered on operating cash flow, we expect cash inflows of around JPY 150 billion over 3 years. Furthermore, the sale of chemical subsidiaries generated cash rooms and it leads to secure more capital than initially planned. How should we spend this?

The top priority is growth investment. As shown on the right, from '26 to '27, we will prioritize growth investment in oral healthcare business, aiming to implement disciplined investment. As we will announce later, we plan to arrange an opportunity to discuss our strategy for profitable overseas growth and expansion of oral healthcare business on a later day. We'll further strengthen shareholder returns by flexible acquisition of treasury stock while considering growth investment based on annually increased dividend.

Regarding shareholder return measures, we plan to pay dividend of JPY 30 per share annually for 2025 as initially planned. And for '26, we plan to increase the dividend JPY 4 from the previous year to JPY 34 per share. This will make the 11th consecutive year of dividend increase. Payout ratio will be 37.6%. Furthermore, as mentioned earlier, we consider acquisition of treasury stock and cancellation flexibly. We continue to steadily enhance shareholder returns while balancing growth investment with financial soundness.

Finally, let me review the progress of Vision2030, second stage. Second stage progress in key KPIs. Margin improvement is progressing extremely smoothly. Profit structure reform shift to high value-added products and cost reforms are all delivering tangible results. Regarding overseas sales growth, given rapid changes in environment, we are implementing measures focused on Personal Care segment to achieve profitable growth, as mentioned. Regarding sales growth, we are flexibly redesigning strategies to offset that deviation from the [ inter ] plan, particularly in China by the contribution of other countries and regions. Accordingly, we continue to aim to achieve our target for 2027.

To accelerate the group decision-making and the strategy execution to achieve the goal, as announced, we transitioned to a new organizational structure in January this year. Under this organizational structure, we will make a steady headway in measures that I described today.

Today's summary. In Consumer Product operations, profit structure improved by strengthening profit foundation. However, overseas, we are clearly aware of the need to further enhance our ability to handle environmental changes. Therefore, in 2025, we will leverage the speed, agility and execution power gained from the organizational transformation, and ensure to achieve profitable growth by steadily executing each business strategy. Furthermore, we will advance growth investment in priority areas while further enhancing corporate value of Lion Group.

This concludes my presentation. Thank you for your attention.

[Interpreted] We'll now move on to the Q&A session. Mr. Hirozumi, please go ahead.

[Interpreted] Yes. This is Hirozumi from Daiwa Securities. Can you hear me?

[Interpreted] Yes, Mr. Hirozumi. We can hear you clearly.

[Interpreted] First of all, I felt quite energized by your passionate remarks, Mr. President. I would like to ask about strategy, but inevitably, the numbers draw my attention. With the addition of new businesses and the exclusion of others this time, I'd like to understand how we should think about the overall impact?

For example, regarding chemicals, that's the sales plan declining from roughly JPY 39.3 billion to JPY 25 billion. That's quite a reduction in revenue. And the core operating income was around 5%. I'm trying to understand how much this divestion affects net income? On the other hand, with PNB and consolidated, even if its revenue is not very large, I assume it contributes to profit. So when we consider both PNB coming in and chemicals going out, how should we think about what is entering and what is leaving the portfolio?

[Interpreted] Thank you for your question. Allow me to respond to your question at a high level. Focusing on the formulation of the FY 2026 plan. As you pointed out, both the acquisition and the [ divestment ] are reflected in the plan. Starting with the sales.

Very roughly speaking, the combined impact of Chemicals Australia and Vietnam results in a net negative effect of approximately JPY 2 billion year-on-year. However, this JPY 2 billion represents less than 1% of the consolidated revenue. So we believe it can be fully absorbed through our existing businesses. To be more specific, the divesture of the Chemicals business results in approximately negative JPY 14 billion impact on revenue. When combined with the contribution from Vietnam and Australia, the net income -- net impact comes to around JPY 12 billion.

As for the business profit, at the operating profit level, the divestiture of chemicals actually has a positive impact. So Australia and Vietnam are making contributions to the profit. OTC and profitability, Australia on the full year basis, actually, the Skin Care and Beauty, actually, its margin is quite good at the general perception of the profitability. So this is the point I'd like to ask you to keep in mind.

[Interpreted] My last question, on Page [ 23 ], the dilution impact starts to be reflected from the second half, correct? PNB is the one that start beginning to contribute. Will these effects carry over into next year as well?

[Interpreted] This has become somewhat technical, and I'd like to ask Takeo to respond.

[Interpreted] Thank you for the question, Hirozumi. This is Takeo. PNB was consolidated on January 20. So its results are included in our consolidated figures from that date onward. Regarding Vietnam, it has been consolidated since July last year. Therefore, when comparing FY 2025 and FY 2026, FY '26 reflects a full year contribution, whereas FY 2025 included only the half year effect given such a positive impact. As a result, the negative impact on LSN is almost fully offset at the core operating income level.

[Interpreted] Next, I'd like to have Mr. Ohana, please.

[Interpreted] This is Ohana from Nomura Securities. I'd like to ask about the transfer of the 2 chemical subsidiaries. Well, to be honest, I may not fully understand the business scope, whether LSN was focused on detergents, specialty chemicals and graphite electrodes, or other products. I wonder if you could, kind of, explain what advantage or disadvantages this divesture has for your consumer products business?

[Interpreted] Thank you for your question, Mr. Ohana. Let me state that conclusion first. The stock transfer of these 2 chemical subsidiaries will have no material impact on our domestic consumer products business. Please rest assured on that point.

[Interpreted] So there's no significant impact on overseas operations either?

[Interpreted] That is correct.

[Interpreted] Were these subsidiaries mainly producing detergent-related chemicals?

[Interpreted] Broadly speaking, the business consists of two areas. Internal supply and external sales. On the external sales side, products include anti-sticking agents for automobiles and the materials used in the components for EV batteries. Regarding your question, one of the key products is the raw material used in the fabric softeners.

[Interpreted] Next, I would like to have Ms. Kuwahara, please.

[Interpreted] This is Kuwahara from JPMorgan Securities. Can you hear me?

[Interpreted] Yes, we can hear you.

[Interpreted] I would like to ask about your view for FY '26 from the perspective of the DHP ratio. In other words, the core operating income margin, as well as the level of business profit and also about the progress toward achieving the medium-term management plan?

First, for FY 2026, the core operating income margin appears to be approximately 8.1%, which represents a 9% year-on-year increase. You have explained the profit drivers. But looking at it by segment, should we understand that both domestic and overseas businesses will be driving this improvement? Or is it mainly domestic?

And as for the domestic side, what are the main drivers? For example, will oral care further improve its DPF? Or will home care, which had been identified as a reform area? Finally move out of losses and begin raising its profit margin? I would appreciate some clarification on these points.

Secondly, regarding progress toward FY 2027 under the medium-term plan, if we look simply at the profit level, for example, JPY 35 billion and then another JPY 5 billion. It would appear that reaching JPY 40 billion is quite achievable. Is this progress in line with your original assumptions? Or are you somewhat ahead of the plan?

From our perspective, considering that the full year contribution from PNB and will be included next year, progress appears somewhat favorable. How does management view this? I would appreciate your comments in these regards.

[Interpreted] Thank you, Ms.Kuwahara. Let me share the slide here. Can you see the screen now?

[Interpreted] Yes, I can see it.

[Interpreted] First, regarding whether there is any upside potential to the FY '27 profit level, to set the conclusion first, we are not necessarily optimistic. That said, there are no specific negative factors either. However, as we have mentioned, economic conditions in China and Asia are changing so rapidly and the visibility even 1 or 2 years ahead remains quite limited. Therefore, the current business profit level we have set should be understood as a minimum target. We aim to achieve this level without fail as we work toward FY '27. There are no negative factors embedded, but we have set this level after carefully considering the various international uncertainties.

As for FY '26 this year and when we expect margin expansion? As shown on this slide, we anticipate a volume effect of JPY 5.5 billion and JPY 3 billion from higher value-added initiatives. In conclusion, we intend to raise the business core operating income in both domestic and overseas markets.

Referring to the waterfall chart for domestic operations, the second number from the left, plus JPY 3 billion, represents the higher value-added products and price revisions, which will primarily drive profitability improvements. Meanwhile, the volume effect, JPY 5.5 billion largely reflects overseas growth, including contributions from Vietnam in the first half and PNB, among others. So the volume growth and mix improvements are mainly overseas driven, while higher value-added initiatives and pricing are primarily domestic driven. Did I answer your question?

[Interpreted] Just one follow-up regarding your domestic business. For the high value-added initiatives, is this simply due to steady expansion in oral care? Or as Mr. Takemori mentioned at this same meeting last year, are you also seeing benefits from production and process integration, particularly in home care, where categories such as detergents, which had previously been loss-making were brought back to the breakeven and are now positioned for growth?

In other words, when we talk about influence from higher value-added initiatives, which factor is more significant? To what extent will Home Care stop weighing on overall profitability? How do you see Home Care's impact on overall margins in FY 2026?

[Interpreted] Yes. Overall, in terms of the impact, the improvement in the core operating profit margin of oral health care has the largest effect. That said, as Mr. Kuwahara pointed out, Home Care has also made significant progress. In FY 2025, we succeeded in substantially improving its profitability in real terms. Therefore, in FY '26 as well, although we will refrain from disclosing specific percentage, we believe there is still more room for further improvement.

This growth will not come solely from the efficiency measures and the cost reductions we have implemented so far. As mentioned earlier today, we are also introducing new initiatives such as new detergents designed to promote water-saving [ laundry ] habits. By combining these efforts with improvements in sales quality, we aim to achieve further growth with enhanced profitability.

[Interpreted] Next, I would like to have Mr. Kawamoto, please.

[Interpreted] I would like to look at what occurred in the fourth quarter on a 3-month basis? I am actually looking at Page 6. There are 3 items shown. And under the profit impact, there is positive JPY 2 billion. Last year, this was negative. But from the third quarter to the fourth quarter, it is plus JPY 2.1 billion. This may include Vietnam, but could you break this down between domestic and overseas?

Also regarding the JPY 1.3 billion price effect you explained, again, how would you break that down between domestic and overseas? For this year's outlook, you are guiding for JPY 5.5 billion volume effect. How would that split between domestic and overseas? Given that the industry environment appears to be quite competitive in terms of volume, I would appreciate if you could share what kind of structure or initiatives enable your company to set such ambitious volume target?

