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We will now start the TDK Corporation Full Year performance briefing for the fiscal year March 2026. Thank you very much for taking the time to join our briefing today. First, let me introduce the attendees. President and CEO, Saito Noboru; Senior Executive Vice President, CFO, Tetsuji Yamanishi; Executive Vice President, Sato Shigeki; Corporate Officer, Sashida Fumio; Corporate Officer, Tsutsui Takao. That is all for the attendees. Today, after presenting the full year results and projections for the fiscal year March 2027 and also midterm planned progress, and then we will have a Q&A session. The entire session is scheduled for about 90 minutes. Today's materials are available in both English and Japanese on our website. So please refer to them as well. The floor is yours, sir.

Hello, I am Saito. Thank you very much for joining us today. At the outset, let me summarize what we want to communicate today. For the fiscal year March 2026, we achieved increased sales and profit, breaking past records. Free cash flow exceeded our assumptions, and we revised shareholder returns upward from the initial plan and raised dividends. For the fiscal year March 2027, although there are headwinds such as tensions in the Middle East and lower ICT device production, such as smartphones due to soaring memory prices, we will continue to reinforce the management conscious of Control the Controllable, that is improving our capabilities. While the midterm plan targets are generally expected to be achieved, we will further enhance business portfolio management.

Today, I will elaborate on the investment in the AI ecosystem, a major potential for us in the mid- to long term, highlighting progress on our growth strategy on AI data center-related products. In addition, we are intensifying our engagement with investors and analysts. At the Investor Day scheduled for September 1, we plan to talk about our software technology as a newly added core and human capital. These are the key points for today. Now let me pass the floor to Mr. Yamanishi.

I am Yamanishi. I will present the highlights of the consolidated results. First, the highlights of the full year results for the fiscal March 2026. In the electronics market, which affects our performance, ICT-related production remained solid year-on-year and demand for nearline HDDs for data centers also stayed strong. In the industrial equipment market, demand for renewable energy remained firm. On the other hand, in the automotive market, battery EV demand continued to be weak, resulting in a component demand below initial expectations. Under this environment, component demand in the ICT and industrial equipment market remained solid, posting year-on-year revenue growth in all segments. In total, sales were up 13.6% and the profit increased 21.5%, breaking past records for both net sales and operating profit.

Next, I will provide the full year P&L overview. Including the FX impact headwind to net sales of about JPY 2.5 billion and operating profit of about JPY 10.5 billion, net sales were JPY 2,504.8 billion, up JPY 300 billion or 13.6% year-on-year. Operating profit was JPY 272.4 billion, up JPY 48.2 billion or 21.5%. Profit before tax was JPY 276.8 billion, up JPY 39 billion or 16.4%. And the net profit was JPY 195.7 billion, up JPY 28.5 billion or 17.1%, marking record highs in net sales and all profit items. EPS was JPY 103.09. The FX sensitivity for operating profit is estimated to be about JPY 2 billion for JPY 1 move to $1 for a year, same as before and about JPY 300 million to euro.

Next, the performance by segment for the full year. First, passive component sales for the industrial equipment and automotive markets increased, posting net sales of JPY 593.2 billion, up 6% year-on-year; and operating profit, JPY 41.8 billion, up 22.8% year-on-year. For ceramic capacitors, sales for the automotive market and industrial equipment increased, leading to higher sales but lower profit due to lower average selling prices.

Aluminum electrolytic and film capacitor sales for the industrial equipment market such as renewable energy and AI servers increased and net sales increased, while structural reform expenses of JPY 2.8 billion were recorded mainly in the first half for the portfolio management, profit increased. For inductive devices, sales for the automotive and industrial equipment markets increased and posted higher sales, but profit slightly decreased due to mix deterioration. High-frequency components. Sales for the ICT and industrial equipment markets decreased, but profitability improved. Piezoelectric material products and circuit protection components sales increased for the industrial equipment and net sales and profit increased.

Next, the Sensor Application Products segment. Net sales were JPY 224.6 billion, up 18.6% year-on-year and operating profit, JPY 20.7 billion, a fourfold growth. Temperature and pressure sensor sales increased for the automotive market and net sales increased, but profit decreased due to a weaker mix and other factors. Magnetic sensors, sales of TMR sensors for smartphones increased and the sales for automotive also increased, posting higher sales and profit for magnetic sensors as a whole. MEMS sensors, on top of microphone sales growth for the ICT, sales of motion sensors for industrial equipment increased and the MEMS sensor sales increased as a whole, turning from the previous year's loss to profit, contributing meaningfully to overall sensor earnings.

Next, the Magnetic Application Products. Net sales were JPY 262.9 billion, up 17.6% year-on-year and operating profit JPY 27 billion, a significant increase of about 8x. HDD heads and suspension assemblies. Sales volume for nearline HDDs increased about 14% for heads and about 35% for suspensions, recording a significant increase in sales and profit. Magnet sales increased for the automotive market, resulting in net sales growth and the loss is shrinking due to cost improvement effects, including quality enhancement. Energy Application Products. Net sales were JPY 1,370.3 billion, up 16.5%. Operating profit, 246.7% (sic) [ JPY 246.7 ] , up 5.2%. Rechargeable batteries. Small capacity battery sales for smartphones increased with new models. And the medium batteries sales also grew for the industrial equipment. Rechargeable batteries in total grew both in sales and profit. Power supplies for industrial equipment showed a gradual recovery in demand and both sales and profit increased.

