Maxell Stock

This is Nakamura. I will now explain the financial results of the first quarter FY 2026. There are 3 points I'd like to cover today. First, FY 2026 first quarter results overview. Net sales were JPY 37.7 billion, up 24% year-on-year. Operating profit, JPY 2.9 billion, up 45% year-on-year. Net profit, JPY 2.4 billion, up 51% year-on-year. Both sales and operating profit increased, driven by the strong performance of the Analog Core Business Group. Second, future outlook. We expect it to remain generally steady from second quarter onward, led by the Analog Core Business Group. Third, front-runner strategy in the highly reliable small battery sector. We aim to become global #1 in the highly reliable small battery sector, including all solid-state batteries.

FY 2026 first quarter results overview. Net sales increased due to the strong performance of the Analog Core Business Group, namely Energy, Functional Materials and Optics & Systems. Operating profit, ordinary profit and net profit increased due to the strong performance of the Analog Core Business Group, along with the positive impact of the foreign exchange rates. As shown in the table below, first quarter net sales for FY 2026 were JPY 37.7 billion, up JPY 7.4 billion year-on-year. Operating profit was JPY 2.9 billion, up JPY 0.9 billion year-on-year with a profit margin of 7.6%. Ordinary profit was JPY 3.1 billion. Net profit was JPY 2.4 billion. The exchange rate was JPY 159 to $1.

Net sales year-on-year changes of the first quarter. Net sales were JPY 37.7 billion in the first quarter FY 2026, up JPY 7.4 billion year-on-year. By factor, the quantity variance was plus JPY 4.5 billion, including the volume increases in primary batteries, adhesive tapes, industrial materials, automotive optical components, semiconductor-related products and hydraulic tools as shown on the right. On the other hand, sales decreased due to the absence of the impact of onetime battery-related licensing revenue recorded last year, decreased in rechargeable batteries due to the discontinuation of the prismatic lithium-ion battery production in May last year and the decrease in health & beauty care products.

Price variance was plus JPY 1.3 billion, mainly due to the price pass-through of increased raw material cost. Exchange variance was plus JPY 1.6 billion due to the impact of the weaker yen. Operating profit changes. Operating profit was JPY 2.9 billion in the first quarter FY 2026, up JPY 0.9 billion year-on-year. By factor, price variance was plus JPY 1.3 billion with a price pass-through of the increased raw material cost. Quantity variance, plus JPY 0.5 billion with increased sales volume of primary batteries, adhesive tapes, industrial materials, automotive optical components, semiconductor-related products and hydraulic tools. Profit decreased due to the absence of the license revenue recorded last year and decreased sales in health & beauty care products.

Material cost worked negatively JPY 1.6 billion due to rising raw material costs for silver and naphtha, but selling price served as offset. In cost reduction, despite progress in cost reduction, as shown in the chart, strengthening investment in human capital, increase in depreciation and the goodwill related to Maxell Sakura, which joined the group, were a part of minus JPY 0.2 billion. Exchange variance was plus JPY 0.9 billion due to the impact of weaker yen.

Review by segment. Let me start with Energy segment. In this Q1, net sales were JPY 15.2 billion, up JPY 4.9 billion year-on-year. Operating profit was JPY 0.8 billion, down JPY 0.1 billion year-on-year. As shown below, net sales increased in primary battery sales due to strong demand for medical devices and automotive applications, including Maxell Sakura, but they decreased in rechargeable batteries due to discontinuation of the production, as mentioned. Operating profit increased in primary battery due to strong sales and gradual price pass-through of soaring raw material costs. Profitability of rechargeable batteries improved as losses from prismatic lithium-ion batteries were eliminated despite continued development costs for all solid-state batteries.

Overall segment profit decreased. But excluding the impact of onetime licensing revenue recorded in the previous year, profit actually increased. Functional Materials. In Q1, net sales were JPY 9.6 billion, up JPY 1.8 billion year-on-year. Operating profit was JPY 1.0 billion, up JPY 0.6 billion year-on-year. Sales increased as demand for inventory buildup arose due to the tight supply and demand for raw materials amid unstable conditions in the Middle East. Sales increased driven by strong real demand of high value-added tapes for construction and semiconductor manufacturing processes. Sales also increased in industrial materials with both coated separators and industrial rubber products performing well.

