Ajinomoto Stock

[Interpreted] So good afternoon. Thank you very much for participating in Ajinomoto's earnings call for the first quarter of fiscal year [ 2027 ]. I am your moderator from the IR division.

My name is Koto. For today's telephone conference, we have Executive Officer and General Manager of IR, Kaji, is present. We are planning this meeting to be 60 minutes.

First, Kaji will explain -- conduct the presentation based on the disclosed material. And after that, we'll go into Q&A.

The material is posted on the homepage IR site in Ajinomoto's website. Kaji will mainly conduct the explanation based on the presentation material. Please refer to the outline of the consolidated results and revised forecast presentation for your reference.

Today's presentation is going to be recorded and is going to be posted on our IR site. Please understand. Let's start. Kaji-san, please.

[Interpreted] Thank you very much for participating in the earnings call for Ajinomoto. I am Executive Officer, General Manager of IR, Kaji.

Before we start the presentation, I would like to offer my heartfelt sympathy to the people of Kumamoto who has suffered from the earthquake. We are praying for the earliest possible recovery and restoration. As a group that focuses on food and health, we will offer all the support that is necessary.

Let me start my presentation based on the financial results material posted on our website. So please turn the page to Page 3. These are the key points. In this first quarter, sales, business profit and profit attributable to owners of the parent company all set new records for the first quarter. Business profit grew 127% year-over-year, setting a new record for a single quarter. By segment, in Food Products business, the Seasonings and Foods business, which includes Sauce and Seasonings, Quick Enrichment and Solutions and Ingredients saw increased sales and profits in Japan and overseas. Healthcare and Other segment saw significant increases in both sales and profit with the Functional Materials continuing to perform well. In addition, the Biopharma Services and Ingredients business as a whole also posted higher sales and a significant increase in profit.

Regarding the full year earnings forecast for fiscal year 2026, we have reflected the impact of the Middle East situation that we have not factored in at the start of the fiscal year while maintaining the forecast for the overall food products business. Furthermore, in light of the strong sales performance in the Functional Materials business, we have revised the forecast upward for this segment. Consequently, we have revised the company-wide forecast upwards for sales, business profit and profit attributable to the owner of the parent company.

We will absorb the impact of the increased costs resulting from the situation in the Middle East by taking agile measures and aim to achieve the revised earnings forecast.

We will further enhance the group's human organizational capabilities to advance ASP initiative and continue our endeavor to achieve the goals of the 2030 road map ahead of schedule.

Next, please to Page 4. This is the digest of the first quarter results. We achieved strong growth with sales up 113% and business profit up 127%. Profit attributable to owners of the parent company increasing by 113%. We remain firmly committed to profit attributable to owners of the parent company and will strive to achieve our revised earnings forecast for the current fiscal year.

Please turn to Page 5. This page presents the analysis of the changes of the business profit for the first quarter. Changes in the gross profit due to the changes in sales, this is second from the left, which contributed to the JPY 18.4 billion increase in profit. This was driven by contributions from Seasoning and Food Products, Functional Materials and Amino Acid for Pharmaceuticals and Food.

And the next graph, change in gross profit due to the change in gross profit margin factor, which contributed to a JPY 7.2 billion increase in profit was driven by Overseas Seasoning, Domestic Coffee and other Quick Nourishment products, Functional Materials and Amino Acids for Pharmaceuticals and Food. Regarding SG&A, we continue to expand investment in intangible assets such as human resources, marketing and R&D to achieve sustainable growth in line with the 2030 road map.

Turning to Page 6. This is an analysis of changes in business profit by disclosed segment. For the Seasoning and Foods segment, compared to the full year profit growth target of JPY 2.8 billion, an increase of JPY 4.7 billion was achieved in the 3 months from April to June.

However, this increase includes a onetime positive impact of approximately several billions of yen resulting from a decrease in the elimination of unrealized gains.

The Frozen Foods segment posted a JPY 600 million decrease in profit compared to the full year plan of JPY 3.7 billion increase. In the Healthcare and Other segment, profit increased by JPY 9.7 billion compared to the full year forecast of JPY 13.7 billion.

Turning to Page 7. I would like to turn to the key points of the financial results by segment. Overall, combining the Food Products business, this combines the Seasonings and Foods and Frozen Foods segment, both sales and profit increased. First, the pink colored area. This is for the Seasonings and Foods business. In the domestic market, Sales increased for Coffee and Soups and Solutions and Ingredients also saw higher sales, resulting in an overall sales increase. Business profit rose significantly for Coffee in addition to higher profits in Seasonings, resulting in a substantial increase in profit overall.

So going to overseas. Sales increased in all the subsegments in overseas, resulting in a significant overall sales increase. Business profit saw a decrease in Quick Nourishment and Solutions and Ingredients segment, but this was offset by the increase in the Seasoning segment, resulting in an overall increase in business profit.

Next is the Frozen Foods segment. In Japan, sales increased overall, driven by strong performance in our Mainstay Frozen Food products. Business profit decreased by JPY 300 million overall due to the impact of raw material and logistics costs.

So Asia, which bears some of the manufacturing base on a combined basis with Asia, business profit decreased by JPY 100 million. In the overseas market, sales increased overall, mainly in North America, partly due to the ForEx effects.

On the other hand, business profit decreased by JPY 400 million overall due to a somewhat delayed recovery from the impact of product recalls and rising costs for raw materials and logistics.

Going to Page 8. This page covers the Bio and Fine Chemical businesses overall. Functional Materials reported sales and profits increase across all of its businesses, which are the functional materials, amino acids for Pharmaceuticals and Foods and CDMO, resulting in the overall strong growth in both sales and profits.

In Functional Materials segment, Electronic Materials continued to perform well, driving a significant increase in both sales and profits. Amino acids for Pharmaceuticals and Foods saw an overall increase in sales and profit driven by high value-added amino acids for biopharmaceuticals and culture media.

The CDMO segment saw an overall increase in both sales and profit driven by small molecules and gene therapy. I will explain the detail later.

Going to Page 9. This is the revision of our forecast for the fiscal year 2026. So please refer to the material revised earnings forecast by segment for fiscal year 2026 posted on our website.

The revised earnings forecast incorporated the impact of the situation in the Middle East, which has not been reflected at the start of this fiscal year. In addition, based on the performance of the Functional Materials business through the first quarter, we have revised the forecast upward for this business. Consequently, we have also revised the company-wide forecast upward for sales, business profit and net profit. Specifically, we have revised the forecast upward by JPY 9 billion for sales, JPY 5 billion for business profit and JPY 3.5 billion for profit attributable to the owners of the parent company.

Regarding the Middle East situation, if you look at Page 10. This is something we covered during the earnings presentation in May for the full year of 2025 and the impact of the Middle East conflict and the response policy is also stated here.

At the beginning of the fiscal year, with respect to the incremental cost resulting from the escalating tensions in the Middle East, we anticipate a potential annual cost increase of JPY 30 billion in terms of business profit. However, after scrutinizing the future impact based on the first quarter results, maintaining the assumptions of $110 per barrel for Dubai crude oil and an exchange rate of JPY 150 to the dollar, we revised the projected annual cost increase to approximately JPY 25 billion.

To address this impact of the rising cost, we will take measures such as price adjustments and cost reduction, responding effectively to absorb the cost within the current fiscal year, and we will strive to steadily achieve our revised earnings forecast.

Page 11. Here, I will explain the impact of the cost increase caused by the escalating tensions in the Middle East on our overall food product business, including Seasonings and Food and Frozen Food businesses and how we plan to respond to them.

The slide here presents the first quarter results, the impact of cost increase in the second half -- second quarter and the second half due to the Middle East conflict, the revenue growth effect from passing on the cost increase to the prices, the cost reduction measures and their overall impact on the business profit.

So the image of these things are illustrated here. The orange part represents the effect of increased revenues and cost reduction and the gray portion represents the impact of the increased costs. As for the first quarter, as of the first quarter, because the impact of cost increase caused by the Middle East situation was still limited, as you can see here.

And also because we were able to offset this part of cost increase to some extent. So consequently, as we presented on Page 6, the Food Product businesses overall, including Frozen Food, recorded a profit growth of JPY 4.1 billion.

On the other hand, for the second quarter, as the cost increase impact due to the Middle East is expected to kick in, in full scale, we continue to implement the offsetting measures, including price hikes. However, especially in the Consumer segment, we need to anticipate a certain time lag before the effects of cost pass-through materializes. Therefore, whether we can completely offset the cost increase caused by the Middle East conflict with these offsetting measures remains to be seen.

For the second half of the year, in addition to the effects of the cost pass-through, we will steadily build upon the increased revenue effects and cost reduction measures to absorb the full year impact of rising costs due to the Middle East situation all within this fiscal year and thereby deliver on our full year guidance.

Now turning to Page 12. This slide presents an analysis of the changes in business profit. The upper section shows the variance with -- between the revised forecast versus last year's performance, while the lower section shows the variance between the initial cost versus previous year's actual results.

As I mentioned earlier, Healthcare and Others segment, reflecting the strong first quarter performance of Functional Materials, we revised the business profit forecast upwards by JPY 5 billion.

Page 13, let us talk about the sales breakdown of Sauce and Seasoning and Quick Nourishment. First, on the left, this is about Japan. Coffee saw a significant increase in sales, partly due to the price revision in response to the rising bean costs. Excluding Coffee, the combined sales for Sauce and seasonings and quick nourishment for Japan as of the first quarter stood at 101% of the previous year's level, with volume at 102% and unit price 99%.

The slight decline in unit price was primarily driven by the setback from the introduction of the two new products under the Kiwami series introduced in the last fiscal year, which resulted in a shift of sales between -- sales mix between the premium and other mix over the past 3 months.

Next, the right-hand side, the overseas market. Sales stood at 103% of the previous year's level with volume 102% and unit price 101%. Let me add some more comments regarding the situations of the five key markets. Please refer to the Page 3 of the document titled Ajinomoto Inc. Consolidated results for the first quarter ended June 30, 2026, which is available on our IR website.

In the 3 months from April to June, Thailand achieved an overall growth of 1%. Coffee products underperformed slightly. But on the other hand, Seasoning category achieved sales growth in the mid-2% range. Indonesia grew by 6% and Vietnam 7% maintained their favorable momentum. The Philippines, on the other hand, for the first quarter remained broadly unchanged from the previous fiscal year.

In the first quarter, there was a temporary production issue with the Umami seasoning in the time frame of around April and May, which prevented shipments from meeting the planned schedule. However, Umami seasonings are -- when Umami seasonings are excluded, the combined sales of Flavor Seasonings and Menu-specific Seasoning achieved a 9% growth. In Brazil, partly due to the impact of inflation in the domestic market, in the April to June period in that 3 months, the results were affected by the move among the wholesalers to reduce inventories in distribution. However, the final demand again continues to be robust.

Next, Page 14. Let us turn to the Healthcare and other segment and the Functional Materials in particular. In the first quarter of this fiscal year, we achieved significant increase in sales and profit compared to last period. Last year, sales was 150% business profit, 170%. Demand for ABF for high-performance applications such as those for AI servers and networks remain robust and the product mix also improved. In light of these first quarter results, we revised our full year forecast upwards.

Turning to Page 15. As announced today, together with the results, we issued a press release titled notice regarding the basic policy for absorption-type merger of Ajinomoto Fine-Techno Company by Ajinomoto Inc. We have initiated the preparations to absorb Ajinomoto Fine-Techno, our wholly owned subsidiary and the core of our Electronic Material business into Ajinomoto Company Inc, with an effective date of April 1, 2027.

When we formulated the 2030 road map, we positioned ICT as one of the four key growth areas. And ever since, our group has continuously evaluated the optimal management structure to accelerate business growth, and we started the concrete studies on this acquisition from early 2025.

Driven by the advancements in AI, the semiconductor industry is currently growing at a pace exceeding expectations and the business opportunities are expanding significantly in the ICT area, a key driver of our group's growth.

Given this business environment, we determined that by combining our management foundation and the control capabilities with Ajinomoto Fine-Techno speed and execution capability, we can further enhance the competitiveness of the entire group and drive the mid- to long-term growth of Functional Materials business.

We anticipate that this absorption-type merger may have a positive impact from a tax perspective. We will conduct a detailed review going forward and promptly announce any matters that require disclosure.

Turning to Page 16, the CDMO business. Overall, the first quarter results showed an increase in both sales and profit. By modality, small molecules and Forge, the gene therapy business, recorded an increase in both revenue and profit. Meanwhile, regarding the middle molecule AJIPHASE, revenue and profit declined due to the impact of shipment timing for the first quarter, but the progress was in line with the initial plan that we have developed in the beginning of the fiscal year.

Leveraging our unique technological strength and by expanding our communication with customers using the Ajinomoto Group's network, we expect to achieve a significant increase in profit this fiscal year in the CDMO business.

Page 17. Finally, here is the progress of the ASP indicators by segment. For the first quarter, on a company-wide basis, organic growth rate was 5.7%, business profit growth was 27.3% and the EBITDA margin was 20.3%. For the full year, although uncertainties remain in the business environment such as the impact of the Middle East, we will unite the forces of the entire company and take agile measures to achieve our full year profit targets at all levels.

We look forward to your continued guidance and support, and thank you very much for your attention. That's all for myself. We'll now move to Q&A.

[Interpreted] [Operator Instructions] Let's start the Q&A. First, from Mizuho Securities, Saji-san, please.

[Interpreted] I want to ask about the Functional Materials. This is my only question area. So the 54% increase in sales in the second quarter to the fourth quarter, after the upward revision, 10% increase of sales. So it was JPY 79.2 billion last year and JPY 17.5 billion this year, so a 10% increase.

So it means that the 10% increase is not that different from the initial forecast. The growth of the first quarter and the second quarter onwards growth trajectory, what is the difference?

And maybe a word on what I'm going to say. You have the tax benefit coming from making the AFT at subsidiary. What is that specifically?

[Interpreted] In terms of functional materials, in the first quarter, results was very good, and that is the reason why we have revised the full year plan. So based on the macro environment and the risk that may appear. So at the initial forecast that was quite conservative. But the second quarter onwards, we have maintained that stance in terms of our outlook. On the other hand, for July to September, we are seeing a very robust demand situation is continuing.

So in terms of the Fine-Techno, the absorption-type merger and what is the tax effect coming out of this? Well, currently, we have just started the deliberations in the details if something is decided, we will inform you. But I think a considerable level of impact can be -- it is possible that type of impact may be seen.

[Interpreted] Another follow-up. So the July to September, very strong demand is continuing, you have said. In your business presentation in the fourth quarter, 42% sales increase. The strong situation has been continued. And then this time, it was about 54%. This strong demand continuing this 42%, 54%, if that is the level, is it the same level of growth is continuing?

[Interpreted] Well, in terms of the actual growth numbers, I cannot mention about that, but let me say that the very strong -- we think that this very strong momentum can be maintained. That is our expectation.

[Interpreted] Now moving on to the next question. This would be from Goldman Sachs, Miyazaki-san.

[Interpreted] This is Goldman Sachs. Miyazaki is my name. So my question relates to CDMO. Roughly speaking, you said you're in line with the initial plan. But this fiscal year, significant revenue and profit increase in Biopharma Functional Materials, I think you are talking about expecting that a significant increase in revenue. So rather than -- in addition to the organic growth, are you expecting something more? That's the point that I would like to confirm.

And also for the -- for first sector, have you seen any of them materializing in the first quarter already?

[Interpreted] Mr. Miyazaki, thank you very much for the question. I would like to add some more comments. I think you asked me to add more comments and give some more color for the Health care and others business. I think, so for the guidance for this fiscal year, organic growth is reflected in the initial guidance, and that has been maintained this time around as well.

And also, this fiscal year, as far as CDMO is concerned, as of May, the revenue growth in terms of the size of the revenue growth, the third quarter and then the second quarter, the fourth quarter and the first quarter, that was the order of the revenue size that we mentioned during the earnings call in May. And going forward, depending on the circumstances, the quarterly shipment may change. There is a possibility that shipment timing may change. But basically, I think in the second half of the year, a significant increase in revenue and profit is expected for this fiscal year. That's our projection. And I think you can expect that to happen.

And also, if I add more -- some more color to that, in the first quarter, in the -- originally, we had assumed that the nucleic acid shipment timing and this revenue impact was in line with our projection. But when it comes to small molecule and Forge businesses, they have been maintaining a very favorable momentum of late. So we would like to -- we are well positioned to achieve the guidance that we have given to you. That's -- we are very confident about that.

When it comes to the amino acid for pharmaceuticals and food, of course, there are some fall from the -- due to the foreign exchange situation, but the amino acid for the culture media and also for pharmaceuticals, those high value-added products are shipping out as planned. So I think the favorable momentum will be maintained in the future. That is our plan.

[Interpreted] AJICAP. As far as AJICAP is concerned, the license revenue I think that incremental revenue from license fee, I think, was -- I think that was my understanding at least. But what about the progress for the first quarter? Is this going to be the driver for the revenue and profit increase in the second half of the year? Can you talk about the progress of AJICAP?

[Interpreted] Okay. Thank you very much. As far as AJICAP is concerned, in the first quarter, we have steadily achieved revenue from the licensing of this business. And if you look at the quarterly trend, as we go quarter-by-quarter, the amount is increasing every quarter.

[Interpreted] Okay. Then the pace is not going to accelerate all over. But you are rather expecting a steadfast increase on a quarter-by-quarter basis.

And now Forge, how significant is the growth of Forge business? Is it similar to last year? Or is the hurdle becoming higher? Are you expecting a slowdown in that? Can give us a hint on the pace of growth of Forge?

[Interpreted] As a general trend, the momentum has not changed significantly. The favorable paces have maintained.

Next. So this is from the English line, we have a question. Miguel Marques from Bernstein, please?

Firstly, on the ABF segment, you've obviously had very strong margin expansion in the first quarter. Can you help us understand a bit more about the mix of drivers that delivered that margin expansion? To what extent was this about volume and scale leverage versus improved product mix? And was there any benefit from price increases in the first quarter?

Can you wait a while? There has been some break in the audio. So would you please wait?

[Technical Difficulty]

So it seems to be the case that there has been some issue with the line -- in the connection with the line. Mr. Marques, maybe we can come back to you later?

So excuse and apologies, but we will get back to you later. So we will continue with the other questions.

[Interpreted] Daiwa Securities, Igarashi-san, please.

[Interpreted] So this is Igarashi from Daiwa Securities. So I do want to hear some comments about the expectations for the upward forecast. So I think basically, you talked about -- in terms of the revision, it was just about the Functional Materials. But in the first quarter, in terms of the Japan and in terms of the Sauce and Seasoning, it was good.

At the beginning of the year, you talked about the investment in the human capital and et cetera. And in terms of the cost, I think basically, you are anticipating a decrease in the margins, but you are spending, but at the same time, you have been able to improve your margins. So I would like to hear about the sustainability of this momentum.

[Interpreted] For the first quarter, in line with the initial plan in specific categories, we have been investing actively in marketing. On the other hand, overall, so in terms of the Seasonings and Foods business, we have been able to see good results in the first quarter. So some ForEx following has been enjoyed and some Middle East situation in terms of the cost increase in the first quarter, we didn't see much of the impact coming from that.

So going forward, the impact of the cost increase will become stronger. So initiatives against that with that as a whole company, we are implementing various initiatives in each market, each categories to respond to that. And we have started to execute those initiatives. So that is the situation.

So I do want to say that this momentum is going to be maintained. But depending how the Middle East situation is going to be, there is may be some changes in the cost. So we will incorporate the impact right now. At the same time, we are committed to steadily achieve our targets. So that will be the core of initiatives.

[Interpreted] So the marketing investment and this type of expenses, you are spending as planned, but at the same time, have been able to grow?

[Interpreted] Yes, that's true. So from the first quarter onwards, in terms of how the cost is going to come out, depending on that, we will be flexible and agile in terms of our responses. So we will flexibly put in -- conduct various initiatives to respond to the ever fluid situation.

[Interpreted] Now moving on to the next question. This will be from Morgan Stanley MUFG, Tsunoyama-san.

[Interpreted] This is Tsunoyama from Morgan Stanley. So I also have a question regarding the impact from the Middle East and also your thoughts about Sauce and Foods -- Seasoning and Food business. This JPY 25 billion impact, are there any difference by region? Can you talk about that? This JPY 25 billion impact? Can you just give us a breakdown of how you arrived at that number?

And also and the countermeasures you said, like you, are making progress with respect to price hikes? If you can give us some more color on that, that would be appreciated.

And also, in the first quarter, I think it's about Asia, but I think the baseline is coming down. Brazil, I think. Is that something unique to Brazil? If you can comment on that point as well, that would be appreciated?

[Interpreted] The impact of the Middle East, of course, our projection for the future may change depending on the circumstances in the region. However, at least, from the first quarter towards the second quarter, I don't think there's a skewed impact by region. It's about the packaging material costs and it's about the logistic cost and also, in our case, amino acid fermentation related -- production-related raw material cost fluctuation relating to that and also the some materials. So those are the cost risks that we are looking into.

It's not really skewed or there's a difference by region. But depending on the production volume, the actual cost will vary depending on the business or depending on the region because of that.

As for the Americas Sauce and Seasonings, if you look at the Page 3, there is a decline of JPY 700 million. This was mostly driven by the Umami seasonings for processing. That was a major factor behind this.

[Interpreted] So it was not really the inventory adjustment, but that was for the Umami seasonings for processing food -- processed food?

[Interpreted] Yes, for Brazil, of course, there was an impact of inventory adjustments at the distribution channel, so it was flattish. That's what I mentioned during the presentation. But the major drivers behind the decline in the profit was the Umami seasoning produced in Brazil because the market condition remains very tough. That's the reason why they are suffering from a decline in profit.

[Interpreted] Just as a confirmation, so in the Seasoning and Food, as for next fiscal year, in the second half of the year, a cost increase will be made so that you can absorb the cost for this fiscal year? So that is the basic approach, right? Is that correct?

[Interpreted] Yes. It's too early to talk about next fiscal year, but it's all about how the cost situation will change in the future. So of course, our ambition is to try to maintain our margin and improve the margin on a continuous basis, and we are taking measures towards that goal constantly.

[Interpreted] Next, BofA Securities, Sumoge-san, please.

[Interpreted] Sumoge from BofA Securities. From my side, I would like to follow up to the previous questions. So I would like to hear more about the impact of the cost coming fundamentally situation. So I do understand it's difficult to separate it segment by segment. So you put in measures in the second quarter and the third quarter and onwards, the profit is going to be improved. I think that is your plan.

So currently, right now, you are increasing prices and putting in measures to reduce the cost. And I think you do have specific initiatives. So currently, can you explain more in detail that these are the measures that we're putting in. So that is the reason why we will be able to absorb this JPY 25 billion of cost?

[Interpreted] So in terms of our measures to -- for the cost, so I think the major theme is that we do have to respond by pricing. And already in the first quarter, we have putting initiatives but efforts to reduce cost. Combined -- these two combined, overall, this fiscal year's predicted cost increase coming from the middle situation, we think we'll be able to absorb all that. For instance...

[Audio Gap] [Interpreted] so when things settle down in terms of Seasoning and Foods and Frozen Food profit, how is this going to trend against your plan? Do you have any idea about that?

[Interpreted] So this is quite difficult. So today, if we look at Page 11 of our slide. As we have shown on Page 11, within this slide, what we're talking about is that cost increase coming from the Middle East situation and what we are doing against that, specifically for the Middle East situation. In the first quarter, so the gray portion is larger, the cost increase. And in terms of the recoveries, maybe about half against that. But actually, besides that, there are some impact coming from the increase of sales. So that is the reason why we have been able to see increased sales and profit for the first quarter.

In the second quarter, for this specifically, if you look at the Middle East situation, for the second quarter, we will not be able to cover all of the cost increase. That's the current prediction. But for the other initiatives that we are implementing, there's those. And depending on that because maybe you should consider the other initiatives that will be taken in the second quarter, for instance.

So if this is the case, this -- in terms of the $110, I think it will be very in terms of the oil price, $110, I think it's quite conservative. And maybe if you'll be able to increase your top line, then maybe there's some expectations to overperform. Well, yes, I do hope that we'll be able to perform as you are expecting us to do so.

So the English channel was disrupted earlier. So I'm sorry for the inconvenience. So the channel is now recovered. So Mr. Marques, if you can raise your hands once again because your question was stopped in the middle.

[Interpreted] So as we wait for him to call, we would like to take the next question. So we'll go with Hirata-san of UBS Securities.

[Interpreted] This is Hirata from UBS Securities. So I have a question regarding the cost relating to Middle East situation. As a countermeasure, you are talking about cost reduction and the price revisions. So do you have a breakdown between these two?

And also, compared against 2022, I think the environment for you to raise prices is becoming increasingly difficult. in reality, do you think you are capable of implementing these price revisions?

And also this JPY 25 billion impact, I'm so sorry for repeating this question several times, but the food raw materials and also when you talk about the raw material and fuel prices for fermentation, can you give us a breakdown of that?

And the last piece of the question regarding the food raw material and also the fermentation-related costs, the fermentation because we are using the things that we have created through fermentation. So it's very difficult to distinguish with the two.

[Interpreted] So if I talk about the countermeasures, the cost reduction initiatives, we will work on this quite rigorously. But I think the effect from the cost -- price revisions will become larger compared to cost reduction efforts. That's our basic thought.

The amount, we have the amount as for internal purposes, but this will also have an impact on the price revisions. And so we cannot -- we would like to reserve any details pertaining to the breakdown in terms of amount.

And also the second question, whether it is possible for us to revise the prices just like the last time, but the capability of implementing this by solidly demonstrating our capability, I think that will show the sustainability of our business growth. So we would like to be evaluated for that. So we would like to take steady measures in order to implement those price revisions. So we are making an all-out effort. So is it going to be 60 to 40, 70 to 30. So regarding price revision versus cost reduction? I'm so sorry, I cannot comment on that breakdown.

[Interpreted] As for the -- if the fuel prices for fermentation is too high, because the intensified competition, your profit has declined this much. So if you cannot achieve the prices, I think this will drag. What is your view on that?

[Interpreted] Well, in the first quarter, if you look at the results for the first quarter, the fuel prices is changing due to the situation in the Middle East, but including those raw material and other materials, we have been able to maintain that on a flattish level compared to last fiscal year. So at the sourcing and procurement, we are making a lot of efforts and also the raw material diversification. We are combining many different materials so that we do not result in cost increase for the fermentation. So we are actually taking many different measures on a combined basis. So in that regard, I think our steady measures, including those efforts that I just mentioned.

[Interpreted] But so the Umami has declined in Brazil, even though you have taken these measures. So this competitive environment, the market conditions is not really turning to the better recently. So therefore, please consider that the momentum is still continuing in the first quarter. But then from here, when the fuel prices and the raw materials of fermentation increases in the future, this could become a very swing factor for your full year performance. That's how I view it. So should we consider this as a potential risk?

[Interpreted] No, not. The fuel and the raw material cost for fermentation and also the processing Umami flavor -- Umami seasoning increases, I think that will have a positive impact because this is about B2B. So everybody will pass on the cost.

Yes. So I think we believe we can have a rational relationship with our B2B partners. But the B2C cost may likely increase. So including that point, that's the reason why we have included this cost increase analysis, and therefore, we are planning to implement the offsetting measures in order to address those cost increases.

[Interpreted] So this could be -- is it better for us to understand that this will be a trigger for you to raise the prices?

[Interpreted] Well, this is something that we cannot tell at this point of time clearly because we cannot talk about the -- how the cost situation unfolds in the future. I'm not in a position to comment on that. But that is a possibility that we cannot rule out. So we would like to take proper measures in order to respond as appropriate.

So we would like to go back to the question. Mr. Marques from Bernstein, would you please ask your question once again? Apologies.

I have a question about ABF and a question about Forge, please. So on ABF, you had very strong margin expansion in the first quarter. So can you help us understand the main drivers of the margin expansion? To what extent was this about increased volume and scale leverage? How much of it was about improved mix? And was there any impact from price changes at all?

[Interpreted] Mr. thank you very much. And apologies for the transmission back at time. So the first question was about ABF. So the current volume and pricing impact is well balanced, and that has been both contributing to the growth of sales. So at the full year results, Nakamura, our CEO, has mentioned about this. Still, in terms of the ABF, the cost of the raw material cost of ABF hasn't gone up that much. So currently, we -- there's no necessity for us to try to increase our prices. The margin improvement in the first quarter was mainly coming from the high value-added ABF sales has grown. That has been the main driver and the mix improvement was the major reason.

Okay. That's very helpful. And then over on Forge, it seems that you've been announcing more and more new customers for Forge. Can you maybe talk a bit about the mix of your customer base between preclinical customers and customers who are already in clinical trials? And just help us to understand how that mix has been evolving over the last few quarters and where you see that going in the coming quarters, please?

[Interpreted] So this is your question about Forge, I understand. So in the first quarter, the new customers has been increasing very steadily. And including these customers, I think basically, there will be a different perspective. So in terms of the -- I think what we're providing right now, the stage will be different. For the existing customers, we have seen a very steady programs that have gone into clinical trial. And this clinical trial programs in itself, the speed has gone sped up. So it's more on the latter stage, development stage or maybe they have progressed to the stage that is looking for close to approval. So these are the types of the customers that we have right now.

How important is this move to clinical trial in the revenue growth, is this like the critical tipping point to get to clinical trials? Or is it more about just getting more and more development customers?

[Interpreted] So both are important. Specifically, in the pretrial stage, in terms of those type of customers, we are able to improve our sales and profit. As the stage progresses, it means that the volume will increase. So if the volume increase, it means that for us, our business scale will improve. So the more the volume increases, the production efficiency will improve. So if the stage progresses at the customer side, of course, that's a good news for us.

Okay. Are you able to give us any sense of the kind of percentage mix between clinical and preclinical?

[Interpreted] Well, yes, we do have that number, but we -- excuse me, we have to refrain from disclosing that.

[Interpreted] since we are running out of time, the next one will be the last question for today. This is from Morita-san from Nomura Securities.

[Interpreted] This is Morita from Nomura Securities. Now I have several confirmation relating to the numbers. In the beginning of the presentation, you said that when it comes to the -- there was a positive unrealized gains of JPY 1 billion plus when you talked about the Sauce and Seasoning, which seasoning? Is this a Quick Enrichment and Solutions? Which area, which region you're talking about? Can you give us an indication? Was it JPY 1-plus billion? So where is this onetime gain included?

[Interpreted] Approximately more than JPY 1 billion , and this is included under the sauce and seasonings and region is divided over many different regions. So it's dispersed over many regions. Yes, correct.

[Interpreted] So double-digit yen, so is it about JPY 1 billion or so? Or is that...

[Interpreted] Yes, that is about right. That's a ballpark right.

[Interpreted] And also, the foreign exchange impact you said is large according to my interpretation. But when it comes to Asia, I thought when it's currency neutral, what was the revenue and profit improvement?

[Interpreted] Let me just confirm the numbers. For Asia, right, you talked about only Asia?

[Interpreted] Correct.

[Interpreted] Asia, on a currently neutral basis, a mid-single-digit improvement for revenue.

[Interpreted] What about profit?

[Interpreted] Double-digit percentage increase for profit. I think apparently, it looks like 12% for Asia. If you look at the Asia segment, it's 12%. And foreign exchange impact was about 10%. So then 2-digit growth. There's -- you're talking about...

[Interpreted] I was mentioning Sauce and Seasoning right now.

[Interpreted] Okay. So you just asked about Sauce and Seasoning of Asia, and then that was a double-digit growth. And what about Solution Ingredients. Solution Ingredients was a negative growth. So if you mix them out altogether, Asia was flattish or just slight increase by segment.

[Interpreted] So Asia profit increase was single or low to mid-single-digit growth. Okay. So it was the growth.

[Interpreted] With this, we would like to finish the Q&A session. Finally, Mr. Kaji will have some final words to conclude the meeting.

[Interpreted] Thank you very much, everyone, despite your busy schedule to attend this conference call. Going forward, we will try to respond to the expectations of the market participants and achieve growth. So we look forward to your continued support and patronage. Thank you very much for your attendance today.

[Interpreted] with this, we would like to finish today's conference call. We thank you very much indeed for your participation. With this, we would like to finish today. Thank you.

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

[Interpreted] Good evening, everyone. Despite your busy schedule, thank you very much for your participation to the FY '25 final results briefing of Ajinomoto. I'm [ Goto ] of IR Office, playing as a moderator. First of all, I would like to introduce today's participants, the new executive structure from April, of which 8 members are here with us today.

Representative Executive Officer, President, CEO, Nakamura; Representative Executive Officer, Executive Vice President, Kaho; Representative Executive Officer and Senior Vice President, General Manager, Food Products Division, Sakakura; Executive Officer and Vice President, General Manager, Bio & Fine Chemicals Division, Arashida; Executive Officer and Vice President in charge of Finance, Mizutani; Executive Officer and Vice President, CTO in charge of Quality Assurance, Smriga; Executive Officer, Supervision of Frozen Foods Business, Komura; Executive Officer in charge of IR, Kaji.

