Nippon Sanso Holdings Corporation Aktie

We will now begin the earnings presentation on the full-term business performance results for the FYE 2026 of Nippon Sanso Holdings Corporation. Thank you very much for taking the time out of your busy schedule to attend our information session today. I am Kajiyama from IR team of the Group Finance and Accounting Office. After the presentation, there will be time for Q&A session. Questions will be answered during the Q&A.

We will now begin the earnings presentation. Please have the presentation materials already at your hand. The materials can be obtained from the IR information page of our company's website. We send you a link in the chat section of this webinar to access the material for you to download. Please take some time to download the materials from this link. Please note that today's session will be bilingual in English and Japanese using interpret function of Zoom. [Operator Instructions] Now allow me to introduce today's speakers, President and CEO, Hamada; Executive Vice President, Watanabe; Executive Officer, CFO, Kubo; Board of Director and President of Taiyo Nippon Sanso Corporation, Nagata; Chairman and CEO of Nippon Sanso [ Matheson ], Draper; Board of Director, Chairman and President of Nippon Sanso Euro Holdings, Giudici; Executive Officer of Group Business Management Office, Sawa; President of Thermos KK, Kataoka; Senior Executive Officer of Group Sustainability Management Office and CSO, [ Niki ].

Let me begin by outlining today's agenda. The session is scheduled to consist of approximately 45 minutes for the presentation, followed by about 45 minutes for Q&A.

First, President and CEO, Hamada, will provide a review of the previous midterm management plan. This will be followed by Executive Vice President, Watanabe, who will present the new midterm management plan.

Next, the business plan for the fiscal year ending March 2027 will be presented by the heads of each segment. Following these presentations, CFO, Kubo, will provide an overview of the financial profile of our group. Now Mr. Hamada, please begin your presentation.

Good morning. This is Hamada of Nippon Sanso Holdings. Thank you very much for taking the time out of busy schedules to join today. May 11, we had a teleconference to announce the fourth quarter financial results of the fiscal year ending March 2026.

And in continuation from this session today, we would like to conduct a full year earnings presentation. And in today's session, we will first look back on our previous medium-term management plan, NS Vision 2026. Then last month from April, we started our new medium-term management plan, [ Next Innovation 2030 ]. We will give an overview of our new medium-term management plan and present our business plan for the fiscal year ending March 2027 this fiscal year, which is the first year of a new midterm management plan. Following this, our CFO, Mr. Kubo, will explain the financial profile of our group.

In addition, as we've mentioned at the outset, we are joined today by the heads of our business segments in Japan, United States, Europe and [indiscernible] Oceania as well as the President of [indiscernible], they will each present their respective segment business plans.

Now let us begin our presentation. First, a recap of our previous medium-term management plan, NS Vision 2026. Under the 4-year plan, NS Vision 2026, which concluded in the fiscal year ending March 2026, we established five focus fields. Based on our global operating structure of four regions, Japan, United States, Europe and Asia, Oceania plus [ SMS ], we worked to execute the strategies in each region. Through these efforts, the entire group has been engaged in driving towards the realization of our overall vision.

In the final year of NS Vision 2026, as you can see, there are the financial KPIs and nonfinancial KPIs. The fiscal year ending March 2026, we set the financial and nonfinancial KPIs. The nonfinancial KPIs were introduced from NS Vision 2026 in response to requests from our stakeholders and also as part of our commitment to advancing sustainability management. Based on this, I would like to give a report.

The previous medium-term management plan was the company's first plan after transitioning to a holding company structure. And by placing the domestic and other operating companies in the same layer under the holding company, [ NSHD ], it became possible to compare KPIs, initiatives and results among all operating companies. As a result, it became clear that the profit margin of our Japan business was lower than that of our other businesses. We were able to confirm this point once again.

Simultaneously, there was COVID-19 and the Russia-Ukraine conflict. There were the various geopolitical events and also international energy problems, which led to supply chain issues, leading to the fact that manufacturers alone cannot overcome the situation just by our own efforts, there was that much cost increase.

Consequently, we were forced to proceed with price revisions in Japan as well. Historically, it is often said that due to cultural differences between Japan, Europe and the United States, it has been said that passing increased costs on to customers was difficult in Japan. But as price revision actions advanced in our European and U.S. businesses, our Japan team also strongly promoted price management and continued careful persistent negotiations with our customers. As a result, the environment of rising prices for many goods and materials accompanying inflation became a tailwind, allowing us to take solid actions and achieve concrete results. This successful experience has served as the foundation for the global price management and revenue enhancement strategy included in the new midterm management plan that began in April this year.

Now I will discuss the progress of our financial and nonfinancial KPIs. And nonfinancial KPIs, this phase, it's rephased sustainable KPI from this fiscal year. And the content is slightly different as well. And we have also decided to rephase this bearing in mind the trend in the world at large. First, on the financial side, to strengthen price management across the group, promotion of productivity improvement initiatives and steady and planned debt repayment, we successfully achieved all of our financial KPI targets.

Despite the extremely challenging external environment, we believe that we have made steady progress in improving both our earnings capability and financial position.

Regarding nonfinancial KPIs. This was the first time for us to set such nonfinancial KPIs in our midterm plan. Third-party certification is necessary. And at this point in time, we only have results currently available only up to the fiscal year ending March 2025 because we have to receive certification from a third party. But we achieved our targets ahead of schedule in areas such as reduction of greenhouse gas emissions within the group, the contribution to customers' greenhouse gas reductions through environmentally friendly products and compliance training participation rates.

Finally, with respect to the execution and outcome of our focused fields, under the five focus fields outlined in the previous medium-term management plan, we have steadily implemented various measures across the group. While there are differences in progress, results and the challenges faced by each strategy and segment, we have seen increasing instances -- and there are ups and downs depending upon strategy and segment, but we have seen increasing instances of sharing best practices and successful initiatives across the group in a horizontal manner. As a result, collaboration and execution capability on a group-wide basis have steadily strengthened.

Based on these achievements and remaining challenges in the new medium-term management plan, we have retained the essence of the five focus fields in the previous medium-term management plan while reorganizing them into three key strategies. Details of the new midterm management plan will be explained by Mr. Watanabe after my presentation. But through its steady execution, we aim to further drive growth.

This concludes my part of the presentation. From here, Mr. Watanabe will explain the new midterm management plan as well as the outlook for the current fiscal year, which is the first year of the [ MTMP ]. Mr. Watanabe, please.

Thank you very much, Mr. Hamada. My name is Watanabe from Nippon Sanso Holdings.

At the end of March, we conducted the new midterm management plan briefing. And today's explanation may overlap with that. So I'd like to keep it brief and succinct for those parts which may overlap.

So as CEO, Hamada just mentioned, these are the three key strategies under our new midterm management plan, NS Vision 2030. The basic idea is to enhance productivity in our core industrial gas business. So continuously, we will raise productivity, including price management. So the best practice within the company and the group shall be pursued so that we can enhance the profitability within the group.

As for electronics business, bulk gases, material gases, equipment and insulation, including everything, we would like to aim for the expansion of our electronic business in a combined manner, globally. And at the same time, we aim to nurture new growth drivers that relates to gas, which can be compared to our electronics business in the future for further growth potential.

And in addition, we recognize that the management foundation supporting these strategies must continue to evolve. So as you see on this slide, we have identified six key themes and will advance initiatives according to further strengthening our foundation.

Now moving on to the next page about the KPIs, first of all, financial KPIs. Let me, first of all, reiterate our approach to setting numerical targets. For the top line, we aim to achieve a compound annual growth rate or CAGR of 3% in revenue. As for profits, we intend to drive steady improvements in profitability and target growth of approximately twice the rate of revenue growth. We plan to continue improving margins by at least 50 basis points per year. Some of our targets are presented as ranges, reflecting our consideration of current geopolitical risks as well as macroeconomic uncertainties.

Regarding financial soundness, we will introduce a new indicator, the net debt-to-EBITDA ratio in place of the traditional [ DE ] ratio. Given that we successfully reduced interest-bearing debt as planned under the previous midterm management plan and that our financial base has reached a sufficiently strong level, we believe this new indicator more appropriately reflects our financial position under the new plan.

And as for the sustainable KPIs that was mentioned earlier, we have expanded from the previous 8 items to a total of 10 items by adding sustainable business and engagement.

So through these measures, we will further strengthen initiatives that support sustainable growth across areas such as environment, safety, human resources and compliance.

Now moving on to the next page, please. I will outline our business plan for the current fiscal year, which is the first year of the new midterm management plan.

For the fiscal year ending March 2027, based upon recent foreign exchange trends, we assume a slightly stronger yen against the major currencies such as the U.S. dollars and the euro compared with the previous fiscal year. And despite the headwind, we expect to achieve both revenue and profit growth. That said, we forecast revenue growth of 1.5% and core operating income growth of 2.4%. This is below the annual 3% revenue growth target I mentioned earlier. The primary reason for this is due to the fact that we estimated slightly moderate growth for the first year of [ MTMP ] because of the uncertainties that we see in economic environment today.

Allow me to move on to the next page, which explains the full year forecast and the assumption for that. With respect to the business environment at present, rising geopolitical uncertainty in the Middle East is increasing concerns over higher energy costs, including electricity prices.

Furthermore, due to the continued global inflationary environment, costs, including labor cost, logistics and raw materials are expected to remain elevated and stay at a high level.

Against this backdrop, our group-wide initiatives will focus on continuing to enforce disciplined price management to appropriately address cost increases. At the same time, we will further strengthen productivity improvement initiatives and cost controls to secure profitability.

We also expect demand to remain resilient in sectors that are less sensitive to economic cycles, such as the food and beverages and the health care, and we will continue to place greater emphasis on these areas.

In addition, for acquisitions completed in previous years, we will steadily execute post-merger integration, PMI, to maximize synergies. As for key initiatives under the new midterm management plan beginning in April, we have been promoting the establishment and the global rollout of the unified Nippon Sanso brand.

With regard to our group-wide IT and digital strategy, we are advancing the development of road map under the leadership of our CIO, who assumed the role in April last year. Based upon this road map, we will drive communication efficiency among the group, operational efficiency and enhance competitiveness through greater utilization of data.

When it comes to [ DX ], we are trying the various [ DX ] tools. And if they turn out to be successful, we would like to deploy such tools on a group-wide basis.

Now each segment will review performance under the new midterm plan and outline key initiatives under the new plan for the current fiscal year. First of all, let's begin with Japan. Mr. Nagata, please.

Good morning. This is Nagata from Nippon Sanso. Today, I will review the performance of the Japan segment under the previous medium-term management plan and outline our initiatives going forward.

