Mitsubishi Motors Stock

Good evening, everyone. Thank you for taking time out of your busy schedules to attend our financial results presentation today.

First, I would like to briefly touch on the key points of our full year results for FY 2025 and our outlook for FY 2026. FY 2025 was a year marked not only by heightened uncertainty, but also by more rapid and significant changes in the business environment than ever before. Even under these circumstances, we steadily executed various measures and, as a result, we were able to secure a profit level in line with our revised plan.

Operating profit was JPY 75.5 billion, and net income was JPY 10 billion. In terms of sales, signs of the effects of new model launches, including the all-new Destinator have gradually begun to emerge in each market, and these results are beginning to be reflected in our business performance. We will explain these points in more detail later.

Next, let me turn to our full year outlook. Based on assumptions that incorporate Middle East risk factors to a certain extent, we expect operating profit of JPY 90 billion, net income of JPY 25 billion and an annual dividend of JPY 10 per share. Even amid an uncertain environment, including geopolitical risks, we will respond flexibly and swiftly to changes in circumstances by accelerating our evolution toward a more resilient management foundation.

In terms of sales, in addition to the full year contribution from models launched in the second half of FY 2025, we will steadily build up sales volume through further expansion of destination markets. At the same time, looking ahead to FY 2026, we plan to launch an all-new cross-country SUV that will play a key role in our next phase of growth, and we will further strengthen our product competitiveness.

Please turn to Page 5. On this slide, I will explain our financial highlights for FY 2025. The business environment surrounding the company in FY 2025 was marked by a series of major changes including the impact of U.S. tariffs, the rise of Chinese manufacturers, and changes in environmental regulations in various countries, making it a year in which we faced considerable challenges in responding to them. Furthermore, since entering 2026, geopolitical risks have materialized, including the situation in Venezuela and the deterioration of the situation in the Middle East, and uncertainty has increased even further.

Under these circumstances, although profit decreased year-on-year, sales of new models, including the all-new Destinator have steadily begun to take hold and our profitability has been improving recently. As a result, we were able to secure our profit level in line with our revised plan.

Net sales came to JPY 2,896.5 billion, an increase of 4% year-on-year. Operating profit was JPY 75.5 billion, a decrease of 46% year-on-year and operating margin was 2.6%. Ordinary profit was JPY 78.9 billion, and net income came to JPY 10 billion. Accordingly, as we were able to secure net income in line with our revised plan for FY 2025, we have decided to pay a year-end dividend of JPY 5 per share and an annual dividend of JPY 10 per share as announced. Retail sales volume was 797,000 units, a decrease of 5% year-on-year.

Please turn to Page 6. This slide explains the factors behind the year-on-year change in operating profit for FY 2025. Regarding volume/mix, although there was a negative impact from a decline in wholesale volumes due to the discontinuation of sales of certain models in North America, Australia and some other markets, the impact was offset by an improvement in model mix and higher selling prices. As a result, volume/mix contributed JPY 37.6 billion to operating profit.

Sales expenses had a negative impact of JPY 29.7 billion, although there were impacts such as increased incentive spending in response to the intensified competitive market environment, we were able to absorb part of these impacts by curbing advertising expenses. Procurement costs and shipping costs had a negative impact of JPY 5.3 billion. Although the increase in material cost was significant due to higher costs associated with product enhancement and the impact of inflation, we were able to absorb part of the impact through procurement cost reduction activities. R&D expenses and other expenses each improved year-on-year.

As for foreign exchange, compared with the previous year, the yen appreciated against the U.S. dollar, while depreciating against the Thai baht. As a result, foreign exchange had a negative impact of JPY 37.4 billion. In addition, U.S. tariff payments had a negative impact of JPY 47.4 billion, as shown on the slide.

Please turn to Page 7. This slide explains the factors behind the year-on-year change in operating profit for the fourth quarter of FY 2025. Volume/mix and price, et cetera, delivered a positive impact of JPY 26.1 billion year-on-year. This was driven by an increase in sales volume, mainly of new models as well as continued price improvement.

Sales expenses had a negative impact of JPY 14.3 billion. Although sales expenses were affected by increased incentive spending in North America, Oceania, Europe, ASEAN and some other regions, we were able to partially offset this by curving advertising expenses. Procurement costs and shipping costs had a negative impact of JPY 5.1 billion. Although material costs deteriorated due to higher costs associated with product enhancements and the impact of inflation, we were able to partially offset this through cost reduction activities. R&D expenses improved by JPY 4.7 billion, partly reflecting the completion of development of new models, and other items improved by JPY 9.7 billion, due mainly to factors related to environmental regulatory compliance costs and aftersales parts.

