Yakult Honsha Aktie

I am Narita. Thank you very much for taking time out of your busy schedule to join our financial results briefing. Today, the Director in charge of Accounting will begin by explaining the details of the financial results announced today. Then I will explain our approach to enhancing corporate value going forward.

In today's timely disclosure, we announced the implementation of share buyback. The company will acquire JPY 55 billion of treasury stock as authorized in the latest resolution and cancel all treasury stock to be repurchased. Including those already announced, the total amount of share buybacks in fiscal year 2026 will be JPY 67 billion. The JPY 100 billion share buyback plan for the medium-term management plan will be implemented during this fiscal year. We believe that what we need to do now is to rework our business strategy and capital policy to improve our corporate value for the future and explain it to the stock market more than ever. I will share my thoughts later. First, Mr. Watanabe, the Director in charge of Accounting, will explain the details of the financial results. Then I would like to explain the overview of the financial results for the fiscal year ended March 31, 2026.

On Page 1, the key point is that we ended the year with a decrease in sales and profit. In the Food and Beverages in Japan, sales and profit decreased due to lower sales performance.

In the Food and Beverages overseas, sales and profit increased on a local currency basis due to the expansion of sales results, but profit decreased due to the impact of foreign exchange rates. These are major points in this area.

Page 2 shows major management indicators. The table includes the amount of increase or decrease in net sales at each stage of profits. Basically, the yen appreciated throughout the year. The amounts in blue indicate the impact of the exchange rate on net sales and profits at each stage, respectively. These are major management indicators.

Next is the statement of income. I would like to explain net sales throughout operating profit in the segment explanation later. The main feature is a decrease of JPY 3.8 billion in interest income, but this decrease was due to lower interest rates overseas and the inflow of foreign funds into Japan.

In addition, in terms of extraordinary income and losses, there is a gain on sale of investment securities of JPY 8.9 billion, which is from the sale of cross shareholdings. As a result, profit attributable to owners of parent was JPY 44.2 billion, a decrease of JPY 1.3 billion year-over-year.

Page 4 shows the balance sheet and main financial indicators. Total assets are JPY 912.5 billion, an increase of JPY 48.2 billion. As I mentioned earlier, the yen was generally strong throughout the year, but it was weak at the end of the fiscal year. These items shown here are calculated based on the current rate. So out of an increase of JPY 48.2 billion in total assets, approximately JPY 17 billion was due to the impact of the exchange rates. These are major financial indicators.

Next, Page 5 is a breakdown of total assets or liabilities. The main change was a JPY 37.5 billion decrease in cash and deposits. This decrease was mainly due to the use of funds repatriated from overseas subsidiaries in the form of dividends for investment-related activities. The increase in property, plant and equipment of about JPY 56 billion was due to investments in the new Chiba plant and in the United States.

Investment securities also increased by JPY 12.3 billion. As you know, their value has risen in line with the upward trend of the Nikkei 225, although we have been selling off some of the securities. There were no significant movement in liabilities. These are the breakdown of the balance sheet.

Next is the results by segment. The Food and Beverages in Japan were decreased by JPY 13.3 billion year-over-year. As we have reported in each of our financial statements, the same trend has continued from Q1 to Q4 of the fiscal year. Higher prices due to inflation led to a decline in the number of bottles sold for our mainstay product, Yakult 1000, which is positioned at a higher price point. Yakult 1000 is priced at JPY 130, while Yakult JPY 400 is priced at JPY 80. While a shift from Yakult 1000 to Yakult 400 could have provided some support, in reality, the number of bottles sold declined for both products. As a result, total sales volume decreased by 7.7% year-on-year.

Next is about the Americas. In the Americas itself, although the number of bottles sold was down 0.4% year-over-year, the number has been basically increasing with each passing quarter, and the number of bottles sold in the Americas has been recovering. In the Americas, the impact of foreign exchange rate fluctuations was about JPY 4 billion.

Next is Asia and Oceania. The number of bottles sold was up 2.7%. In China, which has the highest volume, the number was 106.1% of the previous year for the entire year, indicating that the number of bottles sold is on the road to recovery. Although sales increased by JPY 1.4 billion, the exchange rate had a negative impact of approximately JPY 3.4 billion. These are the key points in the domestic and overseas sales.

Next, Page 8 shows an increase or decrease in operating profit by segment. In total, the decrease in operating profit itself was mainly due to a decrease in the Food and Beverages in Japan. Regarding the Food and Beverages in Japan, as I mentioned earlier at the beginning of this presentation, the decrease in the number of bottles of our mainstay products has had a major impact. Although we have reduced selling expenses by more than JPY 1 billion, we have not been able to compensate for this. In addition, cost of raw materials and purchases increased by approximately JPY 600 million.

Next, in the Americas, operating profit decreased by JPY 1.9 billion. In the Americas, we had a negative impact of JPY 0.9 billion from foreign exchange rates, and we lost about JPY 1.1 billion due to the impact of raw materials over the past year. Also, labor costs have been rising worldwide, and the increase in labor costs was about JPY 1 billion.