Operating profit increased due to higher sales, as mentioned, and secured profits through price pass-through of soaring raw material cost. Optics & Systems. In Q1, net sales were JPY 9.2 billion, up JPY 1.4 billion year-on-year. Operating profit was JPY 1.1 billion, up JPY 0.6 billion year-on-year. Net sales increased in automotive optical components due to expanded sales of next-generation lenses. Semiconductor-related product sales, which was sluggish last year, recovered as customer inventory adjustment progressed. Licensing revenue progressed mostly as planned. Operating profit. Profit increased due to higher sales of both automotive optical components and semiconductor-related products.

Value Co-Creation businesses. In Q1, net sales were JPY 3.6 billion, down JPY 0.6 billion year-on-year. Operating profit was 0, down JPY 0.2 billion year-on-year. Net sales increased in hydraulic tools due to steady domestic and overseas demand, but they decreased in health & beauty care products due to lower orders, mainly in Japan and North America. Operating profit increased in hydraulic tools due to higher sales, but decreased in health & beauty care products. Impact of the situation in the Middle East on business performance. Despite some difficulties in sourcing raw materials and sluggish sales in certain areas, negative impact on performance were avoided through pass-through of soaring raw material costs to selling prices and quick response to customer demand to build up inventory.

By segment, in Energy segment, despite sluggish sales in some Asian routes, the overall impact on performance was minimal. In Functional Materials segment, demand for inventory buildup of adhesive tapes arose due to tight supply and demand for raw materials amid unstable conditions in the Middle East, while we secured profitability through price pass-through of higher naphtha-related raw material cost. In Optics & Systems and Value Co-Creation businesses segment, the impact on both production and sales was minimal.

Future outlook. Outlook for the Analog Core Business Group. We expect it to remain generally steady from 2Q onward, led by the Analog Core Business Group. By segment, in Energy segment, primary batteries will continue to perform steadily, mainly for medical devices. Full-scale operation of the new production line will begin in the second half. Production capacity allocation between Maxell Ono and Maxell Sakura will be optimized to respond to growing demand. In rechargeable batteries, profitability improved as losses from the prismatic lithium-ion batteries were eliminated as mentioned. Development of the general purpose module for FA applications of all solid-state batteries was completed in June and full-scale sales will be accelerated.

Second, in Functional Materials segment, adhesive tapes will remain firm in the second quarter, supported by the situation in the Middle East, although performance is expected to normalize from the second half onward. Tapes for semiconductor manufacturing processes are also expected to remain solid, driven by the increased demand from AI and data centers. Shipment of tapes for construction will increase by expanding production capacity in Kobuchizawa new line. In Industrial Materials, coated separators continue to perform well, mainly in hybrid EV, and they will continue to perform well in Q2 onward.

In Optics & Systems segment, automotive optical components progress is expected to proceed as planned, mainly for next-generation lenses, and we will promote the development of new application in nonautomotive sector. In semiconductor-related products, semiconductor DMS orders increased due to expanding demand from AI and data centers as well as customer inventory reduction driven by the recovery in demand for general purpose types and orders will continue to grow. Production capacity expansion will be put in place during the first half to respond to stronger demand. Response to soaring raw materials, especially silver cost, whose impact is large in Energy segment.

This slide shows a model diagram of the response. Silver price soared since January 2026, but it has been moderating recently. Our cost has been increasing as shown by red dotted line. But through the price pass-through with some time lag, we have been securing profitability in this fiscal year. Profitability will return to an appropriate level from the second half onward. Finally, I'd like to revisit our front-runner strategy in the highly reliable small battery sector. With the technological expertise and know-how that have been refined so far, Maxell will aim to become global #1 in both scale and advanced technology in the highly reliable small battery sector, including all solid-state batteries.

While we are advancing all solid-state battery in rechargeable batteries, our current mainstay product remains the primary batteries. As for the market trend, with the advancement of electronic devices and the shift for high added value products, including smaller products and those with telecom functions, new applications are expanding. Under such circumstances, demand for high-reliability small batteries is rapidly expanding. Disposable primary batteries are being used in an increasing number of new applications and are playing an important role in compact power systems.

Market share of heat-resistant coin-type battery for TPMS and market size of CGM for primary batteries for medical devices are shown here. Both are promising with expected continued growth, and we will expand our sales and profit in this market. We are accelerating customer development, expecting that the value of all solid-state batteries as a permanent power source will be further recognized. We provide a maintenance-free solution for customers' factory automation to expand customer base through the communication between engineers and customers. As for the target market size based on Maxell research, industrial robots are approximately 540,000 units and the industrial robots in operation is more than 4 million.