Today, CEO, Nakamura, will make presentation on FY '26 forecast and initiative for enhancing corporate value, followed by Q&A. The overall briefing is scheduled an hour and 30 minutes. Today's material could be found on IR page of Ajinomoto's website. Please refer to the material. We will be recording today's contents, including the Q&A session. And at a later date, will be uploaded on the IR website. I would like to have your understanding. So we would like to start. Nakamura-san, please.

[Interpreted] Hello. My name is Shigeo Nakamura. Thank you very much for attending today. I would like to make a presentation. Today, I would like to discuss 4 major points. In fiscal 2025, as in the previous fiscal year, we set new records for both sales and business profit. Business profit continued double-digit growth. In Healthcare and Others, the Functional Materials and Biopharma Services and Ingredients businesses saw a significant increase in profit.

The Food Products business overall, combining Seasonings and Food and Frozen Foods also saw increased profit. In our fiscal 2026 forecast, we expect to again post new records in both sales and business profit. We are planning for growth in the Seasoning and Food, Frozen Food and Bio & Fine Chemicals businesses. Although the situation in the Middle East from the end of February 2026 could affect cost and procurement, we, as a company, will respond flexibly and minimize any impact on our performance.

Under a new executive structure instituted in April, we will further raise the human resources and organization capabilities of the group as a whole, evolve ASV initiatives while enhancing the execution capabilities of our management and continue our endeavors to achieve the 2030 road map ahead of the schedule. This slide presents a digest of financial results for the fiscal year ended March 31. For the full year, both sales and business profit increased enough to set new records.

Sales were JPY 1,583.7 billion, 103% the level of the previous fiscal year or 102% with the effect of currency translation excluded. Revenue increased in Seasonings Food in Japan and overseas. In Healthcare and Others, revenue for Functional Materials increased significantly. Amino acids for Pharmaceuticals and Foods and CDMO services, excluding the effect of sales to Althea also increased.

Business profit was JPY 181.1 billion, 113% of the level of the previous fiscal year or 111% with the effect of currency translation excluded. Profit increased in Seasoning Food in Japan and overseas. In Healthcare and Others, profit increased significantly in Functional Materials. Profit also increased in amino acids for pharmaceuticals and foods and CDMO services.

Profit attributable to the owners of the parent company was JPY 134.6 billion, a JPY 40.6 billion gain on the transfer to head office land and building was recorded in other operating income. This slide shows an analysis of the difference in business profit between fiscal '24 and '25. Higher revenue in Coffee in Japan, Functional Materials and in Sauce and Seasoning in Japan and overseas contributed to an increase in gross profit due to increased sales, which was a factor behind the JPY 19.1 billion increase in profit.

Improved gross profit margin in Sauce and Seasoning overseas, in coffee in Japan and Biopharma Services, CDMO services contributed to an increase in gross profit due to increased gross profit margin, which was a factor behind the JPY 27.3 billion increase in profit. As for SG&A expenses, we are increasing investments in intangible assets and other areas aiming for sustainable growth in line with our 2030 road map.

This slide presents the analysis of differences in business profit between fiscal '25 and '24 by segment. As a reference, the bottom half of the slide shows an analysis of the difference between the revised '25 forecast announced on February 5 and our previous year's performance. Looking at Seasonings Food, although revenue decreased in Solutions & Ingredients, we secured increased revenue overall by growing revenue in Sauce and Seasonings business in Japan and overseas and in the coffee business in Japan.

As a result, business profit increased by JPY 8.9 billion, exceeding our revised forecast for the full year. In Frozen Food, although overall sales were on par with the previous year, business profit decreased. In North America, a number of temporary factors arose from the first quarter through the third quarter, such as the impact of tariffs and the restrained food purchasing due to the SNAP program for low-income groups under the federal government spending freeze.

Also in the fourth quarter, in the North America, cold wave weighed down the sales and some products were subjected to recalls. In Healthcare and Others, business profit had a significant increase year-on-year of JPY 20.5 billion. In addition to a significant increase in profit in the Functional Materials business, profit also rose in the amino acids for pharmaceuticals and food business and CDMO services.

This slide presents combined sales for Sauce and Seasoning and Quick Nourishment broken down by volume and by unit price in Japan and overseas. Data on Japan is shown on the left-hand side. Sales for the fiscal year were 111% the level of the previous fiscal year, breaking down to volume at 96% and unit price 115% of the previous fiscal year. Excluding coffee, sales grew to 105% of the previous fiscal year level, volume 104% and unit price 101%.

In coffee business in Japan, volume declined under repeated price increases in response to the rising prices of the coffee beans. However, unit price growth made up for the decline and sales increased significantly to about 120% the level of the previous fiscal year. Revenue also increased in menu-specific Seasonings and Soup. In addition to strengthening sales promotion at stores, we rolled out a special menu campaign for Cook Do, which offers cooking ideas not bound by standard recipes.

We are promoting demand growth through the creation of variety in home cooking and the expansion of new usage scenarios even in an environment where consumers aim to cut costs. Furthermore, there was a contribution from the robust sales of new products and market share growth in mayonnaise. So sales were growing overall in a very strong manner. Overseas data is shown on the right-hand side. Sales for the fiscal year were 104% the level of the previous fiscal year.

Volume, 102% and unit price 102% of the previous fiscal year. Umami seasoning, flavor seasoning, menu-specific seasonings and other products are showing steady growth, primarily in the main countries where we operate. Also in the neighboring countries of the 5 key countries, they also made contribution to overall sales growth, such as higher sales of flavor seasoning in Peru and Cambodia.

This slide shows the progress of ASV indicators vis-a-vis the 2030 road map. ROE was 17.7% and ROIC was 11.8% for fiscal 2025, significant increases from the previous fiscal year. Excluding extraordinary factors such as the Forge Biologics acquisition and the sale of the head office land, ROE was 17.7% and ROIC was 11.2%. EBITDA margin improved from 16.1% in the previous fiscal year to 17.1% for fiscal 2025. This slide shows the ASV indicators by segment.

Overall, we are making steady progress towards our 2030 road map. This slide presents our forecast for 2026. We are planning to achieve new records for both sales and business profit, reaching 108% the level of the previous fiscal year. We expect increased revenue and profit in all segments of Seasoning and Food, Frozen Foods and Healthcare and Others. We expect profit attributable to the owners of the parent company to be JPY 120 billion.

And in fiscal 2025, profit was boosted by the recording of JPY 40.6 billion from the transfer of the head office land. With that factor excluded, profit ended up with a double-digit increase. Note that the impact of present situation in the Middle East is not incorporated into this forecast. There's a possibility of impact in the areas of procurement costs. By responding to these flexibly, we plan to minimize the impact on our 2026 forecast presented here.

Details of the specific actions are presented in the next slide. So let me explain using the next slide. Changes in the situation that has existed in the Middle East from the end of February 2026 onward could result in a certain amount of impact on the procurement cost in the forecast for 2026. Assuming that the crude oil prices remain at about $110 per barrel and the exchange rate remains at about JPY 150 to the dollar, levels seen at the beginning of the fiscal year, we currently envision that the potential impact to be on the scale of about JPY 30 billion or so.

First, about the risk in the area of procurement. There could be restrictions on the procurement of packaging materials and other inputs due to tightness of supply, primarily in the food products business. To address this, we will diversify the sources of supply and work to secure stable supplies. There's also a risk in the area of costs.

In addition to increases in prices of main raw materials, sub-raw materials and food ingredients, increase are expected for the price of naphtha and the energy prices such as electricity and gas and also logistics and transportation costs. To address such impacts, we will engage in ongoing wide-ranging solid cost reduction and work to minimize impacts through flexible pricing geared to the market environment.

We will provide quarterly updates with respect to these impacts on the materialization of these risks and explain the progress of our actions to address them. This slide is a waterfall chart of the business profit in our forecast. The effect of increased revenue and increase in GP margin will steadily bring about an increase in gross profit. And by solidly investing for growth, we will work to sustainably grow our business profit.

This is analysis of the difference by segment for business profit forecast against the previous year's results. In Seasonings and Foods, we expect increased revenue from overseas Sauce and Seasonings and Coffee in Japan, which will offset proactive strategic expenses such as marketing costs aimed at future growth, resulting in a planned increase in profit.

In umami seasonings for processed food manufacturers, we anticipate soft market conditions to remain and plan for profits to be largely unchanged from the previous year. In Frozen Foods, we anticipate increased revenue driven by higher sales volumes, primarily of aging category products in North America and plan for a significant overall increase in profit.

In Healthcare and Others, in addition to increased profit due to the continued strong performance of Functional Materials business, significant -- we expect significant increase in profit in the Biopharma Services & Ingredients. This slide breaks down the projected sales growth for the combined Sauce and Seasonings and Quick Nourishment into volume and unit price components for both Japan and overseas markets and identifies the factors contributing to changes in business profit.

In Japan, sales are projected to reach 106% of previous fiscal year with a breakdown of 103% for volume and 103% for unit price. Overseas sales are projected to be 107% of the previous period with a breakdown of 105% for volume and 102% for unit price. To achieve medium- to long-term growth, we plan to invest in strategic expenses, including marketing, while steadily increasing volume to drive sales growth.

Yet, should the situation in the Middle East have an impact, in addition to cost-cutting efforts, we will implement flexible measures such as price increases and other actions as required. This slide shows the trends in sales, business profit and business profit margin for the entire Seasonings and Food business, which includes Sauce and Seasonings, Quick Nourishments and Solution & Ingredients, S&I.

This business consists of Sauce & Seasonings and Quick Nourishment, B2C operations in Japan and overseas as well as the B2B S&I business and aims to achieve sustainable growth over the medium to long term. In FY 2025, the B2C business secured growth in both sales and profits, driving the growth of the entire business.

Meanwhile, regarding the assumption for the FY 2026 forecast, we anticipate that the sluggish market condition for S&I umami seasonings for processed foods manufacturers will continue for some time. Against -- we will also closely monitor the risk of rising raw materials and fuel costs against the backdrop of falling prices for fermentation, raw materials and fuel.

In light of the situation in the Middle East, approximately 80% of the umami seasonings for processed foods manufacturers produced by our group are used as raw material for intra-group B2C products and the soft market conditions are having a positive effect on the B2C segment in terms of raw material costs.

We will manage B2C and B2B business as an integrated whole, enhance our competitiveness through productivity improvement achieved by introducing new technologies and realize sustainable growth for the entire business over the medium to long term. In FY '26, based on this business structure, we will continue to pursue growth while the group as a whole would absorb the growth in the B2C segment and changes in market condition into the B2C -- B2B segment.

Next, I will explain the growth trends of our B2C business, the overseas Sauce & Seasonings and Quick Nourishment businesses. Here, we present data for 5 key countries where we operate, Thailand, Indonesia, Vietnam and the Philippines and Brazil using bar charts to show sales and business profit and line charts to show business profit margins.

The breakdowns of sales in the bar chart on the left shows the bottom section representing combined sales of umami seasonings and flavor seasonings, while the top section represents sales of menu-specific seasonings, cooking sauces, cook nourishments and others. As you can see from this chart, umami seasonings and flavor seasonings have shown steady growth.

In addition, you can see that sales of other products have been expanding, particularly in recent years, contributing not only to revenue growth, but also to improvements in business profit and margin. In this way, by combining the stable growth of our basic seasonings with the growth of other values, we are achieving sustainable growth in our overall overseas B2C business in these 5 major countries where we operate.

In this way, while expanding sales of products other than umami and flavor seasonings, we are also developing products that cater to the diversifying needs of the consumers in the flavor seasonings and other products. Here is an example of our product in Thailand. In Thailand, our flavor seasonings lineup has traditionally focused on pork-based products aligned with local food culture.

However, in recent years, we have expanded our product range to accommodate consumers' diverse values, including Halal-certified chicken-based products and vegetarian-friendly options. Furthermore, in menu-specific seasonings, we are advancing the launch of premium varieties tailored to local dishes such as phalo and larb Thai salmon smoked salad. In recent years, we have been actively promoting aminoVITAL to target people engaged in sports.

Next, let's look at the neighboring countries of the major 5 key countries. This chart shows the trends in sales and business profit margins for the neighboring countries, excluding the 5 major markets where we operate. As you can see, sales are growing strongly even in countries outside those 5 countries. In FY 2025, sales in neighboring countries accounted for more than 20% of our total overseas Sauce & Seasoning sales.

In neighboring countries such as Peru and Malaysia have already grown to a scale rivaling that of major markets. And as these countries increase their presence and emerge as growth drivers following the major markets, their growth is accelerating. To date, our group has expanded our overseas business by building local factories and establishing sales networks led by local staff to offer products rooted in local food cultures and preferences.

Currently, in countries and regions with food culture similar to Thailand, such as Laos, we are expanding our business into those new markets by exporting products manufactured in Thailand, utilizing an asset-light business model. Furthermore, we are strengthening our local staff structure in line with business growth and enhancing sales capability through efficient marketing initiatives, including the use of social media and other channels.

In this way, we are advancing our expansion into neighboring countries by evolving the Ajinomoto Group's existing model for overseas business development, which centers on establishing products rooted in local food, cultures and preferences and locally led sales networks, and we will use this model to drive medium- to long-term growth. Next slide shows the Frozen Food business. In fiscal year 2025, combining Japan and overseas markets, overall sales increased slightly, while profits declined.

This was due to the several temporary factors in North America, impact of tariffs in North America during the first half of the year, reduced grocery spending resulting from the suspension of the Supplemental Nutrition Assistance Program, SNAP for low-income household, which was affected by the federal government shutdown as well as the impact of cold waves and Q4 and recalls of certain products in North America.

I would now like to explain the recall situation. In February of this year, we received inquiries regarding glass fragments found in specific products sold at chain stores in North America. We immediately reported the situation to the U.S. Department of Agriculture, USDA, and conducted an investigation into the cause.

The investigation revealed that minute glass fragments, too small to be detected by inspection equipment had been mixed into some of the raw materials used in affected products, which were subsequently shipped. In response, we promptly recalled the affected products and provided a detailed explanation of the cause and our response to all relevant customers who have expressed their understandings.

Furthermore, in light of this incident, we have reviewed our inspection processes and strengthened our quality control systems to mitigate the risk of foreign object contamination. We're also moving forward with the introduction of inspection methods capable of detecting foreign objects that are difficult to identify through conventional inspection method. In addition, we have conducted a comprehensive review of our entire quality control process and are working to prevent recurrence by enhancing the precision of management at every process from manufacturing to shipping.

During fiscal year 2025, there were periods when products were not available on store shelves while we provided explanations. However, we have now resumed shipment of all products. Expenses incurred in fiscal 2025 in connection with this matter were recorded under other operating expenses, and we anticipate that the impact of this recall on sales and profit in FY 2026 will be minimal. Over the past 25 years, our group has steadily expanded the sales scale of this business, both in Japan and overseas.

In 2014, we acquired the current Ajinomoto Foods North America, Inc. and had been actively expanding our North American operations. Since then, we have strengthened our business foundation through the promotion of an asset-light strategy. For FY 2026, we anticipate increased revenue and profits in Japan and overseas. In North America, the Asian food category is expected to grow at a rate exceeding that of the overall North American Frozen Food market.

We will aim to return to growth and expand our business by launching new products, primarily gyoza and further strengthen the Ajinomoto brand. Also, we view the Frozen Food business as a key pillar of our group, both in terms of enhancing our corporate brand value and contributing to our customers' well-being. In Japan, Frozen Foods, including gyoza, serve as a key touch point between consumers and Ajinomoto brand.

In addition to our standard products, we offer microwavable gyoza as well as [indiscernible], our line of nutritionally balanced frozen meals featuring approximately 60 varieties, striving to balance convenience with health benefits. In Europe and the U.S., we are also promoting Japanese-style, Hane-Style Gyoza as a new offering, contributing to well-being through a wide range of food choices.

Ajinomoto brand awareness in Europe and the United States has reached approximately 10%, expanding to a level where we can reliably reach specific target demographics. Most recently, the largest premium retailer in the U.S., which operates approximately 600 stores decided to adopt our group's Frozen Foods. This outcome is the result of our continuous product proposal, which have led to the recognition of the value of our Japanese food offerings, and we believe it will serve as a foothold to further enhance our expansion.

We view this development as evident that opportunities for higher value-added expansions are growing in U.S. market and recognize it as a positive step leading to the future initiatives. Given this brand value and expansion of our business foundation, this slide outlines our mid- to long-term plan for enhancing corporate value in the Frozen Food business. Looking ahead to FY '30, we aim to achieve an ROIC that exceeds the current level by approximately 3%.

At the same time, over the medium to long term, we will work to transform our business structure so that we can stably maintain an ROIC that sufficiently exceeds our cost of capital. To date, we have steadily strengthened the business foundation of our Frozen Food business through continued sales growth, the expansion of our North American operation and the promotion of an asset-light model.

We recognize that this Frozen Food business makes a significant contribution to enhancing the brand value of the entire group. Given that our products have been selected by premium retailers in North America, we believe we can continue to achieve growth through business expansion primarily in overseas market. Based on this current situation, our future business strategy will focus on 3 main directions. First is innovation and deliciousness driven by technological lead.

We will apply the deliciousness technology cultivated in our Seasonings and Foods business to Frozen Food business as well, further refining deliciousness and enhancing our competitive advantage by differentiating ourselves from competitors. Second is improving productivity through the thorough pursuit of operational excellence.

We will apply the production management methods such as process control and know-how for improving efficiency, develop the Ajinomoto Frozen Foods, our primary domestic Frozen Food business entity to achieve a balance between profitability and capital efficiency across the entire group. Third, we will further strengthen our business foundation.

We will enhance our ability to adapt to growth markets while advancing the sophistication of our business management to establish a framework that supports sustainable growth. Through these initiatives, we will raise ROIC by FY '30 and evolve our Frozen Food business into one capable of creating value that exceeds the control of capital over the mid- to long term.

Now the Healthcare and Other segment, Functional Materials. Sales for the high-performance boards for AI servers and networks were strong throughout 2025, yielding significant increase in both sales and business profit. In terms of profit margin, products for high-performance boards and high value-added products are growing as well, and the product mix is also improving. Next, I would like to discuss the evolution of semiconductor packages in which ABF is used.

The information on the slide presents estimates by our company based on external materials and other sources. Since ABF was first adopted for PC applications in 1999, semiconductor conductor package substrates have become increasingly larger as high-performance semiconductor chips have advanced. As shown here, the surface area and the number of layers increased in package substrates. The area and then the amount of ABF increases dramatically.

From 2031 onwards, substrates are expected to further increase from the current sizes, which we believe will lead to increased demand for ABF. I would like to share some thoughts in detail regarding the ABF strategy going forward. Since launching the ABF business more than 25 years ago, we have been building relationships in which we create value together with our customers. And alongside achieving high market share we enjoy today, we have continued to sustainably expand the value of the business.

We believe it is precisely these relationships, which constitute a formidable barrier that many companies seeking to enter the ABF business find difficult to overcome. One quick manifestation of this value creation relationship with customers is the high-speed development system. The high-speed development system is a project methodology in which we proactively advance research and development while anticipating a need 2 years ahead.

This enables us to complete development speedily and make proposals to customers as soon as the demand or needs arise, and this system has been built through strong and deep co-creation with our customers. When developing by co-creation with customers, we make comprehensive proposals that include product pricings from the outset.

Development is carried out not only with a focus on improving performance levels, but also a careful alignment of the cost required for such improvements and the resulting unit prices. In other words, the high-speed development system. In this system, performance and prices are closely interconnected and they are inseparable from each other. Accordingly, the sustained improvement in unit prices within the ABF business have been achieved as higher-priced products have come to account for a larger proportion of the product mix, in line with improvements in the product performance.

As a result, the profitability of the Functional Materials business centered on ABF business has improved from approximately 30% around 10 years ago to now above 50%, enabling us to continue to sustain growth in business value. In cases of raw material or utility cost increases, we will provide careful explanations to our collaborating customers, and we will pass on such cost increases properly based on their understanding.

However, raising unit prices solely for the purpose of improving our short-term profit margins risks significantly damaging the ecosystem we have built with our customers through the years of co-creation. Specifically, it will not only undermine the very foundation of our strength, namely the high-speed development system, but could also incentivize our customers to turn to competitive products.

Today, we announced a plan to acquire a land in Gifu Prefecture for a new production facility that will serve as a third based after Kawasaki plant and Gunma plant. This investment will target expanded demand from 2030 onwards, with the start of operations scheduled for 2032. Last year, new manufacturing facility commenced operations at the Gunma plant. And on June 30, we plan to hold a virtual tour of the plant together with a briefing session on the ABF business.

We hope this will provide a valuable opportunity for you to deepen your understanding of the future potential of the Functional Materials business. So if your schedule permits, it will be most -- will be most pleasant, pleased if you could participate in this event. Second, the Biopharma Services and Ingredients business. This slide shows sales over time for each modality.

Towards 2030, we are aiming for dramatic growth by expanding AJIPHASE, which is for medium molecule and nucleic acid drugs and Forge's gene therapy process, AJICAP and other products while also sustainably growing small molecules. This slide shows the status of biopharma services or CDMO services by geographies. Looking first at 2025 in Europe, revenue and profit increased primarily in small molecules.

In Japan, we shipped APIs for nucleic acid drugs on schedule in Q4 and full year revenue and profit increased as a result. In North America, Forge, orders were strong in fiscal 2025. The business is progressing smoothly towards mid- to long-term growth with sales growing significantly over -- at about 1.5x from the previous fiscal year level. As for the plans for fiscal 2026, we expect increased revenue in all regions, Europe, Japan and North America and expect significant growth in overall profit.

By region, in Europe, contributions will come from our mainstay small molecules as well as from our AJIPHASE medium molecule proprietary technology. In Japan, we expect AJIPHASE as well as AJICAP and other products will make contribution. And in North America, forecast sales, we forecast sales growth and positive EBITDA margin. When we compare the '26 quarterly sales to 2025, we expect revenue increases to grow in the order of Q3, Q2 and Q1.

Conversely, in Q4, we expect revenue to decrease from the same quarter in the previous fiscal year, which we saw a major increase in sales from shipments of APIs for nucleic acid medicine. Similar movements will occur in profit as well, and we plan for a significant increase in profit for the full year for fiscal 2026. This slide presents the progress of Forge's initiatives.

By evolving new technologies, Forge is working to improve productivity of its existing gene therapies while steadily expanding the breadth of gene therapies by adapting to new treatment approaches. To enhance productivity, Forge has cooperated with the laboratories at Ajinomoto Company to develop new culture media supplements that enhance the productivity of viral vectors at the core of the gene therapy.

Forge is highly evaluated by its customers for its high productivity compared to other companies. With its latest initiatives, the company has further boosted its strength, i.e., its high productivity and continues to earn customers' praise. Forge is expanding the areas that gene therapy can address by advancing adaptation to new treatment methods. In addition to high productivity with technical adaptation capabilities as its strength, the company will expand pipelines by being selected by more customers.

In March 2026, we entered into a manufacturing partnership with The Progeria Research Foundation regarding a gene therapy for progeria, a form of rapid aging disease with -- we view this initiative not only as a concrete step towards developing a new treatment method, but also as a societally significant initiative that will advance the social implementation of gene therapy, a cutting-edge medical treatment in the field of rare diseases.

With these initiatives, we will expand Forge's business and will connect it to positive EBITDA in 2026 and also to mid- to long-term growth in sales and profit. Next, our AJICAP antibody drug conjugate technology, ADC technology, one of our group's proprietary technology based on AminoScience. This business made a steady progress in fiscal 2025, including the signing of new licensing agreements with multiple companies.

We are currently strengthening initiatives aimed at mid- to long-term sales expansion. Specifically, we have begun strategic collaboration with CROs and CMOs, which are the companies playing an important role for ADC development. CRO is a partner that is contracted by pharmaceutical companies to perform technological selection and experimental design in the early stages of development.

By collaborating with CROs, we will expand opportunities for the adoption of AJICAP from the early stages of development. CMO is a company contracted to manufacture pharmaceuticals bearing the key functions of manufacturing development products and launch products development.

By collaborating with the CMOs, we aim to speed up the development of pharmaceuticals using AJICAP and going forward, establish a manufacturing environment capable of supporting the manufacture of a wider range of pharmaceuticals. In fiscal 2026, we plan to solidly connect these initiatives to outcomes and raise the business to a scale of -- in the order of billions of yen. This slide shows the 2026 forecast for the ASV indicators vis-a-vis the 2030 road map.

ROE and ROIC are estimated to be 15% and 11%, respectively. We expect organic sales growth in fiscal 2026 to be about 9%, significantly higher than the growth rate of 5% projected for the period between '26 to 2030. This slide presents our 2026 forecast for ASV indicators for each segment. We will continue to have appropriate financial leverage that will contribute to organic growth and capital efficiency, asset and liabilities here.

This is the operating cash flow for 2025, which was JPY 239.3 billion, exceeding a forecast of JPY 220 billion, setting a new record. Profit before income taxes in 2025 increased by JPY 88 billion approximately. And even with an increase in corporate tax payments, overall operating cash flow increased from the JPY 209 billion of the previous fiscal year.

In the mid- to long term, we will further grow EBITDA, improve working capital and have a sustainable growth in operating cash flow as a result of that. In fiscal 2025, again, we made growth-oriented capital investments, which totaled about JPY 103 billion in fiscal 2026, we are planning capital investments of about JPY 130 billion. We will continue proactive investment in intangible assets for our mid- to long-term growth as well.

This slide shows key management indicators in the purpose-driven management by midterm ASV Initiatives 2030 road map. ROE and ROIC were impacted in FY 2025 by the recognition of a gain on the transfer of the land and building housing our headquarters. Normalized EPS based on business profit also showed solid growth in fiscal 2025. This slide covers capital allocation. While enhancing our cash generation capabilities through sustainable business growth, we are allocating resources prioritizing capital efficiency in accordance with our road map.

We expect operating cash flow for FY 2026 to be about JPY 230 billion, while focusing on growth investment aimed at organic growth, we will proactively implement shareholder returns and strive to enhance corporate value. Furthermore, we remain committed to achieving the goals set forth in our road map, triple EPS by 2030 compared to 2022 and we will work steadily toward this objective. Next is regarding shareholder returns.

We have adopted a progressive dividend policy under which we do not reduce dividends, but instead increase or maintain them in line with growth in business profits. The dividend for FY 2025 was JPY 48 per share, an increase of JPY 8 from FY '24. We plan to pay a dividend of JPY 50 per share for FY '26, an increase of JPY 2 from FY '25. Regarding share buybacks, we are currently repurchasing shares announced on November 6, 2025, with a maximum limit of JPY 80 billion.

From this slide, I will explain our initiatives aimed at enhancing corporate value over the medium to long term. First, let's review FY '25. After taking office last year, we identified not enough concrete medium- to long-term strategies as a company-wide challenge. Through the cross-SWOT analysis shown on the left. Using this as a starting point, we have spent the past years engaging in extensive discussions regarding the company-wide management issues and the direction of our next actions.

As a result, we have made progress in formulating a strategic vision for the medium to long term and clarifying key issues. I feel confident that we have reached a stage where we can outline specific directions for future actions, including the organizational structure required in a department responsible for execution. At the same time, we have recognized that there are inconsistencies in execution capabilities and the pace of transformation across our business units and regions.

Moving forward to further improve the effectiveness of the action plan we have developed over the past year, we believe it is essential for management to elevate the company's overall capacity to fully execute our strategy. Based on this assessment of the current situation, we positioned FY '26 as a year in which we will translate the strategic concept discussed so far into company-wide strategies and fully execute them.

Today, I would like to explain the progress of our initiatives regarding the first of these 7 strategies, the medium- to long-term growth strategies, the fourth, speed up and scale up organizational execution capabilities and the seventh, strengthening corporate governance and compliance. First, regarding our medium- to long-term growth strategy.

In FY '26, we established a new body called the company-wide Growth Strategy Committee to deepen our discussion on the overarching direction of our company-wide growth strategy. As internal initiatives this fiscal year, we will continue to deepen discussion on major medium- to long-term directions, including post 2030 during executive training sessions and other forums.

At the same time, by discussion -- discussing the road maps, goal progress and initiatives across the entire company, we will refine our company-wide strategies. To foster new businesses rather than simply increasing the number of initiatives, management will focus on commercialization and prioritize and concentrate our efforts on initiatives that will lead to future growth businesses.

In this way, we aim to balance both quality and the speed of innovation. While mechanism for developing new businesses have existed in the past, this fiscal year, we launched INNOSEED by Ajinomoto as an internal accelerator program dedicated to creating new businesses. We will identify promising ideas and technologies within the group that have not yet been commercialized and nurture them into viable business.

Going beyond mere idea generation, we will swiftly assess and decide on businesses and business viability for themes with growth potential, and we'll seize them through to commercialization. Next is speed up and scale up organizational execution capabilities. This fiscal year to enhance our overall strategic execution capabilities, we will also work to transform our management structure, including human resources organization and governance.

We appointed Vice President, Kaho, who is attending today's briefing as CHRO. With an eye on our mid- to long-term growth and direction of our desired future state, we will continue to evolve our human resource strategy. Regarding our global structure, we will evolve our organization into a Decentralized, Autonomous, and Connected Organization or DACO model network, and we will balance the strong local entities across our global locations of businesses with a centralized structure of our headquarters.

Regarding strengthening corporate governance and compliance, we have established new regional compliance committees as subcommittees of the Group Compliance Committee or GCC. As our business expands globally, we will evolve our structure to enable risk identification and initial response based on regional realities, including laws, regulations, practices, risks and other circumstances and to implement the group Compliance committee's policies into each region.

Through this structure, we will maintain and improve our global governance standards while enabling each regional headquarters to conduct risk assessment and initial responses that inform business decisions. At the same time, by allowing headquarters to focus on oversight and company-wide decisions, we will accelerate decision-making process and build a system capable of executing global operations with consistent speed and quality.

The photo on this slide capture my interaction with employees around the world over the past year. I place great importance on meeting with employees in person to understand the front lines. Since taking office, I have engaged in dialogue with more than 4,500 Ajinomoto Global employees in total.

I believe I was able to share my own experiences of challenges and failure while also directly conveying the vision that Ajinomoto Group is striving to achieve. I received more active questions and candid feedback from employees than I had expected. This not only deepened my understanding of the front lines, but also allowed me to gain a clear perspective on the differences between various businesses and departments.

In FY 2026, we will further deepen discussions on mid- to long-term growth through initiatives such as company-wide growth strategy meetings, et cetera. While flexibly adjusting our company-wide growth strategies, we will work to enhance the organizational overall execution capabilities. We will evolve our ASV initiatives to ensure the steady achievement of the 2030 road map.

At the same time, through discussions at the executive meetings and other forums, we will link the 2030 road map with post 2030 initiatives and take on the challenge of creating new businesses to drive mid- to long-term growth. Finally, this is a message from me. We will accurately assess various changes in the external environment, respond agilely and steadily achieve our FY 2026 forecast.

Regarding the 2030 road map, we will continue to strive to achieve our goals ahead of schedule. We will thoroughly implement our High-Speed and CHANTO approach to further accelerate business growth in both food and Bio & Fine Chemicals segments. Furthermore, we will enhance our conceptualization and execution capabilities to accelerate the creation of innovations aimed at mid- to long-term growth. Think well, do well. That concludes my presentation. I would appreciate any questions. Thank you.

[Interpreted] Mr. Nakamura, thank you very much. Now we'd like to move on to the Q&A session. [Operator Instructions] Now we'd like to go to the first question, which will be from Saji-san of Mizuho Securities.

[Interpreted] I have one question. Regarding ABF, this is a question related to ABF. This is on Page 26. You talked about the advanced packages for the AI applications, and you have this expansion strategy, and that will have an impact through 2030 and beyond. But on the page before that, on Page 25, you say that servers and networks will continue to drive your performance and the top line growth was quite significant in the third quarter and fourth quarter.

As for the AI applications, in 2026, what is the proportion of the AI demand for ABF? And what is the contribution in 2030 according to your projections? So can you give us some indication as to what proportion of those applications in the future? That's my first question.

[Interpreted] Mr. Saji, thank you very much for the question. As for ABF, on Page 25, if you look at the bar chart, AI-related AI servers and high end are -- this is included in that section. According to our -- the information that we had, AI applications account for 15% to 20% or so according to our current estimate. This is increasing significantly compared to last year.

So how further this will increase from 2030 is something we don't know yet because the investigation team does not have the information available to them. So we cannot give you a precise forecast, but we believe this could potentially double according to my personal prediction.

[Interpreted] Recently, NTT's IOWN network, the optical electro-convergence commercialization 2.0 has already been making progress. So Mr. Nakamura, you have voiced your expectations to NTT's IOWN project on many different occasions. So for example, the schedule is now becoming quite revealed. So if it's 3.0, it's going to be 2028, then 4.0 is expected to be introduced in 2032.

So devices projection is now becoming quite clear with IOWN project. So why do you have high expectations for NTT's IOWN project? If you can just quantify its economic impact for, let's say, for fiscal 2028, those -- the number of layers will have a contribution, I believe. So what is the economic impact you're expecting of IOWN from NTT? If you can elaborate on that, that would be appreciated.