In the Americas, Mexico is still in the midst of an economic recession following the Trump administration. In Asia and Oceania, operating profit increased by JPY 1.8 billion. There has been a 2.7% increase in terms of the number of bottles sold, which has led to an increase in gross profit.

In addition, cost reductions resulting from the closure of the Shanghai plant last year also generated a JPY 1.8 billion increase. These are the key points of operating profit.

Next, Page 11 shows the number of bottles sold. As you can see on Page 11, in Asia and Oceania, the number was 102.7% of the previous year's volume. In Indonesia, the number was 99.9% of the previous year's volume, but the number has been recovering and was 103% of the previous year in the second half. In China, Guangzhou Yakult and Yakult China combined reached about 106% of last year's sales.

In the Americas, Yakult USA was at 105% and Mexico was at 97.8% due to the weak economy. Those are the regions that saw changes in the number of bottles sold.

As you can see in the table on Page 13, basically, the yen was relatively strong throughout the year. As described in the right column on Page 13, which shows the impact on items from sales to profit attributable to owners of parent by segment. The profit and loss statement for the year ended with the strong yen. These are the results of the fiscal year ended March 2026.

Page 14 is the forecast for the next fiscal year. And overall, we expect an increase in sales and a decrease in operating profit. The Food and Beverages in Japan are expected to remain unchanged year-over-year, but profit is expected to decline due to higher raw material prices.

Regarding the Food and Beverages overseas, despite higher raw material prices and increased expenses, we expect an increase in both sales and profit due to a higher number of bottles sold and the effect of the yen's depreciation in exchange rates.

Next, Page 15 shows sales in each stage of profit for the next fiscal year. Since the yen is expected to significantly depreciate in the next fiscal year, more than half of the difference is due to the impact of foreign exchange rates. Net sales is expected to increase by about JPY 40 billion, and operating profit is expected to decrease by JPY 1.1 billion. As you know, there will be price increases in raw materials and packaging materials and the impact of these price increases on raw materials and packaging materials is approximately JPY 6.3 billion, which are factored into our consolidated operating profit. It is difficult to say to what extent this will have an impact, but I think it is necessary to review the current estimates on a quarter-by-quarter basis.

Basically, we have factored in an unexpected JPY 6.3 billion cost increase, without which we would have been able to announce an increase in both sales and profit. But since this has been factored in, the difference between sales and operating profit may appear inconsistent.

Please turn to Page 16. We are calculating our forecast for the next fiscal year based on the average rate from January to March of this year. As you can see, the trend is toward yen depreciation in all items from net sales to profit at each stage and the amount of the impact is quite large in net sales and each profit. The impact is Japan JPY 22.1 billion in net sales, JPY 3.5 billion in operating profit, JPY 4.3 billion in ordinary profit and JPY 2.5 billion in profit attributable to owners of parent. We are expecting a sharp trend toward a weaker yen now.

Next is the forecast by segment. On Page 17, in the Food and Beverages in Japan, the number of bottles sold is expected to remain roughly flat and net sales are therefore expected to be in line with the previous year. In the Americas, sales is expected to increase by JPY 20.3 billion, of which JPY 11.7 billion is due to the impact of foreign exchange rates. The rate of change is up 22.4%, which seems quite large. But excluding the impact of exchange rates, the increased rate is a little more than 9%.

In Asia and Oceania, the increase amount is JPY 17.6 billion, but JPY 9.3 billion out of that amount is due to foreign exchange effects. Excluding the effect of foreign exchange rates, the growth rate, which is now 13%, will become a little more than 6%; excluding foreign exchange effects, the total overseas sales growth is about 7.7%. We are also projecting a total impact of JPY 6.3 billion in operating profit due to higher raw material prices, consisting of JPY 3.7 billion in Japan and JPY 2.6 billion overseas.

The forecast for the next fiscal year has been significantly affected by raw material prices. Also, labor costs have been rising worldwide, and we have been impacted by that as well. These are the forecast for net sales and operating profit for the next fiscal year.

In addition, on Pages 21 and 22, we have listed the changes in management index, which we hope you will take a look at later. That is all for my explanation.

Thank you. Next, President Narita will explain our approach to enhancing corporate value going forward.

I will now explain our approach to enhancing corporate value. Based on its founding philosophy of Shirota-ism, the company has worked to create social value by contributing to the health of people around the world. Under the corporate slogan of, in order for people to be healthy, everything around them must also be healthy. We have also endeavored to create economic value through sustainable business activities while fulfilling our social responsibilities.

In order to continue to create value in the future, it is important to enhance corporate value. Specifically, the key points are to achieve both sustainable business growth and enhanced capital efficiency on the basis of an appropriate governance structure and accumulate the results. However, in terms of sustainable business growth, the current operating profit margin is on a downward trend. In particular, the food and beverages in Japan has been stagnant, and the company needs to execute strategies to regrow the business.

Regarding the improvement of capital efficiency, ROE is below 8%, and we recognize the urgent need for management to be more conscious of the cost of capital than ever before. In light of these issues, I would like to explain our policy for the current fiscal year.

