Coca-cola Bottlers Japan Hol Stock

[Interpreted] Good evening. This is Gomi, Head of Investor Relations of Coca-Cola Bottlers Japan Holdings. Thank you for joining our Third Quarter 2026 Earnings Presentation for analysts and investors.

Today, we are joined by President, Calin Dragan; and Vice President and CFO, Bjorn Ulgenes. Also with us are Vice President, President of the Food Service Company and Chief Business Strategy Officer, Maki Kado; Executive Officer and President of the Retail Company, Alex Gonzalez; and Executive Officer, Chief Supply Chain Officer and Chief Sustainability Officer, Andrew Ferrett.

Following the prepared remarks, we will be happy to take your questions. Simultaneous interpretation in Japanese and English is available for both today's presentation and the Q&A. Before we begin, please note that today's presentation contains forward-looking statements and should be considered together with cautionary statements in our presentation materials.

With that, I'd like to turn the call over to Calin Dragan. Calin-san, please?

Good evening, everyone. This is Calin Dragan. Thank you for joining us today for our earnings call. Let me begin by sharing the highlights of today's presentation. Please turn to Slide 3. For the third quarter year-to-date, business income achieved an increase of JPY 7.9 billion year-over-year. This summer during the peak demand season, the entire beverage industry was hit by record-breaking adverse weather. The situation in the Middle East increased cost pressures across the industry.

Together, these factors created an extremely challenging business environment for our company. Even under these conditions, we maintain an upward trend in business income through our relentless focus on profitability. We are very pleased with our results. Sales volume continued to outperform the market and our value share grew. This showed that our competitiveness is steadily improving. Key initiatives to strengthen our future earnings base are also on track.

We implemented our September price revision ahead of the industry as planned with strong growth despite the challenging conditions. Our transformation efforts to build the growth foundations are also progressing smoothly. We are also making solid progress on shareholders' returns. In addition to the previously announced enhancement to the shareholder returns measures, we have decided to cancel 7 million shares of treasury stocks equivalent to 4.1% of total share issues.

In the fourth quarter, we intend to build on this momentum and aim to increase business income. While we continue to forecast cost increases due to the situation in the Middle East, we expect those to remain within the projected range. We are working together company-wide to achieve our full year business income target of JPY 35 billion. Furthermore, we will focus on strengthening our profit foundation and investing in growth, both of which are critical to achieve our goals of our Vision 2030.

Now our CFO, Bjorn Ulgenes, will provide a detailed explanation of our financial results.

Thank you, Calin. Good evening, everyone. This is Bjorn. Slide 5 shows the year-to-date third quarter profit and loss. By rigorously focusing our business activities on profitability, we were able to achieve an increase in business income. Revenue declined by 1.4% year-over-year. Record-breaking adverse weather during the summer led to lower sales volumes and an unfavorable channel mix. Positive impact of price revisions continued to improve wholesale revenue per case.

Although sales volume declined year-over-year, we outperformed the market by leveraging the solid growth foundation we have built to date and implemented effective marketing activities. Gross profit was impacted by rising costs due to commodities, including the situation in the Middle East. However, improvements in wholesale revenue per case resulting from price revisions helped support gross profit, limiting the year-over-year decline to 0.8%.

Business income increased by JPY 7.9 billion year-over-year. This was driven by a series of price revisions, transformation benefits and agile company-wide cost savings. These gains more than offset the impacts of lower sales volumes and higher costs related to the situation in the Middle East. We are on track to meet our full year business income target. I will explain the factors behind the change in business income later.

Operating income improved significantly rising by JPY 103.8 billion year-over-year driven by an increase in business income and the absence of JPY 88.4 billion impairment loss recorded in the vending business in the second quarter of the previous year. In addition, net income rose by JPY 68.4 billion year-over-year to JPY 19.6 billion driven by the increase in operating income. Slide 6 shows our financial results by segment.

First, the vending business. Sales volume declined due to factors, including price revisions and adverse weather. Wholesale revenue per case continued to improve, but revenue decreased. On the other hand, segment profit increased by JPY 6.5 billion year-over-year to JPY 14.8 billion. This includes the positive impact of reduced depreciation expenses following the impairment loss in the vending business in the previous year. Transformation initiatives also played a significant role by improving profitability and route productivity, enabling us to achieve organic profit growth.

In the OTC business, volume declined, but revenue remained flat year-over-year supported by the price revision. Segment profit increased by 9.4% year-over-year primarily due to the flexible reduction of marketing expenses in response to adverse weather conditions.

In food service, both volume and revenue grew year-over-year driven by the expansion of our product lineup to meet customer needs and the success of our efforts to secure new business. Revenue grew by a robust 9.3% year-over-year. We're also steadily implementing investments aimed at growth over the medium to long term and are achieving business growth in line with our plans.

Please turn to Slide 7 for the factors behind the change in business income. In addition to price revisions and transformation benefits, agile cost savings efforts across the entire company contributed to a year-over-year increase in business income of JPY 7.9 billion. Starting from the left, we can see the impact of volume, price and mix. Together, these factors reflect changes in marginal profits from our commercial activities and resulted in a negative JPY 0.5 billion impact.

Major contributing factors include the unit price impact, which posted a positive JPY 12.1 billion largely due to improvements in wholesale revenue per case resulting from the series of price revisions. On the other hand, the volume impact was negative JPY 6.6 billion reflecting a decline in volume due to the inclement weather and worsening channel mix. While the others category, including alcohol, had a negative impact of JPY 6 billion.

Transformation benefits totaled JPY 4.1 billion, in line with our plan. Especially in commercial area in particular, we are seeing improved profitability from the transformation of our vending business. We are also achieving cost savings in the supply chain and back office areas. Marketing expenses decreased by JPY 1.7 billion compared to the previous year. This reflected our agile decision to scale back marketing investments when their expected return on investment declined because of the adverse weather in the third quarter.

We continue to make investments that will lead to profit growth from a medium- to long-term perspective. Manufacturing costs decreased by JPY 0.1 billion from the previous year. Although equipment utilization rates declined due to lower production volumes, cost saving initiatives on the production floor continued to contribute positively. Other costs decreased by JPY 4.4 billion. This was driven by company-wide cost saving measures implemented in response to the business environment, including adverse weather conditions and cost increases resulting from the situation in the Middle East.

Note that these figures include the positive impact of this year's depreciation expense from the previous year impairment loss of the vending business. This effect has already run its course in the first half of this year. For commodity and utility costs, including the impact from the situation in the Middle East, became apparent in the third quarter resulting in a total cost increase of JPY 1.9 billion. Although our hedging strategy kept the impact from the Middle East within the anticipated range, market conditions and foreign exchange rate fluctuations contributed to a cost increase of JPY 2.4 billion while energy costs decreased by JPY 0.5 billion.

In the third quarter, we adjusted our capital allocation in response to market conditions and as a result, capital expenditure decreased compared to the previous year. Next year we plan to appropriately strengthen our capital allocation while carefully assessing market conditions and growth opportunities.

Starting with the next slide, Alex will give an overview of our commercial activities. Alex?

Good evening, everyone. This is Alex. Slide 8 shows sales volume by channel and category. Although year-to-date sales volume through the third quarter fell by 1% due to record-breaking adverse weather, we continued to outperform the market supported by the solid growth foundation we have built. Wholesale revenue per case increased year-over-year in nearly all channels driven by a series of price revisions. Vending volume fell 4% year-over-year.

Campaigns marking the 10th anniversary of the Coke ON app and other initiatives supported sales, but the results were affected by the poor weather during the peak season. Supermarket volume declined due to adverse weather conditions and price revisions leading to lower sales of water and sports. At drugstores and discounters, marketing activities tailored to consumer needs helped drive growth in sparkling resulting in volume flat from the previous year. At convenience stores, in addition to implementing price revisions, we appropriately control rebates and promotional activities particularly for coffee.

While sales volume declined, wholesale revenue per case improved significantly and profitability is steadily improving. In the online channel, wholesale revenue per case was affected by an increase in large PET water. However, strong subscription sales and other factors drove a 5% increase in volume maintaining robust growth. In food service, efforts to secure new accounts and increase sales with existing customers contributed to a 7% increase in volume.

By category, Sparkling saw a 3% increase in volume driven by campaigns and in-store promotions that emphasize drinking occasions, particularly for Coca-Cola. In the tea category, strong growth in Yakan no Mugicha and Kochakaden offset the decline in green tea volume following price revisions resulting in a 2% increase for the category as a whole. For sports, water and coffee, volume declined due to adverse weather and price revisions.

Slide 9 shows the status of market share and OTC retail pricing. The total channel value share increased by 0.7 percentage points from the previous year. While record-breaking adverse weather affected the beverage industry as a whole, we steadily increased our market share. In particular, our decision to implement price revisions in September ahead of the industry had a temporary impact in our market share. Nevertheless, our sales volume continued to outperform the market throughout the year, driving growth in our value share.

In vending, growth in volume share drove an increase in value share. In addition to having built a strong consumer base, we have successfully optimized our product assortment to focus on profitability using an AI-powered assortment system and implemented promotions through Coke ON. As a result, we have achieved sustained growth in value share even as an overall volume in the vending channel has stagnated.

In the OTC channel, although the price revisions in March and September had an impact in market share, we were able to maintain both volume and value share at levels roughly equal to the previous year while improving profitability by thoroughly implementing commercial activities designed to strengthen our competitiveness in each channel. OTC retail prices of our products continued to command a premium over the industry average.

As a result of a series of price revisions, OTC retail prices for both small and large PET exceeded the previous year's level despite being affected by channel and category mix. In September when the price revisions were implemented, they were steadily reflected in OTC retail prices. Prices for both small and large PET rose by approximately JPY 4 to JPY 5 across all categories excluding water and sports, which were not included in the revisions.

Slide 10 covers quarter 3 topics. Our ability to achieve profit growth even amid adverse weather conditions was due to the contribution of our profit-focused commercial activities. Supported by the solid growth foundation we have built to date, our sales volume continued to outperform the market. Our core products led by Coca-Cola are one of the foundations of our growth. Marketing activities focused on drinking occasions having strengthened our competitiveness.

In food service, in addition to our focused efforts on acquiring new customers, our strong presence in indoor facilities such as shopping malls and movie theaters contributed to our ability to achieve volume growth even during periods of inclement weather. In the online channel, we continue to expand our product lineup, including label-less products. We also worked to acquire more subscription users. These initiatives helped us capture at-home demand and maintain steady volume growth.

In the vending channel, proactive measures to boost traffic led to strong market share growth. This included campaigns marking the 10th year anniversary of Coke ON and a collaboration with the popular Pokemon GO smartphone game. We're achieving business growth supported by our customers and our partners. In customer satisfaction survey conducted by Advantage, we have been recognized as the highest rated partner for 3 consecutive years among local and global companies in the consumer goods and domestic beverage industries.

We are confident that this solid growth foundation and these strong partnerships are the source of our competitive advantage. We have also steadily and flexibly implemented initiatives to improve profitability. Key measures, including price revision, are progressing as planned. In September, we implemented price revision for products in major categories ahead of the industry. In addition to maintaining and improving shipment prices following the price revisions, we're also working to optimize rebates and other measures, thereby steadily improving profitability.

Another factor contributing to our continued profit growth was our strategic execution of marketing investments tailored to the business environment. This year, we managed our marketing investments in line with market conditions. Slide 11. In addition, our efforts to strengthen our business foundation to achieve Vision 2030 have been progressing smoothly. First, in our vending business, we're working to optimize our product assortment based on profitability using AI and data-driven assortment system and we have already seen improvements in profitability such as increased route productivity.

We have implemented this AI assortment system in more than 300,000 of our vending machines, approximately half of our total. We will continue to expand the system to more machines to further improve profitability. It has been about a year since we launched this initiative and we have accumulated a variety of data and gained many insights. We're leveraging this to upgrade the system and further improve the accuracy of our efforts.

For Monster Energy, a product with high unit price, we began rolling it out early to ensure it was available during the peak demand period and it has already contributed to an improvement in the product mix and an increase in gross profit. In addition, to ensure the placement of new vending machines that will drive profit growth, we're working to efficiently and effectively secure high potential prime locations using our proprietary targeting tool, which combines big data and technology. Through these data-driven initiatives, we continue to optimize the profitability of our entire vending machine portfolio.

Next, let's turn to how we're strengthening our manufacturing and logistics system to support profit growth. Two Integrated Distribution Centers scheduled to open this year have begun operating in phases. We're also reorganizing our logistics network, gradually consolidating product inventory and logistics facilities. We're also working to optimize cost to serve by leveraging our direct-to-consumer model in collaboration with our customers.

Alongside promoting a local production for local consumption model, we are reducing transportation distances and the number of touches, which helps achieve logistics cost savings. In the manufacturing area, we're also preparing to launch a new aseptic production line at our Saitama plant. By strengthening our manufacturing capacity for aseptic products in the Kanto region, our largest market, we will further promote a local production for local consumption model and maximize use for the adjacent Saitama Mega DC.

Now starting with the next slide, Maki will explain our marketing activities. Maki, please go ahead.

[Interpreted] Good evening. This is Kado. Slide 13 provides a review of our marketing activities for the third quarter. To further strengthen our core category, we worked to boost sales of Coca-Cola by launching the Coca-Cola summer campaign and running promotions where consumers can win limited edition Coca-Cola summer goods. Additionally, starting in September, we launched a new Coca-Cola Zero campaign featuring BTS' V focusing on driving trial of the Coca-Cola Zero series.

As part of our new product lineup, we launched Georgia Cafe Water in September, a coffee flavored beverage that does not contain coffee beans, as a new value proposition. Additionally, with the aim of attracting new consumers and creating new drinking occasions that cater to diverse lifestyles, we are offering a 400-milliliter PET bottle of I LOHAS Tennensui with a label-less design exclusively through online channels.

As part of our experiential marketing efforts, we launched a new Coca-Cola Foodmarks initiative in Shibuya in August to deliver experiential value to the food service market. By evolving and strengthening this initiative, we aim to provide greater experiential value to the food service market.

Next, Slide 14. In the fourth quarter, we will carry out marketing activities with an even greater focus on our core categories. In October, Coca-Cola launched a winter campaign aimed at boosting brand engagement, including promotion offering a chance to win Christmas gifts and the release of winter scene bottles featuring iconic designs such as Santa Claus. In addition, starting in November, we will launch a Premier League campaign for Coca-Cola.

We have entered into a global partnership with the Premier League, England's top professional soccer league, and will run a promotion offering the chance to win limited edition cans and merchandise to boost sales. In the coffee category, Georgia is running a cross-channel promotion campaign in collaboration with the popular anime series, JoJo's Bizarre Adventure. We are conducting several large-scale promotions with the goal of maximizing Georgia sales during the fall and winter season.

In addition, within the tea category, we will launch a large-scale Shokutaku-Jumbo promotion spanning our 5 key brands. This initiative will drive consumer purchases and accelerate sales growth across the entire category.

Slide 16 outlines our outlook. By continuing to rigorously focus on profit-driven activities, we aim to achieve an increase in business income in the fourth quarter as well with the goal of reaching our full year business income target of JPY 35 billion. Regarding key initiatives such as price revisions and transformation, we will continue to capture the benefits in the fourth quarter while further strengthening our efforts to lay a solid foundation for profit growth starting in 2027 and beyond.

In terms of the top line, we will continue the positive momentum we have seen so far. Our sales volume continues to outperform the market and we will leverage this solid growth foundation starting in the fourth quarter and beyond. Although October was impacted by a decline in volume due to price revisions, sales volume is expected to decline by only a low single-digit percentage compared to the previous year. Meanwhile, wholesale revenue per case continues to improve as a result of these price revisions.

Regarding the impact of the situation in the Middle East, there has been no change to what we have previously communicated. The impact on our full year earnings forecasted is expected to be limited to an increase in cost of approximately JPY 2 billion to JPY 4 billion thanks in part to our hedging strategy. We expect to absorb this additional cost impact through our key initiatives as well as company-wide cost savings.

We are steadily fulfilling our commitment regarding shareholder returns. The JPY 30 billion share buyback program we have been implementing since last November was completed as planned. Furthermore, we have decided to cancel 7 million shares equivalent to 4.1% of total shares issued. This year we have already announced a 20% year-over-year increase in our annual dividend and a JPY 40 billion share buyback program and we will continue to move forward towards further enhancing shareholder value.

Finally, let me summarize today's presentation. Please turn to Slide 17. Against the headwinds facing the entire beverage industry, including record-breaking adverse weather and the impact of the situation in the Middle East, our company achieved an increase in business income in the third quarter as well resulting in year-to-date business income growth of JPY 7.9 billion. We believe this significant achievement was driven by our thorough focus on profitability across all departments, including the profit contributions from this year's key initiatives and agile cost savings.

In addition, we see positive signs on the top line that supports future profit growth. Although we were impacted by a short-term market contraction, our targeted growth strategies in each channel strengthen our competitiveness, particularly for our core brands. Our sales volume also continued to outperform the market throughout the year. Our value share also increased. Price revisions and transformation initiatives are proceeding as planned enabling us to further strengthen our earnings base. We are confident that the foundation we have built to date will serve as a driver of our mid- to long-term profitability improvement.

In the fourth quarter, we anticipate higher costs due to the situation in the Middle East, but the impact is expected to remain within the projected range. We will continue to build on the upward trend in business income with the goal of achieving our full year business income target of JPY 35 billion. This year marks the crucial first year of our Vision 2030. In this pivotal year based on our strong commitment to achieving Vision 2030, we aim to achieve both improved business performance and enhance shareholder returns, building good momentum toward further increasing shareholder value.

That concludes today's presentation. Thank you for your attention. Now we'll move on to the Q&A session. Gomi-san, please take it from here.

[Interpreted] This Q&A session is intended for analysts and investors. Members of the media are kindly asked to refrain from asking questions at this time and a separate session will be held later today. Due to interpretation, we ask that you ask only one question at a time. We will now begin the Q&A session. Operator, please proceed.

[Interpreted] [Operator Instructions] UBS Securities, Ihara-san.

[Interpreted] UBS Securities, Ihara. I have 2 questions. The first question is about cost reduction. This time you had a high level of profit commitment so you significantly reduced cost. What kind of cost reduction have you done? And also with this cost reduction for the 2027 and onward, but your cost reduction will lead to the benefit for the 2027. I'd like to know the details about your cost reduction.

[Interpreted] So regarding the first question, it's about the cost reduction and the content and whether it will lead to the future dates. So Bjorn-san will answer.

So yes, absolutely correct. We took significant cost measures in Q3 and you can see from the financial statements, overall the SG&A were down close to JPY 10 million. There's basically 2 or 3 elements to that. First, the optimized marketing investments. You heard Alex talk about that later how we adapted a lot of the market-facing investments given the situation we were faced because of the weather in Q3. Secondly, our transformation efforts continued full force across the business as you have gotten used to seeing from us in the past.

And thirdly, we took also more tactical cost interventions in the third quarter again with the purpose of delivering our full year financial commitments. When it comes to next year, we prefer to talk about the details and the drivers of that when we get there. But again from a marketing standpoint and a capital standpoint, we will be investing where the opportunities and the growth is for next year as we have in the past also. I hope that answers your question.

[Interpreted] I understand. Basically, so the cost reductions through transformation will be continued. However, regarding the optimization of marketing investment and in consideration of adverse weather, you control the cost. So for 2027 in order to grow the volume so your cost saving will be invested in the future in 2027 and onwards. Is this correct?

Summarized, yes. We will continue to invest where the commercial opportunities are both from a marketing standpoint and also from a capital standpoint. Yes, agree.

[Interpreted] Then let me go to the second question. Connecting to the previous question. Your perspective of the profit growth in 2027. In the guideline so JPY 45 billion to JPY 50 billion BI is the target of 2027. So at least nearly JPY 10 billion profit should be grown. So of course so you cannot discuss the details, but in what way you are going to significantly increase the BI. If possible, I'd love to know the outlook for the profitability increase in 2027, including the profit increase and decrease.

[Interpreted] Ihara-san, thank you very much for the question. So the view regarding the 2027 profit, Bjorn-san will answer the question.

So let me first state very clearly, Ihara-san, that as management of the company, we remain very committed to delivering our Vision 2030 financial targets and performance targets. When it comes to 2027 specifically, as I said to your prior question, we prefer to discuss these details as you also mentioned and all the drivers when we get to the February announcement for the target. But I think it's fair to say given the external circumstances we are facing, it is fair to believe we will probably target towards the lower end of the range we gave for this year. So it seems like we're in sync with what you're stating if I got the translation.

[Interpreted] So range means JPY 45 billion to JPY 50 billion. So are you going to target JPY 45 billion?

[Interpreted] Yes, that's correct, Ihara-san.

[Interpreted] Okay. And also regarding the factors behind the up and down of the profit. But based on the Vision 2030, the year 2027, what characterized the 2027 for you? So is it the phase to harvesting profit or so in order to jump up toward the 2030, is it a period of investment? I'd like to know your view. That's all for my question.

[Interpreted] So in line with the Vision 2030, what characterizes the year 2027? Bjorn-san will answer the question.

Bjorn again, Ihara-san. So when it comes to 2027, the backbone of the plan which is very consistent again with the Vision 2030 activities and the drivers is strong commercial growth. That is the key for everything we're doing. Support of that, as you have seen multiple times earlier, we've been discussing the key drivers of the commercial growth. It is driving pricing where required. It is executing in the market in the key channels and therefore, the 3 business units we have and it's continuing definitely to invest in the future opportunities we see in the Japanese market.

The second part, as we alluded to in the prior question, we are continuing the transformations full force. We're transforming our commercial operations, as you heard Alex talk about earlier. Deep into the vending, transformation is going very well taking out cost and optimizing capital while using technology again to enhance sales. In supply chain, great technology going into production now, again helping us to optimize logistics costs and drive that.

And for the back office, we're planting the seeds now for again optimizing all our back office processes going into next year. We will invest in capital -- commercial capital again to drive that growth inevitably. As we've been holding back capital now during the Q3 and probably also into Q4, we will be investing again in the market going into 2027. So exciting times ahead.

[Interpreted] Furuta-san from SMBC Securities.

[Interpreted] Furuta speaking from SMBC. I have 2 questions. First question is about the cost reduction initiatives. So for that, there's a market investment optimization and also cost reduction. I'd like to further ask questions. What kind of specific measures are you doing and why are you able to do this and where are the room still to do further cost reduction? Could you please elaborate on this?

[Interpreted] Furuta-san, thank you very much for your question. For the cost reduction and also the optimization of the market investment, Bjorn will take this question.

Furuta-san, I will probably have to repeat a little bit what I said to Ihara-san's questions. But again, try to think about the cost measures we have done for this year in 2 to 3 buckets as I said. One is the marketing investments. As Alex described in the prepared remarks, we have optimized again with the purpose of return on investments adjusted to the external market conditions and basically bad weather as we also said in the prepared remarks.

Secondly, as I also said, our transformations are continuing full force in all parts of our business yielding significant benefits for us, which will translate into savings and better investment abilities in the future. And three, we have what I call the more tactical Q3 cost reduction measures where we optimize again across the board in the company with the purpose of delivering what we have promised on the profitability. On top of that, as I also alluded to earlier, we have held back some on the capital part, again with the purpose of delivering on the cash and the profit targets we have set. Hopefully, that answers your question.

[Interpreted] So the last one that you mentioned, the company-wide cost reduction initiative and also sustain of the capital allocation. What kind of specific items are you doing? Could you please elaborate more details?

[Interpreted] So thank you very much for additional questions. For the company side cost reductions or the capital allocation, what exactly do those entail? So Bjorn will answer this question.

Furuta-san, I hope you appreciate that I prefer not to give too many details of where we're taking out the cost for competitive reasons. But think of it as all conditional spending we do as a company start with the DME, as Alex said earlier; promotion spend, activity spend is very much up to us to gear up and down in the market, again depending on the market conditions. When it comes to the tactical cost savings, holding back on spending where we can and again where we can control is really important.