At foreign exchange, although the Australian dollar, the euro and some other currencies strengthening the yen, the appreciation of the Thai baht, which is cross currency resulted in a significantly -- slightly negative impact overall. In addition, U.S. tariff payment had a negative impact of JPY 10.1 billion in the fourth quarter.

Please turn to Page 8. Now I will explain our retail sales volume results. Overall, although sales volume increased in some regions supported by strong sales of new models, retail sales came to a sudden halt in March due in part to the deteriorating situation in Iran, which began in March. As a result, retail sales volume decreased by 5% year-on-year to 797,000 units.

By region, sales volume decreased in North America due to the impact of tariffs as well as the discontinuation of sales of certain models. In Australia, sales volume also decreased due to the discontinuation of sales of multiple models as well as a strong push by Chinese manufacturers. In the Middle East and Latin America, retail sales volume increased year-on-year. This was supported by strong sales of new models in Latin America as well as core models in the Middle East, which drove sales throughout the year. Although the models in Middle East -- although the Middle East was affected by the situation toward the end of the fiscal year. In Japan, sales volume increased due to steady sales of new models. As a result, both market share and sales volume increased for the fifth consecutive year.

Now I will explain the hot topics for our FY 2025 financial results. First, please take a look at the trend in retail sales volume by model. Overall, retail sales volume decreased year-on-year due in part to the discontinuation of sales of certain models and the situation in Iran. On the other hand, sales of new models, including the all-new Destinator have been steadily increasing. In broad terms, the decline in sales volume of the lower-margin Mirage series, together with the increase in sales volume of the higher-margin Destinator and Xforce led to an improvement in mobile mix and higher profit per unit, resulting in improved profitability.

Please turn to Page 10. Next, I will explain the ASEAN, our core region. In FY 2025, retail sales volume in the ASEAN region as a whole decreased significantly in the first half, due to weak market conditions and the challenging sales environment. However, in the second half, we were able to shift to volume growth. Our market share was also steadily maintained and expanded, particularly in the second half. According to our research, our share ranking among all brands, including Chinese manufacturers, in the 5 major ASEAN countries rose significantly from third place in the previous fiscal year to second place.

Even under an extremely challenging competitive environment by offering products unique to Mitsubishi Motors and products and services that match customer needs, we were able to secure a certain level of volume share and also achieve earnings growth. As a result, we have gained confidence in our continued growth in ASEAN.

Next, Kishiura will explain our FY 2026 outlook and key initiatives to achieve it. Kishiura-san, please.

Please turn to Page 12. Thank you very much, Kato-san. Now this is Kishiura speaking. And I would like to present our FY 2026 outlook and other topics. So in addition to the uncertainty surrounding the outlook for the situation in the Middle East due to risks in material procurement, increases in raw material and logistics costs and the impact of prolonged inflation on demand, the business environment is expected to remain challenging. Even under these circumstances, in addition to the full year contribution of the new models launched one after another in the second half of FY 2025, we will steadily move forward with the expansion of export markets and the launch of additional new models. And at the same time, by continuing to implement cost reduction measures in an agile way and improve our earnings structure, even under such an external environment, we aim to achieve increases in both revenue and profit as shown on the slide.

As for the dividend, at the beginning of the fiscal year, we plan to pay JPY 10 per share. In light of the uncertainty in the business environment, we are obliged to maintain a cautious stance at the moment. However, under any circumstances, we aim to maintain an annual dividend of at least JPY 10. And then we will use the cash generated to enhance corporate value over the mid- to the long term and while considering the balance between strategic investments that will lead to future growth and shareholders' returns.

Please turn to Page 13. And this slide explains the factors behind the year-on-year change in our operating profit forecast. Volume/mix and price are expected to contribute a positive impact of JPY 59.8 billion in total, reflecting an increase in sales volume driven by new models and continued price improvement.

About sales expenses, although we will have discipline in incentive spending in light of the competitive environment and market conditions, we will also expect an increase in advertisement expenses to support the launch of new models. Therefore, we expect a negative impact of JPY 6.8 billion year-on-year in sales expenses. In procurement cost, shipping costs through cost reduction activities, we will partially offset the increase in material cost, mainly derived from inflation and product enhancements. However, we expect a negative impact of JPY 28.7 billion year-on-year.

And R&D expenses are expected to remain largely on par with the previous fiscal year. In addition, mainly due to environmental regulatory compliance costs and ForEx impact on suppliers' procurement, Other expenses are expected to have a negative impact of JPY 9.6 billion year-on-year. Foreign exchange is expected to contribute positively overall, reflecting the generally weaker yen. However, we have factored in the negative impact on earnings from the appreciation of the Thai baht, which is our cost currency.

