Nippon Express Aktie

Now it's time to start. So we'd like to start the explanation briefing. I will explain the attendees. On the right-hand side of the table, Nippon Express Holdings Company Representative Director and President, Mr. Horikiri. On the left of Mr. Horikiri is Mr. Takezoe, President and Chief Executive Officer of Nippon Express Company. On the right-hand side, in the back row is Nippon Express Holdings, Inc. Senior Executive Officer in charge of Corporate Strategy, Mr. Otsuki. On Otsuki's left is likewise, Senior Executive Managing Officer, Mr. Otsuji, who is in charge of the Global Business Division.

The Secretariat is Director and Senior Managing Executive Officer, Mr. Akaishi, responsible for the Corporate Planning Department; Mr. Nakamura, Senior General Manager of the Financial Planning Department; and the facilitator is myself, Tsumori, of the IR Promotion Office, Corporate Planning Department.

This is today's schedule. First, our President, Horikiri, will provide a 20-minute presentation on the financial results overview and our initiative to enhance corporate value. After that, we will allow time for questions-and-answer session. We expect to conclude at 6:00 p.m.

The material to be used today consists of 3 documents, the financial results presentation materials, the earnings release and the progress report on initiatives to enhance corporate value. These are posted on our corporate website for your reference. Please note that today's briefing is being conducted as a live broadcast in both Japanese and English via simultaneous interpretation. Thank you for your understanding.

So we will proceed to explain the fiscal year 2025 financial results by Mr. Horikiri, our President.

This is Horikiri. Thank you very much for taking time out of your busy schedules to attend our financial results briefing today. We also extend our sincere gratitude for your continued patronage. I will now present an overview of the fiscal year ending December 2025 financial results, our full year earnings forecast and initiatives aimed at enhancing corporate value.

Please refer to Page 5 of the materials for an overview of the financial results. The consolidated results for the fiscal year ending December 2025 are as stated in the materials. Although shifts in trade policies such as changes to U.S. tariff policy have had an impact, the global economy has remained relatively resilient and demand for international logistics is showing signs of recovery. However, we expect it will take a certain amount of time before a full-scale recovery is achieved. Under these circumstances, air forwarding saw an increase in annual volume compared with the previous year, driven by steady handling of Asia-Europe lanes and intra-Asia routes. However, despite growth in demand in the ocean transport market, the shift of BCOs led to a decline in our ocean forwarding volumes. Furthermore, domestic logistics revenue decreased due to restructuring of our small cargo business, which offset the earnings contribution from the acquisition of Simon Hegele company completed in February of this year, resulting in a decline in net sales.

With respect to profits, in response to deteriorating performance in overseas regions, we advanced structural reforms, including consolidation of bases and personnel reductions, particularly in Europe and East Asia, which generated onetime costs. Despite this, consolidated operating income and operating profit increased due to a combination of factors, a rebound from the prior year's second quarter decline in forwarding gross margins, higher earnings at Logistics Japan, thanks to spot domestic logistics and improved profitability, and stronger handling at NX SHOJI that led to increased profits in the Logistics Support segment. Please note that the effects of the structural reform in the areas overseas regions are expected to materialize gradually in fiscal 2026.

Regarding changes in operating profit, there was an impairment loss on goodwill in Europe, while an impairment of JPY 59.2 billion was recorded and gains on land sales increased by JPY 75.3 billion year-on-year, which are the main factors. For the current terms, proceeds from land sales amounted to JPY 111.4 billion and gains on sales were JPY 79.4 billion, representing an increase in proceeds of JPY 105.6 billion compared with the previous year. On the other hand, the year-on-year decrease in current term profit is mainly attributable to foreign exchange losses caused by weaker dollar as well as increased interest expenses and tax costs.