And when it comes to transformations and the marketing expense, it's also important to understand that holding back now enables us to keep the powder dry as they say in English to again celebrate for next year where we have the 70-year anniversary for the Coca-Cola system in Japan. That's a big celebration for us. And on top of that, we also have the 10-year anniversary for our company CCBJH in next year. So all of that again will be appropriately funded through savings, through pricing and all the other commercial activities we are doing in the plans for next year. Hopefully, that gave you a little bit of detail into stuff we're working on.

[Interpreted] So the second question. In the September price revision so there is -- as the price hike range is that expected as you? And what is the view on your market situation for price revision?

[Interpreted] For the September price revision, Alex will answer this question.

Furuta-san, Alex here. As we have time and time again said, one of the key initiatives -- big initiatives to leverage pricing to drive our profitability growth. In September, we executed now a Wave 10 price increase ahead of -- and leading the industry and we executed as planned with it because it's significant as before. It's progressing as planned. What we're seeing is the wholesale revenue per case starting to materialize and we'll obviously observe and monitor the situation from a competitive standpoint and we'll continue to monitor. In the end, pricing is one of the factors as well as our old package and price architecture, which we will be leveraging going forward to ensure that we are capturing the demand in the market.

[Interpreted] This is Igarashi from Daiwa Securities.

[Interpreted] I am Igarashi from Daiwa Securities. I have 2 questions as well. My first question. Slide 11 actually and looking at the right-hand side. So this is the manufacturing, the logistics structure that is supporting profitability like IDC, the Saitama plant, the aseptic line. These are the new things that you are mentioning here. And for the next term, the transformation impact is where is it going to come from mainly is my question out of those pillars? So here I know that you are doing various measures, but what is going to be the largest measure for the next fiscal year? And other than this, what are some other new initiatives that you're going to do in addition to these initiatives that you have mentioned here?

[Interpreted] Thank you, Igarashi-san, for the question. So you are talking about the supply chain information on Page 11. So this is about the IDC, the impact from the new plants and other transformation in this area. So I would like Andrew-san to answer this question and if there's any additional points, Bjorn-san will follow up.

This is Andrew. Igarashi-san, thanks for asking the question regarding the supply chain productivity opportunities. As you correctly say, we continue to optimize our network, which is to drive productivity and cost savings. And we have accelerated our cross-enterprise efforts to improve and take cost out of our cost to serve, which will come into full effect in 2027. Furthermore, we are investing in a variety of technologies or digital technologies to enhance our planning and operations capability, which started to take effect in 2026, that will continue to roll out in 2027. And we believe those initiatives will help us significantly to continue to extract productivity across the supply chain.

And maybe to build a little bit, Igarashi-san, on this. So part of your question was when will the benefits of this materialize? As Andrew also alluded to, a lot of it is already happening and we're building the foundations now for even further transformation savings inside supply chain going forward because remember back to what we have communicated many times and also in our Vision 2030. We are investing in the IDCs, which are the physical locations where we will hold inventory for sales activities.

On top of that, we are also investing in digital tools to again optimize the whole network for our business. All of these things will be happening over the 5-year plan period, as we have said earlier, but many of them are already happening today. For instance, the touches are significantly going down again giving immediate cost savings for us as a business. I hope that gave you a little more flavor.

[Interpreted] And on the right-hand side, the second bullet point here, collaboration with the customer and you're going to reduce the cost to serve. I'm just wondering what this means because I don't have a good understanding about what you mean here. Can you kindly explain this point?

[Interpreted] Well, thank you very much for your question. Andrew-san will answer this question.

It's Andrew again. We work closely in collaboration with the commercial teams at a customer level to look at how do we, as we say, optimize the cost to serve through increasing drop size, reducing the frequency of delivery as appropriate; but at the same time, looking to how do we continue to add value for the customer and make doing business with us more convenient and easier.

And Igarashi-san, Alex here. If I may add, I alluded in the prepared remarks about Advantage survey, which is a syndicated survey to assess our level of preference of doing business with the customers and we rated 3 year in a row #1 across beverage manufacturers. And this is a result of our collaboration with customers is going beyond the typical product negotiation and the space to sell into broader holistic enterprise.

And that's the way we're working in synchrony with Andrew's team to bring whole enterprise solutions of how we actually help customers address pain points such as inventories. Lowering inventory with customers is one of the examples of how we're collaborating with them to reduce carrying costs for them, improving forecast accuracy, reducing time travel touches. Those are the initiatives that we're working very actively and taking control and extending that work with customers. So I hope that gives you some color on what's happening.

[Interpreted] So my second question is about the Middle East cost. In this term, you mentioned that it's going to be within your forecast. But what's going to happen in the next term? And due to the September price revision, were you able to offset the Middle East impact or not this year? Those are my questions.

[Interpreted] So the Middle East impact to our cost. This will be answered by Bjorn-san.

So yes, as we said at the beginning of the turmoil in the Middle East, we estimate the impact for this year to be in the range of JPY 2 billion to JPY 4 billion and we're very much still inside that range, probably towards the higher end of it. But as you see in our year-to-date and also in our full year commitment for this year, we are managing that through again pricing, you heard Alex talk about earlier, and also all the different cost initiatives we're doing inside the SG&A area.

So with all of that, we are able to offset that for this year. A lot of that of course comes through again good hedging programs that allows us to mitigate the impact of it as much as possible. For next year, as I said earlier to Ihara-san and Furuta-san, I would prefer to discuss all of these details and drivers when we get to February and we'll announce the full year. So hopefully, bear with us.

[Interpreted] Next person is Saji-san from Mizuho Securities.

[Interpreted] I have one question. With regard to the CapEx, at the beginning of the term, it's on the Page 7, you said JPY 12.6 billion, right? So it's kind of suppressed because at the beginning of the term, it's like JPY 34.8 billion. So my question is which kind of the investment has been suppressed here? And also in midterm view, can you actually shelf this investment to a later stage? Do you think it's okay? So I would like to understand how you revise and how you change in your plan for the CapEx planning.

[Interpreted] So this is a CapEx planning question. So Bjorn, I would like you to answer.

So when it comes to CapEx, many programs will be commissioned and therefore, finally capitalized towards the end of the year. That's the normal planning and deployment schedule. So nothing undue on that part. When it comes to holding back again, we have looked closely into all opportunities again as part of the suppressed external environment in Q3. So we have actually tried to hold back on most of the discretionary CapEx, if we can call it that, from the commercial area into the back office, IT, et cetera.

For the future, as I said earlier I think it was to Furuta-san's question, we will be investing in commercial opportunities going forward. And again by keeping the powder dry now, we will be able to step that up again as the commercial opportunities materialize in the next [Audio Gap]. We strongly believe that celebrating again, what I said, the 70 years anniversary of the Coca-Cola system in Japan is a big thing. And secondly, also celebrating that we then have a decade of operations for the CCBJH company. So all of them again will be appropriately funded for future periods. Hope that gave you a little detail.

[Interpreted] By the way, I think you need to invest into this kind of celebration, but is this going to be adding to you or kind of like you are going into the negative range for that investment?

[Interpreted] So which kind of costs are going to spend for the celebration. So Bjorn, would you like to answer this question, please?

So when it comes to commercial opportunities, which of course is the reality when we execute against these 2 major milestones for us as a company, the investments will come in marketing activities. As you know, we spend the customer-facing part of the marketing and the Coca-Cola Company does the consumer part of it, what we call the ATL. When it comes to the CapEx, again we have plenty of opportunities in investing again for front-facing.

We have investments in the food service coming through. We have investments in profitable locations, as you heard Alex mention in the prepared remarks for vending. And overall, rest assured that when we put capital into the market, it is with the mindset to our capital allocation policy to have a positive return on it. So we're not deviating at all from these type of policies than we hold as a company. I hope that gave a little bit of detail.

[Interpreted] Since we are up on the time, I would like to go for 2 more questions. So operator, please put through the next question.

[Interpreted] Morgan Stanley MUFG, Miyake-san.

[Interpreted] Morgan Stanley, Miyake speaking. First of all, regarding the actual cost, I would like to ask about the cost. So because of the commodity situation, the third quarter I think so JPY 2.6 billion is a gap. So out of that, JPY 2 billion to JPY 4 billion Middle East additional adverse impact. How much of that has already materialized? That's what I'd like to know. And also what are the details of that? So material related one. So I understand that it is related to raw materials and also there should be the energy cost and the logistic cost. So I'd like to know the breakdown of that.

[Interpreted] Miyake-san, thank you for the question. So regarding the commodity cost breakdown, Bjorn-san will answer the question.

Thank you for the question, Miyake-san. So when it comes to the range that we set for the net impact of commodities and currency and all of that at the beginning of the conflict in the Middle East, we are very much still managing within it. As I said earlier to Furuta-san's question and also Ihara-san's question, we are managing probably towards the upper end of that. For competitive reasons, we cannot go out with too many details on how much that has materialized, et cetera. But rest assured, we are managing and again using hedging, buying and cost control to make sure that we are within that range for the full year. I hope that gave a little bit of detail.

[Interpreted] So JPY 2.6 billion so big number so material-related cost and other cost, Could you separate the material cost and other costs out of JPY 2.6 billion?

[Interpreted] Gomi will answer this. The Q3 stand-alone, JPY 2.6 billion. So commodity is JPY 2.5 billion and the energy cost is JPY 0.1 billion cost increase. So what are included in the commodity? So it's related to packages. So derived from naphtha, the PET and also in the commodity; there's a certain impact of the currency, but the majority are the commodity impact. So package materials so that's the cost increase of the package.

[Interpreted] So you have hedging. But from the third quarter, the package cost increase materialized in the third quarter although you set the hedging policy. So for next year so JPY 2 billion to JPY 4 billion range. So this year in the second half, a part of the second half the impact was felt. But next year, you need to prepare for the cost increase. So if the procurement cost could go up, that's a risk in my view. But in what way should I understand? When do you think the risk materializes 2027 and onwards?

[Interpreted] So for including 2027 so impact of the cost, So Bjorn-san will answer the question.

Yes. I think first, Miyake-san, hedging does not mean that you're 100% covered of cost. That's not how hedging works as a policy. When it comes to the impact for this year, as we had said earlier when the commotion started in the Middle East, most of this impact will naturally accrue to the second half so we're very much on track on that estimate. When it comes to next year, as I said both to Ihara-san and Furuta-san, we would prefer to come back with the details and the drivers of all of this when we discuss the 2027 targets for next year. But again rest assured, we are fully committed to deliver our Vision 2030 targets.

[Interpreted] And in the previous question, you mentioned therefore one, the range of 2027. So you think that it will be the lower part of the range of JPY 45 billion to JPY 50 billion. So compared with discussion of the several years ago, I think that cost impacts might have been more than you had expected. But for another person question, the price increase in September could cover all the increase in the cost. So when do you expect additional cost in the current situation or environment? So do you think that you can make a further price increase next year in the market environment? So that's my question.

[Interpreted] So from the 2027 perspective, whether we can have the further price increase. Alex-san, could you take that question?

Alex here. As we repeatedly say, pricing is always in the consideration as we look at cost mitigation and the raw material. So it will be always in the mix. At the same time, we will also leverage all the different revenue growth management levers to address that. I hope that answers your question.

[Interpreted] So operator, could you go to the last person with the question?

[Interpreted] Morita-san from Nomura Securities.

[Interpreted] Morita from Nomura Securities. I have 2 questions. First is the share buyback way of thinking. So you are having ambitious level of share buyback in the future. That's how you already explained, but recently interest rate is getting higher. So again with this external factor changes and your plan to do the JPY 150 billion share buyback plan, are there any changes to this plan of the share buyback or depending on the external factor changes, you're going to flexibly change your plan? So could you please tell us the concept?

[Interpreted] For the share buyback, Bjorn will answer this question.

Again stepping back to the announcement of our Vision 2030 plan, we laid out our clear priorities to drive commercial growth; continue the transformation; and three, therefore, spend appropriately on what we call shareholder value activities; one is dividend and the second one is the share buybacks. We are in no way or form deviating from that plan. As we said in the prepared remarks that you heard Maki Kado say, we have just finished the JPY 30 billion plan in middle late of October. We are kicking off the second tranche, the JPY 40 billion, towards the end of next week. So we are very much staying committed to what we promised.

[Interpreted] And the second question, on the Page 7 for the waterfall chart for the other. I'd like to know about the other elements. For the 3 months, if you really look at only the 3 months, it's a [ 4.5 ] increase of the profit. As Bjorn-san also mentioned the cost reduction earlier, the marketing cost and also transformation initiatives. There are also other transformation also DME cost that you already explained. So the other cost in this slide for the 3 months, it's increased significantly JPY 4.5 billion and what was the reason for this?

[Interpreted] Morita-san, thank you very much for your question. For the waterfall chart, other part, Bjorn will answer this question.

So again the cost measures, as I said earlier, close to JPY 10 billion in total was coming through DME as we said also in the prepared remarks and to Ihara-san and Furuta-san's questions. The second part is the transformation. Again as you heard in the prepared remarks, it's going across the enterprise. And the third one are the more tactical measures we're putting in place for the quarter and the full year to again make sure that we are delivering on our full year commitment of JPY 35 billion. And these type of spending, the more discretionary one will come across the board in hirings, in travels, in outsourcing fees, consulting fees, et cetera. So all of that is part of what we are controlling again with the purpose of delivering what we promised to the market, JPY 35 billion on a full year basis. Hopefully, that helps.

[Interpreted] Sorry, I couldn't really understand. So other; so as you mentioned, the transformation expenses or transformation initiatives of the DME, those are not in the other sector. So 3 months it's JPY 4.5 billion. What is the simple reason for the increase of the JPY 4.5 billion? Is this promotional costs are included in this?

Promotional costs are increased in this. So again, as I said earlier, we have many discretionary costs again that we can flex up and down in our business. For competitive reasons, we will not get into too much details around that. But as I said; it could be outsourcing fees, consulting fees and other costs to run our business that we can flex up and down depending [ on the timing ].

[Interpreted] Thank you, Morita-san, for your questions. So that concludes the list of those wishing to ask questions. As we are already in time, we will now conclude the Q&A session. The content of today's briefing will be posted on our company website shortly. If you have any questions or feedback, please contact our IR team. Thank you very much for participating today.

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

Good evening. This is Gomi, Head of Investor Relations at Coca-Cola Bottlers Japan Holdings. Thank you for joining our second quarter 2026 earnings presentation for analysts and investors. Today, we are joined by President, Calin Dragan; and Vice President and CFO, Bjorn Ulgenes. Also with us are Vice President, President of the Food Service Company and Chief Business Strategy Officer, Maki Kado; Executive Officer and President of the Retail Company, Alex Gonzalez; and Executive Officer, Chief Supply Chain Officer, Chief Sustainability Officer, Andrew Ferrett; and Executive Officer and Chief Human Resources Officer, Yuki Higashi.

Following the prepared remarks, we will be happy to take your questions. Simultaneous interpretation in Japanese and English is available for both today's presentation and the Q&A. Before we begin, please note that today's presentation contains forward-looking statements and should be considered together with cautionary statements contained in our presentation materials.

With that, I'd like to turn the call over to Calin Dragan. Calin-san, please.

Good evening, everyone. This is Calin Dragan. Thank you for joining our earnings call. Before the presentation today, I would like to express our deepest sympathies to all those affected by the Kumamoto earthquake on July 28, 2026. The safety of our employees and their families remains our highest priority. We are currently confirming the safety of our employees and assessing the impact on our facilities and equipment, manufacturing and logistic operations and product supply at the Kumamoto plant and other sites within our business area.

At the Kumamoto plant, safety and product quality are our top priorities, operations have been suspended while detailed inspections are carried out. Logistics and delivery operations in certain areas have also been affected due to damage to roads and other infrastructure. We will continue working closely with the local authorities and internal teams. We will provide further updates as soon as material information becomes available. And once again, we sincerely hope for the safety of all those affected by the disaster and for a swift recovery.

Now I would like to share our first half financial results. These are the highlights of today's presentation. Please look at Slide 3. In the first half, we continued our trend of profit growth and achieving strong results. Business income for the first half grew by JPY 6.6 billion versus the previous year. Although we are still ahead of the peak demand season, we have already achieved over 60% of our full year profit growth target, representing good progress. Furthermore, for the first time in 8 years, since 2018, we have returned to profit in our first half. We view this as a significant achievement that demonstrates steady improvement across our entire business.

Even while the whole industry faces rising costs, we are steadily improving our profitability. In the first half, revenue grew by 1.3% versus previous year, while gross profit grew by 3.4%, exceeding revenue growth and contributing to an increase in business income.

Furthermore, during the first half, key initiatives that will drive future profit growth such as expanding sales space in preparation for the peak demand season, implementing price revisions and accelerated rollout of Monster Energy vending machines made significant progress. Transformation efforts to build growth foundation also proceeded smoothly.

In addition, building on the strong earnings performance, we have announced a JPY 40 billion share buyback program to be carried out over 1 year starting in November as part of our shareholder return program under Vision 2030. We have increased the scale of the buyback by JPY 10 billion compared to the previous program, thereby accelerating our shareholder returns. We believe we are successfully creating a positive cycle of steadily improving our earnings performance and enhancing shareholder returns.

Looking ahead into the second half, we will achieve our full year business income target of JPY 35 billion by maximizing commercial activities during the peak demand period, further advancing our key initiatives and addressing cost increases impacted by the situation in the Middle East. We will also make significant progress towards achieving our ambitious mid- to long-term targets.

Now our CFO, Bjorn Ulgenes, will provide a detailed explanation of our financial results.

Thank you, Calin, and good evening, everyone. This is Bjorn.

Please turn to Slide 5 for the first half profit and loss. The first half saw an increase in both revenue and profits compared with the previous year, and our business performance performed smoothly. Sales volume grew at a rate faster than the market despite the impact of price revisions and other factors.

Revenue grew by 1.3% year-over-year, driven by volume growth and an improvement in wholesale revenue per case despite the impact of a less favorable channel mix. Gross profit increased by 3.4% year-over-year, outpacing the revenue growth rate. In addition to top line growth driven by price revisions, this was due in part to our ability to control commodity and material costs, including joint procurement within the Coca-Cola system and hedging strategies in an environment of rising costs caused by external factors. As a result of such initiatives, business income grew significantly at JPY 6.6 billion year-over-year, which was more than 5x the previous year's figure. I will explain the factors contributing to this increase in profit later.

Operating income increased significantly by JPY 10.3 billion year-over-year, driven by business income increases and cycling of the JPY 88.4 billion impairment loss recorded in the vending business during the second quarter of the previous year. Net income improved by JPY [ 70.77 ] billion year-over-year, reaching JPY 4.8 billion. This was primarily driven by an increase in operating income and marks a return to first half profitability for the first time in 8 years since 2018.

Slide 6 shows our financial results by segment. In the first half, Vending achieved profit driven by the benefits of transformation initiatives, while OTC and Food Service achieved revenue and profit growth. Let's look at the Vending business. Sales volume declined due to price revisions and unfavorable weather in June. And although we continue to see improvements in wholesale revenue per case, revenue decreased. On the other hand, segment profit was JPY 5.3 billion, an improvement of JPY 6.7 billion from the previous year.

While this figure includes the positive impact of lower depreciation expenses resulting from the impairment loss in the Vending business recorded in the previous year, the transformation benefits such as improved profitability and enhanced route productivity are steadily becoming evident. As a result, we were able to achieve organic profit growth even in a challenging business environment.

In the OTC business, revenue increased by 2.6% year-over-year, outpacing volume growth, driven by both volume growth and price revision benefits. In particular, Online, Drugstores & Discounters channel led the growth in both volume and revenue. Segment profit grew 8.3% year-over-year through a relentless focus on profitability-driven initiatives.

In Food Service business, we achieved strong double-digit growth year-over-year in sales volume, revenue and segment profit, driven by business expansion with existing customers and the success of our efforts to secure new customers. Initiatives aimed at driving mid- to long-term profit growth is progressing smoothly, and we will continue this positive trend going forward.

Please turn to Slide 7 for the factors behind the change in business income. Business income grew strongly, increasing by JPY 6.6 billion compared to the previous year. Starting from the left, we can see the impact of volume, price and mix. Together, these factors reflect changes in marginal profit from our commercial activities and contributed a positive JPY 3.8 billion year-over-year.

The main factors were a positive impact of JPY 1.4 billion from volume, including channel mix and a positive JPY 8 billion impact from pricing, partially offset by a negative JPY 5.6 billion impact from other factors. Although adverse channel mix due to the changing consumer trends remained a headwind, volume growth and improved wholesale revenue per case resulting from price revisions are steadily contributing to profit growth.

Transformation benefits totaled JPY 3 billion, in line with our plan. Savings were particularly significant in commercial, where benefits from the transformation of the Vending business continued to materialize steadily. In supply chain and back office, we are building a foundation that contributes to mid- to long-term growth while also generating cost savings.

Marketing expenses increased by JPY 1.4 billion year-over-year. This was due to our marketing investments made with return on investments in mind while taking market conditions into account while strengthening marketing activities in the second quarter in preparation for the peak demand season.

Manufacturing costs decreased by JPY 0.7 billion versus the previous year. As production volume increased alongside higher sales volume, manufacturing efficiency improved. In addition, we continue to implement cost-saving initiatives on the production sites. Although other costs increased due to higher IT-related investments and expenses aimed at future profit growth as well as higher personnel and outsourcing costs, the increase was limited to JPY 0.1 billion, offset by a reduction in depreciation expenses this year, resulting from the impairment loss on the Vending business recorded in the previous year.

Commodity and utility costs decreased by JPY 0.7 billion, thanks to successful hedging strategies and our procurement function leveraging the Coca-Cola system's global network, one of our company's key strengths. Commodities and foreign exchange were flat year-over-year, while utility costs achieved a decrease of JPY 0.6 billion.

From the next slide, Alex will give an overview of our commercial activities. Alex, please.

Good evening, everyone. This is Alex.

Slide 8 shows sales volume by channel and by category. Sales volume for the first half grew 2% year-over-year, exceeding both our plan and the overall market despite the impact of unfavorable weather in June. This growth was driven by commercial activities that fully leverage events such as the FIFA World Cup as well as contributions from our core strategies. Additionally, wholesale revenue per case continued its upward trend in the second quarter because of a series of price revisions, resulting in year-over-year growth across nearly all channels for the first half.

Vending saw contributions from campaigns and other initiatives through the Coke ON app. Sales declined by 1% year-over-year due to adverse weather conditions in June. In Supermarkets, a decline in sales volume for water and sports due to price revisions impacted overall sales. At Drugstores & Discounters, efforts to secure sales space through campaigns such as those tied to the World Cup proved successful, resulting in a 4% year-over-year growth in sales volume.

At CVS, we achieved a significant improvement in wholesale revenue per case and a steady improvement in profitability by implementing price revisions and carefully controlling rebates and promotional activities, particularly for coffee, although sales volume declined. In Online, while wholesale revenue per case was impacted by an increase in large PET water, volume achieved strong growth of 8%. In Food Service, volume grew strongly by 11%, driven by business expansion with existing customers and efforts to secure new accounts as well as initiatives to strengthen core categories.

By category, Sparkling grew by 8% in volume, driven by campaigns and in-store activities that made full use of the FIFA World Cup, a key asset of Coca-Cola. In tea, strong growth in Yakan no Mugicha and Kochakaden helped to offset the decline in green tea volume following price revisions, resulting in a 3% growth for the category as a whole. For sports water and coffee, adverse weather in June and price revisions impacting, leading to a decline in volume.

Slide 9 shows the status of market share and OTC retail prices. Against the backdrop of continued intense competition, we maintained balanced growth of both value share and volume share during the first half through commercial activities focused on profitability. Our total channel value share increased by 0.9 percentage points. While we have been implementing price revisions, our volume outperformed the market and the year-over-year increase in volume share contributed to the rise in value share.

