Lion Corp Stock

Good afternoon, ladies and gentlemen. I'm Takemori, President of Lion Corporation. Thank you very much for your precious time despite your busy schedule. Before I begin, I would like to offer my deepest condolences to those who lost their lives in the recent 2026 Kumamoto earthquake and extend my heartfelt sympathies to everyone affected by the disaster. The Lion Group has already begun providing relief supplies and other assistance to people in the affected areas. We sincerely hope for the earliest possible recovery and reconstruction.

With that, now allow me to begin my presentation. In the second quarter for FY 2026 December, despite increasing uncertainty in the business environment due to developments in the Middle East, both sales and profit exceeded the levels we had initially projected at the beginning of the year. Today, I would like to explain the factors behind this and how we intend to deliver growth in the second half and beyond.

First, let me highlight the key points. In the first half of the year, we achieved the targets we had announced and confirmed the steady progress toward strengthening our earnings power, one of the key objectives of our second stage. In Japan, Oral Healthcare, our highest priority business, drove top line growth. At the same time, our efforts to develop high value-added products and our investments in strengthening our brands are also translating into tangible improvements in profitability overseas.

In addition to the new consolidation effects from Merap Lion in Vietnam and PNB in Australia, both of which operate in highly profitable businesses, there is another key point I would like to emphasize here. Our major markets are now on a recovery trend. As a result, core operating income margin increased by more than 20% year-on-year. We believe this demonstrates that our initiatives to transform our business portfolio shift toward high value-added products and manage our overseas businesses with a greater focus on profitability are steadily delivering results.

In the second half onwards, as you are well aware, various cost increases resulting from developments in the Middle East are becoming more pronounced than they were in the first half. We intend to offset these changes in the business environment through a combination of measures, and we remain committed to achieving the full year targets we announced at the beginning of the year.

Today, I'd like to cover these 4 key points. First, let me review our consolidated results. In the second quarter, net sales increased 8.7% year-on-year, while core operating income increased 21.3%. EBITDA margin, one of our key KPIs reached 11.8%, an improvement of 1.1 percentage points year-on-year, demonstrating steady progress in profitability as well.

Next, allow me to explain the factors behind the JPY 2.7 billion year-on-year increase in core operating income. There are 2 key messages I would like you to take away from this slide. First, the primary driver of profit growth overall was the increase in gross profit resulting from our progress in shifting toward high value-added products. Second, underneath each factor, we have shown in the parenthesis the amount of change for the April through June period. As you can see, gross profit growth accelerated during April through June. In other words, our momentum is improving.

At the same time, we incurred a JPY 1 billion negative impact from the higher raw material costs in the first half due to the developments in the Middle East, but were able to offset this impact. In terms of competitive standing, we are now continuing our investment in areas where we should go for further growth, particularly Oral Healthcare in Japan and our overseas businesses. At the same time, these investments are generating solid returns in the form of higher gross profit. You will also notice that the JPY 9.7 billion positive impact from higher sales on the far left and the JPY 5.3 billion increase in other expenses on the far right are larger than in a typical year.

Next, let me turn to performance by segment. Both Consumer Products and Overseas businesses delivered higher sales and profit. Please look at the figures highlighted in red. In Consumer Products, our focus on developing high value-added products drove sales growth of 1.6%. In addition, measures to reform our earnings structure contributed to a 0.4 percentage point improvement in the profit margin. Overseas business, sales and profit both increased significantly, reflecting not only the impact of newly consolidated businesses, but also recovery in our existing markets and our continued focus on profitability-oriented management.

Next, allow me to break down the Consumer Product business. In Oral Healthcare, our core toothpaste and toothbrush brands continued to grow. In addition, the premium priced SYSTEMA toothpaste line, which we renewed in April, has performed strongly. As a result, Oral Healthcare maintained a strong growth of 9.6%. In Beauty Care, body soap, which struggled during the earlier part of the year are now benefiting from the effects of product renewals centered on high value-added offerings. Home Care, although the top line sales were below the previous year, we have placed a greater emphasis on profitability while working to enhance the brand value. For categories such as fabric softeners, which have been affected by intensified competition, we are planning product initiatives in the second half. I will discuss this in greater detail later. While conditions vary by category, overall, we are able to grow a solid 2.9%, excluding the impact of the transfer of the REED brand.

Next, allow me to turn to Overseas businesses. In the Southeast and South Asia and Oceania, performance was driven not only by the impact of newly consolidated businesses, but also by strong results in Malaysia, which contributed significantly to both sales and profit. In Northeast Asia, China has returned to a recovery trend, combined with a strong performance in South Korea. This resulted in underlying growth in both sales and profit.

This slide shows the performance of our 4 major overseas markets. Sales momentum has improved in all 4 countries. I would particularly like to look at the underlying sales trends for January through March and April through June shown in the notes for each country. In Thailand, structural challenges remain, including lower exports and weak domestic consumption. However, as part of our efforts to transform the business structure, we have been strengthening initiatives in Oral Healthcare. These efforts are beginning to produce results and the overall rate of sales decline in Thailand narrowed substantially during the April through June period.

In Malaysia, in addition to strong top-line performance, our pricing strategy for laundry detergents has led to a significant improvement in profitability. As we explained during the first quarter, we have been working to normalize distribution inventories in China. That process has now been completed. Since April, China has returned to sales growth, improving from 21.6% decline in January through March to 14% growth in April through June. We are therefore beginning to see a clear double-digit recovery trend. South Korea also delivered sales growth, led primarily by our highly profitable businesses.

Against this backdrop, let me now discuss our full year consolidated earnings forecast. Let me start with the conclusion. We will not change the earnings forecast announced at the beginning of the year. We remain firmly committed to achieving it. In the second half, we expect the business environment to become even more challenging than in the first half, primarily due to developments in the Middle East. However, based on the solid progress we achieved during the first half and the benefits we expect from our key initiatives, I believe as President that we are fully capable of offsetting these headwinds.

At the same time, we will continue making steady progress towards strengthening our earnings power as set out in the second stage strategy. Our vision to maintain the forecast should not be viewed as simply leaving our guidance unchanged. It reflects our determination to achieve the targets we originally set. It shows our strong will, and this is not simply a matter of determination. As President, I believe we have now built sufficient underlying strength and resilience in order to deliver these targets. In regard to the shareholder returns, we will also continue to aim for our 11th consecutive year of dividend increase.

This is one of the key slides regarding our responses to developments in the Middle East. We have revised our assumptions regarding the factors affecting core operating income, including the impact of raw material price increases that are expected to become more significant going forward and the measures we intend to take to counter them. The table compares our initial assumption on the left and the overall total remains unchanged. The largest change relates to raw materials prices, we have revised the expected impact from negative JPY 1 billion initially to negative JPY 7 billion, representing additional negative impact of JPY 6 billion. Of this amount, JPY 1 billion has already materialized in the first half, with the remaining negative JPY 5 billion expected to take place in the second half.

To counter this, we intend to build additional gross profit through the further price increases and cost reductions while also improving the efficiency of SG&A expenses, including competitive spending. Our revised assumptions also incorporate the impact of foreign exchange movements. What I have just described will by no means be easy. However, it is precisely because of the progress we have made in reforming our earnings structure that Lion has become a company capable of responding flexibly and swiftly to changes in the external environment.

Next, I would like to provide some more details on the measures we will implement in the second half in order to counter the specific challenges. As I mentioned earlier, we expect the impact of higher raw materials prices in the second half to be approximately JPY 5 billion. Taking procurement lead time and other factors into account, we expect the impact on the results to peak in the third quarter as illustrated in the chart on the right. We will address this from both the gross profit and SG&A sides.

First, with regard to gross profit, we will implement appropriate price pass-through measures in Japan and overseas, while simultaneously pursuing a number of other initiatives, including the development of high value-added products and improvements in the product mix. In Japan, we plan to revise prices across a broad range of products for shipments from October onward.

Overseas, we are also implementing price increases progressively, primarily in categories where we have strong market position. In addition, through further cost reduction, we aim to offset approximately 80% of this JPY 5 billion impact through improvements in gross profit. Naturally, we will proceed carefully while closely monitoring market conditions and the competitive environment. At the same time, we believe that achieving appropriate pricing that reflects the value of our brands will not only support earnings this year, but also to help strengthen our earnings foundation for next year and beyond.

We'd like to actually further expand on the actual efforts in order to actually improve our profit margin. So we'd like to actually allocate our resources in a better way. I would like to emphasize that sustainable growth simply cannot be achieved through the cost reduction alone. This is the most fundamental point I would like to emphasize. We will continue making investments that will generate further earnings while rigorously improving efficiency where appropriate. By maintaining the right balance between the investment and efficiency, we intend to offset the impact of developments in the Middle East.

From here, I will talk about some key measures based on the policy we announced at the beginning of the year. First, let me review our first half results. We are steadily advancing the transformation into a highly profitable business portfolio. For our top priority Oral Healthcare, we have achieved group-wide growth of over 10%. Overseas, we are seeing a continued shift toward the personal care area. In addition, the consolidation of Vietnam and Australian business has made a major contribution to improving our gross margin and core operating income ratio. We see these results as reflecting the effects of the management process transformation, moving to a business unit system that integrates the value chain along with a greater delegation of authority, which has increased the speed of decision-making and execution. We hope to carry this momentum into the second half and translate it firmly into execution.

Let me go into a bit more detail on the status of each business. First, Oral Healthcare in Japan. The biggest achievement of the first half was outgrowing the market in the high-end toothpaste segment priced above JPY 1,000, which continues to grow. Please look at the graph on the left. The yellow line represents the overall high-end segment priced over JPY 1,000. This segment itself continues to grow strongly, but the green line, our own high-end products, has outpaced it, showing the major growth of 131% year-on-year in the first half. The high-end line of SYSTEMA launched in April is also performing well, up roughly 1.4x year-on-year for April to June.

In the second half, as shown on the right, we will substantially upgrade the regular line of the Dent Health brand priced around JPY 1,500. At the same time, we will continue to build up our highest-price line launched in the second half of the last year. Periodontal disease prevention is a category we naturally expect to keep expanding. As a category leader, we will keep strengthening various actions to broaden our brand base and drive growth in the high-end segment. Through this, we aim to further expand the group's sales and profit.

Overseas, in Oral Healthcare, rather than applying uniform measures, we are, of course, pursuing strategies and tactics tailored to the characteristics of each country and region. On the left, in China, we are launching products in the growing high-end segment and strengthening our focus on priority channels that continue to grow. In the middle, Thailand, even though overall domestic consumption remains weak, the toothpaste market continues to grow steadily. We are expanding our customer base by revamping our brand image and having reexamined the target for each brand, we are expanding distribution in our stronghold areas.

On the right, in Malaysia, unit prices, including the general-purpose price range continued to rise. Amid this, we added value in mainstay brands. Across Asia as a whole, the oral health care market is growing and unit prices, in particular, continue to rise. We'll keep strengthening our efforts to continue outpacing market growth.

From the next page, let me give a supplementary explanation on China and Thailand. First, China. In Q1, sales declined due to optimization of distribution inventory. But in Q2, the launch of new highest-priced products under our mainstay brand and cross-brand marketing initiatives resulted in a double-digit recovery of plus 15% in sales, and we were also able to improve profitability. Building on this momentum in the second half, we aim to raise the presence in high value-added products, and we will further strengthen momentum by strengthening our engagement with emerging e-commerce platforms that performed well in the first half and doubling the number of key managed retailers carrying our products compared with the end of the previous fiscal year. While the macro environment remains challenging, we'll keep working to build mid- to long-term brand value so that we can sustain profitable growth.

In Thailand, there are structural macro environment challenges. That said, the effects of initiatives we have pursued since last year, such as SALZ rebranding and expansion of SYSTEMA distribution, are starting to show up in sales. Sales growth has increased from plus 4% in January to March to plus 10% for April to June. SYSTEMA sales shown in the graph at the bottom left are also rising month by month. As with China, we will build on the first half results and in the second half, further advance key measures that we need to promote expanding brand penetration among young customers and expanding distribution.

Next challenge for growth, the Beauty Care and Pharmaceutical Products business. In Vietnam and Australia, initiatives to realize post-consolidation synergies are taking concrete shape in each case. In Vietnam, in addition to stable growth in the pharmaceuticals business, we are also expanding our Personal Care business by leveraging various capabilities across the group's sales network. The Sukin business in Australia is progressing steadily. Going forward, we focus on expansion into Asia, including Japan. The recently announced establishment of Sukin Japan marks the first step in this effort. Leveraging our strong brand value, we push forward by developing their business while firmly securing profitability.

Next, Home Care. In Japan, we are steadily executing product initiatives in line with our business portfolio strategy. We are working to build up high value-added products. As customer needs diversify, rather than competing on price and capital strength for the mass market, we continue product initiatives that create distinctive value using test marketing to create new needs and propose new habits that meet them. As shown on the left, the NANOX washing tub antimold ball launched through test marketing in the first half showed approximately 3x of the planned sales. In the second half, we will also strengthen our lineup of distinctive value fabric softeners and dishwasher detergent. By continuing these initiatives, we aim to improve profitability even with increased raw material cost.

Finally, let me talk about the progress on the second stage growth strategies. Over the medium to long term, we aim to create value continuously, focusing on health care needs, mainly in Oral Healthcare. To achieve this, as I have discussed, second stage has clearly set strengthening profitability as a core theme. What matters here is not chasing short-term results alone, but shifting our focus towards growth accompanied by profitability and capital efficiency. Situations like this may occur again. But we are working to transform into a company that can generate profit even as the environment changes in various ways. And I feel real traction in our business portfolio transformation.

First, on the left, accelerating growth in Oral Healthcare. In Japan, we are achieving high growth accompanied by profitability. In Thailand and Malaysia, through a review of management resource allocation, we are rebuilding our business foundation in markets with substantial room for growth. This is progressing well. As mentioned earlier, results delivered. In China, on the other hand, external environmental changes have caused a divergence from our original plan. I see this not as a temporary issue, but as a phase where we need to reallocate management resources towards areas where we can win. Now and going forward, we will sharpen our strategy and tactics further by clearly identifying the subcategories where our strengths can be leveraged in each country and region, for example, periodontal disease and aesthetics. At the same time, by creating a virtuous cycle between self-care products and services, we will expand profit opportunities beyond simply selling products.

Next on the right, overseas growth. Overseas, we are advancing initiatives to create synergies. In major countries, due to geopolitical effects, we have seen some challenges on the top line relative to our original plan. But as I mentioned earlier, we are currently on a recovery momentum. In addition, I'm personally glad to feel that we are able to manage swiftly and flexibly with an emphasis on profitability. We continue to promote proactively our shift toward profitability-focused growth and optimization of our regional portfolio. Also starting this year, we have newly established a department to explore new export destinations. By pursuing new market development in countries where we have not entered, we expand future growth options while accelerating our overseas growth initiatives.

To summarize today's content, the first half was a period in which growth in our high-profit business centered on Oral Healthcare drove steady progress in transforming our profit structure. Overseas, in particular, the momentum of sales growth has recovered. For the second half, we continue to expand in an uncertain environment, including the situation in the Middle East. That said, we do not see this as a phase of defense. Rather, we see it as an opportunity to accelerate value-added growth, improve profitability in our overseas businesses and develop new growth businesses, building a profit base that is resilient to external conditions.

As one group, we will further strengthen structural reform aimed to achieve the target announced at the start of the year and continue moving forward while sharpening our focus toward the final year of the second stage. We continue to meet your expectation by sustainably building a profitable growth.

We appreciate your continued understanding. That concludes my presentation. Thank you very much for your attention.

We'll now move on to the Q&A session.

This is Hirozumi from Daiwa Securities. Can you hear me?

Mr. Hirozumi, yes, we can hear you.

I'd like to revisit Page 14, which you described as a key slide and better understand how the numbers are structured. I think this is a very interesting table. Compared with your initial assumptions, the negative impact from the raw material cost has increased by JPY 6 billion. However, you are essentially saying that you will fully offset that through the 2 items in the top, quantitative effects and product mix as well as a shift in high value-added products and upward price revision. At the same time, you are also increasing SG&A expenses. Actually, the number there is JPY 7 billion higher than your initial assumption. Could you talk about your level of confidence in achieving these numbers? What are the specifics you have in mind?

Thank you for your question. This table shows our full year outlook. So if it's all right with you, Mr. Hirozumi, I'd like to explain it in the context of what we expect in the second half. First, regarding the JPY 5 billion negative impact in the second half, roughly speaking, we expect about JPY 3 billion in the third quarter and JPY 2 billion in the fourth quarter. So the question is how we could offset the JPY 5 billion.

Let me explain our thinking. We intend to offset approximately 80% or roughly JPY 4 billion through the gross profit improvement. Of this, we expect roughly JPY 1 billion from the shift towards high value-added products and cost reductions, including overseas. We then expect about JPY 3 billion from the domestic price increase that we have announced. And also the -- and as you pointed out, Mr. Hirozumi, this is not just about this year. In particular, the JPY 3 billion benefit from the price increases will carry over in full into the first half of next year.

As for the shift toward high value-added products, as we have discussed previously, we are shifting toward businesses and products that generate higher margins. Therefore, the JPY 3 billion from the price pass-through and the JPY 1 billion from high value-added products should continue to contribute in the first half of next year and beyond.

That gives me greater confidence in our outlook. You've just given us a fairly detailed buildup of the numbers, JPY 4 billion and JPY 1 billion, for example. Since these are based on the specific initiatives, would it be fair for me to say that you have high confidence?

Of course, we do not assume that every single initiative will deliver 100% of the expected benefits exactly as planned. We are living in the business world. But again, I happen to have strong confidence.

One last question. Is the confidence partly based on the fact that you have already demonstrated your ability to execute these programs?

Actually, starting from October, we are going to start working on actually the price pass-through. The most important point is whether the price changes actually materialize at the retail level. Ultimately, this comes down to execution across the distribution channel. As you are well aware, Mr. Hirozumi, October is generally when the retailers revise shelf prices. We, therefore, timed our price increases to coincide with those changes in October. It is not simply a matter of announcing a price increase. What matters is ensuring that retail prices actually change at the point of sales and that the plan is reliably realized. With the October implementation approaching, we have been coordinating with a range of measures and with many people concerned.

Understood. I look forward to seeing these measures to deliver the expected results.

Next, I would like to have a question from Mitsuko Miyasako.

This is Miyasako from Mizuho Securities.

Yes, I'm hearing your voice.

I would like to ask about the strong performance of the domestic oral care business. Looking just at the 3 months of the second quarter, how much did toothbrushes and toothpaste and the dental clinics channel grow? Also, domestic oral care achieved quite strong growth in the first half. I believe you have new products planned for the second half as well. Although I don't think you have disclosed an overall growth forecast for the second half, what level of growth are you expecting? And finally, would you please share your thoughts? Of course, you are able to enjoy good growth in oral care. And what's going to happen moving into the second half from the viewpoint of growth factors?

Could you share the Page 18? Yes. We have a number of categories, including toothpaste and toothbrushes, mouthwash and dental floss. Broadly speaking, the growth across these categories has been around 9.5% level as shown here. As for Lion Dental Products, our B2B business, serving dental professionals, it recorded roughly double-digit growth in the first half. Overall, we saw well-balanced growth across the various categories during the first half.