[Interpreted] Thank you Mr. Kawamoto. Let me explain using the waterfall charts for FY 2025 and FY 2026, respectively. First, regarding FY 2025 and the yellow section of the chart, I will ask our Accounting Officer, Mr. Takeo to explain the domestic and overseas breakdown.

[Interpreted] Thank you for your question, Kawamoto-san. Just to confirm, you are asking about the breakdown between domestic and overseas for the profit increase and decrease factors in the fourth quarter, October to December, am I right?

[Interpreted] Yes.

[Interpreted] First, regarding the positive JPY 2.1 billion volume effect. In regard to this volume, positive JPY 2.1 billion, most of them are coming from overseas. We have benefited out of the consolidation effect of Vietnam. On the domestic side, however, as shown in the text in the above box, the impact of the brand transfer completed at the end of October result in a decline in gross profit. This negative effect is included in this figure. So while overseas contributed positively to volume growth, domestic consumer goods were negatively affected by the brand transfer. This is the breakdown of the JPY 2.1 billion.

Next, regarding the JPY 1.3 billion from higher value-add initiatives and price revisions in the fourth quarter, out of the full year JPY 3.6 billion, JPY 1.3 billion was recorded in the fourth quarter, broadly in line with our initial annual forecast of JPY 3.5 billion. This was almost entirely domestic, including effective price increases such as reductions in product volume accompanying product actions.

Now please look at the FY 2026 waterfall chart. I will here focus upon the two items on the left. First, the positive JPY 3 billion from higher value-added products and price revisions. This is primarily from domestic side. Next, the volume effects on the left-hand side. This is mainly overseas. To give the rough figures, Sukin and the Vietnam together contribute up JPY 8.5 billion and existing overseas markets contributed about up JPY 2 billion, totaling roughly up JPY 10 billion. From this, the exit of the industrial business results in a negative impact of around JPY 4 billion, leading to a net positive approximately up JPY 6 billion.

EBIT margin actually getting improved through the domestic [ BT ] initiatives, which was mentioned earlier. By adding these measures within this year, we aim to generate incremental upside in domestic operations beyond what is currently reflected in this plan. Ms. Kawamoto, does this answer your question?

[Interpreted] Thank you for your clarification. You said that volume increase in existing market is plus JPY 2 billion. In the previous year, China was strong. And will China continue to serve as a driver this year? I had a concern over Japan-China relationship. And in the Q4 of the previous year, China grew 16%. So would you comment on the content of this JPY 2 billion, please?

[Interpreted] I'd like to talk about this in detail in future. But let me give you the overview. We'll stop aiming to achieve double-digit growth in China. Based on the last year and the latest results, we'll strive to achieve the steady target of 102% to 105% of the previous year this year and the next. We will offset this with personal care centered on oral health care in Thailand and Malaysia, as mentioned earlier. We expect to see the growth of approximately 105% in 4 priority countries. Thailand, Malaysia and South Korea, excluding China. With this, we'd like to achieve that target mentioned earlier. Did I answer your question?

[Interpreted] Next, Mr. Ogaki, over to you.

[Interpreted] I'm Ogaki of Okasan Securities. I'd like to confirm the upward price revision in Japan. Last year, you said that the price increase for middle range price toothpaste was delayed in Q3. Were you able to raise price? I'd like to confirm this as sales grew due to the shift to value-added products. And in this year, in which category do you expect to increase prices?

[Interpreted] Thank you, Mr. Ogaki. I'd like to talk about last year. Honestly, in mid-range price, toothbrush and toothpaste, we were able to raise price, but margin improvement was lower than our expectation. There were two backgrounds. For one, as mentioned earlier, consumption trend showed prioritization. High-end products are growing, but mid-range and low-end products are struggling. So although we raised price, but margin did not follow.

Second, this is only about the toothbrushes. Toward the end of last year, we had more campaigns for toothbrush than usual. As a result, campaign price products mix increased and the results for mid-range price products were not in line with the plan. Going forward, the price increase of mid-range product and the low-end toothbrushes will be more difficult.

Next, second half of your question, what shall we do this year and onward? We'd like to focus on SYSTEMA, Haguki Plus, Kyusoku Jikan and the new line of hadakara with focus on our strong high-priced product, upper side of polarization and optimize pricing. Looking at the progress of price increase impact, it was about 52% against the plan last year. This year, against the plan of JPY 3 billion, progress will be about 72%. If we achieve this, we'll be able to hit the initially announced target. Did this answer your question?

[Interpreted] Next is Miyasako, over to you.

[Interpreted] I'm Miyasako of Mizuho Securities. I have a question about the company in Australia. You spent much time in your presentation for its explanation. And you said that you expand it to oral healthcare in future. Would you tell me about its time frame?

[Interpreted] Time frame to expand to oral healthcare business, expansion this year is not likely. In the next year and onward, we will head for the third stage, and that will be the timing. In challenge for growth business, first priority is to establish the profitable business quickly. We will leverage the domestic demand in Australia and the launch of these products in Southeast and South Asia shown here, I'd like to make it happen in 2026.

[Interpreted] I think you don't have experience like this before. Do you let them manage the company independently? How are you going to manage this company?

[Interpreted] That's an important point. If we approach as we did with partner companies in Southeast and South Asia, it will not succeed. We may succeed the way of local management, but have a firm grip, and ensure governance as a group with sound autonomy to establish a down towards profitable business in Australia.

[Interpreted] I think you could concentrate more on oral healthcare business. Is this expansion really necessary?

[Interpreted] Yes. To deepen your understanding of the context, let me talk a bit. In this type of transaction, we need to be mindful of the counterpart and the timing of negotiation. This time, this transaction came first by chance. Oral healthcare remains a top priority. That's unchanged. We are exploring multiple oral healthcare business opportunities all the time. It's not that we quit Oral Healthcare and [ took this ]. We continue to explore oral healthcare opportunities, but this transaction happened to come first.

That said, this is a challenge for growth business. As Lion Group, establishing a highly profitable business is our mission, and this transaction met the requirement.

[Interpreted] I see. In Oral Care, if you do M&A, of course, I understand you cannot be specific. But would you give me any clue? For example, in China and Southeast Asia, what type of acquisition would be useful for you?

[Interpreted] I hope you understand that I cannot disclose everything. I talked about how we will expand oral healthcare business through dental clinic route and professional and self-care will be connected seamlessly as shown on the right of this slide. We'd like to fill the missing piece in this diagram. We are not thinking only about a simple toothpaste or toothbrush brand, but we would like to enhance the capability to realize this diagram.

[Interpreted] Will you do this in Asia as well?

[Interpreted] Yes.

[Interpreted] I think the first round of question is now over. Do you have any more question? Mr. Yamanaka, over to you.

[Interpreted] I'm Yamanaka of SMBC Nikko Securities. I'd like to ask a follow-up question about the price increase in Japan. You said earlier that the effect of price increase was less than your expectation. In Q4, you spent JPY 1.5 billion for marketing and the sales growth in Oral Healthcare was strong overseas. But the growth is slowing down a bit from the third to fourth quarter.

Does it mean that the business in Japan is slightly behind against the midterm plan? Or have you already put measures in place? You have a briefing later, but please let us know more.

[Interpreted] Thank you, Yamanaka-san. To be frank, I think that there is nothing to worry about. Top line growth in Japan is 4.7% in Oral Healthcare as shown here, and the profitability is improving as shown on the right. Only a part of this price increase in mid-range price product was behind the plan. But [ dent health ] and other high-end products are growing steadily. Top line growth and profitability in Oral Healthcare in Japan have nothing to worry. So you can rest assured.

[Interpreted] You mean that including mix, nothing to worry. Is that right?

[Interpreted] Exactly.

[Interpreted] We still have a little more time. Hirozumi-san over to you.

[Interpreted] I'm Hirozumi. I have a question on Page 11 related to Kawamoto-san's question. As far as I recall, in July to September quarter, Thailand declined by about 10% and China dipped likewise. South Korea declined also 5% or so. And in October, December quarter, Thailand continued to be weak, but China recovered.

When you answered to Kawamoto-san's question, you said that China will be up 2% to 5% in Thailand, Malaysia and South Korea will be up 5%, showing the improvement in all areas. Would you tell me about your confidence or probability of this change?

[Interpreted] Let me start with Thailand. As you know, issues with Cambodia have wiped out about 7% to 10% of GDP of Thailand, and that was reflected in the first half results. But much of that, about 60% of cross-border trade across Cambodia's border was related to body of Shokubutsu Monogatari. And we found a way of hedge by exporting them via Malaysia as a group, and we will continue to do this. Additionally, we have confidence about the domestic demand in Thailand as initiatives for oral healthcare worked well. With their expansion supported by domestic demand, we believe we'll be able to reach 105%.

Another key point is in China. Let me share a slide. As shown here, during January to September, there was a recovery from the period October to December. This might look like an optimistic trend, but let me talk about the reality. Due to efforts in Q4 last year and during the Chinese New Year this year, products were put in place in distribution tunnels. After that, due to a slowdown in Chinese economy, certain level of distributors' inventory exists in China. But this is not a structural issue, and we expect that to clear in Q1 from January to March quarter.

And the business in China will recover in Q2. But based on the level of the previous year, we thought that our forecast should be more or less conservative as a business. That is what is indicated here. Is that clear to you?

[Interpreted] Is the indication for 5% for Malaysia and South Korea, likewise the same?

[Interpreted] In Malaysia, partly due to government policy, the consumption was robust last year and that will continue this year. Additionally, as described here, our liquid detergent and local brand, Fresh & White grew more than market. We are confident that they will continue to serve as drivers and that will sustain the growth in Malaysia.

In South Korea, we listed as 105%, but there are may be some risks. But with our strong high-margin products of capsule-type detergent and hand soap, we'd like to moderate the decline in South Korea.

[Interpreted] As it's almost time, we'd like to close the Q&A session. Thank you for your many questions.

[Interpreted] Thank you for your participation. Please bear with me a few more minutes. Amid many earnings calls, thank you very much for joining us. As we received some questions in advance, let me add comments about overseas business.