In Vending, as in the first quarter, growth in volume share drove an increase in value share. We achieved sustained growth in value share through initiatives such as optimizing our product lineups based on profitability using an AI-powered assortment system and conducting promotions via Coke ON. In OTC channel, although the price revisions for green tea products implemented in March had an impact on market share, we enhanced our competitiveness through commercial activities based on data insights, resulting in both volume and value share remaining roughly at the previous year's level.

Our products, OTC retail prices continue to maintain a premium over the industry average. As a result of a series of price revisions, retail prices for both small and large PET products have remained above last year's level despite the impact of factors such as channel mix. A more detailed overview of our green tea products of which we implemented price revisions in March on the next slide.

Slide 10 covers the topics for the first half. Our price revision initiatives are progressing smoothly, and we're steadily improving profitability. First, regarding the green tea price revisions in March, we have carefully implemented increases in shipment prices aligned with revisions to the manufacturer suggested retail price on a business unit basis. As a result, the wholesale revenue per case of Ayataka achieved a significant improvement of over JPY 150 between March and June cumulative period. We are generating results as planned. We're also working to optimize rebates and promotional expenses, focusing on improving profitability from every angle.

Green tea is one of the most competitive categories. And while price revisions have had an impact on sales volume, the launch of several new products under the Ayataka brand and strengthened sales efforts for products such as Yakan no Mugicha have enabled the tea category to achieve positive sales growth. Furthermore, the upward trend in retail prices for green tea is accelerating. The graph in the lower right corner of the slide shows the trend in the per bottle retail price of our green tea at Supermarkets, Drugstores & Discounters. As you can see, retail prices for both small and large PET have been rising since the price revisions last October and following the price revisions in March. The upward trend has accelerated.

In addition, as previously announced in May, we will implement price revisions for our major products in September. We have already begun negotiations with customers and are proceeding with swift and thorough preparations, including the formulation of a market execution plan that leverages the lessons we have learned to maximize the impact of these price revisions. In addition, during the first half, key initiatives in each area that will drive future profit growth progressed smoothly.

Please refer to Slide 11. In commercial, we maximized our market execution to capture summer demand and strengthen the growth foundation for the future. This year, we made the most of the World Cup by launching limited edition packages, rolling out the Coca-Cola FIFA World Cup '26 campaign and thoroughly optimizing store displays to support these initiatives, resulting in significant volume growth for Coca-Cola.

In addition to Sparkling, we focus our marketing efforts on promoting drinking occasions within the tea beverage where demand increases during the summer, which led to increased sales volume and expanded sales space ahead of the peak demand season. In Food Services, we're generating results that are expected to contribute to profits over the mid- to long-term, such as securing new customers and expanding business with existing customers through initiatives such as tailored sales proposals for growing business.

In addition, the rollout of Monster Energy through vending channels, which we discussed at our previous earnings briefing, has progressed smoothly. To ensure we're fully prepared for the peak demand season, we focused on an early rollout of vending machines and began sales in June. Initial sales have been trending well and as the high price point product, we expect it to contribute to profits through increased volume and mix.

As part of our transformation initiatives to strengthen our foundation in the supply chain area, we plan to launch 3 integrated distribution centers in the Kanto region by the end of the year and have been steadily preparing for the launch. We also work with the Commercial teams and our customers to optimize cost to serve by leveraging our direct sales model. Furthermore, to improve the accuracy and efficiency of our S&OP aimed at a stable, high-quality and low-cost supply, we have focused on ensuring the stable operation of the new system introduced at the end of last year. In back office and IT, we steadily advanced the development of our foundation for system and data integration with an eye toward the various system implementations we will undertake in the future to further promote digital transformation.

Now starting with the next slide, Maki will explain our marketing activities. Maki, please go ahead.

Good evening. This is Kado.

Slide 13 provides a review of our marketing activities for the first half. To strengthen core categories, Coca-Cola launched the second installment of its FIFA World Cup limited edition packaging in April, featuring designs inspired by the uniforms and flags of popular participating nations in the FIFA World Cup with the aim of encouraging repeat purchases among consumers. In addition, Fanta underwent a renewal of its core flavors in April. By leveraging AI technology and making repeated product improvements based on insights gained from analyzing consumer evaluation data, the brand has achieved a new level of taste distinct from previous Fanta products. Sales were boosted through campaigns and other initiatives tied to the renewal. Thanks to these initiatives, volume in Sparkling category, including Coca-Cola and Fanta, increased by 8% compared to the previous year.

As a new product, we have launched AQUARIUS THE 0 from the Aquarius brand. By combining the distinctive taste of Aquarius with zero sugar and zero calories, the product has achieved repeat purchase rates on par with our standard products. And we will continue to strive to maximize sales during the summer, which is the peak season.

Under the Ayataka brand, we have launched 3 new products and introduced product renewal. We launched Ayataka Rich Hojicha, our food product with functional claims designed to meet health needs as well as Ayataka Mineral Green Tea and Ayataka Cafe Gently Sweet Matcha Green Tea. By expanding our product lineup to address diversifying consumer needs, we aim to strengthen the brand.

In terms of experiential marketing, in addition to launching the second phase of the Coca-Cola FIFA World Cup '26 promotion, we are collaborating with Coca-Cola Japan to implement initiatives aimed at enhancing the experiential value sought in today's dining out theme, such as launching the Coca-Cola FoodMarks certification program for restaurants that offer delicious meals and the ultimate Coca-Cola experience.

Next, Slide 14 highlights our marketing activities for the third quarter. We will continue to focus even more on our core categories through campaigns and new products. To strengthen our core categories, we launched the Coca-Cola Summer campaign in July to capture summer demand. We are running a digital summer slot promotion where users can win limited edition Coca-Cola summer merchandise with the aim of attracting younger customers. Additionally, starting in September, we plan to launch a Coca-Cola Zero campaign featuring [ BTSSV ] for encouraging consumers to try the Coca-Cola Zero series.

As a new product, we will launch Georgia Cafe Water, a coffee-taste drink without coffee beans in September. Designed to address future coffee supply risk caused by climate change, this product leverages Coca-Cola's proprietary technology to minimize bitterness and astringency, making it easy to drink in large gulps while still offering the aroma and flavor characteristics of coffee, which will be a new value proposition.

In addition, I LOHAS Tennensui began selling 400-milliliter label-less PET bottles from July 13. This is a smaller version of the label-less bottle, which is currently available primarily through online channels. And it retains the features that have earned praise such as no need to peel off the label and easy to recycle with additional benefits like being easy for women and children to grip and drink from and easy to carry even in small bags. The product aim is to attract new consumers and create new drinking occasions that cater to diverse lifestyles.

As part of experiential marketing efforts, we will launch a new Coca-Cola FoodMarks initiative in Shibuya starting in August as a way to deliver experiential value to the Food Service market. In 2026, we will work to provide even greater experiential value to the Food Service market by evolving and strengthening this program.

Slide 16 outlines our outlook. We aim to further enhance shareholder value by achieving our full year business income target of JPY 35 billion and expanding shareholder returns. In the second half, to achieve our full year business income target, we will maintain to steadily -- we will maintain the steady momentum seen in the first half while striving to expand business income during the peak demand season through continued growth and improved profitability. Regarding the top line, we will make maximum use of the growth foundation we have built to date to capture summer beverage demand.

Although the first half of July was affected by unfavorable weather, sales have gradually rebounded, supported by strings of hot days starting in the middle of the month. While we had anticipated a decline in volume during efforts to improve profitability through price revisions, the start of the peak demand season has been steady.

We will also focus on the steady implementation of price revisions for our major products in September. This price revision covers 165 major items, which account for approximately 50% of our total sales volume with manufacturers suggested retail price increasing by between 3.2% and 18.7%. This marks the 10th price revision since 2022. We will leverage the data and insights we have accumulated to date to ensure the success of this price revision and work toward further improving profitability. We are also confident that the early launch of Monster Energy in the first half will contribute to profits during the peak demand period, and we will continue to strengthen sales efforts.

Regarding the short-term outlook for the impact from the situation in the Middle East, there is no change from what we have previously shared. With the contribution of our hedging strategy, the impact on our full year earnings forecast within this year is expected to be limited to a cost increase of approximately JPY 2 billion to JPY 4 billion. Through the price revisions and the rollout of Monster Energy that will -- that we have discussed as well as the implementation of additional cost savings measures, we aim to offset this impact and achieve full year business income of JPY 35 billion.

In addition, we are accelerating our shareholder returns. Since November 2024, we have been conducting share buybacks totaling JPY 30 billion for 2 consecutive years, and the 2026 buyback is expected to be completed as scheduled this October. Furthermore, based on the shareholder return targets set forth in Vision 2030, we have decided to carry out a new share buyback program totaling JPY 40 billion over 1 year, starting this November.

In light of our strong business performance, we have increased the buyback amount by JPY 10 billion compared to the previous program. We remain committed to our ambitious shareholder return targets, including the cumulative share buyback of JPY 150 billion through 2030 and a dividend per share of JPY 140 to JPY 150 in 2030, and we will continue to actively seek opportunities to further enhance shareholder value.

Finally, summary of today. Please turn to Slide 17. In the first half, we achieved a significant increase in business income, continuing the strong performance trend from the first quarter. Although we were impacted by unforeseen business conditions such as unfavorable weather in June, we view it as a strong achievement that in the first year of Vision 2030, we achieved more than 60% of our annual profit growth target before the peak demand season while continuing to make investments towards sustainable growth as planned.

Also, as we explained at the beginning of today's presentation, this marks the first time in 8 years that we have posted a net profit for the first half. Given that we generate majority of our profit in the third quarter, we view this as a very encouraging result.

The solid growth foundation we have built to date, along with our ability to execute strategies aimed at improving profitability, have served as the driving forces behind our strong business performance and earnings growth even in this environment, reinforcing our conviction that our strategic direction is the right one. The key initiatives we have steadily advanced through the first half are all poised to drive future profit growth. And in the second half, we will ensure we fully reap the benefits of these efforts.

Furthermore, while the share buyback announced this time amounts to JPY 40 billion, which is an increase of JPY 10 billion from the previous program, I would like to reiterate that accelerating the pace of shareholder returns reflects our confidence in our performance to date and our future profit growth.

As we enter the second half, our top line revenue is progressing as planned, and we have gotten off to a good start during the peak demand season. We remain firmly committed to improving our business performance, and we will achieve this year's business income target of JPY 35 billion. As the first year of Vision 2030, we will make significant strides toward achieving our ambitious mid- to long-term targets. Throughout the year, we will deliver substantial results in both business performance and shareholder returns, thereby embodying the further enhancement of shareholder value outlined in Vision 2030.

That concludes today's presentation. Thank you for your attention. Now we will move on to the Q&A session. Gomi-san, please.

Thank you. This Q&A session is intended for analysts and investors. Members of the media are kindly asked to refrain from asking questions at this time, as a separate session will be held later today. Due to interpretation, please ask only one question at a time. We will now begin the Q&A session. Operator, please proceed.

[Operator Instructions] We have received request for questions, and we would like to begin the Q&A session. [Operator Instructions] From UBS Securities, this is Ihara-san.

I am Ihara from UBS Securities. So I have 2 questions. My first question is, you are buying back your shares, not JPY 30 billion, but you have announced JPY 40 billion, and we would like to once again hear about the background of it being JPY 40 billion. I know that you have a strong commitment here. But in 5 years, it's going to be JPY 150 billion, and that has not changed. And looking at your cash generation capability for the first half, it seems that it is the same. It's not growing. So this JPY 40 billion, why did you announce this number with an increase? And in 5 years, you're saying that it's JPY 150 billion. Is there a plan to make this number even larger for 2030? I would like to know about that as well. That's my first question.

Well, Ihara-san, thank you very much. This is regarding the buyback of shares. Bjorn-san would like to answer this question.

Thank you, Ihara-san. So yes, correct. We have issued an acceleration of our share buybacks of JPY 40 billion for this tranche while retaining the JPY 150 billion target in our Vision 2030. And the background is very, very straightforward. You heard us say multiple times in the prepared remarks, our first half of 2026, our first 6 months, therefore, of the Vision 2030 is very strong. We have delivered organic growth. We have delivered top line growth. And you see profit delivery in all our business units, which we believe is a strong statement towards our commitment in delivering our Vision 2030 objectives. So yes, we are accelerating now on the backbone of that good performance, and we remain fully committed based on our free cash flow deliverables to continue buying back stock. There is no plan at the present moment to adjust the JPY 150 billion. So we are seeing this as an acceleration based on the good results for this year.

I see. So as now, you don't have a plan to change JPY 150 billion, but is there a possibility to change that JPY 150 billion if the path in the future might be different? Should I understand in that way?

As I said, we have made no determination of changing the cumulative target for now. But of course, everything will be evaluated as the performance continues to deliver.

I see. Then moving on to my second question. So once again, I want to hear about next year. In your mid-term plan, you have JPY 45 billion to JPY 50 billion for the business income. Is there no change in that? And if that is the case, that means that you need to increase the profitability by JPY 10 billion to JPY 15 billion. In 2027, what is your understanding on cost as well? So how are you going to jump up to those numbers? And what is the background for you to be confident to achieve the numbers?

Thank you, Ihara-san, for your question. So you want to ask about the BI for the next term. So again, we'd like to ask Bjorn-san to answer.

Thank you, Ihara-san. First and foremost, we're in 2026. So our first protocol is to deliver this year, as you heard several statements of commitment in the prepared remarks. For 2027, yes, you rightly say, we need to deliver JPY 45 billion, JPY 50 billion, and we remain very committed to deliver that. And this is based on, again, having a very sound strategy in our Vision '30 plans. We have clear deliverables for our 3 business units. We have clear cost-saving targets. And we will also look at inflation, as you all see coming into Japan from external sources as one of the reasons to continue also evaluating price increases and further cost optimizations. So yes, there will always be changes in the operating environment as we execute our strategy plan, but we believe strong strategies, clear focus and the ability to action items like pricing and cost savings will make it very deliverable also for 2027.

I see. So I know that might be difficult to make a comment right now. But what is your assumption on the cost next year? Any assumptions?

I'm not going to comment to...

Go ahead.

Sorry, was somebody speaking? Yes? No. So we will come back in the normal process, Ihara-san, with our 2027 targets in our February disclosure. But of course, as I said earlier, we remain very committed to delivering it and cost increases will happen as they do in the normal course of running a business. And that's why it's very important that we stay committed to our pricing initiatives that you also saw commented on in the prepared remarks. But we will come back with more details on that in February. Thank you.

Next person is Morita-san from Nomura Securities.

One point, I would like to look at the inventory. I believe that your inventory asset has increased by about 25%. So can you tell us about it? Is it because of the impact coming from the bad weather in June?

Your question is about the inventory level. It seems that it's rising up. So maybe Bjorn-san, can you answer to this question?

First and foremost, Morita-san, stepping back a little bit and looking at the last 3, 4 years, you have seen a tremendous evolution in what we call S&OP, sales and operational planning, where we have captured all opportunities for sales in the market coming through the different heat periods, et cetera. And in normal course of business, we will always build inventory in -- a little bit in Q1, but mostly in Q2, again, anticipating our Q3 main peak season. So that's all within the normal course of business.

And we are updating our sales and operational planning, in other words, matching demand and supply, therefore, through inventory adjustments on a daily and weekly business. And we are launching new products continuously to meet demand. On top of that, we are also, as you heard in the prepared remarks and in prior announcements, introducing the IDCs, the Integrated Distribution Centers, which also impacts inventory. So all of that comes together in quarterly year-on-year ups and downs, but this is all in the course of normal business. Some bad weather will, of course, impact inventory. But overall, the sales and operational planning is working very well.

The second question is about the OTC situation. From April to June, in these 3 months, the market share in OTC has been declined pretty big, I guess. So what's the background to this sharp drop? And also why is -- are you looking more on the strategy of getting the margin than the share? Is that the kind of shift in your strategy? I would like to understand any shift in your strategy in OTC or if there is any plan to change your strategy in OTC?

Thank you, Morita-san. Your question is about the trend in OTC share. So Alex, would you like to take this question, please?

Morita-san, this is Alex. Just to probably give a little bit of color on the share in OTC, particularly in the second quarter. Probably what you're reading is -- let me unpack a few dynamics of interest. On the one hand, you -- particularly in the month of June, we saw a significant decline in enhanced hydration category, which typically where we have a high share. So what you're seeing here is a reflect of the negative impact that the decline on this category, high share category because of external factors, it's impacting the overall share. So that's probably one of the most significant impacts that is, again, out of our control. What I can also share is there's no fundamental change on our stance of expanding our value share in the market and outpacing the market. We have been very disciplined against this. We are implementing a very disciplined revenue growth management strategy with a focus of expanding profitable and sustainable value share.

So what you're seeing as well on the back of this, we're reflecting the price increases, particularly in green tea. So evidently, there is a natural impact as not all industry players follow that in the short term, you will see an impact on particularly green tea share. Nonetheless, we have been able to manage our portfolio in a proactive way with the rest of the non-sweetened tea portfolio such as Yakan no Mugicha, Sokenbicha and helping offset as well as some of the exclusive portfolio in the OTC channel. So we -- back to your -- the genesis of your question, there's no change in our stance of expanding market share. We want to make sure that our share expansion is sustainable. So we are activating in a very proactive way our full revenue growth margin expansion algorithm.

Next, we have Furuta-san from SMBC.

This is Furuta from SMBC. I have one question about price increase. So you announced the September wave already, but the timing is different maker by maker. And what are the pricing benefits you can expect because the industry's price increase timings are varied? So do you think that you can really realize the expected benefit from September price increase?

Alex-san, please take this question.

Furuta-san, Alex here. We're very confident on our ability to implement very disciplined price increases. We are -- I think we have stayed committed and we have always walked the talk around our stand of shaping healthier industry economics. And we are progressing very smoothly against this price increase in September. So we are very confident in our ability to work with our customers and implement in due course.

But I think that this benefit from the September price increase will totally offset the expected cost increase in the next year. So you said that about JPY 3 billion, JPY 4 billion cost impact. So you mentioned that 2027 cost increase expected and whether this September price increase can offset that impact?

Bjorn-san, please take this question.

As we said, Furuta-san, in the prepared remarks, we are very committed to taking price in the market. But we also said, as you heard, pricing is one of the options we have to mitigate inflation and over time also grow our business sustainably. So in our toolbox, so to speak, pricing is one. Transformations, cost savings is another one. Capital management is a third one. And we are, as management, using the full toolbox to manage this implication. So pricing is top of mind, but there are also other actions we are taking as a company to again manage the deliverables. Thank you.

Miyake-san from Morgan Stanley MUFG.

Miyake speaking. I have 2 questions. I'm sorry, but at the beginning, I was late to join the call. So if we already -- if you ask -- if I ask a question that you already explained, I'm sorry. But for the first half results, the business income to the initial plan, what was the progress compared to the initial plan in terms of your first half business income?

Miyake-san, thank you for your question. The first half business impact evaluation, Bjorn-san, would answer this question.

Thank you, Miyake-san. Our first half business income of an increase -- sorry, of JPY 6.6 billion is in line with our plan. Volume was probably a little bit ahead of plan. But overall, we have delivered according to plan by the 3 business units, which, of course, we're very pleased with. Thank you.

And then the volume was outperforming and that was turn -- the mix was not so good as expected. So what was the reason why the volume was a bit offset -- so the volume was good, but the business income was the same as the plan and the background of this, please.

Bjorn-san, could you please take this question?

This comes in, Miyaki-san, on predominantly 2 different angles, right? One is the channel mix. As you saw, our OTC business and our vending retail business have different growth patterns, and also our food service has a third growth pattern. So you will have channel mix. Again, we're planning for that, and that's part of our execution plan. But you also saw some -- as we said in the prepared remarks, we had some adverse weather hitting Japan in June. So you will have certain category mixes also inside there on top of the channel mix. So it's a combination of channel and category.

So the second question, for the second half, I would like to ask a question. For the Middle East crisis, there will be JPY 2 billion to JPY 4 billion cost increase. The view for the increase, it remains the same, and it's been quite a long time. So what will be the biggest portion of the cost increase? So the conflict is continuing and also crude oil impact is continuing. So what is the breakdown of the impact that you see for potential cost increase? And also, I'm sorry to ask this, but 2 days ago, there was the Kumamoto earthquake, and you have a manufacturing site in Kumamoto Prefecture, and I'd like to ask the situation of the Kumamoto earthquake.

Miyake-san, thank you very much for your question. For the first question, the impact of the Middle East crisis for JPY 2 billion to JPY 4 billion breakdown, Bjorn will take this question.

Bjorn again, Miyake-san. So yes, as we said in our prepared remarks, we're maintaining the range of impact of JPY 2 billion to JPY 4 billion from the Middle East. For competitive reasons, we cannot break that down into the individual cost buckets. But you can safely assume a lot of that has relations to the energy fluctuations you see globally and also especially the yen-dollar rate that we observe in Japan specifically. But as we said, overall, we're managing this towards our targets, and we're using a very sound hedging policy to again mitigate the impacts of this imported inflation. Thank you.

So for the second question, earthquake impact for the Kumamoto, Kado will take this question.

Miyake-san, thank you for your question. We also experienced the earthquake in Kumamoto 10 years ago. And after that, we have also overcome a lot of difficulties, and we have a lot of experience overcoming those difficulties. And of course, it depends on the infrastructure recovery status. But looking at the overall status to the impact to our performance, we are able to manage or it's manageable at the minimum level. That's what we think. Thank you.

The next question is from Saji-san, Mizuho Securities.

One question from me. So for the beverages, we are wondering how much you can continue to increase the price because last year, the 500 PET, some of the prices are over JPY 200. We're at that level already. And thinking about the disposable income versus that, how much can you continuously increase your price? And looking at the market as a whole, and what is your understanding of how much further you can increase the price? Do you have any benchmark you're comparing with? That will be my question.

Thank you for your question. So how much price revisions we'll be able to continue? So I would like to ask Alex-san to pick up this question.

Alex here. Look, the way -- just repeating myself, we're look at pricing as one of the levers to drive our profit growth expansion. I think we're obviously considering multiple factors, definitely consumer sentiment, consumer disposable incomes and a number of things. Now I think in the end, it's how are we able to think of pricing in the context of a number of variables depending on the pack, the price, the channel. And we're taking a very flexible view, taking into consideration a set of customers that probably are showing more defensive behaviors. And for that, we are addressing our portfolio of offerings, especially on affordable packs, smaller disposable, absolute disposable price points such as the launch of 1.25 liters, which is showing remarkably less price elasticity than the large PET 2 liters.

So we're adopting very flexibly to understand depending on the occasion, depending on the channel, the willingness of consumers to pay. And based on that, we are advancing our understanding on consumer realities and also taking a very balanced view around growing volumes, transactions, revenues and all in the end, profit for our system.

A follow-up question. So in September, you're going to have another price revision. So the price elasticity, what is the difference versus the last price revision?

Additional question. So the price elasticity, Alex-san, would you like to answer?

Price elasticity is an ever evolving fluidity depending on -- it's not a one-off, but it's our accumulated learnings allow us to better understand at a more granular level. So there's not a simple answer. There's clearly obviously some, as I said, the sensitive behavior that obviously people are less elastic, but there are also prices that we just launched Monster in vending at a price point above JPY 200 and people are willing to pay. So I think in the end, it's about how we're optimizing the mix of price points, pack sizes and categories so that we are driving overall profitable growth faster than transactions growth.

So it is past our time, but we would like to still take a couple of questions because there are requests. So we'd like to continue.

Next is Sumoge-san from BofA.

This is Sumoge speaking.

Sumoge-san, sorry, your voice is really, really low.

Can you hear me?

Yes.

So I have 2 questions. One is, at the beginning of Q&A, you mentioned about the JPY 40 billion to JPY 50 billion target. You said that you committed to hit it and that you are very confident. But I believe that you are also considering about a drastic cost reduction factored in. Every year, you have been having the transformation benefit of like JPY 6 billion. Is that the kind of cost reduction that you are factoring in? Or is there any additional cost reduction activities that you are planning on? So I would like to understand, is there any drastic cost reduction plan for next year?