First, a recap of the previous medium-term management plan. As written in the presentation material in the Japan segment, left-hand side, there is the segment strategy. And we've been focusing on enhancing the power of our core business and exploring and nurturing growth businesses. Let me explain, as you can see in the middle of the material, core operating income in the fiscal year ending March 2023 was JPY 31.6 billion with a core operating margin of 7.5%. By the final year -- last fiscal year, the fiscal year ending March 2026, core operating income increased to JPY 54 billion, representing an improvement of JPY 22.4 billion over the full year period. Core operating margin also rose significantly to 13.3%, substantially exceeding our initial target. In addition, EBITDA margin surpassed our segment target of 17%.

The key driver behind this performance was customer management, specifically the continuous promotion of customer-centric value creation. The industrial gas business is fundamentally about providing the invisible value of gases, the functions and services gases deliver, and we can call it a service. And we are offering a solution created by our various functions of our gases. And in this sense, our business is not only B2B, but also one that ultimately serves end users through the value embedded in those functions and solutions.

Even amid the challenging economic environment over the past 4 years, including COVID-19 supply chain disruptions caused by the situation in Ukraine and significant increases in energy prices, we believe our customers appropriately reorganize the value of stable supply and the functional benefits of gases.

Furthermore, we have demonstrated strong capabilities in supporting major projects in Japan's electronics industry. there's been many large projects in Japan. In addition to bulk gases and specialty material gases, we have provided integrated solutions, including gas supply systems, equipment and engineering services.

Based on this review, our key priorities going forward are above all, further evolution of our core businesses and commercialization of growth businesses. These are the two key priorities. Over the next 4 years, expanding the electronics business will be a key focus for the Nippon Sanso Group as a whole with the -- and the Japan segment would like to contribute to some extent here. In the electronics field, for example, we are developing and marketing advanced materials for next-generation semiconductor processes, not just specialty gas, but materials gas as well. And we have -- to support this, we are constructing a new advanced materials development building at our [ Takuba ] Development Center. Through this facility, we aim to develop new process materials and handling equipment used in advanced processes and further strengthen our ability to provide solutions that address customer challenges.

In addition, we are focusing on growth businesses. Although they may be niche areas, we do have growth businesses such as stable isotopes compound semiconductors and additive manufacturing. Well, these are niche markets, we recognize them as areas where we have competitive advantages, and we aim to expand the scale and profitability in Japan and overseas. At the same time, to support the expansion of these growth areas, further evolution of our traditional core businesses is essential. We will continue to invest in broad gases, the CO2, small on-site and large on-site businesses to maintain and expand our business base while further strengthening initiatives to maximize customer value.

For the next 4 years in the new midterm management plan, we expect the CAGR of revenue and profit to be maybe slightly below the global average. However, we will maintain a strong focus on profitability and aim for continuous improvement in core operating margin based upon the new midterm management plan next innovation. And we also target the -- we aim to focus on profitability and continue our corporate margin, and we also target to exceed the segment EBITDA margin goal of 19%.

Finally, let me outline our outlook for the fiscal year ending March 2026, the first year of the medium-term management plan. Given the prolonged geopolitical tensions in the Middle East and rising electricity costs, we remain cautious regarding gas shipment volumes. In addition, but this fiscal year, this fiscal year represents a transitional period for large-scale electronics-related equipment and installation projects. Despite these conditions, from medium- to long-term perspective, we will continue to invest in R&D for next-generation semiconductor-related electronic material gases and equipment, expand our product and service offerings and strengthen market development. In the short term, we will focus on maintaining and strengthening our core businesses through customer management and customer-centric value creation, including securing volumes and continuously optimizing pricing levels.

As a result, for the first year, we expect performance to be slightly below the overall growth trajectory for the 4-year period with revenue and profit broadly in line with the previous year, providing a steady start to the new 4-year medium-term management plan. Thank you for your kind attention.

Hello. Good morning, everyone. This is Alan Draper from Nippon Sanso [ Matheson ]. Today, I would like to review the performance of the U.S. segment under the previous medium-term management plan and outline our initiatives going forward.

First, I'll look back at the previous medium-term management plan. In the U.S. segment, we operated our business based on the segment strategy shown on the left-hand side of this slide. Supported by favorable foreign currency, disciplined pricing and productivity improvements, both revenue and core operating income profit grew steadily. Although profitability declined in the final year, performance improved overall when viewed across the 4-year period.

Based on this review, we identified several key challenges going forward. The need to sustainably enhance profitability, further expand on-site projects and strengthen the electronics business. These priorities are reflected in the new segment strategy shown on the right-hand side of the slide under the new medium-term management plan.

Our strategy centers on strengthening the earnings base through improved plant utilization and increased business density while enhancing our position as a key supplier to resilient growth markets, including food and beverage, health care and electronics.

Within the U.S. segment, the electronics-related business accounts for only around 5% of sales as of this fiscal year ending March 2026. Looking ahead, we aim to expand this business by focusing not only on electronic material gases, but also through the equipment business, building an integrated model that combines materials, equipment and engineering.

In the industrial gas business, we will continue to propose applications-driven solutions while advancing additional on-site projects. This approach strengthens long-term customer relationships and contributes to more stable earnings.

Over the next 4 years, we expect the compounded annual growth rate of sales and profits to exceed the global average. In terms of profitability, we're targeting a steady and sustainable improvement of at least 50 basis points per year.

Finally, I would like to discuss our outlook for the fiscal year ending March 2027, which will be the first year of the new medium-term management plan. While we expect shipment volumes to recover gradually, the pace of recovery may be limited due to heightened geopolitical tensions in the Middle East and rising electricity and energy costs.

On the other hand, the benefits of our ongoing price management and cost control initiatives are expected to become more visible and contributions from newly secured on-site projects should materialize. Under these conditions, our focus will be on strengthening the electronics equipment and construction business as well as securing additional on-site projects through proposals to change supply modes. As a result, for the first year, we aim to achieve a start broadly in line with the overall growth trajectory anticipated for the 4-year period. Thank you very much for your attention. I'll pass it over to Raoul.

Thank you, Alan. Good morning, everyone. This is Raoul Giudici from Nippon Sanso Europe. I will now explain a review of the previous medium-term management plan for the European segment and same I will do for initiatives going forward. But first, let me review our recent performance.

In the European segment, we operated our business based on the segment strategy shown on the left-hand side of the slide. Key achievements included the strengthening of our engineering capabilities through the acquisition of a plant engineering company, which we did in Italy. as well as the acquisition of a home care business in Spain, which has enabled to further expand our presence in resilient markets such as food, beverage and health care.

In the electronic business, we have also expanded our business foundation through initiatives such as increasing production capacity for electronic material gases. And while the business environment was characterized by significant cost volatility, particularly in energy prices, we executed timely and appropriate pricing management, and we continued productivity improvement initiatives.

As a result, as you can see, profitability improved significantly, and this confirms that we are leaving the medium-term plan structurally stronger despite a highly volatile and more complex business environment.

Now moving forward, our key priorities still include maintaining rigorous pricing management in response to ongoing cost volatility and leveraging gas applications to grow our volumes.

Clearly, further strengthening the electronics business will also be important, especially in light of the growing semiconductor-related investments across Europe. So more precisely, we will focus on developing total solutions, including equipment business as well as the total gas and chemical management services, and we will aim to establish a high value-added business model that combines electronic material gases, equipment and operational management services.

Over the past 4 years, as I said, we have expanded production capacity for the electronic market. But as we speak, electronic-related sales account for only around 3% of our total revenues. So that means that we see a very nice space to grow our presence in Europe.

Other priorities when moving forward will include steadily capturing business opportunities in health care, where Europe is growing older and more in need of assistance and also using our technologies to follow energy transition, which is clearly a priority for all European countries.

For the next 4 years, we expect the CAGR of both sales and profit to be broadly in line with our global average, while at the same time, we are fully committed to steadily achieving an annual improvement in profitability of at least 50 basis points.

Let me finally outline our outlook for the fiscal year ending March 2027. Given the prolonged geopolitical tensions, which we see in the Middle East and the rising electricity costs, we tend to remain prudent on volume recovery, while we clearly want to maintain tight control over pricing and productivity. This is also why we are increasing our focus on business development to push organic growth. And at the same time, we expect some extraordinary contribution from inorganic growth, such as the acquisition, which has been completed successfully in Spain.

And with this approach, we believe we are very well positioned to deliver this year as well as to ensure sustainable performance over the course of the new medium-term plan. And with this, I conclude my presentation, and I thank you very much for your attention.

Good morning. This is Sawa from Nippon Sanso Holdings. Today, I'd like to review the performance of the Asia and Oceania segment under the previous midterm management plan and outline our initiatives going forward. First of all, the review of the previous midterm management plan. In Asia and Oceania, we have operated our business based upon the segment strategy on the left-hand side of the slide. Key achievements include strengthening our ability to meet electronics-related demand through expanded production capacity for electronic material gases in East Asia as well as executing two acquisitions in the Oceania region, which contributed to an expanded market presence.

Turning to performance over the past 4 years. Electronics-related sales accounted for approximately 40% of the total revenue. During this period, however, there were phases in which gases and as well as equipment sales and construction was sluggish due to the customer inventory adjustment and postponement of investment. In addition, factors such as the softer helium market resulting from oversupply weighed on the business environment and overall profitability remained broadly flat.

But in the Oceania region, supported by the effects of acquisitions, including [ Clean Heat ] and Coregas, both the revenue and the core operating profit achieved strong growth with a CAGR of approximately 10%. While we have been able to demonstrate solid growth momentum, we recognize that improving profitability and further accelerating initiatives to expand the business scale are key priorities going forward.

As shown on the right-hand side of this slide, in electronics business, we will enhance our comprehensive proposal capabilities by offering not only electronic material gases, but also on-site solutions as well as equipment and installation services. In addition, we will move beyond East Asia to pursue full-scale expansion into Southeast Asia and India, aiming to become the #1 total solution provider in Southeast Asia and India.

And in parallel, we will strengthen governance structures to support this expansion. For the next 4 years, we expect the CAGR of sales and profits to exceed the global average. In addition to -- in terms of profitability, we aim to steadily achieve an annual improvement of at least 50 basis points.

Finally, I'd like to outline our outlook for the fiscal year ending March 2027, which is the first year of the new midterm plan. Due to the prolonged geopolitical tension in the Middle East and the rising electricity costs, uncertainty remains regarding the recovery of gas shipment volumes, including those for the electronics market.

On the other hand, we will move forward with strengthening the electronics business in Southeast Asia and India, creating synergies with acquired business in Oceania and further enhancing pricing management and productivity improvement initiatives across the region. As a result, for the first year, we expect the performance to land at a level broadly in line with the overall growth trajectory. Thank you very much for your kind attention.