Turning to the second half. There are a couple of factors we need to take into account. First, we expect some decline in the volume associated with the price increases that will take effect from October. In addition, the JPY 2,000 Dent Health product shown on the right-hand side of this page will begin to lap its launch from the prior year. So we are not assuming that the 9% or so growth rate will simply continue unchanged. This is one of the important points.

And also as for the core operating income margin, progress has been in line with or better than our plan. We therefore see the core operating income margin as having improved compared with the previous year.

I see. I believe the sales were ahead of the plan. Am I correct understanding that the core operating income was broadly in line with the plan?

I'll ask Takeo, who is responsible for the finance accounting, to provide some additional detail on the figures.

Thank you. This is Takeo. Thank you for your question, Ms. Miyasako. Regarding the core operating income margin for Oral Care, strong sales of high value-added products throughout the first half resulted in a significant year-on-year improvement. Core operating income for the consumer products business also increased year-on-year. And I think it will be fair to understand that increase in the absolute amount of the core operating income from Oral Care was even stronger than that of the Consumer Products business.

I believe your full year growth assumption for Oral Care this year is around 4% to 5%. Given the performance so far, it is fair to assume that you now expect to comfortably exceed that level? And looking ahead to next year, given the significant acceleration you have achieved this year, should we expect growth next year to be higher?

Yes, we have gained considerable momentum in the first half. So as present, I would like to see us outperform the full year growth assumption. Looking ahead to next year, we are also laying the groundwork for the range of high value-added products and initiatives. Of course, we will need to take changes in the market environment and other factors into consideration. Did I answer your question?

Indeed.

Thank you very much. Next, I will take a question from Mr. Kuwahara.

This is Kuwahara from JPMorgan Securities. Can you hear me?

Yes, no problem.

I would also like to come back to Page 14 and following up on Mr. Hirozumi's earlier question to confirm your strategy. If I calculate the figures for the second half alone, the contribution from quantitative effects and the product mix appears to be approximately negative JPY 200 million. Is that mainly the volume impact from the price increases you mentioned earlier? Or does it also include an impact from the divestiture of this Specialty Chemicals business? Could you walk us through the components?

My second question is about the contribution from high value-added products and upward price revision, JPY 1 billion, and actually, JPY 4 billion gross profit offset you mentioned earlier are reflected. Regarding JPY 3 billion contribution from domestic price increase, am I correct in assuming that you expect to realize the full JPY 3 billion through October, November and December? If that's the case, you need to have the contribution of as much as JPY 1 billion. Is this coming from the Oral Care with heavier weight or the Home Care, maybe you would like to actually improve in operation performance. So non-oral care will enable you to actually go for JPY 1 billion. Is this the right interpretation? I wonder if you could help me in this regard.

I believe there are 2 questions. First, on volume impact. Our revised full year estimate is JPY 9.5 billion. As I mentioned earlier, the first half was JPY 9.7 billion. So as you correctly pointed out, that implies a negative JPY 0.2 billion in the second half. As for the components of that negative JPY 0.2 billion, there are positive contributions from Australia and the foreign exchange, among other factors. On the other hand, we have negative gross profit impact from the divestiture of the chemicals business and from REED. We are also factoring in some volume decline resulting from the price increases. So this is the response to your first question.

In regard to the question on the high value-added products and upward price revision, we expect JPY 3 billion from the price increase to break down roughly into JPY 0.5 billion in the third quarter and JPY 2.5 billion in the fourth quarter for a total of JPY 3 billion. As you pointed out, we are also expecting a little over JPY 1 billion of additional profit contribution from high value-added products. Oral Healthcare will be the main driver, but it will not the only one. We also expect contributions from the new fabric softener line we can expect to have a benefit.

In regard to this JPY 1 billion, again, could you expand on that in the domestic market and overseas market? I think in the overseas market, you are increasing the personal health care. So I wonder if you could expand on the major drivers behind it. Well you believe that as far as this year is concerned, it is going to be the Japanese market as the major driving factor.

Yes. Actually, we have included contribution coming from the overseas. So the domestic -- actually, in the domestic business, we will actually go for the higher value realizations out of the high value-added products.

Thank you. Next, we'll take a question from Mr. Miyazaki.

This is Miyazaki from Goldman Sachs.

Yes, I'm hearing your voice.

I also have a question related to Page 14, specifically regarding the price increases. First, just to confirm the numbers, you mentioned that the fourth quarter contribution from the price increases will be JPY 2.5 billion. On a simple annualized basis, it would add up to approximately JPY 10 billion. This is what you have announced the other day. You, of course, have good selling SKUs, and I believe you keep an eye on other companies' SKUs. Could you explain again the background to the price increase announced in July, the strategy behind them and how we should think about the impact heading into next fiscal year? So I appreciate if you could actually go through these points, including the strategy, please.

Certainly. As we explained in our press release, the range of the price increases varies somewhat by category. The degree of cost pressure from rising raw materials and prices naturally differs by category. For example, the cost headwind is a relatively significant in detergents, whereas it is comparatively smaller in oral care. We have determined that the magnitude of the price increase is based primarily on 3 factors: the negative impact of raw materials cost, our competitive position in each market and how receptive each category is to price increases. So of course, we need to keep an eye on the possible impact on the volume. So they are the important ingredients.

And as you mentioned, actually, JPY 2.5 billion in the fourth quarter, again, a simple calculation x4 is going to be JPY 10 billion. Allow me to explain in regard to the next year. Actually, we have experienced actually JPY 5 billion increase in the raw materials and the price, and this impact is going to continue and how we can actually deal with this JPY 5 billion. Actually, JPY 2.5 billion on the quarterly basis. So 2 quarters make it JPY 5 billion. So we need to be able to address this JPY 5 billion while keeping an eye on the sustainable business growth moving forward. Did I answer your question?

If that is the case, it looks as though there could potentially be some upside next year, perhaps another JPY 2.5 billion. Although I appreciate there will be various other factors, should we interpret the fact that you have adopted this pricing strategy and you are now in a position to be able to implement it given you have the visibility of exceeding JPY 40 billion in business profit next year? I wonder if you could expand on those aspects. Are you optimistic?

I will say that at present, I'm not that optimistic. If I may, the next 1.5 years will be an important final year of the second stage of our plan. So I would like to take this opportunity to briefly explain as for these matters. Please -- taking a broader perspective as present, I am managing the company with a very strong focus on our earnings targets for 2027 and ultimately for 2030, the final year of our medium-term plan. Achieving those targets is important evidence that Lion is capable of delivering sustainable growth. I may be repeating the same point.

The impact from the Middle East is going to be JPY 5 billion moving into the full year. With that impact carrying over in full into the first half of next year. Against that backdrop, we are targeting an increase in the core operating income from JPY 35 billion this year to JPY 40 billion next year, a gap of JPY 5 billion. Combined with the JPY 5 billion cost headwind I just mentioned, we need to be able to work on the following initiatives. I'm going to explain. The first, the price increases, the JPY 2.5 billion quarterly benefit that begins to materialize in the fourth quarter of this year and should generate approximately JPY 5 billion of profit growth.

Then second, we will improve our product mix through the high value-added products while also increasing the volumes. We are building in a range of assumptions for both Japan and overseas, JPY 4 billion to JPY 5 billion of improvement from a more profitable product mix. That should enable us to bridge the JPY 5 billion gap. However, it's easier said than done. So we need to be able to tighten our management and mindset.

So we'd like to work on JPY 5 billion actually, we'd like to work on another JPY 5 billion, a total of JPY 10 billion?

Yes, at present, we need to be able to manage these activities as surely as possible.

Sorry to go into some of the details, but I'm still slightly confused about the price increase. If you have a JPY 2.5 billion benefit in the fourth quarter of this year and then JPY 5 billion of benefit in the first half of next year, it seems as though there should be another JPY 2.5 billion not covered.

No, that is not the case. We'll have JPY 2.5 billion in the fourth quarter, this year second half. Running through 3 quarters to lap, we will not have JPY 2.5 billion remaining. You may be thinking of the JPY 2.5 billion as related to the July to September third quarter, but we will, in fact, realize some of the offset in the third quarter. In addition, from a margin perspective, we need to maintain some additional buffer rather than assuming that every benefit will follow exactly as I have explained.

Next, we would like to have a question from Mr. Yamanaka.

This is Yamanaka speaking. I'd like to come back to the impact of the price increases and confirm your level of confidence in actually realizing the plan. Even if you pass through the increase in the cost to prices, I think it is difficult to know exactly how demand would respond until the new prices are actually implemented. In the second half, particularly, you will also have a number of the product initiatives in areas such as fabric care. Other companies have already begun raising prices since July. So I assume you have been monitoring the subsequent volume trends. I wonder if you could share your insights in this area.

Thank you for your question, Yamanaka-san. Yes, I'm hearing your voice. Yes. Actually, I'm gaining more stronger confidence. As I have mentioned, we do expect some volume decline as a result of the price increases, and we are factoring the resulting gross profit impact into our assumptions. Actually, we believe that impact is going to be 3% to 10% in detergents and around 6% to 8% in oral care. The figures I discussed earlier have been constructed after taking those expected volumes declines into account.

As I mentioned earlier, the key to successfully implementing the price increases is whether retail shelf prices actually change. That is precisely why we strategically chose October as the timing for the price increases. Let me emphasize this point again. October is a time when many retailers in Japan reset their in-store merchandising. We chose October specifically so that price changes would coincide with that timing. We have been working very closely with the wholesalers, distributors and retailers in preparation for the October implementation. If I did not believe we had an operational capability to execute this successfully, I will not be telling you that I am confident. We have worked through the details very carefully in preparation for October with many stakeholders concerned.

From a consumer's perspective, I sometimes get the impression that the detergent section in stores is being moved around, becoming somewhat smaller or that the shelves for some major products are looking a little less full than they used to. You may say that, well, the consumers are moving into the e-commerce. However, I wonder how you feel about the observation I'm making here. There could be certain risk factors.

I don't think that you need to be overly concerned about that. We do not expect any major drastic reduction in retail shelf space. Of course, some consumers will shift their purchase to e-commerce. But my sense is that this will not represent a particularly large proportion of customers. We believe that the majority will continue to make their purchases in physical stores. So actually, of course, we would like to actually share our recommended ideas to the retailers. But again, actual implementation is going to be those retailers and distributors. But I don't believe that I am receiving a negative response from those people.

Next, I would like to receive a question from Ms. Kawamoto.

This is Kawamoto from Jefferies Securities. I also would like to ask about Page 14. But before that, I'd like to confirm the first half change factors. Shall we start on Page 14? Before that, I'd like to turn to the results. Quantitative effects in small orange print, it describes the newly consolidated subsidiaries. How much of that came from Vietnam? And based on that, in the second half, the contribution of Vietnam in the previous year will run the floors. I also recall that the new product, Dent Health, was added last year. So with those comparison base changes, you expect a further increase in gross profit. So first, for the orange figure in the first half actual results, could you tell us how much of it was the Vietnam portion?

Understood. Since this concerns figures, so let me have Takeo respond.

This is Takeo. Kawamoto-san, thank you very much for your question. I understand you're asking how much of this plus JPY 9.7 billion quantitative effects and mix change. On the far left, the first half profit change factors is attributable to Vietnam. Roughly half of that is the increase in gross profit from the newly consolidated Vietnam and Australian subsidiaries. In addition, that quantitative effects and product mix and others also includes the plus JPY 3.6 billion foreign exchange impact shown in the arrow. So please note that as well.

Yes. Based on that on Page 14, I have the same question as others, I think, which is about the feasibility of the price increases. Looking back in 2023 and '24, the company achieved roughly JPY 3 billion to JPY 4 billion in annual price increase benefit. And this year, you expect to achieve additional JPY 3 billion from October, which looks like a fairly high number. Could you give us a bit more detail? I'm looking at the release now on the Oral Healthcare breakdown. Specifically, where do you plan to increase prices by item and by how much? And whether there are any concrete examples? If you give us some colors quantitatively, I think that will make it more credible.

Thank you. That's a detailed point and an important one. Let me have Fukuda respond.

Kawamoto-san, this is Fukuda. Thank you. On your question, the price increases we have achieved in past years have mainly been effective in-store price increase achieved by revising promotional cost, increasing the ratio of regular priced sales and reducing the share of special sales. This time, additional price increase, however, involves raising shipment prices across an entire category all at once with external announcement and actual raising shipment prices. Because of this, as other people also asked, there is a higher risk than before that competitive dynamics could reduce volume. But we believe that if we prepare properly and execute carefully, the benefit of the price increases will materialize with certainty.

I see. Then on changes in competition-related expenses, is there anything in particular we should be concerned about this?

On competitive-related expenses and SG&A costs, we do expect an increase, though we have reduced the magnitude of increase from the initial plan due to the impact from the Middle East situation. For the increase in competitive-related and other expenses, part of the increase reflects a foreign exchange impact, which is why the negative profit reduction effect appear larger here. So please understand this in this context.

Thank you very much. Next, Mr. Ohana, over to you.

This is Ohana from Nomura Securities. I'd like to ask about your thinking on the first half progress in the next year. It seems that from around March, you already knew raw material costs would be rising. And the first half core operating income was above the company's plan. Given the raw material cost increase impact expected in the second half, do you feel the first half result was good enough? Or did you expect higher number to have some buffer? I'd like to understand your thinking there.

Also, the increase in core operating income from the newly consolidated subsidiaries is approximately JPY 1.2 billion or JPY 1.3 billion, I guess. If possible, could you break that down between Merap Lion and PNB? My understanding was that PNB wasn't expected to contribute much to the profit this fiscal year. Has that view changed? And earlier, there was a discussion about the next year's roughly JPY 10 billion profit increase. I had the impression PNB would contribute meaningfully next year, and that with a price increase effect and so on, that number looked achievable. Is my observation correct? Sorry for asking several things at once.

I believe there were 3 questions. First, looking at the slide now, with the second half in mind, the first half could have gone a bit further and how I feel about that as present? That's the first question. Second, how much PNB or Australia and Vietnam is contributing to profit this year? Takeo will answer that. And third, since PNB Australian impact will carry into next year, whether that makes next year's target more achievable. How do you view that? Let me have Takeo answer the figures first, and I'll give an overall summary afterwards.

On the first question, whether the first half could have been better, as I mentioned earlier, considering the situation in China in the first quarter and the tough fundamentals in Thailand, my assessment is that we executed fully. As shown here, our progress on the sales and core operating income compares well against the past 4 years. For example, our sales progress rate this time is 50.4% versus 48% for the last 4 years and our core operating income progress 43% versus 37% for the past 4 years. This reflects very strong effect, and I feel confident about it.

I don't feel at all that we should have pushed for. I'm satisfied with that. And combined with the change in the quality of our earnings I mentioned earlier, we are becoming a company that can generate profit regardless of circumstances. So this is the answer to your first question. On the second, share of PNB Australia's impact this year and their impact on the next year, let me have Takeo answer for the figures first.

This is Takeo. Ohana-san, thank you for your question. On the impact through the 6 months to June, you mentioned the figure you have estimated yourself. In terms of the actual profit and loss related to Vietnam and Australia this year, while the 2 companies' results are positive, there is also a onetime acquisition-related expense recorded. Including that, the contribution to first half January to June core operating income is fairly limited compared with the figure you mentioned. Specifically, it is less than JPY 1 billion.

I'll refrain from breaking that down between Australia and Vietnam, but the combined figure for the 2 companies for the first half is as I have just described. Looking ahead to next year, the onetime acquisition-related expense is, of course, only for this year. So we would expect an increase from the 2 companies' profit contribution next year with the absence of onetime expenses of this year.

That said, as Takemori mentioned before, our current plan for the next year does not yet reflect that to that extent. And at the same time, there is also the factor that 2 chemical product subsidiaries will be deconsolidated. So we assume those 2 effects broadly offset each other. That's about the figure.

Was the onetime cost for Australia already incurred or will it come in the second half?

The onetime cost has already been incurred through the second quarter.

Finally, let me sum up the strategic point as the President. To repeat what I have said before, next year is not just another year. It is the final year of the second stage, whether we set out to strengthen our profitability. I see it as a year in which everyone will be watching us to see whether that quality has improved. And I am confident with that. And on the substance growth in Oral Healthcare and Overseas business growth with margins, they may vary by business, but whether we can achieve group-wide strengthening of profitability is something I feel confident about. I'd be grateful if you could judge for yourself whether we have succeed.

Thank you for the question. We are running short of time, but we'd like to take questions from 2 more people who have raised their hands for a while. Ms. Miyake, over to you.

This is Miyake from Morgan Stanley. I also would like to ask a bit about overseas. I also would like to ask about the profit. I believe Northeast Asia's margin improved in Q1 and Q2 and progressing well. But the Southeast and South Asia looks roughly flat year-on-year in Q2, which doesn't seem to align with the improvement in sales. Could you explain what affected this? I think there is a potential for the margin to improve in the second half. Is that observation correct? I'd like to have your thoughts on this.

Thank you. Let me switch to another slide. In my early explanation, I mentioned that sales momentum overseas recovered, improving from January to March to April to June. Let me walk you through some of the underlying figures verbally since not all of them are on the slide. On the real sales growth in the middle, excluding foreign exchange effect, Southeast and South Asia grew 11.9% in April to June. In January to March, it was 7.9%. So Southeast and South Asia, Oceania improved overall from 7.9% to 11.9% growth.

For Northeast Asia, growth was 11.5% in April to June. In January to March, due to partly reduced production in China, it was minus 7.4%. So Northeast Asia recovered from minus 7% in January to March to double-digit growth. In total, the growth was 2% in January to March and 16.1% in April to June. So momentum has clearly increased by region and on a growth basis, which is the big positive.

Now the key question is whether core operating income is following that. Let me touch on that. Please look at the right-hand column in parenthesis. The overall core operating income ratio rose by 1.1 percentage point in April to June. In January to March, it was up 2.0 percentage points. So numbers, it looks like it's decelerating, but this reflects a deliberate forward-looking bet. To be specific, for Southeast and South Asia, Oceania, the core operating income ratio was down 0.1 points in April to June versus up 1.9 points in January to March. That may look like a decline, but it reflects the upfront investment in Oral Healthcare in Thailand. In the first quarter, we deliberately kept Thailand's core operating income ratio flat. So please understand this as a healthy state.

Next, Northeast Asia core operating income ratio was up 2.9 points in April to June versus up 0.4 points in January to March. This reflects China's contribution and shows a healthy improvement in core operating income ratio. So looking at both Northeast Asia and Southeast Asia and country by country, we are deliberately growing where we have decided to grow and bet with the second half and the next year in mind. As a result, as a President, I see the way we are growing profit and the way we are growing the top line as progressing in a healthy way. That was a long answer.

To achieve strategic expense recovery and improve margins, the top line should also need to improve accordingly. Is it fair to expect the effect to show from the second half and for margin improvement to be expected for the full year in Southeast and South Asia as well?

Of course, there are various factors around foreign exchanges and raw materials. But yes, that is what we are aiming for, in particular, regarding the Oral Healthcare in Thailand, even though we made upfront investment, Thailand's first half January to June core operating income ratio was unchanged from the previous year. We are investing firmly without damaging profitability. As a result, as I mentioned, Thailand's Oral Healthcare top line has grown significantly. We see this as evidence that the upfront investment is paying off. So I don't see this as limited to the second half alone. I believe it will carry through into the next year '27. Does that answer your question?