Thank you for your questions. Your question is about, is there any drastic plan for the cost reduction? So maybe Bjorn can answer this question, please.

Thank you, Sumoge-san. So yes, as I said earlier in the Q&A, we remain very committed to our 2027 profit target. Also remind yourself of what I said earlier regarding the toolbox. So we have a very sound toolbox that we, as management, execute to deliver our targets. Pricing is one of them, of course, a major part of how we cover inflation, but we also have a very sound and strategic transformation cost savings program. And we can scale up and down these different levers or opportunities as we go through the year. It's too early to talk about 2027 initiatives now. As I also said earlier, we will come back to that in February. But again, remind yourself that we have that toolbox that we're executing very diligently and agile, I guess, is the best English term for it. Thank you.

I have another question. The second question is about the Monster Energy. You have been selling this product since June. So what is the contribution to the total sales of the vending machine business? Because we couldn't really see what is the magnitude of the impact or the benefit. For example, for second quarter, you have marked negative 2%. But I was just thinking, if you don't have a bad weather, will this be a positive range? Or is there any part of the Monster Energy contributing to offset those kind of minus -- negative impact?

Thank you, Sumoge-san. With regard to the Monster Energy, I would like to ask Alex to answer your question.

Sumoge-san, Alex here. We do not disclose specific figures related to Monster. But what I can share is that we -- as you read in the prepared remarks, we deployed Monster well ahead of our initial plan into our large vending network. We do expect Monster to contribute to organic growth in the vending channel.

So in that case, by looking at it from -- the vending volume is going to pick up into recovery trend because of the introduction of the Monster Energy in the future?

Thank you, Sumoge-san, for your follow-up question. Will Monster Energy change any trend and trajectory in the vending business? Alex, would you like to answer this?

As probably I said, we do expect Monster to continue to contribute to organic growth through the Monster vending, which is comparable vending store sales to grow accretive in revenue and in transactions.

Thank you for your question. I am afraid that we are closing -- we are getting to the closing hours, but I would like to pick up one last question. Operator, please go ahead.

Next, we have Watanabe-san from Citigroup Securities on the line.

This is Watanabe from Citigroup Securities. Just one about EBITDA. Q2 EBITDA, 5% to 6%, which seems like the decline in the profit. So sales volume flattish and DME increased. So what are the factors behind the EBITDA for Q2?

So Bjorn-san, please take this question.

Thank you, Watanabe-san. So overall, as you saw in our prepared remarks, our business income or recurring profit is up 6.6%, which then includes the effects of the impairment and therefore the depreciation from last year. When it comes to the EBITDA, there's a few moving parts in Q2, but the biggest one, which I consider more of a timing issue is the investment into markets, into DME, as we call it, for Q2, again, to ensure we deliver sound profit in our main peak season for Q3. So I would say that's the biggest impact for it. Thank you.

So we are running over time. So that was the last question. With that, we would like to conclude the Q&A session. And the content of the presentation will be posted in our official website. If you have feedback or further questions, please contact the IR team. Thank you very much for your participation.

[Interpreted] Good evening. This is Gomi, Head of Investor Relations at Coca-Cola Bottlers Holdings. Thank you for joining our first quarter 2026 earnings presentation for analysts and investors. Today, we are joined by President, Calin Dragan; and Vice President and CFO, Bjorn Ulgenes. Also with us are Vice President, President of the Food Service Company and the Chief Business Strategy Officer, Maki Kado; Officer and President of the retail company, Alex Gonzalez; and the Executive Officer, Chief Supply Chain Officer and the Chief Sustainability Officer, Andrew Ferrett.

Following prepared remarks, we will be happy to take your questions. Simultaneous interpretation in Japanese and English is available for both today's presentation and the Q&A.

Before we begin, please note that today's presentation contains forward-looking statements and should be considered together with cautionary statements contained in our presentation materials.

With that, I would like to turn the call over to Calin Dragan. Calin-san?

Good evening, everyone. This is Calin Dragan, and thank you for joining our earnings call. Today, I am honored to be able to open my prepared remarks by reminding everyone the next month on May 8, Coca-Cola brand celebrates the 140 anniversary. With that occasion, we want to wish Coca-Cola brand a warm Happy birthday. We are really proud that we are able to bring such an iconic global brand to consumers in Japan, and we remain committed to further enhancing its value in the market.

For the highlights of today's presentation, please turn to Slide 3. We are off to a very strong start in 2026. Business income for the first quarter exceeded our target, growing by JPY 3.8 billion versus the previous year. Already, we have achieved more than 1/3 of the full year business income target. This was primarily driven by a strong volume growth of 4% versus the previous year, gains in value share and improved profitability from price revisions, resulting in a solid profit growth. In vending, Top line trends are improving and showing positive momentum. Announced today, we will offer Japan's leading energy drink plant, Monster Energy through our vending machines starting this peak summer season, positioning us to further accelerate growth in our vending business.

In the first quarter, we successfully executed key initiatives to improve profitability, price revisions, one of our core profitability drivers. We've implemented as planned or green deep products in March and are steadily delivering results. Our transformation initiatives are also progressing smoothly, generating cost savings to strengthen operational foundation. Despite continued uncertainty in the current outlook, we have assessed the potential impact of the situation in the Middle East and we are confident in our ability to manage any resulting cost increases this year. By leveraging the strength of the global Coca-Cola system, which is one of our core strengths, we expect to mitigate these pressures to our procurement efforts.

In addition, by accelerating our profit growth momentum pursuing further cost savings and seriously considering harder price revisions, we will take all necessary actions, which are we are determined to achieve the full year business income target of JPY 35 billion.

Now our CFO, Bjorn Ulgenes, will provide a detailed explanation of our financial results.

Thank you, Calin, and good evening, everyone. This is Bjorn. Please turn to Slide 5 for the first quarter profit and loss.

In the first quarter, we achieved both revenue and profit growth that exceeded our targets. Despite the impact of changes to the channel mix, Revenue exceeded the target and achieved strong year-on-year growth of 3.6%, driven by higher-than-planned volume growth and improved wholesale revenue per case. Gross profit outpaced revenue growth and grew by 5.2%. In addition, the top line growth, this was supported by commodity cost management, including joint procurement across the Coca-Cola system and solid hedging strategies despite a challenging external environment marked by rising costs.

In addition, as the first year of our strategic business plan, Vision 2030, we reviewed the useful life of our manufacturing machinery and equipment in line with our policy of making selective capital investments to improve capital efficiency and deploy capital effectively over the long term. As a result, lower depreciation expenses totaling approximately JPY 0.5 billion contributed to profit growth. Business income increased by JPY 3.8 billion year-over-year, primarily driven by top line growth and cost savings achieved through transformation initiatives. Factors contributing to this profit change will be explained later. Operating income increased by JPY 9.8 billion year-over-year. In addition, the business income growing year-over-year. Gains on the sale of tangible fixed assets recorded as part of our efforts to optimize the balance sheet contributed.

Net income increased by JPY 5.5 billion from the previous year, primarily reflecting higher operating. EBITDA, a measure of cash generating profitability increased by JPY 0.6 billion year-over-year to JPY 5.4 billion. Slide 6 shows our financial results by segment. In the first quarter, a significant increase in the vending business profits drove overall profit growth. For the vending business, volume trends for existing machines improved and volume remained flat overall versus the previous year. While revenue for the business declined year-over-year, specifically Coca-Cola vending machine increased revenues due to improved wholesale revenue per case. In addition, driven by transformation benefits, improving rates. Segment profit increased significantly by JPY 4.6 billion year-over-year, returning the segment to profitability. While this includes the benefit of lower depreciation expenses following the prior year's impairment loss in the vending business, we also achieved solid organic profit growth.

In OTC, revenue outpaced volume and increased by 6.5% year-over-year, driven by robust top line growth and price revision benefit. Volume and revenue growth were driven primarily by online drugstores and discount. Through a rigorous focus on profitability-driven initiatives, segment profit increased by 25.6% year-over-year. In the Foodservice business, we achieved high growth with double-digit increases in both volume and revenue compared to the previous year, driven by an expanded product portfolio tailored to customer needs and successful efforts to secure new customers. To sustain this momentum, we are steadily executing investments to support mid- to long-term growth and are driving business expansion in line with our plans.

Please turn to Slide 7 for the factors behind the change in business income. Business income grew strongly, increased by JPY 3.8 billion compared to the previous year. Starting from the left, we can see the impact of volume, price and mix. Together, these factors reflect changes in marginal profits from our commercial activity and contributed a positive JPY 2.6 billion year-over-year. The main factors were a positive impact of JPY 2.3 billion from volume, including channel mix and a positive JPY 3.8 billion impact from pricing partially offset by a negative JPY 3.5 billion impact from other factors. Although adverse channel mix due to changing consumer trends remained a headwind, volume growth and improved wholesale revenue per case resulting from price revisions are steadily contributing to profit growth.

Transformation benefits totaled JPY 1.9 billion, in line with time. Savings were particularly significant in the commercial function where benefits from the transformation of the vending business continued to materialize steadily. In the supply chain and back office, we are building a foundation that contributes to mid- to long-term growth while also generating cost savings. Marketing expenses decreased by JPY 0.2 billion year-over-year. We continue to invest appropriately in marketing are carefully managing spending based on the return on investment philosophy and market conditions. Manufacturing costs increased by JPY 0.1 billion year-over-year. Although production volume rose in line with sales and manufacturing efficiency improved changes in product mix, including a higher proportion of outsourced production increased cost.

We continue to pursue cost savings in the production floor and strengthening our production structure ahead of the peak demand season. Other costs increased by JPY 1.6 billion, primarily due to higher IT-related investments and expenses to support future profit growth as well as increased labor and outsourcing costs. This increase includes the benefits of lower depreciation expenses resulting from the impairment cost recorded in the vending business in the previous year. Commodity and utility costs decreased by JPY 0.8 billion, thanks to successful hedging strategies and our procurement function, leveraging the Coca-Cola system's global network, one of our companies [indiscernible]. Net cost improvements from commodities and foreign exchange amounted to JPY 0.4 billion. Utility costs also achieved a decrease of JPY 0.4 billion.

On the next slide, Alex will give an overview of our commercial activity. Over to you, Alex.

Good evening, everyone. This is Alex. Slide 8 shows sales volume by channel and by category. Although price revisions negatively impacted demand, our effective commercial activities and contributions from core categories meant that Q1 sales volume grew 4% year-over-year, exceeding both the overall market and our plan. Additionally, because of the series of price revisions, wholesale revenue per case continued to improve across most channels. First, by channel, vending volume trends improved and remained flat year-over-year supported by a strong performance from core products and existing vending machines.

In Supermarkets, drugstores and discounters, sales volume increased as well as we successfully expanded shelf space through campaigns tied to the FIFA World Cup. In Convenience Stores, where price revisions impacted volume wholesale revenue per case improved significantly, leading to improved profitability. In online, volume grew by 20%, driving overall growth despite a decline in wholesale revenue per case due to a higher mix of large PET water. In Foodservice, volume grew by 12% supported by an expanded product lineup, including customer-exclusive launches and stronger sales of a sparkling pressure products and restaurants. By category, in sparkling, Coca-Cola and Coca-Cola Zero contributed to a 10% increase in volume. In tea, products such as [indiscernible] contributed while Ayataka continued to perform well. Although the March price revisions impacted Green Tea products, volume levels in Q1 were comparable to the previous years. Sports, water and coffee declined due to price revision impact.

Slide 9 shows the status of market share and OTC retail prices. This year, through profitability focused commercial activities, we achieved balanced growth in both value and volume share. Our total channel value share increased by 1.1 percentage points. Despite a challenging market, volume outperformed the market and the year-over-year increase in volume share has contributed to value share growth. inventing, growth in volume share drove an increase in value share. Growth initiatives in the vending business, including profit focus assortment optimization using our AI-based assortment system and targeted promotions through Coke ON have delivered strong results. We successfully captured demand while improving wholesale revenue per case through price revisions.

In the LTC channel, despite the impact of lower volumes resulting from price revisions and channel mix changes, we have enhanced our competitiveness through expanded shelf space and targeted commercial activities, achieving balanced market share growth. In the first quarter, we effectively capture increased demand, improved value share by 0.3 percentage points year-over-year. Our OTC retail prices have continued to maintain a price premium relative to industry averages. As a result of the series of price revisions, OTC retail prices for a small PET products continue to exceed those of the previous year. For large PET, although affected by channel and packaging mix shifts, we have maintained the elevated price level.

In March of this year, we implemented the green tea product price revision as planned, market [indiscernible] such provisions since 2022 and we expect further improvement in trends during the second quarter. Slide 10 highlights key topics for our quarter 1 commercial activities. We have successfully translated robust volume growth and improved profitability into solid profit growth. initiatives aimed at enhancing competitiveness have driven volume growth in the core categories driving overall volumes such as sparkling MT marketing campaigns highlight in drinking occasions have proven effective. To expand shelf space, we are focused on maximizing unique Coca-Cola assets such as the FIFA World Cup and rolling out exclusive products for our customers, thereby accelerating efforts to improve competitiveness.

In vending, Positive signs are emerging in volume trends. Growth strategies such as further leveraging of Coke ON and revising product assortments with our assortment system are proving successful. In particular, volume trends for existing machines have improved and vending channel value share has increased. At restaurants, we promoted perfect serve to ensure consumers can enjoy Coca-Cola assets at its best, and aim to enhance the dining experience through proposals such as effectively utilizing bottle, Coke and Glassware. Our efforts to improve profitability are making steady progress. We've implemented price revisions for green tea products such as plan, effective for shipments starting March 1. At the same time, we're focused on maximizing the impact of price revisions and wholesale revenue per case continues to show an upward trend.

In addition, we have proceeded as planned with the rationalization of rebates and promotional expenses, implementing marketing activities that are flexible and focused on ROI in accordance with market conditions. Furthermore, to improve our product mix, we have to strengthen our efforts by rolling out products and packaging tailored to each customer's profitability. Our prioritization of profitability in commercial activities remains unchanged this year. We're implementing optimal growth strategies for each business unit, while rigorously enforcing detailed data-driven performance management.

On the next slide, Maki will go over our first quarter commercial selective marketing activities. Maki, please?

[Interpreted] Good evening. This is Maki Kado. On Slide 12, I will review our marketing activities for the first quarter. In Q1, we achieved strong growth in revenue and value share through powerful campaign activation. To strengthen our core category, in February, we launched limited addition, Coca-Cola FIFA World Cup bottles. We maximize in-store visibility by implementing effective campaign that leverages Coca-Cola's unique assets, including dedicated self displays. These efforts proved successful, further accelerating Coca-Cola's growth trend from the previous year.

Volume in the sparkling category, including Coca-Cola, increased by 10% year-over-year. Additionally, for Georgia, we revamped our core products in parallel with a new campaign launched in March, aiming to enhance the brand's appeal. For Ayataka, we continued and the strength in the last year's campaign that successfully highlighted its bearing with Onigiri and worked to expand Ayataka drinking occasions. In particular, China Ayataka under rental price revision this March, we are thoroughly implementing in-store displays that emphasizes values.

Regarding new products, Minute Maid fruit juice brand. In March, we launched Minute Maid Zero Sugar Peach Lemonade as an addition to the Minute Maid Zero Sugar Lemonade lineup, which has been well received and seen steady sales growth since its launch last month part. We will continue to strengthen sales efforts from the second quarter onwards, aiming for further growth and expanded consumption occasions. In terms of experiential marketing, we have launched campaign for users of the Coke ON app, which serve as 70 million downloads cumulatively by the end of 2025. The campaign will run throughout the year to celebrate the app tenth anniversary, and the first wave has already begun.

For the FIFA World Cup '26. We have organized a trophy tour and launched a promotion where consumers can enter code found on the outer side of caps from purchased products via Coke ON to enter a draw for regional merchandise based on the number of points earned. By building excitement for the FIFA World Cup '26, even before the tournament begins, we aim to maximize exposure on the sales of our products. Slide 13 highlights our marketing activities for the second quarter. To strengthen core category, Coca-Cola is releasing the second installment of its limited edition FIFA World Cup packaging for a limited time starting April 20, featuring a selection of design inspired by the uniforms and flags of popular participating nations.

In April, Fanta relaunched this core flavors. For the first time in the Coca-Cola Japan product, we utilize global AI technology to create a pace that goes beyond the boundaries of traditional fruits for regard sparkling liberties. As for new products, we are launching [indiscernible] from the [indiscernible] line this week. With zero sugar and n0 calories, it provides superior hydration compared to water. By introducing this innovation product, we aim to revitalize the sports drink market. For Ayataka, we are launching for new products and revamping existing ones. In April, we launched [indiscernible], a functional food designed to meet health needs.

In May, we will introduce Ayataka Mineral Green Tea, the first mineral and green tea in the brand's history. By expanding our product lineup to address diversified consumer needs, we aim to achieve further growth for the Ayataka brand. For experiential marketing, in addition to launching the second phase of the Coca-Cola FIFA World Cup '26 promotion, we implemented initiatives leverage in bottled Coke and launch certification program called Coca-Cola Fruit [indiscernible]. For restaurants where consumers can enjoy delicious meals paired with the ultimate Coca-Cola experience. Through these efforts, we aim to enhance the experience of value sold in today's dining out.

Next, Calin will share our outlook. Calin-san, please?

Calin again. Slide 15 outlines our outlook to ensure we achieve our full year business income target of JPY 35 billion, we will carry forward the positive trends we have seen so far in implementing additional measures and maximize profit. And as we enter the second quarter, all initiatives continue to progress smoothly. In April, sales volume achieved a robust growth of more than 2% year-over-year while improving wholesale revenue per case. In addition, we are implementing further cost saving measures to help offset anticipated cost increases.

Furthermore, while we are seriously considering further price divisions, we will ensure that we met this year profit target and drive mid- to long-term profit growth by offering Monster Energy in our vending machines. With regards to the impact of the situation in the Middle East, assuming that conditions stabilized during the second quarter and that oil prices, exchange rates and other factors will improve towards the year-end. We expect the additional cost increase for this year to be limited. Our hedging strategy provides a clear visibility in the near term, and we expect usually no impact on first half earnings. For the full year, we anticipate additional cost increases of approximately JPY 2 billion to JPY 4 billion. And as discussed earlier, we plan to absorb these costs across the business by accelerating our positive earnings trend and implementing further measures.

And accordingly, there is no change to our full year business income target. We will work closely with the global Coca-Cola system to leverage scale advantages for competitive procurement, helping us to maintain and to contain the cost increases and ensure a stable supply of material. Given our strong underlying performance momentum and the resilient business foundation we have built, I'm confident in our ability to achieve our targets. Slide 16 is about Monster Energy, as mentioned earlier. Starting from this summer, our peak demand season we will begin offering Japan's #1 energy drink brand, Monster Energy through the industry's largest vending machine network. This is an exciting initiative that will bring about significant change for us. This was made possible through the agreement between Coca-Cola Bottles Japan, Monster Energy Japan and Asahi beverage.

By sourcing products from Asahi beverage, we will leverage the strength of both parties, namely the leading energy drink brands, Monster Energy and our industry-leading vending machine network to create synergies and maximize value for our consumers. We aim to expand consumer choice and purchasing opportunities for vending machines while further improving sales and profitability in the vending business. We plan to introduce product to core [indiscernible] vending machines in our business area by this summer, which is the peak season with the aim of driving immediate sales growth and improving profitability. The products to be introduced, Monster Energy comes in at 355-milliliter can with the manufacturer suggested retail price of JPY 230, including tax. We anticipate that strengthening the energy category was significant growth, we will significantly boost vending machine transactions. This product will be in the highest price brackets within our vending machine product portfolio, we also have high expectations for improving wholesale revenue per case to product mix improvement.

And under our Vision 2030 strategic business plan, we are striving to improve profitability and capital efficiency while aiming to achieve ambitious goals. And to realize this vision we are exploring every opportunity for growth. And in this context, we are very pleased with the introduction of Monster Energy has paved the way for us to strengthen the energy drink category which holds significant growth potential for our company. Also, as explained today, the vending business is aiming for an increase in segment profit of over JPY 9 billion this year. We achieved a steady profit growth in the first quarter and current sales volume trends are showing signs of improvement. Now offering Monster Energy will build on this positive momentum and further accelerate profit growth in the vending business. Furthermore successful execution of these initiatives will further strengthen our thought towards achieving Vision 2030.

And finally, here is today's summary. Please turn to Slide 7. As the first year of our strategic business plan Vision 2030, we delivered a strong first quarter performance. Business income exceeded our plan, and we have already achieved more than 1/3 of our full year profit growth target. We achieved strong growth across all KPIs, including sales, volume, value share wholesale revenue per case and profit, and we are very pleased that this has led to improved competitiveness and profitability. As a result, business income surpass our targets. And as we move into the second quarter and beyond, we will prepare totally for the peak demand season. We will also build on our positive underlying momentum and steadily implement additional measures with strong discipline. And by doing so, we will mitigate the impact of the situation in the Middle East and deliver our full year business income target of JPY 35 billion.

I would also like to reiterate that our short- and medium-term targets remain unchanged. The measures discussed today, including the potential for further price revision, and the introduction of Monster Energy to our vending machines are important initiatives that will support mid- to long-term profit growth. And by further advancing this lead long-term initiatives and fundamental transformations while continuing to strengthen our business foundation, we will accelerate our profit growth trajectory towards achieving Vision 2030. That concludes today's presentation. thank you for your attention. And now we'll move on to the question-and-answer session. Gomi-san, please take it from here.

[Interpreted] This Q&A session is intended for analysts and investors. Members of the meter are kindly asked to refrain from asking questions at this time. As a separate session will be held later today. Due to interpretation, please ask only 1 question at a time. We will now begin the Q&A session.

[Operator Instructions] We will now unmute the first participant. UBS Securities, Ihara-san, please go ahead.

[Interpreted] Thank you very much for your presentation. This is Ihara from UBS Securities. I have 2 questions. Firstly, it is not just about this year. I would like to rather know what's your outlook for the next fiscal year because this year, you have our offset measures to offset the inflation, cost inflation this year. But if this trend or the market situation continues, then what's your expectation for the cost push next year? And you target for next year's BI is 45 or 50. Are you able to commit to that target? And what do you need to show your commitment to those targets for next fiscal year?

[Interpreted] Ihara-san, thank you very much for your question. So basically, he's asking your ideas about next year's business. So Calin can take this question.

For the question. And well, I decided to pick this question on purpose to try to reiterate on exactly what I mentioned in prepared remarks. I said a couple of things, which I'm going to repeat.

2026, it's a tough year. But as you can see, we were able to over deliver our first quarter and basically in the smallest quarter of the year we already have been able to deliver more than 1/3 of our profit targets. All the parameters of the year are going extremely well as we mentioned, so we are remaining confident for the year-end results, and I mentioned loud and clear that we are forward looking to absorb the costs of the crisis in the Middle East from our own transformation efforts as well initiatives in the market. Having said that, already that position in the very first year of our journey, the JPY 35 billion, I would say, it's a jump start for the lack of a better world, a jump start on a fantastic journey towards 2030.

With that in mind, I mentioned as well that we remain committed to our Vision 2030, including our targets communicated so far. We believe and we based all this on the resilience that we have been able, in our opinion, to build in our business over the last years. going through a number of crises as well fundamental transformation in our business. Nevertheless, through the crisis of Middle East that we are passing through, I just want to remind you that we are part of the worldwide consortium of Coca-Cola Company called [ CEPG ] of Coca-Cola system, I'm sorry. And it's just fair to assume that we are able to acquire at best prices probably in the world, leveraging the power of the entire Coca-Cola system worldwide as well availability of supply.