[Interpreted] Yes. Thank you very much for the question. IOWN, as we have explained before, we too are participating in the IOWN project. The electro-optical convergence materials and sample work has already started its development and production.

This application for electro-optical convergence, how further this will increase in the future and replace the existing solutions is something we cannot calculate completely yet. But I believe not everything is going to be replaced with this optical electro-convergence. But given the projection of the customer in 2030 and beyond, ABF demand, we can expect a steady growth from 2030 and beyond. So the existing AI servers and existing networks will continue to be the mainstay demand for 2031 onwards. Is that correct? Yes, correct.

[Interpreted] Next question from Miyazaki-san from Goldman Sachs.

[Interpreted] This is Miyazaki from Goldman Sachs. I have two questions. First, I would like to ask about Functional Materials. Previous year, at the outset, sales 11% up and profit 8.2% up. And the landing was 32% and 36% increase for profit. And in the fourth quarter, I think we had increased sales and this year plan, sales and both profit is 10.8% growth, and that was the assumption.

Is there any sign of slowdown? Or do you think that the cost will be higher than the previous year? Well, I would like to see and know the background why it looks slowing down. And of course, can we expect that it will be increased later in the years as we saw in the last year?

[Interpreted] Miyazaki-san, thank you for your question. Yes, for Functional Materials, planning sales and profit, we provide -- we have customers' information and this WSTS is the information that we refer to. And for last year, we had referred to those information. December was the latest WSTS information. Based on those information, last year, yes, we had increased profit and sales, and that was the result.

I think that matches with the revised forecast. Initially, logic ICs increase was not so big from WSTS. But during the year, there was 30% of increase in the logics. That was a forecast from the WSTS, and we got the result, and that was correct. FY '26, though, looking at the global economy, I think, of course, our plan is a bit conservative, but information from our customers and information from WSTS, we would like to update our plan.

[Interpreted] Another question is for overall business. This is on Page 37. You talked about normalized EPS and EPS. For this year, you have the gap. Why do you have this gap? I want to know the cause of the gap. I'm not too sure about this. I would like you to explain about this. Do you have to spend for any restructuring or in the past 2 years, as was mentioned earlier, you had business sales gains.

And in 2024, you had restructuring costs included. So I would like to know the gap between EPS and normalized EPS. As a starting point, continuously, I'm sure that you are increasing ROEs, and we fully recognize this. But the initial year plan, whether it be ROE or whether it be sales or net profit, it looks too low. I would like to know the factors behind this, why it looks so low.

[Interpreted] Thank you for the question. The gap, the big gap in FY '24 is because of the sales of Althea and its impairment.

[Interpreted] Yes. Thank you very much. This is Mizutani speaking. The normalized EPS is based on the calculation format as is written here, we make a coefficient and we would make -- 35% is the coefficient that we made. The difference here, there are some factors. One of them is that earlier, I mentioned about we are doing business and growing business in emerging countries.

And in the emerging countries in doing business, we have to respond to the foreign exchange effects in a certain country, we have to acquire hard currency. And in acquiring that, we have to pay the cost for that. And that expense is one of the reasons for this difference. And there are some other factors. So those costs are all added up.

And I think in the coming years, we would like to minimize these costs. And I'm explaining, I think a multinational company, the finance department is always struggling how to minimize these costs. So I think we would like to evolve and advance so that we could minimize these costs so that we would like to increase the EPS.

[Interpreted] So in that sense, in this new year, you -- other expenses or operating expenses, do you -- you're not any including minus negatives in this?

[Interpreted] Yes. Yes, we're not.

[Interpreted] So with this pace, the business profit, 10%, mid-10% EPS triple, that was the image that you explained to us. I think for this year's plan or for FY '26, you have not changed it and you are not changing the goal for 2030? Or is this special year that you're not having an accelerated growth?

[Interpreted] Yes, as you say, yes, I've talked about the foreign exchange factors. Other than that, we have other factors. So one factor is the equipment and facilities writing off. We want to minimize those costs towards 2030. So EPS, we want to converge this into normalized EPS.

[Interpreted] Now moving on to the next question. This will be from Daiwa Securities, Igarashi-san.

[Interpreted] This is Igarashi from Daiwa Securities. I would like to ask 2 questions as well. The first question, the impact of the Middle East situation, if you can give us some more details. If you look at Page 13 of the presentation, you have talked about the JPY 30 billion impact potentially. The crude prices and also the currency rates that you are assuming for is already presented here.

Of course, day by day, it fluctuates quite heavily. So I think it's very difficult for you to make a precise prediction. But this size of JPY 30 billion, will you say this is a worst-case scenario? Or what will be the impact if you make a conservative prediction? Is this a conservative prediction, by the way? So in reality, what do you think it will come in at? And what will be the landing number if you have that kind of projection?

[Interpreted] Thank you very much, Igarashi-san, for the question. On Page 13, as you rightly pointed out, these are the assumptions, the crude prices as well as the currency rate. If this continues from the beginning of the year all the way to the end of the year, with that assumption, the negative impact is estimated to be JPY 30 billion or so. We are not optimistic. We are not pessimistic here.

This is a neutral projection, including the ingredients as well as the raw materials, sub-raw materials as well as the energy cost as well as the naphtha prices and other energy and transportation costs. The negative impact is estimated to be JPY 30 billion. Other companies in Japan have also made a similar projection, and that was about JPY 50 billion.

So we would like to make proper measures and be able to offset that. So JPY 30 billion is the calculation that we have made so far, but we will also like to consider the proper countermeasures so that we can deliver on the forecast that we have given to you.

[Interpreted] In terms of the countermeasure you said, I'm sure you are working on a lot of cost reduction measures. But the price revisions, will you say would be the major countermeasure that you're contemplating right now?

[Interpreted] Of course, the cost reduction will be conducted on an ongoing basis. But if we are not able to absorb them, we would like to pass on them adequately to the prices.

[Interpreted] One more follow-up question. The cost deterioration is not factored in, in the guidance numbers you said. But in your segments, in the foods -- seasoning and foods business, Sauce and Seasonings and also for Quick Nourishment and S&I, all the segments or subsegments are expecting a slight reduction, I think. That is the assumption. Is it? Is there any deterioration factor for the cost ratio?

[Interpreted] Basically, we would like to make investments for R&D and marketing in order to ensure growth in the future. So those are taken into consideration. So -- and also -- so the Middle East situation is not factored in here. So the impact of the Middle East situation will be updated to you on a quarterly basis going forward.

[Interpreted] Okay. Understood. My second question would be biopharma services business. So I would like to ask a question about this. In your current year plan, you're expecting a profit increase. And this is going to make the biggest contribution for your profit increase, the biopharma services, I believe.

In your explanation in the slide, unlike last year, the pace of revenue and profit growth is going to accelerate. What is the difference? What is going to change since last year? Are you foreseeing a big project? Is there a big project in the pipeline? Or are you have -- do you have a solid conviction that you are able to deliver these numbers?

[Interpreted] What has changed significantly from last year, there's nothing like that, but we have steadily been making progress in this business. The small molecules, we have captured good customers, flow reactors generating new value and be able to achieve growth in the small molecule business. As for AJIPHASE and other media molecule, we are going to grow this business together with customers.

And Forge is going to make a great contribution with larger number of customers and the commercialization progress is making good steady progress. So we are getting into new phases. So towards commercialization, we are accelerating their pace. So therefore, Forge is making a good contribution for profit and revenue growth. Arashida-san can also supplement. He's the Head of the Biopharma business.

[Interpreted] So yes, certainly, in this business, we are expecting a huge growth, especially the CDMO, especially the Forge revenue and sales and profit contribution is going to be making the largest contribution, followed by small molecule and also the medium molecule in Japan. Likewise, and also the amino acid for food and pharmaceuticals is also making a good contribution because of the high value-added projects going to make a good contribution. So those are the factors behind this growth for this fiscal year.

[Interpreted] Next is a question from the English webinar. McLeish-san from Bernstein, please.

You talked about having enough ABF capacity to keep you going through 2030. But is that comment that you've made before, is that based on this kind of mid-teens growth rate? Or are you thinking about more of a transformational growth when you look at longer-term planning for the ABF business?

And you've got a pipeline of expansion projects happening already. Can you help us understand how much more scope there is over and above those in the next 3 or 4 years? Or do we have to wait until the Gifu plant as the next kind of incremental addition to ABF capacity that's possible?

[Interpreted] McLeish-san, thank much. As for the capacity, last year, Gunma had started its operation. The new plant had a very successful launch. And as was mentioned to you earlier, currently, Kawasaki and Gunma plant, both of them, 8 hours, they're having one line. The capacity is full, and it is being operated.

I think it can grow more. So the productivity growth for the existing facilities or maybe some overtime and changing the shifts could afford this. The Gifu plant is after 2030, it is assuming a bigger demand. So in FY 2032, the Gifu plant will start its operation. So this is to meet the demand after 2030. That's the role of the Gifu plant.

Okay. But so just maybe the first part of the question didn't come across, but is your plan through 2030 based on the run rate of your guidance? Or is it based on more transformational growth? Because if you're not planning for something beyond your guidance, then there seems to be quite a risk that you won't be able to supply. So I'm just wondering some comfort that you can actually satisfy the demand that's maybe likely to take place.

[Interpreted] Well, I think we need more capacity than the guidance, so -- or else the customer will not be satisfied. So always, we have a capacity more than what we have been provided in the guidance. So we can keep this pace until 2030.

Okay. And then a question about the cost of goods sold pressure. So obviously, the -- can you give us an indication of which business divisions you think are going to be most intensely hit by the cost of goods sold pressure if the scenario, the EUR 30 billion scenario plays out?

And then within those divisions that are going to be most acutely impacted, are there any particular kind of seasonal price increase timings that you need to be thinking about? Because these costs seem to be hitting already in many cases. And I just want to understand where we should be looking for that pressure to come first.

[Interpreted] Well, Page 30, it shows the cost risks. You can see the major and sub-materials. This is Ajinomoto, amino acid fermentation material. So the main is the sugar and tapioca, the sugarcanes. These are the sugars, also grains, and of course, alkali and acid and these are the sub-materials with the Middle East conflict, these prices may go up. And then it will hit the Ajinomoto production.

And of course, for the food raw materials, this is -- will hit all the food-related items, including the Frozen Food. And for the packaging material, naphtha price increase, yes, this will impact for all of the businesses. And of course, energy and logistics, they will impact all. So not specific business will be hit. But as mentioned earlier, each of different materials will provide different impact to different businesses. And all of them added together makes JPY 30 billion impact.

[Interpreted] Now moving on to the next question. This will be from Morgan Stanley MUFG, Tsunoyama-san.

[Interpreted] This is Tsunoyama from Morgan Stanley. I also have 2 questions. First, sorry for this persistent question regarding Functional Materials. You talked about your philosophy for prices. Nakamura-san explained that in detail earlier. But I would like to check on the facts. In the past, due to the raw material increases, you raised ABF prices. Do you have such track record in the past?

Any price increases resulting from cost increases? I would like to confirm that point. So that kind of -- what is the hurdle of raising those prices? Do you set any profit margin? What will trigger any price hike? If you have any philosophy behind that, that would be appreciated.

[Interpreted] Okay. Why don't we go one by one? Yes. Okay. Tsunoyama-san thank you very much for the question. First, in the past, do we have any track record of raising the ABF prices due to the raw material cost? No, we don't have any such cases. We don't use glasses or copper foil. So we are not -- we have never done any universal price increases because we don't use such raw materials. So ABF, first of all, we co-create together with customers.

And also, we align on the prices as well as the performance, and we decide on them on a case-by-case basis together with customers. So it's nearly like a customized approach. So we don't have any universal price increases here as a mechanism. We align with the customer and also agree on the cost to deliver the agreed performance. So the -- that is the starting point for the performance.

So the prices already started inclusive of the cost for production. So when the mass production effect comes in, the price will come down. That is the style of the ABF materials. When something new is going to be created, the ABF with the higher prices will be launched, and then that will improve the product mix, and that's the reason why we are enjoying this high profit margin today.

[Interpreted] Okay. Then if that is the case, Mr. Nakamura, you mentioned that if the cost increases, you talked about the potential of raising the prices. Is it because the cost environment has changed from the traditional environment?

[Interpreted] Yes, indeed, naphtha prices is increasing. And as a result, the film prices is increasing, packaging price is increasing. So if that happens, really, we will have to pass them on in an adequate fashion to our prices.

[Interpreted] Okay. Got it. I understood. Okay. My second question, the Middle East impact, I would like to ask this question again. In comparison with the Ukraine case, I would like to ask this question. Compared to the Ukraine war, the assumption regarding the cost, the Ukraine case was about JPY 50 billion you said. Compared to the Ukraine conflict, if you consider the external factors and the internal factors, do you think the capability to pass on the cost, are you better equipped to do that right now compared to before?

If you can share your thoughts about that, like the rolling forecast, how well this is penetrated in society? Are people more ready to receive the pass on costs or because of the B2B proportion increasing? Are there more accepting these price increases? And also Southeast Asian economic situation is becoming larger. Is there a larger risk compared to the time of Ukraine war?

[Interpreted] Well, the Middle East impact, the situation is changing day by day. So we have to keep a close eye on the changes. And in order to monitor the situation, we have already established a project team inside the company. So we are looking at the daily situation and take proper measures as necessary. So that is the basic assumption.

So there are external and internal factors, but the rolling forecast given the current situation and taking -- we are -- this is quite effective to take countermeasures. So the rolling forecast, we reflect the Middle East situation in the rolling forecast. This is already instructed to the entire company. As for the passing on the prices, there are things that are easy to do and things that are not so easy to do.

Price-sensitive products are difficult to pass on relatively speaking. But last year, in the Frozen Food, we passed on the prices and then the results were not really favorable for us. So we would like to look into the acceptability of price increases as we decide on any pricing hikes in the future.

[Interpreted] Okay. I understood. Well, then -- as for MST, so sorry for going back and forth. For MST, Nakamura-san, you mentioned earlier that the demand and supply situation will relax and that will be more positive for B2C business. Given the Middle East situation and the crude prices gradually rising, is that the case?

[Interpreted] The Middle East situation, not only us, but MST prices, MST prices are increasing globally overall. So the Chinese manufacturers still have a large production capacity. That remains unchanged. So therefore, the competition is still there. And we believe the market situation is softening compared -- in our view. But the overall level is increasing. So for the B2C market, this is going to be a positive impact without having a significant impact on us.

[Interpreted] Thank you very much for the question. So we would like to receive next question. Sumoge-san from Bank of America.

[Interpreted] Yes, BofA, Sumoge speaking. Yes, I can hear you. Thank you. The fourth quarter result, I would like to confirm the fourth quarter result. As for the Sauce and Seasonings, the third quarter was very good. And I think profit accelerated in the fourth quarter. The Sauce and Seasonings, Cook Nourishments, S&I, I would like each of them to know what's happened. And the U.S., this is -- was so far having the losses, but now making profit. I wanted to confirm the reason for that as well.

[Interpreted] Are you talking about the fourth quarter?

[Interpreted] Yes, the fourth quarter result. The Sauce and Seasonings, I want to know in detail about the situation. If it's difficult to answer, I will change the question.

[Interpreted] I'm sorry. I'm sorry. The fourth quarter result, you want to know the reason for the increase in U.S.

[Interpreted] Yes, by region.

[Interpreted] In the fourth quarter, Sauce and Seasonings, U.S., you had an increase in sales. I think the trend is different from the past. The Brazil, the cost down, cost reduction effects or efforts is being reflected now. Is that so? So Kaji-san, please.

[Interpreted] Thank you for the question. Its fourth quarter. When you talk about that 3 months, it is just versus previous period and previous year. B2C Brazil, I think we made increase in profit sales. And as you mentioned, the umami seasonings for the processed food in the South America, Latin America, yes, the profitability increased. Several factors were added up and thus made increase in profit in the U.S. or the Americas.

[Interpreted] Based on that, I want to ask a question about the plan for this year. Yes, Seasonings and Foods, the profit is not going to see much increase, but you're not including the costs. I did not understand the reason behind this. The fourth quarter and the third quarter was good. So I thought that Seasonings and Food, especially Sauce and Seasonings would be a positive factor. And excluding the cost, how should I think about this?

[Interpreted] So Mr. Sakakura would like to respond to this.

[Interpreted] Sakakura speaking. This time, we are enjoying a bit of a profit here. But as was mentioned from Mr. Nakamura earlier, yes, we want to make growth investment. That's one big thing, especially marketing. We want to accelerate investment in marketing. And because of that, we will see a decline in profit.

But top line will grow steadily. For example, on Page 17 slide, the past Sauce and Seasonings results, when you see them, at the time of the Ukraine incident, you had seen a reduction in cost, but the profit is not bad, but it turned to be profitable from the next year.

[Interpreted] But this year, you want to make investment so that you want to create more profit next year. Is that the reason?

[Interpreted] For this year, yes, that is the positioning of this year.

[Interpreted] So the cost pressure, you want to make investment in the marketing.

[Interpreted] Yes. It was mentioned by Mr. Nakamura earlier that the Middle East impact is not incorporated in here. Looking at the situation, we have to respond to it.

[Interpreted] Okay. Well understood. The second question is a bit different question. the stock price of your company, Functional Materials and related to semiconductors, the stock price tends to, I think, fluctuate. I think this is a source of your -- the stock price fluctuation.

And for other businesses, including myself, what are the businesses that we can expect for the growth for the coming years that may impact the share stock price. CDMO would be this year. And of course, Seasonings and Foods, especially Sauce and Seasonings, you can increase the profitability next year. Of course, which is -- what is the driver for the growth for your corporate value?

[Interpreted] I think food is a stable source of business for us. We want to take advantage of that. We want to grow the existing products. And as was mentioned earlier by myself, we want to launch new products. We want to grow into new markets so that continuously and stably, we can increase and grow the food-related business. For Bio & Fine Chemicals, Functional Materials is growing very much.

And because of the AI boom recently, yes, corporate value is being pulled up. This is the driver. So biopharma services and ingredients for the pharmaceuticals, it will take time. But for the gene therapy, progeria-like technology, we can utilize our technology into that, we are expecting its evolution and growth.

And other than that, we have not talked about is AjiPro for the feed and that could be a very favorable thing for the environment. So if the world goes for environmentally friendly situation, I think it will be another growth driver. So in each of the businesses, we would create new businesses so that we can enhance the corporate value as a whole.

[Interpreted] Mr. Sumoge, thank you very much for the question. I'm sure that there are still many hands up, but given the time limited, we would like to take only 2 questions from here, 2 persons. This will be Morita-san from Nomura Securities.

[Interpreted] This is Morita from Nomura Securities. Now I would like to have only one question. Regarding the Seasoning and Foods business, I would like to ask your approach. You said that the Middle East impact is not factored in your forecast. Having said that, I think it's about time for you to take this into consideration and reflect them into your plans. So based on that, I will have several questions.

Your value-added strategy and also you're going to expand the markets in the peripheral areas to your key markets. But given that the Middle East situation is happening, do you see any need to change your mid- to long-term view, vision like the consumers' income status is going to be deteriorating significantly. So do you think it is appropriate for you to continue on your strategy? Or do you have to revise and change course to your plan? So the Middle East impact, does that have any need for you to revisit your mid- to long-term direction?

[Interpreted] Morita-san, thank you very much for the question. The Middle East impact, how and which area will be impacted most significantly. We are still keeping an eye on it. The biggest risk is the packaging materials, especially the special packaging materials. Immediately, right now, we are not seeing any constraints regarding our shipments.

We are not really seeing any changes from the customers' requirements, but the inflationary pressure is there. The consumers are becoming more price conscious, and I think they will be heading for more savings in the future. So in all the segments, we are going to release new products and launch new products. That remains unchanged. Sakakura-san, if you have anything to add as the Head of the Foods business?

[Interpreted] Yes. Thank you. The Middle East situation is not going to -- if there's any impact on our midterm plan, there's nothing significant. We are not going to change our course significantly because of the Middle East situation, as Nakamura-san just mentioned, but we will keep an eye on the circumstances. If there's need to change, we will change it. And also the rolling forecast will reflect all these things in the future. So we will keep an eye on how this will unfold and change the strategy as necessary in a swift manner, if need be. But at the current moment, we don't foresee any significant changes to our direction.

[Interpreted] Just as a follow-up question, one the January to March currency rate reflected, I think you have seen this growth in every region, except for Brazil and Thailand. Can you just explain the reason behind this? And what are the outlook for the future? Because I'm just curious if there's any consumption behavior changes being affected by the Middle East situation. If you have -- can give us some color on that, that will be appreciated.

[Interpreted] Well, Thailand -- in Thailand, this situation is not really directly related to the Middle East situation. So my answer is it's not related. As for Brazil, we have implemented reinforcement measures. So we are expecting sales growth in the future from Brazil. So my answer is that because of the Middle East situation, the third -- fourth quarter sales was not really affected. So we don't have to worry about the consumption in the first quarter, January to March. No, because we don't have -- we have not seen any significant impact here too.

[Interpreted] Next is the last question. Fujiwara-san from JPMorgan.

[Interpreted] This is Fujiwara from JPMorgan. This is the last question and one question. In business portfolio, including the Seasonings and Foods and Healthcare, they are strongly improving and growing. But Frozen Foods, you mentioned that you're going to improve the ROIC for Frozen Food.

But by 2030, 3% plus from the current level, are you heading for 8% ROIC? Well, I think your -- the share stock -- share price has been evaluated high, I think, for your company. So 8%, is it all right? So in the mid- and long term for this business, for the business profit margin and ROIC, what is the potential? How far can you go? Can you explain about this?

[Interpreted] Fujiwara-san, thank you very much for the question. As for the Frozen Food, as I have explained earlier, through M&A, we have been expanding the business. That was the history. So we have goodwill. And in manufacturing Frozen Foods, we need to have fixed assets. So we will have to spend for the cost. So it is very difficult to increase ROIC. That is the business area. So out of other businesses, ROICs are rather low.

But we want to work spread of 3%, and we want to make it into 5% level. And we're not being -- going to be satisfied with 3%. We want to do our best effort to improve that more. But ROIC is not the only thing we can explain. This will enhance our brand awareness as well as this is a touch point with our customers, and it will be a contribution to the well-being. So we want to have these other factors also be involved and understand by you.

[Interpreted] So the significance of this business, I understand that, yes. But looking financially, I think this ROIC may be more than 8%, we have to demand this to this business or else, this business is unlike Ajinomoto style. So I think I would like you to do your best for this business.

[Interpreted] Yes, we want to differentiate. And as was mentioned earlier, we want to do the 3 directions that I have explained, and we'll do our best.

[Interpreted] Since we ran out of time, we would like to finish the Q&A session at this juncture. Finally, Mr. Nakamura will say a few words of greetings to conclude the session.

[Interpreted] Thank you, everyone, for staying with us for very long hours of 1.5 hours. FY '25, we achieved a new record. If -- in FY '26, we would also like to set a new record towards this challenging goal. We will stay united and join the forces of the entire company so that we can aim for the growth of the enterprise value of the mid- to long term, and we look forward to your continued support and patronage. Thank you very much once again for today.

[Interpreted] With this, we would like to finish the briefing for the financial results presentation for fiscal 2025. Thank you very much indeed for your participation. This is it for today. Thank you.

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

Good morning, everyone. Thank you very much for taking precious time out of your busy schedule to attend Ajinomoto's IR Day. We thank you very much indeed.

I will be your moderator for today. My name is [indiscernible] from the IR office. Let me introduce today's speakers. We have Representative Executive Officer and President, Mr. Nakamura; and Executive Officer in charge of Sustainability, Ms. Ono. In addition to the 2 speakers, we also have participants, other participants, including Representative Executive Officer and Executive Vice President, Mr. Shiragami, Executive Officer and Senior Vice President, General Manager of Corporate Division, Mr. Sasaki; Executive Officer and Vice President in charge of Finance and Investor Relations, Mr. Mizutani; and Corporate fellow and General Manager of IR office, Mr. Kaji.

Today, we will begin with the opening remarks from Mr. Nakamura, followed by Ms. Ono's presentation on initiatives to maximize ASV by enhancing sustainability, followed by a Q&A session before we close.

Materials to be used for today's session is already posted on Ajinomoto's Corporate Homepage IR information site under the IR data. So please take a look at them as necessary. Please also be advised that today's session will be recorded, including all the way to the Q&A session, and it will be posted on the IR information side of the company later on.

Now without further ado, we would like to begin. Mr. Nakamura, the floor is yours.

Good morning, everyone. Thank you very much for taking time out of your busy schedule to join us for our IR Day today. I am Shigeo Nakamura, Director and Representative Executive Officer, President CEO.

I will focus on 3 main points today. First, the Ajinomoto Group view sustainability initiatives is the core of our ASV initiatives. They work as one with our business strategy to create both social and economic value and accelerate business growth.

Second, I will discuss our approach to maximizing ASV. We're advancing initiatives to reduce negative impacts and expand positive impacts, aiming to enhance the resilience of our business foundation and create opportunities for growth. Today, we'd like to explain these initiatives focusing particularly on the agrifood systems where we can leverage the strengths of our AminoScience technology.

Third, we are advancing initiatives in collaboration with a wide range of stakeholders, including governments, financial institutions and private companies to achieve sustainable corporate value enhancement. Last November, I participated in COP30 held in Belem, Brazil, where I shared our solutions for addressing social challenges with governments and private sector representatives from around the world.

I also emphasized the need to expand funding for the agricultural sector to build a sustainable agrifood system as well as the importance of broad partnerships, thereby deepening our dialogue with the international community. Going forward, we will further expand these initiatives and achieve sustainable growth in corporate value while balancing sustainability with business growth.

Our aspiration or purpose is contributing to the well-being of all human beings, our society and our planet with AminoScience, and we're advancing initiatives aimed at achieving the outcomes of reducing environmental impact by 50% and extending healthy life expectancy for 1 billion people. To realize this purpose, we're promoting initiatives aimed at creating social and economic value under the banner of ASV Ajinomoto Group, creating shared value, positioning sustainability at the core of this ASV management.

As a road map toward maximizing ASV, we have first identified the 6 material themes being addressed by the Ajinomoto Group as shown on the left. Each of these themes, we are implementing initiatives that take into account risks and opportunities to reduce negative impacts and expand positive impact so as to enhance the resilience of our business foundation and create opportunities for growth, thereby maximizing ASV.

Regarding how we link sustainability to corporate value, we'll strive to enhance corporate value by increasing our cash flow generation capacity, reducing cost of capital, WACC, raising our growth rate and achieving even more of speeding up and scaling up.

Regarding the cash flow, by unifying sustainability with our business strategy through increased sales, reduced raw material and manufacturing costs achieved through stable procurement and management focused on ROIC, we will enhance resilience while refining both our growth potential and earning capabilities. Regarding the cost of capital, by mitigating risks related to raw materials procurement and human rights compliance as well as through the utilization of sustainability finance, we'll aim to reduce WACC.

In terms of growth rate, we'll accelerate growth in our 4 key growth rates, evolve our portfolio and enhance customer loyalty and brand power. Furthermore, we'll create a virtuous life cycle of corporate value enhancement through speed up and scale up achieved by rolling out our high-speed development system across the entire group and engaging in co-creation with stakeholders.

I said we're working to mitigate negative impacts and expand positive impact, focusing on 6 material themes based on respective risks and opportunities. In advancing these initiatives, we're leveraging our proprietary AminoScience technology to develop a diverse range of products, services and solutions that contribute to solving social issues across a wide range of fields, and we're driving these efforts through partnerships that transcend the value chain and the co-creation of ecosystem.

Today, we'll focus on the agrifood system, an area where we can particularly leverage our strengths and where the impact on the solving social issues is significant and explain our initiatives aimed at maximizing ACV. For us, with about 70% of our raw material procurement consisting of agricultural, livestock and fishery products, building a sustainable agrifood system is one of the most critical themes for maximizing ASV. The agrifood sector accounts for over 20% of global GHG emissions and has a significant impact on climate change, attracting international attention.

Furthermore, there are concerns about the impact of climate change on crop yields and stable supply, making the transformation of the agrifood system an urgent social issue. That is why we view this sector as an opportunity for value creation where we can simultaneously generate significant social impact and economic value through problem solving, and we will continue to promote initiatives aimed at transforming the agrifood system.

Interest in the agrifood system instead is steadily growing within the international community as well. In the Emirates declaration adopted at COP29, the establishment of sustainable agrifood systems was explicitly positioned as a key theme for the first time. And at COP30 held last year in Belem, Brazil, discussions on transforming the agrifood system progressed further.

I participated in COP30 following COP29, and I was once again reminded that for companies like ours, which conduct business based on AminoScience, the agrifood system is precisely the field where we can demonstrate our strengths. I took the stage at the Japan [indiscernible] to convey to the international community the need to expand climate finance for the agricultural sector and importance of co-creation with stakeholders. I also introduced the potential of our solutions and sought to strengthen relationship with our global partners, making the most of this opportunity.

Regarding the specific activities at COP30, Ms. Ono, our Executive Officer in Charge of Sustainability, will provide further details later. But together with Ministry of Agriculture, Forestry and Fisheries, we led the issuance of joint statement by 32 private companies, signed an MOU with Banco do Brasil to develop a new financial scheme utilizing sustainable finance and strengthened our relationships with major global meat producers. We believe we have made steady progress and laid the foundation for further initiatives in the future. This concludes my presentation. Next, Ono will explain our initiatives to maximize ASV by enhancing sustainability.

Hello, everyone. My name is Ono. Thank you very much for taking the time out of your busy schedule to attend our IR day. There are 3 key points that I would like to share with you today. First, sustainability is the cornerstone of ASV management. As a company-wide strategy, we will work together with our group companies and business units to accelerate business growth and contribute to the co-creation of social and economic value.

Since our founding, the Ajinomoto Group has worked with stakeholders to address various social issues from upstream to downstream in the value chain, thereby improving the resilience of our business foundation. To further maximize ASV, we will promote collaboration with stakeholders across the value chain and develop a framework for financial valuation, aiming to accelerate business growth and expand opportunities. Today, I will explain our initiatives, including a report on our activities at COP30.

As Nakamura-san mentioned, this is a pathway to maximize ASV. Through our business activities, we aim to reduce negative impact and expand positive impacts, thereby improving the resilience of our business foundations, creating growth opportunities and ultimately maximizing economic and social value, which will, in turn, maximize ASV. We believe this is a unique approach that leverages the strength of our company, AminoScience. An overview of the specific initiatives will be explained on the following slide.

Based on the expectations of our stakeholders and the value we should provide to society, we have organized the challenges we should address towards 2030 as the 6 material themes that are linked to our materiality. For these 6 material themes, we analyze the risks and opportunities. We are steadily working to reduce the negative impacts arising from our business, such as greenhouse gases and human rights risks while also striving to create positive impacts on society at large.

Today, I will explain the initiatives that are creating a positive impact, particularly our initiatives in the agrifood sector. Among our various initiatives for positive impact, I will first explain Ajinomoto Group's undertakings in the value chain. Here, we show the value chain in the agrifood sector. There are social challenges at each stage from upstream raw materials and procurement to midstream production sales and logistics and finally, to the consumers in the downstream.

As a leading company in amino acids, we understand that amino acids are essential nutrients for all life from microorganisms to plants and animals and provide a variety of functions. Our strengths lie in amino acid production and utilization and our science-based approach. Ajinomoto AminoScience allows us to offer solutions to a wide range of social challenges across the entire value chain from the environment to health and nutrition.

Approximately -- First, let's take a look at example at the upstream. Currently around the world, water shortages, extreme temperatures and social -- soil degradation caused by climate change are affecting crop yields, making stable production and procurement of raw materials and [ human rights issue ]. This has resulted in a spread of diseases and lack of cultivation knowledge, which are affecting farmers' income. It is also linked to challenges such as an aging farming population and a shortage of successors.

Accordingly, it is necessary to strengthen farmers' management capabilities and to take measures to improve the sustainability of production and procurement. Ajinomoto provides farmers with education opportunities, biostimulant products to improve crop productivity and the support for agricultural technologies, including disease-resistant varieties.

For example, in Thailand, since 2020, we've been running the Thai Farmer Better Life Partner project to support cassava farmers. As the raw material for MSG and amino acids, we use tapioca starch derived from cassava. And in fact, we are the #1 company in Thailand in terms of tapioca starch consumption. Cassava is extremely important to our company, but it is also third -- the third largest crop produced in Thailand and considered an important crop under the national policy of Thailand. However, in Thailand and other parts of the Malay Peninsula, cassava mosaic disease is currently spreading, leading to reduced yields and income instability for the farmers. These are issues that are difficult for farmers to solve on their own. We established a private and public partnership to support farmers.

And in Kamphaeng Phet province Ajinomoto Thailand, this has a factory. We are providing education and training programs to more than 8,000 farmers operating over 500 farms. We are also offering soil analysis and fertilizer optimization for more than 8,000 farms. As a result, the average productivity of cassava grown by the farmers who participate in the program has increased by more than 30%. This contributes to the development of the Thai regional economy and enhances the resilience of our business foundation, enabling sustainable and stable raw material procurement.