Yes. It was very clear.

Thank you. We will take the final question. Mr. Ogaki, thank you very much for waiting. Over to you.

This is Ogaki from Okasan Securities. I'd like to go back to the change factors on Page 14 again. First, on the impact of raw material cost. Is JPY 6 billion for the second half essentially a fixed confirmed number? Or could it still move significantly from there? And what is the assumed Dubai crude oil price behind that figure? Also, I think that you said the price increases were mainly in Japan. For the impact of the Middle East situation overseas, how do you plan to recover that?

There will naturally be some variation from the minus JPY 5 billion of raw material cost in the second half. But given the lead time lag in the procurement pricing, we don't expect a major swing. We feel we have reasonably good visibility on this. That's the first answer.

On the second point, overseas. The situation overseas differs from Japan by country. In some countries, regulations and rules make it easier to pass through cost to price in some countries, while in others, it's harder. So there are countries where we can talk about the price pass-through as in Japan and countries where we will pursue an effective price increase through means such as reducing the frequency of special sales, adding value and cutting cost. In any case, since conditions vary by country overseas, we intend to counter the raw material cost impact using the approach best suited to each country.

In particular, as you know, in Southeast and South Asia, Thailand and Malaysia, for example, while detergent mix is high, how we strengthen our business there is a major theme. To do that, beyond the price increases already mentioned, we are also working on raw material cost reductions, changing formulations and improving the profit. In Malaysia, we are shifting product mix from powder detergent to liquid detergent to help offset the raw material cost headwind. Taking these various actions, we intend and believe we can address the rising raw material costs overseas through an approach that differs from Japan.

And the Dubai crude oil assumption, could you comment on that, please?

On the Dubai crude assumption, we have a page for that. Let me have Fukuda respond to you.

This is Fukuda. As shown here, we are assuming $85 per barrel for the full year. The first half was $91. So for the second half, we are assuming around $80, slight decline. That said, raw material cost increase and the Dubai crude price do not necessarily move in parallel. So we do not expect the cost increase impact to change materially from what I have described earlier. But if there is a significant change in the Middle East situation going forward, that could be a different scenario, and we intend to respond flexibly.

As we are already considerably behind the time, so we close the Q&A session here. Our apologies to everyone who still has a hand raised. With that, we now close the Lion Corporation's financial results briefing. Thank you very much for joining us today.

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

So I am Ichitani. From my side, I would like to explain specifically about our overseas business. Today's presentation consists of the four points. First, I will provide an overview of our overseas operations, including our current business status and our approach to transforming our business portfolio. Next, I will present the details of our oral health care strategy, which is the focus of today's presentation. In the third part, I will discuss our initiatives in creating new opportunities in challenge for growth businesses. Finally, I will explain the organizational structure and talent for executing these strategies.

First, here is an overview of our overseas business. The breakdown by country and product category is shown on the left. On the right, we have outlined the market positions of our main products. As you can see, Thailand, Malaysia, China and South Korea are our four key markets, particularly, as you can see, we have been able to secure strong market positions. This demonstrates the widespread penetration of our products among consumers across Asia.

Since entering the Thai market in the 1960s, our overseas business has expanded from Southeast Asia to Northeast Asia, and sales has grown by 5x in the past 20 years. We believe that this long-term growth has been supported by two key factors: advanced technological capability and the strong local distribution networks. This is our partnership strategy and localization of management in which we entrust operations to leaders who have a deep understanding of the local environment, including management.

The greatest essence we have cultivated throughout this journey is our unique localization strategy. While global corporations pursue comprehensive product lineups and standardized economies of scale and local corporations cater to region-specific needs, we believe our strength lies in having established a unique position that combines the strength of both while distinguishing ourselves from them.

We combine the solid technical capabilities we have cultivated over many years in Japan, with localization that thoroughly incorporates local cultures and preferences. The approach to offer products that caters to market structures and precise consumer sentiment will become more important than ever to realize proposals with high value adds that serve to earn the support of Asian consumers.

I would like to introduce two case studies that demonstrate the competitive advantages achieved through this localization strategy. The first is, on the left-hand side, is the Systema charcoal toothbrush in China. By focusing on charcoal, which is highly popular in China, and combining it with the cutting-edge technologies such as super tapered bristles and thin toothbrush head, we developed this product. As a result, sales of Systema toothbrush have more than doubled between 2018 and 2024, though not limited in this -- for this product.

The second example is on the right-hand side. This is Nonio mouthwash in Hong Kong. While we previously imported and sold the Japanese product as is, we identified a strong local demand for prevention of receding gums and redesigned the product specifically for the local market.

Since its launch, it has garnered overwhelming support and significantly expanded our market share as shown on the lower right-hand side. In this way, the combination of local preferences and the technology has enabled us to differentiate ourselves from the competition.

Building on these strengths, we must transition to a high-margin portfolio in order to achieve sustainable growth even amid a constantly changing external environment. This slide summarizes the roles and strategic directions of each business segment. Oral health care is, of course, a top priority. On the left-hand side, by allocating management resources to the segment with the highest priority and in a concentrated manner, we will accelerate the growth of both sales and profits.

Regarding beauty care and pharmaceuticals, which we classify as challenge for growth businesses, we will explore growth opportunities primarily in new markets where high market growth is anticipated, aiming to contribute to the growth's overall profitability.

Furthermore, on the right, regarding home care, which we hold a strong market position in laundry detergents, we will treat it as a stable earnings business and thoroughly pursue product mix optimization and efficiency improvements to continue generating stable earnings and cash flow. Today, I will focus my presentation on top priority, oral health care and a Challenge for Growth businesses, which center on new markets.

I will now take a deeper look at how we are accelerating our strategy in oral health care, our highest priority area. In the Asian markets where we operate, two major and irreversible structural changes are underway. The first is, as shown to the left, rapid population aging across Asia.

As shown in this graph, on the left, Asian countries will age rapidly following the path of Japan. As aging progresses, oral care needs will shift from simple disease prevention to maintaining quality of life and preventing periodontal disease. The second change is the expansion of the middle and high-income segments. Forecast for household income distribution in Asia show that the number of middle and high-income households is expected to grow to around 420 million by 2025.

As disposable income rises, consumers who are willing to invest more in their own health will become the majority. As a result, we expect the Asian market to shift further towards higher value-added products. In particular, the oral health care market in the 10 key countries where we operate has very strong potential with sustained growth expected going forward.

What will drive this market growth is higher unit prices. As shown in the market forecast data in the graph, both the unit price per volume of toothpaste and the unit price per toothbrush in Asian countries are expected to rise steadily toward 2030 using 2023 as an index of 100. In short, this is not simply volume growth in terms of the number of units sold. Rather, the market as a whole is moving towards higher value-added products driven by consumers' demand for higher quality and greater functionality. We believe this creates an opportunity for our high value-added strategy.

Changes in distribution channels are also strongly supported -- are also strongly supporting purchases of higher value-added products. These include the spread of e-commerce, social media and the rise of lifestyle shops. The awareness to the beauty and the increasing demand for healthier look, and placing greater value on emotional appeal and design, will rise.

Changes in distribution channels are also strongly supporting purchases of higher value-added products. These include the spread of e-commerce, social media and the rise of lifestyle shops. As a result, even in FMCG, we are seeing strong demand for premium products that offer solid evidence and high satisfaction even at somewhat higher prices. We perceive this to become the new main battleground for growth in Asia's health care market.

Based on these changes, we believe we can further grow the business and improve profitability by driving higher value-added products and targeting consumers with strong interest in health and beauty. To do this, we will build on our strengths in function-based products and services as well as in our sales channels while capturing changing consumer needs and offering new value. Today, I will explain each of these elements in order.

As I mentioned earlier, the strength of our overseas business lies in our globalization strategy. To further accelerate profitable growth in overseas oral health care, we believe we need to sharpen our focus on selected target segments based on this localization strategy. In the past, our investments were spread across multiple subcategories. As a result, we often competed head on with players with greater financial resources, making us vulnerable to price competition.

Going forward, we will clearly identify high value-added subcategories where our globalization strength can be most effective and where high growth and margins can be expected. These include whitening, gum care and sensitive care. We will concentrate our management resources in these areas.

By avoiding a battle of attrition in basic commodity areas and by expanding share in value-added segments, we aim to achieve growth with high profitability. This slide summarizes the targets set for each country where we are strengthening oral health care as well as the initiatives to achieve them. In each country, we are assessing the competitive landscape and our strengths by subcategory and refining our strategy accordingly. I will now explain the progress of some of these specific initiatives.

This is an example of strengthening our brand based on local needs in the Thai market. In Thailand, we are updating our brand strategy. There are still areas and channels where distribution has yet to be expanded and the unit price of toothpaste in the Thai market is also rising. We, therefore, believe there is ample room for growth by building solid marketing initiatives for each brand.

Specifically, we are focusing on salt toothpaste, basic value segment unique to Thailand. This segment accounts for around 17% of the overall toothpaste market. In this category, we offer Salz, a local brand with a solid market position to further enhance its added value and expand its user base, we carried out a bold rebranding. With younger consumers as our clear target, we renewed the package design and promotional communication.

We also launched a new product in collaboration with ChaTraMue, a long-established Thai tea brand. This has generated buzz, especially on social media. Even as domestic consumption remains soft, we are steadily evolving toward a higher value, more profitable business model.

Amid an increasingly challenging consumer environment in China, we have shifted a strategy from quantitative expansion to a focus on profitability through the development of high value-added brands and are seeing positive results. While striving to maintain prices in the highly competitive "volumes of price range", we are focusing on expanding the distribution of high value-added brands such as Systema and Clinica, and our distribution channels in the fiscal 2025 have expanded to approximately 1.5x their size from that of 2 years ago.

As a concrete example of our approach to creating high added value, we would like to present a case study from the Chinese market. While consumption in China is becoming increasingly polarized, the high-price segment we target, particularly the whitening segment, accounts for 22% of the overall market and is a highly attractive area that continues to grow rapidly.

We are making full use of our Shanghai R&D center, LICS, to rapidly develop products that anticipate local trends. In April of this year, we launched a new clinical product that combines the five proprietary enzymes with whitening functions, which enjoyed tremendous support among younger consumers.

As you can see on the right-hand side, this is a photo, thanks to solid evidence and excellent locally driven marketing, initial sales have been extremely strong, and we have achieved a significant increase in unit price compared to existing products. So this is the China business that is transforming. I would like to -- Wang Fo-san has given us a video message, who is the Managing Director of China.

[Presentation]

Hello, everyone. I am Wang Fo, Managing Director of Lion China. It is a great honor to have this opportunity to share with you Lion's competitive advantages and future prospects in China and to extend my sincere gratitude to investors who have supported us over the years. Since entering China for more than 30 years ago, Lion has consistently positioned oral health care as its core business.

As for myself, I joined Lion 23 years ago, starting as the brand manager of Systema. Today, thanks to outstanding quality, the Systema toothbrush choice is highly favored by Chinese consumers, and we sell more than 60 million units annually in the Chinese market.

It is precisely because we uphold the principle of quality-first, that Lion has become synonymous with high-quality oral health care products in China. This is the greatest competitive advantage that we have built.

We have established an efficient and localized product development system that enables agile and forward-looking local innovation to meet the diverse oral health needs of Chinese consumers. We also built a mature sales network that covers the vast majority of Tier 3 and above cities in China efficiently reaching consumers across the country through online, offline and O2O channels.

Including raw materials, manufacturing and logistics, we possess a stable supply chain system that is flexible and cost competitive, enabling us to support the continued expansion of our business scale. Looking ahead, we have a firm confidence in Chinese market.

In China, demand for premiumization and health-oriented products is growing steadily. We will prioritize the high value addition of oral health care basing ourselves on the strong innovation capabilities of both the Japan and China operations, and rely on a highly trusted brand power and strong sales execution as the pillars to continuously strengthen brand momentum, thereby enhance profitability. With further urbanization and the use of e-commerce to penetrate lower-tier rural markets, we can continue to expand our consumer base. As a result, Lion will steadily increase its market share.

Leveraging China's robust digital infrastructure, intelligent operations and refine management will also become our competitive advantages, continuously contributing to improved operational efficiency and profitability. In the past, in China's fiercely competitive and rapidly changing market, we have continuously adapted and evolved with agility. We have not only achieved and sustained growth in performance and market share, but have also attracted talent and built an increasingly strong team.

Today, more than any time before, I feel even more certain and confident about Lion's development in China. We are fully prepared for the future. As the Head of the China region, I will lead my team in upholding a long-term perspective, taking high quality and high value as the benchmark and Chinese consumers' needs as a guiding compass. We will steadily implement each of our strategies, continue to contribute to the enhancement of our corporate value, deliver tangible results to repay the trust and expectations of our investors. Thank you very much.

While I have explained about our product initiatives, we do not intend to remain merely a company that sells high-quality products. To embody our purpose of redesigning habits across Asia and with an eye toward achieving medium- to long-term growth, we are taking steps to expand our business scope.

One such initiative is strengthening collaboration with dentists and related organizations. In 2025, we became the first Asian consumer health care company to participate as 1 of the 7 companies second only to the main sponsor in the FDI World Dental Congress held in China. By building networks with global dental stakeholders, we are enhancing the credibility of our functional products while raising our profile as a leading company in Asian oral health care habits.

Furthermore, based on the partnerships with the dental channel, we are building a new business model that provides end-to-end support from consumers' awareness to behavioral change. By promoting regular visits to professionals and supporting self-care tailored to each individual based on guidance from dental professionals through our products and services, we aim to create a virtuous cycle of promoting visits, treatment and maintenance to self-care, leading to the expansion of consumers' healthy life expectancy and the sustainable growth of our business.

This is an update of our specific progress. In China, we are building a system to create connections with dentists by actively participating in trade shows and hosting seminars while providing advanced technical information through an expert community. We believe this will generate a ripple effect spreading word of mouth about expertise and reliability of Lion products, both within and outside dental clinics, and we aim to further accelerate the shift towards high value-added services.

In Vietnam, we are fully leveraging MerapLion's robust network of medical and pharmacy channels to develop a new methodology called early preventive treatment, which integrates the treatment sought by local dentists with our preventive care.

We are promoting this approach at major events such as dental conferences and driving the robust launch of our oral health care business starting this May. In Thailand, we have also established a team specializing in dental channels and are poised to expand the model we have developed in Vietnam.

Another critical initiative for expanding our consumer touch points and broadening our business scope in Asia is health care education. To date, we have conducted oral hygiene awareness campaigns across Asia. For example, in Malaysia, the Kodomo brand team conducted a 5-day toothbrushing program that attracted over 30,000 participants.

The initiative focused on establishing health care habits, particularly oral health care that engage schools and local communities, we have contributed to improving the quality of life for consumers across Asia and expanded our market presence.

We are currently expanding these activities into Bangladesh, shown on the right-hand side, a market with significant growth potential in Bangladesh, toothbrush usage rate currently stands at only 1/5 of the level of Thailand, and the market is expected to expand as awareness of oral health care increases.

With our new plant set to begin operations in 2026, we are well prepared for market expansion. In addition to initiatives aimed at raising awareness of oral hygiene, we aim to expand the business by fostering loyalty and trust in the Lion brand. We have explained so far represents a functional value propositions, which leverages the strength we have cultivated over the years in areas such as the prevention of tooth decay in periodontal disease.

As consumers' values and lifestyles continue to diversify, we believe that to achieve medium- to long-term growth, we must go beyond this and offer high value-added solutions that reflect the evolving needs of consumers. Going forward, we will strive to expand the oral health care offerings by integrating them with the emotion and beauty axis, which helps boost confidence in areas such as aesthetics and whitening.

From the consumers' perspective, oral health care and cosmetics sections are located very close to one another, making this a field with extremely high affinity for beauty awareness. We believe that potential demand is particularly high in markets such as China, Singapore and Thailand, where consumers are highly attuned to beauty trends.

According to our research, approximately 40% of consumers in our target markets fall into this health and beauty conscious segment, and we intend to take the lead in developing this new market for emotional and beauty-oriented oral health care, which our competitors have not yet clearly addressed. We will achieve solid margins and growth by offering high value-added products and services based on market needs.

I will now move on to the third part, our challenge for growth businesses, which are designed to further enhance the profitability of our overseas business. Today, I will mainly share the progress of business expansion and synergy creation at two companies that were recently consolidated, one in Australia and one in Vietnam.

First, I will discuss the development of our beauty care business in Australia. PNB, in which we acquired shares in January, operates mainly under the Sukin brand. PMI after the share acquisition is also progressing smoothly. Sukin is Australia's #1 natural beauty skin care brand by sales with exceptionally strong brand recognition. Its strengths lie in a product concept focused on being gentle on both the planet and the skin, as well as advanced product development capabilities that respond to global organic trends.

Today, Sukin is sold not only in Australia, its home market, but also in 22 countries worldwide, including Europe, Asia and North America. Clean beauty expansion is -- it's a tailwind. The growth scenario for Australia is to create strong synergies by combining Sukin's brand value with the Lion Group's global infrastructure and operational capabilities.

On the sales side, we will strictly protect Sukin's core brand value and maintain a high-margin brand control model without relying on easy price promotions. As specific synergies, we will roll out successful marketing methods from stores and events in Asia to other countries.

We will also introduce our advanced R&D evaluation technologies and use our SCM platform to improve efficiency and optimize inventory levels. Through these measures, we will further improve profitability and drive lean profitable growth.

Next, I will discuss our Vietnam business, which was consolidated last year. At MerapLion in Vietnam, we operate a unique and highly profitable business, mainly in pharmaceuticals with a model that differs from our businesses in other countries. To help you better understand its potential and its contribution through synergies with the group, please watch this video message from Thúy-san, CEO of MerapLion.

[Presentation]

Dear investors and partners, I am pharmacist, Phan Th? Thanh Thúy, currently the CEO of MerapLion. I have been with MerapLion for nearly 20 years, having held various roles, including marketing management, business unit operations and finally, overall company management. For over 26 years, MerapLion has continuously contributed to health care for the Vietnamese people with many market-leading brands such as Xisat, Osla, Benita, Medoral.

July 2025 is a significant milestone as we officially became a member of Lion Corporation Japan, made -- marking MerapLion transformation from a traditional pharmaceutical company into a health care company with advanced values from Japan.

With this, the vision of becoming the health care expert in Vietnamese and for Vietnamese families, we provide solutions and create good health care habits for the community, thereby building sustainable value for the company.

Our strategy is built on three main pillars. First, MerapLion continues to optimize its competitive advantages from its unique business model, the [ ETC ] model, its integrated capabilities from production to trade and its understanding of customer insights. We focus on developing pharmaceutical and parapharmaceutical products with differentiating factors, bringing added value to customers and ensuring sustainable profit margins for the company.

Second, with MerapLion's strong system and extensive industry connections, combined with Lion's technological and brand strength, we are confident in launching new flagship product lines for Lion such as oral care and beauty care. This strategy not only delivers long-term growth, but also plays a crucial role in realizing MerapLion's Japanese quality positioning.