And nevertheless, I would add is the fact that we are having our company hedging policy which delivered very good results so far. It's helping us at this moment in time, and it's only fair and normal to assume that going on our hedging policy and pricing policy, it's going to deliver results as we deliver so far based on a clear track record. All this gives us confidence that we are going to be able to deliver the results, but primarily, we are very proud of the current trend that we were able to build, especially in the vending business, basically growing from all key performance indicators. Hope that answers your question. Thank you so much.

[Interpreted] Additional questions. And when there was a crane crisis, you utilize the power of our [indiscernible] system, but still you face the push cost increase. So if this trend continues into next year, what the size of the cost push you would expect for next year?

For your additional question, and Bjorn, please take this question.

Thank you, Ihara-san. As Calin price outlay already, we are very confident about our 2026 delivery. And we're also definitely maintaining our 2027 outlook even 2028 for that matter. Speculating today what costs will come in 2027 is not very meaningful for us. I think instead focus on what Calin tried to convey, we have probably the world's most powerful buying consortium for all the commodity baskets.

We have a very good hedging policy that you can see the effect of in the Q1 results. We are already taking proactive cost measures to manage the JPY 2 billion to JPY 4 billion that we included in the prepared remarks. And I think from a qualitative standpoint, you should also think about the flexibility, the agility that we have built into our business over the journey coming out of spending. That's ability to turn around to manage the situation because this is not the first crisis where experience gives us the comfort to believe in our targets and make sure that we will deliver. Hope that answers your question. Thank you.

[Interpreted] Let me quickly ask the second question. Monster Energy, up until now, I haven't seen many non-products in your vending machine up until now, but now you receive supply from your competitors, which is quite rare in the market. So what was the mindset change that you pursue this opportunity positively? And do you think there are any other routes to explore further collaboration with Asahi or...

[Interpreted] Thank you, Ihara-san. So we've just announced the sales of Monster Energy in the venue. So Calin, please take these questions.

This is a strategy question. He has clean back here on the mic. Thank you so much for the interest in our business. Well, very well known that Coca-Cola Company has a stake within Monster business and the collaboration worldwide. So there should not be made a surprise that we are leveraging and trying to exploit exactly in the same way all our all options that are available to us in order to grow our business.

So we believe that Monster Energy, it is a good brand. As you can see, it's a sizable market, and it's the leading brand in Japan. We are opposing to this our significant and basically the largest in the world, vending DASH retail business. and we are convinced through the combination of Monster Energy within our largest lending network outstanding results are going to come out over time. So we are going to look forward to strengthen this partnership and as well to use, as I mentioned in my prepared remarks, every possible opportunity for our business to grow and to build a solid base for our shareholders and their shareholders case. I hope that answers your question.

I will unmute the next person with the questions. SMBC Nikko Securities, Furuta-san.

[Interpreted] I have one question. Further price release, you are going to consider seriously the further price revision. So what is the time line for that? And what the target scope of the other price items have -- could you please tell us that uses price for the green tea category in March is will that be a target for the product price divisions, the kind of scope and further possibilities, I would like to ask.

Furuta-san, thank you very much for your question. The concern [indiscernible] Alex will take this question.

Furuta, Alex here. As you rightly pointed out, we are executing the wave of price revisions with [indiscernible] and that's progressing pretty much as planned. Now with what has been shared in the prepared remarks, if there's evidently a very fluid situation around Middle East and as Calin and Bjorn have shared, we're looking at every single option to make sure that we deliver the business income target.

So in that regard, we are seeing that the pressure is on cost is not only for CCA as a cost pressure for the entire industry. So we always, I think, have been walking the talk as seeing price increases as one of the levers to ensure that we are driving and protecting the margins of our business. So in that regard, we are seriously considering price regions at this point in time, nothing has been decided yet as with regards to the timing endoscope and we would come back when -- in due course to share more details. So that's it for now.

So under such circumstances for the Middle East crisis, the cost increase will further increase the cost. And under such circumstances, the price revision, you probably have to do the price revision at early timing and also green tea categories, you are -- competitors are not following up. And under that market conditions, do you think you are able to do the further price revision?

[Interpreted]Furuta-san, thank you for additional question. This will also -- Alex will answer this question.

Furuta-san, at this point in time, we will continue to evaluate the situation, and we will come in due course when the time is right to share with you more details.

I'll unmute the next person with a question. Nomura Securities, Morita.

[Interpreted] Morita from Nomura Securities. I have 2 questions. First question is regarding the Monster Energy. So EBITDA contract with CCJC within the contract with the CPTC -- or is it outside the contract with CCJC?

Thank you for the question. Regarding the Monster Energy, Calin will answer.

Calin, again, I'm just -- so we need to clearly understand the question to be able to answer precisely inside or outside the framework of our company. I just want to remind everyone, we are working on a franchise or franchisee framework with Coca-Cola Company. And of course, within that framework, there are, of course, certain rules of dozen ones. So of course, this is something that is aligned within the frame of operating in Japan as arrangements between the Coca-Cola Company and the Bottlers regarding this category are happening around the world.

In terms of monster for sale product supply, this is something that is happening between us, Monster and as well [indiscernible].

[Interpreted] Well, did we answer your question Morita-san?

[Interpreted] Sorry, I didn't understand very clearly. So basically, the marketing belongs to the CCJC? So will CCJC provide that market into the Monster? Or is it included in the [ concentrate ]?

Coming into that. So then we need to -- I'm sorry to slow down the answer, but we need to determine some basics and explain a couple of basics which might not be well known. So once the company, it's a stand-alone company as well as publicly listed a separate entity than Coca-Cola company, well, of course, Coca-Cola Company holds equity stake in it. But that's a matter of ownership in terms of marketing and the means of distribution, Monster, it's operating like a separate company. ends from that perspective, the marketing relationship between us and the brand owner happens between Coca-Cola Boto Japan and Monster as a company. I hope that answers the question.

[Interpreted] Additional question is the profit per case with -- compared with other products that must provide a more profit per case?

Morita-san, this Calin speaking again. I'm sorry, to drag these tests. But I'm not going to disclose at this moment in time, details like profit per case. However, we try to be as explicit for you to be able to model telling you that this is going to be in the range of JPY 230 bracket as a price point, one of the highest that you can find within the vending machines in Japan. And if you overlap that SKU at the highest price possible there over the highest number of vending machines in Japan, which is our Coca-Cola network, probably you can stimulate the size of the benefits that can bring to our business. I hope that answers the question.

[Interpreted] My second question is regarding the possibility of additional cost increase because of Middle East, you said that it's JPY 2 billion to JPY 4 billion. So could you explain the background of that calculation. So do you think that in the other hand this year, the will subside and improve. Is this [indiscernible].

Thank you, Morita-san. On the costs, as you heard in our prepared remarks, we estimate the net impact of this with 2026 to be in the range of JPY 2 billion to JPY 4 billion. We're not going to give details on how we arrive at that. That builds on the set of assumptions that in the foreseeable future, this is the impact. And it's within the range of what we will definitely manage. And again, remind yourself exactly what we also said to Ihara-san about the cost levels we are buying at the best prices most likely globally through our global procurement system of whole the commodities used in our beverages in Japan.

Secondly, we have a very strong hedging policy. As I also said to Ihara-san, as you can see that from the impact of Q1, which helps us manage the highs and the lows of commodity basket fluctuations for hedging currency, like I'm assuming is normal. And we have already, as we also said in the prepared remarks, we're taking additional measures already on the cost increase and you heard Alex comment on the on the strongly considering pricing increases into the future. So we believe we are managing this within this year. We are fully committed to delivering the profit for this year and definitely for next year, and we will continue to update you as we go through. Thank you.

I will unmute the next person. Next person is Miyake-san from Morgan Stanley.

[Interpreted] This is Miyake from Morgan Stanley. I would like to check on this current term that you just completed. First question is that with regards to the change in the useful year of your equipment, and then you have enjoyed the benefit of reducing the depreciation of about the tune of JPY 500 million. So it's annualized maybe about JPY 2 billion. Is this already factored in your business plan?

[Interpreted] Thank you, Miyake-san. So your question is about whether or not we are factoring in the benefits coming from the change of the useful life -- useful year of the life for the machinery. So Bjorn, would you like to answer this question?

Yes, correct. We have reevaluated the useful life of our manufacturing assets, again, part of the overall focus on ROIC and sensible uses of our capital. The impact will be JPY 1.5 billion to JPY 2 billion on a full year basis. It was not included in the initial plan, but it's not material enough at this point to revision anything up or down on a full year basis. We put this into the mix and again, remain strongly committed to deliver our JPY 35 million target for [indiscernible]. Thank you.

[Interpreted] So when you come up with the business plan at the beginning of the year that you already factored in you already have factored in this JPY 1.5 billion to JPY 2 billion on a full year basis. So you're not putting this on top? Just to follow up, this is not included at the beginning of the year. Okay. Understood. So if that's the case, you mentioned that you can commit to about JPY 35 billion target, right?

Yes, right.

Okay. One point or point. So against the first quarter plan, you have overperformed for the profit, right? So you have divided into these segments. And can you show me the each contribution breakdown, for example, vending versus last year, JPY 4.5 billion was the amount. And then because of the depreciation decline, there was about JPY 2 billion plus. But the sales, the revenue is not like on top of versus last year. So what are the benefits coming from? Is that the cost? And for the OTC, I know you have a better revenue than last year. But is there any cost increment behind that?

And also the vending, are you not factoring in the reduction in the depreciation, right? So anyway, by looking at the segment, what is the contribution factor for each segment that you can overperform versus the plan?

[Interpreted] Thank you, Miyake-san. So you would like to understand the background to why we could overperform the first quarter versus the plan. So Alex, would you like to answer this question.

I'll take that, Miyake-san. So as you know, we have started publishing the segment profitability. We're very happy with that. In your question, I think let me just go back a little bit again to August last year when we issued the Vision 2030 plan because it contains some very key elements of how we run the business. You remember, we talked about job tickets or job profiles by business unit. So therefore, you can't just correlate immediately volume and revenue and profitability by segment. You have to look at the role of that business unit.

Let me quickly take them, so we don't spend too much time on it. But the whole purpose of vending is to drive profitability and capital improvement. That's what you see happening in Q1 with a very, very strong improvement in cost and efficiency. That's the job ticket at the present one for vending, while we continue to maximize the revenue opportunities coming up in that channel or business unit. OTC, yes, there are expenses related to running OTC, but most of that is related to our work with the customers. and also, therefore, all the programs we're doing in supermarkets and online in convenience stores, et cetera. The role of food service business unit, albeit smaller than the 2 others is to drive both top line growth and profitable growth. And again, the expenses there are more related to customer activation in the model. So hopefully, that gives us a little bit of texture to your question.

[Interpreted] So maybe we shouldn't look by the segment. So at the end of the day, in the first quarter, you could gain more profit than the plan because you have overperforming in the volume. And also, you have more benefit coming from the transformation effects. So can I understand in that way? Or is there any other additional cost reduction activities that we should be fulfilling in here?

Correct a little bit. It might be the translation, but you said you should not be looking at the segment profit. Remember, the segment profit is again to give insight into how we run the business, going back to what I've said, the 3 business units have very distinct and clear topics, the objectives they're supposed to deliver. When it comes to transformation, a lot of the efforts you see coming through in vending improved profitability is the function of transformations. We're optimizing the routes. We're optimizing resources we're optimizing how we buy the products and the [indiscernible].

On top of that, remember, we're also driving a lot of revenue initiatives again pricing, but also the key elements of Alex, we have talked about earlier, on product assortment and how we optimize [indiscernible] profitability. So there are always a lot of activities happening in the big business unit like them. So you can't isolate in most cases, one single cost effect to explain the all profitability. My suggestion, look at the overall profitability, but also how the key drivers are manifested in the second disclosure, then you will have a good picture of what is actually happening.

[Interpreted] So when you look at the overall company base, I was just thinking, I believe that you have many transformation impact effects in every corner of your business and particularly in vending, it was very strong. That's what I understood.

[Interpreted] Thank you, Miyake-san. Since we are approaching the designated hours, we would like to pick up a couple more questions. But I hope that we can keep one question by person. Operator, please put to the next question.

I unmute our next speaker. Next, we have Saji-san from Misuho Securities.

[Interpreted] I have one question about Monster Energy. I would like to just double check. So I would like to understand this will be a wholesale apply from Asahi to VGI. And you say that Asahi is a flyer of Monster Energy to VGI. So VGI has no involvement in the manufacturing meaning that the -- financially, it's about margin. It's only about margin, no production cost because I would like to understand the nature of contribution -- financial contribution of this business.

Thank you Saji-san. So you would like to understand whether VGI is involved in the maturing and this is a pure wholesale business. So Alex can take this question.

Saji-san, Alex here. Yes, just probably building on your confirmation is the agreement with Asahi is we're buying product from them, and we're deploying into the largest network of many machines. So yes, we're not involved in the manufacturing of this product. I help this clarifies question.

[Interpreted] Then you will earn only the sales margin. Is that on the revenue from this business model?

[Interpreted] Yes, that is correct.

Fujiwara-san from JPMorgan Securities.

[Interpreted] Fujiwara-san from JPMorgan speaking. So I have a one question. Just simply would like to ask about the figures. Page 7, Slide 7, there's faster increased decrease. And I'd like to know the first volume price mix, and there is a breakdown number here. And volume other than volume and unit price. And there's other and that is a minus JPY 3.5 billion that's what I heard. I believe, and that is pretty big. I'd like to know the breakdown of that. And after the second quarter, what will happen to the others? What is the outlook for the other segment that also might hold?

Thank you for your questions. The waterfall chart, the volume price mix and there's other. And you would like to know the breakdown of other of the volume price mix. Bjorn can take this question.

It's inside the other, that is a collection of several items. So by selling more volume, and therefore, generating more revenue, which is good. you also incur additional sales costs the moving cost tensive, et cetera. So that will come as part of that because not always having sales that goes straight through overall. The commissions, which is also part of the vending business inside here, decreased a little bit in the quarter. And we also have the, what we call the variable transportation also the [indiscernible] also those again because we're moving more product in the quarter. So all of those mixed elements will come in that category.

[Interpreted] Okay. Then that means the variable promotion costs, the rebate or the kind of impact is coming from those impacted by that. And the negative amount is big for your other is something that is not negative. Is that correct understanding?

Absolutely, 100%. It's the cost of doing business.

Igarashi-san from Daiwa Securities.

Igarashi-san from Daiwa Securities speaking. So quickly, I have one question regarding the volume. So sustainability of the successful volume growth. So plus 4% is very good. In April, it's plus 2% in the first report. So is it slowing down or in the first quarter, so it was too good. So could you give us a comment regarding the growth in the volume?

Thank you for the question. Regarding the sustainability or the growth of the volume and also how to assess the 2% growth in April? Alex will answer.

Thank you. Alex, the preliminary report in April is plus 2% flash so far, we believe we continue to outperform the market, which is a positive thing. What we're seeing in the volume impact is, as you recall, we took the price increase of [indiscernible] that's negatively impacting the trend in the early part of the month. So nevertheless, I think what I want to call out is the fact that we believe to be outperforming the market, and we feel confident about the outlook that we have to deliver the JPY 35 billion profit for the full year.

Next person is Sumoge-san from BofA.

[Interpreted] This is Sumoge speaking from BofA. I know this has been repeating questions. I know this has been repeating questions. I would like to ask about the cost side of about the JPY 2 billion to JPY 4 billion cost push. In Slide 11, you mentioned about those plans. And then you mentioned that in the first half, you don't really have much impact. But then can I understand that you are expecting some kind of impact in the second half? And also, you mentioned about JPY 2 billion to JPY 4 billion is a potential one. They may not happen. But then as you know, if we see the price of the oil stabilize after the April, is that the kind of scenario that you assume in here?

[Interpreted] Thank you, Sumoge-san. Your question is about the cost pressure for this year. So I would like to ask Bjorn to pick up this question.

Again, we reiterated our belief that the net impact will be about JPY 2 billion to JPY 4 billion in our commodity and currency basket for this year. And again, speculating about the future is not very helpful here. We are, again, committed to deliver our JPY 35 billion, and we will manage towards that.

But I think instead, I would remind you of what happened back in 2022 when the Ukraine crisis hit, again, the commodity and the currency market. You saw what we did and we manage that through probably 1 of the bigger impacts to the beverage business ever in Japan. And you heard also the termination of Alex saying we are seriously considering price increases, which is exactly what happened when that Ukraine crisis started flowing through into the commodity. So rest assured, we are on that, and we will manage towards our targets.

[Interpreted] Understood. What about the time line? Because in your presentation on Page 15, first half, you're not expecting any impact, but then you are saying about like maybe second half, you might be having APAC. So what do you think about the time line?

Thank you for your question. The first half and the second half assumption, I would Bjorn-san also to answer these questions.

Yes. Again, Sumoge-san, we're operating with different scenarios that we're managing, again with the purpose of delivering our profits. We estimate as we also said in the prepared remarks that in the foreseeable future, the effects of this event will start subsiding and that's what we're managing against. So I'll leave it at that. Thank you.

[Interpreted] Thank you very much. Thank you for your question. Since we are running over time, I would like to pick the final question.

[indiscernible] from Goldman Sachs.

[Interpreted] I also like to ask a question related to Middle East situation, and you've already explained the cost impact. So it's clear to me, but how about the procurement risk. correct to understand that you have no -- almost no risk in the procurement aspects such as PET, bot or packages how about the physical procurement risk. I'd like to understand how you see it.

[Interpreted] Thank you very much for your question. About the impact of Middle East situation, the risk of our procurement, Calin-san will take this question.

I'm Calin here. I'm jumping again here to take this last question. And to try to answer your question as well to make a comment about this continuous concern and questions directed to us of the company about the political situation in the Middle East as well. Well, I can answer very simply the first part of the question. Right now, we are not facing any shortage of product.

Second thing that I can say, in the foreseeable future, we don't foresee having any shortage of road. We can estimate some cost increases that we have measured because of the overall dynamic of the pricing because of the demand and supply situation, but we are confident that through our network, we are able to supply at least to what we have visibility the supply for our raw materials. And I hope that clarifies the overall situation.

Now let me go back to the Middle East situation, which concern everybody. With all due respect to the audience, I think, asking us about scenarios of product shortage and product pricing for 2027, it's at least unrealistic, meaning we are not geopolitical experts, and we are not having the call here to debate political trends, meaning what's going to happen in 2027, I can tell you right now, I don't know and nobody in our company knows what the impact would be, it describes is going to stay here for another 40, I don't know 24 months or 48 months, nobody can estimate it. But we are doing our best estimations for watching our control as well leveraging our power of purchasing in any conditions out there. We need to make sure that no matter the condition out here, we are buying at the best price in the market.

No matter the conditions out there, we need to make sure that we ensure supply as well, we need to make sure that we are as well best industry in ensuring supply. This is the only thing that I can tell you right now and the fact that we have created a very solid business in Japan over the years through our transformation. The fact that we are purchasing through the consortium, which is one of the biggest in the world. And third, we are having a very healthy hedging policy, which proved to work over the last years gives us confidence to believe that no matter the scenarios are we will manage above average within the industry in Japan and outside Japan in the world within the Coca-Cola system.

But more than that, going and giving granularity now for quarter 4 impact of costs in 2027, I think that's totally unrealistic to be questioned at this moment in time. And this is what I want to highlight. At this moment in time, we stay committed the results of this year through fantastic rents out there in the market for our company. And with all due respect, the way how I would suggest you read the numbers is that we have over delivered in all the KPIs in quarter 1, not only profitability. More than that, we stay committed for the year-end profit as well for step-by-step 2027, 2028 and 2030, Vision 2030 results.

Now I hope that, that concludes the answers today and as well try to set the scene for how we are looking at the crisis in the Middle East. Thank you very much for your questions and your interest in the business.

[Interpreted] Thank you very much for your questions. With that, we would like to conclude the Q&A session, and we are running over time, and thank you for your patience. And we will put the information in the presentation on our website. So if you have further questions, then please contact the IR team in our company. Thank you very much for your participation.

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

Good afternoon. This is Gomi, Head of Investor Relations at Coca-Cola Bottlers Japan Holdings. Thank you for joining our full year 2025 earnings presentation for analysts and investors. Today, we are joined by our President, Calin Dragan; and CFO, Bjorn Ulgenes. Also with us are Executive Officer and President of the retail company, Alex Gonzalez; Executive Officer, President of the Food Service Company and Chief Business Strategy Officer, Maki Kado; Executive Officer, Chief Supply Chain Officer and Chief Sustainability Officer, Andrew Ferrett; and Executive Officer and Chief Human Resources Officer, Yuki Higashi.

Following prepared remarks, we will be happy to take your questions. Simultaneous interpretation in Japanese and English is available for both today's presentation and the Q&A.

Before we begin, please note that today's presentation contains forward-looking statements and should be considered together with cautionary statements contained in our presentation materials.

With that, I'd like to turn the call over to Calin Dragan. Calin-san, please?

Good afternoon, everyone. This is Calin Dragan. Thank you for joining our earnings call. And first, I will go over the key highlights of today's presentation. Please turn to Slide 3. 2025 was a fantastic year that delivered many remarkable results, increasing our shareholders' value. Business income exceeded our forecast even after they were revised upward twice during the year and reached JPY 24.5 billion, more than doubled than the previous year. Despite the challenging cost environment, we maintained a robust profit growth trend. Over the past 3 years, cumulative business income growth totaled JPY 39 billion.

I would also like to highlight that this JPY 24.5 billion business income includes significant cost increases from external factors such as foreign exchange fluctuations and increased commodity prices. I would also like to emphasize that adjusted business income, excluding the cumulative impact of this factor since 2017 exceeded JPY 50 billion and reached a new record high. This clearly shows that our profitability improvement initiatives are delivering steady results.

Building on the strong earnings performance, we revised our strategic business plan upward in August and announced the new Vision 2030. We set ambitious targets for key metrics and continued our commitment to further increase shareholder value. In October, we also announced an expansion of our shareholder returns. We view this positive cycle where we have consistently improved performance and enhanced shareholder returns to be one of our major achievements for 2025.

In 2026, we will continue this positive momentum as a year of great progress towards achieving our ambitious long-term goals. This year, our business income target is JPY 35 billion. This marks the 4th consecutive year of earnings growth exceeding JPY 10 billion. At the same time, we will enhance shareholder returns, including a 20% year-on-year increase in dividends. And as the -- first year of Vision 2030, we will pursue profit growth and higher shareholder returns to further increase shareholder value.

Now our CFO, Bjorn Ulgenes, will walk you through our financial results in more details.

Thank you, Calin. Good afternoon, everyone. This is Bjorn. Please turn to Slide 5 for the full year profit and loss. In 2025, our profitability improvement measures and other initiatives proved successful. As a result, profits increased significantly following the previous year. Sales volume also performed well and outperformed in the market experiencing negative growth. Revenue remained broadly in line with the previous year and exceeded the revised plan announced in October. Price revisions improved wholesale revenue per case despite the impact of channel mix changes.

Gross profit decreased by JPY 3.1 billion year-over-year. This was mainly due to a weaker channel mix and higher external costs. It also includes a onetime revenue decline linked to changes in Coca-Cola Japan companies marketing investment method. Business income increased significantly by JPY 12.5 billion year-over-year. This was mainly driven by top line growth and cost savings from transformation initiatives.

Factors contributing to the profit increase will be explained shortly. Operating income and net income decreased from previous year. This was primarily due to an impairment loss of JPY 88.4 billion in the Vending business, recorded during the second quarter. EBITDA, a measure of cash generating profitability, rose by JPY 6.7 billion year-on-year to JPY 64.2 billion.

Slide 6 shows segment performance. In 2025, the OTC and Food Service businesses supported revenue growth while the Vending business drove profit growth. In Vending, revenue declined due to lower sales volume from ongoing market contraction and the impact of price revision. However, segment profit improved significantly by JPY 6.1 billion. This was mainly due to transformation benefits including lower depreciation expenses associated with impairments and higher route productivity.