First, with regard to our business strategy, we have positioned the current fiscal year as a year of transition to regrowth. I will now talk about our overseas business for this fiscal year. Overall, the number of bottles sold overseas for the previous fiscal year increased year-over-year. In China, Indonesia, Brazil and Mexico, the rollout of flavor products progressed, boosting results in each country. Please note that we are not shifting our focus to flavor variations. Our aim is to attract customers' interest and encourage them to pick up our products and our stance of promoting the Lactobacillus casei strain Shirota remains unchanged. By major country, the U.S. and Vietnam continued to perform well. The recovery trend continued in China, and there were signs of bottoming out in Indonesia.

On the other hand, there was a slight standstill in Mexico. However, overall, overseas sales were generally favorable. This steady trend has not changed in the current fiscal year. Preliminary number of bottles sold in Q1 that was disclosed today shows a 2.8% increase year-over-year, marking the seventh consecutive quarter of year-over-year growth.

As in the previous fiscal year, sales measures have been implemented in a timely manner through the development of flavor products, vigorous sales activities and price revisions. As for flavor products, we launched Muscat Grape flavor in Hong Kong in January, Peach flavor in Vietnam in April and Mango flavor in China. In addition, the company continues to engage in multifaceted and aggressive sales activities. Increased activity and exposure increases Yakult's fan base and presence. Such a virtuous cycle has been created.

At the same time, we revised prices from time to time based on inflationary conditions in each country. In the current fiscal year, we have already revised prices in Brazil, Mexico and Indonesia. The overseas business has passed through a bottoming out phase and is now in the process of moving back into a growth phase.

Next, I will talk about the business in Japan. In Japan, the number of bottles sold has continued to decline since a reaction to the boom in the Yakult 1000 series was combined with sluggish consumption. In order to break this stagnation, we need to promote both the product policy to enhance the value of our products and a channel strategy to strengthen and expand points of contact with our customers.

We have long been engaged in research on intestinal bacteria. Focusing on the immunomodulatory function of Lacticaseibacillus paracasei strain Shirota, the existing product will be renewed Yakult 400 Immunity and Gut Health as a food product with a functional claim that indicates maintenance of immune function and improvement of the intestinal environment. This will go on sale on June 1.

We plan to expand the labeling of this Lacticaseibacillus paracasei strain Shirota immunity related functionality to other products in the future. Another pillar of our intestinal bacteria is B. breve strain Yakult. B. breve strain Yakult contained in the Mil-Mil series has been increased from the current 12 billion to 20 billion per bottle and will be relaunched on June 1.

In addition, the suggested retail price will be revised from JPY 100 to JPY 110 without tax to reflect the continuous increase in raw material prices.

For other products, we will comprehensively consider various responses, including price revisions based on market conditions and trends in raw material prices. With respect to channel strategy, we will provide an optimal channel mix that matches the lifestyle of our customers. As for the home delivery channel, which is a unique feature of Yakult's business, the strength of this channel is that Yakult Ladies meet directly with customers, provide products and services and build relationships of trust.

Yakult DX further enhances this in-person strength with the power of digital. We will introduce Yakult DX to 1/3 of all Yakult Ladies by the end of the fiscal year. This will further strengthen our points of contact with customers. On the other hand, the distribution channel is the point of contact with customers that Yakult Ladies cannot meet face-to-face. Through a wide range of sales channels such as mass merchandisers, schools, hospitals, nursing care facilities and business establishments, we will provide products that support the health of our customers.

In addition, we will aggressively pursue measures in the e-commerce channel to increase customer convenience and maximize points of contact. Regarding capital policy, we aim to achieve ROE of 8% this fiscal year and 10% in fiscal year 2030. To this end, the JPY 100 billion share buyback plan for the period of the medium-term management plan will be implemented during this fiscal year.

As announced today, the company will acquire treasury stock worth JPY 55 billion as authorized in the latest resolution and will cancel all shares repurchased. Including those already announced, the total amount of share buybacks in fiscal year 2026 will be JPY 67 billion.

In addition, as announced in the medium-term management plan, we will accelerate the reduction of the consolidated net asset ratio of policy shareholdings toward the target of 5%. In fiscal year 2026, we will work on these business strategies and capital policies to enhance corporate value.

From the next fiscal year onwards, we will take more medium- to long-term perspective and implement specific measures to enhance corporate value. Currently, while we are proceeding with the medium-term management plan ending in fiscal year 2030, we have been affected by various changes in the business environment, such as sluggish consumption and soaring raw material prices. We are truly at the crossroads of how to chart our next growth strategy.

In addition, in order to enhance the cost of capital conscious management required of listed companies, the company will consider capital policies, including share repurchases and the nature of corporate governance. The Corporate Value Enhancement Committee will be established as a meeting body to consider specific initiatives to resolve these issues related to business strategy, capital policy and corporate governance. This committee will formulate a highly effective plan from a more multifaceted perspective by adding a variety of outside opinions to the knowledge it has accumulated in its business activities to date in order to achieve drastic reform. The result of the study will be announced in the Q2 earnings announcement in November. It will take some time, but we will work steadily to meet the expectations of our stakeholders who support our company. We look forward to your continued guidance and encouragement.