And as for the impact of the Middle East situation, at this point, we assume that the impact of the conflict will remain until the end of July. And based on that assumption, we are expecting a negative impact of about JPY 30 billion. And going forward, we continue to monitor closely the developments in the conflict and review the impact appropriately.

Please turn to Page 14. Next, I will explain our retail sales volume forecast for FY 2026. In retail sales volume, we aim to increase volume in each region this fiscal year. In ASEAN, particularly in the Philippines and Vietnam, we will steadily capture the full year contribution of new models, including the Destinator and boost sales. And in Japan, we aim to expand sales volume by further strengthening sales of the Delica series by leveraging the Delica Mini and the Delica D:5. I will talk more about the specific initiatives in the strategy section later.

Please turn to Page 16. Following the launch of new models in the second half of the previous fiscal year, we have begun to see signs of improvement in model mix. As shown on this slide, the share of ASEAN strategic models has been steadily increasing recently. And in this fiscal year, based on this improvement in model mix and through the full year contribution of new models such as Destinator, the expansion of export markets for ASEAN models and further enhancement of the product competitiveness of existing models, we will transform the model mix in a full-fledged manner. And in that process, we will shift our sales mix towards new models and higher-end models and increasing profit per unit. We aim to build a business structure that can steadily generate profit without relying excessively on volume growth.

Please turn to Page 17. Now I would like to present our key initiatives in our major regions. First, ASEAN and Oceania. The rise of Chinese manufacturers and the aggressive pricing strategies continue to make the environment competitive and challenging. And under the climate in ASEAN, in addition to the full year contribution of the new models launched last fiscal year, we will strengthen our presence through expanding the rollout of HEV models into markets outside Thailand and launching new models. And in Oceania, we will expand our lineup through the launch of new models and work to enhance our brand value.

Next, in Latin America, in addition to expanding sales by leveraging the L200 and Triton, we will move ahead with the full-scale rollout of the all-new Destinator. And in the Middle East and Africa, we will establish a brand centered on SUVs while also proceed with the sequential rollout of the Destinator.

And next, Japan, North America and Europe. In Japan, we will maintain and enhance the sales momentum of the strong performing Delica series while making thorough preparations to ensure the successful launch of new models in the future. In North America, we will work to strengthen dealer retail sales through the introduction of variants tailored to customer needs. And in Europe, we will strengthen sales with a focus on our core models.

Please turn to Page 18. Finally, about the full year contribution of new models. In this fiscal year, the full year contribution of the new models launched last fiscal year is also expected to support both volume and earnings. And the all-new Destinator was launched last fiscal year in Indonesia, Vietnam and the Philippines, and has been highly regarded in each market. And in this fiscal year, we will roll it out to additional marketing stages. And as for the new Xforce, we are currently offering the HEV model in Thailand, and plan to expand it to markets outside Thailand during this fiscal year.

In addition, the refreshed Delica series has already earned a high praise, and by maintaining and enhancing its sales momentum, we will further strengthen the brand power of the series as a whole. And through these initiatives, we will shift our growth drivers from volume expansion to value creation and establish an earnings structure that is not overly dependent on volume growth, thereby steadily achieving the outlook presented today.

And this concludes our presentation. So beginning with the tariff measures at the start of the year, 2025 was a year in which the external environment has been extremely unstable and subject to rapid changes. And we recognize that it was a difficult year, one in which we have been forced to adapt to changing circumstances time and again. And as we enter into 2026, we have seen a series of events with the potential to significantly impact the global economy, such as escalating geopolitical risks and the recent sudden changes in the situation in the Middle East and have occurred in a quick succession and the outlook for the future remains uncertain.

Even under such uncertain conditions, we have seen steady progress, including a recovery in sales from the second half, driven by the effort of new models in ASEAN as well as growth in both sales and volume share in Japan. So building on those developments, we will maximize the effect of new models in regions with upward momentum and expand both sales volume and net sales in FY 2026. At the same time, we will continue to closely monitor developments in geopolitical risks, including the situation in the Middle East and respond flexibly and swiftly to changes in the business environment. Thank you very much for your kind attention.

And please turn to Page 3. Thank you for your participation in our financial result announcement while you're having a busy schedule. While the U.S. tariff policy, which was a significant headwind this fiscal year are beginning to stabilize, the global business environment remains uncertain. Price competition continues to be severe due to the continued aggressive stance to export by Chinese manufacturers.