The factors for changes in net sales and operating profit by segment from the third quarter to fourth quarter. First, in the passive components, sales were up [ JPY 2.5 trillion, ] 1.6% and operating profit was down JPY 4.2 billion, partly due to the fixed asset taxes. Ceramic capacitors sales for the automotive market decreased, but sales for industrial equipment for AI data centers and others increased, resulting in higher sales and profit remained virtually flat. Aluminum and film capacitors saw increased sales for renewable energy and AI data centers. Net sales and profit increased. Inductors, while sales were flat, profit decreased due to mix deterioration and the utilization losses from the Chinese New Year holidays in facilities in China. High-frequency components saw a decrease in sales for the ICT market due to seasonality and sales and profit decreased. Piezoelectric products and circuit protection components sales and the profit increased.

Next, Sensor Application Products. Sales decreased by JPY 2.9 billion, 4.9% and operating profit significantly decreased by JPY 5.7 billion. Temperature and pressure sensors sales were flat, but recorded losses due to structural reform expenses of JPY 300 million. Magnetic sensors, while sensors -- sales of Hall sensors were flat, sales of TMR sensors for ICT decreased with seasonality and net sales decreased for the total magnetic sensors. Profit significantly decreased due to the structural reform expenses of JPY 1.2 billion in Hall sensors. MEMS sensors sales of MEMS microphones and motion sensors were flat, but the profit decreased due to the structural reform expenses.

Next, the Magnetic Application Products. Sales increased by JPY 5 billion, 7.1% from Q3 and operating profit was flat. HDD heads sales volume increased by 9% and sales and profit increased, while sales volume of suspensions was down 5% due to the reaction to front-loaded shipments in the Q3 and sales and profit decreased. For HDD heads and suspension as a whole, sales increased, but the profit decreased. In magnets, we are proceeding with price pass-through of material prices. Sales increased and the loss has narrowed.

Finally, Energy Application Products Sales decreased by JPY 32 billion or 8.5% Q-on-Q and operating profit decreased by JPY 25.8 billion or 38.3%. Sales volume of small capacity batteries for the ICT market decreased by about 14% due to seasonality and the sales and profit decreased. Power supplies for industrial equipment showed a trend in recovering demand and sales and profit increased.

Next, analysis of JPY 48.2 billion increase in operating profit. Increased sales volume across all segments resulted in JPY 128.6 billion increase in profit. Rationalization and cost reduction of JPY 18.8 billion and restructuring effects implemented in the previous term of JPY 5.9 billion contributed to the higher profit, while selling price fluctuation had a negative impact of JPY 53.2 billion. SG&A expenses increased by JPY 44.6 billion due to higher R&D expenses, mainly in rechargeable batteries with accelerated development of new technologies and products. Although there was a negative impact of JPY 3.3 billion from the decrease in one-time income from the previous year, JPY 6.6 billion decrease in restructuring expenses and negative FX impact of JPY 10.6 billion. In total, the profit increased by JPY 48.2 billion from the higher sales volume.

Next, cash flow situations. For the full year, operating cash flow was JPY 507.7 billion, and the investment cash flow saw an increase in CapEx, mainly for rechargeable batteries in new products and technologies. In net, it was up JPY 133 billion year-on-year. Free cash flow was JPY 129.9 billion, down JPY 71.1 billion year-on-year, but it trended above the expected level.

Next, the full year projections for the fiscal year March 2027. First, I will talk about the production volume forecast for major devices as the assumptions for projections. For the automotive market, we expect total production to decrease by about 1% and xEVs to increase by about 13%. For smartphone production volume in the ICT market, we forecast 1.112 billion units, 10% decrease impacted by memory shortages. The total HDD market will decrease by about 2%, but demand for AI data centers will remain strong and we expect production of nearline HDDs for data centers to increase by 7%. For laptops and tablets, we expect decreases by 12% and 8%, respectively, due to memory shortages similar to smartphones. With growth in demand for AI servers, we have included the outlook for AI serverables, which will increase by 21%.

Next, the consolidated earnings projections for the fiscal year March 2027. Based on the device market forecasts and the recent demand trends, our full year projections are JPY 2.58 trillion in net sales, operating profit, JPY 295 billion and net profit JPY 225 billion. For exchange rates, we assume JPY 150 to the dollar and JPY 175 to the euro, roughly the same level as the average for the fiscal March 2026. We forecast free cash flow of JPY 60 billion as we plan a significant increase in CapEx for midterm growth. For business portfolio management, we plan about JPY 6 billion in onetime expenses such as restructuring costs. For the dividend per share, considering the profit increase, we plan JPY 20 each for midyear and year-end, JPY 40 for the full year.

Next, the image of net sales changes by segment for the full year. Since the currency impact is minor, we will compare based on disclosed figures. For passive components, sales of inductive devices for automotive and products for AI servers, including aluminum electrolytic capacitors will grow, thus 5% to 8% increase overall. Sensor application products, while magnetic sensor sales volume will decrease, we expect an overall range of flat to plus 3% with sales growth of new microphone products in MEMS sensors, magnetic application products with nearline HDD heads sales volume increase about 50% with orders from captive manufacturers and the suspension sales volume up about 22%, leading to a significant increase by 21% to 24% overall. Lastly, energy application products, while smartphone production decreases about 10%, we expect small capacity battery sales volume to be down about 7% due to improved mix and share gain, resulting in a range of minus 3% to flat overall.