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

I am Okada from the Finance and Accounting Department. I will explain the consolidated financial results for financial year 2025 Q3. My explanation will be based on the material titled Executive Summary of Consolidated Financial Results for Q3 ended December 31, 2025, available on our website. For detailed figures, please refer to the financial report and the supplementary materials released at the same time.

First, please turn to Page 1 for the key points of the consolidated results for Q3. On a consolidated basis, both net sales and profits decreased compared with the previous fiscal year. Next are the key points by segment. Food and beverages in Japan recorded decreases in both net sales and profits due to a 7% decline in sales volume of dairy products. Food and beverages overseas saw an increase in sales volume overall, mainly in Asia, Oceania. However, due to the significant impact of yen appreciation and higher costs, both net sales and profits decreased.

Next, please turn to Page 2 for the consolidated results overview. Net sales decreased by JPY 14.4 billion year-over-year to JPY 371.7 billion. Operating profit decreased by JPY 9.8 billion to JPY 40.9 billion. Ordinary profit decreased by JPY 13 billion to JPY 55.6 billion. And profit attributable to owners of parent decreased by JPY 2 billion to JPY 41.5 billion. The impact of foreign exchange is shown in blue, and although yen appreciation had a negative impact, looking at the Q3 3-month period alone, profits at each stage of net sales were almost flat. As a result, in the Q3, 3-month period, the food and beverages overseas segment recorded increases in both net sales and profits.

On the far right, we show the full year forecast announced in November. This time, we have left the forecast figures unchanged. As of Q3, sales volume in food and beverages in Japan is below plan, but Asia, Oceania and other regions are progressing steadily, and overall performance is tracking largely in line with the plan.

Next, please turn to Page 3 for the consolidated statement of income. Details from net sales to operating profit will be explained later by segment. As of Q3, raw material costs increased by JPY 0.5 billion in Japan and by JPY 1 billion overseas, mainly in the Americas for a total increase of JPY 1.5 billion. Selling, general and administrative expenses appear to have decreased by JPY 2 billion, but this includes a negative impact of JPY 4.5 billion due to yen appreciation. In substance, this represents a cost increase of JPY 2.5 billion.

Next is nonoperating income and expenses, and extraordinary income and losses. Interest income and foreign exchange gains combined decreased more than JPY 5 billion, mainly due to lower interest rates at overseas subsidiaries and unfavorable foreign exchange translation rates for foreign currency-denominated assets. In extraordinary income, we recorded JPY 7.7 billion in gain on sales of investment securities as the head office sold a portion of its strategically held shares.

Next, please turn to Page 4 for the consolidated financial position. Total assets increased by JPY 16.9 billion from the end of the previous fiscal year to JPY 881.2 billion, and net assets decreased by JPY 3.2 billion to JPY 626.2 billion. As with the statement of income, there was a negative foreign exchange impact due to yen appreciation, amounting to approximately JPY 9 billion on total asset basis. The equity ratio decreased by 0.7 percentage points to 65.7%.

Next, Page 5 shows the consolidated balance sheet. In assets, cash and deposits decreased by JPY 36.1 billion to JPY 232.9 billion. As indicated by the increase in property, plant and equipment below, the main factors were progress in the construction of a new plant and capital investment at Yakult USA, the acquisition of treasury stock totaling JPY 15 billion included in the decrease in net assets and shareholder return such as progressive dividends.

Investment securities increased by JPY 12.1 billion, as mentioned in the statement of income. We work to reduce strategically held shares, selling 5 issues and making no new acquisitions. On the other hand, for the shares, we continue to hold market value increase significantly. As the Nikkei stock average rose from the JPY 35,000 level to the JPY 50,000 level over these 9 months, which contributed to the increase in the amount.

Finally, net assets decreased. Quarterly profit was recorded and the market value of strategically held shares increased but the main factor was a decrease of approximately JPY 13 billion in foreign currency translation adjustments in addition to the shareholder returns mentioned earlier.

Next, please turn to Pages 6 and 7. These pages show the year-over-year comparison of net sales by segment, with Page 6 presenting figures and Page 7 presenting them in graph form. As you can see, due in part to the significant impact of yen appreciation, overall net sales decreased by JPY 14.4 billion.

I will explain by segment. First, food and beverages in Japan. Sales volume of dairy products decreased by 7.4% overall due to the rise of competing products and impact of a challenging market environment, including rising prices. Regarding the Yakult 1000 series, following the nationwide launch of the sugar off product through home delivery in January last year, it was also launched in retail stores in April. However, we were unable to acquire as many new customers as planned and some customers discontinued purchases, resulting in a decrease in total series volume. As a result, net sales decreased by JPY 8.9 billion to JPY 176.2 billion.

Next is food and beverages overseas. In the Americas, sales volume in Brazil and the U.S. increased compared to the previous year and price revisions at each operation contributed positively. However, due to a significant negative foreign exchange impact of JPY 6.2 billion, net sales decreased by JPY 4 billion to JPY 66.6 billion. That said, performance is recovering. And in the Q3, 3-month period alone, net sales increased by JPY 1.7 billion.