We have clarified, identified the role of each country. With profitable growth, we will pursue volume growth of high-margin product. This is our primary mission. With this in mind, we divided the market into 3 categories. By sustaining percentage of margin, we increase profit in Bangladesh, Vietnam and Malaysia, as mentioned. We will increase percentage of margin by change of sales mix in Thailand and China. We will implement a variety of initiatives monitoring the situation, sustaining percentage margin in South Korea.

Depending on the economic and competitive environment, we identified the different role of each country, where to grow, where to sustain and where to secure profitability. Naturally, in doing business, we will face many ups and downs, but we will keep our target of 10% growth of overseas business for 2027. And we'll continue to have engagement with you to share the progress in due course. This is my final message today.

[Interpreted] Thank you very much again for participating despite your busy schedule.

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

I am Fukuda. Thank you very much for your participation in large numbers, despite your busy schedule. I appreciate your consistent support for the company.

This is today's agenda, which consists of 4 points. Without further ado, I'll explain the consolidated financial results for the first 9 months. In this Q3, following the first half, sales and profit grew year-on-year and steadily progressed towards achieving the full year target.

Key points are described at the top. The main issue in the first year of the midterm plan profitability improvement continue to progress steadily. Additional top line growth momentum is accelerating with the launch of new products in July to September quarter. Overseas, amid the increasingly tough business environment in major countries, we fine-tuned strategy towards profitable growth. Today, I'd like to touch upon the mid- to long-term initiatives at the end.

In consolidated financial results, net sales in 3 quarters were JPY 304.9 billion, up 1.3% year-on-year. Against net sales growth of 0.4% in the first half, Q3 growth was 2.9%, showing the improved growth in sales. Core operating income was JPY 22.3 billion, up approximately JPY 3.7 billion year-on-year. Operating profit increased substantially pushed up by the gain on step acquisition along with the consolidation of our Vietnam local company into a wholly owned subsidiary and profit attributable to owners of parents also grew by 64.3%. EBITDA was JPY 35.5 billion, up JPY 3 billion year-on-year. EBITDA margin to sales increased 0.9 percentage points to 11.7%.

Year-on-year changes in core operating income. Blue arrow shows gross profit factors plus JPY 1.5 billion, and orange arrows shows SG&A factors, plus JPY 2.1 billion. Each factor shows numbers in [indiscernible] and this is a change in July to September quarter. In gross profit factors, shift to higher added value products, upward price revisions had plus JPY 2.3 billion impact. In addition to cost reduction to respond to raw material price inflation and cost pass-through, shift to high added value products contributed to improved profitability. In SG&A, as you can see, decrease in competition related expenses was a substantial factor in boosting profit.

As I explained in the Q1 and the Q2 briefings, this is never a cost cut to generate short-term profit. We review the cost, which tend to increase to secure sales volume and improved efficiency. In Q3, we increased advertisement compared to Q2 in Japan, but controlled sales promotion cost partially overseas, which did not lead to sales increases. As a result, cost decreased by JPY 0.5 billion in Q3.

I'll explain results by business segment. In Consumer Products segment, in addition to sales increases, profit substantially increased by 32% due to the mix increase of high value added products and effects of profit structure reform. Our expenses trend by segment in the next slide in detail.

In Industrial Products segment, up to Q2, sales increased but profit decreased, but backed by the recovery in Chemicals segment, it turned into sales and profit growth. In overseas segment, despite the recent slowdown in growth rate, the sales and profit of the entire segment continued to increase due to the addition of our subsidiary in Vietnam.

This slide shows our net sales by product category in Japan. In oral health care, in the top column, sales increased 4.6% due to the contribution of the launch of high value added products in Q3 and continued robust sales of products sourced through the dental clinics. In Fabric Care, sales in 9 months were negative year-on-year. But in Q3, sales turned to positive growth due to the contribution by the revamp of [indiscernible] in September. As a result, real change, excluding the impact of brand transfers was plus 2.4%.

This is for more detailed information, showing changes in January to June, and July to September separately. In Oral Healthcare, we launched new products in September. Sales increased by 8.2% in Q3 with the contribution of shipment upon the launch, but the further shift to high value-added products at the over-the-counter sales expected going forward. Fabric care turned to sales increase in Q3, so sales continued to decrease in the first half due to initiatives to improve profitability through price competition control and price adjustment.

Next, I explain overseas business results by region. In Southeast and South Asia, sales and profit increased year-on-year, and operating income margin increased 1.3 percentage points. Despite sluggish business in Thailand due to the political station deterioration with neighboring countries from July to September, business performed well in Malaysia, and the consolidation of a highly profitable subsidiary in Vietnam also contributed. On the other hand, in Northeast Asia, sales and profit decreased in key countries of China and South Korea, and we are proceeding with the strategic transformation. I'll elaborate on this later.

Status of business in 4 key countries, as I already covered this, let me skip the explanation.

Next, for the current ongoing initiatives, I'll talk about key measures. First, this is about the profit structure reforms in Japan. I have been talking about the steady progress of the structure reform before. And the progress in KPIs are listed here. Upward price revisions and shift to high value-added products resulted in JPY 2.3 billion, and SKU reduction is almost in line with the annual target in terms of improvement in efficiency. Competition-related expenses almost fell to the midterm plan target compared to FY 2023, as we optimize the sales promotion cost which has expanded to respond to price competition for a long period.

Going forward, while we continue to improve efficiency, we will create a cycle of proactive growth investment in the necessary brands and areas in high value-added products. As a first step of the products for forecast investment, we launched new products in Q3 onwards, and they were off to a good start. In Oral Healthcare segment, we launched the [ toothpaste ], our highest price point and its initial shipment was 1.5x higher than our plan. And we confirmed it captured inbound demand as well. It has proven to be successful launch in store sales. In Q4, as shown in the bottom right part, we launched new toothpaste with new technologies of -- to control microflora for dental clinic route to accelerate the growth of this entire segment.

In Fabric Care segment, Sales of NANOX [ 1 ], which was revamped in Q3 increased substantially. In-store turnover has been robust. And it was reported that in some retail chains, its point of sales results exceeded those of competitors. In October, we revamped [ Aroma reach ] updating communications, hiring new talent and promoting the advertising investment, much higher than the level in the previous year. Next, I will explain the overseas business with conditions of key countries and fine-tuning of strategies.

Let me start with Southeast Asia. Beginning from Malaysia on the right. Favorable performance continued there. Local brand in Oral Healthcare has been making firm progress and the fabric data, which has been challenging for long, liquid laundry detergent continued to increase sales, sustaining robustness. In Thailand, shown on the left, mainstay fabric detergent suffered temporary by the geopolitical conditions deterioration in neighboring countries. Partner care category, including body soap and oral health care products continue to grow. We are strengthening Oral Healthcare strategy, our focus area in particular. Let me elaborate on the next slide.

In Thailand, resources have tended to be concentrated too much on orderly detergents, which have a strong market position. But in response to the recent situation, we have begun to strengthen our Oral Healthcare business. We are actually reevaluating our brands and redesigning and promoting sales strategies for each brand according to its role and target, as well as strength segregation of distribution areas, business categories, prices and others. We will share our strategies and goals with our joint venture partner distributors and develop detailed marketing activities. For example, to promote the traditional trade in the rural areas and to increase the distribution rate of this brand to urban convenience stores.

Next is the situation in the Northeast Asia. On the right, South Korea. Although affected by the decline in exports to neighboring countries, there are signs of recovery in recent months. In South Korea, hand soaps and the [indiscernible] detergents are performing well, and we will strive to develop [indiscernible] and other products in addition to recovering our export business.

China on the left. As the economy stagnates, prices are polarizing and the downtrading is progressing. And prices of our mainstay and mid-priced [indiscernible] products have fallen sharply, leading us to shift our strategy to cultivate brands in the higher price range area. Allow me to add more information about China.

As for [indiscernible], there is a balance with the facility in operation and our policy is to maintain this balance while ensuring operations without pursuing excessive sales. At the same time, we are building on this [indiscernible] handling in order to cultivate higher-priced brands such as CLINICA, SYSTEMA and DENT. This year, we are developing and launching new products by utilizing our research issues in Shanghai. And we are intensively managing the distribution of these high-priced brands to nurture them. We have been focusing on the double-digit growth in our China business that we have decided that it is not advisable to pursue volume any further. And we are now selling the business toward renewed growth while raising margins.

[indiscernible] I would like to discuss this year's full year forecast. The annual consolidated earnings forecast remains unchanged from the beginning of the year. Although the overseas business environment remains challenging, we will continue to flexibly invest expenses in growth in Q4, in order to cover our overall expenses and achieve our annual goals announced.

Finally, I would like to share with you my perception of the [indiscernible] from long-term perspectives and then discuss the progress we have made in planting disease for growth in the next fiscal year and beyond. There are 3 major issues to be addressed in the current medium-term management plan, namely strengthening profitability.

First, in this fiscal year, we have focused upon reforming the profit structure of our domestic general consumer goods business. We believe that we have achieved some success in this area, and we will accelerate in this process from next year onwards. On the other hand, from the viewpoint of restoring growth potential, we also began investing in focused growth in Japan in the second half of this fiscal year. On the other hand, we believe that the macro environment overseas has changed since the start of the medium-term management plan.

As for tuning our [indiscernible] for existing countries, as I explained at this point earlier, we believe it is going to be important for us to ensure the growth for the next year in the new countries of Vietnam, Bangladesh, where we entered in the first stage. In terms of management base reforms in the bottom, we have been working to strengthen governance this year. And from next year onward, we intend to make major changes to our internal management processes and systems in order to accelerate the promotion of our strategies. I would like to explain about these reforms, especially in the areas of overseas operations and the management base reforms.

I will explain the specifics on the future initiatives in Vietnam and Bangladesh overseas. For Vietnam, it is a company with a profitable business model based on expert recommendations with a focus on the pharmaceuticals. Now that it has become a wholly owned subsidiary, we intend to expand our business by adding our personal care field to this model. Specifically, the company has already introduced a skin care brand this year, which intends to be nurtured. Next year, we are planning to enter the market for high-performance Oral Healthcare.

We'd like to apply the customer relationship management. We have developed for dental clinics in Japan to Vietnam and China, and expand our business while maintaining high profitability. We believe that Vietnam has the potential to become a model case for the pharmaceutical business throughout Asia in the future as well as a base for supplying products. We intend to expand our business model, which is one of our strengths.