Next, I will explain the changes in operating profit for the fiscal year ending March '27. We project JPY 20 billion increase due to higher sales volumes, primarily in passive components. We anticipate JPY 28 billion increase from profitability improvements in business currently classified and as undergoing improvement such as HDD heads and aluminum electrolytic capacitors. We expect JPY 4 billion increase from loss reduction resulting from exiting businesses such as EV power supply and camera module actuator businesses. Furthermore, we plan to absorb JPY 45 billion impact of selling price fluctuations by enhancing cost competitiveness through rationalization and cost down effect JPY 30 billion effects of structural reforms from previous years, JPY 3 billion, reduction in one-time expense, JPY 9 billion.

Regarding expenses for future growth, we plan an increase of JPY 19.4 billion in SG&A expenses primarily for R&D to strengthen new product and technologies in secondary batteries and HDD heads and an investment of JPY 5 billion, mainly in R&D for new business expenses such as it's AI-related businesses. Finally, including a minor impact of JPY 2 billion from yen appreciation, we project an overall increase in operating profit of JPY 22.6 billion.

Next, I will explain the projection for various expenses. For the CapEx, we plan a total of JPY 370 billion, actively investing in new technology and product launches for small batteries as well as facilities for HAMR compatible HDD heads and further capacity expansion for suspension. Depreciation, we project JPY 240 billion, reflecting the increase from capital investments made in previous fiscal year. R&D expenses, we plan for JPY 310 billion, focusing on developing new technology for secondary batteries, HAMR-related development for HDD heads and accelerating development to expand new businesses such as Edge AI.

Lastly, I will explain about dividends. Our policy for the current midterm management plan is to provide shareholder returns based on 35% payout ratio. For FY '26 March, we initially planned an interim dividend of JPY 16 and a year-end dividend of JPY 18. However, based on increased profit, we have raised the year-end dividend to JPY 20, totaling an annual dividend of JPY 36. For FY '27 March, we plan to increase the dividend to JPY 40 annually with both interim and year-end dividends at JPY 20 each. We will continue to consider appropriate shareholder returns based on future profit performance and our cash on hand situation. This concludes my explanation. Thank you very much.

Now I will explain the progress of our midterm management plan. I will explain the actual results and projections for financial KPIs of this midterm management plan. In FY '26 March, we achieved record high sales and profits at every level, meeting all of our KPIs. For FY '27 March, the final year of the plan, we will strengthen both financial and nonfinancial initiatives to achieve our targets and focus on capital profitability by further enhancing our strengths. Regarding the progress of our capital allocation policy, we initially expected roughly JPY 1 trillion in operating cash flow over the 3-year period. However, since the FCF exceeded our initial expectations in the first 2 years, we now forecast a total 3-year surplus of JPY 300 billion. Of this, approximately JPY 130 billion will be used flexibly for strategic investments. And for the CapEx, we are going to add JPY 200 billion, primarily for the Energy and Magnetic Application segment.

For energy, we are increasing investment in related equipment to meet the strong demand for innovative battery technologies. For magnetic applications, we are expanding the capacity to meet strong demand for both heads and suspensions. The investment for head is specifically for HAMR production launch. Regarding strategic investment, as we did with the acquisition of SoftEye last year, we will continue to invest actively in the AI ecosystem.

Next, I will explain the progress of 3 key points of our new midterm management plan. Regarding the first point, strengthening cash flow management. As I have explained, we have exceeded our initial projections. Regarding the third point, the evolution of Ferrite Tree strengthening nonfinancial capital, we have made various advances. We will continue to enhance these alongside our sustainability and DX initiatives to evolve the Ferrite Tree significantly. Regarding the second point, proactive business portfolio management, I will explain this in detail in the following slides. As I mentioned in last November, we are strengthening, accelerating and promoting proactive business portfolio management to achieve an ROE of 15% or higher an ROIC of 12% or higher. Our portfolio management is primarily about promoting growth strategy. The key points are: first, organic growth and profitability improvement of growth driving business; second, actions for business to be intensively monitored. Third, inorganic growth, including R&D, CVC investments and M&A.

As we have mentioned previously, we view various AI-related applications as part of an AI ecosystem. This slide shows the sales growth performance and projections for AI ecosystem market, which I explained last April. Last year, it accounted for slightly over 10% of total company sales. By FY '27 March, it is expected to grow by 25%, reaching around 15% of total sales. Today, I will focus on our blue and green existing products and the new green shaded business focusing on semiconductor manufacturing equipment. First, regarding our HDD head and suspension business among our existing products. Demand for storage capacity in the HDD market is growing stronger than initially anticipated. HDD manufacturers are responding to this demand by increasing storage capacity per drive rather than increasing unit volume. This presents a major business opportunity for us. We have already started mass production of MAMR technology, which enables high-density magnetic recording in 2 years, we plan to launch mass production of HAMR and increase our high value-added product ratio and make our HDD head business a high profit venture.

Next, regarding passive components, we possess a wide product lineup to support AI data center infrastructure. Data center power unit voltages will increase to 400 to 800 volts. We see this as an opportunity for our high-voltage capable products where we have a competitive edge in xEV applications such as aluminum capacitors, MLCCs and film capacitors. We are also strengthening the low-voltage domain. We announced the establishment of a joint venture with Nippon Chemical Industrial on April 2. This joint venture will accelerate the development and materials for low-voltage, high-capacity MLCCs used in data centers. We are also enhancing inductors. Vertical power deliveries, which addresses a low-voltage high current challenge is an opportunity for us to help reduce power consumption in data centers. We hold various inductor technologies, wire-wound, multilayer and thin film and are accelerating capacity expansion for thin film inductors, which will contribute to earnings in this term.