This is Kataoka from Thermos. I'd like to review the performance of the Thermal segment under the previous midterm management plan and outline our initiatives going forward.

First, let me review the previous medium-term management plan. In the Thermos segment, we have operated our business based on the segment strategy as shown on the left side of this slide. Key achievements include the launch of the new sub-brand and [ Ono ] and our entry into the apparel accessories market as well as the continued launch of new products under strategic pricing that reflects added value.

In addition, we work to improve demand forecasting accuracy and optimize inventory management through digitalization [ DX ], digital transformation. As a result, even amid the business environment characterized by both risk and growth opportunities, we achieved revenue growth while maintaining and improving profitability.

Based on this review, we recognize that the key challenges going forward are to further enhance customer experience through a diverse range of products and to accelerate operations and decision-making in order to respond to various changes in the business environment.

With this recognition, we formulated the segment strategies of our new medium-term management plan. As shown on the right-hand side of the slide, over the next 4 years, we aim to evolve from a business focused primarily on vacuum integrated containers to a lifestyle brand that provides a diverse range of products and services that support everyday life.

At the same time, we will embed sustainability as part of our corporate culture while strengthening brand equity in global markets and expanding through partnerships. We will focus on sustainability and [ DX ] as well. And we would also like to focus on these initiatives. So for the next 4 years, we expect CAGR of sales and profits to be broadly in line with the global average. In terms of profitability, we plan to steadily achieve an annual improvement of 50 basis points.

Finally, I would like to outline our outlook for the fiscal year ended March 2027, the first year of our new medium management plan. While implementing strategic pricing and cost management in line with the business environment, we will continue to introduce new products in growth categories such as cookware and apparel.

In parallel, we will work to strengthen customer engagement through digital initiatives. As a result, for the first year, we expect performance to land at a level broadly in line with or slightly above the overall growth trajectory anticipated for the full year period. Thank you kind attention.

Hello, ladies and gentlemen, this is Kubo, CFO. Thank you very much for joining us today.

Now I'd like to start my explanation. First, I'd like to briefly review the progress of our financial KPIs under the previous midterm management plan. We have set five key financial KPIs for the period, and I'm pleased to report to you that we successfully achieved all of these targets. By the fiscal year ending March 2025, we had already met our targets for revenue, core operating profit and ROCE after tax. In the final year -- fiscal year ending March 2026, we also achieved our targets for EBITDA and adjusted net [ D/E ] ratio as well.

As President Hamada mentioned earlier at the beginning, these results were driven by disciplined pricing management and ongoing productivity improvement initiatives across the group and with steady progress in reducing debt. Through these efforts, we believe we have steadily strengthened our profitability, financial soundness and capital efficiency.

Next, I will explain the financial KPIs under the new midterm management plan. In this plan, we have set targets for the -- for each KPI towards the final year, the fiscal year ending March 2030. We have also outlined our outlook for the current fiscal year, which is the first year of the plan, as shown on the slide. For the current year, we expect the revenue and core operating profit to grow at a somewhat more moderate pace compared with the overall 4-year plan.

Accordingly, improvement in the core operating profit margin is also expected to be around 20 basis points. On the other hand, we are targeting an improvement of 80 basis points in EBITDA margin over the planned period. In addition, we have newly introduced net debt to EBITDA as a KPI in this plan. While this ratio stood at 2.37x for the fiscal year ended March 2026, we expect it to be 2.07x in the current fiscal year.

Next, I will explain our approach to capital allocation under the new midterm management plan. Over the 4-year period, we expect to generate approximately JPY 1.17 trillion in operating cash flow. We plan to allocate 2/3 of this cash to capital expenditures and investments and the remaining 1/3 of the cash to debt reduction and dividends.

Let me now walk you through our cash flow outlook and the dividend forecast for the current fiscal year. We expect operating cash flow of JPY 263.9 billion and planned investment cash flow of JPY 181.0 billion, resulting in free cash flow of JPY 82.9 billion. For dividends, we plan to pay an annual dividend of JPY 66 per share. We have increased our dividend for 10 consecutive years so far, achieving a compound annual growth rate of approximately 13%. We also maintain a long-term dividend payout ratio target of 20% to 30%, and we remain committed to providing stable and reliable shareholder returns. This concludes my presentation. Thank you very much for your kind attention.

Thank you for your kind attention. We will now proceed to the Q&A session. And IR division, Mr. Ishimoto will now moderate and give you some points to keep in mind.

My name is Ishimoto from the IR Department of the Group Finance and Accounting Office. [Operator Instructions] SMBC Nikko Securities, Shintani, please.

SMBC Nikko Securities,, Shintani speaking. Thank you for explanation. First, the overall situation of this fiscal year's plan, core operating income by region forecast, that's a major concern I have.

When you explain about the Q4 results ex Japan, besides Japan, there is expected increase in profit income. And bearing in mind the explanation today, in the 4-year period, improvement will be made in the U.S., Europe as well as Asia and Oceania, mainly speaking. And I want to receive more detailed explanation of the ups and downs of differences by region.

Last fiscal year, particularly for the United States, FY 2025, that was the only segment that declined in profit last fiscal year. And I'm wondering what we can expect going forward. So I want to know a bit more of the regional differences.

Thank you for the question. First, I will give an overview. This may be a repetition of what was explained before, but then Mr. Kubo will explain. And after that, specifically when it comes to the United States, if additional explanation is necessary, we'd like to call upon the people responsible for each of the business. I think to make an additional explanation as well if necessary.

First, overview. Actually, above all, from February of this year, there's the issue in the Middle East. And in the medium-term management plan as well as this fiscal year's budget, after both of these were completed, the Middle Eastern issue started and what impact will this pose? And will there be a long-term issue or just a half year or 1-year impact? It's very difficult to forecast this future. And we are making our utmost effort to communicate with our users in the chemical and steel industry, et cetera. We are watching very closely the trend of our customers. We interview them and they confirm information in the news.

However, I'm not intending to criticize here, but the Japanese government is explaining about [ NASA ]. And on the field, whether there's enough raw material feedstock or not, what's actually happening seems to be different from what the Japanese government is explaining. It's difficult to judge which is correct.

The conclusion, therefore, I want to give is the medium-term management plan itself is a medium-term management plan with notes, and it indicates the future direction of the company intends to head towards. So we kept our medium-term management plan intact.

And this fiscal year, as Mr. Kubo as well as each of the segment has explained, compared with previous fiscal year's numbers and this fiscal year's forecast, we may have a weak stance in terms of positioning within the new midterm plan when it comes to this fiscal year. But this fiscal year, we are full of uncertainties. There might be a significant impact on our customers. And maybe this impact will not be in the first half, but in the second half, we have to wait and see to have a clear understanding, and we are in the industrial infrastructure business. And we are not expecting immediate impact. It's very difficult for us to forecast the future.

Consequently, this fiscal year's guidance when preparing this, we had no choice but to come up with these forecast numbers. But in the medium-term management plan, we have buffers in the group as a whole. we expect group business growth, but we also have set the buffer. And inclusive of that, we think we should be able to sufficiently recover. And that is why we came up with this guidance. And I would like to put upon Mr. Kubo.

This is Kubo. I would like to make a supplementary explanation. The overall view that we have is, as Mr. Watanabe as well as myself, as you mentioned at the outset, in the medium-term management plan, when we prepared this, the compared to the growth rate factored into the midterm plan, we do have a somewhat conservative forecast because the economic environment is full of uncertainty, and we are expecting this uncertainty to continue based on the assumption, we have had this fiscal year's guidance.

And therefore, the overview that we have in mind is sales volume -- we are not expecting sales volume to grow significantly. But still, until last fiscal year, there's been a series of M&A and large equipment and installation projects completed. And from this fiscal year, we should be able to fled enjoy the benefits of these initiatives. And we hope we should be able to enjoy benefits of these initiatives as scheduled from this fiscal year. And that will contribute to revenue expansion, which is already factored into this fiscal year's guidance.

And by region, in particular, we've embarked on M&A, and there's been large investments and the impact from that in the U.S., Asia and Oceania, particularly in these two regions. With regards to Europe as well, [ SA Teijin ], end of March, we closed a completed M&A and this impact should be fully contributing to the group's performance.

And in terms of sales or costs for costs, because of worsening of the Middle Eastern situation, how will cost trend going forward? It's extremely difficult to forecast the future cost trend. But so far, there's been COVID-19 as well as Russian situation. And there's been lots of economic uncertainties and through operational excellence as well as pricing, we've been able to overcome these economic uncertainties through these initiatives. And this fiscal year, this benefit is factored into the guidance of each segment.

Stable cash flow should be generated in this fiscal year guidance as well. And Mr. Nagata commented on Japan, Equipment and installation business is in a transitional period. But excluding that, various initiatives are being taken as is the case in other regions. And we should be able to make steady progress this fiscal year. And this concludes my explanation.

I'd like to ask you another question, if I may. And once again, well, it is quite difficult to tell probably because of the uncertainty. But the first and second half for the profit margin or on a quarterly basis, could you please explain more about how do you see the changes of the profit margin?

Right now, the energy cost is rising, inflation is ongoing. But at the same time, your capability to shift this cost increase to selling price is solid and no major challenge on a full year basis. But considering the time lag, between April through June or the July to September when electricity cost may increase, do you -- are you going to feel the impact? Or in the second half, more and more cost increase may be passed through to the selling price. So the margin changes throughout the year, if you could give me some idea, please?

Thank you very much for your question. Yes, very difficult to respond to the question with detailed specifics. But when it comes to energy costs, in the U.S., for example, electricity cost, including gasoline prices, already, there's a sign -- clear sign of the increase in these cost items. So naturally, price management is what we are going to do in order to recover the recoup the impact -- to recover the impact of the rising cost.

But what's going to happen to gasoline prices or the electricity prices going forward. Even in Japan, there is a time lag of 3 months, it will be visible. In the electricity cost, we don't know for sure, but the assumption is that it's going to increase as a cost. Europe as well. And of course, the situation is different from country to country. So we cannot give you one single answer. But for Asian countries, well, the situation there is totally different from country to country, but the energy cost -- and largely, the costs are expected to increase, unfortunately. And the countermeasures for these are taken by each operating company.

And as CFO, Kubo mentioned, price management and the productivity improvement. So we need to promote these two in order to cope with the rising prices cost. So in that sense, on a full year basis this year, well, of course, we have to take various measures, initiatives, but the numbers shown here, we believe that we will be able to reach and satisfy these target numbers.

Profitability, as I mentioned, energy cost or the changes in the cost will affect profitability. But without allowing much time lag, we explain the situation to the customers. And before we know that for sure, we take actions in order to improve the productivity. And by so doing, we need to respond to these challenges.