We will aim to further expand the number of farmers participating in this program in the future. We have also launched a support program for cassava farmers in Vietnam as well. By providing farmers with the cassava cultivation package, we addressed the challenges they face, such as unstable yields and income, damage from cassava Mosaic disease and pests and resilience on chemical fertilizers that contribute to greenhouse gas emissions. Our program includes introducing new varieties resistant to diseases and pests, switching from chemical fertilizers to co-product fertilizers, providing technical guidance on irrigation and offering a platform for exchanging technical information between farmers and experts using a smartphone application.

As a result, the cassava productivity has approximately doubled at farms that have implemented our program. This initiative in Vietnam has also been selected for the Ministry of Economy, Trade and Industries Global South Future-oriented Co-creation Project subsidy. We will continue to expand our efforts with the aim of improving customer productivity, increasing farmers' income and reducing GHG emissions. We have made a press release on Friday on this issue.

In Thailand and Vietnam, where these farmer support initiatives are progressing, both the awareness score and favorability rating of Ajinomoto brand have risen to nearly 90%, receiving high ratings that exceed the average of overseas operations. Furthermore, a strong correlation has been observed between the awareness of our initiatives and the favorability ratings, which suggests that our farmer support efforts are contributing to improving our ratings and brand value.

Based on these evaluations, we believe that raising awareness of our farmer support initiatives to a wider audience and fostering empathy and support from them will lead to an improvement in our brand value and will have a positive impact on our B2C business.

Our upstream initiatives extend beyond Thailand and Vietnam, but leveraging our global network, we are expanding them to countries such as Japan, Indonesia and Brazil as well as to other crops. In various regions, the use of biostimulant products and regenerative agriculture is advancing and results such as improved productivity and reduced GHG emissions are steadily spreading. We also believe that these results will lead to further trust in our global brand in the world.

Next, I will discuss our midstream initiatives. In domestic logistics in Japan, we are advancing the F-LINE project, a joint transport initiative involving 6 food companies. By implementing joint transport in Hokkaido and Kyushu as well as joint trunk road transportation in Hokkaido, we are improving vehicle loading efficiency and aiming to reduce the number of delivery vehicles to customers, including those from other companies to alleviate the burden at the receiving end and to cut GHG emissions. We're also expanding our logistics efficiency initiative overseas. In the Philippines, for example, we are partnering with logistics providers to improve logistics efficiency and reduce costs while also utilizing electric vehicles to reduce our environmental impact.

On this page, I will talk about our initiatives addressing health and nutrition issues for consumers downstream. In the health and nutrition sector, there are challenges corresponding to each phase ranging from a healthy state free of disease to predisease, disease, treatment and post-treatment. We offer a wide range of solutions in this area, including foods that support daily meals, supplements that complement dietary nutrition, the Amino index, which assesses disease risk based on the balance of amino acid concentrations in the blood, medical foods, amino acids for pharmaceuticals and foods and CDMO services, actively developing a broad portfolio of products and services and leveraging partnerships.

On the other hand, regardless of health status, excessive intake of salt, sugar and fat is considered a common nutritional challenge for all consumers and a factor that increases the risk of lifestyle-related diseases. While WHO recommends measures to curb excessive intake, the fact that people often fail to meet recommended intake levels, coupled with the need to reduce health care costs has led to the implementation of measures such as taxation and regulation in various countries, highlighting the growing global importance of this issue.

In response to this issue of excessive salt, sugar and fat intake, we have long pursued initiatives that do not compromise on deliciousness. Specifically, we utilized umami seasonings, offer reduced salt products across 9 countries, 25 brands and 56 products and offer products that help reduce sugar and fat and regular products with reduced salt content, thereby providing a wide range of products and solutions in both B2B and B2C sectors that leverage our AminoScience technology.

We offer solutions to enable consumers to reduce salt, sugar and fat intake while continuing their normal lifestyle, thereby simultaneously solving social issues and achieving business growth.

In addition to the salt, sugar and fat reduction, I just mentioned, we aim to achieve a comprehensively nutritionally balanced diet by promoting appropriate intake of protein, vegetables and foods under the strategy of nutrition without compromise. No compromise here applies to deliciousness, access to food, the dietary habits of communities and individuals. We believe that what matters most is that consumers can enjoy delicious food sustainably without strain.

The outcome mentioned by Nakamura at the beginning, help 1 billion people to extend their healthy life expectancy is based on this strategy. And by fiscal 2024, we had created touch points for deliciousness and health with 950 million consumers.

Partnerships are also critical for achieving nutritionally balanced meals. As an example, I would like to introduce free nutritional meal program in Indonesia. In Indonesia, the double burden of nutrition where child malnutrition and obesity coexist is becoming increasingly apparent. For example, it is reported that about 40% of young children suffer from anemia. Given this, the Indonesian government launched a free nutritional meal program in 2025 with a budget exceeding JPY 3 trillion, about 10% of the national budget, leveraging our expertise from school lunch projects implemented in Vietnam as well as our community-based sales experience in traditional local markets, we provide menu support that balances nutrition and cost using our products and recipes. We also provide nutrition education programs for cooks at school meal centers, students and their parents.

And by leveraging our local network, we are working to facilitate understanding of health and nutrition while also enhancing awareness and trust in our products. These cumulative efforts are also contributing to local business growth. For instance, sales of cooking sauces in fiscal 2025 grew by double digits over 9 months from April to December. As another example of our partnership, I would like to share with you our approach to creating a dietary environment through the integration of medicine and food to support nutrition during and after treatment. While nutritional balanced meals are crucial both during and after treatment, many patients due to illness, aging or the effects of treatments face issues in eating, such as being unable to eat enough or unable to enjoy meals as they once did.

For family members, it can be difficult to determine appropriate meals, and they may experience significant anxiety and burden regarding meal preparation. If this persists, patients may not be able to consume sufficient nutrition -- nutrients, which could affect the continuation of treatment and recovery and lead to a decline in the patient's quality of life.

And health care professionals such as doctors and registered dietitians provide professional dietary guidance. They face the issue of being unable to provide sufficient explanation tailored to individual situations due to limited consultation time, heavy workloads and staff shortages. So we are contributing to the creation of dietary environment that enables healthy eating through DX leveraging nutritional experiences. Our AI-powered recipe meal-plan search system, ReTabell adheres to guidelines from nutritional societies and provides optimum recommendations by taking into account physical conditions, appetite and chewing ability and dietary history. This helps issues faced by health care professionals providing nutritional guidance and parents while also expanding business opportunities.

Now let me move on to introducing Ajinomoto Group's other value creation efforts beyond the value chain. As Nakamura mentioned earlier, the agrifood system accounts for more than 20% of the global GHG emissions. While it has a significant impact on climate change, it is also a sector that is strongly affected by the climate change. Last year, COP30, the largest international conference on climate change was held in Brazil and the transformation of agrifood system was discussed intensively as a priority issue alongside the energy sector.

Improving efficiency of food production even under droughts, high temperature or other extreme conditions, while simultaneously protecting and regenerating the global environment were agreed as a global agenda. We see this growing momentum as an opportunity to accelerate the demand for decarbonization solutions in the agrifood sector and to promote initiatives utilizing carbon pricing. We will contribute to emission reductions across our value chain and assist the adaptation to climate change and lead them to business opportunities that will create social value while simultaneously achieving financial returns.

I will explain in more detail later, but our company offers innovative solutions such as AjiPro-L and biostimulant products as shown on the right-hand side here. By integrating the ecosystem into our solutions, we will scale up and speed up implementation and expand opportunities for creating social value and growing our business. Here are 2 examples of our decarbonization solutions. First, I will explain AjiPro-L and the progress of our efforts in this space.

AjiPro-L is an amino acid lysine product for dairy cows that efficiently supplements myosin, an essential amino acid that is often deficient in cattle. Its strength lies in its ability to improve feed efficiency by balancing amino acids, reducing GHG emissions and lower production costs. Brazil, where COP30 was held, is one of the world's leading livestock producing countries. We were officially invited to events hosted by the Development Bank and the former Brazilian Minister of Agriculture and actively engaged in discussions. In addition, we have made progress in discussions with a major Brazilian meat producer with whom we had a prior contact, and we are currently in the final negotiations toward concluding a contract with them.

By the end of fiscal 2025, AjiPro-L had reached over 100,000 animals. Over the next year, we will further expand our reach and aim to deliver positive impacts by reducing GHG emissions by some 100,000 tons through this initiative.

Next, I will explain the progress of our efforts in biostimulants. Biostimulants are something like supplements for our plants, but our products utilizes AminoScience and were confirmed to promote the physiological functions and the growth of plants, improve nutrient utilization efficiency and stress resilience and enhance crop quality. These effects reduce the use of chemical fertilizers, a major cause of GHG emissions in agriculture and contribute to reducing the environmental burden.

Brazil possesses the vast Amazon Rainforest, which is often called the lungs of the world. However, a major challenge is that this forest is cut down and converted into farmland and pastures, which are then left to degrade. Aiming to restore the degraded pastures, the Japanese and Brazilian governments established a cooperation framework in 2025 March. Taking this opportunity, we joined the model demonstration project for the restoration of degraded pastures in Brazil as a partner. At COP30, we presented the results of the verifications using biostimulants in actual farmland in Brazil.

Consistent improvement effects were confirmed across multiple crops and the technical advantages were demonstrated. Therefore, we are collaborating with JICA and other organizations to scale up the project and aim for social implementation. Just like AjiPro-L and biostimulants, these innovative solutions leveraging AminoScience cannot really create a significant impact on their own. We believe it is necessary to build an ecosystem. To scale up the solution, it is essential to address the challenges faced by the producers, i.e., the farmers, in collaboration with the financial institutions, government agencies and other relevant parties.

This page shows the examples of implementation of AjiPro-L. Farmers, the primary producers are emitters of GHG and face challenges such as GHG reduction and productivity improvement is an effective solution to these challenges, and there are economic and psychological hurdles to its implementation, such as concern about the initial cost and risks. Therefore, we will create a system that provides an incentive for adoption by converting the GHG emissions reduced by introducing AjiPro-L into credits and return a portion of them to the farmers, thereby expanding the adoption of our products and services.

In addition, for working capital, we will establish a financial scheme that allows farmers to use loans at preferential interest rates to alleviate their cost burden and risks. Now let me briefly explain the credit and financial schemes. First, let's take a look at the trends of carbon credits. While the market size forecast vary significantly depending on the assumptions, the market is expected to expand through 2030 and 2050, driven by factors such as progress of the GHG emission trading scheme and the long-term large-scale credit purchases by major companies such as Microsoft and Apple.

For example, Bloomberg's long-term credit supply outlook predicts that the market, which was approximately USD 2.4 billion in 2024, will expand to some USD 500 billion by 2050. In recent years, there has been a growing emphasis on the quality of credits that is on the effectiveness and reliability of GHG reductions and absorptions that have been materialized. In the agrifood sector, the conversion of GHG reductions into credit is still limited.

So emission reductions and absorptions rooted in agriculture and food production sites are areas that can generate environmentally reliable, high-quality credits. Therefore, we believe this area is likely to expand in the future once we see progress in the development of the relevant frameworks. Based on this understanding, building an ecosystem in view of the development of the credit market will be an effective way to address the social challenge of reducing GHG emissions through the development of solutions.

One of the international credit framework we are considering to use is the joint crediting mechanism, JCM, also known as bilateral credit. This mechanism is an international framework that allows Japan to implement its GHG reduction technologies and solutions in partner countries and utilize the resulting reductions and absorptions as credits. It is an important system for promoting overseas deployment of decarbonization technologies we accumulated in Japan.

Currently, Japan has concluded bilateral credit mechanisms, JCMs with 31 countries and discussions are underway toward concluding a JCM with Brazil, the host country of COP30. Japanese government is actively supporting these efforts, and we are working in cooperation with the government to promote the overseas expansion of GHG emission reduction solutions in the agrifood sector.

At COP30, as a concrete initiative, 32 private companies, including us, collaborated under the MIDORI INFINITY framework established by the Ministry of Agriculture, Forestry and Fisheries, which aims to expand GHG emission reduction technologies in the agriculture, forestry and fishery sectors overseas. Under this framework towards the transformation of agrifood systems, we will aim to attract climate finance and build ecosystems across the entire supply chain while also deploying greenhouse gas reduction technologies overseas, which will lead to the conclusion of JCMs.

At COP30, to demonstrate this direction to the international community, a joint statement from the public and private sectors was issued. Furthermore, we believe that the establishment of the financial schemes, i.e., the financial support incentives will also be effective in promoting the adoption of such solutions within the ecosystem.

As part of this initiative centered on AjiPro-L, we embarked on new initiatives such as establishing partnerships with financial institutions and building financial schemes. Specifically at COP30, to create a financial scheme to facilitate GHG emission reductions using AjiPro-L, we signed an MOU for strategic partnership with a major Brazilian financial institution that plays a highly public role in the society.

The diagram on this page illustrating the preferential loan mechanism is a simplified version created for today's IR Day event. By establishing a scheme in which the Bank of Brazil provides loans at preferential interest rates to the farmers using AjiPro-L, we believe it is possible to lower the economic and psychological hurdles of the farmers. This bank plays a central role in the agricultural lending in Brazil, and this collaboration is a highly significant initiative in accelerating the overseas expansion of our solutions.

Finally, on this page, I will explain the prospects for converting GHG emission reductions into financial values using our solutions. Ajinomoto aims to realize financial value through a 3-phased approach. In Phase 1, we will push forward solution deployment, utilizing existing mechanisms such as J credits to convert GHG reduction using AjiPro-L and biostimulants into credits, thereby generating credit revenue for the company. Although the size is still limited, GHG reduction achieved by AjiPro-L is already beginning to translate into actual revenue for us.

In Phase 2, we will leverage the insights gained in Phase 1 to expand our efforts in regions and markets where systems are still under development, such as the joint credit mechanism in Brazil with a view to realize carbon credit trading in the future. By broadening the target regions and schemes, we aim to gradually expand opportunities to monetize GHG reduction value and further expand the deployment of our solutions.

Then phase 3. Phase 2 is different in nature from Phases 1 and 2, although there are many uncertainties, this is an initiative that offers the potential for a huge growth if it materializes. In the future, if large-scale policy and institutional changes similar to the U.S. Inflation Reduction Act occur in specific countries or regions, our GHG reduction solutions may become eligible for government subsidies and tax incentives, potentially leading to creation of new economic value. We believe it is crucial to secure our position that allows us to flexibly seize opportunities by anticipating long-term institutional changes.

In closing, we will further strengthen our strategic initiatives, leveraging the strength of AminoScience in collaboration with stakeholders across the entire value chain and even going beyond that. Furthermore, while steadily reducing negative impacts, we will continue to expand the creation of positive impacts and strive for sustainable and dramatic improvements in our corporate value.

That's all for myself, and thank you very much for your attention.

Thank you very much, Nakamura-san and Ono-san. Now I'd like to go into a Q&A session. First of all, let me explain how to ask questions. [Operator Instructions] And there are so many questioners that might prohibit us to cover all the questions. So I'd like to ask for your kind understanding. Let me start the question-and-answer session. [Operator Instructions] From Goldman Sachs, Miyazaki-san.

I am Miyazaki from Goldman Sachs. There are two questions. The first question, there's advertising regulation that you mentioned. And in your company, because of that situation, you are working on reduced salt and reduced sugar as one of the solutions. But among your products, any products that are subject to such advertising regulation and then thereby making you accelerate your initiatives, anything? You talked about Asia mainly today, but there are frozen foods in regions other than Asia. Is there any examples where you address advertising regulations for your products? That's my first question.

And second question is AjiPro-L. So those that are introducing AjiPro-L, there are multiple clear benefits that you mentioned. But only those alone, the economics of farmers may not be insured. So you need to have some promotional activities. Is that the truth? Or the -- there is a shortage of working capital? So once you introduce that system, then farmers can immediately enjoy the benefit of introduction of AjiPro-L, which one is the case?

Thank you very much, Miyazaki-san, for your question. To answer your first question about advertising regulation in regions other than Asia. In each of the countries, there are advertising regulations are different. So based on the country, we have to take appropriate actions. Sometimes, we can appeal on our products or maybe we may not advertise our products directly. So our approaches are different from country to country.

And the second question, as for AjiPro-L, at the moment, the feed that is being used has to be reduced in cost, and that is the economic benefits directly enjoyed by the farmers. But from the farmers' perspective, changing feed is a big psychological problem. And so there should be some economic value, like science-based basis that has the data and this can lead to the credit through greenhouse gas reduction. So there should be some incentives to get them introduced products. So we are working with the finance sector and the governments to facilitate the usage of farmers. Ono-san, do you have anything extra to say?

Thank you for the question, Miyazaki-san. As Nakamura said, so to change the feed, especially the protein in the feed is to be reduced with the same benefit. That is going to be a huge cost reduction. But once you actually decide to do that or in order to get them decide to do that, there is some courage required and there's a huge leap that they have to overcome. So you need to provide a deep support for that. Thank you.

For that first question about advertising regulation, there's a follow-up question. So the regulations are different from country to country. So you're taking appropriate actions all the time. Or for the past year or 2, especially, has there been any big change that you've experienced and because of that in Asia, Europe or the U.S., you are forced to take some actions, which one is the case?

Well, in some countries, for excessive salt content, there's FOP package that is labeling that is required, but with that labeling, if you ask me if there has been prominent changes in consumer behavior, no. But I don't know if I'm answering your question directly, but there's no particular increased advertising regulations and thereby address increased approach that we have to take.

Moving on to the next questioner. And this will from UBS Securities. Ihara-san.

My name is Ihara from UBS Securities. All right. Then I have two questions as well. My first question. In the agrifood system, GHG gas reduction and the business opportunities. After listening to the presentation, AjiPro-L initiatives and biostimulants, those initiatives sounded very interesting. And I thought they offer a great business opportunity. But in reality, to what extent do these have a financial or quantitative impact? Can you elaborate on that?

Over the mid- to long term, when you announced the ASV management direction, you said that biostimulant impact will be about JPY 15 billion. At that time, but you said they're going to double that towards JPY 30 billion by 2030. And AjiPro-L sales was about only JPY 5 billion, but you wanted to increase this to JPY 20 billion by -- towards 2030. That was the target you raised. But what is the progress you have been making so far? And are you moving ahead of the plan? What is the tailwind? If it's lagging behind the plan, what is the obstacle, if you can talk about that? That's my first question.

And then my second question. With the Trump administration now in office, what is the impact on GHG gas reduction? I'm sure GHG reduction is necessary over the mid- to longer term. But for the GHG reduction, the temperature differences, I think, is there. Has it changed after Mr. Trump took office in the United States?

Thank you very much, Mr. Ihara for the question. Regarding the first question, regarding the business opportunities, the potential for growth, biostimulants, as we explained earlier, due to climate change, the crop yield is coming down. And that is going to offer us a big business opportunity. So in the green partnership between Japan and Brazil, this has been really well recognized. So going forward with the climate change, in order to maintain the crop yield of, I think, this will offer us great business potential.

The business size, as Mr. Ihara mentioned, that is the current level. It's about double -- some tens of billions of yen. We are aiming to double this by 2030. So major growth is anticipated.

When it comes to AjiPro-L, the economic value is already there. The feed cost can be reduced. So that's one of the attractiveness of this product. But in addition to that, with the environmental impact added to that, the incentive for introducing this product will further increase. So currently, it's about tens of billions -- billions of yen -- single billions of yen, but we would like to increase this to tens of billions yen in 2030 in terms of the business size.

The second question regarding the Trump administration's impact, not only talking aloud about sustainability, it's not resonating well amongst the partners anymore. So we would like to talk about the economic value, something additional so that we can make environmental contribution to some extent. So over the mid- to longer term, towards the climate change, the urgent challenges, I think, is a common understanding across many countries. So the mid- to longer term trend remains unchanged according to our view. Ono-san, if you want to comment.

No, nothing for me to add in particular. Thank you.

Then GHG emission reduction initiatives. AjiPro-L part. If you -- I would like to ask some more questions. AjiPro-L ecosystem development and the carbon credit-related framework, you have to establish the framework for that. That sounds very interesting. But on the other hand, AjiPro-L in Japan, it's not proliferating. And maybe one of the obstacles is that [ Zeno ] may be playing a role here according to my personal consideration.

So in terms of your efforts with [ Zeno ], have you made any progress? Or for example, in Japan, maybe this is not spreading so much, this is because of those trade unions are in place. In the world globally, in order to build an ecosystem, other than the financial institutions, are there any bottlenecks that you need to address? Can you elaborate on that point as well?

Well, thank you very much for the question. As you rightly pointed out, in the -- with Kagoshima Prefecture, we have some joint efforts as well, which is producing good results. So the cattle adopting this product are increasing in Kagoshima as a result of that.

Who is the decision-maker deciding on the feed? It will be the national government, it may be different depending on the country, it may be different depending on the company. So if you say directly operated form by the company. The company makes a decision. If it's a contract manufacturer, the suggestion comes in first. So the fertilizer or the feed advisers are there at the local level. So it is also important to incorporate those advisers. And also, it is also important for us to provide a science-backed data and so -- and received the certification of the administration. That's also a very important initiative. Ono-san, do you have anything to add?

Thank you very much for the comment. Ihara-san, in the world, other than the financial institutions, the farmers how they find this attractive is something very important because it is very important to raise the awareness of these initiatives in the first place because many of the farmers are not aware that these initiatives are available. That was something that we realized after -- at COP30. So the agrIfood system emission level is so high and that is beginning to be recognized broadly right now.

So how do we use the emission from the agrifood sector? Actually, the solutions themselves are not really broadly recognized. So we have to expand the recognition, first and foremost, and also expand the partnership with the financial institutions and the government agencies. And because of these factors, we have decided to visit and take part in the COP30 as a team. And so first, before the bottleneck, the recognition is the most important undertaking that you have to address right now.

Now next question, BofA Securities, Ms. Sumoge-san, please?

Sumoge-san from BofA. I also have a question, which is related to Ihara-san's question on AjiPro-L for clarification. The sales is -- you said single-digit billions of yen and 2030 to double-digit billions of yen. So there is a potential that you're expecting from this product. But for this product, this product has been around since 15 years ago. And the business is for animals. This was positioned as growth drivers, and this was rolled out or intention to be rolled out in North America first. But since then, there has not been too much penetration, and I'm under the impression that this has made a very slow progress, but you have made contracts with food or meat manufacturers in Brazil, and also you have a partnership in Banco do Brasil.

So there has been further progress made recently. So why is it now that you can expect more growth? Has it been because of wider recognition or you have established a scheme for the past 10 years so that you are now finally in a position to aim for growth? So why are you in a position to be able to expand? So can you explain more about the background, please?

Thank you very much for your question. As you said, for AjiPro-L, there has been a long development history behind and in the past, we are focusing on North America livestock manufacturers to enhance economic value by reducing feed cost. That's how we have sold our products. But when you look at feed prices, so that was the incentive to decide whether to introduce this. The soybean waste gas price would decide whether to use the feed or not. So there's a price balance between soy and other contents, and there is a difference in prices that fluctuated and that has also fluctuated our business.

And carbon credit business in the U.S. was making slow progress as well. But more recently, Danone and other meat producers, major meat producers are now looking at Scope 1 or other Scope 3 procurement to reduce greenhouse gas. So they have set up their targets for this. So more larger companies are now paying more attention to this.

And also from government officials, with Japanese technologies we are hoping to contribute to the reduction of GHG emission, and that has actually accelerated the introduction because of increased attention.

In terms of cost, like soybean waste, price has been increasing. So that's why AjiPro-L cost has attracted attention, is that correct?

Well, the demand is different from country to country. And yes, the soybeans had been exported to China, but now not anymore. So there is some surplus. So depending on the markets, it's different, but global companies in larger markets are now more focused on greenhouse gas emission reduction even in the livestock business. That is the most important factor.

So it's not just simply looking at the cost benefits that major meat manufacturers are focusing on, but rather, there is some sense of urgency because of global trends such as COP30. Is that true?

Well, there was some livestock negative campaign that was made once. So actually, livestock industry is a noble job to support the food for human beings, but now it has been -- there had been some batching. So if you can reduce the economic cost and then contribute to environmental value, that would be really precious.

Now moving on. We are still taking questions. We can take second round of questions, if you have any questions. It doesn't have to be a question. We can always take comments as well. [Operator Instructions] The second round of questions. This is from Goldman Sachs, Miyazaki-san.

This is Miyazaki again from Goldman Sachs. Sorry for the second round of the question. So sorry that this may be ambiguous, a comprehensive question. Regarding COP30 in the discussion so far, we talked about the transition to the Trump administration, which led to slowing down of some initiatives of the recourse of some progress that has been made. In 2028, '29, 2030 -- COP28, COP29, COP2030, after following these initiatives, have you really realized any changes or the differences in the position by each country?

And also, you mentioned during your presentation that the undertakings of each company may not be aligned with the government's direction in each country. So if you have noticed any atmosphere to your participation in COP30, if you can elaborate and share that with us, that would be appreciated.

Yes, Mr. Miyazaki. Thank you very much for the question. I attended both COP29 and COP30, both of them. As I mentioned during my speech, the interest for agrifood system is rising. Mr. Trump's influence, especially in the energy sector and the coal sector, there is, I think may be a headwind, but the agrifood importance and also given the climate change, the coffee and cacao prices are increasing, and they are still considered to be an urgent task that we have to address.

And also the new Climate Week was held in New York in September last year. And also in the -- I have also participated in the Global Compact of the United Nations, America, the United States is not really strongly promoting global sustainability. But as the activities is not really dampened, if you will. So that's what I feel as an atmosphere. Ms. Ono, do you have any additional comments?

Well, Mr. Miyazaki, thank you very much for the question. This is a question that we receive frequently from many other people. And also, we are engaged in information exchange with other companies, but the litigation risk and due to other elements and some companies -- some companies do not officially talk this broadly in front of the public because of these issues. They maybe continued activities by changing expression to resilience in some cases. In Europe, it's not really receding. But they are rather focusing on areas where they can achieve a -- strike a balance with business growth. So that is happening both at the government level as well as the enterprise level.

So the mode of expression may have changed. However, the things that we have to address over the mid- to long term remains unchanged, and it's done under the surface because they have to tackle this in any event. That's the impression that I have.

And also what is important and big is that, as you can see on the slide, 70% of our procurement comes from natural capital, i.e., the raw materials. and agrifood system is intertwined very closely with those natural capital. So there is a mounting momentum to address this issue because for one thing, Brazil, the host country of COP30 is a major producer in this area. And so they made a move to address this. So that was certain because in every pavilion, this discussion was taking place. So I thought that, that was a big tailwind for us.

And one more thing that I wanted to ask well-being that kind of expression, you started to utilize this expression from early on. Regarding well-being, what's your view on the interest level of the society at large? Is this accelerating according to your understanding? Or do you think the momentum has somewhat dampened compared to before and -- but still expanding at the grassroot level? So what is your view on the recognition level of this expression well-being? If you can share your view with some examples, that would be appreciated.

Well-being, for us, we are working together with the Oxford University, working -- I mean, eating together with other people in order to raise the well-being. We have obtained some scientific data to prove this. So food and we're eating together, those were the elements that we addressed this time around. But also there are some other well-being-related solutions that we can demonstrate with AminoScience. So we would like to appeal this using science-based data going forward.

The recognition for well-being around the world, the well-being index close something similar to GDP. There are some people suggesting that kind of index is going to be created. So I don't think the atmosphere or the momentum has decreased. But what's your view, Ono-san, if you have anything to add?

I'm sorry, yes, well being itself, this expression itself. There's no clear global definition, and this could be quite subjective. So depending on the individual, the perception is different, and therefore, the definition may be different, which is making it difficult to understand. But as Mr. Nakamura mentioned, on a global, I don't think the momentum has decreased. Rather, the next target of SDG, there is an activity to include well-being as part of the SDG target. This is an effort spearheaded by the Japanese government. So that kind of discussion is now also emerging.

And also in our case, we are trying to make -- contribute to the well-being of society and earth through AminoScience. So people, society and the earth. For broadly in these areas, we would like to make contribution to the well-being of all these elements. And we believe we can make a contribution to the well-being of society and our earth and sustained by AminoScience. That remains unchanged and it remains intact. But we thought that we have to make further efforts in order to have this recognized broadly by the society. So we have to communicate this better so that we can increase the stakeholders to reinforce these efforts together with us. So we have to -- the message -- the path we have to continue working on is to expand this message across.

Let us move to the last question. Let's move to the next question. Citi Group Securities, Watanabe-san, please?

I am Watanabe from Citigroup. There's one very fundamental rudimentary question. For AjiPro-L biostimulant business, in this business, what is the differentiating point and a competitive advantage as compared to chemical manufacturers. Also frozen gyoza and seasoning of -- many specific seasonings or B2C and strong brand, you have also strong sales forces. But in this biostimulant business, according to this presentation, the chemical manufacturers have a larger share in my assumption in Japan as well as in overseas. So in the areas where chemical manufacturers tend to be strong, what is the differentiating factor and the competitive advantage that you can demonstrate as a background, if you can enlighten me, that would be appreciated?

Thank you very much for your question, Mr. Watanabe. So AjiPro-L and biostimulant, what is the source of competitive advantage for us? That's the question. As for AjiPro-L, of course, this -- we are one of the top amino acid manufacturers and lysine for amino acid is produced. And then it has to be delivered more efficiently. And there is a science data that has been taken. And of course, there's competition, but our delivery efficiency to internal -- intestine and GI intestine is really the best. And there are various versions, and there's also research and development to enhance efficiency from the current generation to the next generation. But of course, the recognition is not enough for our products. We have the science-based solutions, and that has to be recognized more.

And by promoting that, we can establish the ecosystem. And also, we could partner with chemical manufacturers if -- in my view, so that we can appeal on our products. And as for biostimulant, there's a different positioning for us compared to chemical manufacturers. We are looking at sugarcane and cassava and amino acid is produced from there. And then the fermentation liquid is used to produce plant supplements. So the way it works is different and the concept behind products are different.

So the amino acid fermentation liquid is something that we have to take advantage of as biostimulant, and we would like to improve our recognition of our products. So the characterization from the amino acid or derived from amino acid is taken advantage of. That's my understanding.

We are still taking questions. [Operator Instructions] Are there any questions? Asset Management [indiscernible].

Asset Management. My name is [indiscernible]. I am an ESG analyst by the way. And after Mr. Trump took office as President, finance and -- nonfinancial initiatives impact on financial performance is something that people are paying a lot of attention to and investors like ourselves also believe that is necessary because otherwise, the good undertakings or companies may not last for such a long time.

So given that, after -- Mr. Nakamura, after you became CEO or even before you became CEO, speed up and scale up, you have been quite aware of this in your corporate management. I'm so sorry for my lengthy comment. So ESG undertakings at Ajinomoto is quite extensive, and you have a very resilient supply chain that you aspire to create. And in order to create that kind of supply chain, you are undertaking many efforts. So speed up and the business portfolio transformation for these things, are there anything that you would like to change compared to the conventional approach? Because, for example, there could be good initiatives. But if that -- if the continuation of such initiatives will be an obstacle for you to do some speed ups, I thought that such case may apply because you have so many initiatives that is being promoted by the company. So if you can comment on that, that would be appreciated.

Yano-san, thank you very much for the question. The sustainability framework is ESG, and we have a lot of ESG-related initiatives, including financial and nonfinancial initiatives. And we have been communicating this, whether this is related to our business portfolio, whether this results in speed up. As far as the business portfolio is concerned, there are many valuation yardsticks such as the strength of our company and also comparing with the speed of the market, whether we can offer unique products to the market, we will consider the business portfolio from those aspects.

So sustainability-related initiatives that we have introduced today, AjiPro-L and biostimulants, those are also positioned as growth areas for the company, and this will allow us to leverage our strength. So this is also aligned with our business portfolio. So the business strategy, sustainability strategy will be aligned together and achieve speed up and scale up at the same time. So that remains intact.

But also the negative impact reduction for those efforts, cost reduction and also impact reduction will have to be done at the same time. That's the priority area that we are focusing on, such as reducing the electricity charges by replacement to renewable energies. Also in order to reduce our plastics, we are using thin packaged materials in order to reduce the plastic emissions. Those are the things that we define as priority, and we're working on them. And we are looking into speed up and scale up at the same time as we address these issues.

So as part of those efforts, have there been any changes after you became CEO? Have you changed anything compared to the conventional method?

Well, my predecessor was quite aware of sustainability that's at the cornerstone of ASV management. Mr. Fujie has also had that kind of mindset, so there's nothing new after I took office. But I'm trying to accelerate the speed up and scale up because the quick development system is my motto. So in order to expedite the speed of scale up and speed up, we are looking into many different initiatives, including the cooperation with the financial institutions and government agencies. So with the Bank of Brazil, I met with them and had a lot of discussions with them and also I met with the CEO of this very big meat producer, so I'm trying to scale up and scale up of whatever I can do.