Next, Asia, Oceania. Vietnam continued to perform strongly, and the recovery in China accelerated compared with the previous year. As a result, sales volume in Asia increased by 2.1%. However, due to a negative foreign exchange impact of JPY 4.1 billion, net sales decreased by JPY 1.1 billion to JPY 103.5 billion.

In Europe, sales volume increased by 2.9% year-over-year and net sales rose by JPY 0.1 billion to JPY 9.2 billion.

Regarding overseas operations, preliminary figures for sales volume from January to December are shown on Page 10 of the supplementary materials. According to this data, total sales volume at overseas subsidiaries reached 101.8% year-over-year, exceeding the previous fiscal year for the first time since 2021. This refers to the full year. If we extract the most recent 3-month period and calculate the figures for Q4 of 3 months, total sales volume at overseas subsidiaries reached 104% year-over-year. We intend to continue working toward recovery and growth by gradually increasing sales volume going forward.

Finally, on this page is others. The other segment include the operation of pharmaceuticals, cosmetics and the professional baseball team. Although the professional baseball team increased net sales, the pharmaceutical business recorded a decrease in net sales due to the transfer of sales of oncology, ethical pharmaceuticals to Takata Pharmaceutical Co., Ltd. in the previous fiscal year with the transfer of the main product, Elplat completed in mid-May. As a result, other businesses overall recorded a decrease of JPY 0.6 billion to JPY 24.8 billion. This concludes the segment overview of net sales.

Next, please turn to Pages 8 and 9. These pages show the year-over-year comparison of operating profit by segment, with Page 8 presenting figures and Page 9 presenting them in graph form. On a consolidated basis, operating profit decreased by JPY 9.8 billion. I will explain by segment.

First, food and beverages in Japan. In addition to the decrease in gross profit due to lower net sales, higher raw material costs and increased expenses such as personnel costs had an impact, resulting in a decrease of JPY 7 billion to JPY 23.6 billion.

Next, food and beverages overseas. In the Americas, although gross profit increased due to price revisions, higher raw material costs and expenses as well as a negative foreign exchange impact of JPY 1.5 billion resulted in a decrease of JPY 2.7 billion to JPY 17.9 billion.

In Asia, Oceania, although there was an increase in gross profit due to higher sales volume and lower manufacturing costs following the closure of the Shanghai plant 1 year ago, expenses such as sales promotion costs increased mainly in China and Indonesia, resulting in operating profit of JPY 11.1 billion, almost unchanged from the previous fiscal year. However, in Q3, 3-month period alone, operating profit increased by JPY 0.6 billion, and the degree of recovery has been strengthening. Including Europe, overseas overall recorded a decrease of JPY 2.9 billion to JPY 29.5 billion.

Finally, other businesses. Although the pharmaceuticals business recorded a decrease in net sales, it implemented cost reductions and did not record a decrease in profit. Meanwhile, the operation of the professional baseball team benefited from increased attendance revenue, including news that attendance exceeded 2 million for the first time. And as a result, the other segment overall recorded an increase of JPY 1 billion in operating profit. This concludes the segment overview of operating profit.

Next, Page 10 shows the composition ratio of net sales by segment in a pie chart. Compared with the previous fiscal year, there were no significant changes. Next, Page 11 shows a list of average daily sales volume of dairy products by country. On a consolidated basis, average daily sales volume was 29.37 million bottles or 98.3% year-over-year. By region, Asia, Oceania and Europe exceeded 100% of the previous fiscal year. At major operations as well, including Guangzhou, China; Vietnam; Brazil; and the U.S., many exceeded the previous fiscal year.

Next, Page 12 shows the composition ratio of operating profit by segment in a pie chart. Compared with the previous fiscal year, the ratio of food and beverages in Japan declined due to the relatively larger decrease in profit, while overseas and other businesses increased their shares.

Finally, Page 13 summarizes the impact of foreign exchange and consolidated profit and loss for the current fiscal year. The graph on the left compares the average exchange rates for January to September 2024 and January to September 2025. It shows the rate of change when the previous fiscal year rates are set at 100. Compared with the materials presented at the end of H1, the degree of yen appreciation has moderated. However, the yen appreciated against almost all major currencies, and in particular, Mexico experienced yen appreciation of more than 10%. Please refer to the table on the right for the monetary impact on each segment.

This concludes the overview of the consolidated financial results for financial year 2025 Q3.

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

This is Narita speaking. Thank you very much for joining our financial results briefing today despite your busy schedule. First, I would like to explain the H1 results and the full year outlook covering both our domestic and overseas businesses. Details of the financial results will be presented later by the Executive Officer in charge of accounting.

Let us begin with the consolidated results for H1. Net sales and all profit levels declined year-on-year. By segment, our business in Japan experienced both lower sales and lower profit. This was mainly due to the sales volume of dairy products, including the Yakult 1000 series falling short of both plan and the previous year. Meanwhile, the overseas business recorded increased sales volume compared to the previous year. However, higher operating costs such as raw material costs, personnel expenses and marketing expenses, combined with negative foreign exchange effects resulted in both lower sales and lower profit. As for the full year forecast, we expect sales volumes to recover in H2. Nevertheless, considering the results of H1, we have reassessed our full year outlook and decided to revise downward our forecast for net sales, operating profit and ordinary profit. While the H1 results fell short of our targets, we are determined to recover in H2 by promoting sales further as well as implementing new public relations and advertising initiatives in Japan.