And CFO, Kubo, I wonder if Kubo-san has additional comment. I'd like to welcome additional comment.

Yes, the President, Hamada has just rightly mentioned pricing activities and operational excellence activities. Basically, for the costs to be raised, and we need to take actions for that. And when will it happen in the -- on a fourth quarter basis, it is very difficult to foresee when it's going to come up.

So's well, the when costs stay at a high level and the assumption that the difficulty may continue on a full year basis, that is our basic assumption on a full year basis. And we need to recover and make the collection and take actions immediately so that the impact will not prolong.

So quarterly breakdown of the profitability is -- was made and the designed with that idea behind.

This is a follow-up question. Particularly in Asia, Oceania, particularly energy cost is rising, and I believe the impact is going to be very big. So compared to the previous midterm management plan, a margin improvement was somewhat slower in Asia, Oceania, particularly. So more proactive price management and actions, are you taking these actions sufficiently? Do you think that you'll be able to take necessary actions in Asia and Oceania?

Yes. Thank you. Later, Mr. Sawa will respond more in detail. But first of all, Asia, Oceania, as was mentioned, the situation is quite different from country to country. For example, between -- even between Japan and Korea, well, the inventory of crude oil, the stockpile is different. So situation is quite different. We are including basic economic strength. they are not uniform. They are different. And so it is very difficult to give you one single answer to cover all these countries and not be specific country by country, but if Mr. Sawa knows more in detail, please respond.

Thank you very much. This is Sawa. So the significant increase in cost was experienced in Asia since COVID-19 pandemic. And there are a lot of learnings and lessons learned from that experience when it comes to price management. Well, they try to include such factors into the contract and agreement. That's what we have started to do since then.

So the countries are different in Asia, but if the cost increase is expected, then in a timely fashion, we are trying to shift the cost increase to selling price, and we have accumulated knowledge and know-how so far. I believe that we can utilize such expertise now. So basically, without time lag, we -- well, the pricing management, selling price management can be done more effectively. So that helps us to achieve the current plan going forward.

Next, Mizuho Securities, Mr. Yamada.

Yamada from Mizuho Securities. I'd like to ask you -- I mean I'd like to ask as well as regarding the investment as well as growth opportunities in Americas as well as Europe. As far as Americas is concerned, you are talking about the business density improvement. Does it mean more ASUs projects? Or do you mean the improvement of the density of the logistics web as well as the other distribution channel? Could you please elaborate this part?

And in addition to that, as far as the EU is concerned, you're talking about the business opportunities regarding the energy transition, which I think relates to the carbon neutrality. However, the company experienced impairment loss recognition in the last midterm business plan, thanks to the slowdown of the pace of the energy transition. Do you see any risk associated with the energy transition in Europe? And if it's possible, could you please elaborate how are you planning to manage those risks?

Thank you for the questions. We have to ask the presidents of each operating companies to respond one by one. First, Mr. Alan Draper from the United States and ask that from Europe, we would like to call upon Mr. Raoul Giudici to respond in that order. First, Ms. Alan, please.

Thank you, Hamada-san, and thank you, Yamada, for the question. So overall, the U.S. still business still has a lot of opportunities for growth. We have ASUs that we're working on economic models for. We're hoping that we find good lucrative models for the -- to install into the ground.

We're also looking at doing small on-sites. So small on-site plants are another opportunity for us. So that's either converting large bulk plants to small on-site or even finding new applications for small on-site customers.

So I think we can increase the density through both ASUs as well as small on-sites. And also, I think there's some opportunities for M&A. We're always looking at small distributors, low tuck-in distributors that can provide synergies and benefit to the business, and that also provides some density for us from a customer perspective. So in the first 50 days or so that I've been there, a lot of opportunities have come to me for my review, and I think we're going to have a lot of opportunities during the next midterm plan.

This is Raoul Giudici from Europe. Regarding investments, which we see on our horizon, first of all, we want to be clearly selective. Volatility keeps being very high in Europe, but we have identified a clear strategy, and we want to focus on resilient businesses such as medical, for example. And also electronics is going to be one of our priorities. As you may know, the European CHIPS Act is driving growth significantly, and we see many opportunities across all the territories.

When referring specifically to carbon neutrality or decarbonizing, what we are seeing now more and more is actually kind of a different concept, which is more about energy security. So there is still a very high focus in Europe on energy, but rather than being driven by decarbonizing, now the priority for most of the European countries and most of the European market industry segment is about energy security and making sure that energy is there, available, reliable and cheap.

And we believe that through our applications, such as, for example, oxycombustion or also upgrading biogas into biomethane, we can be -- we can play a very active role in helping our customers and more in general, the European industry in getting a secure source of energy, while at the same time, pursuing decarbonizing. So we see this. Clearly, there are some risks which are associated with the macroeconomic environment, but we still see this as a promising opportunity for our business and for our growth across Europe. Thank you for your question.

Thanks very much for the May I clarify several points. As far as the U.S. is concerned, you're talking about small separation unit. That means are you planning to improve the quality of the distribution channel as well as the distribution networks within the existing businesses? Is my understanding correct? And if the case, I would assume that this will probably reduce the overall logistics cost in the state and also increase the barrier to entry. Am I understanding right? Could you please confirm.

As far as the EU is concerned, since you are talking about the affordable energy transition, I assume that the risk of impairment loss recognition is much more manageable compared to the U.S. case. Is my understanding correct? Could you please confirm?

First of all, Alan, could you please respond?

Sure. Thank you. This is Alan Draper. So regarding your question on the small on sites, small on sites have a couple of different advantages. One, they allow you to delay maybe larger investments. So if you switch a customer from a large bulk account to a small on-site account, then maybe allows you to free up capacity on the large ASU that may be tight on capacity. So it allows you to kind of delay your investment a little bit and provide smaller investments. So it's maybe a little bit more efficient from a capital efficiency perspective.

Regarding the distribution side, sometimes it's very beneficial from a distribution point. You will definitely reduce distribution costs. And usually, there's a margin shift a little bit as a result of that as well. But that's one of our targets and strategies. So it's both freeing up capacity in the ASU as well as maybe reducing some costs in the model.

Could you please confirm whether this small on-site includes liquification or not?

The small on-sites are gaseous plants.

As far as concerned with the risk of impairment and the exposure to cancellation of projects, Yamada, I don't see such a risk for our operations and business because, first, as I said, we want to be very selective.

But then what is also important to highlight is that the European industry, as you may know, is structurally different from the U.S. So we don't see large projects for [ HEICO ] in Europe. And in any case, this is not clearly one of our priorities. And regarding green hydrogen, we believe that it is important we start building our expertise, but we don't see the opportunity of investing heavily in green hydrogen because green hydrogen keeps being not very competitive.

Now as part of the European strategy, we see more and more the opportunity of using biomethane as a very good alternative to green hydrogen because it is cheaper and also largely available. So that is an opportunity which we see on our horizon. But again, investments are much smaller and the risk of impairment is not there.

Next, in chat, we received Q&A. will read the question. And it's a question in English.

For Mr. Alan Draper. Please talk about the changes you want to implement at the U.S. operation now that you are the U.S. CEO. What are the areas that you feel have room to improve? And what KPIs do you view are most important to you? What are the areas of top line growth that you see have the most potential midterm? Any room for M&A in the U.S. Are you ready to answer this?

Yes. This is Alan Draper. So overall, I've been in the position for about 50 days and some of the things that we're already working on are making sure that we have better plant reliability. We do have a relatively aging fleet. So we want to make sure that we're investing in predictive and preventative maintenance and also coming up with additional new capital when that's required as well. So I think reliability is one of the most important aspects that we have to work on.

In regard to strategy, electronics is clearly a strategy for us. We're going to work with the team of the Nippon Sanso Corporation Group in Japan, the Center of Excellence on the electronics side and make sure that we grow the electronics business much more than we have in the past. We've not had as many resources in that organization as we need, and we're resourcing up our organization to make sure that we can do more on the electronics side.

In addition to electronics, we also see a good opportunity in aerospace. We do have aerospace customers today. It's a small portion of our business. But the United States, I think, leads the world in satellite launches and also in rocket launches. So we're going to continue to try to focus on aerospace as well. And M&A is definitely something that we're interested in. There's always distributors that are looking to sell, and we'll always be an opportunistic acquirer. In addition to being opportunistic, we also knock on doors of distributors that we think would be a good purchase for us. They'd have a lot of synergies and that they fit into our profile. So we are looking at building our plant reliability, looking at electronics, looking at aerospace. And of course, we'll look at food and beverage and medical, which are also resilient markets. And then we'll focus on M&A as well. Thank you very much for your question.

This is a follow-up question. Once again, in English, I'd like to read.

The profitability volatility that the U.S. has witnessed over the years. What needs to be done?

Again. So overall, the results of the volatility and the fluctuation in profitability is related to several aspects. First of all, our costs are relatively lumpy. So what I mean by lumpy is at certain points, you might have to have turnarounds and outages. And I think a lot of investors have referred to the fourth quarter of last year, the first quarter of the following year. And we had some major fluctuation, and that was a result of timing of repairs and maintenance. So we have to make sure that we're doing, I'll say, disciplined preventative maintenance, predictive maintenance and also our productivity projects.

We also have under-resourced the organization. So we have to continue to focus on the commercial side of things. So we have to continue to invest in our business and make sure that we have the appropriate staff so that we can grow in applications development and also into markets that we like to invest in such as aerospace as well as electronics.

So it's a combination of things that we have to make sure that we have a relatively good maintenance profile, predictive maintenance, preventative maintenance and also that we really focus on growing the top line. I'm committed to growing our margins across the business. We're going to continue to do pricing, productivity, and I think we'll get the business back on track in the coming quarters. So thank you very much for your question.

Now any questions from the audience? Morgan Stanley [ NBFC ] Securities, Mr. Watanabe, please.

This is Watanabe from Morgan Stanley. Can you hear me?

I have two brief questions. First, about the Japan segment. somewhere, I heard that with regards to the Japan segment, low profit business portfolio is being revisited. And taking a look from your company in the Japan segment, which areas of the Japan business do you think you see room for improvement?

And activists are engaged with competitors. And if you take a look at the Japanese industrial gas industry, do you think there's room for further industry consolidation? I want to hear your view on this point as well. That's my first question.

Thank you for the question. And Mr. Nagata will respond to this question.