In this large potential demand, we would like to acquire further customers. This is to review the progress from 2 perspectives of product development and customer development. In 2019, we selected sulfide-based technology for our all solid-state batteries since its manufacturing process is very close to that of our core micro battery products and allows us to leverage our core technology. We started sample shipment in the same year. From 2021, we consolidated our company-wide development resources, including all solid-state batteries into a single function, establishing a company-wide structure to firmly develop and accelerate the new business.

In 2022, we managed to achieve commercialization, including ceramic packaging. However, for customers who place particular emphasis on reliability, adoption was difficult without process qualification using samples produced on genuine mass production equipment. Then in 2023, we established mass production equipment and using samples produced on that equipment received qualification evaluations. That same year, this was also adapted for the use in a Multi-Turn Absolute Encoder application. After that, development continued to accelerate across various areas. In 2025 last fiscal year, we were able to broaden the range of applicable temperature as shown in customer development on the right.

And this fiscal year 2026, we are also accelerating the use of all solid-state battery as a main power source together with development of modules to replace primary batteries in existing market. Kyocera and Subaru are currently proceeding with demonstration trials. Going forward, in addition to the existing value of high reliability and long life, we plan to expand the heat resistance output and the capacity of all solid-state batteries. As their use expands into applications such as memory backup and main power sources, we intend to steadily advance this development. Underpinning all of this is our Analog Core Technologies. Through the processes of mixing, coating and forming, we create our final products. Competitors who have examined our products say they cannot determine how they are made.

We intend to continue accelerating our efforts to differentiate through our manufacturing process, making it a source of our competitiveness. As we continue to expand our business centered on small batteries, including all solid-state batteries, we are in terms of scale expansion, advancing our collaboration with Maxell Sakura, while also working to broaden new battery types and use cases. At the same time, through collaboration with venture capital firms, we are steadily working to acquire new technologies with the aim of becoming the frontrunner in the small battery sector. And going forward, under micro battery maximum impact, we continue to work to enhance corporate value.

That concludes my presentation.

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

I'm Nakamura. Today, I'd like to explain the financial results of the third quarter of FY 2025.

Summary of today's presentation. First, FY 2025 third quarter results overview. Net sales were JPY 96.3 billion, up 0.7% year-on-year. Operating profit was JPY 7.2 billion, up 9.1%, and net profit was JPY 6.2 billion, up 12.7%.

While sales declined due to lower sales following the discontinuation of prismatic lithium-ion batteries production, we were able to secure higher sales and profit overall despite the impact of rising raw material cost. Second, the progress of the analog core business group. Progress varies by segment, but the company will strive to meet the full year target. Third, regarding shareholder returns. On November 19, 2025, we executed a share buyback of approximately JPY 13.2 billion. Fourth, the acquisition of primary battery business from Murata Manufacturing is progressing as planned toward completion within FY 2025. Fifth, regarding the updates on all-solid-state batteries, we are receiving requests from a variety of customers and accelerating product development. As you may be aware that following Subaru Corporation, the product has also been deployed on industrial robot at Kyocera Corporation's manufacturing site.

FY 2025 third quarter results overview. As shown in the table, net sales for the third quarter totaled JPY 96.3 billion, up JPY 0.7 billion year-on-year. Operating profit was JPY 7.2 billion, up JPY 0.6 billion, and net profit was JPY 6.2 billion, also up by JPY 0.7 billion. The exchange rate was JPY 149 to $1 with JPY 4 appreciation year-on-year.

Overall, as shown above, net sales increased while sales declined in rechargeable batteries, semiconductor-related products and health and beauty care products, primary batteries mainly for infrastructure and medical devices application increased and license revenue rose, including the advanced recognition of the fourth quarter revenue.

Operating profit increased due to higher profit from primary batteries for infrastructure and medical device applications, industrial materials such as coated separators and license revenue, despite the impact of reduced sales following the discontinuation of prismatic lithium-ion battery production and sharply rising raw material cost.

Net sales changes. Net sales increased from JPY 95.6 billion to JPY 96.3 billion, year-on-year increase of JPY 0.7 billion. By factor, in quantity variance, as shown in the right part, sales growth was driven by increased sales of primary batteries, coated separators and license revenue, including advanced recognition from the fourth quarter as well as increase in hydraulic tools. These positive factors were partially offset by lower sales of rechargeable batteries, semiconductor-related products and health and beauty care products, resulting in a net positive impact of JPY 1.4 billion. Price variance was negative JPY 0.3 billion. As described, sales price changes impacted due to decline in some raw material costs. Exchange variance was negative JPY 0.4 billion due to stronger yen.