Next, compared with the forecast figures announced on November 12, while revenue was in line with expectations, operating profit fell short due to expanded restructuring costs in overseas regions. Furthermore, while operating profit exceeded expectations due to increased gains from the sale of underperforming real estate despite an expanded impairment loss on goodwill in Europe, net income for the period fell short of projections because of higher tax expenses resulting from these fluctuations.

Please turn to Page 6. We have organized the details concerning the changes in operating profit that I just now explained. Among these, the additional tax assessment for NX Italia resulted from local tax audits conducted for fiscal years 2019 to 2022, which partially disallowed input VAT directions. Similar cases have occurred frequently at other logistics companies. Please note that since fiscal 2022, our company has applied the local tax regime known as a reverse charge mechanism and such issues will not arise going forward.

Please turn to Page 7. As indicated in the materials, the downside in overseas is now larger significantly. I will explain these details together with the quarter-on-quarter comparison. Please refer to Page 11. We present a comparison by segment between 4Q and 3Q as well as versus the forecast. In terms of performance trends, revenue increased quarter-on-quarter, but operating profit decreased. Among these, Logistics Japan posted a quarter-on-quarter decline in profit. This was attributable not only to a reduction following the one-off spot work in third quarter related to events such as the Osaka Expo, but also to increased personnel expenses associated with lump sum retirement payments for the second career support program, which led to a higher provision for business taxes. The increase in business taxes caused the shortfall relative to the forecast.

Overseas operations recorded quarter-on-quarter revenue growth due to an increase in cross-border e-commerce cargo originating from China and Hong Kong. However, operating profit declined because of the incurrence of restructuring costs. Moreover, although the handling volume of e-commerce cargo increased, profitability from these operations fell short of expectations, which further widened the shortfall against forecast. Additionally, heavy goods construction underperformed as additional construction work fell below anticipated levels, whereas logistics support exceeded expectations with quarter-on-quarter revenue and profit growth driven by increased sales of logistics equipment and LP gas.

Next, I will explain the status of each business within the Logistics segment. Please refer to Page 12. With respect to the Japan segment, Logistics had anticipated a quarter-on-quarter decline in profit due to a pullback for spot transactions in Q3. However, thanks to expanded year-end demand, it maintained profits at the Q3 level. Meanwhile, Ocean Transport posted a quarter-on-quarter decline in profit due to a reduction in unit gross margin falling short of expectations. As a result, the business achieved nearly the expected level of profit. However, due to an increase in enterprise taxes and other factors previously explained, segment profit fell short by JPY 700 million.

Overseas Aviation exceeded expectations in quarter-on-quarter profit growth due to an increase in handled volumes. However, overseas ocean operations fell short of expectations because although NVO handling increase, this was offset by reduced handling of import-related services such as drayage. In addition, cargo-partner saw quarter-on-quarter increases in revenue and profit driven by a rise in cross-border e-commerce air exports, but fell short of expectations due to deterioration in profitability. Furthermore, as restructuring costs expanded, segment profit fell short by JPY 3.5 billion.

Please refer to Page 18. Next, I will explain our earnings forecast for 2026. Although geopolitical risks persist and the operating environment remains uncertain, we expect logistics demand to continue recovering both domestically and internationally, even though a full-scale recovery will require some time. Furthermore, through cost reductions driven by structural reforms and other measures, we anticipate year-on-year increases in both revenue and profit. Please note that the main reason operating profit increases more than business profit is that in fiscal 2025, gains from land sales were offset by impairments and other factors, whereas in fiscal 2026, we expect approximately JPY 19 billion in land sale gains, which will primarily drive the profit uplift.

Please refer to Page 19 of the materials. With respect to the operating profit forecast of JPY 100 billion, we have incorporated the effects of the 3 measures described in the materials. Starting from an operating profit level of JPY 68.5 billion, which excludes the onetime gains and losses such as impairment charges and land sale profits in fiscal 2025, we will work to expand operating profit.