Furthermore, geopolitical and macroeconomic uncertainties remain high, including U.S.-China tensions, policy friction over green products and concern about global economic slowdown. Against this challenging external environment, our results for third quarter year-to-date in FY 2025 showed a Y-o-Y decrease in both net sales and profit. However, thanks to the success of our initiatives, including the launch of new models, our earnings have bottomed out and are showing a gradual recovery trend. Net sales were JPY 1,976.5 billion, decreasing 1% Y-o-Y. Operating profit decreased 70% Y-o-Y to JPY 31.6 billion, and the OP margin decreased 3.7 points Y-o-Y to 1.6%.

Ordinary profit was JPY 32.6 billion. While we recorded a net loss of JPY 9.2 billion for the first half, mainly due to factors recorded in the second quarter, such as the valuation loss in the U.S. environmental credit, the following changes in the U.S. environmental regulation and losses associated with the withdrawal from a joint venture engine plant in China, the net loss for the third quarter YTD and in FY 2025 improved to JPY 4.5 billion. Sales volume stood at 589,000, down by 6% Y-o-Y.

Please turn to Page 4. In this slide, you can see the factors behind the Y-o-Y changes in operating profit for third quarter year-to-date in FY '25. In terms of volume mix, the impact of decreased wholesale volume due to discontinuation of multiple models in North America, Australia, New Zealand and other regions was offset by our net revenue strategies, resulting in an overall increase of JPY 11.5 billion in operating profit. Sales expenses lowered operating profit by JPY 15.4 billion overall as an increase in incentives to address intensifying market competition was partially offset by a reduction in advertising expenses.

Regarding procurement and shipping costs, the negative impact from higher material costs due to inflation and increased factory expenses for new model launches was largely offset by our procurement and cost reduction activities and improvements in shipping costs. Additionally, R&D expenses showed a favorable impact, partly due to timing differences in spending. FX had an unfavorable impact of JPY 36.1 billion, mainly due to yen appreciation against currencies such as the U.S. dollar and Australian dollars and yen depreciation against the Thai baht on a Y-o-Y basis. The U.S. tariff payments were a negative factor of JPY 37.3 billion.

Please turn to Page 5. In this slide, you can see the factors behind the Y-o-Y changes in operating profit for third quarter in FY '25. Overall, despite the impact of the U.S. tariff, we achieved a slight Y-o-Y increase in profit. Regarding volume mix and price and others, although there was an impact from the discontinuation of some models, contributions from the emerging effects of new models and our price improvement initiatives in the various countries led to a favorable impact of JPY 10.5 billion overall.

Sales expenses reduced operating profit by JPY 4.5 billion overall. While we effectively increased incentive spending in North America as well as in ASEAN, Europe and other regions, this was partially offset by a reduction in advertising expenses. Procurement and shipping costs had a favorable impact of JPY 1 billion, mainly because the negative impact from higher material costs due to inflation was offset by our procurement cost reduction activities.

R&D expenses had a favorable impact of JPY 2.3 billion, while other items, including FX impact on the supplier procurement had an unfavorable impact of JPY 1.6 billion. FX had a favorable impact of JPY 2.3 billion as the yen trended weaker Y-o-Y against major currencies such as the U.S. dollars.

Please turn to Page 6. I would like to explain our retail sales performance. Global retail sales decreased by 6% Y-o-Y. This was primarily due to a decline in retail sales volume in the regions other than Japan, Latin America and the Middle East and Africa. Next, I will explain the situation by region. Please turn to Page 7. First, I will explain the ASEAN and Oceania regions. Total demand in major ASEAN countries weakened in Indonesia, Philippines and Vietnam due to factors such as natural disasters.

While in Thailand, it increased due to last-minute demand ahead of the expiration of the EV 3.0 incentive program. Under these circumstances, our unit sales and market share declined in Thailand affected by intense price competition before the program's expiration and also fell slightly in the Philippines due to credit tightening for small cars. As a result, although the situation for the third quarter YTD remained challenging in the third quarter alone, the effect of our new models materialized in Indonesia and Vietnam and our sales for ASEAN as a wholesale -- as a whole turned positive Y-o-Y. A recovery trend is now visible.

In Oceania, while automotive demand in Australia saw only a slight increase Y-o-Y, New Zealand was on a recovery trend against the backdrop of lower interest rates and slowing inflation. In New Zealand, our sales measures proved successful and sales surpassed the previous year's level. However, in Australia, we couldn't fully offset the impact of discontinued models resulting in a decrease. This led to a decline in the sales volume for the region as a whole.