Operating profit changes. Operating profit increased from JPY 6.6 billion in the previous year to JPY 7.2 billion, up JPY 0.6 billion. Volume variance contributed positively as observed in net sales, driven by higher sales of primary batteries, coated separators, license revenue and hydraulic tools. These gains were partially offset by lower sales of rechargeable batteries, semiconductor-related products and health and beauty care products. Price variance was negative JPY 0.3 billion, reflecting sales price changes due to cost decrease in certain raw materials.

Raw material cost. Particularly the sharp rise in silver prices for silver oxide batteries had a negative impact of approximately JPY 0.2 billion. In cost reduction, we saw increase in fixed costs and in exchange variance, stronger yen impacted operating profit.

I will talk about review by segment, starting from Energy segment. Net sales were JPY 31 billion, down by JPY 0.6 billion year-on-year. Operating profit was JPY 2 billion, down by JPY 0.5 billion year-on-year. Primary batteries, including those for infrastructure applications and medical devices, continued to perform steadily. However, sales declined due to the planned discontinuation of prismatic lithium-ion batteries production. Operating profit was negatively affected by lower sales, higher raw material costs, including rising silver prices for silver oxide batteries and the impact of stronger yen. At the same time, development project for all-solid-state batteries increased, focusing on larger capacity and higher heat resistance, and we intentionally expanded development cost in this area.

Regarding tariffs, we have basically reflected all impacts on selling prices, minimizing the overall effect. Overall, as shown in the right top part, primary batteries for infrastructure and medical devices continued to perform steadily, but their profits were pressured by soaring silver cost, time lag in price pass-on and the stronger yen. Secondary battery profit declined due to the discontinued prismatic lithium-ion battery production, which was within our expectation.

Functional Materials segment. Net sales were JPY 24 billion, up JPY 0.2 billion year-on-year. Operating profit was JPY 1 billion, up JPY 0.2 billion. Sales of adhesive tapes for semiconductor manufacturing processes recovered from the third quarter onward, allowing us to maintain sales levels comparable to the previous year. Industrial materials, particularly coated separators for hybrid applications performed very well and contributed to higher sales. Operating profit has not yet fully recovered, reflecting the weaker sales in the first half of the year. However, profit from coated separators increased in line with higher sales.

The impact of tariffs on this segment was minimal as sales are mainly concentrated in the domestic market. Overall, as shown on the right top, sales of adhesive tapes for semiconductor manufacturing processes recovered recently to the level of the previous year. The impact of weak performance in the first half remains on profit. Coated separators, particularly for hybrid applications, continue to be robust.

Optics & Systems. Net sales were JPY 27.9 billion, up JPY 2.2 billion year-on-year. Operating profit was JPY 3.5 billion, up JPY 1.3 billion. Sales of automotive optical components remained at the same level as last year through sales effort despite the challenging market environment. Semiconductor-related products showed a decline in sales, reflecting weakness in the general purpose semiconductor market. On the other hand, license revenue increased overall, including the recognized revenue advanced from the fourth quarter. Operating profit increased due to higher license revenue despite weakness in automotive optical components and semiconductor-related products.

Regarding tariffs, in line with our company-wide policy, we are reflecting tariff impacts on selling prices. Overall, while automotive optical components and semiconductor-related businesses remain challenging, increased license revenue served to offset these factors.

Value Co-Creation businesses. Net sales were JPY 13.4 billion, down JPY 1 billion year-on-year. Operating profit was JPY 0.6 billion, down JPY 0.4 billion year-on-year. Sales of hydraulic tools continued to perform well, mainly in Japan and the United States. However, health and beauty care products were affected by tariffs on export to the United States, and recovery from weaker performance in the first half has not yet been completed and sales declined. Operating profit increased in line with higher sales of hydraulic tools, while health and beauty care products remained under pressure. Tariff rates on products from China have declined, leading to some shift back from Japanese-made product. Demand has been on recovering trend since Q3. Though products made in Japan are partially shipped, as tariffs have been significantly reduced, we are also moving production back to China where appropriate.