Thirdly, we focus on optimizing operations and improving efficiency by updating the team's capabilities, applying digitalization to operations, streamlining the structure and enhancing supply chain efficiency. This is also a key pillar in ensuring good profit margins for the company.

Looking ahead, we possess three key elements for sustainable growth. The pharmaceutical industry still has significant growth potential due to the aging population and the increasing awareness of health care among Vietnamese people. Our differentiation strategy and clear implementation plan is the second. Specifically, we are also conducting research on a significant investment plan to expand our pharmaceutical business.

Thirdly, from the intrinsic value of MerapLion's culture and people, the organization's most valuable asset. We are confident that together, we will create greater value for the community and for the sustainable development of MerapLion.

Finally, the positive feedback from customers and partners after only a short period of transformation, along with the anticipation of a truly Japanese influenced MerapLion is a great motivation for us to continue moving forward steadfast in our stated strategy and committed to MerapLion's long-term growth. Thank you sincerely, and we look forward to your continued trust.

As just explained, the strength of our Vietnamese business is its doctor recommended model built on strong trust with doctors and pharmacists. Based on this strong infrastructure, we will expand our core pharmaceutical business into new dosage forms that we have not fully addressed before, such as solid form antibiotics. In addition, by leveraging group synergies and developing other business areas, we will increase the probability of achieving highly profitable and sustainable growth.

So from this slide onwards, this will be the final part. I would like to explain about the organization and talent supporting growth that realizes the strategy that I explained and to generate results. First, I would like to discuss the organizational changes we have implemented this year. As previously announced, we have restructured our overseas operations from the previous two-headquarters-based area system to a business unit system directly overseen by me, the CEO. Under the previous two headquarter system, management functions were established separately for Northeast Asia and Southeast South Asia, which slowed down decision-making.

Additionally, since R&D functions were housed in a separate organization, there were challenges in coordination. Under the new single business unit structure, the COO bears overall responsibility for performance and investment decisions across all countries worldwide and functions such as marketing and R&D are integrated directly into the country-specific business units.

This enables each country to make immediate decisions on the ground, evolving our business operations into a swift proactive system capable of taking the initiative in the rapidly changing overseas market environment.

Furthermore, to rapidly implement our localization strategy, we are vigorously promoting the divestment of group R&D capabilities. We have overhauled the development process, which were previously centered in Japan and have positioned Japan with its wealth of research assets in China, with a remarkable pace of innovation as hubs for technological innovation, focusing on the deepening of core technologies and the development of innovative evidence.

Furthermore, we have specialized our development bases in countries such as Thailand and Malaysia and locally led high-speed product development. By clarifying roles and promoting open innovation, we will accelerate the speed from product development to launch and continuously create differentiated products.

Finally, I would like to discuss about human resources. No matter how excellent our strategies or organizational structure may be, we cannot achieve results without talented people on the ground to put them into action. Lion's greatest strength in its overseas operations lies in the localization of management that we have cultivated over the years.

Currently, 75% of the heads and representatives of our group's overseas subsidiaries are local management personnel, with a deep understanding of local culture and market characteristics and leaders in key countries operate the businesses autonomously.

At the same time, we engage in in-depth discussions regarding management policies and overall strategy between our headquarters in Japan and local subsidiaries to ensure a shared direction. Regarding actual execution such as marketing initiatives, local management who deeply understand consumers and work closely with those employees makes swift and precise decisions.

Furthermore, having established a management infrastructure that allows the head office to review various data in a timely manner, we believe we can improve the speed of execution while maintaining effective governance. We are convinced that this management style is the driving force behind the sustainable enhancement of corporate value in rapidly changing overseas markets.

Lastly, based on the strategic overview provided earlier, here is an update on the progress of our company-wide capital allocation. In the second stage, we have made growth investments, our top priority. This has led to the investments in a Challenge for Growth businesses, starting with the acquisition of MerapLion in Vietnam last year and the acquisition of shares in PNB earlier this year.

Going forward, our top priority is to capture growth opportunities in the oral health care business. By executing the strategy outlined today, we will expand our business and achieve further growth and higher profitability.

Once again, this is a summary of today's presentation. Once again, Lion's overseas business is shifting course from the previous stage of quantitative expansion to a stage of profitable growth based on market-driven and competitive advantage-driven strategy. We believe that when these elements accurately capturing changes in the attitudes and structures of Asian consumers, advancing the strategy of selection and concentration in high value-added segments.

Our business unit structure that enables rapid execution and the PDCA cycle and the 75% local management personnel who truly understand local conditions are organically integrated and the gears of the strategy meshed together, the likelihood of achieving profitable growth becomes extremely high.

We view changes in the macro environment as opportunities for evolution and promise to deliver results that meet the expectations of our investors. This concludes my presentation. Thank you for your attention.

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

Thank you very much for your consistent support. I'm Fukuda of Lion Corporation. I'm very grateful that so many of you participate in our briefing today despite your busy schedule.

There are 2 major topics today. First, sales and profit continued to increase in Q1 and the progress stayed in line with our full year plan. In the top priority oral health care business, shift to high value-added products and high growth were achieved and the integration of 2 companies in Vietnam and Australia into the portfolio improved margins.

Second point is related to policy in Q2 onward. As you know, business environment has been drastically changing compared to the initial forecast due to the Middle East situation. On the other hand, we announced the policy this year, the shift to a highly profitable business portfolio and the strengthening of mobility through management processes transformation. And these are exactly to build the resilient business foundation under such environmental changes.

We are currently considering and promoting additional measures to secure profit against the Middle East risks. And though the final impact level is still uncertain, we aim to achieve the initial full year target, absorbing the expected risks at this point. Accordingly, the earnings and dividend forecast remains unchanged. Two key messages are the progress in Q1 is steady, and we aim to achieve the initial target overcoming the impact of the Middle East situation assumed at this point.

Today's contents consists of these 3 points, and let me start with the financial results for the first quarter. Consolidated net sales in the Q1 was JPY 99.2 billion, up 5.3% year-on-year and year-on-year change at constant currency, excluding exchange rate fluctuation, was plus 1.7%. Core operating income was JPY 6 billion, up JPY 0.7 billion year-on-year or 13.8%. EBITDA margin was 11.1%, up 0.8 percentage points. Since the launch of the midterm plan, second stage in the previous year, the basic trend of sales and profit increase and the improvement of margin has been continuing and the progress in line with the plan.

Next, I will explain the breakdown of core operating income increase of JPY 0.7 billion year-on-year. Gross profit factors are on the left and SG&A factors on the right. Gross profit factors were plus JPY 3.7 billion and SG&A factors were minus JPY 3 billion. And the net impact was plus JPY 0.7 billion. Sales increase impact of JPY 3 billion in gross profit factors and changes in other expenses, minus JPY 2.1 billion in SG&A factors were larger than the usual Q1. These are due to the added profit and loss of the newly consolidated 2 companies as well as the acquisition-related expenses of PNB in Australia, which is booked in other expenses.

Raw material costs were not affected by the Middle East in the first quarter, and the cost increase was limited to JPY 0.3 billion. Changes in competition-related expenses was cost increase of JPY 0.9 billion due to the increased expenses for growth in Japan, mainly for Oral Healthcare.

Results by business segment. In Consumer Products, sales increased by 3.6%, but profit decreased by JPY 350 million. In addition to the increased advertising cost to enhance the growth of the key area, as mentioned earlier, there was a rebound from the controlled TV commercials in Q1 last year, and the results were almost in line with the plan.

Skipping one line, overseas business sales and profit increased, partly due to the consolidation of Vietnam and Australia businesses, margin improved 2 percentage points. In Industrial Products, sales declined due to the industrial Red, which is included in the Red brand transferred in the previous year as it is included in this segment, but profit was almost flat.

Consumer Products business net sales by product category. In oral health care, mainstay brands were robust in toothpaste and toothbrushes and high-end dent health reused last autumn also contributed. Sales of products sold through dental clinics continue to be strong, and they led to the strong growth of 9.8% in sales.

In Fabric Care, sales of laundry detergent were firm, achieving 1.9% sales growth. In pharmaceutical, acne products were strong, achieving 4.9% growth in sales. On the other hand, in Beauty Care and Living Care, we controlled the sales promotion in the first quarter as the product renewal is scheduled in Q2. And sales in Living Care decreased partly due to the impact of transferred Red brand.

Overseas business results by region. Southeast and South Asia and Oceania, which includes Australia, marked sales and profit increase based on the existing countries, but because of the addition of Vietnam and Australia, sales increased 18.8% and core operating income increased 58.6%, showing the prominent growth. On the other hand, in Northeast Asia centered on China, due to change in sales strategies and adjustment in distribution inventories in China, sales decreased, but we secured the increase in profit.

Status of business in 4 key countries. In Thailand, sales increased due to FX impact, but they decreased on local currency base. Exports to Cambodia did not recover and local consumption is slightly sluggish. But Oral Health care, which is being strengthened, began to deliver positive results. In Malaysia, price optimization in laundry detergent achieved substantial improvement in profitability and growth investment in Personal Care focusing on oral health care contributed to sustained increase in sales and profit.

In China, we continue the price improvement of white and white and optimization of distribution inventories, which was explained in February, progressed, and they led to substantial sales decrease in Q1. But the inventory reduction was mostly completed in Q1. We are fine-tuning strategies in China, and I'd like to explain it later. South Korea turned to sales growth trend.

I'll explain key measures of this fiscal year, their progress in Q1 and the policy in Q2 onward. I'll talk about the response to the Middle East risks. First, let me confirm key themes and progress this year. Regarding a shift to a highly profitable business portfolio shown on the left, we continue the growth and shift to value-added products, focusing on oral health care in Japan and overseas. From last year to this year, we have been promoting the restructuring of business portfolio in challenge for growth businesses and the structural reform businesses.

Currently, we are working on PMI P&B in Australia and preparing for closing of transfers of chemical product business scheduled in June. Regarding the enhancement of agility through the transformation management process is shown on the right, our primary objective has been to improve agility in business operations. To this end, since January this year, we have implemented significant organizational changes and delegated greater authority throughout the organization. As I will explain later, we believe these changes have already begun to demonstrate the effectiveness in responding to the current situations in the Middle East.

Let me now explain each initiative in a bit more detail. First, regarding our portfolio, oral health care, our top priority area. In Japan, from last year into this year, we have continued strengthening the periodontal disease segment, where the mix of premium-priced products is particularly high.

Following last year's dental health initiative, this year, we are focusing on strengthening SYSTEMA, Haguki Plus, which represents the volume zone within the premium price segment with the aim of improving the overall mix of value-added products. In addition, through the dental clinics channel, we launched new high value-added products last year and have been actively nurturing their growth. As shown here, we are already beginning to see encouraging results.

Turning to overseas oral healthcare business. Revenue in China declined in the first quarter. However, we are now focused on rebuilding the business and returning it to a trajectory of profitable growth. In April, alongside the launch of new products under the mid- to premium-priced brands such as Clinica, we implemented cross-brand campaigns and are working to improve promotional efficiency.

We are also reviewing our channel mix strategy. Rather than pursuing discriminate expansion in off-line channels, we are concentrating distribution on key retail channels. At the same time, for online channels, we intend to strengthen our presence on emerging platforms once again. Although revenue declined in the first quarter, sales have already returned to a growth trend since April. In Thailand, we have updated key elements such as branding target customers, channels and promotional strategies, while also defining concrete product actions for the second quarter onward.

At present, we are already beginning to see positive results from the renewal and repositioning of the local as brand. In Vietnam, we will launch a high value-added brand called [indiscernible]. Rather than distributing through the mass market channels, this brand will be developed under the business model centered on recommendations from the health care professionals through clinics and pharmacies.

Next, I would like to discuss the Beauty Care and the pharmaceutical businesses, which are positioned within our portfolio as challenge for growth businesses aimed primarily at driving overseas growth. As mentioned earlier in relation to all the health care, in Vietnam, we are also expanding into the sensitive skin care category.

Originally, Map Lion in Vietnam has operated under what we call professional recommendation model, and our intention is to broaden the product categories within this business model through the synergies with Lion. Therefore, rather than pursuing large-scale volume growth through mass market expansion in the short term, we aim to steadily nurture these businesses while maintaining profitability.

On the right-hand side is Australia, who joined us this fiscal year. The 100-day plan launched at the end of January has just been completed, and we believe PMI has progressed generally smoothly. Going forward, we will shift our focus towards strengthening the business and generating synergies. Within Australia, this includes reviewing promotional activities for the core Sukin business.

Since the company also operates on OEM business, we are additionally examining ways to improve production capacity efficiency. Furthermore, from a synergy perspective, PMB originally aimed to expand its business across Asian markets, and we are currently considering how the Lion Group can support that expansion strategy. Naturally, we also intend to accelerate discussions regarding introducing these businesses and products into Japan.

Next, I would like to discuss improvements to the profitability and structure of our domestic operations centered on the home care business, which we position within our portfolio as a structural reform business. This year as well, we will continue initiatives aimed at increasing product value-added content, reusing SKUs and improving promotional spending efficiency. In particular, for home care, we believe it is essential to increase the proportion of the products with the clear differentiation, including products utilizing our own proprietary and water-saving technologies.

Regarding supply chain management, we are also promoting more advanced supply chain operations by incorporating AI-based demand forecasting models ahead of the actual supply-demand adjustment and the production planning processes. That said, we are currently anticipating cost increase and potential product supply disruptions stemming from the risks in the Middle East. Accordingly, we recognize the need to further accelerate, strengthen and supplement these initiatives, and I will explain the situation in more details on the next slide.

Turning to the impact of the situation in the Middle East. We have already begun to see some effects from rising raw material costs and freight rates starting from the second quarter. At this stage, it is difficult to determine the ultimate scale or the duration of the impact. However, our current base case assumption is that crude oil prices, which we originally assumed at $70 per barrel at the beginning of the year, and they will remain at around the current level of about $1 per barrel. Under this assumption, we expect the cost increase impact on our raw materials will not subside within this year. And therefore, the entire company is implementing and evaluating countermeasures. These include revising sales plans by shifting the product mix toward items less affected by or consolidating or replacing products likely to face supply constraints and reviewing the product launch schedules and promotional timing.

In conjunction with these measures, we are also revising our marketing plans, including raising effective in-store prices through the changes to promotional programs and trading terms, improving advertising efficiency, implementing additional cost reduction initiatives and expense controls. These efforts are being promoted company-wide from many different angles. In preparation for the possibility that conditions worsen further, we are also preparing additional price pass-through measures as well as further structural reforms should the situations become prolonged.

As mentioned earlier, under the new organizational structure introduced in January, business units themselves are now responsible for evaluating decision making and executing countermeasures. This has enabled us to implement more proactive, flexible and autonomous initiatives than ever before, including scaling raw materials procurement routes, flexibly revising production plans and enforcing stricter cost management. By continuing to enhance our ability to respond to changes and increasing the speed of execution, we will strive to minimize the overall impact.

Based on these circumstances, let me now turn to our full year earnings forecast. We are making no changes to our consolidated earnings forecast from the guidance announced at the beginning of the year. We intend to respond swiftly and dynamically to changes in the business environment, including risk related to the middle situation and remain committed to achieving the earnings targets set at the start of the year.

Please note that our assumptions regarding the FX rates and raw materials prices and the composition of profit increase and decrease factors have already changed significantly from our initial assumptions at the beginning of the year. However, given the extremely fluid nature of the environment going forward, we have intentionally decided not to revise these underlying assumptions at this time, and we appreciate your understanding. There have also been no changes to our shareholders' return policy from the announcement made at the beginning of the year.

Based on our progressive dividend policy, we plan to further increase the dividends from last year with the dividend going up JPY 4 to JPY 34 per share, and the payout ratio is going to be 37.6%. This concludes my formal presentation, but I would like to make one final comment regarding our view of the current environment and this year's positioning. Last year, we launched in the second stage of our midterm management plan, and this year marks its second year. In the current highly uncertain environment, we recognize that achieving our original earnings targets this year is extremely important in order to gain trust and confidence from you and the capital markets.

While the outlook for the current cost environment remains [ ensuring ], and there is certainly no room for optimism. We were able to deliver solid results in the first quarter and have also gained strong confidence in the effectiveness of our management reforms. Accordingly, we intend to respond with even greater flexibility and agility in order to achieve our targets.

This concludes my presentation. I would like to thank you again for your kind attention.

Now we will take questions. First, Ms. Kuwahara, over to you.

I'm Kuwahara of JPMorgan Securities. Let me ask 2 questions briefly. First, how shall we see the sales increase and the profit decrease of Consumer Products business in Japan? In the previous fiscal year, you talked about the objective of this year, and it was growth in Japan. Net sales increased, but would you comment on how you view the situation by category? And is the return from the competition-related expenses improving clearly? Would you comment on this? This is my first question.

Regarding sales increase and the profit decrease in Japan, profit decreased JPY 350 million in Japan. We increased advertising cost by JPY 700 million. And then the profit decline was limited to JPY 350 million. So it does not mean that promotion didn't deliver sufficient results. In Q1 last year, we canceled some TV commercials of JPY 300 million to JPY 400 million. So in addition to this increase, we are strengthening forecast expenses, and we see the expected growth. We achieved sales and profit increase in Q2 onward as planned. So you don't have to worry.

Understood. Second question is about the Middle East.

Thank you for your detailed explanation to that end. Please allow me to ask about the scale, though you are now in the consideration phase. In the previous management meeting, you said that with the crude oil price of around $80 to $90 per barrel, additional cost increase will be around JPY 1 billion or so. Then if the price goes up to $100 per barrel, will the cost increase simply be doubling? Or considering the procurement impact, do you need to prepare for more? With that in mind, do you make a plan? Can you give us any hint?

Quantitatively, we assume the impact would be around JPY 3 billion to JPY 4 billion. Impact of $10 difference was only for Japan business. But dependency on the Middle East varies by country in overseas business and their impact varies. So we need to scrutinize. We are considering countermeasures with the assumption of JPY 3 billion to JPY 4 billion impact by the sustained current crude oil prices at around $100. At this point, we think we'll be able to manage with this.

Next, Ms. Miyasako, over to you. I'm Miyasako of Mizuho Securities.

First question is about consumer products in Japan. Sales of some product categories seem to be strong as was the case with Oral Healthcare. Compared to your forecast, how did they perform in Q1? I think the last-minute demand happened from March. So how did you see its impact? And when it subsided, can you sustain the strong momentum in April and May, in particular in Oral Healthcare? Would you comment on this?

In Q4 last year, as we took product initiatives, in this Q1, we see their contribution. In this year also, we will strengthen mid- to high-end products like Haguki Plus. So combining these efforts, we will strive to sustain growth, focusing on key products. Then oral health care seemed to be strong, but is it not due to the last-minute demand? Right. No special demand spike was observed in March due to last-minute demand.

I thought there were some temporary demand anticipating future price hike. But is that not the case?

It was not the material impact. Holding, so to speak, did not happen.

Well, then oral health care robustness is due to the success of new products and the sales through dental clinics. Is that right?

Yes.

Then is it sustainable?

Yes. As it is positioned as a top priority in the company. Growth rate itself may go up and down quarterly, but we believe the growth and margin improvement are sustainable.