Overseas, in addition to continued growth in the Americas, we expect recovery in the Asia and Oceania region, which should contribute to overall performance improvement. Regarding dividends, based on our policy of pursuing a progressive dividend to achieve continuous increases, as we have already announced, the interim dividend was increased by JPY 1 from the previous year to JPY 33. We project a year-end dividend of JPY 33, resulting in an annual dividend of JPY 66, an increase of JPY 2 from the previous year. We consider it important to continue giving shareholder returns our constant attention.

Next, I will describe our domestic and overseas businesses, starting with Japan. In H1, the average daily sales volume of dairy products was 9.16 million bottles, down 7% year-on-year. Consumer sentiment weakened due to rising prices, while competition from other companies intensified, further tightening the business environment. Although we had planned to expand sales through Yakult Ladies, their activities slowed due to the record-breaking heat, resulting in sluggish sales. For key products such as the Yakult 1000 series and the new Yakult series, we believe focused measures for improvement are necessary. In H2, we will work to increase sales through promotional campaigns, revitalizing Yakult Ladies activities and in-store operations and enhancing evidence-based advertising. We aim to achieve an average daily sales volume of 9.3 million bottles for the full year.

Now moving on to the performance of the Yakult 1000 series. In H1, the average daily sales volume was 2.97 million bottles, down 2.5% year-on-year. This decline was partly due to a reactionary decrease following the surge in demand for the Yakult 1000 series. This fiscal year, we launched a new low carb type in both the home delivery and retail store channels, expecting to attract new customers and drive further growth. However, many customers simply switch from existing products, leading to limited net customer increases. On the other hand, since many people continue to experience sleep issues, we see opportunities to acquire new customers by having them personally experience the effectiveness of our products. Awareness and understanding of the low carb types are gradually expanding. We view this period as one that requires persistence, and we'll continue developing our customer base patiently. Reflecting current conditions, we have revised the full year average daily sales target to 2.98 million bottles.

Next, the performance of the new Yakult series. In H1, the average daily sales volume was 2.79 million bottles, a decline of 10.6% year-on-year. Since the 2023 price revision, sales volumes have been decreasing, and there are still no clear signs of recovery. We consider it essential to achieve an early turnaround. As one measure for recovery, we launched new Yakult Peach Flavor, which has been already sold overseas on a limited time basis starting this month. As in the past, we will continue to promote the value of Lacticaseibacillus paracasei strain Shirota and encourage interested customers to drink Yakult brand products on a daily basis, thereby leading to a recovery in sales volume. Initial sales have been extremely favorable. Considering current conditions, we have revised the full year target for average daily sales volume to 2.84 million bottles. We will focus even more effort on various activities to boost sales volumes in H2.

Last month, the Yakult brand was officially certified by Guinness World Records as the largest lactic acid drink, lactic acid bacteria drink brand. Following this recognition, our domestic Yakult series has begun gradually introducing special commemorative packages to increase visibility. In addition to energizing activities in both the home delivery and retail store channels, we will launch campaigns linked to our 90th anniversary and roll out diverse advertising initiatives, including those supporting exam takers and highlighting scientific evidence. Through these multifaceted efforts, we aim to achieve our full year targets.

Now turning to our overseas business. Today, we have disclosed the preliminary sales volume data through September. From July to September, the average daily sales volume overseas exceeded the previous year by 0.5%, marking the fifth consecutive quarter of year-on-year growth. We believe the overall decline has bottomed out and that we are now transitioning into a recovery phase, gradually improving performance going forward.

Now I will explain the situation in our major countries. First, the U.S. The utilization rate at our first plant in California remains extremely high, approaching the limit of its supply capacity. Currently, the daily sales volume has increased to approximately 800,000 bottles. And until the second plant under construction in Georgia is completed, we expect levels to remain around the current volume. Therefore, it is difficult to pursue aggressive expansion of our sales channels at this stage. At present, we have product distribution in about 20,000 stores, effectively around 19,000, which represents only about 34% of all U.S. supermarkets, well below half of the market. However, including smaller outlets such as convenience stores, we see the potential to expand distribution to over 100,000 stores across the country. The market potential is therefore considered very high. Once the second plant begins operations, we plan to first strengthen the supply system for existing products and then introduce new products.

During this fiscal year, although in small quantities, we began air shipping Y1000 from Japan for sale in Hong Kong and Singapore. Customer response has been extremely favorable, confirming that there is demand for such products overseas. In the U.S. market as well, we aim to introduce higher value-added products such as those in Yakult 1000 series at an early stage.

Next, Mexico. Recently, sales volumes have temporarily declined, affected by a deterioration in consumer sentiment. To counter this, as part of our promotional measures, we have started rolling out flavor products that have proven successful in countries such as China. Since September, we began sales of Yakult Muscat Flavor through retail store channels, followed by its introduction in the home delivery channel in October. We believe this new product will attract customer attention and encourage trial purchases, contributing to increased sales volume. Given that product awareness and understanding have steadily deepened since our market entry, we do not expect the sales stagnation to persist over the long term.