Bangladesh, on the other hand, after investing in the company, we have started a small-scale production of kitchen detergent and tooth brushes on an outsourced basis. And this year, the factory under construction will be completed. We'll like to take this opportunity to expand and improve our sales structure and the channels, and move into full-scale business expansion next year. In addition, Bangladesh has a young population, and we are planning to develop the KODOMO brand, which has been deployed mainly in Southeast Asia, for the baby care market, which has growth potential.

In addition to these 2 countries, we are also in the process of starting the incorporation of new resources and the reorganization of our portfolio. And we believe that next year will be the climax of our medium-term business plan in terms of growth. In order to speed up the implementation of this growth strategy, we plan to make major changes to our internal management processes and structures starting next year.

Until now, we have had a [indiscernible] organization of functional divisions in which organizations by the function worked together in order to promote the overall business. But it is taking too much time in order to respond to issues and the changes in circumstances, and responsibilities and authority tend to be unclear. In order to speed up our business and strengthen our ability to execute, we'd like to switch from an organizational structure based on horizontal functional headquarters to our vertical structure based on value chain starting next year. And we want broadly transfer authority to the top management of the business.

We'd like to speed [indiscernible] process by simplifying the reporting line and utilizing DX in order to increase our [indiscernible] our growth goals. We plan to announce the specific details of the reorganization at the end of this month. In addition to achieving the current annual performance goals, we will attend [indiscernible] and make preparations for the second half of the midterm business plan, and we will bring the results of these efforts to fruition in the next fiscal year and beyond.

That's all for our presentation. Thank you [indiscernible] for your kind attention.

Now we will take questions. Ms. Kuwahara, over to you.

This is Kuwahara from JPMorgan Securities. Let me ask two questions. I refer to Page 6 for core operating income changes in 3 quarters. Thank you for disclosing 3 months numbers as well, which are very useful. You said earlier that you'll be able to achieve the full year target as a whole. But would you comment on the plus and minus factors, if any?

Shift to high added value products and upward price revisions impact was JPY 1 billion in Q3, then it will be JPY 1.2 billion in Q4. You said that you have upward price revision in mid-priced products in Oral Healthcare in Q4. So please let me know the colors and the response.

And next year and beyond with cost increases of many items, will consumers be able to accept price revisions. Do you have any strategies for this or anything you have to revise? Let me know the price strategy for next year, please?

Thank you. Yes, there is some plus and minus compared to our initial forecast. Overseas volume impact, might be slightly smaller than our plan. And that will be offset by the adjustment of SG&A. And we'd like to achieve the target at least.

Regarding the shift to higher added value products and upward price revisions, a toothpaste in the mid-price range was slightly short of the target. But up to the Q3, we have been taking the initiatives for cost pass-through to price. And we expect that the effects will be materialized in Q4 beyond. So we think we'll be able to achieve the full year target.

Regarding the price hike in the next year and beyond. We assume that the raw material cost inflation will continue by 1% or 2% per year going forward. And we will offset this by cost reduction and cost pass-through to prices. For the improvement of profitability, we shift to high-end products to add value. And this is our basic policy.

Understood. It seems that I have asked two questions. So let me ask a follow-up question. Overseas business has some uncertainties for growth, but you're going to offset by cost management and will achieve the target. Looking at the next year and beyond, you said earlier that you are making investment for growth in Japan. So can we take that, you'll be in the phase to accelerate the profit improvement and growth in Japan?

Exactly. It is getting difficult to expect high growth in overseas business as a whole. So we'd like to develop with a policy of profitable growth. While in Japan, competition-related expenses almost came to the level of the target in the midterm plan. So as a basic policy, we continue to improve the efficiency of sales promotion cost and earnings generated will be spent on the investment for advertisement and growth.

Next, Mr. Hirozumi, over to you.

This is Hirozumi from Daiwa Securities. First question is about the overseas business. Numbers of overseas business last year were restated. So it is hard to understand the numbers and the [ growth ]. Profit in overseas business for 3 months is JPY 2.4 billion. Am I correct? That is up by 30%. Is that correct? Sales are JPY 40.3 billion, up by 3% and the core operating income is JPY 2.4 billion, up by 30%. How do you assess this?

For example, profitability of 6% looks good at the glance, but there were changes in the strategy and sales in China might have been weak. So let me know how I should see overseas business? Relating to this, I'd like to know the level of full year profit of overseas business. This is my first question.

It may be a qualitative comment, but I do not think that profitability is sufficient. If we stick to growth, it might lead to profitability risk. So we are fine-tuning strategies to sustain or increase profitability. And Vietnam business is highly profitable by its business mix, or segment mix. So by promoting the business, we made the profitability of overseas business close to that business in Japan.

Numbers of last year were restated, right. Based on the previous numbers, core operating e-com overseas business was JPY 10.2 billion. Core operating income of the overseas business for the full year in the last year was JPY 6.5 billion. According to the [indiscernible] earnings report, it was originally JPY 10.1 billion. This is before the segment change -- before segment change rate. So this year, based on the momentum up to Q3, can we expect it to be over JPY 65 billion, it will exceed JPY 6.5 billion. As we expect the profit growth year-on-year in Q4 as well, the range of profit growth will be sustained.

I see. In overseas business, with change in strategies, has happened in the first half and this time, there were points which were not described in the midterm plan. So how shall we expect to see in the overseas business we may expect the contribution by Vietnam or China may decline. So what expectations and concerns shall we have in overseas business?

Rather than business scale expansion through quantitative expansion and profit growth, we will achieve a little conservative growth with improved profitability. That said, we are considering additional measures consistently. We are exploring opportunities to expand into other businesses in Vietnam and expanding into other countries. So when we disclose them, you know that we will fill the gap.

Allow me to ask another follow-up question. I'm considering 4 key countries in Thailand, Malaysia, China and South Korea. Are there growth in sales below your expectation?

Correct.

Do you catch up in terms of profit?

Yes. As we shifted to policy, not the accessory person sales, we are catching up in profit.

I see. Second question. This is my last question. When management makes execution changes, what to change? I refer to Page 24 with a qualitative description. With this change, what should be visible for us?

Well, if we try to talk about the specific numbers, this can be hoped to be qualitative description. As a President, Takemori has been saying since his appointment as a President, to become the company that proactively moves. And to make it happen, we are trying to change authority, process and the system for decision-making in the company.

Do you mean that it will improve results?

Of course. We are aiming for it.

Ms. Kawamoto over to you.

This is Kawamoto of Jefferies Securities. I also would like to ask about overseas business. Let me know the growth rate in local currency base for 3 months in Q3. And is the contribution by Vietnam included in Southeast Asia? I refer to the 3 months overseas business results in Appendix, showing [indiscernible] Asia breakdown. How much was Vietnam contribution in this? And I'd like to know how we will develop in the next year and beyond as well as its position in the market?

We are not disclosing the information by country. But Malaysia, sales grew close to 10%. However, sales in Thailand, China and South Korea decreased in Q3. Vietnam is included in Southeast and South Asia.

I see. How was the magnitude of decline in Thailand, China and South Korea? Were they single digit or double digit?

In Thailand and China, sales decreased by about 10%, roughly speaking. In South Korea, they dropped about 5%.

I see you explained many initiatives. But according to the numbers in Q3, the effects are not clearly seen yet. Looking at the page of the market trend. In later part, in Thailand, laundry, detergent year-on-year plus is sustained. So how should we see the gap? How can I expect for the Q4?

In the short run, recovery in sales will be rather difficult to achieve. So we will strive to secure profit. In Thailand, China and South Korea, we began to see the sign of recovery in South Korea, and we expect to see a recovery in Q4. In Thailand, we will not pursue laundry, detergent much. But as I said earlier, we'd like to work on Oral Healthcare gain to secure profit.

Understood Talking about the sustainability of margin in overseas business. Margin in Q3 in overseas business was 5.3%. So to which level, how and when are you going to increase margin? Please share with us some specific initiatives to raise margin.

Are you talking about medium-term measures? Well, next year, we'll continue the strategy to pursue profit. Net sales. Next year and 2 years from now, we'd like to achieve higher profit growth than sales growth in overseas business as well. So we are fine-tuning our strategy to increase profit.

Next, Mr. Miyazaki, over to you.

This is Miyazaki from Goldman Sachs. First, I have a question on Page 6. What is prominent in 3 months is plus JPY 0.6 billion in quantitative effects, product mix and others, and minus JPY 1.2 billion in changes in other expenses. Did Oral Care contribute to quantitative effects? And in changes in other expenses, what changed in Q3 compared to the first half? First, please let me know these points.

The increase and decrease in sales, and about half of the increase and decrease in SG&A, and other expenses in the July through September period are attributable to the Vietnam operations. Again, the increase in gross profit will be due to the addition of sales in Vietnam and an increase in G&A expenses in Vietnam.

Yes, there are other factors. I said about [ 1.5 ]. But actually, it is bigger than [indiscernible] when it comes to actually the number in the gross profit in Vietnam.

I understood. Thank you very much. So with this new pharmaceutical [indiscernible] is completed, costs and other [indiscernible] details will not be much reflected in this graph. It is actually a minus JPY 6 million of this, the quantity effect completion in change and others. It also includes an impact an increase in the depreciation of the [ Odawara ] pharmaceutical plant. Thus, in the second place from the left, right?

Yes. The amortization amount is still because just because just a proportion of the facilities became operational in September.

I see now understood it. Thank you indeed. Also, the second point is concerning the pharmaceuticals again. One thing I'd now like to know is what was the inbound numbers? Also, I don't think on the sales of this pharmaceuticals will increase because of the start-up of this new plant. But looking just at Q3, I still think revenue has been declining. If I'm not wrong, could you tell me how you're going to actually address this situation, please?

As for inbound distributions, we estimate that the profit was JPY 1.9 billion during the period from July to September. And therefore, we estimate JPY 5.5 billion for January to September. Last year, we told you that the annual amount was JPY 7 billion. So yes, JPY 7 billion, and so on we think the annual amount will be slightly higher than that.

If I may on pharmaceuticals [indiscernible] still probably around 5%. If you look at Q3, I think revenue is down. Can you give us some background on this, and whether it will increase for the next fiscal year or not?

The pharmaceutical is the most generic type of [indiscernible] [ analgesic antipyretic ] revised the price of [indiscernible]. We had a very large rebate portion. So we revised the deal and lowered the shipping amount. We've reduced our shipment volume and cut back on rebates. And accordingly, it amounted to a price increase. A slight decline in volume, combined with lower unit shipment prices has resulted in decline sales. Overall, we believe now we can make a full circle next year by shifting sales to premium items.