Please turn to Page 20. We are presenting the projected performance by segment. Among these, Logistics Japan expects increased revenues and profits through revised pricing and reductions in direct costs together with the commencement of new logistics operations. For overseas operations, we also, in addition to expanding handling of SMEs, expect increased revenues and profits due to cost-down effects and other factors. Regarding cost reductions by reviewing company-wide common expenses such as head office projects, we anticipate that the adjustments amount will also contribute to increased profits. On the other hand, logistics support is expected to see a decline in profit, primarily due to the negative impact following the last fiscal year's land sale brokerage fee.

Next, please turn to Page 25. I will now explain the progress of initiatives under the management plan. First, regarding the business growth strategy and the track record in our priority industries, the negative impact of the BCO shift affected all industries. Among the priority industries, 3 sectors fell short of the previous year, while 2 maintained revenue growth, albeit with a slowdown in momentum. With respect to mobility, the decrease was larger due to a rebound from the prior year's spot handling in aviation and shipping. Technology, excluding the effect of the liquidation of the U.S. subsidiary in the previous year, is essentially on par with the prior year.

Please turn to Page 26. Next, with regard to our business segment, as for airfreight, IATA reports that international air cargo volume increased by 4.2% for the full year 2025. However, while traffic to Europe and intra-Asia routes remained robust, volumes bound for North America remained subdued, though showing signs of recovery. So the situation varies by trade lane. Against this backdrop, our handled volumes increased by 1.3%, which is below the market growth rate. Excluding the impact of cross-border e-commerce cargo demand, we regard this as largely in line with the market.

Regarding ocean forwarding, while volumes to Europe and North America have showed a sluggish trend, intra-Asia trade and other major routes have remained firm and cargo movements on major trade lanes for the cumulative period from January through to November have increased by 5.0%. Meanwhile, owing to increased space supply, the supply-demand balance has softened and freight rates have generally been on the downward trend. Under these circumstances, impacted by factors such as a shift toward BCOs, our handled volumes decreased by 5.3%. Regarding revenue from warehousing and distribution, we recorded a 3.2% increase compared with the same period of the previous year, which attributes to the measures we have implemented and the investments we have made are beginning to yield results.

Please refer to Page 27. Regarding the restructuring of our Japan operations, we are aiming to improve operating profit margin through the 3 initiatives described in the materials. Due primarily to a reactionary decline in spot air forwarding from the previous year, the initiative to transform into a more customer-oriented company resulted in a decrease in profit. However, thanks to rate revisions and efforts to improve performance, business profit increased and the business profit margin improved by 0.3 percentage points year-on-year to 3.5%.

Please turn to Page 28. Next, regarding our M&A strategy. 2 years have passed since the acquisition of CP and 1 year has passed since the acquisition of Simon Hegele. I will now report on the progress of each company's post-merger integration. With respect to CP, we are proceeding in stages with initiatives to generate synergies in procurement and sales. And by 2025, we had broadly completed the consolidation framework for countries where Nippon Express and CP have overlapping basis and resulting in a progress generally in line with the plan. Meanwhile, with the business performance remaining sluggish due to factors such as a downturn in the European economy, we will pursue profitability improvements through business expansion in addition to cost reductions from consolidation of locations.

Please refer to Page 29. As of now, our assessment of the acquisition of CP is that transaction has strengthened the Central and Eastern European region with respect to the mobility industry and the related sectors. Furthermore, while the increased forwarding volumes have enhanced our presence as a forwarder and thereby strengthened our purchasing power, air freight has met the projected volumes, whereas ocean freight has fallen short of projections due to the deterioration of the market conditions in Europe. Additionally, with respect to acquisition of customer base, we have observed changes in CP's customer base as supply chains shift due to geopolitical and other factors. We believe it's necessary to respond to these environmental changes in order to advance post-merger integration moving forward.

Please turn to Page 30. In light of these circumstances, while completing efficiency improvement through the integration of organizations and functions within this fiscal year, we will further develop our cross-selling initiatives into measures to expand our Central and Eastern Europe business that link European in-region policies with Asia, Central and Eastern Europe trade lane measures.