Yes, certainly, we talked about you are now increasing the touch points, not only in North America but also other touch points around the world. So that's an area that you are intentionally working on.

Yes, listening to people in the field is something that I value so that we can listen to the direct voices of the customers.

Are there any other questions or comments? On Japanese and English webinars, we are entertaining questions if there are any. No more questions? If there is none, we are still early, but we'd like to conclude Q&A session. Thank you very much. Last but not least, I'd like to ask Mr. Nakamura to say a few words.

Well, as we mentioned today, in Ajinomoto Group, we are pursuing sustainability initiative as core of ASV initiative, and we co-create social and economic value with the integration of business strategy and accelerate business growth to achieve sustainable corporate value. So I'd like to ask for kind of continued operation and support. Thank you for your attendance today.

With that, we'd like to conclude today's meeting. Thank you for your attendance once again. This is the end of the session. Thank you.

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

[Interpreted] Good afternoon, everyone. Thank you for joining the IR briefing for the third quarter of FY 2025 ending March 31, 2026, of Ajinomoto. I'm [ Gotou ] of IR Office. We have Mr. Kaji, the General Manager of IR Office, participating as the speaker.

This session will be a 60-minute session. Mr. Kaji will present on the disclosure material, followed by Q&A. Please refer to the materials through the homepage of Ajinomoto IR site. Mr. Kaji's presentation will follow the presentation material. Please also refer to the financial summary and also forecast. This session will be recorded and to be posted on our IR site.

We would like to start. Mr. Kaji, please.

[Interpreted] Hello, everyone. First, please turn to Page 2. This is the summary. For the first 3 quarters of FY 2025, sales, business profit and profit attributable to owners of the parent company all reached new record highs. In the Seasonings and Foods business, despite negative factors in Solutions & Ingredients, higher sales and profits were achieved overall, driven mainly by Japan and overseas seasonings as well as the Japan coffee business.

In the Bio & Fine Chemicals business, Functional Materials recorded significant increases in both sales and profits. Bio-Pharma Services & Ingredients achieved higher sales and substantially higher profits, excluding the impact of the divestment of Ajinomoto Althea, Inc. For the full year FY '25 forecast, both business profit and profit attributable to owners of the parent company have been revised upward.

Looking ahead to FY '26, in addition to achieving sustainable growth of Seasonings and Foods, we aim to realize significant growth in the Bio & Fine Chemicals business and challenge ourselves to achieve the 2030 road map ahead of schedule. Before going into the detailed explanation of the cumulative results through the third quarter, I would like to start by highlighting the key points of the third quarter. Please turn to Page 15.

Page 15. This page shows the results for the 3 months from October to December. In the 3 months of the previous fiscal year, we achieved record highs in sales, business profit and profit attributable to owners of the parent company. In this fiscal year, during the October to December period, all businesses, including Seasonings and Foods, Frozen Foods and Healthcare posted sales and profit growth, enabling us to further accelerate our growth momentum. As a result, we significantly exceeded the hurdle set in the previous year and achieved new record highs. Business profit increased significantly to 115% year-on-year.

Please return to Page 3. As a result, while both sales and profits were flat year-on-year through the first half, the acceleration in growth during the third quarter led to higher sales and profits on a cumulative basis through the third quarter, reaching new record levels. The sales amounted to JPY 1,164.1 billion, representing 101% of FY 2024 and 101% excluding currency translation. Business profit was JPY 145.9 billion, 105% of FY '24 and 105% excluding currency translation.

Please turn to Page 4. This slide shows the GAAP analysis in business profit between FY '24 third quarter cumulative results and the FY '25 third quarter cumulative results. The left-hand side, the JPY 4.8 billion increase in profit due to change in gross profit due to change in sales was driven by higher sales in overseas seasonings, the domestic coffee business, functional materials and others.

Regarding the JPY 18.6 billion increase in profit next to that due to change in gross profit margin, improvements in gross profit margins in overseas seasonings, domestic coffee business as well as the functional materials, pharmaceutical and food use amino acid and Bio-Pharma Services CDMO contributed. As for SG&A expenses, we are expanding investments in intangible assets and other areas to support sustainable growth in line with the 2030 road map.

Please turn to Page 5. This slide shows an analysis of business profit by segment for the FY '25 third quarter cumulative results compared with the same period of the previous year. For reference, the lower part of the slide presents an analysis of the differences between the initial full year FY '25 forecast and the actual results of FY '24. In the Seasonings and Foods segment, sales increased overall, driven mainly by Japan and overseas seasonings and Japan coffee business, more than offsetting the decline in Solutions & Ingredients. Business profit, which had declined through the first half, rose significantly in the third quarter, resulting in higher profit on a cumulative basis.

In Frozen Foods, while sales were roughly flat year-on-year, excluding foreign exchange impact, business profit declined, unfortunately. However, in the Frozen Foods business for the 3 months from October to December, effective measures taken in Japan proved successful, resulting in a return to sales and profit growth. As planned, the Frozen Foods business shifted into a profit recovery phase in the third quarter and performance is steadily improving.

In Healthcare and Others, sales were flat overall. However, excluding the impact of the divestment of Ajinomoto Althea, underlying sales increased steadily. Business profit rose significantly overall, supported by a substantial increase in profits from Functional Materials as well as steady profit growth in pharmaceutical and food use amino acids and CDMO operations.

Please turn to Page 6. I would like to provide some additional details regarding seasonings and processed foods. First, please see the left-hand side on Japan. In coffee products, the effects of aggressive price increases have become evident, resulting in a significant increase in sales. In addition, within Seasonings and Foods, the core menu-specific seasonings achieved close to double-digit percentage sales growth, making a major contribution to overall sales growth and the growth has accelerated across Japan as a whole.

For the cumulative results through the third quarter, sales were 110% year-on-year with volume at 95% and unit prices at 115%. Excluding coffee products, sales were 104% year-on-year. with both volume and prices at 102%. For the 3 months from October to December, this is for domestic Japan. Sales reached 113% year-on-year with volumes 97% and prices at 116%. Similarly, excluding coffee products, sales were 108% year-on-year with volume at 106% and prices at 102%. Excluding coffee, for example, in December to -- October to December period, each subsegments product performance continued to be strong.

Moving on to the overseas business to the right, the third quarter cumulative results are shown here, 104% year-on-year and 102% for volume and unit price, especially in 3 months from October to December, the growth is accelerating overseas, 106% growth in sales, out of which 104% for volume and 102% for unit price. The status of the 5 major countries, the separate document that outlines the performance results on Page 3 in the middle of this page, we have shown the 3 months local currency-based performance.

Let me add some more comments. In Thailand, the overall 2% growth was recorded. Although exports of instant noodles to Cambodia were weak, sales of seasonings achieved mid-single-digit growth in local currency terms. Vietnam remained flat year-on-year for the 3-month period. While Tet New Year-related demand was recorded in the third quarter in the previous fiscal year, it will be recorded in the fourth quarter this fiscal year due to the timing difference. And we, therefore, expect an increase in demand in the fourth quarter. In the Philippines, during October to December, temporary factors such as typhoons and earthquakes affected. Despite these negative factors in some countries, overseas operations as a whole achieved 106% sales growth during this period.

Please turn to Page 7. Based on the performance up to the third quarter, we have thoroughly reviewed our full year outlook and revised our fiscal year '25 forecast. Please also refer to the revised full year forecast by segment for the fiscal year ending March 2026 also provided to you beforehand. While sales have been revised slightly downward on an overall basis, we expect business profit for the food business as a whole, including Seasonings and Foods as well as Frozen Foods to steadily meet our initial plan, which we made public at the beginning of this year.

The Healthcare and Others businesses have been revised upward, mainly driven by the strong performance of Functional Materials. Profit attributable to owners of the parent company has been revised upward. And as the gain on the partial sale of fixed assets disclosed separately today is expected to exceed the initially assumed amount, that is the reason why we decided to do an upward revision.

Please turn to Page 8. So the upper section shows an analysis of the differences between the revised fiscal year '25 full year forecast by segment and the prior year results. So you do have the revised figures in brackets. And at the bottom, you can see the differences between the initial fiscal year '25 forecast and the prior year results.

Please turn to Page 9. From here on, I would like to provide additional details on the Healthcare and Others businesses. Starting with Functional Materials. Sales of ABF for high-performance boards used in AI servers and networks have been performing strongly, leading us to revise our initial growth plan upward and expect a 28% increase in sales for the full year.

Next, Page 10. As the first step to respond to growing demand towards 2030, we have constructed a new furnish production facility at the Gunma plant of Ajinomoto Fine-Techno. The new facility began full-scale operations in October 2025 and has started producing ABF furnish for cutting-edge applications. We will continue to build a supply structure that reliably meets robust demand while maintaining our high market share and solidifying our position as the industry's de facto standard.

Next, Page 11. I would like to provide additional information on our biopharma business or CDMO business. Cumulative sales through the third quarter of fiscal year '25 has been in line with the company-wide plan. As for business profit, this is something that we have disclosed in the first half, but excluding consultant costs incurred at Forge for commercialization support that were not included in the initial plan, performance has been progressing as planned.

In Europe, small molecule products are performing steadily, and we expect continued solid growth in the fourth quarter. In Japan, although profit declined through the third quarter, a large-scale shipment of AJIPHASE is planned for the fourth quarter, and we expect full year sales and profit to be in line with our plan. Forge in North America has been performing well, achieving both higher sales and higher profits. Its customer base continues to expand steadily, and the number of approvals for customers to initiate new drug clinical trials is increasing, driving strong revenue growth.

Business profit was impacted by temporary costs associated with the accelerated commercialization efforts that were not initially anticipated. These are recognized in the first half. Including these costs, we initially aim to achieve profitability on an EBITDA basis in fiscal year '25. However, management has chosen to prioritize accelerating medium- to long-term growth over short-term targets, resulting in a slight downward revision to the full year plan. So this explains the slight downward revision for CDMO business. By leveraging our proprietary technological advances and responding steadily to customer needs, we will continue to build a track record and accelerate the growth of our CDMO business.

Please turn to Page 12. Next, I will explain the progress of ASV indicators for each segment. For this fiscal year, ROE at the top is expected to be approximately 18% on a substantive basis, excluding the impact of the Forge acquisition and the sale of the head office. Organic growth is expected to be approximately 5%. The EBITDA margin is expected to reach 17%, in line with our road map.

Page 13, the progress of ASV indicators by segment is summarized in this table. That concludes my brief explanation of our third quarter results and earnings forecast. Thank you very much for your kind attention.

[Interpreted] We would like to move on to Q&A session. [Operator Instructions] First, Mr. Saji from Mizuho Securities.

[Interpreted] This question, I must ask, Functional Materials third quarter, 42% sales increase, JPY 8.6 billion and JPY 5.3 billion increase and 57%. Any background or special reason or element? My interest is whether this is sustainable or not.

[Interpreted] May I reply one by one? This question was on Functional Materials. The third quarter sales and profit accelerated its growth, but are there onetime factors? That was the nature of the question. As of the end of September in Taiwan, there was a large-scale hurricane, and it was around the end of the month. So the shipment was partially postponed to October. However, there is a certain impact from that. But overall, this business in the third quarter was extremely strong.

[Interpreted] How about the sustainability?

[Interpreted] After this, towards next fiscal year, Mr. Nakamura referred to this point when we conducted briefing for the first half, the high-end demand is extremely strong. And currently, any individual negative factors, whether we hear them right now, well, actually, no. So that is the present status. 2 percentage point improvement, 57% of business profit margin, that is thanks to the growth of the high-end area. Yes, the product mix shifted favorably. So that is the major factor.

[Interpreted] Will this be sustainable?

[Interpreted] Yes. On a quarterly basis, fourth quarter usually have some seasonality. So quarter-by-quarter, there may be some variances. But overall, we are seeing strong growth in the demand at the high-end area, and we are able to supply to that demand. That generates positive impact, and we intend to continue to work on this area.

[Interpreted] And briefly, just one comment. The Umami seasoning JPY 2.8 billion decline of the profit. It seems that the decline is expanding from JPY 1.8 billion. What are the updates there were? And how should we understand this number, JPY 2.8 billion?

[Interpreted] We are implementing various measures, for example, to improve the efficiency using new fermentation bacteria. In addition to first half measures in the future as well in various sites, we are going to implement various measures. That remains the same. Currently, the market price of the raw materials have settled down. Considering the current situation, the market shift of direction is rather difficult to foresee. Based on such assumption of the market trend and as the overall food market in order to achieve sustainable growth, we are to implement various measures.

[Interpreted] 11% for full year, for total Solutions & Ingredients, you have made downward revision, but the revised number is achievable?

[Interpreted] Yes, as the business, the market trend will recover. The raw material cost decline, one cycle will be completed. And after that, the market will settle down, and we will react to that and take measures. On the other hand, the effect of the low raw material cost is seen in the B2C business. It includes Umami seasonings for processing as well. And we are able to increase the profit margin steadily.

[Interpreted] Next question from SMBC Nikko Securities, Furuta-san.

[Interpreted] This is Furuta from SMBC Nikko Securities. I have one question regarding CDMO. As you mentioned, there is a large shipment expected in Japan in the fourth quarter. So we are expected to grow sales there in the fourth quarter. However, when it comes to the progress that has been made, are we having a clear picture of the actual progress that is being made? Are we sure about this?

[Interpreted] So this is something that is being scheduled with our customer. So the fourth quarter is just 1 month, 2 months down the road. So we are, yes, expecting this large shipment, especially AJIPHASE in Japan will lead to higher revenue and higher profit, and this is for sure.

[Interpreted] So as you mentioned, that is expected, but maybe there is going to be some kind of postponement and there is going to be an unmet target for the full year. Are there any such risks?

[Interpreted] Well, in the third quarter, this time around, each business performance has been scrutinized, and we came up with this revised plan. Therefore, we believe that we are having an accurate outlook on the situation and the revised numbers reflect our perspective on that matter.

[Interpreted] Moving on to the next question, Morgan Stanley MUFG Securities.

[Interpreted] I'm Tsunoyama of Morgan Stanley. I have 2 questions. First is on food business. The Umami seasonings for processing, you have reduced the plan. But in other areas, you have made upward revisions by about JPY 8.6 billion. What are the gap with the assumptions? Can you explain in more detail? And also the Umami seasonings, the competition is becoming fiercer. Is it going to impact your B2C business? Or you don't have to be concerned about that? What is your view on that?

[Interpreted] In the food business, this time, the -- looking at the third quarter results in each country, in various countries, there are impacts of fruits from the initiatives, and we are able to grow volume and necessary price increase were implemented and mix improvement impacts are generated. We expect this to be sustainable. That is the major factor.

In addition to that, we covered this topic in the first half, the Umami seasonings for processing, the global B2C market is staying soft. On the other hand, for our Seasonings and Foods segment, there are cost benefit including those factors as the overall food business, strong full year forecast upward revision was possible.

[Interpreted] For Umami seasonings for processing, any impact to B2C?

[Interpreted] As you have seen from our results, there is no particular impact that we expect to see.

[Interpreted] I see. In Thailand, the situation is the same. There were flood, but the third quarter started to improve. So we don't have to be concerned about that. Am I right?

[Interpreted] Regarding Thailand, it wasn't actually flood. It was the instant noodle risk exported to Cambodia. That risk remains. And that is the factor pushing down the overall volume. When we just look at the seasonings, it is the growth of mid-single digit. So the trend right now does not require a lot of concerns.

[Interpreted] The second question, Bio-Pharma, CDMO. In the fourth quarter, the profit is higher than JPY 4 billion. The level will be rather high. AJIPHASE, is that the major impact? Is it a onetime factor? Or is it due to the capability? Any context of this level for CDMO?

[Interpreted] Firstly, on slide, please turn to Page 11. Low molecule, this area, the trend is very positive. And Forge, top line is very strongly growing, and the improvement of the revenue is steadily progressing. And for AJIPHASE, on quarterly basis due to the timing of the shipment, there were ups and downs, creating concerns to investors. But on a full year basis, it is in a trend with very high top line and bottom line growth that we expected, and that is sustainable. Please understand that there will be concentration in the fourth quarter.

[Interpreted] JPY 1.5 billion downward revision this time is the upfront cost mostly?

[Interpreted] Yes. Consulting fee is the major factor.

[Interpreted] Next, this is from the English channel. McLeish-san from Bernstein.

So obviously, the ABF results were very, very strong in the third quarter. But each quarter, you seem to be getting less margin uplift relative to the revenue growth than you were in prior years. Is this a factor of the increased depreciation from the Gunma expansion? Or have there been some other changes to the cost structure in the ABF business?

[Interpreted] Yes. Thank you very much for your question, McLeish-san. Yes, new facility has been built. Therefore, depreciation has gone up. However, the cost structure or revenue structure remains unchanged. This business, as I mentioned in the first half, ABF and also other related areas with new product development, these are ongoing. So R&D goes up and down quarter-by-quarter. So that is one of the factors that is leading to the margin trend that you referred to. However, in conclusion, there is no change in the revenue structure.

Okay. That's very helpful. And maybe turning to the Americas Seasonings and Foods business. It's good to see the revenues back in growth, but there's still a lot of margin contraction in that business. Can you help us understand what's impacting the margin contraction in the Americas Seasonings and Foods, please?

[Interpreted] Thank you very much. So in the Americas, Seasonings and Foods. So if you refer to the document, Page 3, regarding the performance by region, you have a matrix. And please look at Seasonings and Foods and a big portion would be Latin American business. And within it, we have Umami seasoning for food processing. We have a large facility in Brazil for production, and there was a negative impact that significantly affected the final number.

So you talked about the Brazilian factory having some problems in the second quarter, but then I thought that had been all resolved. So is this something different to the downtime of the Brazilian factory?

[Interpreted] No, it's not that the downtime continued. But in the third quarter, we are still seeing a challenge because the market has not improved yet. So the market condition has not improved. That is the reason.

[Interpreted] Moving on to the next question, BofA Securities, Sumoge-san.

[Interpreted] I'm Sumoge of BofA Securities. My first question I would also like to ask about Seasonings and Foods. When we look at regional breakdown, if the calculation is correct, in Japan, JPY 3.9 billion increase of profit is achieved. The pricing and the volume you have explained and JPY 3.9 billion increase in profit in the third quarter. Can you break them down into factors?

[Interpreted] Thank you for the question. In Japan, although I cannot talk about the details, roughly speaking, domestically, coffee business, AGF profit grew significantly and so-called Japan domestic seasonings business, I briefly touched upon this. Cook Do and Koa-mi series, these are very popular, and that generated a significant profit increase. And also soups, we introduced new products. Sakusaku de Copan is the product name, that is very popular. And those are the factors contributing to increase of the profit. The major core categories are contributing to profit growth. So that led to major profit increase overall.

[Interpreted] In the second quarter, the profit of the Seasonings and Foods in Japan slightly declined. And towards the third quarter, what changed mostly? What are the main factors? The changes from the second quarter, what are the points? When you look at the prices and volume, the third quarter is slightly strong. But given the magnitude of the profit increase, I am not really digesting the reason.

[Interpreted] First of all, coffee products, the improvement is continuing, and this is further improvement in trend from the second quarter. The very good initiatives are underway, and those are bearing fruits. On the other hand, seasonings-related area on quarterly basis, there are ups and downs. But from 1 or 2 years ago, we have been making challenges and changing the corporate culture so that we will make more challenges, and that is continuing.

New products and services are being proposed to the retailers. And various transactions are activated, and these are generating good impact to existing products as well. And the many specific seasonings, the general prices are rising and consumers are being -- trying to be creative in managing their finances. So with reasonable food raw materials, they are able to cook balanced meals, and we are making very proactive proposals and the fruits of such efforts have materialized in a concentrated way in the third quarter.

[Interpreted] Next question. The profit contribution, you disclosed a half year basis for Japan and overseas. The gross profit increase through volume increase or SG&A or cost increase. In terms of the broad breakdown, this time, what was the Seasonings and Foods segment?

[Interpreted] On Page 4, the business profit analysis is shown. It's hard to carve out just Japan business because we look at the seasonings business on a global basis. But generally speaking, 2 items in the left, they are growing in good balance. So there were price increases and new products were launched through making challenges, and that is leading to better product mix. And from second to third quarter, major profit increase was achieved. Good impact is felt among the existing products as well. So overall, we are able to proceed with good initiatives.

[Interpreted] And my second question, in the fourth quarter, the plan has been revised and calculating backwards, this Seasonings and Foods, the increase of profit will further accelerate. Third quarter, JPY 3.3 billion and fourth quarter, nearly JPY 6 billion. So Seasonings and Foods further accelerate and Solutions & Ingredients will turn to profitability in the fourth quarter. Are these numbers already visible?

[Interpreted] As I have said before, there's only a few days remaining for the current fiscal year. So our forecast is quite accurate in our forecast. As you correctly pointed out, in the fourth quarter, the seasonings, the strong profit growth will continue. Partially last year, fourth quarter, overall, there were some excess capacity. So we have introduced various measures proactively. In other words, expenses rose in the fourth quarter last year, but this year, it has evened out. So that is another factor in expecting strong performance.

And Solutions & Ingredients in the third quarter, we -- our plan assumes some upside. As was commented previously, we have introduced new fermentation bacteria in some of the plants, and that is generating fruits. And we are seeing some end of the cycle. So in fourth quarter alone, we have expectations of a flat or slight positive.

[Interpreted] Moving on to the next one. From Citigroup Securities, Watanabe-san, please.

[Interpreted] This is Watanabe from Citigroup Securities. So in the third quarter, profit increased in Japan. I have one question related to that. And the second one is related to the building and land sales of your headquarters. So for the first point, you mentioned that coffee increase in sales has contributed greatly. That said, however, the raw material cost has increased, and that is having a strong impact on the situation. So in the overview on Page 1 at the bottom, it talks about negative JPY 3 billion relating to material cost increase and mostly coffee, I believe.

But however, you are being able to achieve increased profit. So I'm not sure what is a contributing factor in the business. But if the coffee bean price will stabilize, then probably we could see more profit increase in the next year or maybe not. So what kind of measures are you putting in place for the coffee business overall? That is my first question.

[Interpreted] Yes. Thank you very much. As you rightfully pointed out, year-on-year, Japan's coffee business is still seeing an increase in material cost. However, this is a trend that happened in the first half and is accelerating. However, customers are very understanding of the matter, so we are able to make price adjustments. That has led to the performance that you are seeing. That is one.

In addition, and I have explained this several times that one of our strengths is stick-type coffee. So the current situation is seeing an increase in our market share. So in the domestic market in Japan, we have the #1 share in stick-type coffee. So the product mix has improved, and that has had an effect on the increase in profit.

And -- in the first half, Masai, the General Manager of Food BU mentioned that AGF and our group as a whole are very determined to talk with our customers, have points of contact and make meaningful proposals. This has been an ongoing effort, and our customers are stuck with us because of such activities despite the challenges that we are currently seeing.

So talking about next year, maybe this is not the right timing to talk about what would be expected, but these good activities that we have been conducting will continue on into the next year so that we can have a sustainable growth going forward based on a solid foundation.

[Interpreted] Okay. Understood. Second point. So JPY 45.1 billion was the selling price for your land and building of your headquarters, and you are going to deliver it on 27th of February. So I do acknowledge that this will be the case, but the cash generated, which would be coming in, of course, you had a target of meeting JPY 90 billion cash level by the end of 2026, but maybe you have even more. So what are your plans for the cash that will be generated?

[Interpreted] Thank you for your question. Our way of thinking remains unchanged. Thankfully, as you can see in our third quarter results, our business is going on very well. Therefore, regarding the one-off cash in generated by the sales of our head office, yes, we will have abundant cash. And in the first half, we mentioned share repurchasing in addition to what we had already announced. So all these are ongoing.

But there are only limited measures that we can take within this fiscal year. So we initially targeted for JPY 90 billion, but the cash position may slightly go up beyond the initial target at the end of this fiscal year. That is as much as I can say on this matter. But our way of thinking remains unchanged. We will not keep the excess cash. We will make sure we utilize them. You have our expectation here. So please keep that in mind.

[Interpreted] We would like to take questions from 2 more people, Ihara-san from UBS Securities.

[Interpreted] I'm Ihara of UBS Securities. I have 2 questions. First is the Frozen Foods business in the U.S. In the first half, the sales promotion was not possible. But from the second half, you said that you're going to focus more on the sales promotion, but the sales of the frozen foods in the third quarter is not really growing. So please explain the present status of this business.

[Interpreted] Let me answer one by one. First, in the U.S., as you can see, the third quarter, both top and bottom lines are not actually growing. But in the fourth quarter, we expect strong increase in the profit. There was a major promotion in the previous period, and that is scheduled in the fourth quarter, and we expect impact from that. On the other hand, the current period, October to December period, the business initiatives are being operated in a good way.

However, unfortunately, in November, there was a government shutdown in the U.S. and low-income households food subsidy program was temporarily stopped, and there was a confusion. So November was a difficult month. December performance was very good, but there was an impact of November in the third quarter results.

[Interpreted] I understood. My second question is in the medium- to long-term ASV management 2030 road map, the March '26 is the interim period was 2030 road map. And what were successful beyond expectation? And what are the challenges? And in the full year financial results of March '26, do you plan to update the indicators for ASV 2030 road map?

[Interpreted] First, on the review of the road map, I'm not in the position to make a comment because this is a third quarter result briefing. And once again, in the full year result briefing, Ihara-san, please raise your question again.

When you look at the current financial results, the Forge acquisition, which was not included in the road map and also there were other special factors and 18% ROE was the initial target as the interim year, and we are close to achieving this target. Organic growth, although there are ups and downs, currently, we are likely to achieve 5% growth. So we are steadily implementing initiatives.

And on Page 12, there are indicators listed. And as the interim results, FY '25, we are in a good place in terms of achieving numerical targets. The background and future outlook, please ask this question to Nakamura-san later. How are we going to do with the road map? The first half briefing slide was rather difficult to understand, and I'm sorry for that, but we plan to apply on a rolling basis. There is one slide that explains that.

[Interpreted] If you have time, please review.

[Interpreted] The timing is not being communicated accurately. But 1 year later or 2 years later, we will do the rolling adjustments towards 2030.

[Interpreted] ROE target 20% at 2030. On this target, 18% to 20% gives the impression that the improvement is rather small, but are you going to achieve earlier than the schedule? Are you going to be aggressive?

[Interpreted] We have not been communicating on individual items. But overall, the vision towards 2030, we strive to achieve earlier than 2030. And that is the determination of all of the employees to accelerate all of the initiatives.

[Interpreted] There were personnel changes, and you have made bold changes this time towards 2030, shall we expect new news will be announced?

[Interpreted] Please expect -- keep expectations high from various perspectives.

[Interpreted] So from JPMorgan, Fujiwara-san, please ask your question.

[Interpreted] This is Fujiwara for JPMorgan. I have a question regarding Healthcare, Bio & Fine Chemicals business. In the fourth quarter, AJIPHASE is going to make a contribution and Forge is growing steadily. So that is expected. But when it comes to the gene therapy, this market is going to grow going forward, we believe. Of course, there's going to be some ups and downs quarter-by-quarter. But if you level it throughout the year, maybe the contribution to profit growth would be higher going forward. Would you agree?

[Interpreted] So this is not something that we have already disclosed. So it is hard for us to make a comment at this point. But the CDMO business will see a contribution from Forge going forward. And AJIPHASE,, this is based on proprietary technology that we have pride in. So we believe that the profit will grow going forward. And when it comes to small molecule in Europe, we have, again, unique technology and production process. And therefore, we have unique technologies focusing on specific areas. We would want to be asset-light in this business. So going forward, in terms of profit contribution starting from next year, I think you would see a steady contribution.

[Interpreted] So in the fourth quarter, AJIPHASE, with regards -- this is going to be factored in, in the fourth quarter just because of the timing. And therefore, you have a very strong fourth quarter. But if you see it throughout the year, you are growing steadily. And in Healthcare, ABF, so in the third quarter, margin improved. So it was a product mix improvement and the new generation products increased shipment, thereby improving the margin, I believe. But for your company, when it comes to price increase, has this happened before? Or are you planning to do so? I want to ask you about the price revision.

[Interpreted] As -- Fujiwara-san mentioned, you are talking about simple price increase, correct?

[Interpreted] Yes.

[Interpreted] So this is same as the policy company-wide. When material cost increases rapidly, and we cannot absorb this cost increase internally, then we will start negotiations with the customers regarding price increase. However, the current situation is not requiring us to do so. Therefore, a simple price increase is not something that we are currently considering.

[Interpreted] Okay. Understood. And one more thing, just quickly. So Umami seasoning for food processing, S&I is the subsegment. And in the fourth quarter, if we compare year-on-year, this might not contribute so significantly. But looking back in history, it was a loss-making business at some point, maybe a decade ago or so. So when comparing the situation now to then, what -- do you have any concerns or risks regarding this business again going into the red?

[Interpreted] Well, I cannot say anything for sure. But looking at the trend of profit for over a 5- to 10-year period, I think we have shown a steady track record in terms of margin. So this is a business that is profitable, and we have a business structure that supports such profitability. So we don't have such concerns at this point in time.

[Interpreted] So year-on-year, you have bottomed out. And so fourth quarter will be the bottom maybe. And you don't know when the recovery would happen. And in the short term, maybe there's going to be volatility. But when it comes to the overall company performance contribution, it's not going to pull the performance down, right?

[Interpreted] Yes. If you just look at the third quarter figures, you see that the profit has gone down. However, if you see the forecast, the seasoning and the processed food is going to rise. And therefore, the overall Seasonings and Foods business has a very solid business foundation. I hope you understand.

[Interpreted] Yes, if we look at the segment overall, that is true. But when it comes to external sales, I want you to decrease that ratio and make sure that you accelerate your improvements.

[Interpreted] So it's time for us to close, but there is one more question. So we will take that question. Morita-san from Nomura Securities.

[Interpreted] I'm Morita from Nomura. I'm sorry to join belatedly. I have just 1 question, especially related to Asia seasonings business, can you talk about the pricing strategy and cost? Yesterday or day before yesterday, I was looking at PepsiCo's financial results, and they are saying that they need to reduce the prices of potato chips. Is it because of the reaction of consumers to price increases? Considering your business, have you started such discussion yet? Or have discussions been started?

[Interpreted] Morita-san, thank you for the question. Overseas consumers, the seasonings for them, we have extremely strong trust from customers. So we have such a strong platform in the past on a sustainable basis, regardless of the economic growth status. Well, I believe I showed the graph on Thailand for more than decades. Regardless of the economic fluctuations in Thailand, our seasonings continue to grow both sales and profit-wise.

The characteristics of our product and the positioning of our products in the market and the assessment by customers looking at those factors comprehensively. The situation that you have just talked about is not being experienced by the company. Looking at the numbers up to the third quarter, overseas seasonings business, it has accelerated to first, second and third quarter, and the sales is growing. The situation that Morita-san referred to is not being experienced by the company.

[Interpreted] Towards next fiscal year, you are able to further pursue margin improvement?

[Interpreted] On the next fiscal year, it is difficult to share concrete information. But basically, we present the road map, which is the basic thinking. The value-add type of products are highly valued by the customers. And through mix improvement, we aim at improvement of profitability and using rolling forecast and other elements, and we have internal meeting structure, and we are evolving and making various changes and creating strong platform.

[Interpreted] Thank you very much, Morita-san. So we will hear from Kaji-san, who will give a final word.

[Interpreted] So thank you very much for staying with us for a long period of time. The third quarter saw a lot of progress. And going forward, we would like to make sure we take steady steps in achieving the road map, and this is going to be a company-wide effort towards that goal. I ask for your full support. Thank you very much.

[Interpreted] With that, we would like to finish today's call. Thank you very much for your participation. Good night.

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

Good evening, everyone. Thank you very much for taking precious time to attend Ajinomoto's Fiscal 2025 First Half Earnings Call. We thank you very much for your time this afternoon. I am Kaji of the IR office. I'll be serving as moderator.

Let me first introduce the participants from the company. We have Representative Executive Officer, President and CEO, Mr. Nakamura; Representative Executive Officer and Executive Vice President, Mr. Shiragami; Executive Officer and Senior Vice President, General Manager of Corporate Division, Mr. Sasaki; Executive Officer, Senior Vice President, General Manager, Food Products Division, Mr. Masai; Executive Officer, Senior Vice President, General Manager, Bio & Fine Chemicals Division, Mr. Maeda; Executive Officer and Vice President, in charge of Finance and Investor Relations, Mr. Mizutani; Executive Officer, Vice President of Supervision of Frozen Foods, Mr. Kawana ; Executive Officer in charge of Diversity and HR, Ms. Kayahara; Corporate Executive General Manager, Bio-Pharma Services Department, Bio & Fine Chemicals Division, Mr. Otake. 9 members from the company are present today.