Please turn to Page 8. Next is Latin America, the Middle East and Africa. In Latin America, although some markets continues to face deterioration due to intensified price competition, our sales have remained strong overall, increasing by 14% Y-o-Y, supported by solid sales of the new L200/Triton and the new Outlander Sports. Going forward, we aim for further sales expansion with the launch of the Destinator.

In the Middle East, automobile demand in major countries has generally remained robust. While our sales have been partially impacted by price competition, they have remained stable overall, maintaining the same level as the previous year. We'll continue to strengthen our focus on the core SUV segment and further enhance collaboration with distributors in each country for the launch of the Destinator.

Please turn to Page 9. Here Japan, North America and Europe. In Japan, while total demand was generally flat year-over-year, we struggled somewhat through the third quarter, partly due to the impact of model changeovers, but the Delica Mini launched in October supported our sales and brought them back to the previous year's level. In the fourth quarter, in addition to solid sales of Delica Mini deliveries of the new Delica D:5, which has received orders significantly exceeding our plan will begin in earnest.

Driven by the effects of these new models, we will further accelerate our sales expansion. In the U.S. market, total demand saw a slight increase. This was driven by pull forward purchases in anticipation of price hikes from additional tariffs in addition to the confusion surrounding the end of EV tax credits. On the other hand, our sales fell below the previous year's level. This was due to factors, including discontinued models and our cautious approach to sales activities in response to the additional tariffs.

We will continue to promote the achievement of our plans through flexible responses that capture changes in the market environment. In Europe, while the total demand saw a slight increase year-over-year, our sales volume decreased. This was affected by model changeovers in key countries, and we were unable to fully recover with our new models. Next, Mr. Kato will explain the full year outlook for FY 2025. Kato-san, please.

Please turn to Page 11. Our forecast for FY '25 is as shown in this slide, and the challenging external environment we have been implementing multifaceted measures to rebuild our business. Recently, an increase in sales volume driven by the launch of new models has begun to materialize, particularly since last December, and we are now moving on to a recovery track.

However, in some regions, we have yet to see signs of improvement in the sales environment. Based on the current business environment and recent performance, we have decided to slightly revise our forecast for retail and wholesale volume and net sales to align them with the actual situation. Nevertheless, we will maintain the full year profit plan as we believe it is achievable through our ongoing cost reduction efforts and in light of the current foreign exchange situation. Additionally, the dividend per share will be maintained at JPY 10, in line with the initial plan.

Please turn to Page 12. This slide explains the factors behind the year-over-year change in our operating profit forecast. Please note that in this presentation, the impact of U.S. tariff is shown as the direct payment amount only and other items have been revised accordingly. First, in terms of volume, mix and price, et cetera, we see a total improvement of JPY 38.9 billion, driven by the effect of new models and our continued price implemented efforts.

Next, our sales expenses. We are increasing sales incentives in Australia, New Zealand, North America and ASEAN to address intensified competition as well as in Europe in line with our plans. On the other hand, while we are controlling advertising expenses globally, which will partially offset the increase in sales incentives, we anticipate a negative factor of JPY 25.3 billion.

Regarding procurement cost and shipping costs, we expect to partially absorb cost increases from inflation and enhance product competitiveness through material cost reduction activities and improved expense efficiency at the plant. However, overall, we anticipate a negative cost impact of JPY 13.7 billion. R&D expenses are expected to show a year-over-year improvement, partly due to more efficient expense management. Other items are expected to be a positive factor of JPY 7.4 billion due to improvements in areas such as aftersales parts, labor costs and other G&A expenses.

Regarding FX, due to the depreciation of the U.S. and Australian dollars, in addition to the appreciation of the Thai baht, our cost currency, this is a negative factor of JPY 37.3 billion. The amount of U.S. tariff payments is estimated to be JPY 45.2 billion for the full year.

Please turn to Page 13. We have revised our full year retail sales volume forecast, as shown in the slide, in light of the current demand trends and the sales results to date. Primarily, we have lowered our retail sales volume forecast in Australia, New Zealand, North America and Europe. Although the sales environment remains challenging, our sales momentum is steadily strengthening on a recovery trend driven by the full-scale effect of new models.

Going forward, we will continue to make steady efforts to solidify this upward trend. Next, we'd like to present our recent business highlights. Please turn to Page 15. The Destinator was first launched in Indonesia last July, followed by its rollout in the Philippines in November and Vietnam in December. In all these countries, orders have exceeded our plans, indicating a very strong start, especially in Vietnam, where they are more than 3x our initial plan.