I'd also like to ask about the Middle East. Do you think that you'll be able to counter JPY 3 billion to JPY 4 billion with countermeasures that you described? And we'll be able to achieve JPY 40 billion target next year? And on price revision, we will be able to have additional pass-through.

Currently, we are considering countermeasures targeting the impact of JPY 3 billion to JPY 4 billion. If these countermeasures work successfully, we think we will be able to counter. Regardless of the condition of the straight of home moves, higher cost will continue next year onward. So by enhancing the structural reform in the next year onward, we will strive to achieve the midterm plan target.

What's your thought on price pass-through? Additional one.

We are currently increasing effective selling prices by adjusting terms and condition for sales promotion cost, which is used in reducing prices. And we'd like to continue this in Q2 onward. We will increase the number of products to increase effective prices in the second half. And monitoring the situation, we may accelerate the initiatives.

Mr. Miyazaki, over to you.

This is Miyazaki from Goldman Sachs. My first question is a follow-up question to Miyasako-san. I'd like to ask about the next year's target of JPY 40 billion. By taking the initiatives this year, do you foresee any upside next year? Are you exploring such a strategy? Or if the higher cost continues, do you aim to achieve JPY 40 billion? If I consider the time lag, then can I expect to see the upside next year after achieving this year's target? Would you clarify your thought for this year and the next?

Partly, it's up to the crude oil prices, but we consider internally that the current cost environment of our raw materials will continue for upcoming 2 or 3 years. It means that if the cost environment improves next year, it is possible to see the upside. In short term, we may need to curb the growth investment to secure profit. Then if cost environment improves, the initiatives which were originally planned for this year might be implemented next year. Through overall management, we'd like to achieve JPY 35 billion this year and JPY 40 billion next year.

Very clear. Second, I'd like to ask about Industrial Products. Due to business transfer, the business scale shrunk year-on-year. Compared to the pre-downsizing and considering the recent situation in the Middle East, can we assume that the downsizing has reduced the damage or impact? Also regarding the remaining business, is it still being affected to some extent by the situation in the Middle East? And are you considering countermeasures for this as well? Would you comment on the industrial product?

Industrial Products segment consists of 2 main areas: industrial detergent and Chemicals. Since chemical business is scheduled to be transferred at the end of June, its operation are currently continuing. So this part is almost flat. On the other hand, the sales decline in industrial sector is due to the sale of Red brand last year. The industrial use Red kitchen paper, cooking paper. So underlying sales are up. So the business transfer neither gives merit nor demerit to sales.

After the end of June, considering the impact of the Middle East, I wonder if the impact would have been greater if you had kept the business. And regarding the remaining industrial detergent business, do you need to counter for this part as well? Would you comment on this?

Got you, your question is about the future, right? The chemical business will certainly be significantly affected. But on the other hand, compared to B2C business, cost pass-through is easier. So although the impact on this business is significant, but it can be offset easily by nature. I do not think there is any particular gain or loss along with the absence of this business as of the end of June.

What about the remaining business?

Regarding industrial detergent, the cost environment is tough. But since this business engages with food processing plant and hotels, it is easier to pass the cost to price compared to B2C business. So we'll be able to mitigate the impact through price control.

Next, Mr. Hirozumi, over to you.

This is Hirozumi from Daiwa Securities. Let me ask 2 or 3 questions. First, JPY 3 billion to JPY 4 billion, is it additional one or not? Originally, you said JPY 1 billion of the merit per year. And are you saying additional JPY 3 billion to JPY 4 billion to it?

Yes. Initial JPY 1 billion was at the time of attack started in the Middle East. So it is additional one.

Got it. And you will counter this. I would like to ask about overseas business. existing and new parts. The growth of existing overseas business was somewhat disappointing, to be honest. Referring to Page 10, I was not fully satisfied with the sales of existing business, though you commented on many things. How should I see this? Is it unavoidable?

I think the past 3 months, it was unavoidable because our existing businesses in main markets, Thailand and China were weaker year-on-year. I think in Thailand, we need to strengthen domestic business again. In China, we had to reduce inventory. So I believe this March quarter weakness was unavoidable for the future recovery. As you said, April looks promising in China. Perhaps you can actually be looking forward to China going forward. We plan to rebuild our strategy to go back to a growth trajectory.

Then looking at the newly consolidated overseas business, profit was remarkable. And I was surprised, is it normal that profit is so good when you have new consolidation?

Existing business profit is also up with sales decrease. On local currency basis, sales are down, but profitability is up. As a margin of the 2 companies are higher than our entire business, by the addition of these companies, the profit was boosted.

Existing business also increased profit, though sales decreased, right?

Yes.

Is it because of the mix improvement as described, say, oral health care in Thailand was steady?

Yes.

In China, sales declined significantly, but we secured profit. So in addition to securing profit in existing businesses, with the addition of 2 high-margin companies, we showed such a significant profit increase.

Mr. [indiscernible], over to you.

First, my question is regarding cost increase due to the Middle East situation, as mentioned earlier, which is additional JPY 3 billion to JPY 4 billion. Now I'm referring to your materials for FY 2022. Back then, [indiscernible] crude oil price was $97 per barrel. And your raw material costs were JPY 14 billion. I'd like you to explain what has changed since then from your perspective? Is it because of portfolio change or your relationship with suppliers? Why can you manage with just JPY 3 billion to JPY 4 billion in addition? There may be various reasons such as palm oil prices, which has not increased or the product mix being different. So would you explain this?

Yes, costs did rise significantly in 2022, but that increase was JPY 14 billion year-on-year. It is not the case that cost then declined by 2025. What we are saying is that on top of these already elevated cost levels, we are now facing an additional JPY 3 billion to JPY 4 billion cost increase possibility. I see. So this is not a comparison between JPY 14 billion versus JPY 3 billion to JPY 4 billion, rather, compared with the level after the JPY 14 billion increase over those 2 years, we are expecting cost to further rise by JPY 3 billion to JPY 4 billion.

Yes, this time, unlike a gradual increase in crude oil prices, the rise was triggered suddenly by geopolitical issues. As a result, suppliers and others have moved proactively ahead of the market. And therefore, the impact is emerging with a shorter time lag than under normal cost increase conditions.

I see. Then regarding how you intend to absorb these additional costs, when looking at the earnings factors you presented at the beginning of the year, should we understand from the first quarter progress that the offset would mainly come from changes in sales mix and price increases or from cost reductions? I would appreciate if you could give us some guidance in this regard. Also, how much cost increase do you expect next year? And how do you expect to offset that while achieving JPY 40 billion in profit?

As for our measures, first and most, we are shifting the sales mix toward products that are more profitable and less affected by the current environment. Normally, we will not make such revisions during the fiscal year. But this time, we are implementing rather drastic revisions to our plans. As a result, the timing of product promotions and launches is also changing. Through these efforts, we aim to prevent deterioration in overall gross profit margins. In addition, we are reducing promotional and advertising expenses as well as the various other expenses in order to control cost at broad.

As for the next year, although the visibility remains limited, our current assumption is that the additional JPY 3 billion to JPY 4 billion cost burden this year will continue into next year. However, at this point, we are not assuming another incremental increase of tens of billions of yen on top of that level.

Does this JPY 3 billion to JPY 4 billion increase apply only to the second half? Or will costs begin rising additionally from the second quarter?

We believe the increase will begin from the second quarter onward. And therefore, we intend to implement these countermeasures in Q2 as well.

If I may, I have a brief second question. Regarding the newly consolidated companies in Vietnam, Australia, which performed well this quarter, could you provide some indication of how much they contributed in terms of top line growth and margins?

I believe they are included in the JPY 2.2 billion sales increase in the earnings, as you explained in the outset. Broadly speaking, the contributions from the newly consolidated companies are included throughout the entire bar charts. This is one of the points I just wanted to get your attention to. However, the areas where the impact is relatively large are the JPY 3 billion item and JPY 2.1 billion in SG&A item. Roughly speaking, about 2/3 of those amounts can be attributable to the 2 newly consolidated companies.

Next, Mr. Ohana, please.

This is Ohana from Nomura Securities. First of all, apologies for returning again to the JPY 3 billion to JPY 4 billion raw materials cost increase question. When splitting that impact between domestic and overseas operations, how should we think about the breakdown?

Also regarding the various countermeasures you mentioned, should we understand that domestic operations will mainly offset domestic impacts, while overseas operations offset overseas impacts independently? I would appreciate if you could share your basic thoughts here.

Yes. We believe roughly 60% to 70% of the impact, 60% or so range will affect domestic operations. So the 60% domestic and 40% overseas. This is due to the factors such as FX impact and the differences in raw materials procurement contracts across countries. So it may be fair for me to say that 60% impact on the Japanese market and 40% on the overseas markets. As for the countermeasures, it all depends on the case by case within each region, but we are also considering broader responses such as sourcing raw materials or intermediate products in one country and reallocating them across other regions depending on the situation.

Understood. One more question regarding overseas markets. You explained about China in some details, but even in countries where revenue growth remains positive, growth still appears somewhat soft. I wonder if the domestic consumption being weakened by the Middle East situation. Also in Thailand, I believe some competitors are significantly lowering the detergent prices. Should we assume that such impacts could continue and that business conditions in Thailand may remain challenging for some time to come?

Fundamentally, while the Middle East situation may also be a factor, we believe the domestic consumption conditions in Thailand themselves are not particularly strong and that the economic fundamentals are not necessarily good. On top of that, when the cost environments are changing like now, competitors sometimes adopt very aggressive or extreme strategies. And therefore, we may experience some short-term impact from such actions. However, we believe increasing the proportion of the personal care business within our portfolio will also improve our resilience against these types of conditions. So while this is more of a medium- to long-term approach, we intend to continue working on those initiatives. Does that answer your question?

Yes. What about the other countries? Malaysia, for example, is growing, but only modestly. Could you comment on the other countries as well?

Regarding Malaysia, we believe that we are growing faster than the underlying organic growth rate of the domestic market. Because we hold a strong market position in detergents, it is relatively easier for us to implement price pass-through measures, and we believe performance has remained solid. In other countries, conditions differ depending on whether or not they maintain crude oil reserves. In countries without reserves, sudden disruptions to gasoline supply can temporarily affect economic activity and consumer behavior. So the situation varies country by country.

I see. So because Malaysia has domestic oil resources, although revenue growth was only 0.5%, should we interpret that as simply a somewhat weaker only in the first quarter?

Yes. Malaysian also posted revenue growth last year, and we believe that underlying growth trend remains intact. In Malaysia, the government implemented demand stimulation measures last year. As a result, there was a reactionary effect this year, which led to somewhat lower growth rates.

Next, Ms. Miyake, please.

This is Miyake from Morgan Stanley. I would like to ask once again about the sales in domestic consumer products business. The 10% growth rate in oral health care appears to be a very strong start compared with your full year plan of 4% to 5% growth. Although you mentioned there could be some ups and downs quarter-to-quarter, should we understand that the first quarter performance was generally tracking above the plan?

Also, were there any special factors included such as initial shipments or onetime items? I would appreciate if you could share your insights in this regard, particularly from the viewpoint of the progress of the midterm management plan. And if possible, I'd also like to ask you to actually share your thoughts in regard to other categories at the same time, please.

Yes. Since this is a comparison of the January through March period versus the same 3 months period last year. Oral Healthcare benefited from the fact that last year's new product initiatives, including dental health as well as the dental clinics channel initiatives were concentrated in the second half of the year. As a result, we had already planned for relatively strong growth in the fourth quarter and in the first half of the year. That again, you are right, actually, we had a rather strong first quarter performance above the original plan.

Meanwhile, in categories such as the beauty care and living care, we had planned new product launches and product renewal initiatives beginning in April and onward this year. Therefore, ahead of those transitions, we intentionally did not significantly increase retail inventory or conduct major promotions during the first quarter. As a result, performance appeared somewhat weak.

However, we do not believe the revenue decline reflects a competitive weakness. Well understood. Related to the earlier discussion on the measures to offset raw materials cost increases, there has also been news that some new product launches were postponed.

When thinking about the measures to build top line growth aside from the cost reductions, should we assume that suppressing promotional spending, which effectively functions as a price increase will have the greater impact? Or are there also the product-related initiatives that can still be strengthened even in this kind of environment?

Fundamentally speaking, to put it very bluntly, it boils down to the idea that we should sell more profitable products. Accordingly, we are reviewing the category and business area plans that were established at the beginning of the year as well as all related procurement and production plans.

The biggest lever in our view is to adjust the business and the product mix in order to offset the impact. In addition, for products where costs inevitably rise, we intend to suppress promotional spending as much as possible in order to effectively reduce the cost burden. In other words, in order to achieve effective price pass-through, we believe those are going to be quite important activities.

As we are running short of time, I will take the one final question. Mr. Ogaki, please.

This is Ogaki from Okasan Securities. I would first like to ask about Fabric Care within the Consumer Products business. On Page 8, you mentioned that long detergents performed steadily. Regarding this year's price increase, fabric softener was highlighted as one of the key focal areas. I wonder if you could comment on how fabric softener sales have been performing. Also, given the product renewals discussed on Page 16, could you share what you can regarding the current situation, please?

Thank you very much. For the fabric softener, going forward, we plan to implement product initiatives as well as price pass-through measures in the second half of the year. On the other hand, for laundry detergents, the liquid detergent category as a whole returned to revenue growth in the first quarter. Therefore, we view the performance as solid overall.

Understood. I have one more question, if I may, regarding the pharmaceuticals business. You mentioned that acne medication performed well due to the inbound demand. However, I believe the number of Chinese visitors to Japan has been declining. Was there no impact from that? Also regarding antipyretic analgesics, you mentioned that the factory had resumed operations. How did that business perform? I appreciate if you could expand on those aspects.

First, regarding antipyretic analgesics, sales were slightly down this year. Again, since this is only a comparison of a 3-month period, we intend to focus upon strengthening the business again going forward. As for the acne medication and inbound demand, while the number of the Chinese visitors to Japan has indeed declined, we believe the inbound-related consumption overall has remained relatively solid, not necessarily limited only to the Chinese consumers, if I may say so. In particular, our acne treatment and brand PR apparently gained attention on social media, and we understand that this contributed to a very strong sales during the quarter.

You mentioned that social media helped the performance this quarter. Should we, therefore, be somewhat cautious regarding the next quarter and beyond?

Yes. Overall, rather than relying heavily on the volatile inbound-driven sales, we believe it is more important to strengthen our core categories such as antipartic analgesics and eye care products.

As we are now running out of time, we will now conclude the Q&A session here. Thank you all for many questions. This concludes the earnings presentation of Lion Corporation. Thank you indeed for your precious time and participation.

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

[Interpreted] Good afternoon. I understand that you have had a series of meetings today and must be quite busy and tired. Thank you indeed for your precious time to join us. I am Takemori, President and CEO. It is a pleasure to be with you.

Today, now I would like to speak along these 4 points shown here. First, the highlights. Let me begin with a summary of FY 2025 results. By [indiscernible] and executing our second stage strategy, we achieved growth both in revenue and profit and improved margin, marking the second consecutive year of meeting our guidance. In our Consumer Products Business, in addition to improving profitability, we reinvested in the profit generated into nurturing high value-added products. As a result, we believe we have created sustainable growth momentum. In our overseas business, despite increasingly and challenging country conditions and the business environment, we shifted our management focus toward profitability. As a result, we secured both revenue and profit growth.

FY 2026 this year will be a decisive year as we work toward achieving the targets of second stage. To enhance both the effectiveness and the speed of sales execution, we have reformed our management processes and shifted to a business unit structure centered on domestic and overseas operations, including the major portfolio actions announced today. I would like to walk you through these points step by step.

First, let me present the consolidated results for FY 2025. As mentioned earlier, net sales were JPY 422 billion, exceeding our guidance by JPY 2 billion. In terms of profit as well, we exceeded guidance in all items. We believe we have made a solid start toward strengthening profitability under the second stage theme. Core operating income reached JPY 30.7 billion, up JPY 4.4 billion year-on-year. The breakdown reflects results in line with our targets. I will elaborate shortly. Please also note that the increase in operating profit includes a gain on step acquisition associated with the consolidation of Vietnam's Merap Lion.

This slide shows one of the key charts for FY 2025 performance. The breakdown of the business profit changes. The plus and minus figures represent full year result. While the figures in brackets below, each box indicates the comparison between October through December periods. There are 2 key messages I would like to convey with this slide.

First, one year ago at this meeting, we stated that we will aim to generate JPY 5.2 billion in gross profit for FY 2025. The result was largely in line with what we committed. Second, we said that in the second half, particularly from October through December, we would focus on expanding key brands and priority areas. As a result, we made concentrated investments in competitive expenses, mainly in domestic oral health care and new products gross profit shown in the blue brackets increased by JPY 3.5 billion, more than offsetting those investments and achieved healthy growth. While there were various fluctuations during the year, we believe that on a full year basis, profitability strengthened steadily in the direction we had targeted.

Next, by segment. In Consumer Products, focused investments in high value-added products led to 1.6% increase in sales. Business profit margin improved by 1.4%, as shown on the far right of the table, driven by the efforts of structural profitability reforms. We believe that now sales and profit has been well balanced. In the overseas business, the effects of key initiatives in major countries materialized. In addition, with the consolidation of Merap Lion from July, both revenue and profitability improved. The specific numbers are indicated on the far right of the table.

Here is the breakdown of the Consumer Goods business. In Oral Healthcare, our top priority category, growth and premium toothpaste drove a 4.7% increase. While Public and Living Care recorded revenue declines, the arrows on the right side of the page indicate the trend in profitability. Profitability has improved.

This slide shows the changes for the most recent October through December period. Again, please focus on the arrows. Overall, we have been able to generate a momentum in sales growth. Living Care was affected by SKU reductions, but the product mix itself improved through the introduction of high value-added new products.

Next, overseas. As mentioned repeatedly, we achieved both revenue and profit growth. There are two tables here. Please look at the top one first. Malaysia, shown by the arrow in the lower table, continues to perform strongly in Southeast Asia. In addition to Malaysia, the consolidation of the high-profit Vietnam business from July also contributed result in revenue and profit growth.

The margin in Southeast Asia also improved by 1.5 percentage points. As shown in the percentage of the far right of the upper table, the margin improvement from 2023 to 2024 was 0.5 points. Therefore, since entering the second stage, margin have been improved steadily. One of the key drivers behind this has been the growth of Personal Care. Although the figures are not shown here, allow me to explain this probably.

Thailand Personal Care and sales grew 106% year-on-year. In Malaysia, they rose to 109%. We are clearly seeing and achieving profitable growth. In Northeast Asia, China recorded revenue growth, while South Korea declined year-on-year, resulting in lower revenue and profit. For overseas operations as a whole, as shown in the total row of the upper table, net sales increased by 1.5% on a real basis. Previously, as we had shifted our focus toward growth, it has been rather difficult to improve margins as much as we would have liked. However, by firmly pursuing profitable growth, margins improved by 0.8 percentage points. Even under various challenging circumstances, we believe we were able to achieve both growth and profitability.

Similar to the domestic business, this slide shows the changes for the most recent October-December period across the 4 key countries. Please focus on the arrows. In Thailand, product performance declined due to the continued decrease in export business caused by geopolitical issues. However, we strengthened personal care, particularly oral health care. As a result, domestic demand in Thailand grew steadily. In Malaysia, growth continued centered on renewed liquid detergent product. In addition, as in Thailand, Personal Care expanded significantly.