Demand for thin film inductors for optical transceivers and chip beads is also robust. Through these initiatives, we plan to increase sales of passive components for AI data centers by approximately tenfold. We will continue to refine our competitive edge in both high-voltage and low-voltage areas, executing each strategy with timely and aggressive investment.

Next, I will explain the progress of our initiatives for semiconductor manufacturing equipment as presented at the Investor Day on November 28. We sell equipments such as load ports and flip chip bonders. We plan to expand this business by combining high-density, high-precision mounting technology with high reliability and high heat dissipation materials to contribute to reduce power consumption in order to expand our business. And today, I will focus on the progress of our semiconductor bonding materials. We have acquired technology from Naphra related to nanocomposite materials, which offer higher heat dissipation than the precious metals like silver currently used for loaded and power IC bonding materials. This material offers numerous advantages of heat resistance reliability and heat dissipation.

We have decided to aim for the industry's first mass production of this material. We plan to begin mass production for some customers during the next fiscal year. We have already received many inquiries and are considering expanding this to our internal product lineup. This material holds great potential for reducing power consumption in high-density packaging and is expected to expand into many markets beyond semiconductors. Going forward, we will be collaborating with our partners and enhance this business. And therefore, please have great expectation to us.

Next, I will explain the progress of our portfolio management. Out of 29 total CBUs, 2 business units have reached profit base. The number of businesses under improvement that have a clear path to profit base have increased from 9 to 13. These are primarily passive component CBUs. We will determine the direction for the 5 CBUs currently under discussion by the end of this fiscal year, which is the final year of the midterm plan. Additionally, while the effect is about JPY 32 billion from FY '26 to FY '27 March, we estimate the cumulative improvement effect during this midterm plan to be approximately JPY 90 billion. Following the progress made of our portfolio management, ROIC by segment has improved as shown here. We will continue to focus on capital profitability to raise the ROIC-WACC spread and aim for expanded cash flow.

Finally, regarding inorganic growth, which is the third pillar. In April, we reorganized the corporate marketing and incubation group integrating the factory component and sensor sales teams to establish a sales and marketing headquarters responsible for company-wide sales. We have also made the incubation group independent and placing it within the R&D center to further strengthen new business creation. Through these changes, we will transform our value creation cycle to be more agile and more efficient. At the September Investor Day, we plan to explain our efforts regarding human capital, the root of Ferrite Tree and software technology such as SensEI and the AR platform. Through this transformation, our value creation chain, we will continue to grow the Ferrite Tree sustainably. This concludes my presentation. Thank you for your attention.

We would like to start TDK Corporation's Third Quarter Financial Results Briefing for the fiscal year ending in March 2026. Thank you for being here despite your busy schedules. Let me introduce the participants. Senior Executive Vice President, CFO, Tetsuji Yamanishi. Executive Vice President. Shigeki Sato. Corporate Officer Fumio Sashida. Corporate Officer, [indiscernible]. That's all the participants from the company side.

We will first cover financial results for the third quarter of fiscal year ending March 2026 and the full year forecast before moving on to Q&A. The entire session is about 60 minutes. The handout materials used during the briefing are available on the company's website, both in Japanese and English.

Now Mr. Yamanishi, the floor is yours.

This is Yamanishi speaking. Thank you very much for joining TDK's earnings call for the third quarter of fiscal year ending March 2026. I will now begin with a summary of our consolidated results. First of all, these key points for the 9-month period from April to December. In the electronics markets that drive our results, ICT-related production remained solid year-on-year and nearline HDD demand for data centers stayed strong.

In contrast, in the automotive market, battery EV demand remained weak and automotive parts demand was below our initial assumptions. In this environment, solid component demand in the ICT and the industrial equipment markets drove year-on-year revenue growth across all segments for the 9-month period. Overall, net sales rose 11.3%, and the operating profit increased 10.4%, both reaching record highs for the 9-month period.

Next, I will provide more details on the 9 months results. Including FX impacts, approximately a JPY 29.4 billion tailwind to net sales and a JPY 9.3 billion headwind to operating profit. Net sales were JPY 1,858.6 billion, up JPY 188 billion or 11.3%. And operating profit was JPY 230.7 billion, up JPY 21.6 billion or 10.4% year-on-year. Profit before tax was JPY 235.1 billion, up JPY 17 billion or 7.8%. Profit attributable to owners of parent was JPY 181.2 billion, up or JPY 20.3 billion or 12.6%. As a result, we achieved record high net sales and profit at every level for the 9-month period ended Q3.

EPS was JPY 95.48. FX sensitivity is JPY 2 billion on annual OP for a JPY 1 move against the U.S. dollar and JPY 0.3 billion against the euro. Next is performance by segment for the 9 months ended December. In Passive Components, net sales rose 3.2% to JPY 438.2 billion, as higher sales to industry equipment market more than offset the lower sales to the automotive market.

Operating profit fell 25.6% to JPY 30.4 billion. Ceramic Capacitors achieved higher sales on increased sales to Automotive and Industrial Equipment, while the profit declined due to lower average selling prices. Aluminum electrolytic and film capacitors posted higher sales, although sales to the automotive market decreased. Sales to industry equipment increased, especially for renewable energy and AI servers. Profit increased on a net basis, excluding JPY 2.7 billion restructuring costs recorded in Q2 as part of our portfolio management initiative.

Inductive Devices, saw higher sales on increased sales to ICT and Automotive, but profit fell slightly due to an unfavorable product mix. High-frequency components declined in both sales and profit, reflecting weaker sales to Industry Equipment and ICT. PSO Electric Materials and Circuit Protection Components increased net sales on stronger sales to Industry Equipment, but profit declined due to the stronger yen.

