Toppan Printing Stock

My name is Kurobe, CFO. Thank you very much for taking time out of your busy schedules to attend our fiscal 2026 first quarter results briefing today. I will now begin with an overview of our financial results. Please turn to Page 2.

Our consolidated results for the first quarter came in above plan. We achieved record high profit for first quarter. Net sales increased 15% year-on-year to JPY 457.3 billion, driven by the impact of new consolidated entities and strong performance in the Living & Industry and Electronics segments.

Non-GAAP operating profit, which adjusts for amortization of goodwill and intangible assets, increased 57% to JPY 25.4 billion, driven by higher sales. EBITDA increased 33.6% to JPY 43.1 billion, while non-GAAP net profit increased 175% to JPY 25.7 billion due to a reduction in the tax burden following the integration of the 3 operating companies.

As for per share indicators, EPS increased year-on-year. Please turn to Page 3. Here, we show the results by segment.

In Information Solutions, net sales increased 0.5 percentage points year-on-year to JPY 211.2 billion, and non-GAAP operating profit increased 11.8% to JPY 7.6 billion.

In Living & Industry, net sales increased 57.3% to JPY 214.2 billion, and non-GAAP operating profit increased 85.5% to JPY 18.5 billion.

In Electronics, net sales decreased 33.4% to JPY 37.6 billion, while non-GAAP operating profit increased 2.4% to JPY 9.3 billion. Excluding the financial contribution of Tekscend Photomask Corporation, or TPC, in the previous year, the Electronics segment recorded increases in sales and a significant increase in profit. All segments recorded profit growth in the first quarter.

Relative to our profit plan, Information Solutions was largely in line with plan, while Living & Industry and Electronics came in above plan. I will explain each segment in more detail later.

Next, please turn to Page 4. I will explain the year-on-year changes in non-GAAP operating profit. As TPC transitioned to an equity method associate, we used JPY 9.9 billion as the starting point after excluding JPY 6.2 billion attributable to TPC. Foreign exchange had a positive impact of JPY 2.6 billion. Excluding foreign exchange effects, Information Solutions contributed a positive JPY 300 million. Living & Industry suffered a negative impact of JPY 1.9 billion due to onetime costs in the Packaging business in the Americas.

Excluding these onetime costs, Living & Industry contributed a positive JPY 10 billion, driven by strong performance in packaging and decor materials.

Electronics contributed a positive JPY 4.6 billion, mainly due to growth in the semiconductor-related business. As a result of these factors, non-GAAP operating profit for the first quarter was JPY 25.4 billion.

Next, I will explain the results of each segment. Please turn to Page 5. Information Solutions recorded increases in both sales and profit, driven by strong performance in the Security business. Looking at the results by subsegment, Security recorded higher sales due to the new consolidation of dzcard. Profit also increased due to factors such as DPS price increase in Japan.

IoT Solutions recorded higher sales due to acquisition of public sector projects. In marketing, sales remained flat as project wins from private sector companies offset the post demand decline from World Expo-related projects in the previous year. The first quarter tends to have a relatively small number of projects, but we have been steadily expanding orders for high value-added projects through integrated proposals based on customer challenges.

In BPO, sales remained flat as project wins from the public sector offset the decline in private sector projects. BPO tends to be weighted towards the latter half of the fiscal year. Meantime, we will continue to reduce costs and scale back low profitability projects with the aim of improving the profit margin from the second quarter onward. In Securities & Business Printing, capturing demand for election solutions overseas contributed to increases in both sales and profit. Domestically, we withdrew from the supplies business as part of structural reform. Information Printing recorded decreases in both sales and profit due to continued market contraction.

As we explained at IR Day, we will continue to implement structural reforms in Information Printing, including the closure of the Sakado plant and consolidation of prepress sites to maintain and improve profitability.

Please turn to Page 6. Living & Industry recorded increases in both sales and profit, driven by strong performance in both overseas packaging and decor materials. In Packaging, sales increased due to the new consolidation of the packaging business in the Americas and strong demand in the Asian region. Profit increased due to sales growth as well as contributions from cost synergies achieved through global procurement and other initiatives.

The market environment in North America has been improving since the previous fiscal year. Factors related to the Middle East had a positive impact on first quarter profit due to the inventory valuation methods used in accounting. However, this is purely an accounting impact and will be offset once the situation in the Middle East stabilizes. Decor Materials recorded increases in both sales and profit due to market share expansion for decorative sheets in Europe and North America.

Please turn to Page 7. In Electronics, sales decreased due to the impact of TPC's deconsolidation. However, growth in FC-BGAs and the positive impact of foreign exchange more than offset the decrease in profit from TPC, resulting in higher profit.