Progress and outlook for analog core business. First, regarding the progress as of the end of the third quarter, as shown on the right-hand side. For the Energy segment, the full year plan for net sales is JPY 40.3 billion, and we achieved JPY 31 billion, approximately 77% of the plan, roughly 3 quarters. On the other hand, operating profit reached JPY 2 billion, already achieved 112% of the full year plan, indicating the very strong progress.

Looking at the current situation and the outlook, as noted in the comments below, primary batteries are expected to remain solid, mainly for infrastructure applications such as electricity, gas and water meters as well as for medical devices. Meanwhile, demand for automotive tire puncture sensor remains fundamentally strong. However, some customers continue to face difficulties in procuring semiconductors, which has resulted in a slight decline in orders. In addition, raw material cost, particularly silver prices have soared. While we are steadily reflecting these increases in selling prices, there is a time lag, and we aim to shorten this time lag as much as possible to minimize the impact on profitability.

Regarding Murata Manufacturing's primary battery business, we aim to ensure that it contributes to Maxell Group's sales and profit from FY 2026 onward. As for secondary batteries, production ended in May 2025 and the sales decline along with discontinuation is within the plan. With respect to all-solid-state batteries, the number of development projects is increasing. We are accelerating development efforts, and they are beginning to contribute gradually to sales.

Functional Materials segment progress and outlook. The progress of net sales and operating profit is shown in the table on the right. Against the full year plan of JPY 34.3 billion, net sales reached JPY 24 billion with approximately 70% progress. Operating profit reached JPY 1 billion against the plan of JPY 1.9 billion, representing about 53%, which remains somewhat behind the plan. As shown on the left, orders for adhesive tapes for construction are expanding orders in Japan, the United States and Asia. In semiconductor-related products, performance was weak in the first half, but sales have been recovering in the second half. In Industrial Materials, coated separators remained firm in line with expanding demand for hybrid applications. For industrial rubber products, we aim to improve profitability through strengthened sales of high value-added products.

Optics & Systems progress and outlook. Net sales reached JPY 27.9 billion against a full year plan of JPY 42.3 billion, representing 66% progress, slightly behind the plan. Operating profit reached JPY 3.5 billion against a plan of JPY 5 billion, representing approximately 71% or roughly 3/4 of the target. As shown in the comments on the left, automotive optical components, in-car camera lens unit, continue to face challenging environment. However, joint development of next-generation product is progressing smoothly with OEMs and the Tier 1 customers, including initiatives under the next midterm management plan.

Regarding LED headlamp lenses, full-scale production of next-generation lenses is scheduled to begin in the fourth quarter. In addition, as already press released, in-car camera lens unit business is being transferred to Maxell Frontier to improve management efficiency and overall profitability. In semiconductor-related businesses, in semiconductor assembly process, volume-tier commodity memory and power-IC semiconductors remain weak, but orders are gradually improving, and we aim for a full year recovery in FY 2026.

Business progress by segment. At the company-wide level, as of the end of the third quarter, net sales reached JPY 96.3 billion, representing 71% progress, and operating profit reached JPY 7.2 billion, representing 72% progress. With 3 months remaining in the fourth quarter, although market conditions remain volatile, we aim to achieve the full year target.

Shareholder returns. In line with the initial forecast, we paid an interim dividend of JPY 25 per share. In addition, on November 19, as we press released, we executed off-auction share buyback. We will continue initiatives to improve capital efficiency with the aim of enhancing ROE and PBR. Status of share buyback is shown on the table on the right. On November 19, we acquired 6.3 million shares for a total value of JPY 13.2 billion.

Acquisition of primary battery business from Murata Manufacturing. Progress towards the completion of the business acquisition by the end of FY 2025 is proceeding as planned. Currently, we expect to execute the share purchase on March 1, 2026. The business contribution is expected from FY 2026. Including details on synergies, we plan to share further information in the next fiscal year, around the end of April 2026.

Updates on all-solid-state batteries. As a repost, we are mass producing all-solid-state batteries, which do not use liquid and offer high heat resistance safety and long life. By leveraging our differentiated technologies of mixing, fine coating and molding and forming, we aim to enhance temperature range, durability, output and safety and contribute to society.

Looking back at product development and customer development from 2 perspectives. In product development, in 2019, we began shipping initial development samples using sulfide-based all-solid-state batteries in the Energy segment. In 2021, given the resource in Energy segment was not sufficient, considerable development resources were consolidated under the new business producing division to accelerate company-wide development. In 2022, ceramic packaged all-solid-state batteries were successfully commercialized, accelerating customers' sampling.