Low profit segment review, that was the main theme in the previous midterm management plan as in the material. on the left-hand side, what's written on the left-hand side of this slide, for example, [ Astomot ] Group with them, we are working on propane business. And this is a finance and accounting issue, but JEC [ Cultural ] Center became a joint operation no longer consolidated. And JPY 70 billion to JPY 80 billion decline in revenue is created and JPY 420 billion to -- and there's a decline, but JPY 20 billion increase in profit. But business portfolio review as a result of that, JPY 70 billion to JPY 80 billion we've divested. And we are focusing on main business instead of that. And we are seeing growth in our main business of electronics and industrial gas.

And in the next midterm plan, other than low profit businesses, we want to focus on strengthening profitability more. The low profitable transactions that we have, we have to drill down into them. And the transaction and deal level, we have to be able to make improvement that we think is in the phase we are in now. We have transitioned to this kind of phase.

And about your second part of your question, Nippon Sanso so in Japan, we are not intending to have our company proactively pursue industry consolidation in Japan.

And my second question is about the U.S. segment. Basically, business will mainly be in the U.S. But Latin America, including Latin America, are you intending to expand business in Latin America? Are you intending to expand geographic footprint for the U.S. business?

Thank you for the question. Our company -- we are a global company. As we are starting to be recognized as a global company in that sense, industrial gas, we want to be able to offer as long as there is demand regardless of geographic region, that's our concept. And there are some regions where we have not yet advanced.

But constantly, we want to pursue opportunity. [ NSHT ] Holdings will constantly pursue opportunity. And setting up the ASU from and cylinder filling plant, that's one way to expand. But the current situation is such that geographic areas that we do not have business in, locally, we want to tie up with local gas companies or global gas companies. If they are already engaged in business, we want to collaborate with such companies to do something or another option would be to acquire such local or global companies. And these are the global possibilities we are constantly pursuing.

And Latin America or Central America, what specifically you have in mind rather than ask Alan to respond, I think I should mention the [indiscernible] Holdings. At the moment, we do not have any specific plans. But information network, we have in North America. North America is, of course, geographically close to Central and Latin America, and there's a lot going on by the U.S. government at the moment. But setting that aside, physically, Latin and Central America are going to be close to North America. So we have to broaden our information collection network to constantly pursue possible opportunities. That is what I want to mention.

And for example, not just in the United States, but Central or Latin America, the language used is Spanish or Portuguese in that sense. we need a human-to-human connection. Our European business is headquartered in Spain.

So this connection, we think, is also important. The right timing to enter into a new geographic market, the quality of business and what specific place we should enter into, we need to be able to constantly have information network to collect all of this appropriate information. These are the comments I have.

And I have one follow-up question to Mr. Hamada, Middle East. Do you have a similar concept vis-a-vis Middle East?

Thank you for the question. This once again is a very difficult question. We say Middle East, but frankly speaking, petroleum we think is the strongest impression we have when it comes to Middle East. And there are issues in the Middle East. We hear a lot of news about the Middle East recently, but there's various kinds of industries existing in Middle East related to petroleum.

First of all, on-site gas can be supplied, there is that opportunity. And there are industrial gas manufacturers already conducting business in the Middle East. But frankly speaking, at this point in time, 10 or 20 years or 30 years ahead, when we take a look at the distant future, should we enter into the Middle Eastern market.

As of the end of the previous midterm plan, when I was responsible, including ASU and industrial gas, we -- it was difficult for us to consider the Middle East as a market to enter into. However, maybe on an export and import basis, various chemical companies are conducting business in the Middle East, meaning that standard gas, various analysis becomes necessary. That kind of business, we think constantly exists. And for that, we have what we call standard gas business.

One by one, the vessel or container business to be sold one by one, that kind of business. With the more sophisticated level of chemical companies business, they need higher quality standard gas. this is an area we want to continue to focus on, but it's not that we will be immediately entering into the Middle East. That seems difficult. And the new midterm plan just started and towards the end of the new midterm plan, it depends on what happens to the Middle Eastern conflict, but there might be some new developments on the horizon. This concludes my remarks.

Next, SMBC Nikko Securities, Mr. Shintani, once again, please.

Just one point I'd like to ask you. Earlier, Alan explained about the U.S. Aerospace is the area that you would like to expand. That was the comment.

Well, aerospace is indeed an industry with very large value -- added value, but the entry -- the barrier is also quite challenging. I know that, that is the area where the gas companies are trying to enter into.

Well, there may be a little bit of a business related to the aerospace. How big is it compared to the total revenue? And in order to expand into the aerospace, if you have specific strategy to enter into aerospace, I appreciate -- we'd like to hear.

Well, if Alan happens to have the numbers, then I will ask Alan to respond for that part. But when it comes to aerospace, naturally, in Japan, we have aerospace business. For rocket, launch space chamber to reproduce the outer space environment and how the rocket performs in that environment. The oxygen or the hydrogen are also used for combustion. So the aerospace is the area which uses a wide range of gases and technology to make gas -- to make the auto space environment is a highly vacuum environment is needed. Well, not the regular level of vacuum intensity.

It has to be highly vacuum. So to make the vessel for that container or to create the vacuum state safe, well, not only to the aerospace, but to create the cryogenic or the extremely low temperature environment. Well, that is a potential related to air separation unit. It is a part of the potential related to ASU, which is the vacuum.

So this is the side story, but the Thermos and the vacuum -- well, the Thermos is also based upon this technology. So considering this point, Well, the U.S. and the aerospace industry may use the helium or oxygen or nitrogen. So these are the well-known industrial gases.

But other than that, well, to make the environment, well, the equipment and the installation, high level on the equipment installation is also needed in aerospace. And for us to enter into aerospace business, well, that's the one technological edge that we can utilize. But of course, country-by-country situation may be different. But it's highly -- that's the area which is highly confidential. So the U.S. operating companies and -- it's a U.S. company operating in U.S., but the owner is the Japanese company, Nippon Sanso Holdings. So that part, how is it rated or evaluated in the U.S. business environment, particularly in aerospace.

It's a little difficult to understand. But anyway, it is the highly confidential business, but there are areas which are not that confidential. And we can take an initiative to make inroad into that part of the aerospace. That's one of the channels that we can explore going forward. So Alan, if you have happened to have the current information, please share that with us.

This is Alan Draper. Today, the aerospace business for Nippon Sanso [ Matheson ] is less than 2%, so less than 2% of our revenue.

However, we already have customers in the space, three or four customers that you'd recognize the name are customers of ours. We obviously can't discuss or communicate about who those customers are.

But aerospace customers, they use nitrogen for blanketing, oxygen and hydrogen and helium for propellants, Argon for welding. They're using rare gases. So they're really a good industrial gas customer.

So in order to get closer to them, obviously, you have to have good relationships. So we're always working with our salespeople, regional sales managers and vice presidents to try to get into the customer to develop relationships.

And then the key is really once you have the relationship to show reliability, have good location, good ability to back up your location and make sure that we're in the right location because location means everything when it comes to rocket launches and also satellite launches. Thank you very much.

And we're approaching the scheduled closing time. And we apologize the next question should be the last question. And we have received a question in chat. It's a question in English.

Alan, our volumes have been negative for 3 years now. Do you think this fiscal year, we can see a cyclical recovery in volumes? What are you seeing so far in the last few months? Which industries and areas are you seeing green shoots? What are some areas that can still be drags?

Thank you for the question. In the short term, conclusive of the short-term situation, what we know so far, we would like to share with you, in the short term. It's difficult to forecast the short term as well. And what to factor into or what not to factor into this fiscal year's guidance and midterm plan, we had an extensive discussion as you mentioned before. The instinct, the sense we have is, I will call upon Alan and Raoul to share with us the sense or instinct that they have.

This is Alan Draper. Thank you for the question. So as you mentioned, volumes have been negative in this upcoming fiscal year, industrial production, which is a better correlator than gross domestic product to our industrial gas sales is supposed to be about 0.7% in that range this year, so a little bit less than 1%. And that really should be something that we see on the manufacturing side.

In the first month of the year, we are seeing a little bit of improvement in bulk business and also in the on-site, but we still see that the package and hard goods is weak. And then helium is showing a little bit of positive movement as well as a result of price increases.

But overall, it's going to be -- continue to be a tough year on the base business. When you look at new projects that we brought online, we have two on-site businesses that are coming online or have come online recently. That would be the business in India, the hydrogen business, the [ HEICO ] business in [ NRL ] India and also the business in 1.5, which is in Odessa, Texas.

So that's going to help the on-site business have a pretty decent year. So that's going to give us some momentum. And then hopefully, we'll do better on the bulk side as we did in the month of April. But overall, packaging hard goods still remains relatively soft, and that's a large portion. That's 33% of our business. So packaging and hard goods still remains soft. Thank you very much for your question.

This is Raoul speaking from Europe. As far as concerned with the volume trend, what we are now seeing is a declining trend driven by macroeconomic scenario across most of the geographies and all lines of business, all industrial lines of business.

On the other side, I'm glad to say that through applications, we've been investing pretty much in applications and also in terms of sales force and training our sales force.

So through applications, we've been able to keep our volumes up, and we plan to do the same to be shoring our volumes across the new fiscal year by leveraging applications in the industrial business, referring to both bulk and package.

Where we see a growing trend, which we clearly want to leverage as much as possible is, as I mentioned earlier, the medical business on one side, which is clearly driven by aging population and need for more services on one side and on the other side, the electronic business. There is where we see a growing trend. And last year, we grew double digit. We grew double digit in both medical and electronics, and we want to keep the same momentum also for the new fiscal year.

So all in all, from a macroeconomic perspective, let me summarize. The trend in the market is negative, but we keep our volumes flat by shoring up demand through new applications, while we see a pretty promising and growing trend in medical and in electronics. Thank you for your question.

Well, questions we were not able to take because of the limited time will be responded later. Now we'd like to welcome the closing remarks from CEO, Hamada. Yes. Thank you very much for your participation.

Well, the -- this is going to be the last on the earnings and the presentation meeting that I preside over. Thank you very much for your cooperation over the past 5 years. Thank you.

Thank you very much. With this, we would like to conclude today's earnings presentation meeting. And today's presentation will be made available on our corporate website, IR page later this evening. If you have further questions, please feel free to contact with us. Thank you very much for taking the time to join us today. We appreciate your continued support. With this, we'd like to conclude.

[Interpreted] It's now time to begin the Nippon Sanso Holdings Corporation Earnings Call for Fiscal Year ending 2026 Third Quarter. Thank you very much for taking time out of your busy schedule to attend today. My name is Ishimoto from the IR Department of the Group Finance & Accounting Office. I will be the moderator for this conference. Thank you very much for your cooperation.

I'd like to give you some information about today's conference. First of all, the conference materials or the financial results furnishing and earnings conference -- earnings call reference that we have just released, I'd like all participants to have them at hand.