Please turn to Page 31. Next, SH is a logistics firm headquartered in Germany with expertise in the installation of large medical devices within hospitals. By integrating our group's forwarding capabilities, we are now able to provide global end-to-end services. In addition, for SH customer base of foreign medical device manufacturers, we are first rolling out the same logistics services in Japan as are provided in Europe. We intend to drive the creation of synergies by primarily focusing on integrating forwarding operations from customers originating with SH and focusing on the global expansion of logistics services.

Please turn to Page 33. Next, for shareholder returns in the fiscal year ended December 2025. We have set the annual dividend at JPY 100. In addition, with an upper limit of JPY 50 billion, we are acquiring treasury shares and canceling treasury shares, including those acquired. For the fiscal year ending December 2026, we project an annual dividend of JPY 100, and on that basis, forecasting an ROE of 7.0%. Although the figure is below the interim target of 8%, we will continue to enhance shareholder returns, including consideration of share repurchases based on achievement of earnings forecast and trends in share prices and performance.

Please refer to Page 35. This section outlines the key initiatives to achieve the business plan. We believe results are steadily emerging. To accelerate this, in February of last year, we decided to update our initiatives to improve corporate value.

Next, I will explain the current progress. Please refer to Page 2 of the material titled Progress in Initiatives to Improve Corporate Value. In the update on this material, Progress in Initiatives to Improve Corporate Value, we have set interim targets for fiscal year 2026 and are working to strengthen balance sheet management, review capital policy and promote business portfolio management.

Please refer to Page 3. As part of improving corporate value, this shows the progress of the items added in the update. As an overall framework for our initiatives, by pursuing 3 approaches set out in the materials, we aim to secure and further expand the equity spread. Among these measures, with regard to the sale of low-profit properties, we had initially planned a target amount of JPY 50 billion or more, but we have accelerated and executed part of the disposal of large-scale commercial assets. As a result, by the end of 2025, cumulative sales totaled JPY 117.2 billion, and we have further advanced this initiative by raising the disposal target of low-yield real estate to more than JPY 150 billion.

In addition, progress is noted in the materials regarding the advancement of our business portfolio strategy and the reduction of strategic shareholdings. We intend to invest the proceeds from these disposals primarily into growth areas such as M&A and thereby drive business portfolio management. To achieve this, we have increased the planned amount for M&A investment by JPY 50 billion from the previous plan, bringing it to JPY 450 billion.

Please refer to Page 9 and 10 of the materials for further details on the promotion of business portfolio management. Regarding capital policy, we aim to maintain a credit rating by targeting an equity ratio of approximately 35%. The equity ratio at the end of 2025 stood at 34.3%. And as disclosed by R&I on February 3, the credit rating remained at AA-. We will proceed with the consideration of share repurchases, keeping the planned acquisition amount in mind.

Please turn to Page 4. Based on our current analysis and assessment, our present PBR is approximately 1x. To further improve the PBR, we consider it necessary to secure and expand the equity spread.

Please turn to Page 5. We view the securing and expansion of this equity spread as requiring promotion of 3 approaches aimed at enhancing corporate value. And in particular, we regard improvement in ROE through increased earning power, i.e., profit growth as necessary. In addition to pursuing cost reduction through structural reforms, it's important to accelerate the strategies formulated in the management plan.

For future growth, we believe the key will be expanding and accelerating end-to-end solutions driven by account management. To achieve this, it is essential to strengthen our customer base and global network. We must increase the pace of these efforts and, while leveraging M&A, build a business portfolio that supports the realization of our management plan. By integrating organic and inorganic strategies and accelerating strategy execution, we aim to expand profits and create a virtuous cycle that fosters further growth and enhance shareholder returns.