In OTC, the market environment was challenging and volume declined due to price revision. However, growth in online and drugstores and discounters supported overall performance and full year volume remained in line with the previous year. Revenue increased by 1.7%, partially due to price revision. Changes in Coca-Cola Japan companies marketing investment methods had an impact which led to a decrease in segment profit.

The Foodservice business achieved strong sales volume and revenue growth and earnings growth rate that was even higher. This was supported by expanded product offerings, activities to acquire new customers and price revision.

Please turn to Slide 7 for the factors behind the change in business income. Starting from the left, we can see the impact of volume, price and mix. These reflect changes in marginal profit from commercial activities and contribute a positive JPY 8.8 billion year-over-year. The main factors were a negative impact of JPY 6 billion from volume effect, including channel mix, a positive impact of JPY 18.8 billion from pricing and a negative impact of JPY 4 billion from other factors.

While channel mix deteriorated due to shifts in consumer trends, improved wholesale revenue per case from price revisions is steadily supporting results. Transformation benefits exceeded initial projections by a significant margin and reached JPY 6.9 billion. Major contributions came from commercial and supply chain with vending transformation, particularly exceeding expectations. Promotional expenses increased by JPY 0.9 billion year-over-year. Spending increased due to intensified activities to capture peak season demand and secure shelf space ahead of the October price revision. However, the increase was well controlled versus the initial plan through appropriate marketing investments based on market conditions and ROI.

Manufacturing decreased by JPY 2.2 billion compared to the previous year due to cost savings at manufacturing sites and in the procurement process. Other costs increased by JPY 3.2 billion year-over-year. This was mainly due to higher outsourcing fees, logistics costs and vehicle and facility-related expenses, despite lower personnel expense. It also include special factors such as reduced depreciation following the vending business impairment and changes in Coca-Cola Japan companies marketing method.

Commodity and utility costs increased by JPY 1.3 billion. Of this increase, JPY 1.4 billion was attributable to commodity market and ForEx rates, while utility costs decreased by JPY 0.1 billion.

Next slide onwards is on commercial activities. Slide 8 shows sales volume performance by channel and category. Full year sales volume was flat year-over-year despite negative impacts from price revision. This was achieved by strengthening core categories, expanding sales space and executing effective marketplace. As a result, we outperformed declining markets. Wholesale revenue per case also improved across all channels following price revision benefits. By channel, sales volume for vending and convenience stores declined due to price revision. However, in Vending, wholesale revenue per case improved by JPY 90 year-over-year due to price revision.

In convenient stores, profitability improved through higher wholesale revenue per case, disciplined control of rebates and promotion. Supermarkets, drugstores and discounters face challenging conditions, especially for large PET buffers due to price revisions and the cycling of the previous year's special demand. However, in the fourth quarter, we captured increased demand opportunities and achieve positive volume growth.

Online and Food Service continued to perform well and supported overall volume growth. Online volume increased by 17%, driven by the channel exclusive labelless products and other initiatives. Food Service volume increased by 9%, supported by stronger Sparkling sales at restaurants and related initiatives.

In the Sparkling category, volume increased by 5%, led by Coca-Cola and Coca-Cola Zero. Tea volume grew by 1%, mainly driven by Ayataka, which delivered double-digit growth last year following its successful full product renewal. Ayataka further grew by 2% with the launch and renewal of multiple products, including Ayataka Koi Ryokucha, sports, water and coffee, so volume declines due to the impact of price revision.

Slide 9 shows market share and retail price trends. Our profitability focused commercial activities supported value share growth and maintain price premiums. Market share increased by 0.2 percentage points in total channel value share and 0.5 percentage points in volume share. Despite tough market conditions, our volume continued to outperform the market and contributed to positive value share growth.

In Vending, the market remained challenging and value share declined. However, effective demand capture measures, including Coke ON campaigns, supported volume share growth, while wholesale revenue per case improved through price revision.

In the OTC channel, value share declined due to volume decreases from price revisions and channel and package mix. However, in the fourth quarter, we capitalized on increased demand opportunities resulting in a 0.6 percentage point increase in value share, showing recent improvement. Our products continue to maintain the price premium relative to the industry average. In October last year, we implemented our 8th price revisions since 2022 and retail prices continue to show an improvement trend year-over-year.

Slide 10 covers key topics in our 2025 commercial activity. Despite continued challenging market conditions in 2025, we implemented price revisions to improve profitability while enhancing competitiveness and achieving volume growth performance of the market. In 2025, in line with our profitability focused strategy, we implemented price revisions twice in May and October and work to maintain and improve shipment prices after the revision. The effects of these price revisions have materialized as planned and contributed significantly to profitability.

Alongside price revisions, we flexibly controlled rebates and promotional costs. Through ROI-focused marketing activities, we work to contain costs and allocated resources to mid- to long-term growth investments. We have also announced ahead of the industry, our 9th price revision this March, targeting Green Tea products. This shows our strong commitment to further profitability improvements in an environment of rising industry costs. From a competitive perspective, we also delivered solid results. By strengthening core categories, expanding sales pace and executing effective marketing, our sales volume consistently outperformed the market experiencing negative growth throughout the year.

Implementing these growth strategies within clearly defined business units has led to a more effective business operations and performance management, contributing to enhanced competitiveness and improved results. We are confident this will form the foundation for our mid- to long-term growth.

Slide 11 explains our sustainability and human resource strategies for sustainable growth. For environmental and community initiatives, we invested in projects that reduce environmental impact in the future. This includes conducting road tests of large trucks using renewable diesel, a new generation biofuel contributing to decarbonization and demonstration projects that generate clean electricity from tea and coffee grounds, while using refurbished high purity CO2 as a manufacturing power source.

At the Osaka, Kansai Expo, we implemented horizontal PET bottle recycling through bottle-to-bottle and introduce groundbreaking initiatives, such as the world's first vending machine powered by hydrogen cartridge. To strengthen human capital, we focused on recruitment, development and retention to enhance the pipeline at each stage to increase the ratio of female manager.

As a result, we achieved our 2025 target of 10% female managers ahead of schedule. We also introduced initiatives to support dual-income households, shared parenting and flexible work style. These ESG initiatives have been highly recognized and our company has been selected for multiple indices. We will continue to advance our efforts towards achieving ESG initiatives, that supports sustainable growth.

From the next slide, Calin will explain our 2026 full year plan.

Thank you, Bjorn. This is Calin again. In our strategic business plan, Vision 2030 aimed at further increasing shareholder value, we have set ambitious shareholder return targets alongside profitability and capital efficiency goals, such as business income exceeding JPY 80 billion and ROIC exceeding 10%. We consider 2026 the first year towards achieving this Vision 2030 to be a crucial year. And as mentioned earlier, we positioned 2026 as a year of great progress towards achieving our ambitious long-term goals. We aim to further increase profits beyond the substantial growth achieved in 2025.

We will also enhance profitability and capital efficiency with a focus on ROIC while further expanding shareholder returns in line with our Vision 2030. Our 2030 targets are ambitious. However, we are confident that steady profit accumulation will allow us to achieve them. With this conviction, we will move ahead with determination in 2026.

Slide 14 outlines the strategic direction for 2026. In commercial, as a key initiative for achieving commercial excellence outlined in Vision 2030, we will further evolve the business operation structure for each business unit aiming to enhance competitiveness and profitability. We will strengthen our market execution through an optimized product portfolio and marketing plans while continuing to focus on profitability driven commercial activities, including price revisions throughout this year. We will also focus on further strengthening customer engagement, which is crucial for accelerating our growth strategy.

Furthermore, through transformation, we will generate an annual cost savings of JPY 6 billion, while building a solid growth foundation for the future. Within the supply chain domain, one of our key pillars, we will continue to focus on strategies that achieve further productivity gains through the local production for local consumption model in both manufacturing and logistics, while strengthening demand-driven agile responses.

Furthermore, in the back office and IT fields, we will further advance data-driven management. To strengthen our financial foundation, we will continue to strive for appropriate capital management and utilization aiming to improve capital efficiency, including optimizing our balance sheet. Through a steady advancement of these initiatives, we aim to achieve business income of JPY 35 billion, an increase of over JPY 10 billion from the previous year, with a ROIC of 4% or higher.

Regarding the shareholder returns, we will increase the annual dividend per share by 20% compared to the previous year and complete the second year of our JPY 30 billion share buyback program by October. While aiming to achieve this ambitious 2026 targets, we also intend to realize the year the positive cycle embodied in 2025, improving performance and expanding shareholder returns.

Now Bjorn will take you through the details of the 2026 earnings plan.

Thank you, Calin. This is Bjorn again. Slide 15 shows the P&L for the full year 2026 plan. For 2026, we plan to achieve revenue of JPY 902.7 billion, representing a 1% increase year-over-year. While we anticipate a 1.5% decrease in sales volume compared to the previous year, due to the continued challenging market environment and the impact of price revisions on volume, we plan to steadily implement profitability improvement measures, including price revisions to achieve a strong improvement in wholesale revenue per case.

Gross profit is targeted to grow by 4.3%, outpacing revenue growth driven by improvements in wholesale revenue per case from price revisions and other factors as well as controls and sales deductions such as rebates. For the 4th consecutive year, we aim to achieve business income growth exceeding JPY 10 billion, targeting JPY 35 billion. We will provide details on the factors driving changes in business income later.

Operating income and net income are projected to improve significantly year-over-year, driven by increased business income and the cycling effect of the impairment loss on the vending business recorded in the previous year. EBITDA is projected to reach JPY 70.1 billion, an increase of JPY 5.9 billion as we steadily enhance our profit-generating capability.

Slide 16 shows the P&L by segment. The Vending business is projected to achieve revenue similar to the previous year despite anticipating continued challenging volume trends across the overall market due to the impact of price revisions. On the other hand, we expect segment profit to increase significantly by JPY 9.3 billion as we accelerate the transformation of our Vending business, leveraging technology. This includes the effect of reduced depreciation expenses following the impairment of the vending business in the previous year, but even excluding this factor, we will achieve solid profit growth.

For the OTC business, volume is projected to decline year-on-year overall, impacted by the challenging market environment and volume declines due to price revision, despite anticipating growth in the robust online segment. In contrast, we anticipate a 2% increase in revenue driven by improved wholesale revenue per case resulting from the effect of price revision. Segment profit is targeted to grow by 5%, exceeding the revenue growth rate through price revision benefits and optimal promotional investments focused on ROI and cost control.

In the Food Service business, we anticipate strong volume growth of 3.5% driven by expanding product offerings to enhance customer proposals and the results of new business development activity. We aim to increase profit through top line growth.

Please turn to Slide 17 for the factors behind the change in business income. We aim for an increase of JPY 10.5 billion year-over-year, driven by top line growth and the realization of transformation benefits. Starting from the left, we can see the impact of volume, price and mix. We target JPY 10.2 billion improvement over the previous year, primarily driven by the positive impact of price revisions, improving wholesale revenue per case while factoring in the continued trends in volume and channel mix.

Cost savings through transformation will generate benefits across all areas; commercial, supply chain, back office and IT, aiming for a total profit contribution of JPY 6 billion. We will steadily advance this plan as outlined in Vision 2030. DME plans to increase its budget by JPY 1 billion from the previous year to further strengthen the growth foundation toward achieving Vision 2030, we will strategically execute marketing investments focused on ROI that drive mid- to long-term growth while taking market conditions into account. Regarding manufacturing, we expect to reduce costs by approximately JPY 0.2 billion through measures such as maximizing utilization rates and yield rates at manufacturing. Other costs are projected to increase by JPY 3.5 billion.

Overall costs are expected to rise as we implement necessary investments and expenditures at appropriate levels to achieve Vision 2030. This figure includes the reduced depreciation effect associated with the impairment of the vending business recorded in the previous year. The impact of commodity prices and utility costs is expected to deteriorate by JPY 1.4 billion compared to the previous year, primarily due to foreign exchange impact. While the upward trend in cost is expected to continue, we believe we have been able to mitigate some of the cost increases through collaboration with the Coca-Cola Systems global procurement organization and our own unique procurement strategy.

Now starting with the next slide, Alex will explain our 2026 commercial strategy.

Alex, please go ahead.

Thank you, Bjorn. Alex here. Slide 18 outlines our 2026 commercial strategy. In commercial, we will enhance competitiveness and profitability through business unit-specific operational framework. As pillars of our commercial strategy, we have established strengthened portfolio edge, ensure profitability focused commercial activities, strengthened relationship with customers and business unit-specific operations.

Now let's move on to the next slide for a detailed explanation. Slide 19. In collaboration with Coca-Cola Japan Company, we will strengthen our portfolio age centered on the 3 pillars you see here. Establishing our core involved strategically focused on our core brands, enabling Coca-Cola Trademark to achieve robust growth last year and deliver one of the highest volume growth rates within the global Coca-Cola system.

This year, we will continue implementing initiatives to expand our share in meal occasions and enhance our shelf presence. Additionally, Ayataka has achieved growth for 2 consecutive years since its full renewal 2 years ago. This year, its third year since renewal, we will implement price revisions while leveraging the competitiveness we have strengthened to capture demand. Starting this month, we have launched a campaign encouraging people to enjoy rice bowls with Ayataka. In Georgia, we will strengthen sales through campaigns at convenience stores and vending machines near workplaces, aiming to establish drinking habits in work settings and expand our customer base. For strategic new products, we will enhance sales by relaunching Karada Sukoyakacha W+ with a renewed focus on promoting its consumption during meals, responding to growing consumer demand for health and wellness.

Additionally, for Ayataka Koi Ryokucha, we will broaden consumer choices in daily life by offering a diverse range of package sizes, meeting a wide variety of drinking needs. Minute Maid Zero Sugar Lemonade was launched in March last year as a juice beverage offering zero sugar and zero calories, capturing the growing health consciousness trend. Since its launch, it has been well received and has contributed to the expansion of the growing thirst quenching juice market. We plan to introduce new products and aim for continued growth across the entire series. To deepen connection with consumers, Coca-Cola will leverage FIFA World Cup assets to maximize drinking occasions. Furthermore, the Coke ON app, a key digital engagement tool, has surpassed 65 million downloads, contributing to the growth of repeat users. We will continue to evolve this platform.

Slide 20 is on commercial activities focused on profitability. To maximize profits, pricing strategy will remain a key initiative this year. We will maintain disciplined commercial activities to generate the benefits from the series of price revisions we have implemented. Additionally, we will proceed as planned with the price revisions for green tea products effective for shipments starting March 1. This marks the 9th price revision for our products since 2022. Revision applies to approximately 10% of our total sales volume with the adjustment rate representing an increase of 6.3% to 12.1% of the manufacturer's suggested retail price. Price revisions remain a key measure for improving profitability and form the growth foundation supporting our sustainable profit growth.

We will leverage the gain from our series of price revisions to implement strategic pricing approaches that adapt to changing environments while continuing to explore further price revisions. We will also focus on mix improvement and strategic growth investments, implementing profitability focused commercial activities from a broader perspective.

We will strengthen sales of profitable small package products and high value-added products to strategically deploy optimal products and packages tailored to customer profiles and competitive environment and focus on ROI-driven marketing investments from a mid- to long-term perspective. By executing these initiatives, reliably under a strong partnership with our customers, we will achieve improved profitability.

From Slide 21, we will now explain business unit specific operations. In the Vending business, we will enhance profitability and capital efficiency through technology-driven transformation. This year, we will accelerate the placement of new profitable vending machines. This will be achieved by introducing new targeting tools for placement locations, building a digital platform that combines vast amounts of data to gain insights into locations with promising profitability and revamping our operational processes to enable efficient and effective new placements.

We will further enhance sales and operational efficiency by focusing on strategic assortment and flexible pricing and packaging strategy. Regarding assortments, we will improve the quality and precision of our initiatives. So just updating the AI engine of the assortment system introduced last year, while also sequentially rolling out measures to achieve optimal pricing and packaging tailored to each location, implementing this through ongoing testing.

Additionally, as part of our digital marketing efforts, we will continue to strengthen initiatives on the smartphone app, Coke ON. We will implement individualized strategies based on usage patterns and sales data to acquire new users and increase purchase frequency. Furthermore, to strengthen the foundation of the vending business, we will work to optimize costs and capital investment by reviewing operational route designs, revising transaction terms, effectively utilizing equipment and prioritizing system investments focused on return on investment.

Slide 22 covers the growth strategies for the OTC business and the Food Service business. In the OTC business, we will thoroughly execute market strategies tailored to each area and stores unique characteristics. We will focus on establishing core products as staples aligned with consumer needs, while aiming to expand shelf exposure, particularly for Sparkling and Tea.

In convenience stores, we will pursue the development of customer exclusive products. We will also appropriately manage and execute promotional investments, including rebates based on ROI. Investment will be directed to our initiatives aimed at fostering buying habits, such as implementing digital-driven promotions and integrating retail media with in-store activation. Furthermore, focus on enhancing proposal capabilities through AI and strengthening comprehensive collaboration with customers to build a foundational -- for sustainable, high-quality profit growth.

In Food Service business, we'll focus on expanding beverage consumption occasions by strengthening tailored proposals for each customers and building a strategic partnership with customers that leverage our strengths. We will optimize equipment and product assortment with a focus on profitability while also leveraging digital tools to stimulate demand. By concentrating on effective and efficient activities and creating drinking occasions, we will strive to expand business opportunities.

I will hand it back now to Bjorn.

Alex, thank you. This is Bjorn. Slide 23 outlines our initiatives in the supply chain and back-office IT. We will build a robust business foundation through a transformation to achieve Vision 2030. In supply chain, we will continue to enhance productivity by further promoting the local production for local consumption model in both manufacturing and logistics. This year, we will establish a new integrated logistics center, IDC, in the Kanto region, following last year's launch of such a center in the Kyushu area. Leveraging our accumulated knowledge, we will accelerate the reorganization of our logistics network, including the consolidation of product inventory and logistic hubs.

Additionally, we will fully implement the new supply planning platform introduced by the end of 2025 as the foundation for our SOP process. By leveraging AI and utilizing detailed data and analytical capability, we will strive to further improve the process. Additionally, in the second half of this year, we plan to commence operations for new aseptic production lines at our Saitama plant,, which involves modifying parts of the existing production line. This will enhance overall manufacturing capacity in the country region.

The back office and IT areas, we will further advance the standardization and streamlining of business process. We will also integrate various IT systems and data to drive data-driven management. Preparations for the future introduction of a new core system will also be undertaken. We will accelerate these initiatives by leveraging access to DX best practices within the global Coca-Cola system.

Please turn to Slide 24. I will outline our financial strategy and shareholder returns. Each business unit will manage and enhance not only profitability, but the ROIC as well, which will lead to an improvement in the company-wide ROIC. We will also focus on executing capital investments with an emphasis on ROIC and on initiatives to optimize the balance sheet. ROIC improved by 1.8 percentage points year-on-year in 2025, reaching 3%. This year, we aim to improve it by at least another percentage point targeting 4% or higher.

We will also focus on improving our cash generation capabilities, which serve as the foundation for expanding shareholder returns. While we have a JPY 60 billion corporate bond repayments due this September, we will consider borrowing and refinancing options while keeping an eye on mid- to long-term funding needs and considering balance sheet leverage. Our earnings power is steadily improving, and we will continue to allocate the generated cash appropriately between growth investments and shareholder returns.

Regarding shareholder returns, we will expand them as planned on the Vision 2030. The dividend, based on our progressive dividend policy, we plan to increase dividends for the third consecutive year. This year's annual dividend per share is planned to be JPY 72, a 20% increase from the previous year that grew 13%.

Furthermore, the share buyback program totaling JPY 30 billion. Now it is second consecutive year and implemented since last November, is progressing as planned and is scheduled for completion by the end of October. Whilst details for the 2027 program has not yet been decided, based on previous levels, we are considering a buyback equivalent of JPY 30 billion or more.

Now finally, for the summary. Maki, please take it.

Thank you, Bjorn. This is Maki. Allow me to conclude today's session. Please turn to Slide 25. Once again, 2025 delivered outstanding results and proved to be a remarkable year. The growth foundation we gained through transformation pursued even under challenging conditions, combined with profitability-focused business activities contributed to increased profits and enable us to achieve significant progress. The substantial improvement in performance we have realized thus far provides momentum and confidence toward achieving our ambitious Vision 2030 goals.

Furthermore, I would like to reiterate our strong commitment to enhancing shareholder returns and our track record of delivering results. To increase shareholder value, it is crucial to create a positive cycle by simultaneously improving profitability and capital efficiency while expanding shareholder returns. We believe that embodying this cycle represents a significant achievement contributing to the realization of Vision 2030.

Moreover, based on our track record to date, and the outlook for 2026 and beyond, we are now setting a new target for business income in 2027 at between JPY 45 billion and JPY 50 billion. While this is an ambitious target, we believe it is achievable, given our track record and the steady progress of key initiatives according to plan. This further strengthens our commitment to the Vision 2030 goal of over JPY 80 billion in business income. To ensure the growth trajectory towards 2030 outlined here, the success of 2026, the first year of Vision 2030 is of crucial importance. By executing the strategy explained today, with unwavering focus, we will firmly achieve our 2026 business income target of JPY 35 billion and launch Vision 2030 with a strong momentum, aiming to further increase shareholder value.

That concludes today's presentation. Thank you for your attention.

Now we will move on to the Q&A session. Gomi-san please take it from here.

Thank you, Kado-san. This Q&A session is intended for analysts and investors. Members of the media are kindly asked to refrain from asking questions at this time as a separate session will be held later today. [Operator Instructions] We will now begin the Q&A session. Operator, please proceed.

[Operator Instructions] Ihara-san from UBS Securities.

This is Ihara speaking. So I would like to ask one question. On Page 25, you were talking about like JPY 45 billion to JPY 50 billion for 2027, the return is also very strong in commitment in the tone. So I feel a confidence in the management here. But on the other hand, probably by looking through the length of the stock market, we were wondering the external environment is really harsh, but you have a very, very strong confidence. I feel that the communication is a little bit weak in here. So my question is when it comes to mid- to long-term plan, I know you are very confident, but what is the reason behind your confidence? I know there are something obvious to us, but there must be something that we are not yet realizing. I would like to understand where the confidence comes up from -- within your company?

Thank you, Ihara-san, for your question. From the midterm mid- to long-term perspective, you would like to understand why you are confident about this plan? So Bjorn-san, would you like to pick up this question, please?

Ihara-san, thank you for the question. So as you said, we are confident about the trajectory our business is on. And that's why we also thought it would be helpful for you to see a 2-year range so you can evaluate how we are progressing towards those strategic targets. And I think the root of your question, if I got the translation correct, is what's the source of the confidence? I think there are several things.

One, we have a clear vision where we're going. We know our targets, we know our KPIs and the whole purpose is executing against that. Everything will stand and fall on commercial execution. And every day, we're seeing the 3-legged business unit approach we have or segments, as we also call them, continue to perform very well according to the job ticket they have been assigned. So that's the overall commercial part. And if we have time, maybe Alex and Maki can build on that.

The second part is transformation. You saw very strong results for transformation in 2025, and we continue to build on that across the board, the Commercial business units, supply chain and back office. And three, you also see from the shareholder-related results that we're putting out there with the dividends, the share buybacks and the commitment to continue, so is the source of a very strong balance sheet. So overall, we believe these key fundamental elements will enable us to deliver our targets. Thank you.

Ihara-san, Alex here. Just to provide a little bit more color on the business unit. I think to begin with Vending, clearly, we have over the last 3 years and particularly last year, driven a significant profit growth back to the strategic role of this business unit in Vision 2030. And we will continue to accelerate beyond the learnings of what we have captured until now. And again, back to the track record of delivering in a very challenging environment, we have been able to grow ahead of the market, indeed, the market growth.

Particularly with Vending, we will move further into more granular growth looking at unlocking opportunities beyond the total Japan but really looking at where by subsegment closures and location level and unlocking and deploying the tools and the data-driven strategies back to placement back to how are we allocating the capital in the market and how are we driving assortment. But just to give you a color on Vending.