Next, I'd like to have Ms. Miyasako.

Yes, this is Miyasako from Mizuho Securities. My first question, I would like to ask about the new products. On Slide 14, I think you mentioned earlier that the store fronts are doing okay, or doing well. But I wonder if the new products in Q4 are also included in Q3 as initial shipments?

As you see here, the new products actually were launched on September 24. So at this point in mind, may I remind you that Q3 [indiscernible] just include the very first shipments.

You're talking about new products in the Q4, right?

Well, I mean, [indiscernible] that new products of Q4 are going to be in Q4. They are not part of the Q3 numbers.

I see then the numbers for Q3 [indiscernible] toothpaste was good and also the fact that it seems to have come back, except for the pharmaceuticals. Is something that is going to -- likely to continue in Q4 based on the [indiscernible] in the stores?

This new drug and product rather had a good response in the second half of the year. Can you actually expand on the balance between profit and the sales domestic market?

Regarding new oral health care products. Since these are not improvements, but new launches. With this point in mind, the first shipment will be stock by wholesalers and distributors. So the first shipment will be fairly large. So this is going to be a very high growth rate. That's in the background.

However, since the turnover at the stores and after delivery is also higher than we had expected, we expect that sales for the fourth quarter will also be driven.

You mentioned that NANOX was also good in some places. The stations in stores?

Actually, our overall performance was good. And even though actually compared with the major competitors, actually, we enjoyed a higher performance. Well, this is a part of [ spot ] information we have received. Well, actually, we have already launched -- NANOX [indiscernible] standard. And this has been actually replaced within cleaning power plus that we are now seeing. So this has given us [indiscernible] results.

I see. Then I guess the overall new products are getting a pretty good response?

What you said is right. We believe that the issue here is going to be how, now, we can actually maintain this kind of [indiscernible] in terms of investment and [indiscernible] products. This is going to be a quite important issue for us to keep an eye on.

How much of the initial shipment of toothpaste should be in Q3?

Probably, I would say, perhaps 3% to 4% of the 8.2% in July to September Y-o-Y ratio. That's the assumption we are making now.

I see. Yes, understood. As for the next year, can we expect that attractive new products will be launched starting from the first half? And that will be continuing into the second half?

Yes, that is going to be our intention. Please stay tuned.

Thank you indeed. I have a question concerning over sales of the operations. You're talking about the margin improvement, including China. You seem to be trying new initiatives. Could you expand on the specific ways how you're planning to increase the margin without Vietnam, for this fourth quarter? And actually, the margin probably will not come up but improve. How do you feel about it?

Well, you're right. The overall margin will increase simply because of the addition of Vietnam. But we would like to increase the overall margin by simply selling products with higher gross margin in China and elsewhere. So this is going to be one of the ideas of why and how we'd like to actually increase the overall margin.

At one time, we were diversifying all our business to include detergents and pet care and products, in addition to Oral Healthcare products. But we decided to discontinue such unprofitable products and concentrate on sales promotion of high-margin products while ensuring overall profitability.

Does that mean that you don't have to spend that much money in order to sell something with high margin?

Well, let me put this way. We expect to spend a certain amount of money on sales promotions and storefront merchandising. But since we are focusing on products with a low cost pricing ratio, we believe we can secure a higher overall margin than we have in the past.

Now I would like to have Ms. Yamanaka.

This is Yamanaka from SMBC Nikko Securities. I would like to ask you, actually, in a nutshell, about JPY 1.7 billion in terms of the business, the profit in the first half. And actually JPY 2 billion just [indiscernible] the second quarter. But on the cumulative basis for the Q3, what is the progress you're making in terms of profit? And also vis-a-vis the midterm business plan compared with actually the first half, are you making progress? Or are you behind the schedule? You don't have to give me a quantitative explanation.

Yes, [indiscernible] actually, we are making actual profit up until the second quarter. And without [indiscernible] and actually, we have become quite an aggressive in making investments in the third quarter. With that, thinking on how we are in line with our expectations in terms of profit.

How about vis-a-vis the midterm business plan?

Well, all this [indiscernible] is going to be the efficiency of the sales promotion expenses. I think we are making much more on the progress than we had expected. So with this point in mind, actually, advertisement and others, investments actually are going to be further added. I think we are having more capacity moving into that direction.

In regard to the existing business, I think we are actually in line within our plans.

In regard to the public new products, you try to reduce the investment, but still you enjoy really good results. What's the difference between what you have done here? And also the activities in the past?

Well, Actually, we try to reduce the unprofitable SKUs and also the general purpose and products and [indiscernible] also try to be reduced as much as possible. And in regards to NANOX [indiscernible] of course, within our [indiscernible], because actually, the profit level is quite high. So by selling [ one ], we should be able to enjoy the [indiscernible] profit. I think we're able to actually create such an overall business structure.

Understood. If I would now like to ask the last question. In regards to the value chain aspects, any collaborations among the divisions? And also the efforts to try to reduce the indirect cost and also try to manage and reduce the personnel cost? But that we can expect to see the improvement in actually reducing the effects on the cost or you keep an eye on more on the growth side?

Well, what you said is right. Actually, actually on execution and also our judgment, I think that will be quite important going forward. But so far, for example, R&D and also in production, and distribution and others. Actually, we had those indirect functions and operations. And actually, we put them, actually, vertically under the leadership of the business owners. Going through that process on the mid- to long-term basis, we should be able to avoid overlapped in operations and others. I think we can have such expectation.

And going forward, of course, the population is aging, I think in at was difficult for us to find the right amount of the resources. So I think those efforts are going to be beneficial to us on the midterm and long-term basis.

Time running out. So this is the last question, I'd like to ask [indiscernible] raise your questions.

This is [indiscernible] from [ Nomura Securities ]. Yes, I have one question. The target of the current midterm plan. And actually, looking at top line overseas actually there seem to some issues and challenges. And with that point in mind, corporate profit targets. If I'm not wrong, probably you need to naturally revise that corporate profit target. Am I right saying that?

And also in terms of profitability. I think you can on a higher level of profitability. So the higher profit is going to help you to make up for whatever the loss you may have. So these are the areas [indiscernible] upon.

Actually, 2027 goal, actually 10% overseas growth, I think is going to be one of the challenges we have to address. In [indiscernible] performance and the profit, I think we are right on line. So we would like to make sure that we can actually reach that the goal. And in terms of overseas growth and Oral Healthcare growth, as I mentioned earlier, we are considering further portfolio changes. And if these are realized, there is going to be a possibility that we'll be able to go even further.

If this does not come to fruition, probably we have to make change during, and before, FY 2027. I think we have to make an adjustment at 1 point. At any way, we would like to go for our goal I've just explained.

Understood. Well, you seem to be rather successful in the Japanese market. But in times to the overseas markets, compared to [indiscernible] the goals of the midterm management plan? If you can grow on the Oral side, that is going to actually give you more profit. And with increase in profit, you should be able to actually make up for the loss in sales.

What you said is right. In terms of the organic part, existing business, or current business, what you said is right.

We do appreciate for the many questions we have received from you since we are somewhat behind in the schedule. Now I would like to conclude Lion Corporation's financial results briefing. Again, I'd like to thank you for your precious time. Thank you.

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

This is Takemori, President and CEO of the company. Thank you indeed for your precious time today. Now let us begin.

Today, now I would like to walk you through these topics. You may have your perception about our company that we are prioritizing profit over growth and focusing on cost cutting. And can the company truly achieve sustainable and profitable growth. I believe you would like to confirm these points. So today, I would like to address those concerns as I go through my presentation today.

Let me begin with our consolidated results for the first half of the fiscal year. To summarize our performance, we achieved year-on-year revenue growth while also improving profitability. In particular, while profit significantly exceeded our initial forecast, driven by steady progress in our structural reform initiatives that have strengthened our earnings base. I want to emphasize that this improvement is not merely a result of cost reductions. Rather, it reflects our delivered focus on driving high value-added initiatives alongside the strategic and the positive based investment in competitive capabilities. As noted at the bottom of the slide, we have not revised our full year forecast we announced in the beginning of the fiscal year. By executing the key initiatives outlined for the second half, we believe both revenue and profit targets remain well within our reach.

Let me now walk you through our key financial indicators. Net sales, JPY 199.4 billion, up JPY 0.82 billion or 0.4% year-on-year. Excluding exchange rate fluctuation impact, it would become a 0.3% increase. Excluding the impact of the transfer of the certain pharmaceuticals brands that took place last year, revenue rose in substance by 1.1%.

Next, core operating income came to JPY 12.6 billion, a significant year-on-year increase of JPY 3.08 billion, reflecting progress in strengthening our earnings structure. As for profit attributable to owners of the parent, we recorded a decrease of JPY 0.32 billion compared to the same period last year. This decline is mainly due to the absence of onetime gain from the brand transfer booked last year and we believe it is a temporary factor. EBITDA was JPY 21.4 billion, up JPY 2.7 billion year-on-year. EBITDA margin, one of the most important indicators for demonstrated earnings power and profit growth rose by 1.3 percentage points to 10.7%.

Now I will explain the factors behind the changes in core operating income. I will explain those 2 points, respectively, blue arrows left gross profit, factors and orange arrows right, SG&A, respectively. Allow me to start with the gross profit side on the left side. Overall, gross profit contributed JPY 0.2 billion increase. The first factor on the far left is our continued focus on high value-added process and appropriate pricing, including price increase. This contributed positive JPY 1.3 billion. Mix volume and product mix effects yielded a JPY 0.4 billion gain in sales. However, these were offset by negative impacts such as the brand transfer and the changes in the segment commission resulted in a net negative impact of JPY 1.2 billion. Raw material costs had a negative JPY 0.8 billion impact but were largely absorbed by JPY 0.9 billion in cost reduction, bringing the gross profit total to a net positive impact of JPY 0.2 billion.

Now turning to the right SG&A. SG&A resulted in a JPY 2.8 billion profit increase. Let me emphasize again, this is not mainly the result of cost-cutting efforts. Competitive spending was strategically and efficiently allocated both in Japan and overseas, contributing an improvement of JPY 2.5 billion. Sales promotion costs were controlled to avoid excessive competition, and we are advancing additional shift in advertising from traditional mass media.