Please refer to Page 6. I will explain the key M&A policies and direction that are central to our company's growth. Regarding M&A, we are continuously exploring multiple opportunities from various angles, focusing on acquiring overseas customer bases and expanding volumes in forwarding and related services and strengthening function in priority industries. Although nothing has been decided at this point in time, for our business, which holds strength within the Asia region, the areas to be completed are acquiring non-Japanese customer segments from Europe and the Americas and increasing volumes on Asia origin destination lanes.

As a future direction in expanding our global reach to further strengthen the global network infrastructure, we will focus on access to non-Japanese customers in North America and acquisition of logistic capabilities and reinforcement of Asia-bound and departing lanes. As functional enhancements, we will focus on strengthening capabilities in priority industries and establish business bases in growth regions where we have not yet advanced where expansion of locations is required. And while implementing improvements based on past M&A activities, we will continue to actively consider overseas M&A.

We have now explained the highlights of the financial results for the fiscal year ended December 2025 as well as the progress made in initiatives aimed at improving corporate value. Going forward, the group will continue to work together to realize our long-term vision, and we kindly ask for your continued support and cooperation. Thank you very much.

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

Now it is time. We will now start the earnings results briefing for the second quarter of the fiscal year ending December 2025. First, today's attendees, President Horikiri will be absent due to various circumstances. We apologize for this. The main speaker for today will be Managing Executive Officer, Otsuki, who will speak on behalf of Mr. Horikiri. Let me introduce today's attendees. On your right is Furue, Senior Managing Executive Officer and Head of Global Business Division, Nippon Express Holdings. In the center of the table is Otsuki, Managing Executive Officer and Head of Corporate Strategy Division. On the left side, Takezoe, President and Representative Director of Nippon Express. The Secretary is Akaishi, Director, Executive Officer and Head of the Corporate Planning Department, Akaishi; Shinkkawa, Senior Manager of the Financial Planning Department. I am Tsukasumori of the IR Promotion Office of the Management Planning Department. I will be moderating today's meeting. Today's schedule, Mr. Otsuki will provide 20-minute presentation on the financial results. Then we will have a Q&A session. The meeting is scheduled to end at 6:00 p.m. We will use 2 materials today, the financial results presentation materials and the financial results summary. They are available on our company website. Please note that today's briefing will be conducted in both Japanese and English via simultaneous interpretation and live streaming. We kindly ask for your understanding. We will now proceed with the explanation of the financial results for the second quarter of the fiscal year ending December 2025.

This is Otsuki speaking. Thank you very much for taking time out of your busy schedules to attend our earnings results briefing today. We would also like to express our sincere gratitude for your continued support to the company. Now I would like to present an overview of the financial results for the second quarter of the fiscal year ending December 2025 as well as our financial full year forecast. Please turn to Page 5. The consolidated financial results for the second quarter of the fiscal year ending December 2025 are as described on the slide. Amid ongoing uncertainty regarding U.S. tariff policy, overall logistic demand during the second quarter remained subdued. Nevertheless, air forward forwarding volume increased year-on-year in the first half, supported in part by robust cargo movement in the first quarter. On the other hand, in Ocean forwarding, due to the continuous shift to PCOs, our handling volume declined year-on-year. Domestic logistics also faced sluggish cargo movement. However, revenue increased due to factors, including the consolidation of Simon Hegele in February this year, a company operating logistics business for medical devices and other products mainly in Europe. On the profit front, consolidated business profit and operating income increased, supported by higher earnings in Logistics Japan, driven by the rebound from deteriorating gross profit per unit in the forwarding business in the second quarter of the previous fiscal year as well as higher profits in the Logistics Support segment due to solid performance of NX Shoji. JPY 9.6 billion year-on-year increase in operating income was significantly higher than that of business profit. This is primarily attributable to reactionary increase following the recognition of impairment losses in the previous year associated with the integration of special combined delivery service business with Mejuu Transport Company Limited. Furthermore, the amount from land sales this fiscal year was JPY 4.5 billion with gains on sales totaling JPY 4 billion. an increase of approximately JPY 1 billion compared to the previous year.