We commercialize our products with our strength of reliability. And customers expect to evaluate products produced with the mass production equipment. In 2023, mass production equipment for all-solid-state batteries were completed and began operation. As customer evaluations accelerated, these batteries were adopted for applications such as Nikon's encoders.

In a subsequent year, in addition to expanding adoption by new customers and devices, we started development of modules to replace existing primary batteries to accelerate sales. In 2025, development accelerated further, including combination with energy harvesting and higher heat-resistant types, and coin-type all-solid-state batteries for expanded uses were developed as well. In the year, as shown on the right, we started joint development with CO-WORKS and Yoshinoya as well as partnership with Micro-Sensys GmbH in Germany on next-generation sensors.

Furthermore, our batteries were installed in industrial robots operating at Subaru Corporation's plant and evaluation is making progress. In January 2026, this year, we began developing all-solid-state battery modules size compatible with ER battery to replace existing primary batteries. And Kyocera started evaluation of our product.

This concludes the presentation of our third quarter financial results.

I am Nakamura. I'd like to present the financial results of the first half of FY 2025. Page 2, summary of today's presentation. As for the FY 2025 first half results overview, net sales were JPY 64.7 billion, up 2.4% year-on-year. Operating profit was JPY 5.1 billion, up 21% year-on-year. And net profit was JPY 4.2 billion, up 37.2% year-on-year. Energy segment performed well and licensing revenue, which was previously planned in the third quarter onward was advanced to the second quarter, and the results exceeded the company plan.

Second, future outlook. While sales of primary batteries remain strong, we maintain the original forecast due to delays in the recovery of semiconductor-related businesses and potential risks of a slowdown in the global economy triggered by the U.S. tariff measures.

Third, acquisition of primary battery business from Murata Manufacturing is progressing as planned toward the completion of the business acquisition within FY 2025.

Fourth, updates on all-solid-state batteries. We started test operations at SUBARU's ’plant, and we are accelerating the development of larger capacity and further high heat resistance to meet customers' demands.

Page 4, review on the first half FY 2025 summary. Net sales were JPY 64.7 billion, up JPY 1.5 billion year-on-year. Operating profit was JPY 5.1 billion, up JPY 0.9 billion year-on-year, with operating profit ratio of 7.8%. Net profit was JPY 4.2 billion, up JPY 1.1 billion year-on-year. And exchange rate was JPY 146 to $1, with yen's appreciation by JPY 7 to $1. Rechargeable batteries production was discontinued in May with intentional decrease in sales. And sales for semiconductor-related products and health and beauty care products were sluggish. But net sales increased due to sales increase of primary batteries and industrial materials as well as the advancement of licensing revenue.

Operating profit increased due to sales increase of primary batteries, industrial materials and advancement of licensing revenues despite the adverse impact of stronger yen. Ordinary profit and net profit increased as well.

Net sales changes show the year-on-year change as of the end of the first half. Starting from net sales in the first half FY 2024 at JPY 63.1 billion, quantity variance was plus JPY 2.9 billion. As described on the right part, increase in primary batteries offset decrease in rechargeable batteries. In line with the electrification of automotive, coated separator sales increased as well as the advancement of licensing revenue, which was originally planned for the second half and beyond.

Additionally, hydraulic tools global sales increased, and they contributed to sales growth. However, semiconductor-related products and health and beauty care products sales decreased. Price variance was minus JPY 0.3 billion as the sales price partially linked to the material cost was impacted by the decline in some raw material costs. Exchange variance was minus JPY 1 billion, and they have led to JPY 64.7 billion in net sales, up JPY 1.5 billion year-on-year.

Operating profit changes in the first half show JPY 0.9 billion increase year-on-year. From JPY 4.2 billion in FY 2024, quantity variance was plus JPY 2.2 billion, in line with the sales, they were both plus and minus. Material costs were positive by JPY 0.1 billion as the overall material cost was trending down despite some cost increases. Cost reduction was negative by JPY 0.5 billion with fixed cost increase. Price variance was negative by JPY 0.3 billion with the impact of sales price changes due to raw material cost decreases. Exchange variance was negative by JPY 0.6 billion, they have led to JPY 5.1 billion in operating profit.