Additionally, as part of our structural reforms, we streamlined SKUs and reduced inventory, which enabled us to cut a logistics cost by approximately JPY 0.6 billion. This is a clear sign that our efforts to reform the profit structure are bearing fruit. As a result, consolidated profit increased significantly from JPY 9.5 billion last year, far left to JPY 12.6 billion this year, far right, an increase of approximately JPY 3 billion.

Now I would like to briefly touch upon the changes in the profit structure between the first quarter January through March, and the second quarter, April to June as a follow-up to the previous slide on the first half profit factors. This slide is one of the key slides that illustrates our performance during the first half. The main key takeaway message I want to convey is this. Our profit-generating ability steadily improved over time from January through March to April through June.

Let me particularly expand on the blue bar representing gross profit factors. In the first quarter, gross profit had a negative impact of JPY 0.2 billion. But in the second quarter, this reverse to a positive impact of JPY 0.4 billion. This is a JPY 0.6 billion improvement quarter-over-quarter. This improvement was driven by the launch of new high value-added products and expansion of high-profit business areas, which collectively led to an increase in the gross margin.

Furthermore, the effects of value-added pricing strategies are progressing steadily toward our full target of JPY 3.5 billion. we targeted JPY 1 billion but we exceeded to JPY 1.3 billion in the first half.

Next, the orange bar, SG&A factors. In the second quarter, competitive spending continued to contribute to JPY 0.5 billion increase in the profit. But at the same time, we internally invested in key strategic areas such as oral healthcare. As a result, this reduced the profit contribution by JPY 1.5 billion, reflecting increased competitive investment in the second quarter, April through June. I hope this clearly demonstrates that we are not simply chasing short-term profit but rather making a strategic investment to enable sustainable long-term growth.

In summary, over the course of the first half, we believe we have significantly strengthened our fundamental ability to generate profit. As a result of those efforts, the segment performance for the second quarter is shown here. In the Consumer Products business, revenue declined slightly by 0.4% year-on-year. However, as I mentioned at this point earlier, excluding the impact of the brand transfer, the actual increase was positive 0.8%, in line with our expectations. Thanks to the structural reforms, we are making.

Core operating income increased significantly to JPY 3.14 billion, representing a growth of more than 52%. Overseas business, external sales exceeded the previous year's level, and the core operating income reached JPY 0.2 billion with profit margins also improving. As for the Industrial Products business, revenue increased due to solid performance in rubber additives, among others. However, due to the changes in product mix, profit declined. That said, the margin improved compared to the first quarter, January through March.

This slide shows the sales breakdown by category within the Consumer Products business. As I have been already emphasizing this I will say again, although the total revenue declined by 0.4% year-on-year, excluding the impact of the brand transfer actual sales rose by 0.8% as shown in the lower right corner. All healthcare categories, which we position as the most important segment in our segment sales strategy, grew by 2.7%. We are seeing solid growth in categories we aim to expand such as CLINICA PRO, our premium toothpaste line as well as our products sold through these dental clinics. Looking ahead to the second half and towards 2026 and 2027, we plan to implement product initiatives, leveraging our unique technologies.

On the other hand, the Fabric Care and living care recorded a decline or only a modest growth in sales. However, initiatives to improve profitability are steadily progressing. Core operating income margins and EBITDA margins have improved. Earlier, I mentioned that business profit in the Consumer Products segment increased significantly to over JPY 3.1 billion. The category that contributed most to this growth was actually Fabric Care. As I have stated before, we are focusing our structural reform efforts with the home care business during the second stage. I would like to emphasize that this strategic direction is sound, and we are making steady progress so far.

This slide provides a qualitative summary of each business segment, including the points I have just mentioned. I won't go into all the details but let me highlight a few key takeaways. At the top, oral healthcare. You may notice that growth slowed from Q1 to Q2. However, we view this as a temporary reduction. Products with high added value such as CLINICA PRO, toothpaste and continuing to perform well. In the Beauty Care segment, we saw significant growth in high value-added products, especially the KireiKirei medicated hand conditioning soap, which nearly doubled in sales compared to the same period last year.

The Fabric Care segment remains in negative territory but the decline is narrowing. Although we face challenges in Fabric softness, the liquid detergent NANOX one is performing strongly. Most, importantly through the efficient use of promotional and competitive spending, profitability has improved significantly.

Next, let me turn to our Overseas business, beginning with the Southeast and South Asia. Both Thailand and Malaysia recorded sales and profit growth. Net sales increased by 5.4% year-on-year and 1.4% excluding the effects of exchange rate fluctuations. Core operating income reached approximately JPY 560 million, representing a significant 26.1% increase. Profitable growth is continuing in the Southeast and the South Asian markets. In contrast, Northeast Asia faced some challenges. In particular, South Korea recorded a sharp decline compared to the same period last year. Overall sales in the region decreased by 8.4% or 3.5%, excluding the effects of exchange rate fluctuations and core operating income also declined.

Looking at Overseas business as a whole, net sales fell 0.6% but external sales rose by 1.5%. Core operating income increased by JPY 200 million or up 6.9% year-on-year, and we believe we are successfully achieving both growth and profitability.

This slide outlines the performance of our 4 major overseas markets. In Thailand, body soaps and liquid detergents continued to perform well, resulting in sales growth. In Malaysia, toothpaste and liquid detergents supported by overall market growth also saw solid gains. In China, despite a variety of challenging economic conditions, high value-added products achieved significant sales growth. Specifically, although volume growth slowed for mass market products like White & White toothpaste, mainly due to our strategic decision to maintain pricing, premium brands such as CLINICA and SYSTEMA achieved double-digit growth, significantly exceeding the previous year's performance. I will provide more details on this later but we believe these results are very much in line with our strategic intentions.

Let me now move on to our full year consolidated earnings forecast for the current fiscal year. As previously mentioned, there are no changes as for our full year earnings forecast announced at the beginning of the year. As we have communicated before, the impact of the full acquisition of Merap Lion in Vietnam has already been factored into the initial forecast.

Shareholder returns. As you see here, there are no changes as for our shareholder return policy from what we announced at the beginning of the year. This slide shows the updated breakdown of factors affecting full year business profit, taking into account the first half results as well as reflecting adjustments to the second half outlook. Compared to our initial assumptions, the negative impact from raw material cost is expected to ease somewhat in the second half. At the same time, we plan to increase investment in SG&A by JPY 2 billion with a focus on competitive spending to drive growth.

Following the review of the first half, I would like to explain key measures for the second half and the probability to achieve the guidance. Looking back the first half, we made steady progress toward the business structure with higher profitability. In Japan, we made progress in profit structure reforms and overseas personal care field, including oral healthcare expanded. On the other hand, return to top line growth continues to be our challenge.

In the second half, keeping tight rein on structural reform, we aim to return to top line growth trajectory through product actions in focus areas and focused brands as well as strategically skewed allocation of marketing resources. Let me explain how we do this.

In domestic oral healthcare category, the response to growing high-end products in toothpaste market has been our challenge. For this, we launched the top class new products in Dent Health brand in September and strive to grow it. We'd like to demonstrate our strength in gum disease category, which accounts for 70% of high-end product market. For further steps, we will leverage new technology that we have been developing over years.

We launched a new product that uses new technology of microbiome control through dental clinics in the second half of the year. Oral microbiome control may remind you of intestinal flora. As we increase intestinal good bacteria, we propose to do the similar things orally. Next year onwards, we consider delivering the high-end oral healthcare products, taking advantage of this technology on commercial retail routes as well. We continue to grow in 2026 and '27 using them.

In toothbrush category, imminent challenge is the response to declining purchases to stage consumer campaigns to promote regular replacement, we will spend additional competition-related expenses in the second half, as mentioned earlier. In Fabric Care and Living Care category, fabric softener struggled in Fabric Care category, while liquid type concentrated detergent NANOX one grew as mentioned earlier. In the second half, high added value NANOX one will be enhanced and we revamp fabric softener, which slowed before with Aroma Rich.

In Living Care category, antibacterial and deodorizing fogger for toilet with the proposal of new habit has been performed well in the first half. In the second half, we will concentrate management resources on top priority brands and launch new products to expand no scrub category in Look Plus. We will steadily grow highly profitable new products and achieve steady progress.

Overseas, in Southeast and South Asia, securing profitability in major laundry detergent will strengthen oral healthcare products and its marketing actions in the second half. In Thailand, we will make focused investment into SYSTEMA and SALZ. And in Malaysia, we will continue to work on growing strong local brand, Fresh & White.

In Vietnam, we introduced new skin care products to enter the beauty care category. In Northeast Asia, there was a challenge in the growth of entire top line despite the strong growth in area where growth was expected. In China, we accelerate growing high added value products and in offline channel or for physical stores, we will expand distribution with a focus on key management chains. I assume one of your key concerns is the growth in China. Amid sluggish economy, market is polarized also in our segment, and we focus management resources on high added value products for high-income customers with strong consumption appetite.

For low to mid-end product, we prioritize maintaining brand value and securing profit. High-end products, CLINICA and SYSTEMA achieved much higher growth than the previous year, as mentioned earlier. We expand them in offline distribution as well to achieve profitable growth. We expand the new brand DENT, brand for dental clinics that was launched in Q2, expanding them in e-commerce or for hypermarket. Enhancing relationship with dentists will increase distribution to offline channels. We have increased the distribution to offline channel to 900 stores that understand our price policy by the end of the first half in just 4 months, starting from scratch, and we reached 900 stores in 4 months. By the end of this fiscal year, we aim to achieve 3,000 store. With this, we will build the base for high-end products of Clinica, SYSTEMA and DENT, and we'll be able to prominently recover sales in China.

Finally, let me touch upon progress of the second stage growth strategies briefly. This is how we will accelerate growth in oral healthcare as shown before. We have already taken initiatives to expand scope of provided value to expand target markets and to permeate more areas. Although it is just 6 months since the second stage started, specific initiatives in line with the strategy in each country and area have already started as shown on this slide. It may take some more time to blossom but the entire group will continue to work to strengthen and accelerate investment for our focus, the growth of our oral healthcare business. This is the financial forecast for the fiscal year, and it remains unchanged from the initial announcement.