With the strong support from many customers, we have been able to make a very good start in ASEAN. Going forward, we will expand its rollout to other ASEAN countries in addition to South Asia, Latin America, Middle East and Africa, ultimately planning to launch it in about 70 countries. We will strive to expand sales in each country while continuing to thoroughly meet our customers' expectations.

Please turn to Page 16. In the Japan market, we have successfully updated and launched Delica Mini and Delica D:5 as the new Delica series. Since their launch, both models have been very well received by a great number of customers, marking a very good start. This Delica series consists of models that have been thoroughly refined to embody the freshness and uniqueness of our Mitsubishi Motors-ness. We believe that these distinctive products will provide a strong boost to our future sales expansion and market share growth.

Going forward, we will continue to further enhance our presence in the domestic market by delivering unique value to our customers that cannot be found elsewhere.

Please turn to Page 17. This graph shows our sales performance in ASEAN. The sales environment in ASEAN remains challenging and the outlook continues to be uncertain. However, driven by the launch of new models, the situation has steadily bottomed out, and we are beginning to see the signs of recovery. Particularly in Vietnam, a strong recovery is reflected in the numbers as a single month sales in December reached a record high, and we achieved #1 market share in the ICE category for the first time.

Going forward, we anticipate that the competitive environment will remain tough due to an increase in new entrants, including Chinese OEMs. Amid this environment, rather than focusing on price competition, we will deliver the unique value of Mitsubishi Motors-ness by strengthening our attractive product lineup to meet customer expectations and consistently providing meticulous services.

Through these efforts, we will continue to steadily enhance our presence in ASEAN. This concludes my explanation. This fiscal year, the business environment has faced extremely strong headwinds, including U.S. tariffs. This was compounded by the discontinuation of sales for some models. And as a result, our business performance has remained challenging. However, the effects of new models launched in the second half last year began to materialize noticeably from December, showing the signs of recovery, and we believe we are now moving past the bottom of our performance.

We will work to solidify this trend first by securing profitability to close out this fiscal year on a strong note and then connect this to our transformation and growth from the next fiscal year onwards. Thank you for your attention.

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

Thank you for your participation in our first half FY '25 results meeting while you're busy today. I am Kentaro Matsuoka, CFO of the company.

While some uncertainty regarding U.S. tariff policies has dissipated and there are signs of easing environmental regulations, price competition, mainly driven by Chinese manufacturers, has intensified further. Geopolitical and macroeconomic uncertainties such as supply concerns due to U.S.-China tensions and economic stagnation remain high. Under these circumstances, the sales environment surrounding us continues to be severe, compounded by rising costs and a delayed recovery in demand.

Against this industry backdrop, our results for the first half FY '25, as shown in the slide, showed a decrease in both sales and profit on a year-on-year basis. Net sales were JPY 1,261.3 million, decreasing 4% Y-o-Y. Operating profit decreased 81% Y-o-Y to JPY 17.3 billion. And the OP margin decreased 5.5 points from 6.9% in the same period of last year to 1.4%. Ordinary profit was JPY 15.8 billion.

Net loss was JPY 9.2 billion, primarily due to temporary factors such as JPY 7 billion valuation loss in U.S. environmental credit following changes in U.S. environmental regulations and JPY 6 billion in losses associated with the withdrawal from a joint venture engine plant in China.

Retail sales decreased 6% Y-o-Y to 384,000 units.

Please turn to Page 4. In this slide, you can see the factors behind the Y-o-Y changes in the operating profit for first half FY '25.

In terms of volume mix, the impact of decreased wholesale volume due to the discontinuation of some models in North America and other regions was offset by price in others, resulting in an overall increase of JPY 1 billion in operating profit.

Sales expenses decreased operating profit by JPY 10.9 billion overall as an increase in incentive to address intensifying market competition was partially offset by a reduction in advertising expenses.

Procurement costs and shipping costs resulted in a JPY 1.2 billion decrease in operating profit as the increase in the material costs and factory expenses due to inflation and other factors are largely offset by procurement cost reduction activities and shipping cost improvement. Additionally, R&D expenses and other items each decreased slightly.

ForEx exchange had an unfavorable impact of JPY 38.4 billion operating profit compared to the same period of the previous year due to a trend of yen appreciation against the U.S. dollar and yen depreciation against the Thai baht.

Please turn to Page 5. In this slide, you can see the factors behind Y-o-Y changes in operating profit for second quarter FY '25.

Regarding volume mix and price and others, the impact of decreased volume due to additional tariffs in the U.S. and intensifying market competition in some parts of ASEAN was partially absorbed by price improvement and other factors. However, this overall resulted in an unfavorable year-on-year impact of JPY 6.8 billion on operating profit.