Thank you, Ihara-san. So I hope that answered your question. Operator, please put through the next question.

Next person with a question, SMBC Nikko Securities, Furuta-san, please go ahead.

SMBC Nikko Securities, Furuta speaking. So I have one question. So the concept behind the guidance for this term. So volume mix effect will be much higher than last year. So there is an impact of the price revision in last October and also deterioration of channel mix. And also -- so not many manufacturers announced the price division. So considering everything, how are you going to deliver on the plan for this term for 2026.

Furuta-san, thank you for your question. So in the guidance for 2026, so there is a tough situation in the volume price mix and how we can deliver on the high target. Bjorn will answer the question. Bjorn-san please.

Thank you, Furuta-san. So I think the essence of how we're going to deliver the plan is included in our waterfall. So let me try to put some context around it. One, we believe the Commercial profit will increase, which is a combination of what I said to Ihara-san's question around 3 business units executing their job ticket. And yes, as we also said, there are some challenges in the market with, for instance, Vending, not growing as fast as OTC and Food Service. But overall, we believe the combination of focused Commercial plans, price increases and a good management of our trade investments will deliver the commercial profit.

When it comes to transformation, I think you would agree with me that we have delivered on our promise to change the business, and we will continue to do so across the board. This is not one specific business unit or function carrying the transformation. It comes from all the significant functions in the company, including IT. We're managing our investments, as you saw from the waterfall.

Yes, there will be some increases in DME or marketing investments as we support the effect of the price increases and the channel mix. We are continuing the excellent track record in our manufacturing and our logistics to again, make sure we manage cost per case and in our investments. And we are offsetting a lot of the inflation we see coming through, especially on third-party outsourcing expenses and logistics in a good way to overall manage our performance. There is impact from a weaker yen that continues to hit the commodity basket. But overall, I think a very balanced way of achieving our 2026 guidance.

Operator, could you move on to the next person with a question?

Saji-san, from Mizuho Securities.

I have a question for Slide 25. For next year's guidance, thank you very much for the next year's guidance. And this year, the next 2026, except the depreciation is JPY 6 billion, JPY 7 billion, profit has increased. By 2027, in that sense, the depreciation -- because of the impairment, impact will be shorter or smaller and the performance amount, I believe the amount will be increased, that is the forecast, I think. But what I'd like to ask is that for 2027, comparing with 2026, the transformation initiatives or what will be the differences for the 2 years? So what is the driver for accelerating the growth? What is your thought?

Saji-san, thank you very much for your question. For next year, what are the factors that are going to increase the profit? And for this, I would like to ask Bjorn to take this question.

Thank you, Saji-san. Excellent question. Let me try to give a little bit of context to it. One, on the commercial arena, as we have said earlier, our main focus is to execute the commercial strategies across the 3 business units with 3 different job tickets. And as you heard earlier, we are surgically focusing on leading on price and therefore, positive price mix that would be one of the elements.

But secondly, also pick up the very important points that Alex had in his prepared remarks and also his answer to Ihara-san, data-driven profit growth. And as we keep on investing in Vending, but also an integrated finding, as you heard about earlier, and overall, in our tech-led transformation programs. All of this will start taking effect, we estimate, from 2027 onwards. So that will give us new insights that we either can't find today or will take a lot of time to develop. We will have them more at our fingertips. And that, again, will enable us to sell smarter and spend market.

So the major changes are going to be primarily internally driven that we can control, but of course, also working, as I said earlier, striving for positive pricing. Hope that gives a little texture to your question. Thank you.

So the transformation initiatives, the positive increment of the profit, so that will expand for 2027. Is that correct?

Correct.

Operator, please move on to the next person.

Daiwa Securities, Igarashi-san.

This is Igarashi from Daiwa Securities. I have a question on the business units. So I would like to hear more about the sales activities, especially Food Service. And I'm seeing that you are having a lot of outcomes and success in the Food Service. And looking at Page 16, it seems in terms of sales, volumes is going up. So you have a positive outcome in this area. And what I have heard so far, it seems that you have expanded lineup and you have new customers that you have achieved as well.

But to be more specific, what kind of success are you really seeing in the sales activities? And when we think about the Food Service right now, so the mix out of your total business is still small. But probably, if you have a great success here, you'll be able to expand it to other businesses? Would that be possible? That is my question.

So your question is about Food Service business, about volume, sales, why is it really strong? And are we able to use the learnings to the other business areas, was another question. And I would like to ask Kado-san to answer this question.

Well, thank you very much for the question. This is Kado-san from Food Service. I would like to mention 3 points. First of all, looking at the past 2 years or so, I would like to say, basically, the foundation part has changed. What I mean by that is, for example, in the past, Bjorn, Alex, they have explained this already, but let me repeat. So we are using more data. So it's data driven than the past, and we're getting all the insights from the data. So we're doing that. And also, our sales members have a stronger skill set. So the capabilities are really being stronger. So we have been really improving the base or the foundation of our business. And I think this is the foundation for success in the couple of past years.

And the second point I want to mention is, again, I have mentioned this before, but we have customers that are winning at. So we want to have a closer collaboration, a very strong relationship with these customers, and that's working as well and that is another source of our growth.

And talking about the future, so how should we proceed in this way. I think what we have to do is we need to make sure that we have more customers that we can win with, we would need to have sales activities based on strong proposals. That will be our ultimate goal. So that's my third point. We have already been doing it; OTC, Vending team, we have been collaborating already. We have been changing information.

Of course, we are sharing our learnings to them, and vice versa, are the learnings from OTC and Vending. So they have a long history in their commercial activities. They have really achieved lots of success as well. So from those teams, we are gaining lots of insight information as well. So it is like it is a vice versa, mutual relationship that's really working. And we want to continue to do that. Thank you very much.

It is already time, but we would like to take one more question. Operator, please move on to the next question. This will be the last question. Thank you.

Sumoge-san from BOA.

Sumoge, from BOA. I would like to ask about the guidance. On Page 17 on your presentation, I would like to understand this. So in others, you said that you are factoring in the reduction of the depreciation from the Vending impairment. But I think other than that, we also have the cost elements here. So I would like to understand what are the other parts. And also, Kyoto has already put up some market investment because you have to secure the volumes since you have hiked the price. But I see your marketing expense is not going up that much. I believe that you are having very good control. So I know it's all in all a very positive trend. But is this feasible? My overlap to other questions, but I would like to understand about the marketing expenses? And also, what are the costs that are increasing?

So you would like to understand about the cost elements on the waterfall chart. I would like Bjorn-san to answer to that detail. Thank you.

Sumoge-san, let me try to give a little picture to you. First, let's start with the others part. So yes, correct, negative JPY 3.5 billion, but that includes the close to JPY 5 billion of the positive impact of the depreciation, correct. So what is happening inside here, we are having inflation as most other companies in Japan, for instance, of logistics and outsourced expenses and overall inflation in general. That's one element, sort of the cost increase part.

The second part, we are also investing, as you heard me said a couple of times today and also Alex talked about in Vending, we are investing ahead of the curve to again reset of how we work with data and using technology level transformations going forward. And you've also heard in our prepared remarks late last year and for this year, we went live with an integrated end-to-end planning system, which again, demands investments for us to be able to reap the benefits later back to my answer to Saji-san earlier about what the future benefits that we're going to see from all of this.

So, net-net, we're seeing cost increases but also investments ahead of the curve in others. When it comes to DME, we are surgically focused, Sumoge-san, on having an ROI when we invest in the marketing activities together with the Coca-Cola company, as you know. So this will depend on the customer landscape. It will depend on the channel and also the competitive environment where we commit to managing these expenses just like we do with every other expense in our P&L. Hopefully, that added a little texture.

We have run over time. So we would like to close the Q&A session for today. All these materials will be uploaded to our corporate website. If you have any questions or feedback, please reach out to IR team. Thank you very much for your participation.

Good evening. This is Gomi, Head of Investor Relations for Coca-Cola Bottlers Japan Holdings. Thank you for joining us today for our third quarter 2025 earnings presentation for analysts and investors.

Today, we have our President, Calin Dragan; and CFO, Bjorn Ulgenes. We are also joined by Executive Officer and President of the Retail Company, Alex Gonzalez; Executive Officer, President of the Food Service Company and Chief Business Strategy Officer, Maki Kado; Executive Officer, Chief Supply Chain Officer and Chief Sustainability Officer, Andrew Ferrett.

Following prepared remarks, we will be happy to take questions. Simultaneous interpretation is both -- in both Japanese and English is being provided for both today's call and the Q&A.

Before we begin, let me remind you that today's presentation contains forward-looking statements and should be considered together with cautionary statements contained in our presentation.

With that, I'd like to turn the call over to Calin Dragan, Calin-san, please.

Good evening, everyone. This is Calin Dragan. And thank you for joining our earnings call. Before I share details of our financial results, this time, we are announcing earnings about 1 week earlier than before and compared to any other major company in the domestic beverage industry. This progress reflects our efforts to standardize and streamline our operations through process reengineering and digitalization. It shows that our transformation initiatives are delivering positive results in this area as well.

Now, let's move on to the financial results. First, I would like to explain the positive trend in our current performance improvement. Please turn to Slide 3. Over the past 4 years, we achieved a robust increase in business income of JPY 39 billion. We highly value this and are very satisfied with this trend of profit growth.

Now looking back in 2021 under the severe business environment, our business income was at a loss of approximately JPY 15 billion. Since then, we focused on profitability-driven commercial activities and transformation of our business, achieving significant results and remarkable performance improvement.

Regarding price revisions, one measure for improving our profitability, we have implemented 8 revisions since 2022, driven by our strong commitment to enhancing profitability. And as a result, this year's business income is expected to reach JPY 24 billion following this upward revision. This JPY 24 billion business income includes the impact of significant cost increases due to external factors not in our control, such as ForEx and commodities.

If would be to exclude this impact, the adjusted business income would exceed JPY 50 billion, reaching the highest level in the history of our company. Overall, business restructuring has led to this very strong performance.

We achieved this business growth together with our customers and partners. In our customer survey satisfaction survey conducted by Advantage, we are recognized as the most highly valued partner within the consumer goods industry and the domestic beverage industry, which includes many local and global companies. This demonstrates that we have built a solid growth foundation and a great partnership.

Our achievement of improved performance based on this robust growth foundation proves the correctness of our strategic direction and gives us great confidence in achieving our upcoming strategic business plan, Vision 2030.

Slide 4 details the largest shareholder return program in our company history announced in Vision 2030. Alongside ambitious growth in business income, we plan to significantly accelerate the pace of expanding shareholder returns in line with our Vision 2030. The JPY 150 billion planned for share buybacks announced in Vision 2030 represents approximately 35% of our market capitalization.

We are pleased to note that, this represents one of the largest buyback amounts relative to market capitalization in the Japan market. Our company has thus created a positive cycle linking improved performance with enhanced shareholder returns, and this announcement is consistent with that approach.

Now, let's turn to today's highlights. Please take a look at Slide 5. I'm very pleased to share another set of strong results with you all. This year, third quarter delivered financial results that demonstrate the steady success of our ongoing initiatives. The third quarter year-to-date business income reached JPY 24.5 billion, 1.7x higher than last year, exceeding the plan that had been revised upwards in August. This strong performance was the solid result of profitability-focused commercial activities and cost savings achieved through transformation and other measures during the peak demand third quarter delivering above plan.

Sales volume also stayed strong in the third quarter, exceeding the growth rate of the overall market. So based on this strong performance, we have decided to further raise our full year business income forecast once again. We are now targeting JPY 24 billion in business income for the full year. This is double of the last year results and 20% above our original plan.

Along with this upward revision, we are enhancing shareholder returns in line with our shareholder value enhancement policy outlined in Vision 2030. Further details will be provided later, but as part of the initiatives, we will implement the cancellation of treasury shares equivalent to 6.5% of the total share issues and increase the year-on-year dividend by 10% compared to the initial plan. Additionally, as previously announced, we will continue to share buyback program starting in November, targeting JPY 30 billion to further enhance shareholder value.

Now, our CFO, Bjorn Ulgenes, will walk you through our financial results in more details.

Thank you, Calin. Good evening, everyone. This is Bjorn. Slide 7 shows the P&L statement for the third quarter year-to-date. Revenue continued to grow and business income gained momentum, resulting in a larger profit increase.

Revenue increased by 1% year-on-year. This was driven by higher wholesale revenue per case of the price revisions despite lower sales volume and weaker channel mix. Gross profit increased by JPY 2.4 billion year-on-year, driven by the benefit of price revisions despite being affected by deteriorating channel mix and rising costs due to external factors.

Business income rose by JPY 9.8 billion year-on-year, driven by higher revenues and cost savings from our transformation initiatives. The third quarter profit increase was the largest among the year's quarters, accelerating the trend of quarterly profit growth. The next slide explains the main factors behind this change in business income.

Operating income and net income decreased year-on-year due to the recording of an impairment loss of JPY 88.1 billion in the vending business during the second quarter, as previously explained.

Now please turn to Slide 8 for factors behind the change in business income. Starting from the left, we can see the impact of volume, price and mix. These reflect changes in marginal profit from our commercial activities, contributing a positive JPY 6.9 billion year-on-year.

The main factors were a negative impact of JPY 6.3 billion from volume, including channel mix and a positive impact of JPY 15.1 billion from unit price and a negative impact of JPY 1.9 billion from other factors. Although, lower volume and an unfavorable channel mix affected results due to changing consumption trends, improved wholesale revenue per case from price revisions made a strong positive contribution.

Transformation benefits totaled JPY 4.6 billion. This is mainly driven by strong results from vending transformation and improved efficiency in our supply chain network. In particular, the vending transformation is progressing ahead of our original plan.

Marketing expenses increased by JPY 1.2 billion compared to the previous year. This increase reflected strengthening activities in the third quarter to capture peak season demand and secure shelf space ahead of price revisions in October. However, spending remained below the initial plan, thanks to careful investments based on return on investments and market conditions.

Manufacturing costs fell by JPY 1.7 billion compared to the previous year. This was the result of cost-saving measures implemented at our production sites and through more efficient procurement processes.

Other costs increased by JPY 700 million year-on-year. This was mainly due to higher outsource fees, logistics costs and vehicle and facility expenses despite reduced personnel costs. This figure also reflects special factors, including lower depreciation expenses following the impairment loss of the vending business.

Commodity and utility costs increased by JPY 1.5 billion. Market conditions and exchange rate impacts accounted for JPY 1.4 billion of this increase, while higher energy costs added a further JPY 100 million.

Next is Slide 9, outlining sales volume performance by channel and category. Third quarter year-to-date sales volume was impacted by past price revisions. The cycling impact of last year's strong Ayataka renewal and the temporary surge in demand following the Nankai Trough emergency notice. However, contributions from strengthening core categories, expanded sales force base and effective marketing helped limit the decline to 1%, outperforming the overall market.

Wholesale revenue per case achieved a double-digit yen improvement year-on-year across all channels, reflecting the impact of price revisions.

Supermarket sales volume decreased by 4%, primarily due to lower volumes of tea beverages and large PET water bottles, influenced by price changes and the cycling of last year's performance. At drugstores and discounters, growth in medium-sized PET coffee bottles helped limit the volume decline to 1%.

At convenience stores, volume decreased by 5%, but profit rose, thanks to a profit-focused strategy that included optimization of promotions. In vending, market conditions remain tough with volume down 5%. However, price revisions continue to have a positive impact, improving wholesale revenue per case by JPY 98.

In Retail and Foodservice, volume increased by 6%, supporting by new customer acquisitions and stronger sales in the sparkling category. Online volume grew by 17%, driven by growth in the tea category and the launch of channel exclusive products.

By category, Sparkling grew 3%, driven by contributions from Coca-Cola and Coca-Cola Zero. Tea volume held was flat year-on-year, supported by Ayataka's solid sales after last year's successful renewal and the strong performance of KochaKaden.

Sports drinks and water saw a decline due to factors, including price revisions and cycling of the Nankai Trough emergency notice. Coffee volume remained at last year's levels, supported by contributions from medium-sized PET bottles despite tough competition.

Slide 10 shows market share and retail price trends. Profitability focused sales activities helped us grow our value share and maintain price premiums. Market share increased by 0.1 points in the total channel value share and by 0.4 points in volume share. We are very pleased that we achieved both higher volume share and positive value share growth even while implementing price revisions.

Vending volume share increased by 0.3 points even as the overall market continued to shrink. The strong growth in volume share compared to value share reflects the impact of product mix, while our wholesale revenue per case showing solid improvement, as mentioned earlier.

In the OTC channel, share declined due to lower volume and changes in channel and package mix. However, profitability is improving steadily here as well, supported by higher wholesale revenue per case.

Our retail prices maintained a premium relative to the industry average. We have applied price revisions with discipline and retail prices for both small and large PET bottles have improved compared to last year.

Now on the next slide, Alex will explain the status of our commercial activities. Alex, over to you.

Good evening. This is Alex. Slide 12 covers the status of our commercial activities. In the third quarter, we continued to execute our profitability-focused commercial strategy while also building a stronger foundation for future growth.

We are proud that our sales volume outperformed the overall market growth rate during the third quarter peak demand period while focusing on profitability. Our targeted summer sales initiatives helped boost volume.

By focusing on our core categories and leveraging marketing that connected with drinking occasions, along with effective digital promotions, we maximize in-store exposure. We also offset last year's cycling effect of the Ayataka renewal by introducing new products like Ayataka Koi Ryokucha was a key point.

In addition, we expanded sales opportunities by rolling out packaging tailored to consumer needs and by executing growth strategies aligned with each channel, supported volumes. Our efforts to build a foundation for further profit growth also moved forward steadily. Price revisions, which are key to profit growth are progressing smoothly.

We're maintaining improved shipment prices achieved through previous revisions, and these are contributing to improved profitability as planned. We have also been preparing for the price revisions that began in October.

Looking ahead, we aim to implement further price revisions for our green cheese products, market suggested retail price by up to JPY 20 per bottle by the first quarter of next year.

Tea leaf prices have continued to rise since the second half of this year and expected to reach a level of 3 to 5x from last year. We expect this trend to significantly impact the entire industry. We see this action as a necessary response to cost increases within the Coca-Cola system.

From the perspective of both growth investment and cost control, we made appropriate marketing investments during the third quarter peak season while keeping annual sales promotions expenses below plan.

We also focus on strengthening our growth foundation through customer engagement and vending transformation, further reinforcing the foundation for future expansion. As Calin explained earlier, our commercial capabilities are highly valued by our customers and represent a key strength of our company.

Moving forward, we will continue to enhance our market execution capabilities on this solid foundation of engagement and pursue further growth.

Slide 13 covers our third quarter marketing activities. To strengthen our core brand, we launched the CoChiLu campaign, encouraging consumers to enjoy Coca-Cola wood chicken through joint promotions that lever our strong partnership with McDonald's. We also partnered with Star Wars, releasing limited edition products and boosting in-store visibility using the campaign as a hook to successfully attract a wide range of consumers.

As for new products, we introduced FANTA Amazuppai Lemon and brought FANTA Fruit Punch, an iconic FANTA flavor from the 1980s and 1990s for a limited time to strengthen the sparkling beverage category.

As part of our experiential marketing, we ran a campaign where customers could enter a code found inside their bottle cap for a chance to win tickets to Coca-Cola X Fes 2025. We also rolled out vending machines across Japan set 2 degrees colder than usual to capture demand during the intense summer heat.

Next is highlights of our fourth quarter marketing activities. Coca-Cola launched its winter campaign in October, featuring promotions with exclusive Coca-Cola gifts to boost brand engagement. Georgia will also run gift campaigns, including invitations to live concerts by our brand ambassador, Adam.

As for new products, this month, we have launched Kochakaden CRAFTEA Grape mix tea from the popular Kochakaden series. In November, we will release FANTA Golden Apple, a flavor loved across generations and highly requested by consumers.

As part of our experiential marketing, we will partner with Japan's national baseball team, Samurai Japan for a campaign on the Coke ON app. Users will have the chance to win tickets to the WBSC Premier 12 tournament as well as original Samurai Japan merchandise. Additionally, for the consistently strong Ayataka brand, we will also launch a winter campaign to further boost engagement and sales.

Now for the further future outlook, I'll hand back to Bjorn.

Thank you, Alex. This is Bjorn again. From here, we will cover the revised full year earnings forecast for 2025 and the expansion of shareholder returns. So please turn to slide 16. This is our second upward revision of the full year earnings forecast this year. Business income has been revised upward once again, showing robust progress in our core performance. This revision reflects the fact that year-to-date business income exceeded the plan, supported by profitability-focused commercial activities and transformation benefits. As a result, we are raising the full year business income target to JPY 24 billion, which is 20% above the initial plan and double the previous year's figure.

Regarding sales volume and revenue, the previous revision was made prior to the peak demand period, and so detailed updates were not provided. This time, we are revising our plans based on the latest market conditions. In the fourth quarter, we will focus on achieving the revised full year business income target of JPY 24 billion, while continuing to strengthen our foundation for profit growth beyond 2026. This includes implementing price revisions in October, making mid- to long-term marketing investments and driving further transformation.

As Alex mentioned, we are also preparing additional price revision for green tea products in the first quarter of 2026. Our October sales volume showed mid-single-digit growth, maintaining a strong trend. We will leverage this momentum to achieve our full year business income target of JPY 24 billion.

Slide 17 shows the revised full year 2025 profit and loss plan following the upward revision. Full year revenue is now projected at JPY 887.9 billion, a 0.5% decrease year-on-year. While we expect the positive effects of price revisions as planned, revenue will be impacted by volume declines and channel mix.

Reflecting the current market environment, sales volumes is expected to decrease by 1.4% year-on-year. Full year business income is targeted at JPY 24 billion, double the previous year's figures, driven by profitability-focused commercial activities and transformation benefits. This represents an even more ambitious target and is a JPY 4 billion upward revision from the initial plan.

Key factors affecting business income will be explained on the next slide. The main factors contributing to lower operating income and net income remain largely the same as in the previous revision, such as the impairment loss of the vending business recorded in the second quarter. However, this time, we have newly factored in the additional impact from the revised timing on fixed asset sales.

Slide 18 explains the factors behind the change in business income under the revised plan. For the fiscal year 2025, we are targeting a significant increase of JPY 12 billion in business income compared to last year. This growth will be driven by profitability-focused commercial activities and cost savings from transformation.

On the left side, under volume price/mix, we expect a positive impact of JPY 8.7 billion, driven by increased profit from improved wholesale revenue per case following price revisions. This also reflects the impact of volume declines and channel mix trends in the current market environment.

Transformation-led cost savings aim to contribute JPY 6.7 billion to profit. Transformation benefits have exceeded expectations and initiatives in other areas are also progressing smoothly. This represents an additional JPY 1.5 billion benefit compared to the initial plan.

Marketing expenses are expected to rise by JPY 800 million as we optimize spending in line with marketing market conditions. However, this still represents an improvement of JPY 3.7 billion compared to the initial plan. Manufacturing efficiency has progressed beyond expectations. Cost-saving measures at our manufacturing sites and in procurement are delivering results, contributing JPY 1.3 billion in profit.

Other costs are projected to increase by JPY 2.6 billion as we continue to make strategic investments for future profit growth. This figure also includes factors such as the approximate JPY 5 billion reduction in depreciation expenses from the vending business impairment in the second quarter and the profit impact associated with changes in Coca-Cola Japan's marketing methods.

Commodity and utility costs are expected to worsen by JPY 1.3 billion due to the impact of higher raw material prices. These are the main factors affecting business income in the revised plan.

On the next slide, Maki will explain the expansion of shareholder returns. Maki?

Hello. This is Maki Kado. Please turn to Slide 19. From here, I will provide the explanations. Along with the upward revision of our full year earnings forecast, we have also decided to enhance shareholder returns in line with the shareholder value enhancement policy outlined in Vision 2030.