On the other hand, the decrease in net profit compared to the previous year is mainly attributable to the increase in foreign exchange losses resulting from appreciation of the yen. Please refer to Page 7 and 8 of the presentation materials for a breakdown of factors of fluctuations in revenue and operating profit. Next, regarding the figures announced on May 13, although we initially expected the impact of U.S. tariff policies to be limited in the first half of the fiscal year, overall logistic demand remains sluggish as many client companies adopted a wait-and-see stance. As a result, revenue and all profit metrics below business profit fell short of expectations. In addition, business profit fell short of expectations by approximately JPY 1 billion. However, a one-off positive impact from reversal of cost at SimonHgele was included in the second quarter. And in real terms, the underlying shortfall is considered to be approximately JPY 2 billion.

Please refer to Page 6 of the presentation material. With regard to the performance by segment, there was a large shortfall in logistics overseas. I will explain details focusing on the Q-on-Q trends in the business profit.

Please refer to Page 9. As indicated in the presentation materials, despite quarter-over-quarter decline in revenue and increase in business profit, please note that the main factor contributing to the profit increase was a onetime recording of fixed asset tax for the first quarter. In real terms, both revenue and profit decreased year-over-year.

Please turn to Page 10. We present a comparative analysis of quarter-over-quarter performance as well as against the earnings forecast by segment. Amid these conditions, in addition to a sluggish economy, -- there has been a particularly notable downturn in our European region, where luxury apparel, a major segment for our company, has performed poorly. Further details regarding the status of Logistics segment will be provided in the subsequent materials. Regarding other segments, heavy haulage and Construction segment underperformed due to delays in project progress. However, the Logistics Support segment continued to perform solidly following the strong trend observed in the first quarter. Additionally, with respect to adjustment amount, business profit exceeded forecast due in part to reductions in consulting costs related to head office projects.

Please refer to Page 11. I will now provide an overview of the status of each business within the Logistics segment. First, regarding the Logistics Japan segment. While unit sales price and gross profits in international air forwarding declined quarter-over-quarter, strong intra-Asia cargo movements led to increased volumes, resulting in revenue levels comparable to those of the first quarter. Next, in Ocean Forwarding, although gross profit in the NBO business decreased quarter-over-quarter, both revenue and profit increased driven mainly by growth in overseas moving business. With respect to logistics, there have been no significant changes in domestic logistics and the overall trend remains sluggish. However, quarter-over-quarter decrease in profit is attributable to factors such as reactionary decline in following the peak moving season and increase in personnel costs, resulting in a profit level that was broadly in line with our expectations. As a result, the Logistics Japan segment achieved generally expected level of profit in the quarter, largely attributable to one-off expense recognition of fixed asset taxes versus the forecasted JPY 3.9 billion increase in profit quarter-over-quarter. Next, regarding the Logistics overseas segment, although air forwarding volumes increased Q-on-Q, a decline in unit sales price, gross profit per unit due to a decrease in long-haul shipments from Asia to the United States resulted in an outcome below the profit increase forecast. Although the volume handled in Ocean forwarding increased quarter-over-quarter, revenue declined due to lower unit sales prices. On the other hand, while unit gross profit also decreased. -- reductions in outsourcing expenses such as vehicle chartering costs led to an increase in profit both quarter-over-quarter and year-over-year. In logistics, despite increased revenue from the addition of SimonHegle, both quarterly and year-over-year profits declined due to decrease in transactions with existing clients in Europe and higher initial costs associated with the start-up of new warehouse in South Asia and Oceania, resulting in overall downturn. Moreover, while Cargo Partner has experienced an increase in air freight from Asia to Europe, primarily driven by e-commerce-related shipments, its ocean freight forwarding within Europe has remained sluggish, resulting in decreased profit base quarter-over-quarter and year-over-year. As a result, the Logistics overseas segment maintained profit levels comparable to the first quarter, falling short of the projected profit increase by minus JPY 3.4 billion.