In Sensor Application Products, net sales increased 17.3%, to JPY 167.7 billion, and operating profit was JPY 19.2 billion, up about 3.5x year-on-year. Temperature and Pressure Sensors posted higher sales on stronger sales to automotive, but profit declined due to deterioration of product mix. Magnetic Sensors achieved higher sales and profit, driven by increased TMR sensor sales to the smartphone market.

In MEMS sensors, microphone sales to ICT market increased, and the motion sensor sales for Industrial Equipment also grew. As a result, MEMS sensors posted higher net sales year-on-year and returned to profitability greatly contributing to the Sensor segments expanded earnings.

In Magnetic Application Products, net sales increased 13% to JPY 186.8 billion and operating profit rose to JPY 19.4 billion, up nearly fivefold year-on-year. For HDD heads and suspension assemblies, nearline HDD related sales volume increased by 15% for heads and over 30% for suspensions, driving a significant growth in both sales and profit. Magnets declined in sales but cost improvements, including quality-related enhancements helped improving profitability, although the business remained at a loss.

Next, in Energy Application Products, net sales increased 14.4% to JPY 1,025.2 billion, and the operating profit rose 4.3% to JPY 205.1 billion. Rechargeable Batteries delivered higher net sales and profit overall with small capacity products for smartphones achieving higher unit sales, partly helped by a new model introduction and medium products achieving stronger sales to the industrial equipment market. Power supplies for Industry Equipment declined in sales as demand has not recovered meaningfully, but profit increased due to improved product mix.

Let me move on to Q3 quarterly performance. Including FX impacts of plus JPY 12.3 billion in net sales and minus JPY 0.1 billion in operating profit, net sales were JPY 675.2 billion, up JPY 94.2 billion or 16.2% year-on-year and operating profit was JPY 83.1 billion, up JPY 7.3 billion or 9.7% year-on-year. Profit before tax was JPY 87.6 billion, up JPY 6.8 billion or 8.4%. Profit attributable owners of parent was JPY 69.8 billion, up JPY 14.6 billion or 26.5% year-on-year. And EPS was JPY 36.77.

Next, I will explain about the factors contributing to the increase and decrease in segment sales and operating profit from the second quarter to the third quarter. The Passive Components segment saw net sales increase by JPY 5 billion or 3.4% from the second quarter and operating profit increased by JPY 4.5 billion, excluding onetime expenses of JPY 2.7 billion. Ceramic Capacitors saw increased sales and profits due to higher sales to the automotive market.

Aluminum electrolytic film capacitors remained largely flat in both sales and profits, excluding the JPY 2.7 billion restructuring cost recorded in the second quarter. Inductive Devices saw increased sales due to higher automotive market demand, but profit remained at the same level as the second quarter due to factors such as deterioration in the product mix. High-frequency components experienced a decline in sales due to reduced automotive market demand, but profit increased due to improvements in the product mix. Piezoelectric and circuit protection components saw increased sales and profit due to higher demand in the Industrial Equipment market. Sensor Application Products saw a JPY 1.7 billion or 2.7% decrease in net sales compared to the second quarter with operating profit decreasing by JPY 2.2 billion.

Temperature and Pressure Sensors experienced decreased sales and profits due to lower automotive market sales. Magnetic sensors saw a slight decrease in overall sales and profits partly due to seasonal declines in demand for TMR sensors in the ICT market. MEMS sensors saw reduced sales and profits overall as microphone sales to the ICT market declined due to seasonal demand reduction. And Motion sensor sales to the industrial equipment market decreased. However, the business overall remained profitable.

The Magnetic Application Products segment saw net sales increase by JPY 9.9 billion, 16.1% from the second quarter. And operating profit increased by JPY 1.9 billion, 34%. HDD heads saw sales volume remained largely flat but as the mix of new products improved and led to a higher average selling prices, sales increased. HDD suspensions saw sales volume increased by approximately 23% due to rising demand for nearline HDDs, leading to increased sales and profit for both HDD heads and suspension assembly.

[indiscernible] Also saw increased sales and reduction in losses as efforts to pass on higher material costs to selling prices progressed. Lastly, the Energy Application Products segment saw net sales increase by JPY 14.5 billion or 4% from the second quarter while operating profit decreased by JPY 14.9 billion, 18.1%. Sales of small capacity batteries for the ICT market declined seasonally in volume but increased sales of small capacity battery packages led to higher overall sales for rechargeable batteries.

Operating profit decreased due to the lingering impact of significant material price increases. Sales of power supplies for Industrial Equipment remained largely flat. Sales of EV power supplies decreased due to reduced battery EV demand, but the deficit narrowed.

Next is the analysis of the JPY 21.6 billion increase in 9-month operating profit up to the fourth -- third quarter sales volume growth for rechargeable batteries, HDD heads and suspensions and sensors contributed to a JPY 88.5 billion profit increase. This was offset by a JPY 41.7 billion decrease due to the impact of selling price fluctuations despite JPY 11.2 billion profit increase rationalization and cost reductions and a JPY 4.9 billion profit increase from benefits of restructuring implemented in the previous period.

SG&A expenses increased by JPY 29.8 billion, mainly due to higher R&D expenses, particularly for rechargeable batteries, where development of new technologies and products is accelerating. Although there was a JPY 2.2 billion decrease due to the absence of onetime gains recorded in the previous year and the JPY 9.3 billion decrease due to the impact of stronger yen, the overall increase in sales volume resulted in a net increase of JPY 21.6 billion.