For today, at the outset, Mr. Nakamura will explain the overview of the first half results for the year ending March 2026 and also the corporate value enhancement initiatives, after which we would like to move on to the Q&A session. We expect to finish the entire meeting in about 1 hour and 30 minutes. The materials to be used for today's presentation is already posted on the IR information site of our corporate home page. Please look at them as adequate. Please be advised that this session will be recorded, including all the way to the Q&A session to be posted on the company's IR site later.

Now without further ado, we would like to begin the meeting. Mr. Nakamura, the floor is yours.

Now I, myself, Nakamura, will make presentation. What I would like to talk about is 2 points. Both sales and business profit in first half of FY 2025 remained at the level of previous year, while progress toward the full year plan is slightly behind schedule, we are quickly addressing the issues faced in Q2 FY 2025 and aim to steadily achieve our forecast for FY 2025.

In our efforts for further growth and evolution of ASV initiatives, we have identified issues, set out a direction for actions and worked out concrete strategies. We will evolve our activities to achieve the 2030 Roadmap and we'll tackle the creation of innovation to achieve sustainable growth over the medium to long term.

This slide presents a digest of first half financial results of FY 2025. Sales was JPY 738.8 billion, nearly unchanged year-on-year. Revenue increased in Healthcare and others with the impact of the sale of Althea excluded as well as in Seasonings and Foods, but decreased in Frozen Foods. Business profit was JPY 86.7 billion, nearly unchanged from the previous year. Profit attributable to owners of the parent company increased 2% from the previous year. We are thoroughly committed to achieving bottom line profit as well.

This slide shows an analysis of the changes in the business profit in the first half of FY 2025 and of FY 2024. The change in GP due to changes in sales decreased by JPY 2 billion due to decreased revenue. The change in GP due to change in GP margin in both the Food and Healthcare and others businesses contributed to improvement of the GP margin and GP increased by JPY 10 billion overall. In line with our 2030 Roadmap strategy, we'll firmly control SG&A expenses while undertaking investments aimed at future sustainable growth.

This slide shows a year-on-year analysis of changes in business profit by segment for the first half. For reference, at the bottom of the slide is analysis of changes for the full year forecast from the previous year's results. In the first half, profit decreased in the Seasonings and Food and the Frozen Foods businesses. Profit increased in the Healthcare and others business. While progress appears to be lagging versus the full year forecast, we expect an increase in profit in the second half.

Looking closely at the 2 businesses where profit decreased, the Seasonings and Foods was affected primarily by a profit decline in Umami seasonings for processed food manufacturers and oversupply in the market due to increased production and new entry by major Chinese manufacturers. In the Frozen Food business, key reasons for the decrease were the inability of home use frozen foods in Japan to fully meet the diversifying needs of consumers and the loss of mainstay product market share to private brands, et cetera, following price increases with the result of sluggish sales. Later slides will look at the current situation and our comeback strategy.

In Healthcare and others, business profit increased significantly in the Functional Materials. Profit also increased in Bio-Pharma Services & Ingredients.

This slide shows our forecast for FY 2025. Due to the shift of promotional activities for Frozen Foods in North America to the second half and expectation of a significant profit increase for CDMO business in the second half, sales and profits are projected to rise in the second half. In Umami seasonings for processed food manufacturers and frozen foods in Japan, as areas in which progress is behind schedule will act agilely to recover sales and profit in the second half. At the same time, amid positive market conditions, both sales and business profit in the Functional Materials grew to 120% of the previous year's levels in the first half. We will continue to accelerate growth in the second half. We aim to achieve our forecast for the group overall.

This slide shows progress toward ASV indicators of the 2030 Roadmap in the first half of FY 2025. The organic growth rate remained 1.9%, but EBITDA margin steadily grew to 17.5%. These are the ASV indicators for each segment.

This slide breaks down sales into volume and unit prices for Sauces & Seasonings and Quick Nourishment both in Japan and overseas with an analysis of change in business profit. Sales in Japan in the first half were 107% year before, and volume was 94% and unit price was 113%. Within this, sales of coffee grew to 120% versus the previous year due to price increases despite a decrease in volume. Consumer frugality increased and second quarter was also affected by extremely hot weather, but sales of Food Products in Japan, excluding coffee, exceeded last year's results, achieving 101% in overall sales with volume at 99% and unit price at 102%, responding to high raw material costs and the weaken with price increases.

Overseas sales increased to 103% versus the previous year. Volume remained flat, while unit prices rose to 103%. Volume in Sauce & Seasonings achieved low single-digit percentage growth. In addition to Umami and flavor seasonings, both exceeding last year's levels in terms of growth and volume and unit price. We achieved solid growth for menu-specific seasonings. We realized unit price growth not only through price increases, but also by increased sales of high value-added products.

On the other hand, RTD coffee, sensitive to economic trends, saw a decline in volume. In SG&A expenses, we focused investing in advertising to enhance our future brand value. As a result, business profit increased by JPY 2.5 billion, coming close to our full year forecast of JPY 3 billion.

Now I will look at results by subsegment, beginning with combined overseas and Japanese results for the Sauce & Seasonings business. This business, a cornerstone of our group, is resistant to changes in the macroeconomic environment and is steadily growing sales. Business profit margin fluctuated significantly during the COVID-19 pandemic and in FY 2022 fell to the level of 10 years earlier. Due to soaring raw materials prices due to initiatives such as repeated price increases and increased sales of high value-added menu-specific seasonings and also introduction of new products, business profit margin in the first half of FY 2025 exceeded that in FY 2019, which was before the pandemic, we'll continue working to increase sales and profit margin to support the stable growth of Food Products business.

This slide looks at Umami seasonings of processed food manufacturers. In the first half, revenue and profit decreased in MSG and nucleotides. This was mainly due to both increased production and new market entry by major Chinese manufacturers, leading to oversupply in the market. This business has suffered drops in profit in the past due to increased production by competitors and high prices of raw materials and fuels, we see the decrease in revenue and profit shown here as originating in a cyclical phase, not a change in business structure. We believe we can restore a business foundation that generates stable profits.

Umami seasonings for processed food manufacturers is an important business that supplies main ingredients for B2C seasonings. In April this year, we established the MSG business collaboration promotion department as part of our Food Products business orchestration and further strengthen the linkage between B2B and B2C. By centralizing the management of B2B and B2C businesses to optimize company-wide operations, the MSG business aims to achieve sustainable growth and maximize profitability. We also actively engaged in protecting our intellectual property, including filing lawsuits against infringement of our MSG manufacturing patent, an intangible asset of our group to maintain our competitive advantage. We also use our proprietary technologies to enhance productivity and cost competitiveness. With these measures, we will secure our competitiveness and advantageous position to grow continually.

Next, Frozen Foods. The issue in Frozen Foods in Japan is sluggish sales of home-use products. Strong performance continues in restaurant and industrial use products for which we have narrowed our product strategy targets and channels as well as in the Aete frozen lunch box within D2C services that meet niche consumer needs. In particular, Aete is expected to achieve growth with annual sales projected to reach billions of yen.

However, our home-use products, which enjoy strength in mass production have been slow to fully meet the diversifying needs of consumers. Following price increases, our mainstay Gyoza products lost over 10 percentage points of market share, primarily to private brands. Amid increasing consumer frugality driven by rising living costs since September, we have been revising our pricing strategy under awareness that we have not been providing products at prices that meet the needs for cost effectiveness. Results have quickly become apparent. In September alone, following a strategy revision, we regained the top share with an increase of over 2 percentage points. By recovering market share, we will further increase points of contact with consumers to enhance corporate value for the Ajinomoto brand.

In our mainstay Gyoza products next spring, we'll introduce revised products intended to balance product strength with profitability. We'll work to recover share and strengthen our profit structure. In the medium to long term, we'll reinforce the consumer perspective for Gyoza and for home-use products as a whole, expand a new lineup of products with those that meet consumer needs and revitalize the business. Heading toward 2030, this business will contribute to the growth of the Food Products business by increasing sales to a CAGR of about 3% and business profit to about 7%.

This slide deals with Frozen Foods in North America. In the first half, both sales and profit declined year-on-year even on a local currency basis. The main factors are transient, the U.S. tariff policy and a timing shift in customer sales promotions to second half. We believe that we will be able to grow sales and profit in the second half. Our North American Frozen Foods is essentially a local production for local consumption business. However, some products are imported from group companies in China and have been affected by higher tariff rates. We have already responded with price revisions to these products and believe that we can improve profitability in the second half.

Performance was also affected by the fact that sales promotions in large-scale distribution channels carried out in the second half of the previous fiscal year were not carried out in the first half of the current fiscal year and are planned to be carried out in the second half. The North American business structure has evolved into a stable one with structural reform and initiatives to expand TDC margin. While quarterly fluctuations may occur, we will solidly expand the business throughout the year and in the medium to long term.

Previous slides looked at current status of the Food Products business and action taken. We recognize that in the first half, we faced the issues in the Frozen Foods in Japan and Umami seasonings for processed food manufacturers. We'll strictly manage these areas. As CEO, I recognize the importance of properly assessing the true nature of the issues. In addition to a return to growth through actions to address Frozen Food business in Japan and Umami seasonings for processed food manufacturers, we will achieve steady volume growth in the Food Products business overseas and with the recovery of profit margin to the pre-pandemic level in the Food Products business in Japan, we work to achieve the 2030 Roadmap.

Next, about the Healthcare and other segment. I'll begin with Functional Materials. In the first half of fiscal '25, there was no change in the environment, i.e., the strong sales for AI servers, the recovery of PCs and general purpose services continued from 2024. Both sales and business profit grew year-on-year in excess of our expectations. Assuming no major changes in the environment, we expect to maintain strong momentum in the second half as well, sustaining a trend from the first half. We will work to grow our Functional Materials business, including in areas peripheral to the Ajinomoto Build-up Film by solidly fulfilling our responsibility to supply and meet demand by undertaking next generation and next-generation development within the ecosystem with the end users included.

This shows the current status of Bio-Pharma Services CDMO by geographic area. Europe continues to perform well. India is also receiving many recoveries and contributing to profit. There's no change in the status of orders, and we expect this momentum will continue in the second half. The results for AJIPHASE in Japan are below the previous fiscal year. This is due to the shipments being moved back compared to the fiscal -- previous fiscal year when shipments were concentrated in the second quarter. However, the progress vis-a-vis the full year trend target remains unchanged. In the second half, we expect growth in AJIPHASE shipments and AJICAP to make a profit contribution. In North America, Forge is performing well, and I'll explain the details in the next slide.

This slide is about Forge, the North American gene therapy CDMO that we acquired in 2023. Within the advanced medical care field of gene therapy, Forge has won the trust of customers and increasing its sales on the strength of its proprietary technologies. Projects are also progressing smoothly as sales grow dramatically and customers steadily increasing.

The number of projects that have obtained IND approval, that is the U.S. FDA approval for the start of new drug clinical trials has also increased significantly following our acquisition. There are also projects aiming for early commercialization. Funds to cover the expenses of preparing for commercialization, which are scheduled for next year or later are being used earlier than planned. While this will weigh down short-term profit, we will pay these expenses ahead of schedule as investments to accelerate future growth and will aim for early commercialization. We will work to achieve the target of a positive EBITDA during the current fiscal year by doing our best to absorb these upfront costs through increased sales. And Mr. Otake, who is a member of the Forge management and well versed in on-site operation is present today, so we welcome your questions.

AJICAP is a proprietary antibody conjugate ADC technology based on AminoScience. Our ADC drug discovery support services and manufacturing adopt an asset-light business model centered on AJICAP technology licensing. Last month, we signed 2 new AJICAP technical license agreements. One of these is with an undisclosed overseas companies and the other is with Astellas Pharma Inc. And we will continue to conclude new license agreements with companies in Japan and overseas with both major and venture enterprises and will contribute to develop AJICAP as a growth driver.

With the aim of maintaining financial soundness and maximizing capital efficiency from 2025, we are changing our fiscal discipline indicator from previously net D/E ratio to now net interest-bearing debt over EBITDA ratio. We will continue to keep our financial leverage at an appropriate level, one that can contribute to organic growth and capital efficiency. Operating cash flow in the first half fiscal 2025 was JPY 93.2 billion, about JPY 11.5 billion higher than the first half of 2024. We will continually strive to improve our cash generation capability.

As reported in our recent release on the construction of a new factory in the Philippines, we will steadily invest to grow organically, and we will also promote -- proactively invest in intangible assets that can create innovation.

These are the key management indicators of our midterm ASV management 2030 Roadmap. We will aim to steadily achieve the guidance for fiscal 2025. Based on our foundation of sustainable business growth, we are working to further strengthen our cash generation capabilities or our earnings power. Building upon these achievements, we are promoting resource allocation with a focus on capital efficiency in line with our Roadmap. To further improve capital efficiency, we are actively implementing shareholder returns and striving to enhance our corporate value.

In addition, we remain committed to achieving the goal set out in our Roadmap of tripling EPS in 2030 compared to the 2022 level, and we will make -- we will continue to make steady progress towards this target. Based on this approach, in addition to the JPY 100 billion share buyback announced on May 8, we are pleased to announce a new share buyback program of JPY 80 billion with the acquisition period starting from December 1 and until November 2026. Going forward, we will continue to enhance shareholder returns as we strive to further improve capital efficiency.

From this slide, I would like to talk about the progress of our initiatives aimed at further growth of the Ajinomoto Group and the evolution of ASV initiatives. After I took office as CEO, we implemented a 60-day program from April to address the issues identified through cross-water analysis and constructed a framework for identifying management issues and clarifying the responsibility and what actions to take. The outcome was that we were able to lay the groundwork for change. Since July, we have discussed concrete strategies and actions based on this framework in what is called the Ajinomoto Group Executive Seminar or AGES, with a focus on executive training for all executive officers, corporate executives and corporate fellows. And the content of this is described on the next place onwards.

At the AGES meeting, we discussed 7 topics. We first focused on the creation of the new businesses that will drive our mid- to long-term growth, and we discussed concrete strategies and actions in 4 key areas: health care, food and wellness, ICT and green. In the future, we will deepen discussions from the angle of 3Cs: continuity, change and challenges. I recognize that creating new businesses that comes after ABF is my duty as CEO. And I will establish an R&D budget that we can flexibly utilize, and I will leverage my experience of commercialization APF to nurture the seeds of new businesses.

At the AGES, in addition to the 4 topics that I mentioned, we discussed 3 other topics aimed at maximizing management's resources, strengthening corporate brand, strengthening global management structure, strengthening data-driven management. For example, with respect to strengthening corporate brand, we examine the ways to increase brand value and so that it can lead to business expansion, taking into account the different conditions in each market and regions. Furthermore, to strengthen data-driven management, we will further promote the advancement of management through the utilization of data. We will confirm our progress on these topics at the Executive Committee meetings and lead it to actions. Our group will work as one to increase our corporate value.

The Ajinomoto Group is working steadily to achieve our 2030 Roadmap by evolving our ASV initiatives while making regular course corrections to our medium- to long-term plans and group-wide strategies aimed at addressing the management issues. Also drawing on the discussions at the AGS meetings, we plan to begin discussions of our long-term vision during the current fiscal year, which is 1 of the 7 important management matters for the Board of Directors, and we'll make those discussions on the starting point for the post-2030 by looking at our strategy for achieving the 2030 Roadmap with the post-2030 plan. And by agilely making course recorrections, we will drive innovation and endeavor to create new businesses that can come after ABF. Here, I intend to demonstrate the leadership as positive energizers promoting this linkage.

Next, about our human assets. Human assets are the most important intangible assets for the Ajinomoto Group. We are currently in the phase of strengthening our ability to plan and execute. The evolution of our human assets organization and corporate culture is vital in supporting this. During the time of former CEO of Fujie, we broke down the silos in Japan and achieved growth for the group. During my time, we will advance global integration and aim for further growth. Towards this end, we will appoint diverse human resources regardless of gender or region to overseas assignments or key positions. We will also develop career paths that cut across business departments such as Food Products and bio and fine chemicals and functional departments such as technologies and sales to achieve further diversity, evolution into a truly global company. That is the future that I envision for Ajinomoto Group.

The preliminary scores for the 2025 engagement surveys are shown here. For ASV realization process, there were increases in every category, a 2-point increase from the previous fiscal year to 78 points. The score of empathy for our purpose rose to 94 because of the activities to promote empathy with our philosophy, which tie the purpose of individual employees to the Ajinomoto Group's purpose, contributing to the well-being of all human beings, our society, our planet with AminoScience. We see this increase as an indication that activities are steadily taking root throughout the group. The score of enhancement of productivity, which has been an issue, improved by 9 points to 28.

Although the score remains low, we added a new question this fiscal year. I believe the unnecessary approvals are kept to a minimum in my daily work when making decisions. This question received a favorable response score of 78. While there are still many approvals required before decisions are made, we have confirmed that a certain number of employees do not necessarily perceive these approvals as unnecessary. We will continue to analyze the engagement survey and work towards further improvement. Innovation for the future is created by our human assets. Through the creation of ASV, we will strengthen our human assets and aim to become a company that can continue to create new innovation.

This is the last message for myself. Even in an uncertain environment, we will properly recognize change, respond quickly and aim to achieve our 2025 guidance in a steadfast fashion. We will endeavor to achieve the 2030 Roadmap ahead of schedule through sustained growth in the Food Product business and dramatic growth in the Healthcare and others business, always maintaining a healthy sense of urgency. Aiming for growth beyond the 2030 Roadmap, we will further enhance corporate value by creating concrete strategies for realizing a vision and by sustainably driving new innovations.

I believe that creating new innovation is my duty as CEO. The assumption that the present state will continue is the most dangerous thing that we could do. By always maintaining a healthy sense of urgency, we will sustainably grow the group. That's all for myself. Thank you very much for your attention.

[Operator Instructions] The first question, Saji-san from Mizuho Securities.

On Page 38, full year segment numbers, how to look at this? In first half so it was flat mostly. And the full year forecast has remained unchanged. So you have -- you are increasing -- expecting a significant increase in second half?

As for CDMO in Healthcare, there's a good response. That's what you have explained. But especially for Seasonings and Sauces and Frozen Foods, I think this is quite deviant from the plan in the first half. So in the second half, to what extent you see the viability of your forecast? What will be the driver for increased numbers in the second half?

Can you -- do you want me to explain the second question? Well, thank you very much for your question, Saji-san. For the full year forecast, we haven't changed. In the first half, in the food business, the Umami seasoning for processed food manufacturers has seen a decline in profit, and there was an extreme heat in Japan. And because of a shortage of rice, there was some decline in sales and profit, but we have to provide some 9, 10, 11, they are all performing well. So we can increase the months in the second half. So for Bio and Fine, Maeda will explain.

First, as for food business, Masai will answer the question. So let me give you more details. First of all, as for Seasoning and Food, there will be 50 more in the second half compared to the first half. That's what you had asked about. As for Seasoning and Foods, there's B2B and B2C, and this is the total sum that we're talking about. As Nakamura said, especially for Umami seasonings for processed food manufacturers was quite challenging in the first half. So how to recover this is what I'm going to explain. And then I will talk about home-use seasonings.

In the Solutions and Ingredients division or B2B business, the following 3 are the differences between first half and second half. The first one, is the special factors, extraordinary factors. So this year, Brazil Ajinomoto, the largest site for us in Brazil, in the first half, MSG new technology introduction was prepared and construction work was done, but we got stuck and introduction didn't go well, and we struggled slightly. However, this issue has been already resolved. So in the second half, from the beginning, we can expect increased production because of this new technology introduction. So this will go well, and this will also lead to cost reduction. That's the first one.

And second one, the North America, in the retail, there is a loss of a major customer, but this can be made up for. So this will be -- there will be a recovery in the second half. In the fermentation, the raw materials are going to be below budget in the second half. That's what we're expecting. So we are seeing signs of recovery in the second half for B2B because of those 3 factors.

And as for home-use, B2C, especially in Japan, there are several points that I'd like to emphasize. First of all, as you know, our seasonings food is strong in winter. And ahead of the peak in the second half, there's a very favorable environment that is being built up. Especially what is important is [ HEF ] coffee and there's a lot of recovery signs and green beans or the raw material prices are going up. But overcoming that, this business has started -- has been set up in first half, and this will be carried over to second half. So AGF will be in even better position in the second half.

And usually, the sales promotion expenses are recognized in February and March, but we have intentionally distributed and evened out this sales promotion expenses in the first half. So this will be favorable in second half. And in first half, mayonnaise, which is one of the major businesses for us, the competitors in mayonnaise has run centenary anniversary campaigns in a large scale. So we struggled because of that. But from September and October, we have been successful in recovering our share. So this will be all reflected as it is in the second half.

And last but not least, in last year, there was a large-scale sales promotion for Umami seasonings, that went well. But in the first half this year, we were below the last year's level because customers have bought a lot, and there was a home inventory that was built up, but this has been resolved now. So we can see a recovery in Umami seasonings in the second half.

There are many others favorable points, but that's why we are expecting recovery in the second half of seasonings.

Thank you very much, Saji. As for Bio, Fine, just I'll be very brief. On Page 38, it's JPY 17 billion increase. But if you go back to JPY 4.2 billion ahead of the last year's and only JPY 4.2 billion improvement in first half, but JPY 17 billion in second half. So in '24, in Q2, there was a peak. But in fiscal 2025, in Q4, as Nakamura said, we'll see profit peak. So JPY 17 billion improvement from the previous year against the budget, as you can see in the material, Bio, Fine and Healthcare after first half, 48% progress against profit budget for the full year. So there will be stronger profit in the second half. So 48% in the first half and 52% in the second half. So this will be how we can match the full year forecast.

This will be leading to the second question. So the Umami seasonings for processed food manufacturers, I think there was a JPY 1.4 billion profit decline. So there were some troubles or a challenging environment in the past. So Meihua has already announced like 10,000 ton class production capacity increase. So there could be a sustained oversupply next year. So with this seasonings, is there any prospect for recovery for the second half? Is it really realistic to expect recovery?

So Masai will continue to answer that question.

First of all, there is a mid- to long-term prospects and also short-term issues. As for MSG, including nucleotide, the Chinese manufacturers increased production capacity was started in 2023, 2 years before. And from that timing on, we have been quite concerned and taking actions, as Nakamura said. This Umami seasonings, we have combined B2B and B2C businesses and centralized management was considered to be important. So MSG collaboration promotion department was established. So we struggled with the production capacity increase by Chinese manufacturers in amino acid in the past.

But MSG and amino acid, the biggest difference between these 2 is that in MSG, in Ajinomoto Group, there is internal sales within the group, and that proportion is quite high. More than 70% of MSG is intra-group sales. So home-use Umami seasonings or flavor seasonings are expected to increase steadily. So in the long term, this internal sales proportion of 70% is going to be raised to more than 85% by 2030. And that is our plan.

And also going forward, even if prices are increased, fortunately, there are customers that want to buy from Ajinomoto. There are so many customers that say that. So because of those 2 factors, in the mid- to long term, even if there's a continued competition from Chinese manufacturers, we are seeing the environment where we can compete. And in the short term, there are various actions to counter competitors in this MSG collaboration promotion department. And one of them is what we announced on October 14 as a press release. Our Chinese competitors have infringed upon our intellectual property rights, and we have taken action. And this will break -- put the break on export increase.

And as for nucleotide, we are planning various initiatives to counter the competitors. We can't say everything here, but organization on a systematic basis, we are taking actions against competitors. So please feel assured. Especially for the short term, as I said, in Brazil, this new technology introduction will contribute in the second half to the profits. And in the short to midterm, there will be new technology introduction that will be done in various factories around the world. So there will be a long-term recovery in MSG business.

Now moving on to the next question. This is from Goldman Sachs. Miyazaki-san, please begin your question.

This is Miyazaki from Goldman Sachs. I also have 2 questions. The first question, from the first half towards the second half, you just talked about the trends. According to the presentation material, strategic expenses -- strategic investments, you said that there are several initiatives implemented for strategic purposes in the first half already. You also talked about SG&A on Page 5 and also the Frozen Foods structural reform-related initiatives. And for Forge towards commercialization, you talked about investments and expenses for commercialization. So are there some one-off things that are incurred in the first half only, but not in the second half or something that will not incur in the next year? So what is the amount of strategic spending and how much in which area, if you can explain that?

Thank you very much, Mr. Miyazaki, for your question. As you rightly pointed out, SG&A changes are presented on Page 6. And roughly speaking, personnel expenses, marketing spend, R&D investments, those are recording increases. Besides them, separate from them, DX-related and AI-related system investments have been made. And this relates to licensing fees. So these expenses are likely to continue in the future.

Regarding the expenses for bringing forward the commercialization of Forge, this is a one-off expense for commercialization. So this is not going to be recurring.

Anything to add, any members? Is there anything to add?

No, thank you very much for that. Yes. On Page 20, as you can see on Page 20, the IND approval, this is, I think, pleasant cry, but this has happened much earlier than expected. So you have to produce larger quantity than expected. So this, I think, is a one-shot expenses for commercialization related including consulting expenses. I think as Nakamura mentioned, so those one-off expenses have occurred in the first half of this year, and that had an impact on the performance.

Okay. I just wanted to confirm, so Forge-related expenses, it's difficult for you to quantify. Is it difficult for you to quantify? And also for the personnel expenses on Page 6 and marketing spend and DX related? Those investments incurred in the first half of this year and those are likely to continue and be recurring in the future as well. Is that the right assumption?

The Forge-related expenses is not disclosed, but that was quite a hefty amount.

Okay. I understood. Okay. and the remaining expenses are likely to continue in the subsequent years according to my interpretation.

And the other one is Functional Materials related. So I have a question relating to Functional Materials. In the second quarter compared to the first quarter, I think the sales was slightly declined, but still be higher than the target and the plan and the profit margin was higher than the first quarter in the second quarter. So I think you are seeing a favorable trend here. So as in the second quarter, can we expect a favorable performance comparable to the first half?

For semiconductor overall, I think the demand and also your competitiveness in the market? I'm not worried about these factors. But ABF packages, for example, there is a restriction in the supply of some of the components. And because of that, the demand for ABF was dragged by that. And I think the demand has come down -- will likely come down.

Do we have to anticipate such kind of risk? So can you talk about the second half and towards the next year? What is your recognition? If you can update on your recognition of this business?

Thank you very much for the question. As I explained earlier, the AI-related demand, high function semiconductor is enjoying great demand, and I think that is the most advanced products. So therefore, the gross margin is high, and that's the reason why we are performing like this.

The semiconductor WSTS, World Semiconductor Trade Statistics, WSTS, this is an indicator used in the semiconductor business. On June 3, it was not updated, but the calendar year logic IC growth was plus 23.9%. That was the expectations back then. And I think we are close to 20% growth is already shown here. So we have been able to enjoy growth as planned. In calendar year 2026, this is going to come down to 7.3% according to WSTS projection. We believe that is too conservative. That is rumored to be too conservative, but there might be some factors behind that.

It's impossible for us to comment on the supply situation of other components. But according to what we hear from customers, in the second half, we expect a favorable performance in the second half as well.

Okay. Then let me confirm. So the -- set aside the components of other companies, I cannot -- I don't want to ask that. But as you have been engaged in communication with your customers from before and according to that conversation, you have an outlook that is expecting a favorable growth?

That is correct.

Next, from English webinar, there is a person who wants to ask a question. Bernstein, Mr. McLeish, please.

Just following on from the ABF question there. Can you confirm that you're not seeing any negative impact at all from downstream production bottlenecks at this stage? Is that the right understanding?

Thank you very much, Mr. McLeish for your question. So in terms of first half growth, well, if there is more needs, then it could be settled down. But with regard to the growth in the first half, we can continue on with that pace of growth in the second half.

Okay. And then over in the domestic food business, we've seen that coffee bean prices have been declining for almost 8 months now. When do you expect that to benefit your margins? And how does this change your coffee portfolio strategy in Japan going forward?

Well, as coffee beans procurement lead time is long, 6 months to 1 year is the contract period. So the most recent coffee beans lower prices will be reflected at the lagging timing. So I'd like to let Masai answer the question.

Masai speaking. Let me answer the question. Actually, -- so there is some time lag, but in actuality, AGF coffee business from this first half compared to the previous year has been making more contribution to profits. So there's no detailed breakdown. But if I may say, in Japan, in this page on the left, so plus 0 compared to last year as this graph shows. But in the coffee business, actually, in the first half alone, compared to the previous year, more than JPY 1 billion profit increase was recorded.

So then you may ask what are the negative businesses that are offsetting that. So let me make some comments. So in this graph, it's not from the apple-to-apple comparison perspective, from this fiscal year, part of the common fee has been allocated to the business units. So about JPY 600 million has been paid for by the business units. So excluding that, then in the previous fiscal year, plus 0 is shown in this graph, but actually plus JPY 600 million or JPY 700 million is actually -- would have been shown. And then part of that is borne by coffee business. And there's JPY 600 million negative numbers in other business. But at least for the coffee business, there is significant signs of recovery that is manifesting in coffee business. So I'd like you to understand that way.

Now moving on to the next question. Morgan Stanley MUFG Securities. Miyake-san, please.

This is Miyake from Morgan Stanley. I'm sorry, I have a sore throat, so maybe it will be difficult for you to hear. The overseas seasoning -- food and seasoning for processed food, I just wanted you to give me so much color regarding the changes. If you look at the Page 11, as far as I look at this, the SG&A increase is a major factor behind the changes that is diluting the revenue growth. So if we look at this by region, S&I is also included here.

But if you just single out the second quarter only and talk about the Sauce & Seasoning altogether, there was a decline of JPY 1.8 billion in revenue. So the seasoning for processed food accounts for JPY 1.4 billion out of that, I believe. But the raw material prices is also decreasing for fermented food. And also you have increased expenses, you said. But if you look at the general trend of revenue, the July, September quarter, I think the trend was strong. So if you could just talk about the profit performance driven by revenue growth. And also, if you can divide between consumer and also the restaurant channel demand and how have they affected the decline in revenue by those different channels?

Okay. Thank you very much for the question, Mr. Miyake. For overseas, first, SG&A. In order for us to increase the brand value, we have made intensive investments for the brand investment. And if you look by segment, the volume is not increasing in Thailand, and that is due to the coffee bean raw material price increases, and therefore, the coffee drinks, beverages in Thailand did not increase so much in terms of volume vis-a-vis the competition. And also instant noodles due to geopolitical reasons in Cambodia, those exports that we had made in Cambodia did not grow as much. So those are one of the factors behind the revenue performance.

And maybe Masai-san can add some more comments.

Thank you very much, Miyake-san, for the comment -- for your question. I would like to supplement. As Nakamura-san just mentioned, in addition to what he just said, I would like to add that, as you rightly pointed out, in fact, the situation was difficult in some regions, especially for overseas home-use business.

What are the challenges? And in the second half, what are the countermeasures that we are going to implement? I will have to talk about that. Especially in the ASEAN region, the Asian regions, there are 3 points that I would like to share with you. For the Umami seasonings, home-use, because of the competitor in China, there was an indirect impact from this Chinese player because this competitor, they are -- they have been using China. So that's the reason why we are affected by them. And China's players, they are also engaged in a B2C business. So they are a direct threat for us as well. So against this, we have been trying to reinforce our sales. We have taken a meticulous look at it and leveraging our strength, i.e., the strength -- our sales rep strength. We are trying to counter them and fend them off, especially in Nigeria, in Myanmar, we have struggled in some of these markets, but we are seeing the recovery trend already. So I think this will have a positive impact on the second half performance.

The second was the flavor seasoning. Flavor seasoning previously, mainly in Europe, there was a global competitor, and that was the main player in the past. But recently, in many ASEAN regions, we are seeing the emergence of local competitors competing directly against us because they are stepping up their activities. The way of combat is different. So therefore, we were confused a little bit in this first half, but we have analyzed already, and we now see how to compete against them. So the competition with the local player is going to be a key factor in the second half of the year.

For instant noodles, Mr. Nakamura already mentioned that and talked about Cambodia. But if I add one more comment, another thing that I would like to comment on is Latin America. Latin America, instant noodle is performing quite well. Having said that, however, the production facility is located in Peru, and there is a shortage of production capacity, and that's the reason why we are not able to sell the quantity that we intended to. But we have completed the construction of new line in September. So we are now already pressing the accelerator. So the produced the instant noodles produced in Peru is now expanded sales in other markets, in the peripheral market. So although we struggled a little bit in the first half, but I think these efforts will begin to bear fruits in the second half of the year.

For processed food, I've already commented, and I think that will be overlapping. So I won't comment on processed food anymore.

And regarding Brazil, you talked about the introduction of new technology, and you struggled in the initial introduction of the new technology. In terms of expenses in the first half, especially in the second quarter, was there any cost associated with that?

Thank you. That's correct. Yes. Exactly. With the introduction of this new technology, we were not able to produce. So meaning that we only had to incur these fixed expenses. So that had a weight on the cost. But that is not going to be the case from October onwards. So this will have a positive impact on the performance of the second half onwards.

Now let us move to the next question from Daiwa Securities, Igarashi-san, please.

I am Igarashi from Daiwa Securities. I have 2 questions. First question, you talked about ABF and to the question of ABF, in the next fiscal year, the numbers look a bit lower, but the major players are coming up with new chips. That's what we heard. So unit price could increase or area could increase. So this could accelerate your growth. Isn't there such expectation that we can have? Can you elaborate on that?