Next, Vietnam. We revised prices across all sales channels in April and May, yet sales volumes have continued to post a single-digit growth rate in the high range. Thanks to the favorable performance of Yakult Light, which was launched in April last year, sales remain at a high level, and this fiscal year's performance has successfully surpassed that high benchmark. There still exists significant potential for deeper market penetration through geographical expansion and increased sales per store. Most recently, a new monthly record of 1.5 million bottles was achieved last month, and we expect steady growth to continue.

Next, China. Although consumer activity remains sluggish due to a downturn in the economic environment, our proactive sales measures have been yielding visible results. Sales from January to June this fiscal year increased 4.8% year-on-year. And results for July through September also exceeded the previous year by 5.2%, marking 5 consecutive quarters of year-on-year growth. The Yakult Muscat Flavor launched in April contributed further to sales expansion. Additionally, to optimize our production structure and make more efficient use of management resources, we plan to close the Guangzhou #1 plant at the end of November. This initiative will improve the overall production utilization rate in China and enhance profitability through reductions in fixed costs.

We will continue implementing both short-term and medium- to long-term initiatives in parallel, continuously reviewing measures based on performance valuation to maintain effective operations. As for our current business network in China, including home delivery and retail distribution, we have a total of 74 bases, among which 61 have already exceeded last year's results by a wide margin. We, therefore, maintain strong expectations for further growth.

Next, Indonesia. While results from January through June were below the previous year, performance from July through September exceeded last year by 3.2%, marking the first year-on-year increase in 14 quarters. The Yakult Mango Flavor launched in June also contributed to sales growth. We are currently taking a multifaceted approach that includes expanding supermarket distribution, running SNS-based campaigns, selling through e-commerce platforms and launching new channels such as the school lunch market. In Indonesia, there are approximately 82.6 million elementary and junior high school students in the school lunch target audience. We began distributing products for school lunches in February this year. And by September, monthly deliveries had reached about 3 million bottles. We aim to further accelerate this initiative and continue building cumulative results. By steadily achieving quarterly sales growth above the previous year, we expect to reach a clear turning point toward recovery. That concludes the explanation of the H1 results and outlook for this fiscal year.

Lastly, we will continue our proactive efforts to meet the expectations of all our stakeholders who support our company. We sincerely appreciate your continued guidance and encouragement. This concludes my remarks and presentation. Thank you very much for your kind attention.

Based on the financial results briefing materials, I would like to explain the results for H1 of this fiscal year. On Page 1, the key points of the consolidated results have already been mentioned at the beginning, which reflect the current situation as explained.

Next, Page 2 shows net sales through operating profit margin. Net sales decreased by JPY 13.9 billion, operating profit by JPY 8.4 billion, ordinary profit by JPY 9 billion and profit attributable to owners of the parent by JPY 2.9 billion. During this H1, we were significantly affected by the stronger yen compared with the same period last year, and the impact from exchange rates is shown in parenthesis.

Page 3 shows the profit and loss details. We will discuss net sales and operating profit in the segment section later, so I will focus only on notable items here. On the right side, you can see a JPY 2.1 billion gain on sales of investment securities, which is related to the sale of cross shareholdings. A special loss labeled as impairment losses is also recorded here. This corresponds to the asset impairment of the Guangzhou #1 plant that was disclosed in the release issued on October 20. Other than that, there are no particularly extraordinary factors.

Next, Page 4 presents key financial indicators. Total assets amounted to JPY 817 billion, down JPY 47.2 billion from the previous fiscal year-end. This decrease reflects foreign exchange impacts amounting to around JPY 20 billion. The equity ratio increased by 2.4 percentage points from the previous fiscal year-end to 68.8%. This temporary rise results from debt reduction due to the repayment of borrowings during the settlement month. Since borrowings are expected to increase again to fund group-wide investments, this should be viewed as a temporary factor with the ratio expected to trend downward going forward.

Page 5 shows the breakdown of total assets, listing major asset and liability items by account category. Cash and deposits decreased by JPY 64 billion. The primary factor is the share buyback of JPY 30 billion announced in the fourth quarter of the previous fiscal year, with JPY 15 billion booked in the previous term and another JPY 15 billion in the current term. The rest is dividends or repayment of loans. Also, the foreign exchange effect of approximately JPY 9 billion also contributed to this decrease. Investment securities increased JPY 9.4 billion due to higher unrealized gains despite the sale of some cross shareholdings. These factors represent the primary drivers behind the changes in the financial position.