Sales expenses reduced operating profit by JPY 1.9 billion overall, mainly due to an increase in incentive spending at Oceania, Europe and ASEAN, which was partially offset by a reduction in advertising and promotional expenses.

Procurement cost shipping costs increased by a total of JPY 2.3 billion as the negative impact of an increase in material costs, mainly due to inflation was partially offset by -- partly due to the completion of new model development.

Other items increased by a total of JPY 5.4 billion due to expenses such as those for the environmental regulatory compliance. Impact from ForEx exchange rate resulted in a JPY 17.5 billion negative change to operating profit.

Please turn to Page 6. I would like to explain our retail sales performance. Compared with the same period of the previous fiscal year, global retail sales decreased by 6%. This was primarily due to a decline in retail sales volume in the region other than Japan, Latin America and the Middle East and Africa.

Please turn to Page 7. First, I will explain the ASEAN and Oceania region. In the ASEAN region, automobile demand remains sluggish in Thailand and Indonesia. In contrast, the Philippines continues to experience solid demand. Amidst this market environment and intensifying sales competition in each country, we have largely maintained our market share through flexible responses.

Moving into the second half of the fiscal year, aim to expand our market share through the full-scale market expansion of new models among other initiatives.

In Australia, the total demand for automobiles slightly increased year-on-year. However, the market environment remained challenging as sales promotion driven by intensified sales competition and propping up demand. Most the sales volume and the market share decreased partly due to the impact of models whose sales have been discontinued. Going forward, we will focus on bolstering our sales volume through both the expanded sales of new models, ASX and strengthening collaboration with the fleet partners.

Please turn to Page 8. Next is Latin America, the Middle East and Africa. In Latin America, although some markets are experiencing intensifying price competition, the recovery trend continues across the region, supported by robust domestic demand. This environment, we're able to increase sales year-over-year driven by the expanded sales of the new L200/Triton and the new Outlander Sports Xforce. We'll continue to roll out these new models to boost sales throughout Latin America.

In the Middle East, while total automobile demand temporarily plummeted due to the impact of the certain conflict has generally remained robust. On the other hand, intensified competition has also impacted our sales. Going forward, we will strengthen cooperation with our distributors and partners in each country. We will position our brand pillars, the Outlander and L200/Triton at the core of our sales strategy and work towards achieving our targets.

Please turn to Page 9. Here is Japan, North America and Europe. In Japan, total automotive demand was generally flat year-over-year. Despite the discontinuation of some models, our sales volume increase is primarily driven by strong sales momentum of Delica D:5. Going forward, we will aim to further expand sales volume and market share by ensuring a successful launch of the updated Delica Mini.

In the U.S., which accounts for the great majority of the North American region, automobile demand increased due to a surge in demand, which is fueled by the anticipated price increases from additional tariffs in the timing just before the discontinuation of the federal tax credit for electric vehicle purchases. On the other hand, our sales volume decreased primarily because the suspension -- suppression of sales expenses in the first quarter as a response to additional tariff made it challenging to expand sales.

The market environment is undergoing significant changes, including shifts in tax systems, environmental regulations and the expiration of the EV tax credit. We will accurately identify competitors' trends and customers' needs and promote the achievement of our plan through flexible responses.

In Europe, while automotive demand saw a slight increase year-over-year, our sales volume decreased Y-o-Y, affected by intensified sales competition in key countries. Going forward, we will promote sales expansion of the new Outlander PHEV and focus on ensuring the successful launch of the upcoming new models.

Next, Mr. Kato will explain the full year outlook for FY 2025. Please turn to Page 11.

Looking back at the first half of FY 2025, companies across the industry were forced to review their production and sales strategies due to cost increases and market disruptions from tariffs and the emergence of Chinese competitors. This resulted in a half year characterized by an increasingly uncertain outlook and ever fiercer competition for the industry as a whole.

Despite headwinds from the external environment, our company took agile measures, enabling us to achieve results that surpassed our initial plan for the first half.

Based on the current business environment and recent performance trends, we will maintain the profit plan within the full year FY 2025 forecast that was revised on August 27. However, due to changes in retail and wholesale volumes, we will revise our net sales forecast to JPY 2.82 trillion. Additionally, the dividend per share will be maintained at JPY 10, in line with the initial plan.

We will continue to strive to achieve our plans by responding swiftly and flexibly to changes in the external environment.

Please turn to Page 12. This slide explains the factors behind the year-on-year change in our operating profit forecast, which was revised in August.