Details regarding the handling volume and unit gross profit trends in the forwarding business can be found on Page 13 to 15 of the material and additional information on changes in the external environment is provided on Pages 2 to 3 of the supplementary documents for your later reference.

Next, please refer to Page 17. With respect to the full year consolidated earnings forecast for the first half and assessment of pros, we have decided to make downward revision to our forecast for revenue and all profit business profit. noted by JPY 2.9 billion year-on-year, which is significantly larger business profit due to rebound from the previous year, sassomarmsesis. Specific, the value of land was JPY 9.2 billion gains from sales reaching JPY 7 billion, an increase of JPY 2.9 billion in gains from sales of land -- on the other hand, comparatively, modest increase of JPY 8.2 billion in net income over the previous term despite higher operating income is primarily attributable to an increase in foreign exchange losses due to yen appreciation. Furthermore, while a special loss is anticipated in relation to the recently announced implementation of the second 3-year support program, this has not been incorporated in the current forecast. Once the amount is finalized, we plan to provide an updated figure around mid-November.

Please refer to Page 18. We are comparing the status of forecast revisions by business segment. As explained earlier, the impact of U.S. tariff policies has served as a negative factor, resulting in sluggish logistic demand during the second quarter. Meanwhile, given that negotiation agreements are currently progressing in various countries, including Japan, we are assuming in our earnings forecast that international logistic demand will show signs of recovery going forward, although we anticipate that a full-scale rebound will require a certain amount of time. Regarding the European region, which has seen substantial adjustments, we are implementing cost control measures through structural reforms amid ongoing economic stagnation. Furthermore, with regard to Logistics Japan, we have revised our outlook downward as the recovery of international logistics is expected to require some time and domestic logistics is also projected to remain sluggish for the foreseeable future due to weak demand recovery. In this context, to secure short-term performance, our primary focus will be placed on space control in the forwarding business and the maximization of our internal resource while appropriately allocating our operational workforce. Through these measures, we aim to implement cost controls in response to demand trends. In addition, expanding warehousing capacities in the United States and newly established production basis as well as capturing trade lanes arising from supply chain modifications will be key focus areas, and we are diligently preparing and responding to these changes. While making every effort to secure our short-term performance, we will continue to accelerate business growth in the global market, restructure our Japanese operations to achieve our long-term vision, advancing organizational and business structure reforms accordingly.

Please refer to Pages 4 to 13 of the supplementary materials for further details on the segment overview for your later reference. Next, please turn to Page 23. This is the overview of the progress of the business plan initiatives. First, on our business growth strategy, the results for key industries are provided in the material. Technology has significantly impact -- had significant impact of the liquidation of our U.S. subsidiary in the previous year as well as the Lifestyle segment, which was affected by the loss of major customers' ocean forwarding business due to the shift to BCO, both recorded lower results year-on-year. Additionally, in the second quarter, the slow movement of the international logistics resulted in a slowdown in growth across other industries as well.