As new additional measures, we are announcing the cancellation of treasury shares and an upward revision of the dividend forecast. First, regarding the cancellation of treasury shares, we will cancel 12 million shares in November, equivalent to 6.5% of total shares outstanding. This represents nearly all of the treasury stock acquired over the past year. We believe that appropriately canceling treasury shares is an important action that enhances shareholder value. While our Vision 2030 plan calls for cumulative share buyback totaling JPY 150 billion, we will continue to cancel acquired treasury shares at appropriate times going forward.

Next, regarding the upward revision of dividend forecast, we have raised the year-end dividend per share by 10% from the initial plan, revising the full year dividend forecast for 2025 to JPY 60 per share, representing a JPY 7 increase from last year. We will also continue our share buyback program. The JPY 30 billion share buyback announced last November was completed yesterday as planned and another JPY 30 billion buyback will begin this November. By implementing this comprehensive shareholder return program, we aim to further enhance shareholder value.

Regarding shareholder returns, over the past 2 years, we have significantly accelerated efforts to strengthen shareholder returns. This includes our comprehensive shareholder returns announced in November last year and our largest ever shareholder return program included in Vision 2030 this August.

We see it as a major achievement that improved performance and has enabled us to expand shareholder returns, creating a positive cycle. We will continue to build on this positive momentum going forward.

Finally, let me summarize today's presentation. Please turn to Slide 20. This year, we have pursued both profit growth and strengthening foundations for sustainable profit growth, positioning the year as a year to achieve both profit growth and strengthening foundation.

I am very pleased to share this strong update with you today. We have achieved business income growth that exceeded the upward revision announced in August. As a result, we are announcing our second upward revision of the business income plan this year.

Furthermore, we have decided to enhance shareholder returns based on these improved results. I firmly believe this success reflects our ongoing profit focused activities even in a challenging environment and our commitment to the shareholder value enhancement policy outlined in Vision 2030.

We will maintain this positive momentum through the fourth quarter and beyond, working to achieve our full year business income target of JPY 24 billion, double of last year's result. At the same time, we will diligently strengthen our foundation for future growth, including preparations for further price revisions on green tea products to ensure a strong start in 2026.

Next year marks the launch of our ambitious Vision 2030. Building on our solid business momentum and strong track record, we will continue to commit to further improvement performance and expand shareholder returns. We will also keep driving our key initiatives with a mid- to long-term perspective. This concludes today's presentation. Thank you very much for your attention.

With that, I will hand it over to Gomi-san for the Q&A session.

Thank you, Kado-san. This Q&A session is for analysts and investors. For members of the media, please refrain from asking questions as this time as we will have a separate session later today. Due to interpretation please ask only 1 question at a time.

Now, I would like to start the Q&A session. Operator, please begin.

[Interpreted] [Operator Instructions] From UBS Securities, this is Ihara-san.

[Interpreted] This is Ihara from UBS Securities. I have 2 questions I would like to ask. First question is about the third quarter performance. I want to know more details. So, I thought the profitability, you might be struggling a bit more -- a little bit more. So, I was really surprised for the really strong performance. Looking at the third quarter, it seems that the volume is negative for the third quarter actually. And if you go into the details, the manufacturing cost, maybe that is really showing a strong impact. So, what is the background of seeing a drop in the manufacturing cost because it seems that, that is one of the drivers for the good Q3 performance.

Thank you Ihara-san. So, the third quarter profit, you thought that it will be very tough, but it actually seems that we're enjoying lots of profit in the manufacturing side. And what is the background? So Bjorn-san, would you like to answer this question?

Thank you, Ihara-san, for the question. We are, as you heard from the prepared remarks, extremely pleased with the Q3 performance, where we are, as we also heard, outperforming the market. And when it comes to the details behind it, I think it's very important to see we had -- if you look at the waterfall that we provided, we have a very balanced and I think very strong performance delivery across all the levers of the business.

First and foremost, we're growing commercial profits, which is important. We continue to drive transformation savings in the business, again, pushing -- changing how we work and investing in future digitization. You also mentioned the manufacturing cost, which, of course, helps, which also includes procurement benefits that we have implemented in the quarter, and also how we utilize utilities, for instance, inside manufacturing. So overall, very pleased with the quarter and the overall performance of our profit delivery.

[Interpreted] And I want to focus on the manufacturing cost actually. More details there will be helpful. So looking at the full year number, the manufacturing cost reduction, there was a certain number. But is this like a onetime thing? Or are you going to expect more savings in the manufacturing area next fiscal year?

So Ihara-san, thank you very much for the additional question. So, you are wondering about Q4. And if you calculate backwards from the full year number, it seems that Q4 will be a little bit shy in the numbers. So, you're wondering about the background for that. Bjorn-san, do you want to answer again?

Thank you, Ihara-san. Bjorn again. Manufacturing cost, remember, is a function of several things. One is the volume that supply chain is producing and putting through our network. And secondly, you have the impacts of how they utilize the resources, as I said earlier, for instance, water and energy. And then you have the procurement part.

So you always see variations in manufacturing costs going up and down basically daily, weekly, monthly and quarterly. However, when it comes to transformations, the supply chain is really pushing forward. And as you heard in my earlier parts of the prepared remarks, supply chain is the second driver of our transformation savings year-to-date, and it will continue to be so as we go into the future.

So we're very pleased, as we said earlier, with the transformation efforts, you will see these continue to flow through into the P&L, including manufacturing, but also vending and back office as we have talked about earlier. So, thank you for that.

[Interpreted] So, if I could move on to my second question. So, the price revision from October, I want to know more details. So, in the third quarter, looking at the revenue per case compared to the second quarter, I think the impact is smaller. In the fourth quarter, looking at your plan, the revenue per case, it seems that it's getting deteriorated by like 3% or so. You mentioned that you have mid-single-digit growth in October, but I'm not really sure if that is the case. So, I'm just wondering what is going to be the situation after October after you fully kick in the price revision?

Well, thank you very much. So, we have revised the price from October. So, I would like Alex-san to provide a little bit more detail on that.

This is Alex. First and foremost, I think it's clear, we evaluate the series of price revisions positively overall contributing to profitability. The price revisions are being implemented as scheduled starting October 1. It's too early to evaluate as they have been implemented. I think it's important we're strategically raising the shipment prices in consideration of the market conditions with implementation expected to be mostly completed within this year.

I think also just want to reiterate what I also said in the prepared remarks, looking ahead, we aim to implement additional price increases of up to JPY 20 per bottle for green tea as by the first quarter of 2026. The increasing costs are putting pressure on the beverage industry, make it urgently for the industry to secure profitability. And this decision to implement additional price revisions proves again that we at CCBI, we walk the talk, and we lead the industry towards more rational pricing in order to shape healthier industry dynamics.

Operator, we would like to move on to the next question.

[Interpreted] Next person is Morita-san from Nomura Securities.

[Interpreted] This is Morita from Nomura Securities. I have 2 questions. First is about the tea leaves costs. So, with regard to this cost increase, is this more to do with the lower cost that CCJC should bear? Am I understanding it right? Because if the inflation happens for the tea leaves, it means that the cost is going up as in like you are going to pay more to the CCJC -- or are you paying more to the outsiders?

Thank you, Morita-san, for your question. If we see further increase in tea leaves cost, I would like to ask Bjorn-san to take this question.

Thank you, Morita-san. So first and foremost, yes, we're seeing market movements in the cost of green tea leaves, which are quite significant. And you also heard Alex and Maki in the prepared remarks underscoring the opportunity for the industry to take price across as we have done now in October, and also for specifically the green tea business.

So we believe this is something that's going to hit the industry overall. And again, it's a great opportunity to again look at pricing. we're not seeing any changes in the incidence model you're referring to with CCJC. But as, of course, we take up price in the market, a percentage of that will naturally go to CCJC. But overall, very confident with the price increases we're pulling through and looking forward to see it happening in the marketplace.

[Interpreted] So going forward, do you -- are you -- is there any potential that you will see this incidence-based model will change over time?

Thank you for your question. Your question is, is there any possibility that the CCJC will revise the pricing for the incidence pricing model? So Bjorn-san, would you like to answer this question?

Thank you, Morita-san. There is no indications of anything like that happening. We are on an incidence-based pricing model with the Coca-Cola Company as we have spoken about many times, and we do not expect any changes to that. So, the answer is no.

[Interpreted] So, my second question is, so you are going to stock up JPY 1 billion on the BI, so it's wonderful. So, I was just understanding that SG&A is going to be reduced by JPY 18.1 billion. So, when it comes to this reduction of JPY 18.1 billion in SG&A, what is the factors behind it?

Thank you, Morita-san, for your question. So, within our revision on the BI, your question is how we reduce the SG&A to the tune of 18.8%. Bjorn-san, would you like to answer this question, please?

Thank you, Morita-san. In our P&L management, first and foremost, very happy again to report the second increase in our profit target for this year. When you look at the overall SG&A for our business, I think it's very important to look at it from many angles.

One, we continue the transformation efforts across the board in our business. I mentioned that both in the prepared remarks and in the prior question from Ihara-san. That is impacting everything that we do in this business, as we said, across the 3 business units and in the functions that I referred to.

Secondly, we are also doing heavy cost control, again, across the business units and the different functions. And overall, by doing that, we are able to deliver good cost trajectories while we improve the commercial profit in our business. Therefore, we're able to deliver the strong results you saw in Q3. and we continue or plan to continue that into the full year. Thank you.

[Interpreted] So what are the breakdown? Is this going to be a marketing or any other item? So, what are the plan? And what are the planned items inside that reduction plan?

Thank you, Morita-san, for your follow-up question. So, your question is about the specific items that we are looking to reduce the cost. So Bjorn-san, would you like to follow up, please?

Thank you, Morita-san. There's many elements coming into it. And I think you will appreciate that I can't give you all of the details there in our management accounts. But think of it as overall in the enterprise, as I said earlier, we're cutting back and using return on investments, as we said earlier, as a measure for all our spend.

Secondly, as I said, we're focusing on optimization. That includes people costs, for instance, and other budgetary elements. We also have the effect of the depreciation that is reduced from the vending impairment. You remember, we posted in Q2 and overall, a very, very strong budget and cost control regime that we have in the company. So overall, that gives us a very good trajectory on the cost management side.

Thank you very much, Morita-san. Operator, proceed with the next question.

[Interpreted] Next, we have Miyake-san from Morgan Stanley MUFG.

[Interpreted] This is Miyake from Morgan Stanley. And may be overlapping with the previous questions, but let me ask my question. Up to Q3, BI progress Q3 YTD versus your initial plan, how you can compare? How much is the upside compared to the initial plan? And when you announced your first half results, -- from the initial plan, you said that most of the items in your financial reporting are almost in line with the initial plan. That's what you said at the end of Q2. But you mentioned the effect from vending transformations and so on. So from Q2 to Q3, why you were able to accelerate the performance or how did you accelerate outperformance versus in Japan?

Thank you very much, Miyake-san, for your question. So as for the upward revision you announced this time from Q2 to Q3, how you were able to accelerate the change -- positive change? That was the question. That led to the -- another upward revision. Bjorn-san, please take this question.

Thank you, Miyake-san. So we are, as we said in the prepared remarks, extremely pleased with our Q3 performance. And when we announced back, as you said, in Q2, our performance, we were still ahead of the -- or entering into our peak season, which is the summer period.

During the summer period, as you can see from the Q3 performance and then as I also said earlier, we delivered a very, very balanced and strong profit improvement across all the levers that we can control in the business. We had good commercial growth in the period, even though at certain points, there were some weather challenges, et cetera, and cycling of the Nankai Trough as of last year that you all remember. We continued the transformation. We managed our marketing spend, and we also start flowing through, as you know, the impact of the depreciation of the vending and all the other cost measures we are doing. So therefore, we accelerated into Q3, which, as I said, we're very pleased with. Thank you.

[Interpreted] And you mentioned the depreciation of lending business and the payment to the Coca-Cola Japan company are included in others. And you also mentioned the DME or depreciation. So, what are the major changes from Q2 to Q3 that led to the upward revision this time?

Thank you for your additional questions. From Q2 to Q3, transformation, DME, what exactly have changed from Q2 to Q3? Bjorn-san, please take this question.

Miyake-san, I'll probably repeat some of the items that I answered to your first question because they're very, very much linked. So, inside the cost part that I mentioned, leading to the excellent performance in Q3, we continued the transformation and accelerated it. You saw that also flowing through very nicely in Q3 and the full year. We are also seeing other cost measures that I referenced earlier, both to Ihara-san, Morita-san and yourself, therefore, coming out of the strong cost control. And overall, we're also seeing the benefits then, as I said, of the depreciation flowing through. So overall, that delivers very, very strong performance for the quarter.

I'm sorry -- if I may continue with a little bit of stressing a little bit more, if I may, on the tones of the questions today. I am Calin Dragan trying to add here, just a bit of nuance. My colleagues here are trying to answer about almost any questions since the beginning of the call, all related to our performance.

And I cannot say anything else other than we are extremely pleased with our performance over the quarter 3 and as well year-to-date. But I'm -- as I said earlier, I'm a bit surprised about the tone of the questions that are coming. And it's referring to the start of -- and the reason why I put it at the beginning of the deck today, the first 2 slides and primarily the first slide, which reminds everyone the transformation and the swing in performance of this company.

By now, I was expecting that it is going to drive way more confidence in what we are doing. We are coming out of 9 or 10 quarters, successive quarters of overdelivering our performance. we are producing a swing of almost JPY 40 billion in performance over 36 months or 40 months or so in total. And pretty much we were discussing in this -- in the meetings in the same forum here with all of us, meaning after 3 or 4 years of overdelivering quarter-over-quarter, meaning I'm a little bit surprised about the tone of the question and the misbelief in the performance.

So -- and I'm sorry to say that bluntly at this moment in time. I was thinking that by now, after we led about 8 wave of price increases and every time they were concerned, so is it going to be able to do another one? Well, I always answer, I don't know, but we are going to drive it, and we drove it 8 times so far. and we always overdelivered.

What I'm trying to say here, I think it is a moment of a reset in evaluation of Coca-Cola Bottlers Japan performance. It is quarter-after-quarter delivery, leading industry in initiatives like digitalization, like transformation, cost savings, if you measure our cost savings in one company compared with the entire beverage industry, I think you would be really surprised about the outcomes that will come there.

If you measure our performance in terms of pricing in the market over the last years and the moments when we took price, I think you understand as well that we are leading the industry. And of course, in the circumstances on which we are operating exclusively in Japan, and we are not an integrated company like all the other players in the Japan industry. I think the performance needs to be evaluated in a way more positive way and should be less surprised when Coca-Cola Bottlers Japan deliver performance, especially in a very big quarter like quarter 3.

So the numbers that you are seeing are significant because we are generating a lot of our profitability in quarter 3 every year historically. So that's why probably JPY 1 billion up or down shouldn't be that much of a surprise. I hope that I'm not going to shock you with my very bold statements today. Apologize if I do that. And I'm very happy to take questions if something of what I said is not clear. If everything is okay, I'm happy to continue to take questions and answers on topics that you might be interested in. Thank you so much.

[Interpreted] So as Coca-Cola Bottlers Japan, so you said that you were able to deliver a very strong result by Q3 YTD and you were able to deliver very strong profits even after price revision. So, I'd like to understand why or exactly why that is why we are repeating the similar question.

So, my second question is also referring to the price revisions. And you said that, you are thinking about the ninth wave by the end of Q1. That why are you considering another price increase? And of course, other beverage companies are increasing their prices as well. But -- when we look at other channels except from CVS or vending, I've observed your Ayataka prices are relatively lower priced than your suggested price. So, I understand that price revisions, if there is a justification is a good thing for the industry. But it seems -- so I'd like to understand what is the right approach because when I look at the actual selling prices in the market, it may not be fully reflected. And what are the premises needed for another price hike? As for the green tea price division, that was mentioned in the prepared remarks. So, what is the situation now?

Miyake-san, Alex here. Just probably repeating myself, price revisions, we see it as one of the key levers in driving overall contribution to profitable growth. I think when you step back and look why price increases, the fact is the cost of doing business, the cost of commodities is -- we need to see the Japanese yen to the dollar exchange rate depreciation and with U.S. dollar-denominated commodities, it's natural that the cost, not only for CCBJI but for the industry in general is pressed for price increases to help offset commodities. So, what we're doing here is we are essentially driving price increases to capture the value from the market and creating that value to consumers and customers. And that's what we will continue to be doing. We are growing our consumer base -- we are delivering on our profitability targets sustained quarter-over-quarter. And we are working to continue to earn the right to price by creating and adding that value to consumers. So that is at the essence of what we need to do to win in the long term in Japan.

[Interpreted] So, you continue to observe how the October Wave 8 will be responded or reacted in the market. So, you continue to look at the market reaction of Wave X and make the final decision about Wave 9, understood.

And our scheduled time has already passed, but we still have some people waiting in the queue. So, I'd like to put through the next question.

[Interpreted] Saji-san from Mizuho Securities.

[Interpreted] So I would like to ask a question about the gross profit. For the third quarter, July to September, it's almost flat. And accumulative is minus 0.3% drop and the gross profit rate is about JPY 200 billion increase. So mostly is the S&GA drop. and the channel mix decline, I think this will continue for the future. But this gross profit improvement, how are you planning to improve the gross profit? Cost inflation is continuing and the price hike or price revision is continuing, but the gross profit rate estimate for the future, I would like to ask your estimate for the gross profit.

Saji-san, thank you for your question. The plans for the future for the gross profit. Bjorn-san like to answer this question.

Thank you for the question. Overall, remember for the Q3 that we delivered a very strong profit overall, including the commercial profit, which is, of course, heavily impacted by the gross profit. Inside gross profit, there's many parts that we can influence directly when it comes to improvement.

One is the element you heard us talking about at [ OCM ], which is pricing. We are now executing our eighth price increase and the gross margins, of course, include the effects of the prior 7 ones. That is the major determinant.

The other parts that we are also impacting, again, the controllable elements is how we execute in the marketplace. And you have seen us running the business in 3 business units or 3 segments, which is a major ability to focus and deliver targeted activities to our customers and our consumers. So therefore, how we balance the mix between the business units and the subchannels is also an important way to improve gross margin.

Overall, you also have what we call revenue growth management, which is a very, very important part for any consumer goods company. It includes pure pricing increases, but it's also about how you manage, for instance, terms and conditions with your customers. So overall, going forward, we will continue, just as you heard Calin mentioned earlier, we are continuing to drive price in the industry. We are continuing to execute revenue growth management. We are continuing to have BU and channel-focused execution and brand programs, and we will continue the transformation. So hopefully, that gives you some comfort how we will work on it. Thank you.

[Interpreted] So the mix improvement, you are going to -- the gross profit margin is going to be improved, and that is how we are paying attention to. And in the future, if you -- if we can confirm that in some of the opportunities, I'd like to know that.

Thank you for your question. Operator, please move on to the next question.

[Interpreted] So this is Igarashi-san from Daiwa Securities.

[Interpreted] This is Igarashi from Daiwa Securities. So, I would like to ask about the sales trend from October on. I want to check once again actually. And from October, you have revised the price is executed. And on the other hand, the sales has gone up as a downward revision. So, I'm just wondering about the sales like volume, et cetera, from October on. So, the upside potential downside risk, which is going to be stronger in the fourth quarter? And are you going to invest strongly for the following year as well? This is another question.

Well, thank you very much for the question. So, the sales trend after October is one of the questions. So, I would like to ask Alex-san to answer, please.

Alex here, the October, although it's preliminary sales figures, October volumes is in the mid-single digits, although it's very preliminary, we have preliminary indications that we're outpacing the market, but we will continue to observe and monitor the trends as the retail prices in the market are materialized and we continue to increase our wholesale price in an agile and monitor and flex all the muscles behind our revenue growth management algorithm.

[Interpreted] In November and December, is it going to be negative? Is that your plan?

Well, thank you for the additional question. So, November and December, our volume, is it negative or not? Alex-san, please?

At this point, the numbers that we have reflected in the guidance is our best estimate of what the quarter 4 figures will do, and we will continue to monitor the situation as it progresses.

And we would like to move on to the next question. Next question will be the last question.

[Interpreted] Sumoge-san from BofA Securities.

[Interpreted] This is Sumoge speaking. I hope I'm audible.

Yes, you are. So please go ahead with your question.

[Interpreted] So, I would like to look into more to the midterm vision. So, you mentioned about like JPY 50 billion to JPY 55 billion as a target for 2028.

Sorry, you are very intermittent and sound. Can you repeat that?

[Interpreted] I would like to question about how your vision about the midterm plan. So, in 2028 target, you mentioned about like JPY 50 billion to JPY 55 billion, right? So, every year, you have to stock up like JPY 10 billion and above. So, in the previous quarter, you mentioned about the business unit separation, right? So, you have a vending, OTC and food service. And you mentioned about how you're going to execute separately in this segment. But what is your vision in each segment? For example, OTC and foodservice, they have a high profitability. So, are you going to hike the pricing there? Or are you going to improve the profitability in the vending because they have a lower profitability? So, what would be the approach going forward in each segment in midterm? And maybe the projection of each profitability in 3 segments?

Thank you, Sumoge-san, for your question. Your question is about the growth trajectory and the forecast of our 3 segments going forward. So, Bjorn, would you like to take this question, please?

Thank you, Sumoge-san. Very good, a more long-term question. Very happy to answer that. First and foremost, we are very confident that we can deliver these targets, whether it's the 2028 that we revised up or the 2030. And you can see that confidence coming through in the revisions we have done for this year.

Going into more specifics of your question, yes, overall, the performance will be driven by, first, the 3 business units or segments as we also call them. And secondly, they will be supported by transformation initiatives in supply chain and back office. If we take or step back, if you remember what we spoke about in our update in August, sorry, late July. We said the different business units have different job tickets. So, OTC clearly will be delivering top line growth and profit growth, and that is by far our biggest channel and segment. And the pricing you heard about in the prepared remarks and the comments by Alex earlier are paramount inside that.

Foodservice remains a growth engine, both for top line and for profitability. And you also heard in the prepared remarks that we're doing exceedingly well in this business unit, capturing new customers while driving profitability and pricing.

Vending, the higher focus will be on profitability because as you also mentioned, the profitability or relative profitability there is lower than the other segments. And overall, all of them coming back to my question about supply chain and back office will support through efficiency programs, digital programs, et cetera, to improve the overall profitability for the company. So that's why we're saying with confidence, we believe in our plan, and we're executing it right on the mark on how we envision it. Thank you.

[Interpreted] With regard to the vending business, I would like to dig a little bit deeper here. I know the marginal profit is really high in here, but the -- I know the volumes are kind of struggling in here in this business segment, and you don't really expect it to jump so easily. So, if the volume goes down, maybe you can think about the price hike or reducing the fixed costs to secure the profitability. But is that the kind of idea that you have with the vending business right now?

Thank you for the follow-up question. So, your question is about more detail about the vending business. So, we have a high GP in vending business, but what are our forecast on how we are going to generate the profit in vending business. So Bjorn, would you like to take this question, please?

Love to take it. Thank you, Sumoge-san. You kind of answered your question. So, I'll try to just say it a little bit different words. Yes, the marginal profit is the highest in vending, but also it has the highest operating cost given the nature of this retail business. So, when it comes to balancing volume and profitable growth, we will balance definitely how we execute in vending, which you have heard about in earlier investment calls, we have said we're getting more and more data-driven. It's a key element on how we're going to improve vending performance overall and by machine.

We are also focusing a lot on operating efficiencies in vending, again, with the nature of the retail business. And pricing, as you also mentioned, will, of course, play a part in that retail landscape. So, in the end, you summarized it well. It's a balance of initiatives that we are in control of that we will execute across the board for vending. So, looking forward to the next steps. Thank you.

Thank you , Sumoge-san for your question. Sorry for running over time. I would like to now close the Q&A session for today.

So, today's materials will be posted on our website. So, if there is any follow-up question that you would like to ask, please get in touch with the IR team. Thank you very much for your participation.

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