In terms of volume/mix and price, we have revised the volume/mix following the adjustment of wholesale unit sales, and we project a total increase in profit of JPY 63.5 billion compared to the previous fiscal year. The effect of new models, which will fully take hold in the second half of the fiscal year is expected to contribute to increased profit in ASEAN, Oceania, Europe and Japan.

Sales expenses are projected to further increase due to intensified market competition in various countries, resulting in an anticipated total negative impact of JPY 32 billion on operating profit.

For procurement costs and shipping costs, with upward pressure on material costs due to inflation exceeding expectation, we anticipate a negative impact of JPY 24.3 billion on operating profit. R&D expenses are expected to show a slight improvement. And for other expenses, we anticipate a total improvement of JPY 4.3 billion, primarily through the promotion of fixed cost reduction.

Regarding foreign exchange, no changes have been made from the initial announcement, and it is a JPY 51 billion decrease in operating profit.

Regarding the impact of U.S. tariffs, as we have already disclosed, we estimate the impact to be JPY 32 billion.

Please turn to Page 13. We have revised our full year retail sales volume forecast as shown on the slide, in light of current demand trends and sales results to date.

Primarily, we lowered our forecast for ASEAN, Latin America and the Middle East and Africa, while we raised our forecast for North America, anticipating sales opportunities arising from tariff reductions.

Next, we would like to present our recent business highlights. Please turn to Page 15.

The new Destinator began its full sales launch in Indonesia, its initial target market at the end of July. By the end of September, orders had already surpassed 10,000 units, significantly exceeding our initial expectations. We believe we have achieved solid results by introducing a product that meets customers' needs, particularly in a challenging Indonesia market where total demand has seen a continuous decline for 28 months. Looking ahead, the Destinator is scheduled for sequential rollout in the Philippines and Vietnam.

The Delica Mini and the eK Space, which went on sale at the end of October, have already secured over 10,000 preorders, marking a very smooth start. The Delica Mini has been a popular and iconic model, symbolizing our brand since its launch in 2023 and has garnered considerable support from numerous customers together with its official character, Deli Maru. With these new models, we have further enhanced their driving performance, functionality and comfort, and we hope that they will be chosen by many customers as reliable companions for their adventures.

Furthermore, we have made significant improvements to our all-around minivan Delica D:5 and began accepting preorders on Thursday, October 30. This new Delica D:5 further enhances its unique characteristics of powerful styling and exceptional driving performance. The new Delica D:5 is scheduled for release this winter.

Please turn to Page 6. For the European market, we will begin the sequential launch of the all-new compact SUV Grandis before the end of 2025. This model supplied on an OEM basis by our alliance partner, Renault, is based on the CMF-B platform. The lineup will include mild hybrid and hybrid EV models.

In September 2025, we held the world premiere of the all-new Eclipse Cross battery electric vehicle in Brussels, Belgium and announced its sequential launch in the European market. The new Eclipse is our first BEV in Europe and plays a strategic role in our electrification road map.

Please turn to Page 17. Next, I would like to explain our structural reforms.

Although some improvement is expected on the U.S. tariffs, we forecast that the severe competitive environment will continue. Under these circumstances, we have been implementing flexible and swift measures to secure profitability. We executed the withdrawal from our engine plant in China in July. And going forward, we will continue to implement the necessary structural reforms in a timely manner.

In Thailand, while we have been advancing structural reforms since the last fiscal year, the business environment has recently become even more severe. This is due to a combination of factors, including a decrease in demand for pickup trucks, intensified competition with Chinese BEVs and the deterioration in export profitability caused by the strong Thai baht.

In light of the situation, we have decided to suspend operations at the third plant of our Thai subsidiary, MMTh, as the next phase of our reforms. We will consolidate vehicle production into the first plant to improve efficiency. Furthermore, we will utilize the site of the suspended plant to attract suppliers and as a parts storage hub, thereby strengthening our cost competitiveness. Going forward, we will continue to enhance our competitiveness through agile reforms.

This concludes our explanation.

Regarding the U.S. tariffs, a major topic since the beginning of the year, while the situation has become clearer, a high rate of 15% will be maintained. In addition, we believe the automotive industry will undergo extremely significant and dynamic changes driven by factors such as aggressive price cutting by Chinese manufacturers, supply concerns for rare earth and components, stemming from U.S.-China tensions, a slowdown in the transition to carbon neutrality and the spread of AI.

To ensure we keep pace with these major changes, we will strive for both the growth and stability of our business. We will achieve this by continuously and promptly implementing necessary reforms while securing a certain level of profit and by proactively investing in areas with high growth potential.

Thank you for your attention.