Next, I will explain about the cash flow situation. With the first 9 months of this fiscal year, operating cash flow was JPY 353.2 billion. Investment cash flow increased by JPY 92.8 billion year-on-year, primarily due to increased CapEx focused on rechargeable batteries, including new products and new technologies. Free cash flow was JPY 104.9 billion, a decrease of JPY 108.6 billion year-on-year, but it remains above the projected level for the current period.

Next, I will explain about the full year forecast for the fiscal 2026 period. This is an overview of segment-specific sales fluctuations for the fourth quarter. The average exchange rate for the fourth quarter has been revised from the previously assumed JPY 145 to JPY 153 per dollar. For easier comparisons, we will explain the changes excluding exchange rate impact.

First, for the Passive Components. We expect inducted devices to increase for all for the automotive market and aluminum electrolytic capacitors to increase for AI servers. Overall, we anticipate flat to a 3% increase. Sensor Application Products, we expect sales of magnetic sensors, MEMS sensors for smartphones to decrease seasonally. Overall, we anticipate a decrease of 8% to 5%.

Going to Magnetic Application Products. HDD heads are expected to see an approximately 8% increase in sales volume for nearline HDD applications. Suspensions sales are projected to decrease by about 6% due to some orders being brought forward to the third quarter. Overall, we anticipate a plus 7% to plus 10% increase.

For Energy Application Products, we expect sales of small capacity batteries to decline due to seasonality in the smartphone market, resulting in an overall decrease of minus 18% to minus 15%.

Lastly, I will explain the consolidated earnings outlook for the fiscal 2026 period ending in March. As explained earlier, in the electronics market during the 9-month period up to the third quarter, sales of rechargeable batteries and sensors expanded driven by factors such as the launch of new smartphone models. Furthermore, demand for HDDs for data centers remain robust and sales of HDD suspensions performed well.

Under the circumstances, third quarter results exceeded the assumptions made at the time of the October 31, 2025 announcement, partly due to the weaker yen. Based on these factors, we have revised our full year earnings forecast upward from the previous announcement. We now project net sales of JPY 2.47 trillion, operating profit of JPY 265 billion and net income attributable to owners of parent of JPY 190 billion.

The fourth quarter exchange rate assumption is JPY 153 to the dollar. Free cash flow is also expected to increase by JPY 35 billion from the previous forecast to JPY 115 billion, partly due to the contribution from increased profits. As part of promoting business portfolio management, we expect to incur approximately JPY 3 billion in additional onetime expenses, including restructuring costs in the fourth quarter compared to the previous forecast, bringing the total for the full year to approximately JPY 13 billion in operating expenses.

Regarding the dividend per share outlook, based on the upward revision of the profit, the year-end dividend forecast is revised upward by JPY 2 per share from JPY 16 to JPY 18. Consequently, the annual dividend forecast is revised from JPY 32 to JPY 34 per share. We have revised our full year earnings forecast upward. At the same time, we have reviewed various expenses. CapEx is planned to increase by JPY 20 billion from the previous annual forecast of JPY 280 billion to JPY 300 billion.

Depreciation and amortization expenses are planned to increase by JPY 5 billion to JPY 205 billion and R&D expenses are planned to increase by JPY 20 billion to JPY 280 billion. This increase is primarily driven by planned new product launches, mainly in rechargeable batteries and accelerated development of new technologies. We are preparing for further growth to achieve the targets for the final year of the next medium-term plan.

This concludes my presentation. Thank you for your attention.

We would like to start the performance briefing of TDK Corporation for the first half of fiscal year ending March 2026. Thank you for your participation despite your busy schedules. First, let me introduce the participants. President and CEO. Noboru Saito. Senior Executive Vice President and CFO, Tetsuji Yamanishi. Executive Vice President, Shigeki Sato, Corporate Officer Fumio Sashida. Corporate Officer, Takao Tsutsui.

Those are the participants for today's meeting. We will explain the results for the first half for fiscal year ending March 2026 as well as the outlook for the full year to be followed by a Q&A session. Overall, this will be a 75-minute meeting. The slide deck we are using today will be posted on our website on a later day, both in Japanese and English.

Now let's start.

This is Yamanishi speaking. Thank you very much for taking the time to join TDK's performance briefing for the first half of fiscal year ending March 2026. Let me begin with an overview of our consolidated results. First, Key points of the first half results, starting with an overview of the market environment. In the electronics market, which has a significant impact on our business, ICT-related production remained steady year-on-year. Demand for Nearline HDDs for data centers also stayed firm.

And in the industrial equipment market, demand related to renewable energy remained solid. On the other hand, demand for BEVs, continued to stagnate, resulting in component demand that fell short of our initial expectations. Under these circumstances, the 3 business segments, namely Sensor Application, Magnetic Application and Energy Application Products benefited from solid demand in the ICT and the industrial equipment markets as well as tariff-related front-loaded demands.

As a result, net sales increased 8.6% and operating profit rose 10.7% year-on-year, both marking record highs for our first half period. By Market segment, sales of small capacity batteries and sensors to the ICT market increased and demand in the HDD market far exceeded last year's level, driving a sharp rise in HDD suspension assembly sales. Meanwhile, sales of passive components to the automotive market declined due to slower sales. In the industrial equipment market, sales of small capacity batteries, passive components and sensors all increased.