Next, Page 6 shows results by segment. Overall, net sales were JPY 241.1 billion, down JPY 13.9 billion. The Japan business declined by JPY 5.1 billion, while overseas businesses in total decreased by JPY 8 billion. The impact of foreign exchange amounted to JPY 10.9 billion. In detail, of the JPY 5.8 billion decline in the Americas, foreign exchange effects accounted for JPY 7.2 billion and Asia and Oceania was affected by JPY 3.5 billion. Thus, overseas businesses were significantly impacted by currency fluctuations. First, regarding beverages in Japan, as mentioned earlier, number of bottles sold per day decreased 7% year-on-year, resulting in a reduction in sales. The prolonged inflationary environment has led to negative real wages and the stronger-than-expected consumer savings mindset. In October this year as well, prices of approximately 3,000 items were raised, which suggests that the recovery of consumer sentiment will take some more time.

In addition, on the retail side, lower-priced products from competitors have been introduced, affecting our sales. To mitigate the decline in Yakult 1000 series sales, we launched the low carb type through the home delivery channel in January and the retail store channels in April in response to customer demand. Our intent was to encourage former customers to resume purchases. However, in practice, many customers switch within the same category, leading to cannibalization. And as a result, we were unable to successfully recover those customers. This represents the primary factor behind the decline in domestic net sales.

Next, the Americas. Overall, sales volume decreased by 1.5%. Sales volumes in the U.S. and Brazil were maintained at similar levels to the previous year, but Mexico recorded a temporary downturn. Before the recent tariff issues, the Mexican economy had been performing well, but due to the impact of new tariffs, economic conditions softened, resulting in the 1.5% volume decline. Nevertheless, both Mexico and Brazil implemented price increases around January and February this year, which helped offset the reduced volumes through higher unit prices. The foreign exchange effect of JPY 7.2 billion had a significant overall impact. Although not yet reflected in this fiscal period, Mexico saw the introduction of Yakult Muscat Flavor in September and Brazil launched Yakult Peach Flavor in the same month. Both new products have sold well so far, and we expect their positive effects to appear in the next financial results.

Next, Asia and Oceania. Net sales decreased by JPY 2.1 billion, but foreign exchange had a JPY 3.5 billion negative impact. In terms of volume, both China and Vietnam showed growth and total sales volume increased by 1.2%, while Indonesia stayed at about 97% of the previous year, still affected by weak consumer demand due to inflation. In China, Yakult Muscat Flavor was launched in April. And in Indonesia, Yakult Mango Flavor began sales in June. These numbers are only partially reflected in the current results.

Next, operating profit. Total operating profit was JPY 25.3 billion, down JPY 8.4 billion. Japan decreased by JPY 5.2 billion, the Americas by JPY 2.5 billion and Asia and Oceania by JPY 700 million. Foreign exchange had a total negative impact of JPY 1.8 billion in the Americas and JPY 300 million in Asia and Oceania. One main reason for the decline in domestic operating profit was a roughly JPY 400 million increase in raw material costs and about JPY 600 million in higher labor expenses. Together with other increased costs, fixed costs became more difficult to absorb due to lower sales. This led to a slightly higher cost ratio and a reduction in overall profit. In the Americas, a foreign exchange loss of JPY 1.8 billion was combined with an additional JPY 800 million increase in raw material costs.

Asia and Oceania was affected by JPY 300 million. Although sales volume itself has been increasing, in China and Indonesia, promotional expenses rose in preparation for the launches of the Muscat and Mango Flavors mentioned earlier, resulting in a slight decline in profit. These are the segmental results for net sales and operating profit.

Next, Page 10 presents the breakdown structure.

Page 11 below shows the trends in sales volume by country for H1, as mentioned earlier. Please refer to it later.

Page 12 displays the composition ratio of operating profit, which remained largely unchanged from the previous period.

Page 13 summarizes the foreign exchange effects by segment. As shown, all figures reflect the impact of the yen appreciation and the list aggregates the exchange rate effects for each segment. This concludes the summary of the H1 results.

Next, Page 14. As indicated, we have decided to revise our earnings forecast downward. We plan to reduce net sales by JPY 5.5 billion, operating profit by JPY 5 billion and ordinary profit by JPY 2.5 billion, while revising profit attributable to owners of the parent upward by JPY 1 billion.

The foreign exchange assumptions shown on Page 15 indicate that there is no significant change from the previous forecast.

Pages 16 onward present the comparison between the previous and current forecasts. For Domestic Beverages, net sales are expected to decrease by JPY 4 billion. As mentioned earlier, the previous full year daily average sales volume target was 9.43 million bottles. But considering the continued cautious spending behavior among consumers, this has been revised to 9.3 million bottles, a reduction of approximately 130,000 bottles for the year. In the Americas, the forecast was revised down by JPY 2.3 billion and in Asia and Oceania by JPY 500 million. Although these are not large numbers, the economic environment remains somewhat weaker than initially expected. However, compared with the previous year, we expect Asia and Oceania to show improvement in H2. Taking these factors into account, we have revised both of the net sales and operating profit forecasts downward.

Pages 18 and 19 show the comparison between the revised full year forecasts and the previous fiscal year's actual results. Compared to the previous year, the stronger yen had a noticeable effect as indicated in parenthesis, JPY 11.9 billion impact on net sales, JPY 2.2 billion on operating profit, JPY 2.9 billion on ordinary profit and JPY 1.7 billion on profit attributable to owners of the parent.

This is a brief explanation, but I would like to conclude the explanation of the financial results.