Review by segment, starting from Energy segment. Net sales were JPY 20.9 billion, up by JPY 0.3 billion, and operating profit was JPY 1.6 billion, up by almost JPY 0.1 billion. As described below, net sales increased in primary batteries due to steady sales of automotive applications, medical devices and infrastructure applications. Net sales decreased in rechargeable batteries due to sales decline from discontinuation of production in May this year.

Operating profit in primary batteries increased despite the recent surging raw material cost of silver pushing down the profit. Operating profit in rechargeable batteries progressed within our expectation with certain costs continuing along with the shipment even after the discontinuation of production. Development cost for all-solid-state batteries increased to achieve larger capacity and higher heat resistance. U.S. tariffs impact has been reflected in selling prices in the Energy segment.

Key points are sales of primary batteries performed well, centered on growth sectors, whereas rechargeable batteries decreased within expected range. Sales and profit increased despite the impact of rising raw material cost of silver.

Functional Materials segment net sales in the first half were JPY 15.7 billion and operating profit was JPY 0.5 billion. Adhesive tapes for construction performed well, but tapes for semiconductor manufacturing processes struggled in the intensified competition environment in the first half. Net sales increased in industrial materials due to strong performance of coated separator for EVs.

Operating profit decreased in adhesive tape due to the impact of product mix, but operating profit in industrial materials increased due to strong performance of coated separators contributing to profit growth. As domestic sales are dominant here, tariffs had effectively no impact on this business.

As key points, sales and profit increased due to strong sales of tapes for construction and coated separators, which more than offset the struggled tapes for semiconductor manufacturing processes.

Optics & Systems segment, net sales were JPY 19.7 billion, up JPY 2.1 billion year-on-year. And operating profit was JPY 2.7 billion, up JPY 1.1 billion year-on-year. Sales increased due to advancement of licensing revenue originally planned for the third quarter and beyond despite decrease in automotive optical components and semiconductor-related products. Operating profit increased with the contribution of advancement of licensing revenue. The effect of tariffs has been reflected in selling prices.

As key points, sales and profit increased in the first half due to advancement of licensing revenue originally planned for the third quarter and beyond.

Value co-creation businesses, net sales were JPY 8.4 billion, down JPY 1.2 billion year-on-year, and operating profit was JPY 0.3 billion, down JPY 0.4 billion year-on-year. Sales of hydraulic tools increased, but due to sales decline in health and beauty care products affected by the U.S. tariff measures, net sales decreased. Operating profit decreased due to sales decline in health and beauty care products, while profit of hydraulic tools increased.

Our selling price of Chinese-made shavers was not affected by tariffs, but the real demand in terms of sales in the United States decreased in the second quarter following the first quarter. To minimize the U.S. tariffs impact, we will gradually shift production to Japan for lower tariff rate.

As key points, sales and profit decreased due to health and beauty care products affected by the U.S. tariff measures despite strong sales of hydraulic tools centered on overseas market.

Combining four segments, net sales were JPY 64.7 billion against the full year forecast of JPY 136.5 billion with a progress of 47%, achieving almost half. Operating profit was JPY 5.1 billion with a progress of 51%. Partly due to the advancement of licensing revenue, the progress exceeded the company plan.

Shareholder returns. Interim dividend is JPY 25 per share, sustaining the same level as last year, in line with the basic policy of 30% to 40% of payout ratio. We have announced to aim for a total payout ratio of over 100% during the 3 year of MEX26, which includes next year. And we will maximize capital efficiency while controlling equity.

Future outlook. Outlook for the Analog Core business group. Primary batteries will continue to perform steadily. Recovery of semiconductor-related business is expected to be later than our initial plan. We will maintain the full year forecast considering the potential risks of slowdown in the global economy brought about by the U.S. tariff measures.

Looking more in detail, in Energy segment, primary batteries centered on automotive application, medical device and infrastructure application will continue to perform steadily. While we have a scheme to reflect the rise in raw material cost of silver in selling prices, a time lag is expected to occur. Rechargeable batteries volume will decrease due to discontinuation of production within the planned range. We accelerate development of all solid-state batteries.

In Functional Materials segment, adhesive tapes for construction will be stable, mainly in the domestic market, with gradual expansion in overseas sales. Tapes for semiconductor manufacturing processes slowed down in the first half in the intensified competition, but the recovery in the second half is anticipated to make profit contribution. In industrial materials, coated separators are expected to perform steadily, particularly for the use in hybrid EV.