Next, we have 3 main presenters today: Hamada, President and CEO; Draper, Senior Executive Officer, Group Finance, Accounting Office and CFO. In addition, Group Executive Officer, Group Corporate Planning Office; Miki, Senior Executive Officer, CSO Group Sustainability Management Office; Yoshida, General Manager of Accounting; and Kajiyama, General Manager of IR, are also in attendance.

As for the program today, first, Hamada, President and CEO; and then Draper, CFO, will present the third quarter financial results, along with the presentation materials. Then there will be time for Q&A. Please note that today's session will be bilingual in Japanese and English. [Operator Instructions] Hamada-san will now be starting the presentation.

[Interpreted] Good afternoon, ladies and gentlemen. I am Hamada from Nippon Sanso Holdings. Thank you very much for taking the time to join our third quarter earnings conference call today despite your busy schedules.

Without further ado, let me briefly walk you through the key points summarized on this slide regarding our business performance. Following my overview, our CFO, Mr. Alan Draper, will provide you with a detailed explanation of our financial results.

First, let me provide you an overview of our business operations. The overall sales trends, unfortunately, have not shown robust demand growth and have remained either flat or on the weaker side. On the other hand, in the electronics sector, generative AI data centers or growing semiconductor demand for data centers, sales are on a recovery trend across regions, which we view as a positive development. However, if we look at the macro environment, there are U.S. military actions in Venezuela and concerns over U.S.-Europe tensions regarding Greenland. And after New Year, I don't know whether Japan was the cause, but there are uncertainties regarding Japan-China relationships. So these are all concerns.

And China announces the tightening of the restrictions -- export restrictions to Japan. And dichlorosilane, which is a specialty gas, has been announced that there is an initiation of an antidumping investigation.

We are currently assessing the potential impact on some of our business. And according to my experience, it should not account for a large volume. However, we would continue to closely monitor the trends as well as the actual numbers.

And during this situation, I think each of the regions are doing very well, thoroughly implementing price management and operational excellence or improving efficiencies, including cost reduction. And as a result, profitability has recovered more than we had originally expected.

Now if I may give you the performance highlights. Well, later on, Mr. Alan Draper will provide you with a detailed explanation of the situation in each region and business segment. But I here would like to briefly share the performance highlights for the third quarter, specifically regarding U.S. and Asia and Oceania.

First, the U.S. business. As I mentioned earlier, volume-wise in gas, we cannot say that we have reached a full-scale recovery. However, we have continued execution of price management and thorough cost controls. These have been successful. And in the third quarter nonconsolidated basis, core operating income margin has improved up to 15.1%. From the fourth quarter onward, we will -- we have the full-scale launch of new on-site projects. It has been launched and ongoing price management is conducted. Thorough cost controls as well as productivity improvement initiatives will be worked on. Therefore, we expect continuous improvement in profitability.

As a matter of fact, with regards to the United States, we thought that -- we have been thinking that the industry itself will be more booming. However, the fact that the gas industry volume has not fully recovered, the manufacturing industry using gas has also not been recovering full-fledgedly. So from our perspective, it is slower than our forecast. We were thinking that from the middle to the third quarter, the industry will be recovering and becoming more active in the U.S. However, there may be some geographical matters or political issues leading to this situation. But still, we believe that our company is doing very well.

And when it comes to Asia and Oceania business, as I have briefly touched upon, electronics rather than Oceania, Asia, the sales to the electronics sector is on the recovery track. In the third quarter nonconsolidated basis, core operating income margin improved to 10.7% and EBITDA margin reached 17.9%. According to the current medium-term management plan, segment EBITDA margin target is 17%. So we were able to exceed that. This means that it marks the first time that all segments have achieved this target on a quarterly basis.

As I mentioned at the outset, electronics is for AI data centers impact is, well, giving us a positive result. And I may have said this before, we were expecting an early recovery. However, finally, I think we are seeing that recovery is on track.

Now next, I would like to talk about the status of investment of our company. I earlier talked about the -- that we will be monitoring the world global situation, and we'll be carefully listening to the customers' voices, and we have proceeded with capital investments carefully, taking those into account.

Now we have actually stopped most of our capital expenditure because we have not known what will become of the tariff impact. However, the CapEx through the third quarter totaled to JPY 78.4 billion. Compared to the previous year, it is still at a lower level. However, the industrial gas business -- in order to expand industrial gas business, we need to make investments. Therefore, in the latter half of the year, we have seen more momentum recover. So we would like to catch more of those CapEx projects. However, still, there are investment risks. Seeing the uncertainty in the global situation. we would like to grasp, for sure, the growth opportunities, so that we will be able to grow our business, capturing investment opportunities. And I would like to talk about the backlog situation of CapEx later.

Now topics. First of all, we announced the construction of a, well, in our Tsukuba laboratory at Taiyo Nippon that we will be making a R&D center for advanced materials for the electronics industry called -- well, tentatively called Advanced Electronics Materials Development Building and we expect it to be completed in March 2027.

Now at this new facility, we aim to develop new products that address the not only gas, but liquid materials, new products that address the evolution of the electronics industry. And we would like to also promote development through collaboration, both within our group and with external partners. And as we have been mentioning from the past, the current midterm management plan will end this March. And a new midterm management plan right now is being reviewed proactively.

NS Vision 2026, which is the current medium-term management plan will end, as I mentioned earlier, this March. So as for the new MTP starting from April this year, well, on March 30, next month, we would like to conduct a briefing to explain about the new MTP as our team has announced, and we will have a venue near the Tokyo Station for the briefing. This will be held both face-to-face as well as online, a hybrid format. So we welcome your participation.

And additionally, our fourth quarter earnings announcement and conference call are scheduled for May 11. And the earnings briefing where we will explain our business plans for the next fiscal year and beyond, based on this fiscal year's full year results, is scheduled for May 22.

Now next, I would like to explain our future capital investment execution plan. As in previous presentations, this chart shows the composition of our capital investment plan by customer industry.

Our backlog as of December 31, 2025, stood at approximately JPY 150 billion, no difference from the second quarter. However, there are some replacements. We have added new projects, 6 of them, and completed -- there were 4 completed projects. There are also foreign exchange impacts as well. However, as we mentioned in the first half, we have not been making CapEx -- normal CapEx at all. Therefore, in the second half, we would like to make investments for these projects.

Our industrial gases itself contribute to a sustainable society. And we are communicating this proactively recently, and we don't know whether this is a good categorization. However, if I may, new CapEx contributing to a sustainable society according to our calculation is approximately 38% of our total backlog. As shown on the lower part of this slide, for projects below JPY 500 million are not included here.

So now I would like to hand over to the CEO (sic) [ CFO], Alan, to walk you through the financial results. Alan, please. [Foreign Language].

Please turn to Slide 8 as I start my presentation on performance. Let's go to Slide 9 now, please. For the quarter, October 1, 2025, through December 31, 2025, revenue grew 5.7% or approximately 2%, excluding currency impact compared to the same time last year.

Core operating income increased by 12.3% or 7.6% on a constant currency basis. COI margin improved to 15%, up 90 basis points and EBITDA margin rose 150 basis points to 24.5%.

As mentioned by Hamada-san earlier, this quarter marks the first time that all NSHD business segments exceeded EBITDA margin of 17% and as a group achieved more than 24%, meeting our medium-term plan goal. Year-over-year growth and margin improvements were primarily driven by price management, operational excellence, productivity and best practice initiatives applied across businesses and geographies and also contributions from acquisitions.

On the right-hand side of the page, we summarize the revenue bridge for Q3. Foreign exchange contributed 3.7%, primarily due to yen weakness against major currencies. Price added 1.8%, while pass-through and surcharges decreased about 1%, reflecting lower on-site energy costs. Volumes declined minus 1.8% and then the other category reflects positive contributions from acquisitions in Europe and Oceania as well as strong equipment sales in Japan electronics. There were no significant nonrecurring items this quarter, resulting in operating income increasing 12.2% year-over-year.

Turning to guidance, as shown on Page 23. Today, we're revising our full year revenue and profit outlook. Although gas demand remains soft due to ongoing macroeconomic and geopolitical uncertainty, favorable currency tailwind and continued contributions from M&A and sustained price and productivity actions supported an improved outlook.

We now expect to exceed our original revenue forecast by 3.1%, resulting in JPY 1.33 trillion, and we expect COI of JPY 196 billion, a 2.6% increase compared to our original forecast of JPY 191 billion. The currency rates assumed for the revised forecast are JPY 150 per USD 1 and JPY 170 per EUR 1. In addition, we also expect to achieve our midterm plan EBITDA margin goal of 24%. This one we determined was one of the hardest ones to achieve, and it looks like we're going to achieve favorably.

Please turn to Page 31. Operating cash flow rose 16.5% year-over-year. Investing cash outflows rose 22%, primarily due to the Oceania acquisition. Free cash payments -- sorry, free cash was slightly negative for the 9-month period due to acquisition-related payments.

Now I'll review results by segment. In Japan, price management efforts continued in specialty gases and CO2. However, soft volumes more than offset the revenue growth. Industrial gas-related equipment and installation projects performed well, while electronics-related projects decreased versus prior year. Electricity costs remained stable with a slightly downward trend. The revenue for Q3 in Japan was JPY 100.6 billion, down JPY 0.2 billion or minus 0.2% year-over-year. Core operating income of the segment was JPY 12.6 billion, up JPY 0.4 billion or 3.4%. COI margin improved by 40 bps, which is basis points, to 12.6% and EBITDA margin improved by 70 basis points to 17.4%.

Page 11. Revenue growth in the U.S. was supported by favorable foreign exchange, strong price initiatives and solid equipment installation sales. Inflation headwinds remain, but due to price actions and productivity measures, COI increased year-over-year. Q3 revenue was JPY 92.6 billion, up JPY 2.1 billion or 2.3% year-over-year. Excluding currency impact, it was up 1.3%.

Core operating income was JPY 13.9 billion, up JPY 0.4 billion or plus 2.6% year-over-year, and excluding currency impact, COI was up 2.1%. COI margin and EBITDA margins were 15.1% and 28%, respectively, representing an increase of 10 basis points on COI and 80 basis points on EBITDA. We continue to drive price actions, productivity initiatives and cost reduction and also savings efforts to improve profits of this business.

Slide 12. In Europe, on-site volume softness persisted. However, positive price performance, stable to moderating energy costs and contributions from the Italian acquisition supported solid year-over-year growth and margin expansion. The revenue for Q3 in Europe was JPY 90.2 billion, up JPY 6.9 billion or 8.3% year-over-year. However, excluding currency, revenues were slightly negative at minus 2.3%. Core operating income was up JPY 18.5 billion or up JPY 3.1 billion or 20.4% increase year-on-year, while the COI improvement was a modest -- a more modest 8.6% increase, excluding currency. The core operating income margin improved by 210 basis points to 20.6% and EBITDA margin rose 280 basis points to 33.5%.