This slide shows risks in achieving the full year target of FY 2025. Continued economic slowdown in China is one of the anticipated risks but let me touch on its impact on the consolidated results of Lion Group. In February this year, we expected 10% top line growth in China business. The results in the first half were a growth of close to 5%. It was due to intentional control, including the exploration of new channels, as mentioned, rather than the economic condition. If this growth of around 5% continues in the second half, the impact of this downside risk on consolidated sales is less than 1%. Therefore, we believe that the possible business risk in China can be fully absorbed and addressed in the entire group. Of course, we will manage to avoid such cases. But even if it happens, its impact on consolidated results will be minor.

This is the final slide to summarize the first half as present. Structural reform steadily progressed and the foundation for profitable growth was established in this first half. To be more specific, there are 2 factors. Against a committed target of key indicator, EBITDA margin to increase 3% to 5% in 2027 in Consumer Products, already increased by 2.3%. Looking at the key drivers, upward price revisions impact was JPY 1.3 billion against the first half target of JPY 1 billion, more efficient supply chain impact was JPY 0.6 billion and gross margin improved by 0.7 points. But they are only parts of the effects and the effects will be fully materialized in FY 2026 and '27. This is the first point.

Second, in Overseas business, profitable growth is steadily progressing, but still, we are midway. In this first half, we prioritized laying the ground in expanding oral healthcare in countries where we already have presence and growing business in Vietnam with consolidated subsidiary. From the second half this year to FY 2026, we materialize their effect. On the other hand, in the first half, I'm aware and regrettable that we could not win the prominent victory in the area where we should grow. In the second half, we will build on this foundation and develop it into a lean company by increasing investment in high added value fields and aim to achieve profitable top line growth.

In the next year onward, centering on oral healthcare, we will continue to focus on growth initiatives and aim to achieve the second stage management KPI.

With this, I conclude my presentation. Thank you for your attention.

We will now move on to the Q&A session.

This is Kuwahara from JPMorgan Securities. It was very compelling and left a strong impression. That said, I hope you won't mind if I ask a follow-up question. Could you once again summarize the main factors behind the upward revision of your core operating income in the first half? You mentioned that additional JPY 300 million came from higher value-added offerings, which I understand. However, I [ suspect ] that SG&A expense were lower than originally planned, perhaps due to sometime differences. That, to me, implies that those expenses will be incurred in the second half. I would appreciate if you could clarify that this is not simply a matter of delayed spending.

Also regarding the JPY 300 million from value-added products, can you specify where that came from? Which category or the region contributed to that? This value-added impact seems to be downgraded for the second half. Could you explain why?

Thank you, Ms. Kuwahara. I believe your question refers to Page 6 of the presentation materials covering the first half of the fiscal year. You are asking for a more detailed breakdown of the structure, especially from a numerical perspective. We'll first have Mr. Takeo, our Head of Finance, explain the figures, and then I will provide a summary.

This is Takeo from the Finance Department. Thank you indeed for your questions, Ms. Kuwahara. Regarding the profit increase in the first half, as you noted, the higher value-added offerings played a key role. On the left side of the graph, you can see that pricing from value-added initiatives contributed to a total of JPY 1.3 billion, which is JPY 300 million above our initial forecast of JPY 1 billion. This upside came primarily in the second quarter, driven by the new high value-added products launched in the Beauty Care and Living Care segments.

Did I answer your question so far?

Yes. Thank you. But the total upside was around JPY 1.6 billion, wasn't it? So I assume there must be other contributing factors beyond value-added pricing.

Yes. In addition to that, improvements in product mix due to an increased inbound demand for pharmaceutical products also contributed to gross profit.

So these 2 main factors, there are value-added pricing and the mix improvement in pharmaceuticals. Understood.

I would like to have Mr. Fukuda to actually share follow-up comments.

This is Fukuda. Thank you, indeed, Kuwahara-san. I will say that the overall upside in the first half came not only from the sales and the gross profit factors as Takeo mentioned but also from a greater-than-expected reduction in competitive spending. While some advertising expenses are planned to increase in the second half. In the first half, we were able to reduce the promotional and advertising costs without significantly affecting our sales. This cost efficiency, particularly within our home care business was a key initial step in our value-added strategy and worked quite well in our view. So these are points I just wanted to share with you. I hope you're with me.

We were able to actually enjoy good progress in terms of efficiencies and effectiveness. So in terms of actually SG&A and also the advertisement costs.

One follow-up question, if I may. In the second half, why is the projected impact from the value-add initiatives lower despite the success in the first half?

As for the second half of the fiscal year, we plan to continue making competitive investments to nurture certain areas selectively. So while we aim to pursue some interest and increase in sales, we are also mindful that if profit margins were to return to previous level, it will fit the purpose. Therefore, our approach is to maintain overall value add and profitability, while partially targeting sales growth. This is why we are revisiting how we structure things.

Next, I'd like to have Mr. Hirozumi.

This is Hirozumi from Daiwa Securities. Yes, I have just one question. I would like to confirm the situation in the overseas segment for the second quarter. Since your company changed the segmentation a bit earlier this year, it's been a bit difficult to read. My understanding is that the profit fell quite a bit over the 3 months of the second quarter, around 5% or so. Earlier, you mentioned Korea and China but frankly, the results were disappointing to me. So how should we view overseas sales going forward?

Also, could you comment on how core operating income is expected to trend in the overseas segment?

Thank you, Hirozumi-san. Your question is about how we view the top line and the profit in the overseas segment based on the first half results and looking into the second half and beyond, right?

Yes.

I'd like to have Mr. Suzuki, Executive Vice President, to respond to your question.

Thank you. This is Suzuki. Thank you again for your question, Hirozumi-san. One of our marketing and product strategies this year has been to sharpen our targeting. As mentioned earlier, we've been tailoring our approaches depending on the market situation. For example, in China, we focused on high value-added products like CLINICA and SYSTEMA. In Malaysia, we've concentrated on Fresh & White, targeting the Malay demographic. This kind of strategy, identifying the right growth segments and target customers is what drove our growth in the first half. That success has validated our approach. So we intend to expand and strengthen this targeted strategy in the second half as well.

In China, especially, as you know, the economy is not in a good shape, and there is a trend of downward consumption. As Mr. Takemori mentioned earlier, our White & White brand, which sits in the low to mid-price range will not be a growth driver in the second half as it wasn't in the first half either. Letting that brand slip into a negative spread would be risky as it would put us in direct competition with the countless local brands. These local competitors have also improved their quality considerably. So the Japanese product advantage we once had is now harder to leverage. Furthermore, with the prices falling rapidly, it is going to be quite difficult for us to secure a profit on our side.

Based on such analysis, we've chosen to focus our strategy where we can differentiate and maintain profitability. That's the direction we'd like to go for in the second half.

Let me clarify, and please correct me if I'm misunderstanding. But in the past, I believe you mentioned that China was the standout market where you were aiming for significant sales growth. Has your strategy shifted toward prioritizing profitability, not only in China but also in Japan and other Asian markets?

Well, before COVID, we were exploring major growth potential in China, driven by an expanding middle class and rising incomes. However, given the many changes since then and our current focus on profitable growth, we believe it is going to be necessary to shift to higher value-added products. So yes, this is going to be a strategic pivot.

I don't need the detailed breakdown but just one more thing. How do you see the sales in Northeast Asia, particularly in Korea going forward, please?

In Korea, one of the main reasons for the downturn in the first half was a decline in exports. Looking ahead to the second half, we are working on securing those exports again, including development of the third country export destinations and new markets. We made significant progress and have a clear direction. We plan to build on that going forward. As for the domestic market in Korea, we are aiming for increased sales of hand soap and capsule detergents, which we are currently focusing upon. We look forward to a rebound in the third quarter.

I'll have Fukuda provide some supplemental explanation.

This is Fukuda. Hirozumi-san, regarding China, at the time of the first quarter earnings announcement, I had said that we would return to the growth in the second quarter. Yes, I remember that. But as it turns out, that did not happen. What we are seeing is a sharper-than-expected polarization of consumption in China. Our mid-range product, White & White, which had been our core product, found itself caught in the middle and lost in the position in the market. Prices have begun to decline. If we try to grow sales with that, we would end up sacrificing profitability.

So we shifted our brand-building efforts to higher-priced segments. That's why the growth we had projected as double digits for the first half. Ultimately, it came in at 4.4%. I need to apologize for that. I have been accurately grasping the situation on the ground in real time. That's the background, if I may say so.

That was very clear.

May I add something else here, Hirozumi-san? This was a deliberate strategic decision. In China, the sales breakdown is roughly 30% for high-priced clinical, 30% for the SYSTEMA and 30% for mid-priced White & White. We determined that continuing to push White & White for long term, say, 2 or 3 more years will not lead us to sustainable growth. What we want is profitable, healthy growth. So we decided to prioritize expanding CLINICA, which is growing 130% and SYSTEMA growing nearly 110% along with DENT. These are the products that consumers in China appreciate and once through which we can also secure solid profitability, ultimately delivering value to all of you as well. I hope you understand that you are making such an adjustment.

Thank you for your understanding. Now I would like to move on to Yamanaka-san, please.

Yes. This is Yamanaka from SMBC Nikko Securities. Apologies for some technical question but could you provide details on the nonoperating income in the second half items outside of the business profit? I understand there will be a gain from the sale of the Reed business as well as the step-up gain from the Merap acquisition. Your guidance shows a JPY 5 billion gap between operating profit and the core operating income, which I assume is mostly the Merap gain. Will the gain from the REED sale be added on top of that.

Thank you, Yamanaka-san. I'll have Takeo from the acquisition to explain this matter.

This is Takeo. Thank you for your question, Yamanaka-san. As you noted, we had factored in a positive contribution to operating profit versus core operating income from the start of the year. And most of that is to come from the Merap acquisition gain. As for the sale of the REED business, as indicated in our press release, the impact on earnings will be minor. Of course, we'll recognize a gain on sale but the effect will be limited. I hope that clarifies these matters. Did I answer your question?

Will both of these be recorded in the third quarter?

The Merap gain is expected to be recognized in the third quarter. For REED, it depends on the closing timing. And at this point, we expect it to be in the fourth quarter.

Understand. Then I look forward to the JPY 5 billion plus a little extra.

Next, I'd like to have Ohana-san. Would you please go ahead?