Next, I will explain the first half results in more detail. Including the impact of foreign exchange fluctuations, which reduced net sales by JPY 41.7 billion and operating profit by JPY 9.2 billion. Net sales totaled JPY 1,183.4 billion, up JPY 93.9 billion or 8.6% year-on-year. Operating profit was JPY 147.6 billion, up JPY 14.3 billion or 10.7% and profit before tax increased 7.4% to JPY 147.5 billion.

Net profit attributable to owners of parent rose 5.4% to JPY 111.4 billion. As a result, we achieved record highs in net sales and all profit items for the first half. Earnings per share were JPY 58.7. As for ForEx sensitivity, JPY 1 change in the yen-dollar exchange rate has an annual impact of roughly JPY 2 billion on operating profit and a JPY 1 change against the euro has an impact of about JPY 0.3 billion.

Next, let me explain the results for each segment. Starting with Passive Components. Although sales to the industrial equipment market increased, sales to the automotive market declined. Net sales totaled JPY 285.7 billion, up 0.2% year-on-year. While operating profit decreased 48.8% to JPY 14.8 billion, including JPY 2.7 billion in restructuring costs. Ceramic capacitors which have a high sales ratio to the automotive market, so both sales and profit declined. Sales of aluminum electrolytic capacitors and the film capacitors to the automotive market decreased, but demand for renewable energy applications remained solid. However, due to restructuring costs of JPY 2.7 billion booked as part of the portfolio management efforts, profit declined.

Inductive Devices posted higher sales but lower profit as increased demand for the ICT market was offset by weaker sales to the automotive market. High-frequency components recorded lower sales and profit due to reduced sales to the ICT and industrial equipment markets. For Piezoelectric Material Products and the circuit protection components, sales increased to steady demand from the industrial equipment market, but profit fell because of lower sales to the automotive market.

Turning to Sensor Application Products, Net sales increased 13.8% year-on-year to JPY 107.9 billion and operating profit rose sharply to JPY 12.1 billion, a significant improvement from the previous year. In Temperature and Pressure Sensors, overall sales were flat, but profit declined due to weaker sales to the home application -- home appliance market.

In Magnetic Sensors, sales of whole sensors to the automotive market decreased, but the TMR sensor sales increased with the smartphone production being in the peak season. Overall, Magnetic Sensors achieved higher sales and the profit was roughly flat, partly due to the stronger yen. For MEMS sensors, sales of microphones to the ICT market and motion sensors to the industrial equipment market increased. As a result, MEMS sensors as a whole returned to profitability.

Next, Magnetic Application Products. Net sales were JPY 115.8 billion, up 4.3% year-on-year and operating profit surged to JPY 11.9 billion, reflecting a sharp improvement in profitability. Sales of HDD heads and HDD suspension assemblies rose significantly, thanks to robust demand in the HDD market, particularly for Nearline applications. Auto-magnet sale, profitability improved through quality enhancements and cost reductions.

Next, Energy Application Products. Net sales were JPY 648.1 billion, up 13.3%. Operating profit was JPY 137.7 billion, up 11.6%. Rechargeable battery sales volume grew in small capacity batteries for smartphones with the effect of new models and spot orders contributed to sales and a significant profit increase. Sales of medium capacity batteries also grew in the industrial equipment market. Sales and the profit of power supplies for industrial equipment decreased due to the lack of meaningful recovery in demand.

Next, the results of the second quarter. Including exchange rates, a negative impact to sales of up JPY 4.1 billion and the operating profit JPY 2.1 billion, net sales were JPY 647.6 billion, an increase by JPY 76.9 billion or 13.5% year-on-year. Operating profit was JPY 91.2 billion, up JPY 15.8 billion or 20.9% year-on-year. Profit before tax, JPY 89.8 billion, up JPY 22.1 billion or 32.6% year-on-year. Net profit was JPY 69.9 billion, a significant increase by JPY 23.9 billion or 51.8% year-on-year.

On a quarterly basis, net sales and all levels of profit reached record highs. Earnings per share were JPY 36.06. Next, segment sales and the factors of changes in operating profit from the first quarter to the second quarter. The Passive Components segment, net sales increased by JPY 9.4 billion or 6.8% from Q1. Operating profit increased by JPY 5.7 billion, excluding a onetime expense of JPY 3.7 billion incurred in Q2. Semi capacitors sustained temporary production suspension due to flooding in Akita in August a loss of about JPY 1 billion. However, increased sales to the automotive market drove higher sales and profit.

Aluminum electrolytic capacitors and film capacitor sales increased to the automotive and industrial equipment equipment markets. Business portfolio management related structural reform cost of JPY 2.7 billion were recorded to improve future profitability and efficiency. This results in a slight loss, but in substance, profit increased. Inductor sales increased to the automotive and industrial equipment markets, along with sales to the ICT market, partly with seasonality leading to increased net sales and profit. High frequency devices sales increased to the ICT market due to seasonal factors, Piezoelectric and Circuit Protection Component sales increased to the industrial equipment market. Net sales increased. Operating profit increased with higher sales despite onetime expenses of JPY 3.7 billion.

Since Application Products, sales increased significantly by JPY 15.1 billion or 32.5% Q-on-Q and operating profit increased by JPY 6.7 billion. Temperature and pressure sensors posted increased sales and profits due to higher sales to the automotive and industrial equipment markets. For magnetic sensors, whole sensors and the TMR sensor sales increased with seasonality in the ICT market, achieving a significant increase in profit. MEMS sensors sales increased due to strong MEMS microphone sales Profitability also significantly improved, achieving breakeven in the first half.