In China, amid an increasing polarization of consumption, we set our brand strategy, at the same time, by strengthening channel management. Offline brick-and-mortar sales grew, enabling us to secure growth both in revenue and profit. Although South Korea was affected by the decline in exports to neighboring countries, the impact of recovery measures helped narrow the decreases in revenue in the October to December period.

Next, I would like to discuss the results of the first year of our medium-term management plan. Before that, however, allow me here to briefly revisit our basic policy. Based on our core policy of strengthening profitability, we are implementing measures at achieving the management indicators shown on the right. In particular, I will now elaborate on the result of our key initiatives to enhance business portfolio management, the very first point.

Accelerating growth in oral health care. Let me begin with conclusion. We are gaining solid traction. We have been focusing on priority development, both domestically and overseas, and the results are already visible in various countries. On the left in Japan, we successfully nurtured new products in the premium toothpaste segment, result in increased market share and total sales growth of 105% year-on-year. In China, we strengthened high value-added brands and implemented focused offline channel initiatives, as mentioned earlier. These efforts are steadily the bearing fruit with sales reaching 103% year-on-year.

Moving on to the right-hand side. In Thailand, where we fundamentally reviewed our brand and channel strategies last year. Close collaboration with the local partners drove strong growth in October through December, resulting in full year sales growth of 114%, achieving double-digit expansion. In Malaysia, growth has continued to recover strongly, reaching 120%, driven mainly by the local brand, Fresh & White. Even in the markets where the global brand, Colgate is indeed present, we have demonstrated solid growth in both countries. We believe this momentum will continue into FY 2026. As mentioned at the beginning of the slide, group-wide oral healthcare growth came in at 5.2% compared with our initial assumption of 5% to 6%, which we view as a reasonably solid result.

Reform of the profit structure in the Consumer Goods business. The initiative is also progressing steadily. We have achieved the KPIs for our key measures. This was not simply about cutting costs. It was the combination of upward price revision, a shift toward higher value-added products, and the focused strategic investments and competitive expenses that contributed to the result. The impact of these measures is also reflected in the improvements in the top line performance in the second half, as explained earlier.

Summary of first year results and the key themes for this year. In overseas markets, the environment has been changing rapidly since the launch of midterm plan. In FY 2025 last year, we're able to respond to those changes and secure profit growth. However, we expect the challenging conditions to persist in FY 2026. Therefore, across the entire group, we will once again focus on nurturing high profit businesses and achieving growth accompanied by the improved profitability. I will outline the specific initiatives shortly.

Moving on to this year's initiatives. First, as I mentioned [ premise ], the markets in which we operate are showing a clear trend toward polarization and consumption. In particular, high functionality, high-end products continue to grow. Across many categories, growth in high-end segment is exceeding overall market growth as evidenced by the data. The key question is how we adjust to this trend?

In line with the portfolio strategy set out in our current medium-term plan, we will further strengthen our focus on high value-added products and increase investment in branding development. At the same time, we will enhance capital efficiency. Through these efforts, we will further advance the core theme of our second stage, strengthening profitability. As President, I am committed to driving profitable growth.

This slide illustrates our ideal approach to portfolio management. In the current medium-term plan, we have clarified the role of each business, and we are implementing strategies aligned with those roles. In the upper right is Oral Healthcare, our highest priority business, both domestically and overseas. It will continue to serve as the main driver of revenue and profit growth, and we will pursue further expansion. To the left is our challenge business. With the acquisition of PNB in Australia announced in January, we have secured a new business platform. I will further expand on details later.

In the lower left is the structural reform business. Today, we announced the transfer of shares in two chemical business subsidiaries. In the home care field, we have steadily advanced profitability and improvement measures and have already achieved a certain level of success in building a stable earnings structure. Accordingly, the arrows are now pointing upward. Today's presentation will proceed in line with this portfolio framework.

Let me start with our top priority business, Oral Healthcare. In Japan, the periodontal care market is expected to continue expanding in line with rising health care consciousness as shown on the left. The key message of this slide is shown on the right. As a leading company in oral health care, we will promote these measures. We will strengthen functionality of mainstay brands, utilize new technologies in products for the dental clinic route, and penetrate services for professional and self-care to create a positive loop between them.

We will advance our 3-pronged strategy and drive market expansion. In the case when capabilities to accelerate these activities exist outside our organization, we will actively engage with companies, governments and academia, or pursue partnerships and acquisitions to materialize the plan.

This slide shows our measures to strengthen overseas business. As mentioned earlier, in Thailand and Malaysia, the toothpaste market is growing and our shipment also performing well. In China, the market is shrinking, and there is a risk that we might be absorbed in the trend, but we are still holding firm. The key message here is that there is still good room for us to grow. And with that in mind, what will we do this year?

In China, while market risks continue to be expected, we will not pursue excessive quantitative growth. Instead, we will continue and strengthen our high value-added strategies. We will focus on profitability in channel development in offline channels. We'll strengthen initiatives with priority retail outlet. And in online channels, we efficiently leverage emerging platforms in Thailand and Malaysia. We delivered results last year. Collaborative brand and channel strategies proved to be successful. We accelerate profitable growth through this work with JV partners.

Next, regarding our challenge for growth businesses, which include Beauty Care and Pharmaceutical products businesses. In this midterm plan, we aim to create new business opportunities and contribute to improve company-wide margin. Of course, Oral Healthcare remains our top priority business. But in our challenge for growth business, we have been exploring new business opportunities, primarily overseas while narrowing down investment target.

In Vietnam, where the company became a wholly-owned subsidiary, we launched Oral Healthcare business, leveraging our channel network, key source of high profitability. In countries where we hold the #1 market share brand, we will pursue stable profitable growth. In this way, the challenge for growth business plays a key role in strengthening profitability. However, we believe that we need to shift into a higher gear to capture further growth opportunities.

We decided to acquire 100% of shares of PNB in Australia. We received many questions, why Australia? Why Beauty Care and what are the synergies? This explanation will be a bit lengthy, but I'd like to provide a thorough response. Strategic aims are to establish and expand a new highly profitable business. We believe the Sukin business aligns with our strategy as it not only captures domestic demand in Australia, but also offers potential synergies with our operations in other countries, particularly in Southeast Asia.

First, regarding domestic demand, Australia's GDP growth remains stable. and market expansion is expected going forward. Australia is also geographically close to Asia and so many Asian immigrants reside there. For our company, which focuses its business development on Asia, Australia is a highly attractive and compatible country. Why Sukin? What synergies exist?

The Sukin brand has established a solid position as a natural beauty care brand in Australia and the company boasts high profitability. By extensively expanding the Sukin brand across the group, primarily in Southeast Asia and South Asia, we believe we can significantly grow our highly profitable personal care business. Actually, Singapore, one of our business area is included in the export destinations, and they already hold a certain market share there. We have high expectations of accelerating expansion in Asia. In Australia, we believe we can expand business in research, production and sales by teaming up with the local management and integrating our capabilities with PNB's business foundation.

Going forward, of course, the expansion of Oral Health Care is also within our scope. Reflecting on the past M&A transactions where we failed to fully leverage acquired brand value, this time, we emphasize the following 3 points. First, clarifying growth scenarios and synergies. Second, establishing an operational framework that respect brand uniqueness. And third, strengthening the execution structure and governance in post integration. We believe the acquisition of Sukin brand will serve as a major starting point for creating mid- to long-term value with challenge for growth business in the group.

Next, regarding the structural reform business aimed at achieving stable profitability. As announced today, we decided to transfer shares of two chemical product subsidiaries. We resolved to transfer shares of Lion Specialty Chemicals Company Limited, the core of our group's Chemical business and its subsidiary, IPPOSHA, Indonesia to AP88 supported by a fund serviced by Advantage Partners. Regarding our Chemical business, we continued operations while implementing measures to enhance business efficiency, including reorganizing group companies and improving profitability. However, amid the rapidly changing environment in recent years, we carefully reviewed the direction of this business, and that led to this conclusion.

Home Care business also belongs to structural reform business. Focusing on improving profitability, we have shifted it into a stable profit business. It achieved a certain level of success primarily in Japan, but the current level of profitability is still not satisfactory. We will continue to implement the measures shown here, both in Japan and overseas, striving for stable growth and further profitability improvement.

As mentioned earlier, the profit structure reform in consumer products is progressing steadily and the measures implemented in 2025 will show results in '26. This fiscal year, we continue to shift to high value-added products and supply chain optimization as well as delivering the effect of new measures to further strengthen profitability. Efforts to advance supply chain are progressing toward concrete materialization in particular, and we expect them to significantly contribute to EBITDA and ROIC as shown in our KPIs.

Forecast of consolidated results and capital policy. Financial forecast for this fiscal year is as follows. Sales and profit will increase with core operating income reaching JPY 35 billion. We are steadily advancing toward our second stage target and are largely on track for our FY 2027 target. Note that the difference between core operating income and operating profit, JPY 5 billion includes gains from the sale of share in chemical product subsidiaries. External sales forecast by business segment. We expect continued growth contribution from overseas business bolstered by contributions from our newly launched business in Vietnam and Australia. The decline in industrial product is as explained.

Year-on-year changes in core operating income. While business actions will bring changes, we expect an increase of JPY 9.8 billion in gross profit, driven by quantitative effects from overseas sales growth. Shift to higher added value products and upward price revisions mainly in Japan and cost reductions. On the other hand, an increase of SG&A, including competition-related expenses will result in a JPY 5.5 billion decrease, leading to a net growth of JPY 4.3 billion.

Second stage, capital allocation. Centered on operating cash flow, we expect cash inflows of around JPY 150 billion over 3 years. Furthermore, the sale of chemical subsidiaries generated cash rooms and it leads to secure more capital than initially planned. How should we spend this?

The top priority is growth investment. As shown on the right, from '26 to '27, we will prioritize growth investment in oral healthcare business, aiming to implement disciplined investment. As we will announce later, we plan to arrange an opportunity to discuss our strategy for profitable overseas growth and expansion of oral healthcare business on a later day. We'll further strengthen shareholder returns by flexible acquisition of treasury stock while considering growth investment based on annually increased dividend.

Regarding shareholder return measures, we plan to pay dividend of JPY 30 per share annually for 2025 as initially planned. And for '26, we plan to increase the dividend JPY 4 from the previous year to JPY 34 per share. This will make the 11th consecutive year of dividend increase. Payout ratio will be 37.6%. Furthermore, as mentioned earlier, we consider acquisition of treasury stock and cancellation flexibly. We continue to steadily enhance shareholder returns while balancing growth investment with financial soundness.

Finally, let me review the progress of Vision2030, second stage. Second stage progress in key KPIs. Margin improvement is progressing extremely smoothly. Profit structure reform shift to high value-added products and cost reforms are all delivering tangible results. Regarding overseas sales growth, given rapid changes in environment, we are implementing measures focused on Personal Care segment to achieve profitable growth, as mentioned. Regarding sales growth, we are flexibly redesigning strategies to offset that deviation from the [ inter ] plan, particularly in China by the contribution of other countries and regions. Accordingly, we continue to aim to achieve our target for 2027.

To accelerate the group decision-making and the strategy execution to achieve the goal, as announced, we transitioned to a new organizational structure in January this year. Under this organizational structure, we will make a steady headway in measures that I described today.

Today's summary. In Consumer Product operations, profit structure improved by strengthening profit foundation. However, overseas, we are clearly aware of the need to further enhance our ability to handle environmental changes. Therefore, in 2025, we will leverage the speed, agility and execution power gained from the organizational transformation, and ensure to achieve profitable growth by steadily executing each business strategy. Furthermore, we will advance growth investment in priority areas while further enhancing corporate value of Lion Group.

This concludes my presentation. Thank you for your attention.

[Interpreted] We'll now move on to the Q&A session. Mr. Hirozumi, please go ahead.

[Interpreted] Yes. This is Hirozumi from Daiwa Securities. Can you hear me?

[Interpreted] Yes, Mr. Hirozumi. We can hear you clearly.

[Interpreted] First of all, I felt quite energized by your passionate remarks, Mr. President. I would like to ask about strategy, but inevitably, the numbers draw my attention. With the addition of new businesses and the exclusion of others this time, I'd like to understand how we should think about the overall impact?

For example, regarding chemicals, that's the sales plan declining from roughly JPY 39.3 billion to JPY 25 billion. That's quite a reduction in revenue. And the core operating income was around 5%. I'm trying to understand how much this divestion affects net income? On the other hand, with PNB and consolidated, even if its revenue is not very large, I assume it contributes to profit. So when we consider both PNB coming in and chemicals going out, how should we think about what is entering and what is leaving the portfolio?

[Interpreted] Thank you for your question. Allow me to respond to your question at a high level. Focusing on the formulation of the FY 2026 plan. As you pointed out, both the acquisition and the [ divestment ] are reflected in the plan. Starting with the sales.

Very roughly speaking, the combined impact of Chemicals Australia and Vietnam results in a net negative effect of approximately JPY 2 billion year-on-year. However, this JPY 2 billion represents less than 1% of the consolidated revenue. So we believe it can be fully absorbed through our existing businesses. To be more specific, the divesture of the Chemicals business results in approximately negative JPY 14 billion impact on revenue. When combined with the contribution from Vietnam and Australia, the net income -- net impact comes to around JPY 12 billion.

As for the business profit, at the operating profit level, the divestiture of chemicals actually has a positive impact. So Australia and Vietnam are making contributions to the profit. OTC and profitability, Australia on the full year basis, actually, the Skin Care and Beauty, actually, its margin is quite good at the general perception of the profitability. So this is the point I'd like to ask you to keep in mind.

[Interpreted] My last question, on Page [ 23 ], the dilution impact starts to be reflected from the second half, correct? PNB is the one that start beginning to contribute. Will these effects carry over into next year as well?

[Interpreted] This has become somewhat technical, and I'd like to ask Takeo to respond.

[Interpreted] Thank you for the question, Hirozumi. This is Takeo. PNB was consolidated on January 20. So its results are included in our consolidated figures from that date onward. Regarding Vietnam, it has been consolidated since July last year. Therefore, when comparing FY 2025 and FY 2026, FY '26 reflects a full year contribution, whereas FY 2025 included only the half year effect given such a positive impact. As a result, the negative impact on LSN is almost fully offset at the core operating income level.

[Interpreted] Next, I'd like to have Mr. Ohana, please.

[Interpreted] This is Ohana from Nomura Securities. I'd like to ask about the transfer of the 2 chemical subsidiaries. Well, to be honest, I may not fully understand the business scope, whether LSN was focused on detergents, specialty chemicals and graphite electrodes, or other products. I wonder if you could, kind of, explain what advantage or disadvantages this divesture has for your consumer products business?

[Interpreted] Thank you for your question, Mr. Ohana. Let me state that conclusion first. The stock transfer of these 2 chemical subsidiaries will have no material impact on our domestic consumer products business. Please rest assured on that point.

[Interpreted] So there's no significant impact on overseas operations either?

[Interpreted] That is correct.

[Interpreted] Were these subsidiaries mainly producing detergent-related chemicals?

[Interpreted] Broadly speaking, the business consists of two areas. Internal supply and external sales. On the external sales side, products include anti-sticking agents for automobiles and the materials used in the components for EV batteries. Regarding your question, one of the key products is the raw material used in the fabric softeners.

[Interpreted] Next, I would like to have Ms. Kuwahara, please.

[Interpreted] This is Kuwahara from JPMorgan Securities. Can you hear me?

[Interpreted] Yes, we can hear you.

[Interpreted] I would like to ask about your view for FY '26 from the perspective of the DHP ratio. In other words, the core operating income margin, as well as the level of business profit and also about the progress toward achieving the medium-term management plan?

First, for FY 2026, the core operating income margin appears to be approximately 8.1%, which represents a 9% year-on-year increase. You have explained the profit drivers. But looking at it by segment, should we understand that both domestic and overseas businesses will be driving this improvement? Or is it mainly domestic?

And as for the domestic side, what are the main drivers? For example, will oral care further improve its DPF? Or will home care, which had been identified as a reform area? Finally move out of losses and begin raising its profit margin? I would appreciate some clarification on these points.

Secondly, regarding progress toward FY 2027 under the medium-term plan, if we look simply at the profit level, for example, JPY 35 billion and then another JPY 5 billion. It would appear that reaching JPY 40 billion is quite achievable. Is this progress in line with your original assumptions? Or are you somewhat ahead of the plan?

From our perspective, considering that the full year contribution from PNB and will be included next year, progress appears somewhat favorable. How does management view this? I would appreciate your comments in these regards.

[Interpreted] Thank you, Ms.Kuwahara. Let me share the slide here. Can you see the screen now?

[Interpreted] Yes, I can see it.

[Interpreted] First, regarding whether there is any upside potential to the FY '27 profit level, to set the conclusion first, we are not necessarily optimistic. That said, there are no specific negative factors either. However, as we have mentioned, economic conditions in China and Asia are changing so rapidly and the visibility even 1 or 2 years ahead remains quite limited. Therefore, the current business profit level we have set should be understood as a minimum target. We aim to achieve this level without fail as we work toward FY '27. There are no negative factors embedded, but we have set this level after carefully considering the various international uncertainties.

As for FY '26 this year and when we expect margin expansion? As shown on this slide, we anticipate a volume effect of JPY 5.5 billion and JPY 3 billion from higher value-added initiatives. In conclusion, we intend to raise the business core operating income in both domestic and overseas markets.

Referring to the waterfall chart for domestic operations, the second number from the left, plus JPY 3 billion, represents the higher value-added products and price revisions, which will primarily drive profitability improvements. Meanwhile, the volume effect, JPY 5.5 billion largely reflects overseas growth, including contributions from Vietnam in the first half and PNB, among others. So the volume growth and mix improvements are mainly overseas driven, while higher value-added initiatives and pricing are primarily domestic driven. Did I answer your question?

[Interpreted] Just one follow-up regarding your domestic business. For the high value-added initiatives, is this simply due to steady expansion in oral care? Or as Mr. Takemori mentioned at this same meeting last year, are you also seeing benefits from production and process integration, particularly in home care, where categories such as detergents, which had previously been loss-making were brought back to the breakeven and are now positioned for growth?

In other words, when we talk about influence from higher value-added initiatives, which factor is more significant? To what extent will Home Care stop weighing on overall profitability? How do you see Home Care's impact on overall margins in FY 2026?

[Interpreted] Yes. Overall, in terms of the impact, the improvement in the core operating profit margin of oral health care has the largest effect. That said, as Mr. Kuwahara pointed out, Home Care has also made significant progress. In FY 2025, we succeeded in substantially improving its profitability in real terms. Therefore, in FY '26 as well, although we will refrain from disclosing specific percentage, we believe there is still more room for further improvement.

This growth will not come solely from the efficiency measures and the cost reductions we have implemented so far. As mentioned earlier today, we are also introducing new initiatives such as new detergents designed to promote water-saving [ laundry ] habits. By combining these efforts with improvements in sales quality, we aim to achieve further growth with enhanced profitability.

[Interpreted] Next, I would like to have Mr. Kawamoto, please.