In the semiconductor-related business, FC-BGAs recorded increases in both sales and profit due to the Niigata line's contribution to production and an increasing proportion of AI-related products. Improvements in TAT time were also completed ahead of our expectations. For advanced packaging, expenses came in below plan due to factors such as a review of the accounting treatment method for development expenses.

In displays, sales of antireflective films increased due to strong performance in products for OLEDs.

Next, please turn to Page 8. I will explain the key points of the consolidated statements of income for the first quarter. The gross margin improved by 0.2 percentage points year-on-year to 24.2%. While there was an impact from the removal of TPC from the scope of consolidation in Electronics, increased profitability driven by expanded FC-BGA production and the recovery in packaging business demand in the Americas contributed to the improvement.

SG&A expenses increased by JPY 9 billion year-on-year due to the impact of newly consolidated entities, while the SG&A ratio improved by 0.8 percentage points, primarily due to reduced personnel expenses. Nonoperating income and expense line increased year-on-year from positive JPY 1.5 billion to a positive JPY 2.9 billion this quarter. Interest expenses increased due to increased borrowings, while investment income increased following TPC becoming an equity method associate. Gain on sale of investment securities decreased by JPY 2.2 billion, while we continue to reduce strategic shareholdings as planned.

Please turn to Page 9. I will explain the progress of the priority initiatives under our medium-term plan. To execute the 3 priority initiatives set out in the medium-term plan announced in May, business portfolio transformation, corporate reform and balance sheet reform, we have established an integrated project structure, bringing together the holding company and business units with the COO as project owner and are driving these initiatives top down. We have established subprojects for each of the items under the priority initiatives.

Through close collaboration, we are currently analyzing the current situation, identifying target opportunities and examining their expected impact in detail. We will disclose and explain the progress and results of each project as appropriate going forward.

Please turn to Page 10. Although our first quarter results came in above plan. Given factors, including the continued uncertainty over when the situation in the Middle East will stabilize, we have made no changes to our full year forecast for this current fiscal year, including the segment forecast shown on Page 11.

That concludes my overview of our financial results. Thank you.

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

Good afternoon. This is Kurobe, I'm the CFO. Thank you indeed for your precious time despite your busy schedule to join our briefing on the financial results for fiscal year 2025.

Without further ado, I would like to walk you through the details of our financial results for the FY 2025.

Please turn to Page 3. For the fiscal year under review, consolidated net sales increased 5% year-on-year to JPY 1.805 billion. Non-GAAP operating profit, excluding M&A-related and other expenses, was down 3.5% year-on-year to JPY 94.1 billion. Compared with the revised forecast announced at the time of the interim results, non-GAAP operating profit fell short by approximately JPY 3 billion.

The main factors behind the shortfall were sluggish demand for the packaging materials in the North American Lifestyle segment and the impact of reduced operating rates for FC-BGA and production in the Electronics segment, although the Information segment outperformed the plan. As for ROE, which we position as a key measurement indicator in our medium-term plan, we achieved 5.4% on a non-GAAP basis and 4.9% on a GAAP basis, generally meeting our target of 5%.

Regarding the acquisition of treasury stocks, we executed share repurchases totaling JPY 30 billion as planned. As for dividend, we will increase the annual dividend by JPY 2 from the previous fiscal year to JPY 58 per share.

Next, please turn to Page 4. I will explain the year-on-year changes in non-GAAP operating profit. Beginning in the second half of the current fiscal year, Tekscend Photomask became an equity method affiliate. Accordingly, we used JPY 84.5 billion as the starting point, excluding JPY 13.1 billion in profit from the Photomask business recorded in the second half of the previous fiscal year. There were negative impacts of JPY 5.4 billion from the unification of the bonus accrual period and JPY 300 million from the infrastructure development costs.

Among the growth businesses, Erhoeht-X contributed a positive JPY 5.3 billion, while domestic SX and overseas lifestyle businesses contributed positive JPY 14 billion. In contrast, semiconductor-related business posted a negative impact of JPY 5.4 billion. Cyclical businesses recorded a negative impact of JPY 4.7 billion, while existing businesses contributed a positive JPY 6 billion due to the effects of structural reforms. As a result of these factors, non-GAAP operating profit came to JPY 94.1 billion.

Next, I would like to explain the performance of each segment. Please turn to Page 5. In the Information & Communications segment, net sales were flat year-on-year at JPY 923.2 billion, while non-GAAP operating profit increased 3.2% to JPY 53.4 billion. For the segment as a whole, non-GAAP operating profit exceeded the revised forecast of JPY 49.7 billion announced at the interim results stage. All subsegments except digital business outperformed the revised plan.

Looking at each subsegment, Digital Business achieved revenue growth driven by the newly consolidated HID and dzcard businesses in overseas secure operations, contributions from government ID-related projects and growth in domestic secure solutions and marketing DX. Profit also increased in line with higher sales across the businesses.