Sales and profit of MEMS motion sensors also increased for Chinese smartphones and the game consoles. Overall, MEMS sensors turned profitable in the second quarter and secured a profit for the first half. The Magnetic Application Products segment, sales were up JPY 6.6 billion or 12.2% on Q-on-Q, while operating profit decreased slightly by JPY 700 million. HDD head volume increased approximately 14%, mainly in new Nearline head products.

The volume -- this volume growth combined with a favorable product mix led to increase in sales and profit. Suspensions volume also increased by up 4% due to rising demand for Nearline production, achieving higher sales and profit. Magnet sales remained flat. Profit decreased due to JPY 1 billion of gains from the sale of a welfare facility in Q1. Overall, Magnetic Application Products posted a slight decrease in profit.

Next, Energy Application Products segment. Sales increased by 27% or JPY 77.1 billion. Q-on-Q, operating profit was up significantly by JPY 26.9 billion or 48.6% for rechargeable batteries, sales of small capacity batteries for the ICT market grew due to seasonality better product mix with higher new models percentage and the spot orders leading to substantial sales and profit growth. Power supplies for industrial equipment sales and profit increased with a moderate recovery in demand, EV power supplies continue to post loss due to reduced BEV demand.

Next, let me elaborate on the fiscal year March 2026 projections. Next, let me explain the factors behind the JPY 14.3 billion increase in operating profit. The main positive driver was higher sales volume of rechargeable batteries, HDD heads and suspensions and sensors, which added about JPY 64.3 billion. Additional gains came from cost reductions of about JPY 7.2 billion, and the balance effects from restructuring cost of JPY 3.4 billion.

On the other hand, pressure had a negative impact of roughly JPY 27.2 billion, and SG&A expenses rose by JPY 20.6 billion, mainly due to higher R&D spending on rechargeable batteries. We also saw a JPY 3.6 billion decline from onetime gains recorded last year and the yen's appreciation reduced profit by JPY 9.2 billion. Even so the overall effect of higher sales outweighed these negatives, resulting in a JPY 14.3 billion increase in operating profit.

Turning to cash flows. Operating cash flow for the first half was JPY 189.4 billion, while investment cash flow totaled JPY 128.3 billion, including the acquisition of companies related to the AI ecosystem. As a result, free cash flow reached JPY 61.1 billion, exceeding our initial projection for the first half.

That concludes my explanation. Thank you.

Good afternoon. This is Saito speaking. Thank you very much for joining us today. I would like to share TDK's full year outlook the fiscal year ending March 2026. First, let me go over the key assumptions behind our forecast, particularly the revised production outlooks for major devices. In the automotive market, overall production volume has been revised upward from the April assumption. However, CV projection was revised downward due to a lower BEV production volume.

Next, for the ICT market, smartphone production has been revised down to 1.191 billion units from the April number of 1.2 billion units. As for the HDD market, demand remains firm, particularly for Nearline HDDs used in data centers. So we have revised the forecast upward to 67 million units compared with the projection as of April this year.

Next, let me touch upon the outlook for the third quarter based on the same exchange rate for the easier comparison. Although we have updated our assumption from JPY 140 to JPY 145 per U.S. dollar for the second half. First, for Passive Components, sales to the automotive market are expected to increase, while those to the industrial equipment market are likely to decrease, resulting in a decline of 0% to 3% Q-on-Q.

In Sensor Application Products, temperature and the pressure sensors for automotive are objected to grow, but Magnetic and MEMS sensors for smartphones are expected to decline after the seasonal peak and the front-loaded demand leading to a decline of 10% to 13% Q-on-Q.

Next for Magnetic Application Products, Sales of HDD heads and suspensions are expected to increase by 3% to 15%, respectively, due to -- due partly to capacity expansion, leading to an increase of 9% to 12% Q-on-Q.

Lastly, Energy Application Products are likely to decline by 3% to 6% with small capacity batteries for smartphones declining due to seasonal factors as well as the tariff-related strong demand during the second quarter. Next, let me elaborate on the fiscal year March 2026 projections. The impact of the U.S. tariff measures is considered to be limited to the fiscal March 2026 projections. Therefore, we provide projections based on the base scenario only rather than both base and risk scenarios.

As I explained earlier, in the electronic market in the first half, while demand in the automotive market remains sluggish. Production in ICT markets, such as smartphones and ATDs increased year-on-year and remains robust. The performance for the first half exceeded the levels anticipated at the time of the April 28 announcement. In the ICT market, with new model launches and the demand brought forward to tariff measures, sales of rechargeable batteries and sensors expanded.

Furthermore, demand for data centers continued to be robust and the sales of HDD suspensions were healthy. Based on these factors, we have revised our full year projections upward from what we announced on April 28, projecting net sales of JPY 2.37 trillion; operating profit, JPY 245 billion and net profit JPY 180 billion.

The exchange rate assumption for the second half has been changed to JPY 145 per dollar. To promote business portfolio management and address the businesses that are facing challenges, we plan to record approximately JPY 5 billion of additional onetime expenses including restructuring costs from the initial forecast, bringing the total for the full year to be JPY 10 billion.

Regarding the dividend per share, we plan to increase the annual dividend from the initially announced JPY 30 to an interim dividend of JPY 16 and a year-end dividend of JPY 16, to a total of JPY 32.

Finally, I have one announcement. We will hold the TDK Investor Day on November 28. We will present the road map to achieve our long-term vision the progress of our midterm management plan and portfolio management. For outside directors will also take the stage to engage directly with investors on topics such as governance effectiveness. The event will be held as a hybrid format, an on-site venue with a live stream. We sincerely look forward to your participation. This concludes my presentation. Thank you.