Please see Page 24. Next, with regard to our business segments, the volume performance of Air and Ocean Forwarding as well as sales from warehouse and distribution services are presented here. Air Transportation, according to EA's report, international cargo volume for the cumulative period from January to June increased by 3.5% year-on-year, partly due to the cautious stance of many companies of U.S. tariffs, logistics demand for international air freight has remained subdued compared to initial projections. Furthermore, air freight rates have been trending downward in line with falling jet fuel prices and prevailing demand trends. Under these circumstances, our handling volume increased by 1.3% year-on-year and excluding the impact of e-commerce-related cargo, our performance is largely in line with market movements. Next, Marine Transportation. Demand for shipments from Asia to U.S. has fluctuated due to U.S. tariff policy. However, cargo flows on other major trade lanes have remained stable. As a result, the total volume across all major trade routes increased by 6.5% in 5 months from January to May. Freight rates are declining sharply on routes from Asia to the United States due to a softening of supply-demand conditions. Meantime, other key lanes remain stable. However, concerns remain on potential rate declines due to ongoing deliveries of new vessels, further relaxing demand and supply balance. In these circumstances, our handled cargo volume decreased by 5% due to factors such as customers shifting to PCL. Next, regarding sales from warehouse and distribution operations, we recorded year-on-year increase of 4.7%, which we attribute to the effectiveness of our ongoing initiatives and investments. Our expansion of end-to-end solutions driven by account management focusing on key industries aims to position logistics as the core business while increasing the volume handled through related forwarding services. Currently, in both Japanese and non-Japanese global accounts, there has been increasing number of cases where high-quality logistics operations in Japan are recognized, leading to overseas business opportunities as well as cases where forwarding services transaction expanding to logistics. We will continue our efforts to expand handling volumes from both logistics and forwarding business perspective.

Please see Page 25. This is about the restructuring of our Japan business. We are striving to improve our operating margin through these 3 initiatives outlined in the material. We have started to see positive results such as end-to-end solutions and price revisions to offset increased labor and other costs as well as decrease in handling of infectious disease-related supplies. OP increased and operating margin improved by 0.6% year-on-year to 3.1%. Furthermore, leveraging the internal company system at Nippon Express as a catalyst, we will further accelerate the optimization of allocation of management resources to various domestic markets to enhance profitability and capital efficiency.

Next, please refer to Page 26. Key initiatives to achieve our business plan objectives. While we recognize that our initiatives such as strengthening the account management structure are key steady progress. We are making steady progress. We believe it is necessary to further accelerate and enhance the execution of our strategies and measures in the business plan in the mid- to long term in addition to short-term actions. As I mentioned, we anticipate changes to the supply chain may occur in the future. We consider it increasingly important to address our customer challenges through end-to-end solutions, encompassing the entire supply chain. Furthermore, to enhance corporate value, we will steadily enhance balance sheet management, including a review of our asset holding strategies, the revision of our capital policies and the strengthening of our business portfolio management. In order to achieve the current business plan target, we are committed to achieve our interim targets for 2026 operating profit of at least JPY 100 billion and ROE of at least 8% -- the most critical factor is to accelerate the strategies and initiatives outlined in the business plan. With regard to our operating profit target, we will implement additional measures while using the announced JPY 70 billion in operating profit as a baseline and to aim to achieve over JPY 100 billion through 3 key initiatives.

Please see Page 27. First, as the main driver of revenue growth, we will expand business profits by promoting the strategies and measures specified in our business plan. Second, we will start measures to reduce indirect costs. to improve the SG&A expense ratio by approximately 1 percentage point from the fiscal 2024 actual, targeting around 5% by 2028. In addition, we recently disclosed the support program for second career. This initiative is intended not only to optimize the age structure of the company and rejuvenate the organization, but it will also lead to a certain reduction in the personnel expenses. Thirdly, land sale. we plan initial transactions of more than JPY 50 billion. We will accelerate this initiative and expand the sales amount for the fiscal year 2026 to approximately double of the fiscal year 2025. Through these 3 initiatives, achieving the operating profit of JPY 100 billion will not only improve ROE, but also contribute to the success of our current business plan. Please refer to Page 29. Lastly, shareholder returns for the fiscal year ending December 2025. There are no changes to our dividend forecast with interim and year-end dividend each at JPY 50 totaling JPY 100. The dividend payout ratio at 62.3% with the share buyback up to JPY 50 billion. The total shareholder return ratio amounts to 187.4%. We project a cumulative total shareholder return ratio of 154.7% for the 2-year period from fiscal 2024. We will continue to pursue enhancement of corporate value, achieving the targets of business plan and further enrich and enhance shareholder returns. This concludes the overview and other explanations of the financial results for the second quarter of the fiscal year December 2025. That is all for my presentation. Thank you.