In BPO, sales declined due to the impact of large-scale projects recorded in the previous year. However, excluding one-off factors, sales increased, thanks to the efforts of -- to secure the recurring projects in the financial and public sectors. Overall profit declined, but it returned to growth in the second half of the year.

In Secure Media, sales increased due to the strong performance in IC cards and DPS. Profit also increased, supported by the higher sales and improved profitability in DPS.

In Communication Media, sales declined due to the continued contraction of the commercial publishing print market and cyclical impacts in textbook printing. Although structural reforms in commercial publishing printing improved profitability, overall profit declined due to the textbook-related impact.

Page 6 summarizes the performance of Erhoeht-X for reference. For the full year results, overall sales increased significantly, driven by the growth in the marketing DX and secure businesses. Profit also increased across the board as scale expansion progressed steadily with the categories posting profit growth on a non-GAAP basis.

Next, I'd like to move on to the Lifestyle & Industry segment. Please turn to Page 7. In the Lifestyle and Industry segment, net sales increased 31.4% year-on-year to JPY 723 billion, while non-GAAP operating profit rose 30.5% to JPY 50.8 billion. However, both the packaging and the core materials businesses fell short of the revised plan.

In the Packaging business, overseas sales increased due to the newly consolidated TFP business of Sonoco and Irplast as well as the solid performance in films in Asian and barrier films in Europe. However, profit declined due to sluggish food packaging demand in North America caused by inflation, delays in the full-scale adoption of SX packaging by European customers as well as the recording of onetime M&A-related expenses.

In Japan, sales increased as SX packaging remained strong, but profit was flat due in part to equipment troubles in the first half of the year.

In the Decor materials business, overseas sales increased due to the strong demand for decorative sheets in Europe and South America. Profit also increased, thanks to the cost reduction and the effects of structural reforms. In Japan, both sales and profit increased due to the higher market share in decorative sheets and growth in the spatial design business.

Next, please turn to Page 8. This page shows the regional sales for the overall packaging business and SX packaging. On the left-hand side, for the overall packaging business, the overseas sales ratio increased from approximately 35% to the mid-50% range, driven by the newly consolidated TFP business of Sonoco in the Americas, the newly consolidated Irplast business in Italy and growing overseas demand for barrier films.

On the right-hand side, for SX packaging, demand has been particularly strong overseas, especially in Europe and Asia, driving sales expansion for SX packaging. Going forward, we will continue to position the global market as a key growth area and expand our business centered on SX packaging, where we possess a competitive advantage.

Next, I would like to move on to the Electronics segment. Please turn to Page 9. Net sales in Electronics segment decreased 34.2% year-on-year to JPY 186.3 billion. Non-GAAP operating profit also declined 36.1% to JPY 34.1 billion, falling short of the plan. In addition, foreign exchange had a negative impact of approximately JPY 700 million on profit, mainly in the semiconductor business.

In semiconductor-related business, both sales and profit declined overall due to the deconsolidation of Tekscend Photomask and the revised plan was not achieved. However, comparing the fourth quarter with the third quarter performance, sales increased 17%. Operating profit rose 25%, indicating a steady recovery trend.

As for our core FC-BGA business, with the increased proportion of high value-added products such as AI-related applications, both sales and profit in the fourth quarter exceeded the levels recorded in the same period of the previous year. Regarding the slower takt production operation that we mentioned in the previous earnings briefing, corrective measures have already been implemented and conditions are steadily improving. We now have a clear path toward restoring full production by June.

Currently, customer inquiries remain at a high level, and we will continue working diligently in order to meet customers' demand.

Meanwhile, in displays, though both sales and profit declined, we achieved our revised plan. Sales fell significantly following our withdrawal from the TFT-LCD front-end process business. However, profitability improved as a result of structural reforms in the Display Solutions business.

Please turn to Page 10. This page presents our quarterly performance, excluding Tekscend Photomask. As you can see, the performance in semiconductor-related business, particularly FC-BGA, has been steadily recovering since it hit the bottom in the first quarter. This concludes my explanation of performance by segment.

Next, please turn to Page 11. I will now explain the key points of the income statement. The gross profit margin deteriorated by 0.5 percentage points for the full year. This was mainly due to the deconsolidation of the Tekscend Photomask, the delayed recovery in FC-BGA and the sluggish demand for food packaging in North America.

SG&A expense ratio increased by 0.7 percentage points, mainly due to the impact of newly consolidated subsidiaries. Nonoperating profit improved significantly with ordinary profit increasing from a positive JPY 4.5 billion in the previous fiscal year to positive JPY 8.6 billion. The main factor was a JPY 5.8 billion increase in equity method investment gains associated with the transaction of Tekscend Photomask to an equity method affiliate.