Next page, please. Strong revenue and profit growth were driven in the Asia and Oceania segment, primarily by the Oceania acquisition and continued strength in specialty gases and electronics-related installation projects. Q3 revenue was JPY 55.5 billion, up JPY 10.3 billion or 22.7% year-over-year or an 18.1% improvement with constant currency. Core operating income was JPY 5.9 billion, plus JPY 1.9 billion or 47.2% year-over-year. Excluding currency, COI grew at 40.5% COI margin increased 180 basis points to 10.7% and EBITDA margin was up 240 basis points to 17.9%.

Next page, please. Thermos. Thermos experienced weaker results due to sales decline in its core markets of Japan and Korea. In addition, increase in procurement costs more than offset pricing actions and cost optimization efforts. Revenue for Q3 was JPY 7.6 billion, down JPY 0.4 billion or minus 5.1% year-over-year. The decrease was 5.2% ex currency. For core OI, it was JPY 1.3 billion, down JPY 0.3 billion or 17.6% versus prior year. Ex currency, COI was down 19.2%. The segment COI margin declined by 270 basis points to 17.6% and EBITDA margin declined by 240 basis points to 23.2%.

For your reference, please refer to Pages 15 through 21 for the first 9-month detail. I will not cover that information today. As previously explained, we have revised our full year forecast to show updated financial expectations for this fiscal year. And this concludes my comments and full year outlook. Thank you very much for your attention.

[Interpreted] Mr. Hamada and Mr. Draper, thank you for your explanation. We would now like to take questions. [Operator Instructions] So we would now like to take your questions until the scheduled ending time. CLSA Securities, Mr. Cho, please.

[Interpreted] I'm Cho, CLSA Securities. I have a question regarding the European situation. The European margin is improving a lot in the third quarter. And was it the acquisition impact? How much was the acquisition impact? And towards the fourth quarter, the European margin, how do you -- what is your outlook on the margin in Europe for the fourth quarter? Those are the 2 questions.

[Interpreted] For this, I'd like to have Mr. Draper answer the questions based on specific numbers.

Thank you for your question. This is Alan Draper. So overall, we don't disclose the performance, unfortunately, on a region or acquisition basis. You can see that in our walk, you get a fairly good sense of we have a sizable portion that's due to Coregas as well as Kleenheat and Polaris.

But overall, it's not a huge acquisition for Europe. The biggest driver was strong performance was due to lower power pass-through. And then at the same time, they had significant amount of pricing and productivity efforts that went through the organization. So there was some benefit related to the acquisition, but it's not a huge impact when you look at Europe's EBITDA margins.

[Interpreted] So the fourth quarter, do you think that the margin will be similar in the fourth quarter as the third quarter?

Yes, this is Alan again. So overall, margins, it was a good quarter in the third quarter. I think things will be probably pretty similar to what they were in the third quarter to the fourth quarter. There's always a little bit of movement. Power always is an unknown. If power costs go up, we do more pass-through, which is a little bit of a deterioration on your margins.

If power costs go down, there might be a little bit of a benefit. But probably around that range is probably pretty good estimate. We've been in that 31%, 32%, now 33% range the last year. So I expect it to continue in that same range.

[Interpreted] And as for the second point, -- as for the Asian trend, segment margin Q-on-Q and Y-on-Y has been improving. And the background of the improvement is, of course, Coregas acquisition impact, I think that is one thing. But excluding that, the largest is the semiconductor gas sales improvement. Is my understanding correct? Asia's third quarter margin is improving. So I would like to know the background of that and also the fourth quarter outlook as well.

[Interpreted] So again, I would like to have Mr. Alan Draper answer this as well.

Overall, we've been really working hard at the Asia-Oceania segment. I think we hit kind of a low late last year, beginning of this year. We had a lot of pre-acquisition and acquisition costs that came through that kind of brought results down. We had some helium headwinds that while they still are a headwind, they're a little bit more, I'll say, modern normalizing a bit.

So the underlying business is driven by East Asia Electronics. That business is performing well. We're seeing good improvement, good electronics demand on both gases as well as on the equipment side. And I expect to continue to see progress as we get into the fourth quarter into the next year. So I do expect to continue to see this level and even a little bit higher as we move into next year.

[Interpreted] SMBC Nikko Securities, Shintani-san, please.

[Interpreted] SMBC, I am Shintani. And now I'd like to talk about the factor for the revision of the corporate performance. I'd like to check the detail as a positive factor effects, yes, depreciation or price management, productivity gain and a new consolidation factor. On the other hand, the volume are the reason of the negative factor. As much as possible, how much was the impact, the order or the breakdown? Could you elaborate on that?

[Interpreted] Thank you very much. As for the ForEx impact -- presentation. So we'd like to ask Alan-san to respond to that question.

Yes. So thank you. This is Alan Draper. So obviously, we're continuing to see the foreign currency benefit. So that's by far our largest benefit that we have. Underlying volumes are a bit soft. So if you look at it, it's really driven by the foreign currency being offset by a little volume weakness. So we're thinking that in the fourth quarter, volumes are going to continue to stay at this relatively soft pace, maybe minus 1% in that range as a combined NSHD group and the currency is really offsetting that. And obviously, we're still driving price and productivity efforts. So -- but the major driver is definitely the pricing aspect -- sorry, the currency aspect.

[Interpreted] So ForEx has been the major driver. The next contributor is price and productivity. They are on the equal footing, the same level?

Yes, this is Alan. If you take a look at the bridge walks that we have and you look at the third quarter, it kind of gives you a sense for what we're seeing when you look at revenue growth and obviously, the profit side of things. So I don't think we're going to have any major dramatic change from what the third quarter looks like to the fourth quarter.

Fourth quarter sometimes is a little bit stronger with equipment sales, but I don't anticipate any major shift from that 3Q vision when we look at fourth quarter. So that gives you a little insight as to the major drivers.

[Interpreted] BofA, Mr. Enomoto.

[Interpreted] This is Enomoto BofA Securities. I have 3 questions. Number one, electronics improvement. I think the CEO referred to the improvement. Exactly what is happening? Can you elaborate? For example, the demand or order in Japan is increasing for equipment or specialty gas recovery is gaining momentum? Or what kind of field do you have, a live field? That's my first question.

[Interpreted] As for electronics, it's not that this one particular gas has improved greatly. The semiconductor production itself is growing a lot. Therefore, our semiconductor manufacturing factory, we do have factories in various countries and regions. And so there are -- we are seeing great volume in all regions. And also this is not reflected in the numbers. It's very detailed. But as I have mentioned before, the capital -- the installment of construction in Japan, we had 2 large projects.

And other than we also have other projects as well. Therefore, the electronics-related business has increased a lot. And therefore, similar thing is happening in the United States as well. There is one manufacturer ordering us a part of their equipment installment. And we -- that kind of a project is increasing. Therefore, gas uses material and equipment to use gas, both are increasing. That is the situation of electronics. That's all for myself.

[Interpreted] Understood. So recently, it's not that you are seeing a sudden increase lately. It's not that you are seeing an increase in backlog all of a sudden.

[Interpreted] Well, as a matter of fact, in Japan, there are new construction projects, but that is not reflected in the numbers yet.

So the improvement in numbers that you see is not due to some sudden project. It's that our overall volume is increasing. That's all.

[Interpreted] My second question is Europe -- about European market. From this year, the border tax carbon or CBAM regulation has been introduced. Do you see any kind of impact from the CBAM, for example, steel industry or chemical industry, the industry that will impact the CBAM. I think you do have -- make a lot of shipments of industrial gas to those industries. So if you see some sort of situation.

[Interpreted] Well, thank you for your question. I do not have a good understanding in it. So maybe Alan Draper, can you -- Alan, if you do you have any comment that you can make?

Draper. So we had our Board meeting today and our President of the European business was here. And he mentioned that we don't see any impact of this yet. Obviously, we don't know what is going to happen in the future. But as of right now, we don't see any significant impact related to this. So we'll keep monitoring it closely. And if anything changes, obviously, we'll let you know.

[Interpreted] And lastly, sorry, I have a question regarding special project. The Numaligarh India refining construction, whether the construction has completed and from next year, I think it was a HYCO project. So is it going to contribute to your business, HYCO business?

[Interpreted] India's HYCO project has completed, yes, it's construction. And it has been delayed just a little bit than planned. However, in the overall construction, we have made adjustments in the overall scheduling. Therefore, on a timely basis, I think we have completed the construction. And the actual operation will start shortly.

[Interpreted] Mizuho Securities, Mr. Yamada, please.

May I ask you several questions in English. The first one is basically the electric materials. As Hamada-san said that the China seems to be probing the -- I'm sorry, dichlorosilane, DCS. I think anyway, Japanese corporations are basically dominant in this field. Hence, the Chinese probe seems to be kind of -- has some side agenda. So how are you planning to cope with that? And then is there any strong or major implication or impact as a result of the geographical tension mounting between China and Japan in the administrative business?

[Interpreted] Please allow me to respond in Japanese. Currently, it is under investigation. So what will be the impact or the magnitude of impact? Well, as far as we can investigate is that what is the amount and the volume of this material to be shipped and to whom we are shipping to, that is what we study.

Well, the grounds for dumping investigation submitted by the other party is currently under scrutinized. But whether it would be a huge impact or little impact, at this point in time, it is difficult to make such a judgment. So as far as we know, well, first of all, we have to study and examine and decide whether we will respond to this or not. First, we have to have a full study and there is a deadline. So towards the deadline, we will solidify -- examine the situation.

I do appreciate the wise comment regarding the accepting the note. And in relation to that, the -- according to the backlog, electronics backlog seems to be increasing. The overall amount seems to remain similar at around JPY 150 billion outstanding. Is this a reflection of the increasing demand in Americas as well as in other nations? Or is this just basically reflecting the project progresses in Japan?

[Interpreted] Thank you very much for your question. Well, first of all, what I can tell you is that in Japan, the major construction work or investment work for semiconductor was already completed. So this is already completed, reducing the backlog.

On the other hand, in the electronics area, there are some facility-related construction work are available. However, details are yet to come. So on our end, we have a high expectation. So I sincerely hope that this will be added to the number.

And talking about overall capital expenditure, Americas and Europe in different parts of the world, they are on an equal basis. Well, the major item was completed in Japan, and therefore, the ratio of backlog of Japan has been reduced. However, as for the overall value, it has been flattish. However, there are 6 order intake and 4 completed. Well, I cannot show you the breakdown in detail, but there is an increase in order intake, including the bigger one and the smaller one. This is the number we are seeing right now.