[Interpreted] I would like to look at what occurred in the fourth quarter on a 3-month basis? I am actually looking at Page 6. There are 3 items shown. And under the profit impact, there is positive JPY 2 billion. Last year, this was negative. But from the third quarter to the fourth quarter, it is plus JPY 2.1 billion. This may include Vietnam, but could you break this down between domestic and overseas?

Also regarding the JPY 1.3 billion price effect you explained, again, how would you break that down between domestic and overseas? For this year's outlook, you are guiding for JPY 5.5 billion volume effect. How would that split between domestic and overseas? Given that the industry environment appears to be quite competitive in terms of volume, I would appreciate if you could share what kind of structure or initiatives enable your company to set such ambitious volume target?

[Interpreted] Thank you Mr. Kawamoto. Let me explain using the waterfall charts for FY 2025 and FY 2026, respectively. First, regarding FY 2025 and the yellow section of the chart, I will ask our Accounting Officer, Mr. Takeo to explain the domestic and overseas breakdown.

[Interpreted] Thank you for your question, Kawamoto-san. Just to confirm, you are asking about the breakdown between domestic and overseas for the profit increase and decrease factors in the fourth quarter, October to December, am I right?

[Interpreted] Yes.

[Interpreted] First, regarding the positive JPY 2.1 billion volume effect. In regard to this volume, positive JPY 2.1 billion, most of them are coming from overseas. We have benefited out of the consolidation effect of Vietnam. On the domestic side, however, as shown in the text in the above box, the impact of the brand transfer completed at the end of October result in a decline in gross profit. This negative effect is included in this figure. So while overseas contributed positively to volume growth, domestic consumer goods were negatively affected by the brand transfer. This is the breakdown of the JPY 2.1 billion.

Next, regarding the JPY 1.3 billion from higher value-add initiatives and price revisions in the fourth quarter, out of the full year JPY 3.6 billion, JPY 1.3 billion was recorded in the fourth quarter, broadly in line with our initial annual forecast of JPY 3.5 billion. This was almost entirely domestic, including effective price increases such as reductions in product volume accompanying product actions.

Now please look at the FY 2026 waterfall chart. I will here focus upon the two items on the left. First, the positive JPY 3 billion from higher value-added products and price revisions. This is primarily from domestic side. Next, the volume effects on the left-hand side. This is mainly overseas. To give the rough figures, Sukin and the Vietnam together contribute up JPY 8.5 billion and existing overseas markets contributed about up JPY 2 billion, totaling roughly up JPY 10 billion. From this, the exit of the industrial business results in a negative impact of around JPY 4 billion, leading to a net positive approximately up JPY 6 billion.

EBIT margin actually getting improved through the domestic [ BT ] initiatives, which was mentioned earlier. By adding these measures within this year, we aim to generate incremental upside in domestic operations beyond what is currently reflected in this plan. Ms. Kawamoto, does this answer your question?

[Interpreted] Thank you for your clarification. You said that volume increase in existing market is plus JPY 2 billion. In the previous year, China was strong. And will China continue to serve as a driver this year? I had a concern over Japan-China relationship. And in the Q4 of the previous year, China grew 16%. So would you comment on the content of this JPY 2 billion, please?

[Interpreted] I'd like to talk about this in detail in future. But let me give you the overview. We'll stop aiming to achieve double-digit growth in China. Based on the last year and the latest results, we'll strive to achieve the steady target of 102% to 105% of the previous year this year and the next. We will offset this with personal care centered on oral health care in Thailand and Malaysia, as mentioned earlier. We expect to see the growth of approximately 105% in 4 priority countries. Thailand, Malaysia and South Korea, excluding China. With this, we'd like to achieve that target mentioned earlier. Did I answer your question?

[Interpreted] Next, Mr. Ogaki, over to you.

[Interpreted] I'm Ogaki of Okasan Securities. I'd like to confirm the upward price revision in Japan. Last year, you said that the price increase for middle range price toothpaste was delayed in Q3. Were you able to raise price? I'd like to confirm this as sales grew due to the shift to value-added products. And in this year, in which category do you expect to increase prices?

[Interpreted] Thank you, Mr. Ogaki. I'd like to talk about last year. Honestly, in mid-range price, toothbrush and toothpaste, we were able to raise price, but margin improvement was lower than our expectation. There were two backgrounds. For one, as mentioned earlier, consumption trend showed prioritization. High-end products are growing, but mid-range and low-end products are struggling. So although we raised price, but margin did not follow.

Second, this is only about the toothbrushes. Toward the end of last year, we had more campaigns for toothbrush than usual. As a result, campaign price products mix increased and the results for mid-range price products were not in line with the plan. Going forward, the price increase of mid-range product and the low-end toothbrushes will be more difficult.

Next, second half of your question, what shall we do this year and onward? We'd like to focus on SYSTEMA, Haguki Plus, Kyusoku Jikan and the new line of hadakara with focus on our strong high-priced product, upper side of polarization and optimize pricing. Looking at the progress of price increase impact, it was about 52% against the plan last year. This year, against the plan of JPY 3 billion, progress will be about 72%. If we achieve this, we'll be able to hit the initially announced target. Did this answer your question?

[Interpreted] Next is Miyasako, over to you.

[Interpreted] I'm Miyasako of Mizuho Securities. I have a question about the company in Australia. You spent much time in your presentation for its explanation. And you said that you expand it to oral healthcare in future. Would you tell me about its time frame?

[Interpreted] Time frame to expand to oral healthcare business, expansion this year is not likely. In the next year and onward, we will head for the third stage, and that will be the timing. In challenge for growth business, first priority is to establish the profitable business quickly. We will leverage the domestic demand in Australia and the launch of these products in Southeast and South Asia shown here, I'd like to make it happen in 2026.

[Interpreted] I think you don't have experience like this before. Do you let them manage the company independently? How are you going to manage this company?

[Interpreted] That's an important point. If we approach as we did with partner companies in Southeast and South Asia, it will not succeed. We may succeed the way of local management, but have a firm grip, and ensure governance as a group with sound autonomy to establish a down towards profitable business in Australia.

[Interpreted] I think you could concentrate more on oral healthcare business. Is this expansion really necessary?

[Interpreted] Yes. To deepen your understanding of the context, let me talk a bit. In this type of transaction, we need to be mindful of the counterpart and the timing of negotiation. This time, this transaction came first by chance. Oral healthcare remains a top priority. That's unchanged. We are exploring multiple oral healthcare business opportunities all the time. It's not that we quit Oral Healthcare and [ took this ]. We continue to explore oral healthcare opportunities, but this transaction happened to come first.

That said, this is a challenge for growth business. As Lion Group, establishing a highly profitable business is our mission, and this transaction met the requirement.

[Interpreted] I see. In Oral Care, if you do M&A, of course, I understand you cannot be specific. But would you give me any clue? For example, in China and Southeast Asia, what type of acquisition would be useful for you?

[Interpreted] I hope you understand that I cannot disclose everything. I talked about how we will expand oral healthcare business through dental clinic route and professional and self-care will be connected seamlessly as shown on the right of this slide. We'd like to fill the missing piece in this diagram. We are not thinking only about a simple toothpaste or toothbrush brand, but we would like to enhance the capability to realize this diagram.

[Interpreted] Will you do this in Asia as well?

[Interpreted] Yes.

[Interpreted] I think the first round of question is now over. Do you have any more question? Mr. Yamanaka, over to you.

[Interpreted] I'm Yamanaka of SMBC Nikko Securities. I'd like to ask a follow-up question about the price increase in Japan. You said earlier that the effect of price increase was less than your expectation. In Q4, you spent JPY 1.5 billion for marketing and the sales growth in Oral Healthcare was strong overseas. But the growth is slowing down a bit from the third to fourth quarter.

Does it mean that the business in Japan is slightly behind against the midterm plan? Or have you already put measures in place? You have a briefing later, but please let us know more.

[Interpreted] Thank you, Yamanaka-san. To be frank, I think that there is nothing to worry about. Top line growth in Japan is 4.7% in Oral Healthcare as shown here, and the profitability is improving as shown on the right. Only a part of this price increase in mid-range price product was behind the plan. But [ dent health ] and other high-end products are growing steadily. Top line growth and profitability in Oral Healthcare in Japan have nothing to worry. So you can rest assured.

[Interpreted] You mean that including mix, nothing to worry. Is that right?

[Interpreted] Exactly.

[Interpreted] We still have a little more time. Hirozumi-san over to you.

[Interpreted] I'm Hirozumi. I have a question on Page 11 related to Kawamoto-san's question. As far as I recall, in July to September quarter, Thailand declined by about 10% and China dipped likewise. South Korea declined also 5% or so. And in October, December quarter, Thailand continued to be weak, but China recovered.

When you answered to Kawamoto-san's question, you said that China will be up 2% to 5% in Thailand, Malaysia and South Korea will be up 5%, showing the improvement in all areas. Would you tell me about your confidence or probability of this change?

[Interpreted] Let me start with Thailand. As you know, issues with Cambodia have wiped out about 7% to 10% of GDP of Thailand, and that was reflected in the first half results. But much of that, about 60% of cross-border trade across Cambodia's border was related to body of Shokubutsu Monogatari. And we found a way of hedge by exporting them via Malaysia as a group, and we will continue to do this. Additionally, we have confidence about the domestic demand in Thailand as initiatives for oral healthcare worked well. With their expansion supported by domestic demand, we believe we'll be able to reach 105%.

Another key point is in China. Let me share a slide. As shown here, during January to September, there was a recovery from the period October to December. This might look like an optimistic trend, but let me talk about the reality. Due to efforts in Q4 last year and during the Chinese New Year this year, products were put in place in distribution tunnels. After that, due to a slowdown in Chinese economy, certain level of distributors' inventory exists in China. But this is not a structural issue, and we expect that to clear in Q1 from January to March quarter.

And the business in China will recover in Q2. But based on the level of the previous year, we thought that our forecast should be more or less conservative as a business. That is what is indicated here. Is that clear to you?

[Interpreted] Is the indication for 5% for Malaysia and South Korea, likewise the same?

[Interpreted] In Malaysia, partly due to government policy, the consumption was robust last year and that will continue this year. Additionally, as described here, our liquid detergent and local brand, Fresh & White grew more than market. We are confident that they will continue to serve as drivers and that will sustain the growth in Malaysia.

In South Korea, we listed as 105%, but there are may be some risks. But with our strong high-margin products of capsule-type detergent and hand soap, we'd like to moderate the decline in South Korea.

[Interpreted] As it's almost time, we'd like to close the Q&A session. Thank you for your many questions.

[Interpreted] Thank you for your participation. Please bear with me a few more minutes. Amid many earnings calls, thank you very much for joining us. As we received some questions in advance, let me add comments about overseas business.

We have clarified, identified the role of each country. With profitable growth, we will pursue volume growth of high-margin product. This is our primary mission. With this in mind, we divided the market into 3 categories. By sustaining percentage of margin, we increase profit in Bangladesh, Vietnam and Malaysia, as mentioned. We will increase percentage of margin by change of sales mix in Thailand and China. We will implement a variety of initiatives monitoring the situation, sustaining percentage margin in South Korea.

Depending on the economic and competitive environment, we identified the different role of each country, where to grow, where to sustain and where to secure profitability. Naturally, in doing business, we will face many ups and downs, but we will keep our target of 10% growth of overseas business for 2027. And we'll continue to have engagement with you to share the progress in due course. This is my final message today.

[Interpreted] Thank you very much again for participating despite your busy schedule.

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

I am Fukuda. Thank you very much for your participation in large numbers, despite your busy schedule. I appreciate your consistent support for the company.

This is today's agenda, which consists of 4 points. Without further ado, I'll explain the consolidated financial results for the first 9 months. In this Q3, following the first half, sales and profit grew year-on-year and steadily progressed towards achieving the full year target.

Key points are described at the top. The main issue in the first year of the midterm plan profitability improvement continue to progress steadily. Additional top line growth momentum is accelerating with the launch of new products in July to September quarter. Overseas, amid the increasingly tough business environment in major countries, we fine-tuned strategy towards profitable growth. Today, I'd like to touch upon the mid- to long-term initiatives at the end.

In consolidated financial results, net sales in 3 quarters were JPY 304.9 billion, up 1.3% year-on-year. Against net sales growth of 0.4% in the first half, Q3 growth was 2.9%, showing the improved growth in sales. Core operating income was JPY 22.3 billion, up approximately JPY 3.7 billion year-on-year. Operating profit increased substantially pushed up by the gain on step acquisition along with the consolidation of our Vietnam local company into a wholly owned subsidiary and profit attributable to owners of parents also grew by 64.3%. EBITDA was JPY 35.5 billion, up JPY 3 billion year-on-year. EBITDA margin to sales increased 0.9 percentage points to 11.7%.

Year-on-year changes in core operating income. Blue arrow shows gross profit factors plus JPY 1.5 billion, and orange arrows shows SG&A factors, plus JPY 2.1 billion. Each factor shows numbers in [indiscernible] and this is a change in July to September quarter. In gross profit factors, shift to higher added value products, upward price revisions had plus JPY 2.3 billion impact. In addition to cost reduction to respond to raw material price inflation and cost pass-through, shift to high added value products contributed to improved profitability. In SG&A, as you can see, decrease in competition related expenses was a substantial factor in boosting profit.

As I explained in the Q1 and the Q2 briefings, this is never a cost cut to generate short-term profit. We review the cost, which tend to increase to secure sales volume and improved efficiency. In Q3, we increased advertisement compared to Q2 in Japan, but controlled sales promotion cost partially overseas, which did not lead to sales increases. As a result, cost decreased by JPY 0.5 billion in Q3.

I'll explain results by business segment. In Consumer Products segment, in addition to sales increases, profit substantially increased by 32% due to the mix increase of high value added products and effects of profit structure reform. Our expenses trend by segment in the next slide in detail.

In Industrial Products segment, up to Q2, sales increased but profit decreased, but backed by the recovery in Chemicals segment, it turned into sales and profit growth. In overseas segment, despite the recent slowdown in growth rate, the sales and profit of the entire segment continued to increase due to the addition of our subsidiary in Vietnam.

This slide shows our net sales by product category in Japan. In oral health care, in the top column, sales increased 4.6% due to the contribution of the launch of high value added products in Q3 and continued robust sales of products sourced through the dental clinics. In Fabric Care, sales in 9 months were negative year-on-year. But in Q3, sales turned to positive growth due to the contribution by the revamp of [indiscernible] in September. As a result, real change, excluding the impact of brand transfers was plus 2.4%.

This is for more detailed information, showing changes in January to June, and July to September separately. In Oral Healthcare, we launched new products in September. Sales increased by 8.2% in Q3 with the contribution of shipment upon the launch, but the further shift to high value-added products at the over-the-counter sales expected going forward. Fabric care turned to sales increase in Q3, so sales continued to decrease in the first half due to initiatives to improve profitability through price competition control and price adjustment.

Next, I explain overseas business results by region. In Southeast and South Asia, sales and profit increased year-on-year, and operating income margin increased 1.3 percentage points. Despite sluggish business in Thailand due to the political station deterioration with neighboring countries from July to September, business performed well in Malaysia, and the consolidation of a highly profitable subsidiary in Vietnam also contributed. On the other hand, in Northeast Asia, sales and profit decreased in key countries of China and South Korea, and we are proceeding with the strategic transformation. I'll elaborate on this later.

Status of business in 4 key countries, as I already covered this, let me skip the explanation.

Next, for the current ongoing initiatives, I'll talk about key measures. First, this is about the profit structure reforms in Japan. I have been talking about the steady progress of the structure reform before. And the progress in KPIs are listed here. Upward price revisions and shift to high value-added products resulted in JPY 2.3 billion, and SKU reduction is almost in line with the annual target in terms of improvement in efficiency. Competition-related expenses almost fell to the midterm plan target compared to FY 2023, as we optimize the sales promotion cost which has expanded to respond to price competition for a long period.

Going forward, while we continue to improve efficiency, we will create a cycle of proactive growth investment in the necessary brands and areas in high value-added products. As a first step of the products for forecast investment, we launched new products in Q3 onwards, and they were off to a good start. In Oral Healthcare segment, we launched the [ toothpaste ], our highest price point and its initial shipment was 1.5x higher than our plan. And we confirmed it captured inbound demand as well. It has proven to be successful launch in store sales. In Q4, as shown in the bottom right part, we launched new toothpaste with new technologies of -- to control microflora for dental clinic route to accelerate the growth of this entire segment.

In Fabric Care segment, Sales of NANOX [ 1 ], which was revamped in Q3 increased substantially. In-store turnover has been robust. And it was reported that in some retail chains, its point of sales results exceeded those of competitors. In October, we revamped [ Aroma reach ] updating communications, hiring new talent and promoting the advertising investment, much higher than the level in the previous year. Next, I will explain the overseas business with conditions of key countries and fine-tuning of strategies.

Let me start with Southeast Asia. Beginning from Malaysia on the right. Favorable performance continued there. Local brand in Oral Healthcare has been making firm progress and the fabric data, which has been challenging for long, liquid laundry detergent continued to increase sales, sustaining robustness. In Thailand, shown on the left, mainstay fabric detergent suffered temporary by the geopolitical conditions deterioration in neighboring countries. Partner care category, including body soap and oral health care products continue to grow. We are strengthening Oral Healthcare strategy, our focus area in particular. Let me elaborate on the next slide.

In Thailand, resources have tended to be concentrated too much on orderly detergents, which have a strong market position. But in response to the recent situation, we have begun to strengthen our Oral Healthcare business. We are actually reevaluating our brands and redesigning and promoting sales strategies for each brand according to its role and target, as well as strength segregation of distribution areas, business categories, prices and others. We will share our strategies and goals with our joint venture partner distributors and develop detailed marketing activities. For example, to promote the traditional trade in the rural areas and to increase the distribution rate of this brand to urban convenience stores.

Next is the situation in the Northeast Asia. On the right, South Korea. Although affected by the decline in exports to neighboring countries, there are signs of recovery in recent months. In South Korea, hand soaps and the [indiscernible] detergents are performing well, and we will strive to develop [indiscernible] and other products in addition to recovering our export business.

China on the left. As the economy stagnates, prices are polarizing and the downtrading is progressing. And prices of our mainstay and mid-priced [indiscernible] products have fallen sharply, leading us to shift our strategy to cultivate brands in the higher price range area. Allow me to add more information about China.

As for [indiscernible], there is a balance with the facility in operation and our policy is to maintain this balance while ensuring operations without pursuing excessive sales. At the same time, we are building on this [indiscernible] handling in order to cultivate higher-priced brands such as CLINICA, SYSTEMA and DENT. This year, we are developing and launching new products by utilizing our research issues in Shanghai. And we are intensively managing the distribution of these high-priced brands to nurture them. We have been focusing on the double-digit growth in our China business that we have decided that it is not advisable to pursue volume any further. And we are now selling the business toward renewed growth while raising margins.

[indiscernible] I would like to discuss this year's full year forecast. The annual consolidated earnings forecast remains unchanged from the beginning of the year. Although the overseas business environment remains challenging, we will continue to flexibly invest expenses in growth in Q4, in order to cover our overall expenses and achieve our annual goals announced.