In Optics & Systems segment, in-car camera lens unit continued to face tough conditions. In the previous midterm management plan period, we could not establish new customer acquisition model, partly due to COVID pandemic. But the business itself is progressing in line with initial plan. There is a concern about the slowdown in market conditions for LED headlamp lenses. In semiconductor-related products, full-scale recovery of semiconductor DMS is being delayed. And the latest forecast is that it will be in FY 2026 or later.

Impact of U.S. tariff measure. For Energy and Optics & Systems products, the additional tariff is reflected in our selling prices, resulting in a minimal impact, but Chinese-made shavers affected by tariff impact in the second quarter following the first quarter in terms of our customers' demand and end customers' demand. So we are trying to mitigate the impact by shifting production from China to Japan. We will monitor the risk of global economic slowdown closely.

Main tariff target products and countermeasures are listed below.

Acquisition of primary battery business from Murata Manufacturing. Schedule until closing. We are making progress as planned towards the completion of the business acquisition by the end of FY 2025. Share purchase execution is planned for March 1, 2026, and business contribution is expected to begin from FY 2026. We plan to disclose business plans for the Energy segment and the entire company, including synergies from this transaction.

Updates on all-solid-state batteries. We must produce all-solid-state batteries that achieve heat resistance, safety and long life, which were not achievable by liquid-based conventional lithium-ion batteries. Accelerating the development of our underlying unique Analog Core Technologies will continue to contribute to society.

Looking back on the progress history, in September FY 2019, 6 years ago, we developed sulfide-based coin-type all-solid-state batteries and started sample shipment. In FY 2021, we consolidated future development project to the new business producing division with concentrated resource allocation toward all-solid-state batteries. And in FY 2022, we commercialized high-capacity ceramic packaged all-solid-state batteries.

Following the very good evaluation feedback from customers, we completed mass production equipment in April FY 2023 and started sample shipment of all-solid-state batteries produced with the mass production equipment for evaluation purposes with an aim of adoption.

In FY 2024, we promoted the use of all-solid-state batteries in-house. Maxell Frontier adopted them for their image recognition units. YOSHINOYA and Micro-Sensys GmbH in Germany decided adoption. As major industrial equipment manufacturers completed the variations for adoption, we started deliveries for customer mass production application, though their volume is not substantial yet.

In this year, FY 2025, as press released, our power module for industrial robots at SUBARU CORPORATION's plant to replace the primary batteries were installed to start test operations as a step into the new phase. We appreciate it as it has triggered the increase in inquiries. We received request for the product for higher upper limit temperature, and we started sample shipment of 150-degree compatible ceramic-packaged all-solid-state batteries this November. We are accelerating the development of larger capacity and enhanced heat resistance has added new value going forward.

Solving customer issues by all-solid-state batteries. In factory automation, without harness, reliability of robot is improved. And we offer a maintenance-free by minimizing the maintenance process.

This is all-solid-state battery modules replacing primary batteries and test operation started at SUBARU's plant. With their feedback, we'd like to promote the further development.

In solving customer issues, the second case is highly heat-resistant all-solid-state batteries. As was the case with Micro-Sensys, demand for sterilization is increasing with a growing interest in health. We can make proposals for highly value-added applications for data logging to ensure reliable sterilization effect. We continue to accelerate these initiatives.

This is a specific case of our partnership with Micro-Sensys in Germany for data loggers application. For sterilization application, we received customers' request for higher heat resistance with higher upper temperature limit. We started sample shipment of 150-degree compatible all-solid-state battery developed from the conventional 125-degree type. So we are ready to have customers' evaluation.

In solving customer issues, the third case is a sensing application, including those for pipelines. All-solid-state battery itself is an almost permanent power source in energy harvesting, but charging is one of the major issues in sensing application. As this energy harvesting technology development cannot be done on our own, we are promoting this infrastructure-related sensing system business through partnership.

In evaluating usability for harvesting on customer side, stand-alone batteries are sometimes difficult to evaluate. So we launched power modules and energy harvesting compatible evaluation kits to accelerate development, collaborating with customers.

This is our development road map for all-solid-state batteries. We have been progressing in line with the initial plan for small-sized all-solid-state batteries in terms of expansion of applications. For the further technological evolution of all-solid-state battery module, as shown in the case of SUBARU, we have been progressing steadily. The vertical axis shows the size of batteries, and expansion in size is an important growth point. We also plan to develop advanced functions in addition to size, including heat resistance in new aspects to promote development in two-pronged approach.

This concludes my presentation.

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