Last one, regarding the company's estimate revisions, according to the information shown on Page 23, the company's operating profit, operating income estimate has revised up by around JPY 3.3 billion, whereas the net income after tax for parent shareholder increased much more. What's the gap between the operating profit or operating income estimate increase and net income after tax increase?

[Interpreted] On this matter, we'd like to invite Alan Draper-san to respond.

Thank you for the question. This is Alan. One of the bigger items we have is in Germany, they changed the tax rule. They reduced the tax rate, and that has a pretty significant impact on the quarter and also year-to-date. So it's significant enough. You notice that our taxes did not go up that significantly, and our effective tax rate went down quite a bit, and that's mostly due to the German situation.

We always have a little puts and takes through the tax line, but that's one of the bigger items is related to the new German tax rules. And it's going to continue to decline, I think, through the 2030 is, I believe with the tax, what the government said. And they're doing that to stimulate the economy and more growth and investment. Thank you for the question.

Thanks for the elaboration. So we expect the European income would be less subject to less taxation for next maybe 2, 3 years' time horizon because of the German tax reforms?

Yes. I think overall, when we did this the entry, it's really a deferred tax item that comes through. So it's what your expectations are. So I think it considered what the future rates were as long as they were locked in. If the government and the legislation has finalized it, then it would be coming into play, and I think that was the case. So I can't give you a perfect answer, but I have a feeling most of it's been taken into consideration in this quarter as a result of...

[Interpreted] Morgan Stanley, MUFG, Mr. Watanabe, please.

[Interpreted] I'm Watanabe from Morgan Stanley. My first question is regarding the segment in Japan, if you can supplement a little bit. In comparison with the second quarter, this segment alone margin is decreasing from the -- is it because of the completion of installation of some of the projects? Or are there any other factors? And as for the installation, you said that orders are increasing. But from the fourth quarter, is it -- will that -- will they be contributing to the revenues in the fourth quarter? That's my first question.

[Interpreted] As for the margin of Japan for construction, the margin is relatively good in Japan. But with regards to margin in Japan, it's not only that, but power cost is continuously been contained in a very good level, a slight decrease as well. So presuming from that, there is not much of a big change in the margin. The largest factor perhaps is that CO2 gas volume and the balance of supply and demand, I would not say is deteriorating, but that could be causing a little bit of a difference in margin. That is my interpretation.

And in the fourth quarter, whether the construction projects -- well, there will be some posting of revenue. However, there will be no major project completing in the fourth quarter according to my memory. Therefore, it will be from next year onwards that large numbers will be reflected for the construction project.

My second question is about the United States, the Americas. In the second quarter's briefing, you said that the U.S. margin as of September is slightly below 15%. It has improved to close to 15%. You said we can highly expect in December and I think you were right. Now the 15.1% in December, the background, what has been improved from September? Is it the new plant operation? Or is it the profitability of existing business? So -- and are there any additional factors that we can factor in, in the numbers of January to March?

[Interpreted] As for Americas, United States, as I touched upon earlier, the first half was not very good, and we had expectations that we will grow in the second half. And in the third quarter, the first half of the third quarter was not very good.

As I mentioned, we have decided to be more active and aggressive in pricing and our operational excellence, the improvement of productivity or the improvement in transportation costs, we have thoroughly worked on these projects. And these have been planned -- and when we compare the first half and what we had planned, there were a great gap in the numbers. So we have aggressively worked to correct that. And those efforts have been reflected in the third quarter results.

[Interpreted] So in that sense, the fourth quarter, we will see a further improvement. Is that correct?

[Interpreted] Yes. As for pricing, we will continue. And we also are starting new pricing initiatives as well. If there's anything to add from Alan?

For the question. Just one thing to add. We are expecting an uptick in the margins. However, you've probably seen in the news, there was a major winter storm that went through the United States. I think it affected about 3/4 of the country. That obviously caused some headwinds. So that will be a little bit of a negative.

So we were expecting a pretty good improvement in the fourth quarter. We're still expecting an improvement in that quarter, but the winter storm definitely caused some headwinds that we weren't expecting. So I'm sure you saw it in the news, but that's going to be a little bit of a headwind, but we still should be seeing some positive momentum on margins.

[Interpreted] So your plan does already factor in the winter storm. Is that correct?

Our guidance that we provided of JPY 196 billion of core OI does include the storm. So we did include that since it occurred about 10 days ago. However, there's -- when you talk specifically about the U.S., the U.S. probably shifted a little bit from what we thought it was going to do at the beginning of the month. So -- but our forecast does include the winter storm.

[Interpreted] Now there was some trouble for 5 minutes, the English channel was not effectively working. So sorry for some technical trouble for English channel. Now let me continue Omura-san from the UBS Securities, please.

[Interpreted] I am Omura from UBS Securities. My first question, well, now I'd like to ask you about Europe, which was not so asked so far. The 20% or more, that is the margin for the third quarter, which is quite a high level. Only looking at the first half, it was quite high, but now the margin has further increased in the third quarter. What is the priority of running the European business? So I would like to check that the pricing or the cost reduction or the top line increase, what will be the major factor for the margin? So to how much extent would you like to see a margin increase to satisfy you as a company?

[Interpreted] Later, we'd like to ask Alan-san to supplement my comment. Well, rather than the prioritization, the maintenance of the pricing or the raising the price or as a manufacturer, cost reduction or improving the operational efficiency, they are all facilitated in parallel simultaneously. At the end of the day, looking at the results, well, there might be a difference in the plant utilization. And therefore, even if you take action, the end results may vary. So there might be a margin of error. So should we first raise the price? Or should we reduce the cost? So it does not mean we are running the operation by having any prioritization. No, no, that is not the case. We are able to continue the decent margin level that is because of the fact that we have continuously working on these efforts simultaneously. If you have additional comments, Alan-san, please?

Thank you, Hamada-san, and thank you for your question. Overall, when you think about the margin side, one of the things we've been trying to have a mindset change across the organization is that we can have continuous improvement across the organization. So we're always going to be trying to push the organization margin -- for margin improvement in a sustained way. So that's our goal.

And to get sustained growth, we'd love to see volume growth, if we can. If we can't get volume growth, we're also going to be pushing on price and productivity. But our goal, as I've mentioned to many of the analysts and investors is try to get at least 50 basis points of EBITDA margin improvement a year and make sure that we're growing our profit faster than we're growing sales. So we're going to continue -- doesn't matter what margin level the European business gets to, we're going to continue to try to drive them further and make sure their President of the business continues to drive their organization further as well. Thank you very much.

[Interpreted] My second question, Thermos business, what is your take on the Thermos business right now compared to other businesses, be it revenue growth or the margin improvement. There might be a difference in direction and the magnitude compared to other businesses. And what is your take on the synergy with other businesses in the new midterm business plan, what is your positioning of Thermos? Do you have any take on that?

[Interpreted] Thank you very much. Well, at Thermos, well, we have explained the background or the history of Thermos. Setting that aside, for 30 years as a B2C business, they have been operated independently. Therefore, they have made their capital expenditure and working on the productivity gain, marketing and pricing. So they are different from the industry gas. So the perspective or the angle is different.

So Thermos, in different parts of the world, location, including small one in Japan, we have 5 facility for production. So they have their own business plan. And based on that, they will go ahead with their business as a holding. We would like to support the Thermos business.

So we are not demanding the synergy with the industrial gas. We are not pushing that. In the area where we are running the industrial gas, we believe that the market is very important. So we have to listen to the voice of our actual users. So from that perspective, even in the area of industrial gas, I think that Thermos has a good marketing methodology, which will be effective in the industry gas.

Well, talking about the Thermos business, the business is promoted together with a partner in a different country, Asia, Japan and Korea, America, well, the volume is not so huge, but Europe, so we have the sales network in different parts of the world and the situation varies from one country to another. And the users' preference and the orientation is different.

So single-mindedly having a heavy production in one particular production site, rather than that, listening to the voice of the market, we will have a production in different sites. Currently, this does not require significant capital expenditure because we have a preexisting plant with sufficient production capacity to secure sufficient cash. That is the nature of this industry. From that perspective, as a parent and a holding, we would like to render support to Thermos business. Will that do?

[Interpreted] Yes. Thank you.

Next, [indiscernible] Asset Management, Mr. Hayashida.

[Interpreted] Hi, I'm Hayashida. I have a question regarding electronics gas. In the third quarter, the electronic gas revenue sales year-on-year, how much did it grow? That's my question. In Asia and Oceania, excluding currency impact, it grew 18%. So is it equivalent to that or not? That's my first question.

And on a related note, as you commented, I think you are starting to see a boom in this area. And then towards next year, what kind of growth are you expecting next year, just a rough image?

[Interpreted] Thank you very much. Right now, the electronic gas figures are not in my hands right now, so I cannot give you specific numbers. But maybe if Alan has some numbers, I would like to have him answer. But including memory, it is true that manufacturing is increasing.

In particular, Korea, a large manufacturer and a Japanese manufacturer and famous manufacturers in the U.S., they are increasing gradually the production level. And as was mentioned, 18% is a number that we are seeing. It depends on the product, but similar to that level, I think, is being enjoyed throughout the world.

Semiconductor manufacturing factories process is largely changing recently. They are not using -- in some cases, they are using different gas from conventional gas. So how much new gas they are going to use and how we are going to evaluate that, we would like to have such information and how to respond to their request is something that we need to figure out.

But it's not that all gases can be produced locally and shipped and used locally. Some may have to be manufactured in Japan and shipped out to U.S., et cetera. So how much gas is used where, of course, we need to do some marketing investigation. So that will be linked to the manufacturing capability of companies. And if Alan, you have the numbers, can you explain?

Yes. This is Alan Draper. So right now, we are not disclosing, we don't disclose kind of volumes by business segment. We just started disclosing volumes for the total company maybe 2 years ago, and we're assessing as an organization whether we want to start disclosing more to the investors. So we know it's something that everyone is asking for. We just want to make sure that we feel comfortable and we may do that going forward. So unfortunately, we can't disclose that now. But I will say the East Asia Electronics business is doing a lot of the carrying when you strip out the acquisition, they're carrying the weight to get to positive volume activity. Thank you very much.

[Interpreted] With this, we would like to conclude the Q&A session. Prior to the conclusion, I would like to make some announcement. On the 31st of -- on the 30th of March, we will have the announcement for the new midterm plan. And March 24, we will have an announcement of the midterm business plan. So if you haven't replied to your participation yet, please let us know. With this, we would like to conclude the earnings call.

The contents of today's call will be made available on our corporate website IR page later this evening. If you have any questions or require any further information, please feel free to contact our IR department. Thank you very much for taking the time to join us today. We truly appreciate your continued support. Thank you.

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