Finally, I would like to share with you my perception of the [indiscernible] from long-term perspectives and then discuss the progress we have made in planting disease for growth in the next fiscal year and beyond. There are 3 major issues to be addressed in the current medium-term management plan, namely strengthening profitability.

First, in this fiscal year, we have focused upon reforming the profit structure of our domestic general consumer goods business. We believe that we have achieved some success in this area, and we will accelerate in this process from next year onwards. On the other hand, from the viewpoint of restoring growth potential, we also began investing in focused growth in Japan in the second half of this fiscal year. On the other hand, we believe that the macro environment overseas has changed since the start of the medium-term management plan.

As for tuning our [indiscernible] for existing countries, as I explained at this point earlier, we believe it is going to be important for us to ensure the growth for the next year in the new countries of Vietnam, Bangladesh, where we entered in the first stage. In terms of management base reforms in the bottom, we have been working to strengthen governance this year. And from next year onward, we intend to make major changes to our internal management processes and systems in order to accelerate the promotion of our strategies. I would like to explain about these reforms, especially in the areas of overseas operations and the management base reforms.

I will explain the specifics on the future initiatives in Vietnam and Bangladesh overseas. For Vietnam, it is a company with a profitable business model based on expert recommendations with a focus on the pharmaceuticals. Now that it has become a wholly owned subsidiary, we intend to expand our business by adding our personal care field to this model. Specifically, the company has already introduced a skin care brand this year, which intends to be nurtured. Next year, we are planning to enter the market for high-performance Oral Healthcare.

We'd like to apply the customer relationship management. We have developed for dental clinics in Japan to Vietnam and China, and expand our business while maintaining high profitability. We believe that Vietnam has the potential to become a model case for the pharmaceutical business throughout Asia in the future as well as a base for supplying products. We intend to expand our business model, which is one of our strengths.

Bangladesh, on the other hand, after investing in the company, we have started a small-scale production of kitchen detergent and tooth brushes on an outsourced basis. And this year, the factory under construction will be completed. We'll like to take this opportunity to expand and improve our sales structure and the channels, and move into full-scale business expansion next year. In addition, Bangladesh has a young population, and we are planning to develop the KODOMO brand, which has been deployed mainly in Southeast Asia, for the baby care market, which has growth potential.

In addition to these 2 countries, we are also in the process of starting the incorporation of new resources and the reorganization of our portfolio. And we believe that next year will be the climax of our medium-term business plan in terms of growth. In order to speed up the implementation of this growth strategy, we plan to make major changes to our internal management processes and structures starting next year.

Until now, we have had a [indiscernible] organization of functional divisions in which organizations by the function worked together in order to promote the overall business. But it is taking too much time in order to respond to issues and the changes in circumstances, and responsibilities and authority tend to be unclear. In order to speed up our business and strengthen our ability to execute, we'd like to switch from an organizational structure based on horizontal functional headquarters to our vertical structure based on value chain starting next year. And we want broadly transfer authority to the top management of the business.

We'd like to speed [indiscernible] process by simplifying the reporting line and utilizing DX in order to increase our [indiscernible] our growth goals. We plan to announce the specific details of the reorganization at the end of this month. In addition to achieving the current annual performance goals, we will attend [indiscernible] and make preparations for the second half of the midterm business plan, and we will bring the results of these efforts to fruition in the next fiscal year and beyond.

That's all for our presentation. Thank you [indiscernible] for your kind attention.

Now we will take questions. Ms. Kuwahara, over to you.

This is Kuwahara from JPMorgan Securities. Let me ask two questions. I refer to Page 6 for core operating income changes in 3 quarters. Thank you for disclosing 3 months numbers as well, which are very useful. You said earlier that you'll be able to achieve the full year target as a whole. But would you comment on the plus and minus factors, if any?

Shift to high added value products and upward price revisions impact was JPY 1 billion in Q3, then it will be JPY 1.2 billion in Q4. You said that you have upward price revision in mid-priced products in Oral Healthcare in Q4. So please let me know the colors and the response.

And next year and beyond with cost increases of many items, will consumers be able to accept price revisions. Do you have any strategies for this or anything you have to revise? Let me know the price strategy for next year, please?

Thank you. Yes, there is some plus and minus compared to our initial forecast. Overseas volume impact, might be slightly smaller than our plan. And that will be offset by the adjustment of SG&A. And we'd like to achieve the target at least.

Regarding the shift to higher added value products and upward price revisions, a toothpaste in the mid-price range was slightly short of the target. But up to the Q3, we have been taking the initiatives for cost pass-through to price. And we expect that the effects will be materialized in Q4 beyond. So we think we'll be able to achieve the full year target.

Regarding the price hike in the next year and beyond. We assume that the raw material cost inflation will continue by 1% or 2% per year going forward. And we will offset this by cost reduction and cost pass-through to prices. For the improvement of profitability, we shift to high-end products to add value. And this is our basic policy.

Understood. It seems that I have asked two questions. So let me ask a follow-up question. Overseas business has some uncertainties for growth, but you're going to offset by cost management and will achieve the target. Looking at the next year and beyond, you said earlier that you are making investment for growth in Japan. So can we take that, you'll be in the phase to accelerate the profit improvement and growth in Japan?

Exactly. It is getting difficult to expect high growth in overseas business as a whole. So we'd like to develop with a policy of profitable growth. While in Japan, competition-related expenses almost came to the level of the target in the midterm plan. So as a basic policy, we continue to improve the efficiency of sales promotion cost and earnings generated will be spent on the investment for advertisement and growth.

Next, Mr. Hirozumi, over to you.

This is Hirozumi from Daiwa Securities. First question is about the overseas business. Numbers of overseas business last year were restated. So it is hard to understand the numbers and the [ growth ]. Profit in overseas business for 3 months is JPY 2.4 billion. Am I correct? That is up by 30%. Is that correct? Sales are JPY 40.3 billion, up by 3% and the core operating income is JPY 2.4 billion, up by 30%. How do you assess this?

For example, profitability of 6% looks good at the glance, but there were changes in the strategy and sales in China might have been weak. So let me know how I should see overseas business? Relating to this, I'd like to know the level of full year profit of overseas business. This is my first question.

It may be a qualitative comment, but I do not think that profitability is sufficient. If we stick to growth, it might lead to profitability risk. So we are fine-tuning strategies to sustain or increase profitability. And Vietnam business is highly profitable by its business mix, or segment mix. So by promoting the business, we made the profitability of overseas business close to that business in Japan.

Numbers of last year were restated, right. Based on the previous numbers, core operating e-com overseas business was JPY 10.2 billion. Core operating income of the overseas business for the full year in the last year was JPY 6.5 billion. According to the [indiscernible] earnings report, it was originally JPY 10.1 billion. This is before the segment change -- before segment change rate. So this year, based on the momentum up to Q3, can we expect it to be over JPY 65 billion, it will exceed JPY 6.5 billion. As we expect the profit growth year-on-year in Q4 as well, the range of profit growth will be sustained.

I see. In overseas business, with change in strategies, has happened in the first half and this time, there were points which were not described in the midterm plan. So how shall we expect to see in the overseas business we may expect the contribution by Vietnam or China may decline. So what expectations and concerns shall we have in overseas business?

Rather than business scale expansion through quantitative expansion and profit growth, we will achieve a little conservative growth with improved profitability. That said, we are considering additional measures consistently. We are exploring opportunities to expand into other businesses in Vietnam and expanding into other countries. So when we disclose them, you know that we will fill the gap.

Allow me to ask another follow-up question. I'm considering 4 key countries in Thailand, Malaysia, China and South Korea. Are there growth in sales below your expectation?

Correct.

Do you catch up in terms of profit?

Yes. As we shifted to policy, not the accessory person sales, we are catching up in profit.

I see. Second question. This is my last question. When management makes execution changes, what to change? I refer to Page 24 with a qualitative description. With this change, what should be visible for us?

Well, if we try to talk about the specific numbers, this can be hoped to be qualitative description. As a President, Takemori has been saying since his appointment as a President, to become the company that proactively moves. And to make it happen, we are trying to change authority, process and the system for decision-making in the company.

Do you mean that it will improve results?

Of course. We are aiming for it.

Ms. Kawamoto over to you.

This is Kawamoto of Jefferies Securities. I also would like to ask about overseas business. Let me know the growth rate in local currency base for 3 months in Q3. And is the contribution by Vietnam included in Southeast Asia? I refer to the 3 months overseas business results in Appendix, showing [indiscernible] Asia breakdown. How much was Vietnam contribution in this? And I'd like to know how we will develop in the next year and beyond as well as its position in the market?

We are not disclosing the information by country. But Malaysia, sales grew close to 10%. However, sales in Thailand, China and South Korea decreased in Q3. Vietnam is included in Southeast and South Asia.

I see. How was the magnitude of decline in Thailand, China and South Korea? Were they single digit or double digit?

In Thailand and China, sales decreased by about 10%, roughly speaking. In South Korea, they dropped about 5%.

I see you explained many initiatives. But according to the numbers in Q3, the effects are not clearly seen yet. Looking at the page of the market trend. In later part, in Thailand, laundry, detergent year-on-year plus is sustained. So how should we see the gap? How can I expect for the Q4?

In the short run, recovery in sales will be rather difficult to achieve. So we will strive to secure profit. In Thailand, China and South Korea, we began to see the sign of recovery in South Korea, and we expect to see a recovery in Q4. In Thailand, we will not pursue laundry, detergent much. But as I said earlier, we'd like to work on Oral Healthcare gain to secure profit.

Understood Talking about the sustainability of margin in overseas business. Margin in Q3 in overseas business was 5.3%. So to which level, how and when are you going to increase margin? Please share with us some specific initiatives to raise margin.

Are you talking about medium-term measures? Well, next year, we'll continue the strategy to pursue profit. Net sales. Next year and 2 years from now, we'd like to achieve higher profit growth than sales growth in overseas business as well. So we are fine-tuning our strategy to increase profit.

Next, Mr. Miyazaki, over to you.

This is Miyazaki from Goldman Sachs. First, I have a question on Page 6. What is prominent in 3 months is plus JPY 0.6 billion in quantitative effects, product mix and others, and minus JPY 1.2 billion in changes in other expenses. Did Oral Care contribute to quantitative effects? And in changes in other expenses, what changed in Q3 compared to the first half? First, please let me know these points.

The increase and decrease in sales, and about half of the increase and decrease in SG&A, and other expenses in the July through September period are attributable to the Vietnam operations. Again, the increase in gross profit will be due to the addition of sales in Vietnam and an increase in G&A expenses in Vietnam.

Yes, there are other factors. I said about [ 1.5 ]. But actually, it is bigger than [indiscernible] when it comes to actually the number in the gross profit in Vietnam.

I understood. Thank you very much. So with this new pharmaceutical [indiscernible] is completed, costs and other [indiscernible] details will not be much reflected in this graph. It is actually a minus JPY 6 million of this, the quantity effect completion in change and others. It also includes an impact an increase in the depreciation of the [ Odawara ] pharmaceutical plant. Thus, in the second place from the left, right?

Yes. The amortization amount is still because just because just a proportion of the facilities became operational in September.

I see now understood it. Thank you indeed. Also, the second point is concerning the pharmaceuticals again. One thing I'd now like to know is what was the inbound numbers? Also, I don't think on the sales of this pharmaceuticals will increase because of the start-up of this new plant. But looking just at Q3, I still think revenue has been declining. If I'm not wrong, could you tell me how you're going to actually address this situation, please?

As for inbound distributions, we estimate that the profit was JPY 1.9 billion during the period from July to September. And therefore, we estimate JPY 5.5 billion for January to September. Last year, we told you that the annual amount was JPY 7 billion. So yes, JPY 7 billion, and so on we think the annual amount will be slightly higher than that.

If I may on pharmaceuticals [indiscernible] still probably around 5%. If you look at Q3, I think revenue is down. Can you give us some background on this, and whether it will increase for the next fiscal year or not?

The pharmaceutical is the most generic type of [indiscernible] [ analgesic antipyretic ] revised the price of [indiscernible]. We had a very large rebate portion. So we revised the deal and lowered the shipping amount. We've reduced our shipment volume and cut back on rebates. And accordingly, it amounted to a price increase. A slight decline in volume, combined with lower unit shipment prices has resulted in decline sales. Overall, we believe now we can make a full circle next year by shifting sales to premium items.

Next, I'd like to have Ms. Miyasako.

Yes, this is Miyasako from Mizuho Securities. My first question, I would like to ask about the new products. On Slide 14, I think you mentioned earlier that the store fronts are doing okay, or doing well. But I wonder if the new products in Q4 are also included in Q3 as initial shipments?

As you see here, the new products actually were launched on September 24. So at this point in mind, may I remind you that Q3 [indiscernible] just include the very first shipments.

You're talking about new products in the Q4, right?

Well, I mean, [indiscernible] that new products of Q4 are going to be in Q4. They are not part of the Q3 numbers.

I see then the numbers for Q3 [indiscernible] toothpaste was good and also the fact that it seems to have come back, except for the pharmaceuticals. Is something that is going to -- likely to continue in Q4 based on the [indiscernible] in the stores?

This new drug and product rather had a good response in the second half of the year. Can you actually expand on the balance between profit and the sales domestic market?

Regarding new oral health care products. Since these are not improvements, but new launches. With this point in mind, the first shipment will be stock by wholesalers and distributors. So the first shipment will be fairly large. So this is going to be a very high growth rate. That's in the background.

However, since the turnover at the stores and after delivery is also higher than we had expected, we expect that sales for the fourth quarter will also be driven.

You mentioned that NANOX was also good in some places. The stations in stores?

Actually, our overall performance was good. And even though actually compared with the major competitors, actually, we enjoyed a higher performance. Well, this is a part of [ spot ] information we have received. Well, actually, we have already launched -- NANOX [indiscernible] standard. And this has been actually replaced within cleaning power plus that we are now seeing. So this has given us [indiscernible] results.

I see. Then I guess the overall new products are getting a pretty good response?

What you said is right. We believe that the issue here is going to be how, now, we can actually maintain this kind of [indiscernible] in terms of investment and [indiscernible] products. This is going to be a quite important issue for us to keep an eye on.

How much of the initial shipment of toothpaste should be in Q3?

Probably, I would say, perhaps 3% to 4% of the 8.2% in July to September Y-o-Y ratio. That's the assumption we are making now.

I see. Yes, understood. As for the next year, can we expect that attractive new products will be launched starting from the first half? And that will be continuing into the second half?

Yes, that is going to be our intention. Please stay tuned.

Thank you indeed. I have a question concerning over sales of the operations. You're talking about the margin improvement, including China. You seem to be trying new initiatives. Could you expand on the specific ways how you're planning to increase the margin without Vietnam, for this fourth quarter? And actually, the margin probably will not come up but improve. How do you feel about it?

Well, you're right. The overall margin will increase simply because of the addition of Vietnam. But we would like to increase the overall margin by simply selling products with higher gross margin in China and elsewhere. So this is going to be one of the ideas of why and how we'd like to actually increase the overall margin.

At one time, we were diversifying all our business to include detergents and pet care and products, in addition to Oral Healthcare products. But we decided to discontinue such unprofitable products and concentrate on sales promotion of high-margin products while ensuring overall profitability.

Does that mean that you don't have to spend that much money in order to sell something with high margin?

Well, let me put this way. We expect to spend a certain amount of money on sales promotions and storefront merchandising. But since we are focusing on products with a low cost pricing ratio, we believe we can secure a higher overall margin than we have in the past.

Now I would like to have Ms. Yamanaka.

This is Yamanaka from SMBC Nikko Securities. I would like to ask you, actually, in a nutshell, about JPY 1.7 billion in terms of the business, the profit in the first half. And actually JPY 2 billion just [indiscernible] the second quarter. But on the cumulative basis for the Q3, what is the progress you're making in terms of profit? And also vis-a-vis the midterm business plan compared with actually the first half, are you making progress? Or are you behind the schedule? You don't have to give me a quantitative explanation.

Yes, [indiscernible] actually, we are making actual profit up until the second quarter. And without [indiscernible] and actually, we have become quite an aggressive in making investments in the third quarter. With that, thinking on how we are in line with our expectations in terms of profit.

How about vis-a-vis the midterm business plan?

Well, all this [indiscernible] is going to be the efficiency of the sales promotion expenses. I think we are making much more on the progress than we had expected. So with this point in mind, actually, advertisement and others, investments actually are going to be further added. I think we are having more capacity moving into that direction.

In regard to the existing business, I think we are actually in line within our plans.

In regard to the public new products, you try to reduce the investment, but still you enjoy really good results. What's the difference between what you have done here? And also the activities in the past?

Well, Actually, we try to reduce the unprofitable SKUs and also the general purpose and products and [indiscernible] also try to be reduced as much as possible. And in regards to NANOX [indiscernible] of course, within our [indiscernible], because actually, the profit level is quite high. So by selling [ one ], we should be able to enjoy the [indiscernible] profit. I think we're able to actually create such an overall business structure.

Understood. If I would now like to ask the last question. In regards to the value chain aspects, any collaborations among the divisions? And also the efforts to try to reduce the indirect cost and also try to manage and reduce the personnel cost? But that we can expect to see the improvement in actually reducing the effects on the cost or you keep an eye on more on the growth side?

Well, what you said is right. Actually, actually on execution and also our judgment, I think that will be quite important going forward. But so far, for example, R&D and also in production, and distribution and others. Actually, we had those indirect functions and operations. And actually, we put them, actually, vertically under the leadership of the business owners. Going through that process on the mid- to long-term basis, we should be able to avoid overlapped in operations and others. I think we can have such expectation.

And going forward, of course, the population is aging, I think in at was difficult for us to find the right amount of the resources. So I think those efforts are going to be beneficial to us on the midterm and long-term basis.

Time running out. So this is the last question, I'd like to ask [indiscernible] raise your questions.

This is [indiscernible] from [ Nomura Securities ]. Yes, I have one question. The target of the current midterm plan. And actually, looking at top line overseas actually there seem to some issues and challenges. And with that point in mind, corporate profit targets. If I'm not wrong, probably you need to naturally revise that corporate profit target. Am I right saying that?

And also in terms of profitability. I think you can on a higher level of profitability. So the higher profit is going to help you to make up for whatever the loss you may have. So these are the areas [indiscernible] upon.

Actually, 2027 goal, actually 10% overseas growth, I think is going to be one of the challenges we have to address. In [indiscernible] performance and the profit, I think we are right on line. So we would like to make sure that we can actually reach that the goal. And in terms of overseas growth and Oral Healthcare growth, as I mentioned earlier, we are considering further portfolio changes. And if these are realized, there is going to be a possibility that we'll be able to go even further.

If this does not come to fruition, probably we have to make change during, and before, FY 2027. I think we have to make an adjustment at 1 point. At any way, we would like to go for our goal I've just explained.

Understood. Well, you seem to be rather successful in the Japanese market. But in times to the overseas markets, compared to [indiscernible] the goals of the midterm management plan? If you can grow on the Oral side, that is going to actually give you more profit. And with increase in profit, you should be able to actually make up for the loss in sales.

What you said is right. In terms of the organic part, existing business, or current business, what you said is right.

We do appreciate for the many questions we have received from you since we are somewhat behind in the schedule. Now I would like to conclude Lion Corporation's financial results briefing. Again, I'd like to thank you for your precious time. Thank you.

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