Thank you very much for your question, Igarashi-san. In terms of statistics, as I said, this is from June and industry is on the conservative side. As you said, each player is coming up with new products. And if you look at our customers, their investments are going well, and there will be more plants that are coming online. So for us, the growth in the statistics is not realistic in our view.

So in terms of volume and unit price, you believe that the numbers will be accelerated? Well, for the cutting-edge technologies, the best mix with the cutting-edge products are coming out. And Ajinomoto Fine-Techno Gunma plant, we made investment and that production equipment will have the latest version for AI applications. So what you said is right.

And profitability rate in first quarter, you hired people aggressively and profitability lowered. But in the second half, there was a recovery. So is there any changes in the policy?

Well, we are growing. So we have -- the personnel expenses are increasing and the Gunma new plant has come online. So there will be depreciation costs that will be incurred. So there will be profitability that will suffer a bit.

But in terms of cutting-edge semiconductors like AI chips, the products with the better mix are being launched and sold earlier than expected. So that has helped us improve profitability.

The second question, the frozen food business in America. So if you look at the profit decline in the second quarter, that seems to be larger. In Slide 16, the tariff has impacted and sales promotion timing, those were the 2 factors you mentioned. Were they all transitory and tentative? And can you see a recovery and also product initiatives like pricing strategy that you talked about in Japan, but in the North America, what are the initiatives that you have in mind specifically?

So as you said, so the tariff policy in the U.S. and the customer sales promotion timing that have been lagged. Those are the 2 main factors in the U.S. There's nishiki gyoza, that is a premium, and it is performing well and major retailers are having those in the stores in the shelf. And so things are going well.

So Kawana will make more comments.

So as Nakamura said -- so with regard to tariff policy, the price increase will be a bit delayed. So there is some impact, but there are some production disruption. So those are all tentative factors, so we can make a recovery in the second half in our view. And as for sales, as was said, nishikino gyoza and the shumai dumpling, they are all delivered to our customers, and we can expect sales increase from there.

And also previously, in the food service, we are not selling too much in Asia. But now the shift is for Asia. So there could be more profit margin expected. So we could be more positive in the second half.

What about the production disruption? Has it been resolved?

Yes, this has been completed.

Now moving on to the next question. UBS Securities, Ihara-san.

Can you hear me?

Yes, we hear you.

Ihara from UBS Securities. I also have 2 questions. First, regarding domestic Frozen Food business structural reform, you previously mentioned that you're going to announce your structural reform program, and you did already. But this did not live up to our expectations because, to be honest with you, the second quarter Frozen Food business' profit margin is less than 1%. And then 3% of sales and profit growth of 7% CAGR, that is not going to be a strong impact in any event. And even if the Frozen Food gross profit margin is returned to the pre-COVID era, still that level in the first place is low. So this Frozen Food business in Japan, I think you are at the phase of having to go through a structural reform. With a shorter time horizon, can you take any actions in a shorter time frame? That's my first question.

Thank you very much for the question, Ihara-san. For the Frozen Food business, drastic reform, well, we have been engaged in structural reform all the time and the integration of our production facilities, manufacturing centers and producing multiple products in a single line. And through these efforts, we try to improve the production efficiency. And also, we have focused on delicious food and launched Gyoza products and so forth. This time around, we have conducted a price hike that does not match with the customers' perception for value. So not only this deliciousness, but we have also decided to focus on affordability and release products -- Gyoza products. So we changed our strategy in that regard.

Maybe that will not be conducive to profit margin. So we would like to provide different levels of products. So on one hand, we would like to focus on cost performance, but also time performance and health value and experience of cooking. So we will produce and prepare different menus, different pricing ranges so that we can optimize overall. So the highest productivity -- highest product will be the ready-to-eat with microwave heating only. So those are kind of products that are already available. So wherever possible, we would like to generate profits with all these 3 different patterns of categories.

And as I mentioned earlier, Gyoza is a touch point of ours with many different customers. So because Ajinomoto is known for the delicious products, we would like to have customers try many other food products that we offer. So this is a touch point to enhance our brand value. So we are not really complacent with the low profit margin, but I think this offers additional value, not only the prices.

Then Kawana-san can add some comments if necessary.

Thank you. I'm so sorry for the concerns that you have. As I mentioned, the growth overseas is larger compared to the Japan growth rate. So that's the reason why we have shifted the focus of resources to overseas. And we have tried to improve efficiency of Japan as a cash co, and that's the reason why we were related in structural reform.

There are 2 major challenges that we are facing today. One is that the market is diversified much more than before. So in that environment, the traditional approach of selling only to the mass market will deprive us of some segments like the Gyoza product that we have today is tuned towards the mass market. So the biggest audience -- we are trying to sell the products to the largest audience. But in the current contemporary age, there are more diverse needs, people who want a larger with greater meat portion gyoza, that's taken by other competitors. And there are some other people who want something affordable gyozas, and those are taken by PBs and PB brands. So we have been taking away the market share for different needs of Gyoza products.

So in order to address this, previously, we focused on this production efficiency, and we focused on the single products, and that was the reason why we were not able to address these needs, and that has diluted our profit margin. We are now currently going through a reform and so we would like to look into different lineups and have a more broader range of product lineup. So we had this business lineup, but now we look into a different portfolio for different categories of products and thereby improve the utilization of the factories. Fortunately, in October, we have seen a very steadfast growth. So I think you can be reassured about that.

The other thing that I wanted to address and the other challenge that we are facing today is that in the market, the frequency of people cooking is now declining in the market. And we have been selling complete meals and staple foods, not only the ready-to-eat meals. And that is the trend that we are seeing in many other industrialized markets. So we were belated in addressing these needs. So we now have the Aete products.

So we would like to focus more on the meal products going forward. As we started this initiative, we believe that this is an area where we can leverage our strength, the design of deliciousness, the design of new nourishment, I think we are very good at that. So I think depending on the preferences of the customers and health conditions, we are able to customize. So we realize that we have the strength. So in these areas, we would like to achieve growth in the future.

Okay. Understood. So my second question, if I may, the share buyback. This year, JPY 100 billion share buyback is already ongoing, and you have additionally announced another JPY 80 billion program this time around. So JPY 100 billion plus, I think, is going to be the size that you are going to address for share buyback per year -- per fiscal year. But if it's JPY 110 billion this year and again next year and then the year after that, if you continue this, the net debt-to-EBITDA ratio will be lower than 2x. I think you can continue that. But the net D/E ratio with more leverage, I think that will have a detrimental impact on your financial leverage according to what I think. So this share buyback program, do you think this can be sustained? If you can comment on that, that will be appreciated.

Thank you very much for your question. This is on Page 26. We have this cash management policy on Page 26. Of course, the cash that we generate will, of course, be first allocated for investment for organic growth so that we can properly grow the company. Then we'll look into M&A, other inorganic opportunities and the share repurchase is the third priority. So this is the cash management priorities that we have. And on top of this idea, we have decided on the share buyback program this time around.

Mizutani will explain in more detail.

Thank you very much, Ihara-san, for your question. As Nakamura just mentioned, this time around, this share buyback period, if you look into that period, this will end in November 30 next year -- on November 30 next year. So this includes the repurchases planned for next fiscal year as well.

And if you can go back to Page 26, this is the cash allocation policy that we have. And at the bottom, you see on the right-hand side, we will shrink to JPY 900 billion as for the cash balance. So the current cash balance plus the JPY 90 billion, if you look at that, the extra things -- because we would like to improve the capital efficiency with this new decision. And the profit that can be spent out for dividends, we'll look into that as well and also manage the debt. We will look at the leverage level. So I don't think you have to worry about that. So that's all for myself.

But like JPY 100 billion, if you wanted to buy back with a 6-month period, and I think this is -- this period is going to get over shortly. And this JPY 80 billion is going to be done over a 1-year period. If you look at things from that angle, your capability for share repurchase, given that your leverage is now increasing, I think the leeway for additional repurchase is now coming down. Don't I have to be concerned about that?

Well, again, at the risk of repeating myself, this program will last up to November last year -- next year. And the budget for next year is not formally decided yet, but we have some assumptions for next fiscal year, and we will make sure that the leverage will not be over this level. So we are properly managing that. So I hope that you understand that.

But the market participants, not JPY 80 billion, but I think they are looking at the level next fiscal year on top of this. I just wanted you to be mindful of that. So that's all from my side.

Now next question from JPMorgan Securities, Fujiwara-san, please.

Fujiwara from JPMorgan Securities. I'd like to ask this question to Mr. Nakamura. It's not about specific segments, but in the financial results this time, honestly speaking, it seemed negative and disappointing slightly. That's a fact in various businesses, there are some problems that we are seeing. And as we listen to the presentation, you say that these are all tentative and you can do better in second half. So this could be assuring, but root cause is Japanese -- Chinese players and more intense competitive players' activities. So maybe you have to revisit your management in the core. So the response speed -- I think your company has been quite quick in responding to the changes, but you may have to accelerate that in order to tighten up your management. That may be necessary. So how to run your business? Can you give your thoughts on this as President, Nakamura-san?

Thank you very much, Mr. Fujiwara-san. Well, this time, there is a healthy sense of urgency that we have. So as much as possible, we have to earn and those business that are growing are growing. But as you said, because of competition from Chinese players, we have been a bit late in responding, as Masai said, but however, in the short term, we have taken actions that we were able to take. And as for mid- to long term, we have instructed business units to accelerate. So it's not exotic materials, but those products that are weakening, including Frozen Food, so successor development has been instructed to Ajinomoto Frozen Food. So we have to increase the speed to even higher level. And we have to be strongly aware of the competition. And that's what we -- I have been saying in my dialogue.

So Chinese players more recently have been gaining momentum. So I talked to Korean customers, and I talk about this to our employees and there are 3 impossible or unknowns. You don't rest, you don't go home and you don't sleep. That's what they say about Chinese. But -- and they have 3 shifts, and so they are catching up with Toyota Motor in terms of EV. That's what we are -- I am telling our employees in dialogue. So we have to look at the global environment, and we have to compete with the players around the world. So we have to keep this sense of urgency.

There's another question. So I'd like to ask one more question, if I may. In the Frozen Food, I do understand what you have taken as actions. But as for home-use, other than Gyoza, there are other categories. And compared to competitors, your competitiveness is not that high in my view. So for those categories, you may have to narrow them down further like Gyoza or restaurant, industrial use dessert. So you have to focus more on those where you excel strongly and then you throw away other categories. Isn't that the risk that you can take?

As Kawana said, as for Gyoza, in a single production line, there will be multiple products that are coming out. So shoga, ginger gyoza and miso paste gyoza have been launched on top of the regular gyoza, and they're selling well. So in the current production line, we can create some products in terms of different SKUs that will sell.

And as for dessert, as you pointed out, this is something that we can focus more on. And the frozen food without meat through desserts, there is some qualification for exports or a profit for exports. So we are planning to also consider the potential exports from dessert.

So if there's any more comments from Masai?

Yes. Thank you. So as for dessert, on our part in Ajinomoto, as Ajinomoto Group, what produced in Japan has not been exported too much. But we had a sense of urgency now. So Ajinomoto and Frozen Food, AGF, this is a common issue. So as of October 1, export promotion department was established. And what is going to be the main points in this is frozen food dessert. And so these activities will be done and gyoza and dessert were pointed out by you, but I totally agree, and we would like to focus our resources on those.

And for the question that was asked previously, so structural reforms may look a bit weak compared to others. And I'd like to just make more comments on that. So subsequently, what we found and thought was that the actions taken against competitors. And from that perspective, especially the competitors in Gyoza and Frozen Food are not just Japanese players. So Japanese structural reform is important, but we have to have more global perspective to compete. And so Japanese structural reform is necessary, but we have to make more investments in Asia, and that's what we're considering.

So as we do structural reforms in Japan, at the same time, for Gyoza and Frozen Food, we are taking actions against competitors. So before structural reforms in Japan, we are also aiming for expansion in Asia. That's what we have begun to consider.

Okay. Then -- so Karaage or fried chicken or Chahan or fried rice, you have those products. Would there be any change in the positioning of those products?

Well, as I said, we are revisiting our categories, especially Gyoza and dumping shumai and chicken and sweets. Those are the major segments. But Gyoza and dumping shumai and sweets, there's still room for growth. As for chicken, well, in the structural reform, we are narrowing down the items, and we are seeing increased profits as a result. So -- but we're not trying to grow this. And frozen rice is the biggest challenge. Osaka plant was closed to enhance efficiency, but there's still challenges to address. And so we have to review this more.

So we are shifting towards complete meal, and that's what we're trying to do. And as for rice, you shouldn't just look at Japanese business. In overseas, the rice is more of a mainstay in U.S. and others. And all these are exported from Japan. So in total, there's profits that are generated. But what about -- what to do with rice business in Japan is something that we have to address. So we have to go beyond that. So like -- and by transitioning to complete meals and others.

The next question, we would like to address the next question. In the interest of time, I would like to limit to only 2 more questioners for today. So the first will be for Furuta-san of SMBC Nikko.

This is Furuta from SMBC Nikko Securities. I have a question relating to the outlook for CDMO business in the second half. I'm looking at Page 19. You mentioned that the AJIPHASE shipment delay in Japan was a factor, but I think your performance in the first half was in line with the plan. As for the different initiatives in each region, can you give us some more color for the second half initiatives in this CDMO business?

Thank you very much, Furuta-san, for your question. So this will be answered by Otake-san because he's here today.

All right. I would like to address your question. Forge, as we explained during the presentation, Forge is enjoying favorable growth, especially towards 2026 and 2027, we are expecting to start the commercialization. We have decided to bring this forward. So with this year, we have incurred some consultation fee, and therefore, the EBITDA positive is quite challenging, but we are still working on this target. And also the sales has increased by 4x compared to the time of acquisition. So we are achieving a very steadfast growth here.

As far as the Japanese business is concerned, AJIPHASE, we have a very big growth projection in the future. But compared to that plan, we are slightly behind the plan. But starting this fiscal year, Forge AJIPHASE salespeople are sent there so that with the Forge members and the Healthcare members in North America, we are working together in the sales activities together with them. With this, we have been able to cultivate new customers. So towards the 2030 Roadmap, we are going to make steadfast progress in our actions.

For AJICAP and also last year, COYRNEX as well, we have made a press release regarding the collaborative efforts. And with AJICAP, AJICAP has been driving the growth of CDMO business. But in addition to that, AJIPHASE, AJICAP and COYRNEX and Forge. So these are the unique businesses of Ajinomoto, and they are going to be the pillar of our business in the future. So with these pillars, we believe we shall be able to achieve the growth of the company. So the prospects of future is becoming much brighter than before.

Okay. Then I have a follow-up question. AJICAP, on Page 21, customer expansion, you're talking about customer expansion, and you are talking about the new client in overseas and also Astellas. So I think -- can you comment on whether the speed of customer expansion is accelerating? Can you talk about that?

May I? I'll try to answer that. Yes. Okay. As it's written up here, in October, we have signed up new license agreement with Astellas and another company, 2 companies altogether. So the sales is expanding. In order to further accelerate the sales within Ajinomoto Group, we would like to leverage our internal network. OmniChem, for example, we would like to leverage that network. And in addition to that, the former [ Lonza ] business development chief, we have entered into an agent agreement, a consulting agreement with them. So we would like to leverage those external networks as well so that we can accelerate our customer cultivation efforts.

CRO, CMO, we will promote collaboration with them so that we can further increase the number of licensing agreements after -- so that we can -- AJICAP can become a next driver for growth after AJIPHASE. And we believe we have been able to achieve a steadfast progress towards that direction.

Last question from Nomura Securities, Morita-san, please.

Morita from Nomura Securities. I'd like to ask about Seasonings and Food once again. In this presentation meeting, what has become one big theme is action taken against competitors. So from that perspective, why at this timing, the competitive risks have risen. So before the pandemic, getting back to the pre-pandemic level, the Americas, you have increased the profitability margin, and that has driven your profit in your business. But maybe your profitability level has risen too much. That is my concern. Of course, profitability level being higher is good, but this would reduce the entry barrier. So I think your profitability level has risen, especially in overseas. So maybe you're earning too much or it's not unsustainable business or profit level or you have an overhang. What is your thoughts on this possibility?

Thank you very much for your question. So profit level and pricing, it won't go up if you don't need the customer value. So you have to increase the customer value and profit margin. So [ Saji ] will explain more.

So with regard to profit margin, well, I'd like to answer the question, including that. So with regard to actions taken to competitors, it is very important initiative. Honestly speaking, previously, in Ajinomoto Group, especially for home-use businesses, so we were quite strong. So we -- honestly speaking, we were a bit short in terms of actions taken against competitors. So as I said, in 2023, we had seen these signs. So we have established a competitor response team, several competitor response teams. And one of them is competitors in China. And also, there are some organizations that are taking actions against other types of competitors. So we are very serious in taking actions against competitors, even though we haven't disclosed this yet.

And as for China, especially, honestly, it's not just food, but in all industries, the same is happening. So we're not an exception. So with the economic slowdown in China, maybe regardless of supply-demand balance, if I may so, they are taking actions. So we had expected the supply-demand balance to take effect, but actually, they are disregarding this. So we have to be ready and take action with that in mind.

And with regard to profitability level or margin, it's not a straight answer to your question, but to Chinese competitors and Ajinomoto, we're looking at the price differences, especially. So what sort of price differences would be allowed for customers to buy our products. If this is too wide, then they will not buy our products. But if this is not too wide, then they will buy from us. So we have learned that from our experience, and we are taking pricing policies. And if that works well, we are defeating competitors in some countries. But in others, we haven't been able to do so. So we are taking more actions.

It's not a straight answer to your question, but we're looking at price differences. And the pricing margin or pricing ratio comparison is what we are taking.

So in the short term, you are increasing profits in the short term. But in the mid- to long term, that is going to be important. But just for clarification, so the price gap between Chinese players and your company, is it still higher than the optimal level? And maybe you have to make adjustments to match that optimum level. Is that correct understanding?

Well, different countries have different situations. For example, in Europe, euro is quite strong now. So with the euro being strong, Chinese players, when they export products at CIF, probably in dollars. So in Europe, there is the tendency that price gap will be widened. So you have to reduce our prices in there. But in Asia, regardless of foreign exchanges, I think things are settling down. So in some countries, we don't have to reduce prices. But in some others, we may have to reduce the prices.

So with the collaboration promotion department being playing a central role, we are looking at that.

Well, a different question from a different perspective. The food business is -- the consumption is very weak, not just in Japan, but around the world. I think the weakening is more than you are assuming. So with these changes in the business environment, what sort of actions you have to take in your thoughts?

Well, the first one, there is difference between Japan and other countries, but it depends on the country that you're talking about. What is -- what we are driving our business in ASEAN compared to the past 5 years and the next 5 years, probably growth rate will slow down. So in ASEAN countries, we have to find a new frontier to compete, and we have already have done that from the 5-star to Cambodia, Laos, Myanmar and Bangladesh, we're shifting our focus to those countries. And same goes for Latin America, like Brazil and Peru to adjacent countries. That transition is what we're taking as an action.

And as for Japan, it's not just a Ajinomoto or food manufacturer carbon alone because of population decline, as I said, you have to strengthen exports. So what we produce in Japan is not just delivered to Japanese customers, but to customers around the world. And so that's why we have established export promotion department. So depending on regions and countries for the consumption decline, the actions that we have to take will be different. We have -- I have learned a lot.

So with this, we would like to finish the Q&A session. So finally, Mr. Nakamura will have the final closing remarks.

Well, thank you, everyone, for staying with us for such a long hours. We always would like to maintain this sense of healthy urgency -- healthy sense of urgency, and we would like to drive the company on a continuous basis. We look forward to your continued support and patrons. Thank you very much indeed for today.

With this, we would like to finish the earnings call for today. We thank you very much for your participation. This is the end of today's session. Thank you.

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

Good morning. Thank you for joining Ajinomoto's business briefing meeting on Latin American business despite your busy schedule. This is Kaji from IR. At the outset, I'd like to introduce today's speakers.

Representative Executive Officer, President and CEO, Mr. Nakamura; Executive Officer, General Manager of Latin America, President of Ajinomoto Brazil, Ms. Yamamoto. Hello. Nice to have you. Those 2 are the speakers. Yamamoto is joining from Brazil.

Other than that, we have participants from Ajinomoto, Mr. Shiragami, Representative Executive Officer and Executive Vice President; Mr. Sasaki, Executive Officer and Senior Vice President, General Manager, Corporate Division; Executive Officer and Senior Vice President, General Manager, Food Products Division; Masai, Executive Officer and Senior Vice President, General Manager Bio-Fine Chemicals division, Maeda; Executive Officer and Vice President in charge of Finance and IR, Mizutani; Executive Officer in charge of diversity and HR, Kayahara; Executive Officer in charge of sustainability, Ono. Nice to have you. So those are the 7 participants.

Today's proceedings. First, Mr. Nakamura will make presentation on Latin American regional strategy, followed by growth strategy of Ajinomoto Brazil from Yamamoto and then Q&A session. For the whole session, we are scheduling 1 hour and 30 minutes. Today's material is uploaded on our IR website. So please refer to them. Today's content will be recorded including the Q&A session and will be uploaded on our IR website. I would like to have your understanding.

So we would like to start the meeting. Nakamura-san, please.

Thank you very much for taking time out of your busy schedule to attend Ajinomoto's business briefing. I will first discuss the business activities of our group in the Latin American region and our strategy for the future growth.

I would like to share 3 points with you today. Have you changed the slide? Okay. Good. First, in Latin America, we operate a broad range of businesses in food and Bio & Fine Chemicals, and we have achieved solid growth based on this strong business foundation. Two, with COP30 taking place in Brazil this November, we will further accelerate our sustainability initiatives centered around Amino Science, creating positive impact while accelerating business growth; three, looking forward, 2030 and beyond, we will pursue new business opportunities alongside expanding existing operations, strengthen intangible assets and global collaboration to achieve further growth. Through these efforts, we will realize the Ajinomoto Group's aspirations and ASV, leading to sustainable enhancement of the corporate value.

This is our organizational structure in Latin America. Under the umbrella of Ajinomoto Brazil, we have branches in Argentina and Colombia, Ajinomoto Peru, overseas branches in Chile and Bolivia as well as Ecuador Cepacol and Ajinomoto Mexico, are all covered by the Latin American regional headquarters. The regional headquarters overseeing all of Latin America is located in Brazil. The key hub was in the area. It works in coordination with business and corporate divisions in Tokyo to formulate and advance regional strategies for the entire area. Our group operates under this regional headquarter system for governance and to manage operations by distinguishing between matters advanced globally and those decided locally.

Now a brief introduction to Ajinomoto Brazil and Ajinomoto Peru, which play central roles in Latin America. First, this is Ajinomoto Brazil. With 4 factories and approximately 3,000 employees, it is the largest base within our group in Latin America, established in 1956 with a history of approximately 70 years. Our company focused on the post-war resumption of Japanese immigration to Brazil and made a full-scale entry into the Latin American region, expanding the business together with Brazilian economic growth. Initially, we imported and sold the product Ajinomoto. But starting in the 1970s, we began production using local sugarcane. Subsequently, we expanded our product portfolio to align with local food cultures and needs. In the food sector, this includes the flavor seasoning, SAZON, and powdered beverages, MID; various amino acid for pharmaceuticals and foods agricultural materials produced using amino acid fermentation by products; and amino acid lysine preparation for cattle such as AjiPro-L doing a wide range of business in food and Bio & Fine chemicals.

The photo in the lower left shows our R&D members. Having local development teams in each country is one of our strengths. Ms. Yamamoto, who succeeded me as President of Ajinomoto Brazil and Head of the Latin America division in April 2025, will explain our growth strategy and specific initiatives later on.

Next is Ajinomoto Peru. With approximately 1,500 employees in Peru, it is the second most important base in the region after Brazil. It began selling the product Ajinomoto in 1968 and developed flavor seasonings like Dona Gusta, tailored to the local culinary culture that favors chicken-based soups; and in the 2000s, established instant noodle culture in Peru with Aji-no-men, alongside the company's growth we've contributed to the development of Peru's food culture. In recent years, our business performance has expanded strongly, including the export. The current President, Mr. Iwao is a Japanese Brazilian born in Brazil. After joining the R&D department at Ajinomoto Brasil, he worked in the overseas food division in Tokyo and was seconded to Ajinomoto Indonesia, and then served as Head of the Food business division at Ajinomoto Brazil. Drawing on his diverse regional business experience, he assumed the role of President of Ajinomoto Peru in 2022, while he continues to demonstrate strong leadership.

In the Latin American region, we have developed and grown both our Food and Bio & Fine Chemicals business, primarily in Brazil and Peru. As shown in the slide, in the food business, we manufacture and offer products from Umami seasonings Ajinomoto to those rooted in local food culture, as explained earlier, the Brazilian SAZON and Dona Gusta in Peru, instant noodles like Aji-no-men tailored to local needs. We are also expanding in 2 neighboring countries. In Bio & Fine Chemical, we manufacture and sell various products utilizing amino science, including amino acids for pharmaceuticals and food. Furthermore, Brazil serves as a key global manufacturing base for MSG and amino acids. Beyond these business developments, we will further expand product categories in the food business, grow in neighboring countries and further accelerate our Bio & Fine Chemicals and convergence businesses in Latin America. We believe there remains significant overall growth potential.

Latin America is a vast region. And while logistics and infrastructure post challenges, our company has built a robust distribution network. As shown here, we have manufacturing bases in core countries, Brazil and Peru, from which we export and sell products to neighboring countries, expanding our business throughout almost all of Latin America. As mentioned earlier, Brazil also serves as an important global amino acid manufacturing base, supplying both products to the entire Ajinomoto group.

Sales in Latin America, as a whole, have already reached JPY 125 billion. We will steadily expand our business in Brazil, where the scale of the business is large, while further accelerating the rapid growth in Peru and promoting growth in neighboring countries such as Bolivia and Colombia in order to achieve high business growth throughout the Latin America.

So why has Ajinomoto achieved such high growth in Latin America? One reason is our robust business foundation and overwhelming presence in the region. In particular, in Brazil and Peru, our product market share and awareness have been high, thanks to our expansion to date. In Brazil, our flagship flavors seasoning, Tempero SAZON, has a market share of approximately 70%. In Peru, our Umami seasoning Ajinomoto and instant noodles, Aji-no-men, have nearly 100% market share. And our flavor seasoning, Dona Gusta, also has an extremely high share of approximately 80%. Ajinomoto Umami seasoning has an extremely high awareness rate of 93% in Peru, and SAZON in Brazil has an extremely high awareness rate of 96%. Leveraging the strong brand equity, we will accelerate the development of new products.

Umami, one of the strengths of our food business has high penetration in areas where rice farming and fishing is common, and thus, rice and fish are consumed. And like ASEAN, our group has developed its business in Latin America based on this food culture. Latin America has a population similar to ASEAN and a large economy, but our group's sales in Latin America are still only about 1/3 of ASEAN, and we believe the region still has great potential. In addition to the growth potential in Brazil and Peru, we also see significant room for growth in neighboring countries. Furthermore, compared to ASEAN, many countries in Latin America share common languages and food cultures, making it easier to pursue cross-regional initiatives than in ASEAN. Currently, we are focusing on basic seasoning such as the Umami seasoning Ajinomoto, the previously mentioned Brazilian, SAZON and Peruvian Dona Gusta

However, in recent years, with the economic development of each country, the need for more convenient meals has increased. And sales of Aji-no-men instant noodles made in Peru have grown strongly, with exports also increasing significantly. We will strengthen our expansion in the area going forward, including new initiatives such as the frozen food business we launched in Brazil.

To realize this growth potential, we will rapidly develop new products, services and solutions that meet local needs, further strengthen our relationships with customers and accelerate the organic growth of our existing business. We will also leverage the strengths of amino science to maximize the synergies between food and bio and fine chemicals, thereby further expanding our business domains.

This growth will be supported, first and foremost, by strengthening our valued intangible assets, brand equity, human capital and digital transformation. Furthermore, as for deepening global collaboration, when I was in Brazil, I felt that disseminating information such as cutting-edge R&D information from Tokyo to each region would lead to greater innovation on the ground, and I am eager to work on deepening such collaboration in each field.

Using our regional headquarters as a hub, we will evolve our business operations into more agile and effective ones, while also contributing to the creation of local innovation. By rapidly implementing these initiatives, we will further expand our business in Latin America and contribute to the growth of the entire Ajinomoto Group.

In Latin America, we are linking our Food and Bio & Fine Chemical businesses to put ASP initiatives into practice such as improving nutrition, supporting agriculture and reducing environmental impact through products and services that utilize AminoScience. And we believe that our challenge in Latin America are important initiatives that will lead to value creation for the entire Ajinomoto Group.

Going forward, the entire company will continue to work together to evolve -- the management, realize our purpose and strive for business growth.

Now I would like to ask Yamamoto-san to tell us more about Ajinomoto Brazil. Yamamoto-san, over to you.

Thank you very much. I would like to introduce you Ajinomoto Brazil and its growth strategy. Hereafter, I will refer to Ajinomoto Brazil as ABR, and Ajinomoto Peru as APU.

Once again, let me self-introduce. My name is Naoko Yamamoto. I joined Ajinomoto in 1991. And since then, I have been responsible for the food business in and out of Japan. After 2 overseas assignments, I served us Head of Human Resources at Ajinomoto and Vice President of AGF in 2020. And this year, I assumed the role of President of ABR and Head of the Latin America division. By the way, in 2022, I was in HR. And in this IR Day presentation, I talked about HR Capital.

Here is what I will be introducing today. First, I will provide an overview of ABR as a whole, followed by our core businesses, and finally, the intangible asset that supports our growth.

So first is ABR company overview. As was mentioned by Mr. Nakamura earlier, ABR was established in 1956, and will celebrate the 70th anniversary next year. Sales amount to approximately JPY 100 billion with 3,000 employees. We operate in 3 business segments. Right top, the food business that sells various seasoning and food products to retailers and food services. The second is the Food Ingredients and Agriculture business with sales products like MSG through B2B channels and sales coproducts generated -- or CoPro, we call it, generated during the manufacturing processes as fertilizers; and Bio & Fine Chemical as the last one, which sells amino acid and amino acid-derived products to B2B customers.

This is a map of South America and Brazil. I'm in Sao Paulo. We have bases in Brazil, Colombia and Argentina. In addition to our headquarters in Sao Paulo province, we operate 4 factories. The breakdown of sales is as follows. You can see on the left is the pie chart. The food business accounts for approximately 50%; the food ingredients in Agri accounts for 30%; and the Bio & Fine Chemical business at 20%. Compound annual growth rate since FY 2018 is about 8%. We aim to realize sustained growth through FY 2030.

Earlier, it was mentioned, one characteristic of ABR is that it serves as a supply base for MSG and amino acid that supports the entire group. Using a button Brazilian sugarcane as raw material, we stably produce and supply high-quality products, thereby contributing to the entire group.

From here, I will introduce each of ABR's businesses. First, the food business. As you can see on this slide, our food business covers a wide range of product. Left-hand side, the seasonings business centered on SAZON, which has a strong foundation and has been growing steadily for many years. And next is the processed food, instant soups and the MID, the powdered beverages; and the supplement and frozen foods, where we anticipate new growth as well as commercial products. Right bottom is we have a wide range of products for the food services. So we are expanding our business not only in Brazil, but also in Argentina and Colombia, where ABR has basis and export our products to countries throughout Latin America.

Regarding sales in the food business, we have maintained growth. As you can see, from FY 2018, CAGR of 8% and 9% is seen here. As you can see from the graph, the red, the dark red, seasonings, account for primarily large share, and this segment is currently our growth driver. Going forward, we aim to achieve even greater growth by expanding into other areas as well.

Next, in order to help you visualize our products, we will introduce Tempero SAZON, a key product within our seasonings portfolio about Tempero SAZON via video.

[Presentation]

So how did you find it? Did you get a sense of what Tempero SAZON is about? Let me explain more about Tempero SAZON using the slides.

Tempero SAZON was launched in 1988 and is a flavor seasonings loved by Brazilians. We take pride in the seasonings that it has been used for generations by our customers, its use being passed down within families and has become deeply integrated into Brazilian food culture.

Brazilian food culture has been influenced by various ethnic groups, including Portuguese, African, indigenous, Italian and Japanese; features diverse regional characteristics brought by the immigrants. For example, this right-hand side, you can see the photograph Feijoada, stew of black beans and pork is very popular. And in this menu, it's often eaten at the homes, and SAZON is used in these menus. And Tempero SAZON is widely used in many of these dishes adding Umami, flavor and color. So frequently, they are used in diverse menus in Brazil.

Tempero SAZON is the strength of our food business. It was mentioned in the video as well, but market share of approximately 7% -- 70% and brand recognition of 96%. In 1996, Its love-themed commercial became a hit. Since then, SAZON has become strongly associated with the theme of amortization or love in Portuguese. This has made SAZON more than just a seasoning. It symbolizes love for family and loved ones. This element has become an emotional benefit for SAZON, leading to stronger consumer support.