This is Ohana from Nomura Securities. I would like to ask about your view on overseas business and the consolidated revenue overall. Based on your guidance, it seems overseas sales are projected to grow by around 9% in the second half. However, I got the impression from everyone's comments that you are no longer aiming for sales growth per se but rather focusing on delivering a solid profit and asking us to be satisfied with that kind of explanation. If that is the case, I'm wondering whether expectations for overseas revenue previously seen as the main driver for overall growth should now be revised downward. I wonder if you could share your thoughts in these regards.

Thank you, Ohana-san. I'll have Takeo explain the numbers in details. But first, allow me to address the bigger picture. Let me be clear here. We have absolutely no intention of sacrificing overseas growth in order to focus solely to profit. Overseas growth remains the key growth driver for the Lion Group. This has not changed. That said, depending on the situation in each country and the strategies that we pursue, the timing of growth may shift but our commitment to growth itself is unwavering.

This is a very important point I need to emphasize. If we subtract the first half results from the full year plan, there is going to be the remaining portion that needs to be achieved in the second half. That is going to be about 109% overseas.

Again, I would like to have Takeo-san to explain this matter.

As you pointed out, when we subtract the actual first half results from the full year overseas segment forecast published in the beginning of the year, the second half comes out to 109% year-on-year. One contributing factor is the consolidation of Merap Lion. Well, we have to refrain from disclosing specific numbers. We consider the size of Merap Lion sufficient to ensure we hit our originally forecasted full year overseas external revenue. If you look only at the existing countries, achieving the 9% growth might seem to be quite difficult. But we do believe that this is going to be good enough for us to go for the target we would like to achieve.

Of course, you knew that Merap will be consolidated. Weaker-than-expected performance in China and South Korea will be offset by Merap, Thailand and Malaysia. Is that your image?

As this is related to strategy, Vice President, Suzuki will take your question. Is it okay?

Yes, please.

Thank you for your question. One of the growth drivers in the second half and the next year is the growth in Vietnam. And in next year onward, also in China, we'd like to pursue double-digit growth. With the major brands of CLINICA, SYSTEMA and DENT, as shown here, centering on oral healthcare, we'd like to strengthen business. As for South Korea, as mentioned earlier, one of the bottlenecks is export, which is to recover from the second half. And in its domestic market with some growth drivers, we'd like to grow. So not only by Merap but including China as well and putting focus on oral healthcare, we'd like to expand growth in the next year onward.

This is Takemori. I'd like to add a comment. On this slide, I said earlier that we would expand distribution to stores who understand our policy. It is same in Thailand and Malaysia. We continue to work with JV partners. But in this first half, we learned in our work to lay ground that in Thailand, there were sales channels with which we didn't have access yet. If we expand there, we have opportunities to compete against the global giant corrugate. In China, Thailand and Malaysia, where we already have presence, we began to see new winning propositions through new channels for distribution.

So we will act in the second half and the next year. And by doing this, we'll be able to realize the profitable growth in oral healthcare business.

Next, Ms. Miyasako, over to you.

This is Miyasako of Mizuho Securities. I have a question about oral healthcare in Japan. Q1 sales were not so strong, and Q2 might have been in line with the impact of OCH-TUNE. Is my observation correct? Referring to challenges on Page 19, it says the strength in high-end lineup. Does it mean that you lost share and the products were in short supply? And it says that the declining purchases due to growing consumer lifestyle maintenance concerns. I feel that if people have lifestyle maintenance concerns, selling high-end products will be increasingly difficult. Is the situation for toothpaste and toothbrush different? I found that the domestic oral healthcare seem to be slightly weak. So please explain this situation.

I see. Thank you for your question. For domestic business, Kawanishi, who is in charge of Domestic business, will take your question first.

Thank you for your question. First, about the weakening trend of oral healthcare in Japan from Q1 to Q2. The biggest factor is, as you said, the reactive downturn due to OCH-TUNE launched in the previous year. For other value-added products such as CLINICA PRO, sales grew from Q1 to Q2. And in the second half, in high-end category, we counter with new products of DENT Health toothpaste DX at the price point of JPY 2,000 as we allowed competitors like Daiichi Sankyo and Haleon to grow earlier.

In the first half, toothbrush sales were slightly lower than our plan. In addition to the market condition, we did not offer many new or modified products.

Let me add a follow-up comment from Takemori, Miyasako-san. As I mentioned earlier, we have been behind competitors in high-end toothpaste and toothbrush for some time. It is not the first time this year, and it has been our challenge in the last few years, and it is Lion's mission to find a breakthrough. To that end, DENT Health will be launched in the consumer market and the new toothpaste with unique technologies will be launched in dental clinic market. Launch in dental clinic markets will enable us to let dentists and dental hygienist appeal the effects of new products.

Going forward, we are considering launching a new product in some areas of oral healthcare category with our new technology. I should not talk too much about the new product as they may be showing cards. So I will stop here. But as a leading company, Lion would like to differentiate to boost growth. This is the same for toothbrush. We input various technology into new products, so you can count on us with that big picture.

In the first place, why have you been behind competitors in high-end product? And amid concerns about maintaining lifestyle, can you sell high-end products in this environment?

I talked about polarization in China, and it is same in Japan. And amid increasing concerns about maintaining lifestyle and increasing polarization, if you ask whether we can sell high-end products, my answer is yes. Because even in the current environment, growth driver in the toothpaste and toothbrush market is high-end products. I think that is driven by people's desire to live a healthy life. So despite the economic environment, the proportion of high-end products will continue to rise further, and will increase measures to meet the demand.

Then you wonder why Lion has been behind there. It is because we have been doing volume business in the mid-price volume zone of CLINICA and SYSTEMA in our historical background. But we will increase the mix of high-end product. And as President, I'm convinced that this will contribute to market and society.

In growing the high-end product, what do you think is the biggest hurdle?

Time. Users of high-end toothpaste tend to pick familiar, reliable brands with renowned functionality. As Kawanishi mentioned, some competitors' mega brands before. To shift those customers to us, it will take some time. It will be an obstacle. We have countermeasures but spending not half a year or 1 year, but 2 or 3 years might be obstacle. And at the same time, it may be a shortcut. So my answer to your question is time.

Next, Ms. Sato, over to you.

This is Sato of Morgan Stanley. I'd like to ask in order, starting from Page 7. Changes in core operating income are clearly shown from Q1 to Q2. Big improvements are in quantitative effect, product mix, et cetera, and changes in other expenses. As operating profit in Overseas business declined from Q1 to Q2, can I see that this improvement happened in Japan, simply put?

Can I go one by one? Your question is about Page 7. And are you asking that comparing Q1 and Q2, if they happened in Japan?

Yes, my question is about the major improvement, quantitative effect and other expenses. Did they happen in Japan?

Takeo will take your question.

Thank you for your question. In overseas business, in Northeast Asia, for example, volume slowed down from Q1 to Q2. As you indicated, in domestic consumer product market, we talked about high-end new products. And with market improvement in Japan in Q2, quantitative effect was prominent in Japan. Changes in other expenses. As described in the comments on the right, profit structure reforms led to improved logistic efficiency. Inventory reduction has been gradually progressing from the second half of the previous year. And after some time lag, storage costs have been declining. Its impact materialized more clearly in Q2. And with the increased direct delivery, logistics efficiency was more prominent. This improvement also happened in Japan.

I wanted to ask whether that happened in Japan?

In Japan, I see. Moving to Page 10. This slide shows consumer products change from Q1 to Q2 and volume improved prominently in Beauty Care and Pharmaceutical.

So volume improvement from Q1 to Q2 was prominent in Beauty Care and Pharmaceutical. Is my observation correct?

In Beauty Care, hand soap grew. In pharmaceuticals, inbound sales grew.

Their strong sales was surprise for me. According to SRI, your sales in Pharmaceuticals have increased so much. And in general, inbound sales have been slowing down since May. But why could you accelerate your inbound sales? And in Beauty Care, could hand soap alone make such a big change as plus 7.2. This is a big change. Or was initial shipment of new hair care brand, MEGAMIS substantial? So 2 clarification points, please.

Put simply, both contributed. MEGAMIS net add and high added value hand soap performed well. And inbound sales are trending up in our estimate.

Is it sales of Kyusoku Jikan, the cooling sheet for legs, a popular among Korean people?

Yes, this is the main product, among others. When we watch the sales of stores with more inbound sales, we found the increasing trend in our case.

Drastic improvement in momentum was a surprise. Is MEGAMIS impact one-off with due respect?

As this is the limited test sales, so it is one-off, but the scale is small. We sell only at the limited stores.

I see. Pharmaceutical continues to be robust even now, though the overall trend of inbound sales is weakening. Is it right?

I would say steady now. Quarter-on-quarter, momentum is not weakening.

We are running out of time. So I'd like to take the last question.

I'm Kawamoto of Jefferies. I may have missed it but at the beginning on Page 6, logistics optimization is shown as plus JPY 0.6 billion. I see this for the first time. Fabric products are heavy products. And I thought that if we shift to lighter compact and high GPM product, logistics optimization might progress. Will the effect be sustainable in the second half and the next year?

Thank you, Kawamoto-san. The question was why logistics optimization was possible and its sustainability going forward. Takeo, will take the question.

This is Takeo. Thank you for your question, Kawamoto-san. In logistic optimization, inventory optimization is one thing as described here. Through inventory optimization, we reduced the storage cost. And with the declined inventory, the number of the process reduced in delivery, and that led to decreased transportation cost. Besides this, the proportion of direct delivery from factories has been increasing whose effects are increasingly materialized.

As for the sustainability in future, in terms of inventory optimization, we aim to reduce inventory days by 30% by 2027. We are still the midway, but we will continue to strive. Did that answer your question?

Let me add a few comments. In logistics optimization, by using digital transformation mechanism, DX, from factory to the point of shipment, we can observe the excess inventory very closely. And that led to reduction of average inventory through combination of awareness and IT systems.

Impact was JPY 0.6 billion in the first half. How will it be in the full year and the next year? Would you give us numbers?

This is Takeo. Inventory optimization has been progressing since June last year with the gradual effects materialized. In terms of year-on-year comparison in the second half, as several hundreds of million yen optimization impact was already realized in the previous year, year-on-year progress may seem to be smaller. But as we are still midway, the equivalent level of effect is expected.

As a scheduled time is already passed, I'd like to close the Q&A session here. Thank you very much for your many questions. With this, I'd like to close the financial results meeting of Lion Corporation. Thank you for your participation today.

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