On the right bottom, you can see, in recent years, SAZON has also sponsored the reality show program, the Big Brother Brazil, a national phenomenon in the country. And that has also contributed maintaining its high recognition and market share as well as capturing users and the younger generation.

Next is the distribution network, which is also one of our strengths and capability to bring things and products to our customers. We cover all of Brazil with approximately around 80 exclusive distributors. Brazil has very vast land. It is 22.5x the land area of Japan with approximately 80 logistics network is not very developed. And the tech system is very complex. And that makes nationwide business expansion challenging. So taking approximately 40 years, we have collaborated with those distributors and partners to establish a system capable of delivering products throughout Brazil.

Thanks to this, our distributors love and treat our products as if they were their own, and as a result, provide exceptionally attentive service throughout Brazil. We firmly believe that our current position is entirely due to the cooperation with these distributors.

Here, I would like to talk about -- more about the future. Building on the strength, as I outlined, I will explain how we plan to grow our food business going forward. This is, on the vertical side, the product category; and on the horizontal, you can see the customers; more to the left bottom means existing. So existing category, existing customers, I have already mentioned about Tempero SAZON. We have a very strong position. And in this area, we can propose new cooking applications, introduce product with more distinctive concept and also introduce product with more accessible, affordable concept to attract new customers taking on our strong position.

And we also want existing customers to use our products in more cooking scenarios. For example, as a new cooking proposal, we have seasonings for making risotto with left-over rice. For those who stronger focus on cooking, we offer the hub seasonings. And last year, we launched a smaller size of SAZON as a more affordable option. That's what we launched last year. And through those efforts and efforts, initiatives like these, we were able to capture customers we couldn't reach with existing products alone, such as younger generation with strong sustainable values. Furthermore, we would focus on leveraging existing -- using the existing businesses, cash generated from strong existing businesses, we want to play in new categories.

Last fiscal year, we launched frozen gyoza. Thanks to all who supported, it's currently performing very well. Going forward, we plan to expand the category and aim to handle a wide range of Aji in frozen food products. Furthermore, as a symbol of the integration of Food and Bio & Fine Chemicals, we will strengthen the supplement sector, including Amino Vital. At the end of last fiscal year, we launched Amino Mov, a supplement targeting middle-aged to senior women. And moving forward, we will thoroughly nurture the products we have launched, provide a new value to society while contributing to food and health in Brazilian society, and we would like to accelerate our growth.

Next, I would like to introduce our food ingredients and agri business. In the Food Ingredients business, we sell MSG to processing customers and products for improving texture and flavor on a B2B basis. So we sell functional products. And we also supply these products to our global affiliates. Agribusiness, on the right-hand side, like I mentioned in MSG, we utilize co-products generated during the MSG production process to sell products such as fertilizers.

Relevant to this, this is the bio cycle in which we are engaged in, and let me introduce this bio cycle. In Thailand and Vietnam, this is conducted. But at ABR, similar to these countries, we are also engaged in the bio cycle. In Brazil, sugarcane is fermented to produce MSG. Once the fermentation finishes and amino acids are extracted, the remaining liquid known as the coproduct, still contains a lot of nutrients. And we would use that and sell that as a fertilizer product to local farmers. Local farmers would grow sugarcane using this fertilizer. And that sugarcane then becomes raw material for MSG, therefore, creating a cycle. Through these efforts, we are reducing greenhouse gas emission, GHG emission. And from the upper stream, we are able to ensure a stable supply of sugarcane and therefore, contribute to building a sustainable food system.

Words alone may be difficult for you to understand, so we have prepared a video which explains this. Please enjoy the video.

[Presentation]

In addition to the biocycle initiative you just saw, there is one project that Brazil is engaged in, and I would like to introduce you that. A press release was announced at the end of March. We are participating in cooperation with the Japanese government assistance program for Brazil. And this is a verification study for the recovery of degraded pasture verification.

YKK Brazil has pasture. Last week, I just visited there myself. It's 1.7x of the Yamanote line area. And we are testing our products on this degraded pasture. We are now verifying the effectiveness of our products. And through this project, we hope to demonstrate the effectiveness of our products, thereby further contributing to the environment and society, which is ASV while growing our business.

Next, I would like to introduce our third business, which is Bio & Fine Chemicals business. This business offers supplements and IV fluids, and amino acid is used in this, and also amino acid-derived products such as moisturizers using cosmetics and surfactants used in detergents as well as value-added feed for livestock is what we offer in this business.

Next slide, please. This graph is from a survey conducted by consulting firm, Bain & Company. The red bar represents people whose environmental concerns have increased over the past 2 years. This shows that environmental concerns are growing globally. But upon looking at this result, we saw an increase, particularly notable in Brazil. Against this backdrop of changing awareness among people in Brazil, we want to contribute to solving climate change issues with solutions that utilize Amino Science. And at the same time, we believe that this is an opportunity to accelerate business growth.

Now based on that backdrop from here on, I would like to talk about AjiPro-L, which leverages Amino Science and also introduce about sustainable solution examples. As you all know, GHG emissions related to cattle rearing account for approximately 9.5% of global GHG emissions. And this is an urgent issue as one of the causes of global warming. AjiPro-L is a product that can contribute to this.

Let me explain the product overview. In raising dairy and beef catalyzing is necessary. But if lysine is given as it is, it's broken down by microorganisms in the rumen of the ruminant cattle, and the nutrients do not reach the small intestine. However, by utilizing our proprietary granulation technology, lysine can pass through the rumen and reach the small intestine as a nutrient.

Using AjiPro-L, this allows you to optimize feed such as soybean meal, which was previously given to cattle, and also contributes to reducing CO2 generated during feed cultivation and procurement as well as N2O generated from manure. Although this varies depending on the farming conditions, it is possible to expect a reduction of 1 ton of CO2 per cow per year as well as reduction in feed costs of approximately $100.

Currently, [ 2 of ] the major dairy and meat factors in Brazil, we are promoting understanding of the AjiPro-L, and collaboration efforts with these companies are progressing steadily. By strengthening our collaboration with these partners, we hope to achieve even greater results towards reducing GHG emission Brazil is rich in nature, and both agriculture and livestock farming are very thriving.

And 6% -- it exceeds 6% to the country's GDP. In the advanced countries, it is below 1%. So engaged in these initiatives in Brazil is something we find to be highly meaningful. By offering solutions, we can make contributions to a sustainable food system. And hence, we would like to dramatically grow our business while making these contributions.

Now relevant to this, I would like to talk a little bit about the COP 30. As you know, COP 30 will be held in Belem of Brazil. It's the entrance of Amazon in November of this year. And we plan to introduce AjiPro-L and our efforts in the recovery of degraded pasture verification study. And we would like to communicate to the world that we have concrete solutions that are effective in combating global warming. There are many stakeholders that will attend. And since it's a great opportunity, we would like to also strengthen our network and tie that to business opportunities.

This will be my final part, and I would like to introduce our efforts regarding intangible fixed assets. Let me start by introducing our high-speed development system. Nakamura-san cultivated high-speed development system in the electronic materials business and has spoken a lot about this. And so I'm sure many of you are familiar with this.

When he was the President of ABR, this initiative started. So it has taken foot not only in development, but also in corporate and also in the factory, this initiative and system is being leveraged. One example is our efforts to develop frozen gyoza, which we will introduce today. As mentioned in his presentation, this high-speed development system is about anticipating needs and acting first and starts by gaining a deep understanding of the market and consumers.

In Brazil, we have identified that the restaurant industry is facing labor shortages. Therefore, the needs for convenient food is on the rise. And also the development of cold chains for transporting frozen foods have made advancement. And in Brazil, they eat meals, side dishes and rice, which is well balanced. And due to this, we have found potential in frozen Gyoza.

In order to deliver to the market as quickly as possible, we have considered [ varied ] options, but we have decided to use our group's own assets. So we're going to start with import and also consider export, and test sales is conducted at some of the cities.

So while our initial strategy was to expand into restaurants, primarily serving Japanese food, we have found that the delicious taste and ease of preparation of frozen Gyoza will have widespread acceptance. So we are now expanding our efforts to incorporate Gyoza into local food culture as an appetizer and restaurants serving local food. And also in the supermarket, we are selling this in the deli section, and we would like to expand channels going forward.

These efforts are supported by the corporate culture that we have right now, which is one of the intangible assets. Based on the spirits of fail fast and learn faster, this is common in ABR. We would like to take on challenges without fear and work as one team throughout the entire value change. These kind of product launches usually takes about 1 year or even longer. However, in this case, we were able to achieve this in 6 months. And we believe that our established high-speed development system is a major strength of ABR, and we will continue to proactively take on new challenges.

The next topic is about corporate branding. On the left side of the slide, there is a graph. And this shows the difference between awareness of SAZON and the number of people who know that SAZON is actually a product from ABR. While 96% of the people are aware of SAZON, only half are aware that it's an ABR product. People who know 96 -- who know SAZON, but don't know that this is from Ajinomoto, if we tell them that this is from Ajinomoto, the likability actually increases, which is encouraging results. And that's why we would like to, through our communication, link the two. And this is an effort that we have been continuing. There is still room for improvement. However, for SAZON advertising, we are proactively conducting corporate branding so that we can be able to create an ideal relationship between the SAZON awareness and the fact that the product is from ABR.

In fact, last year's survey, I said earlier that the people who know SAZON is from ABR is 51% this year, but last year, it was 46%. So although it's a few percentage points, in a short period of time, I think we are seeing some effects through communication and advertising, and we would like to further strengthen this going forward. This will lead to further strengthening our existing businesses. And it will also accelerate new business.

The next topic is about digital transformation. ABR began its digital transformation efforts in 2017 with all employees actively participating with ownership. On the right-hand side, this is automating the factory. And in the middle, this is using data. So in another words, data-driven management. And through these initiatives, we are promoting digital transformation.

On the left-hand side, where it's just e-commerce, I would like to introduce this a little bit more. In 2022, MeuPedido, a B2B platform was launched. We believe that this is a unique initiative. Like I mentioned earlier, the distributors would use this platform to distribute products to the retailers. So distributors would use this platform to sell not only our products but other commodities and food products. There's still room for growth in this area. But the transaction volume in fiscal 2024 is expected to expand 6.6x compared to the previous year, and we would like to further promote this platform.

As the final topic for intangible assets, I'd like to introduce our human capital initiatives. As you all know, human capital are one of the most important assets supporting our business. And we are undertaking a variety of initiatives to develop them. One is a global talent rotation initiative. We have employees seconded from Brazil to other countries where they can share the experience and know-how they have gained in Brazil. And they also learn from the new local area to take back to their home countries. This initiative not only leads to individual growth, but it also promotes knowledge sharing globally and also strengthens D&I so that we can strengthen our power and also strengthens our competitiveness. We currently have 12 colleagues from Brazil working in various countries, including Japan and Thailand. And next month, one other member will be seconded to Malaysia. So there will be a total of 13 colleagues. And today, we would like to introduce 2 of them who are seconded in Thailand, and this is Normando. And the other member is currently working in Japan, and her name is Naralice.

So we would like to do a brief self introduction by them and would like for them to talk about what kind of experience they are gaining from their new destination. So let us start off with Normando-san.

Thank you, Nakao-san. So hello, everyone. It's a great pleasure to be here today. My name is Normando Filho. So I have now worked with Ajinomoto for almost 25 years, building my career across sales, marketing, digital, data science and the supply chain management in Brazil.

Since July last year, I have been based in Thailand. In Thailand, I handle 2 positions. First is a Deputy Managing Director of Ajinomoto Sales Thailand. And the second position as a Director of Solution Ingredients, S&I, at Ajinomoto Thailand.

So here, here in Thailand, I'm supporting the evolution of our distribution system in traditional trade, we call TT, and the food service. We are also focusing on talent development to building a capable future-ready teams.

What I learned in Brazil has been essential and the Thailand has added new perspectives that I intend to bring back. Ajinomoto Brazil route to market and the distribution system model shows how long-term partnership and disciplined execution support sustainable growth. So when I return, 3 strategic initiatives I aim to implement are: number one, agile product development through cross-functional teams accelerating innovation; number two, slide asset expansion with our local partners, enabling rapid testing and scaling new categories; and number three, integrate B2B strategies in food service, S&I to create stronger synergies and create value propositions.

So this international experience is broadening my perspective and enabling me to contribute to Ajinomoto global growth agenda by connecting market, optimizing operations and develop talent to drive value creation. So together, I believe we can continue to build sustainable growth and a stronger connection across marketing. Thank you very much.

Normando-san, thank you very much. The next member is Naralice-san. Please go ahead.

Hi, everyone. Good morning. My name is Naralice Fuzinelli, and it's a pleasure to be here today talking to you. I started my career at Ajinomoto do Brazil in 2009, right after my graduation. It was my first job. And over the past 16 years, I have grown with the company.

I began in the technical center where I spent 10 years focusing on the development of our core technologies. And after that, I moved into sales and business roles. Since 2022, I've been based at Japan headquarters, where I'm in charge of the global production strategy for the amino acids business. This role has deepened my understanding of customer values, market trends and the strength of our production sites and business globally. So when I return back to Brazil, I will bring this broader and more integrated perspective.

My priorities will be 3. First, enhance the collaboration between Brazil and global teams to share best practice and accelerate innovation. Second, expand the production capacity and portfolio by leveraging insights from our customers and global network in both business and technical areas. And third, support the development of a strong customer-focused and globally oriented team to drive value creation.

So as a result of my experience from the technical roles to global strategy, I feel ready to drive value creation through brother perspectives and strategic insights. So I'm confident that by working together, we can further advance our position in Brazil, not only as a strong local player, but also as an even more integrated and competitive part of our global business. Thank you very much.

Thank you, Naralice-san. With Normando-san, I have online conversations. And when I return to Japan, I met Naralice-san. And the 2 seem to be full of energy while they are working, and I find them to be highly reliable. And these are initiatives that we would like to further reinforce going forward.

Finally, let me conclude my presentation with a comment as the General Manager of the Latin America. ABR has both food and bio and fine chemical business functions. And by maximizing these strengths and by utilizing amino science power, we will lead the growth of Latin America as a whole. Furthermore, together with APU in Peru, where business is growing rapidly, we will lead each country and neighboring countries and companies by pursuing synergies. Through these activities, we will contribute to the well-being of the people and society of Latin America and ultimately from Latin America to the entire world, and this will lead to increased corporate value for the Ajinomoto Group.

This concludes my presentation. Thank you very much for your attention.

Thank you very much, Nakamura-san and Yamamoto-san. We would like to now move into the Q&A session. First is how to do the Q&A. [Operator Instructions] Those participants from overseas, you are able to ask questions in English. We have simultaneous interpretation service. If we have too many participants who want to ask questions, so we may not be able to entertain all of them. So we would like to start the Q&A. [Operator Instructions]

There's the first question. Saji-san from Mizuho Securities, please.

I have one question to Brazil Ajinomoto's seasonings, flavor seasonings and foods business. As was mentioned by the President, I think the scale is low, but it is now going to expand the scale with ASEAN. What is the difference between ASEAN and your business? I think in ASEAN, you are using the route sales. And in Brazil, you have strong partnership with AT and over distributors that you have mentioned. So I think these 2, what are the differences in the strategies going forward, especially for the food and seasonings? If you look at the margin, flavor seasonings, ASEAN is more than 19%, but Latin America is 3 to 5 points reduced. So is this business for Brazil Ajinomoto, will be able to improve your profitability? And at this point of time, you have difference because this comes from the business model difference, then it may be difficult. So in order to reduce the scale difference here. That may be one of the strategies. Could you elaborate on this point?

Yes. Saji-san, thank you very much for the question. Yes, first of all, ASEAN and Brazil, well, Brazil's history of flavor, seasonings flavor is a bit different from ASEAN. I think Latin America, they started with Ajinomoto, and then they went into the flavor seasonings. Sorry, that was ASEAN. ASEAN started from Ajinomoto and then started to flavor seasonings and moved on to other seasonings. But in Latin America, the situation different. Peru, yes, it started with Ajinomoto. But in Brazil, the business started from the SAZON, which is a flavor seasonings. And centering on that -- and that was a driver of our business in Brazil. So compared to ASEAN, Latin America, where most population is there, the Brazil, we have different business model or the history. So I think it started out from the growth of the flavor seasonings and then to menu flavorings.

I think people would not do most of the cookings in different ways. So menu flavorings is not growing so much, but rather, they went into a more convenient type of food, like noodles and frozen foods. And so therefore, Masai-san, would you like to supplement, and maybe Yamamoto-san, if you want to provide some supplementary comments, please do so.

So Masai would like to talk about the seasonings. I think there lies difference in the area -- land area. Compared to ASEAN countries, Brazil is very vast. They have Amazon jungles. So I think similar sales models and the sales teams are not able to reach the retailers. This was a successful business model in ASEAN, but it was difficult in Latin America.

30 years ago, Ajinomoto started to rely on reliable distributors around the region. So I think compared to Thailand, Indonesia, Vietnam, ASEAN countries, I think we have lower own the salesperson. I think this is a very efficient sales and distribution model. And in addition to that, it was mentioned that because this is a wide land of area, logistics is quite difficult. So we had to have a longer and strong relationship with the distributors, including the logistics. So that is one feature of Brazil.

As was mentioned by Mr. Nakamura, Peru, we have a business model close to ASEAN. So within Latin American countries, I think there lies differences. From the processed food perspective, already, we have been in this business Aji-no-men is a model which is growing, and this is being exported to neighbor countries. Because of the capacity issue, we had a bit of problem. But the Peru last month, we have now newly established noodle facilities, noodle-producing facilities. So we are able to enhance this business. In addition, Argentina, Peru and Paraguay, I think they have different food cultures. So we would like to think about most suitable expanding strategies. Together with Yamamoto, I went to those countries and did the market survey. That's all from me.

And one confirmation from myself. So that means that you have new teams being launched. The margin itself for new business, would you have higher margin? Or are you going to improve the margin in existing product? Can we expect improvement of margin in existing products?

Yes. This is Nakamura. For the margin, improvement, yes, we made us as a factory that we are going to be seeing and we want to improve the existing business so that we can make improvement of margin. And for processed food, especially frozen food outside Japan, I think they could, I think, capture more margins. So from both sides, we will be doing our most efforts. Thank you. Thank you very much, Saji-san.

Next, from Goldman Sachs, Yamanaka-san, please go ahead -- excuse me, it was Miyazaki.

I'm Miyazaki from Goldman Sachs, and I have 2 questions that I would like to ask. This could be overlapping or as an extension of the previous question by Saji-san.

About sales, in Peru, because of historical background, you said it's very similar to ASEAN. So up until the phase of menu seasoning, how far have you made progress? Are we in a favorable condition where we can expect improvement going forward?

And looking at a few graphs, until 2030, the growth curve seems to be going upward. So through expansion of existing business, how much can we expect? And in addition to that, how much more new business would you need to generate? If you can please explain about that as the first point, that would be very much appreciated.

And number two is about the operating margin. In the last few years, I understand that the margin has improved. Is that really the case? And because of new trial, is it actually flat? And in the next few years, is the OP margin going to improve with the new, for example, fermentation process and/or perhaps due to the scalability of processed and frozen food? So in looking towards 2030, I see that you are foreseeing improvement. But what is your assumption in the next couple of years in terms of OP margin perspective?

Miyazaki-san, thank you for the question. To your first question about the sales and your question about Peru. Now in the case of Peru, Ajinomoto, itself, is a big product as well as Aji-no-men and Dona Gusta, which is a flavor seasoning. These 3 are drivers. And recently, Ajino Shirao, which is shoyu or soy sauce is growing. So these are the 4 core businesses that are driving the sales.

Whether if there's room to grow until menu seasoning, yes, we believe so. However, as mentioned earlier, Brazil and also Peru, sales is not that significant when it comes to menu seasonings, and the number of product is still yet insufficient. So we would like to have positive expectation. But in terms of leapfrog, I think there is a trend towards convenient food. And that's why we have started frozen food in Brazil. And in Peru, we have started studies so that we can be able to pursue growth in the processed food.

Now to your second question about the margin. Looking at the recent margin, appropriate price increases have been conducted so that we can be able to secure profitability. This is one thing that we have communicated and also continuous cost reduction, introducing new technology and also removing redundancies is what we would like to pursue growth.

Gyoza is imported from Thailand and is sold. So in terms of improving profitability, if there is enough volume demand, we would like to domestically manufacture Gyoza in Brazil so that we can be able to increase profitability.

That would be it from myself. Masai-san, would you like to add anything?

Yes, I, Masai, would like to make one point. I'm not able to disclose the details today. However, in fact, both Brazil and Peru, efforts are being made. Tremendous efforts are being made to reduce costs. And I may be repeating myself, I cannot share with you the details, but cost reduction measures will prove to be effective in the next 1 to 2 years. So this is where we have positive expectations on.

Sorry, that's my answer may be lacking the details. Thank you.

Just one more point for me. Sales has been growing stably. And I think your plan is that it will continue to grow stably. So due to scalability, can we foresee improvement in OP margin? Or is it the cost reduction efforts that is going to impact profitability?

I think it's both. So the cost reduction efforts and also increasing distribution and also expanding region for -- so it's both growing sales and also cost reduction efforts.

Yamamoto-san, if you would like to jump in and make further explanation, that's fine.

No, I think enough has been said so I'm fine. Thank you very much.

Thank you very much, Miyazaki-san. Next, we have a question from overseas. Marian from Bernstein, please.

I just wanted to ask you a question about the importance of the U.S.A. as an end market for Ajinomoto Latin America. Can you give us a sense of how big the U.S. market is in terms of revenue and future growth for Latin America -- for your Latin American business? It would be helpful if you could talk about the key products that you're selling to the U.S.A. and how this business is being impacted by tariffs.

Thank you very much for your question, -san. So I think your question was for overall Americas business, not just Latin America. Latin America and North America, we have different -- yes, I think important...

Sorry. Can you clarify the question? The question was about exports from Ajinomoto Brazil to the U.S.A and Ajinomoto Peru to the U.S.A. How important is that?

Thank you very much. Yes. Brazil, yes, it is local consumption, local production. But for Bio & Fine Chemicals, I think to around the world, Brazil is exporting. This is a production hub. So from Brazil to U.S., yes, we do have exports to the United States from Brazil. Yes, we did not anticipate Trump tariff, and that's a very big impact, especially amino acids and part of the co-product and cosmetics products, this is impacted, but that is converted or transferred to other countries. I think cosmetics and co-products are exported to other countries so that we are able to reduce risk, minimize the risk. That's globally done. Bio & Fine Chemicals is headed by Mr. Maeda. So Maeda-san, can you comment on this?

Yes. Thank you very much for your question, -san. Can you go to Page 7 of Yamamoto-san's presentation, you can see export to Brazil -- from Brazil to others. I think Bio & Fine is partial. And part of that goes to U.S. That is the raw material for cosmetics and amino acids for pharmaceuticals and so forth, partially of them. I think this is going to be impacted by Trump tariff. Basic policy for us is for -- of course, we want to pass through the prices we are now negotiating with the customer. That's long-term reduction of cost. But of course, from the short term, we have to pass through the prices to the customers and reduce our costs on our side. That's for short term.

Next, Igarashi from Daiwa Securities.

My name is Igarashi from Daiwa Securities. Just one point for me. And I'd like to hear from Yamamoto-san. So in Latin America, namely Brazil, is there a change in needs or changing consumer behavior that you see within the food culture? And what kind of change in needs would you like to capture?

Now in the frozen Gyoza, you talked about convenience and also time-shortening needs. So if there's any other needs in which you have positive expectations for in the future, please share that with us.

Thank you for the question, Igarashi-san. So your question is in Brazil, if there is any change in needs for the food culture. Did I understand your question correctly? Okay. So as Igarashi-san, you have mentioned, people are looking for convenience and time-shortening methods when it comes to cooking. And although we don't have many offerings, there are light snacks and light meals in frozen food that is growing significantly.

Looking at the past 5 years, it has been growing double digits. And going forward, if you take a look at your monitor, it is expected to grow also at double digits. So this is an area that is going to grow for sure.

Now along with that, even if we say easy cooking, I think people's preferences are also diversifying. Some people, for example, if it's an authentic Japanese food or authentic ethnic food, there's needs. So we believe that there's going to be diversification of needs. But on the other hand, we're seeing inflation and high interest rates from a macroeconomic stance. And there are consumers that are concerned about the economical situation. So I think something that is economically rational will also -- will be important.

This is a terminology that we use internally, and we have 3 levels like small, medium and large. So we will offer premium price point as well as affordable price point items so that we can be able to capture diverse needs.

Now relevant to that, I'd like to ask another question. Needs for time-shortening cooking. I understand that in Japan, there's a need by consumers to be able to cook in a shorter period of time. But you see that trend in Brazil. Is there a social reason why there's a need for people to want to shorten cooking time?

So the social backdrop and the changes that we see, it's similar to Japan. Population is declining and aging, and we have smaller families. In the metropolitan area, property land is increased, rent is increasing, and people are now commuting from the suburbs. And I think this is all the social backdrop on why there's a need for why people would like to spend less time in cooking.

Next, Miyake-san from Morgan Stanley MUFG.

This is Miyake speaking. I am watching Slide -- Page 12. One question. You have grown 9% on a CAGR basis. When you look at the volume, what is the increase in volume? What is the impact of the unit price? And you see seasonings is also growing, and we have high brand recognition and -- is growing? Is it the reason for SAZON? Or is there any other drivers that has grown this or led this growth in seasonings?

Second question is about e-commerce. In Brazil, in Latin American countries, I think you see a rise of e-commerce. So far, you have distributors network, and they are firmly with you. And I think that's demonstrated your strength so far. So with this rise in e-commerce, would there be any difference in how you deal with the distribution network? Are you also responding to the rise in e-commerce? So the e-commerce percentage, if it is growing in the future, are you still going to rely on? And can you keep this distribution network that you have now? So those are the 2 questions that I have.

Miyake-san, thank you very much for the question. The first one is the volume growth. I do not have detailed figures and numbers here. But yes, we have grown the volumes figures and also increase in prices. As was mentioned to you earlier by Yamamoto-san, based on data, we have -- doing the marketing, data-driven marketing are being carried out. Brazil, when you do shopping there, you would have to carry in the ID numbers like my number in Japan. So to what you have purchase, you get the return or reimbursement from the tax. So when you do shopping, you would have to present that for that purpose. So using that as a data, we can appropriately use those figures how that has contributed to our product. So looking at those data, we have been growing our business. So that's our history.

And the second question, e-commerce. Yes, during the COVID-19 period, it grew, and we had much of delivery business going on. But recently, people would like to go to the markets and supermarkets and retailers directly. Yes, commerce itself, of course, we have a Brazilian e-commerce platform, and that is growing, and we can do that. But in order to grow the business, we need to increase the distributors key accounts, Carrefour Pondera is a very big key accounts in Brazil, and we do directly trade with the cash and carry, so to speak. Those volume supermarkets, we are doing it direct trading. So by doing that kind of business, we want to increase the profit. Yamamoto-san, do you have anything to add?

Yes. Thank you for the question. Yes, one comment to supplement. In the earlier presentation, I mentioned about the supplement Amino Vital and so forth. These products, of course, real stores are important to sell them, but I think they are important more in e-commerce. And I think these products, along with the needs, we would do sales promotion, including e-commerce. Earlier, what are the activities beyond now? So in -- by product, I think the significance and meaning of e-commerce will be different. So we have to identify that, and we will be responding to that.

And another supplementary comment is that, yes, like was other countries in Brazil, it's social network, I think it is going to be important for the e-commerce. So I think we always would like to focus on those changes in the society and would like to respond.

So in that sense, your trade with e-commerce is going to be directly done by your company. Is my understanding correct? And I think new entrants in the market is going to be easier in this market. So you have a firm network and e-commerce as well. So that you will be able to lead in e-commerce market as well? Is my understanding correct?

Thank you for the question. The first one, yes, yes, Mr. Nakamura mentioned earlier, there are some accounts that we go directly in the e-commerce. But as mentioned earlier, together with the distributor, we do have initiatives. So I think we do both in e-commerce.

And the second question, I have may not well taken your question, but e-commerce is it easier to go into the new business or to have new entries? And how we're going to be responding in this market? Is that -- was that your question?

Yes. If it's going to be a new channel and you may have new entrants coming into so that may be your risk -- more risk for you. So based on rates and store channels, maybe there might be more risk of new entrants, is my understanding correct? And if that is correct, how are you going to be responding to those new entrants into the e-commerce market

Thank you very much. Yes. This is my personal hypothetical answer. Depending on the area, I think it may be different. Yes, high unit price product and in a niche market, I think new entrants would come into the market -- new entrants would come into -- through e-commerce. But I think those daily product that we sell, like seasonings and so forth, processed food, I think real store sales are the main market. So we would like to protect that. And if there are new distribution where we see risks, we would like to fully cope with that. Thank you very much.

I see that many hands are still up, but I'm very sorry. But since we are almost close to the time to finish, we would like to take the next question as the last question. From JPMorgan, Fujiwara-san, please go ahead.

I'm Fujiwara from JPMorgan. So I have 2 questions. The first one is, in Yamamoto-san's part, I believe it was Page 8. You talked about the supply chain of your group, and I would like to have a deeper understanding. In Brazil, MSG and Amino Acids are being supplied as a global hub. And I think in ASEAN, there's a similar structure. We talked about the tariff situation in the U.S. earlier. But in Brazil, along with ASEAN, how do you split roles between Brazil and Southeast Asia as a hub to supply products?

And the second one is in 2015, I think JV was dissolved for instant noodles. Is there a possibility that you might reenter in the form of JV in Brazil to do instant noodles? Because I understand that in Peru, it is growing. So is there a possibility of reentering instant noodles within Brazil?

Fujiwara-san, thank you for the question. To your first question about the global supply chain, amino acids, we have a global policy in managing where it is produced and where it is applied to. And because of the North America tariff situation, Brazil is being slightly impacted. And the same situation is that for ASEAN. Ajinomoto and amino acids are manufactured in ASEAN. And what is produced there at the optimal price point is supplied globally. And we figure out what is the optimal route when it comes to supply. So antidumping -- of course, what is prioritized at the country will be prioritized locally, but it is being globally managed.

And secondly, about the instant noodles in Brazil. At this point at this point in mind -- at this point in time, we are not looking at reentering Brazil. But Masai-san of the Food division, if you have other thoughts, please go ahead and share.

Of course, we have the aspiration of want to reenter instant noodles in Brazil. But for South America, in Peru, Aji-no-men is doing really well. And like we mentioned earlier, we have just increased capacity, and we would like to start there. This is growing. So neighboring countries would be Chile, Bolivia, Colombia and perhaps Argentina going forward. We would like to expand in these neighboring countries and take a look at the situation and see.

How about from Peru to Brazil? Is that route viable from Peru to Brazil?

Could be a viable route. However, in South America, in the middle, there's the Andes Mountain. So land transportation, therefore, is difficult. And if we were to sell by sea, then we have to go around Panama Canal or Masland Sea Strait. And so it's not that realistic.

Okay, I see. Just one more point about my first question. Sorry, that I'm asking such a detailed question. From Brazil, is there a possibility to export to Southeast Asia? And if there -- if that's already happening, what kind of products are they? Because I think in Southeast Asia, I think everything is already being produced within Southeast Asia, but are there products that are being supplied from Brazil to Southeast Asia?

Ajinomoto itself is actually exported as a case from Brazil to Southeast Asia. In Southeast Asia, the basics is locally produced and locally consumed. However, for volume that is not being met like amino acid, Brazil manufactures it, and then it's exported to Southeast Asia.

I see. So Brazil and Southeast Asia, from a global perspective, are important manufacturing hubs.

Yes, they are.

Fujiwara-san, thank you very much for the question. We would like to now close the Q&A session.

Lastly, closing remarks from Nakamura will be made.

Okay. Thank you very much for taking time out of your busy schedule to attend this meeting. As I mentioned earlier, this year, November, in Belem of Brazil, COP 30 will be held. Looking at global GHG emissions, the Agrifood system accounts for over 20%. However, efforts to reduce emissions in this sector have lagged behind due to the focus on the energy area. As Yamamoto-san mentioned earlier, our company has several businesses that can contribute to this sector, including solutions such as AjiPro-L, which helps reduce GHG emissions from cattle and a biostimulant derived from a co-product of MSG fermentation. Today, these businesses, combined, have global sales of over JPY 30 billion and generate double-digit profit margins. Furthermore, we aim to expand profits in the future by creating new economic value in the form of carbon credits associated with GHG reduction.

At COP 30, we will actively promote these solutions to increase global awareness, further accelerating business growth and creating a positive impact. I will also go to Belem myself. In conjunction with these initiatives, we will steadily grow the business of the entire group and increase the corporate value of the Ajinomoto Group. So we hope that you will continue to look forward to our efforts. Thank you very much, once again, for attending.

This concludes the meeting. Thank you very much for your participation. Thank you, and goodbye. Thank you.

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