Please turn to Page 12. This is the consolidated balance sheet as of the end of March 2026. The main factors for change were the acquisition of the Sonoco TFP business and Tekscend Photomask becoming the equity method associate, but there have been no significant changes since the Q3 results briefing, so I will omit detailed explanation.

Please turn to Page 13. Regarding strategic shareholdings, as a result of proceeding with divestments as planned, the ratio of -- to consolidated net asset was 12.3% as of the end of March 2026, achieving the medium-term plan target of less than 15%. We will continue divestments and improve asset efficiency. In the new medium-term plan, starting this fiscal year, we aim to achieve less than 7% at the end of March 2029. This concludes the explanation of fiscal 2025 results.

Next, I will explain the full year results forecast for fiscal '26. Please turn to Page 15. For the full year, net sales are forecast to grow 6.6% year-on-year to JPY 1.925 billion, non-GAAP operating profit to grow 7.3% to JPY 101 billion, non-GAAP net profit to grow 5.2% to JPY 75 billion and non-GAAP ROE to be 5.7%. As we made timely disclosure today, we will conduct treasury share purchases of JPY 50 billion this fiscal year.

Next is the segment forecast. Please turn to Page 16. For Information Solutions, net sales are forecast to grow 4.6% year-on-year to JPY 966 billion and non-GAAP operating profit to grow 14.2% to JPY 61 billion. For Living & Industry, net sales are forecast to grow 14.4% to JPY 827 billion and non-GAAP operating profit to grow 26% to JPY 64 billion. For Electronics, net sales are forecast to fall 13% to JPY 162 billion and non-GAAP operating profit to fall 29.6% to JPY 24 billion.

Please turn to Page 17. This shows the year-on-year changes in operating profit, starting from JPY 81.1 billion after excluding the impact of TPC's transition to an equity method associate, there will be a positive impact of JPY 5.4 billion from the standardization of the bonus provision period. By business, we expect a positive JPY 4.3 billion from Information Solutions. For Living & Industry, there will be a positive JPY 3 billion due to the elimination of the onetime M&A-related costs. For Electronics, there will be a negative impact of JPY 7.2 billion from development costs for advanced semiconductor packaging. But other than that, we expect a positive JPY 9.5 billion from growth in electronics centered on semiconductors.

For adjustment costs, we expect a total negative impact of JPY 4.1 billion, including a negative JPY 2.5 billion from the reclassification of costs with the Information Solutions segment from the integration of the 3 companies. As a result of these factors, non-GAAP operating profit is forecast to be JPY 101 billion.

Please turn to Page 18. Before explaining Information Solutions, I would first like to explain the redefinition of its subsegments. Until the previous fiscal year, the subsegments were as shown on the left. From this fiscal year, Communication Media will be changed to 7 subsegments: Security, IoT Solutions, Marketing, BPO, Securities & Business Printing, Information Printing & Information Other.

The segment name has been changed to Information Solutions. Along with this, the businesses within each subsegment have also been reclassified based on the new definitions. Please refer to this page for the main businesses that have been reclassified.

Next, I will explain the forecast for each segment, Page 19. As shown in the sales and profit figures by subsegment, at the bottom left, we will offset the decline in profit from information printing through growth in the other subsegments. I will focus on the segments where we expect significant growth in non-GAAP operating profit.

In Security, overseas, we will leverage our global infrastructure to expand revenue in the government ID business. In Japan, we will continue to grow digital services and secure stable contracts for smart cards and DPS. For marketing, we will grow sales of high added value contracts based on solving clients' business challenges and enhance profit margins through AI utilization.

For securities and business printing, we expect revenue growth through IPO-related printing and U.S. election solutions. For information printing, while strategically selecting orders to improve profitability, we will continue to optimize production equipment and consider site consolidation.

Please turn to Page 20. This is the full year forecast for Living & Industry. As shown in the table at the top right, we expect both revenue and profit to grow for both packaging and decor materials.

For packaging, sales are expected to increase due to the full year contribution from the TFP business and Irplast, expanded production at the Czech plant for European barrier films and organic growth in Asia. We also expect continued expansion of SX packaging. Profit is expected to increase due to the reduction of JPY 7.8 billion in onetime M&A-related costs recorded in the previous fiscal year as well as profit growth associated with higher sales.

For decor materials, we expect improved profitability through overseas sales growth due to gradual market recovery in Europe and U.S., along with continued cost reducing measures such as bringing ink manufacturing in-house.

Page 21. This is the forecast for Electronics. As shown on the right, both semiconductor-related and display-related businesses are expected to see lower revenue and profit. For semiconductor-related business, the main factors behind the lower revenue and profit are the deconsolidation of Tekscend Photomask and higher development costs for advanced semiconductor packaging. On the other hand, FC-BGAs are expected to achieve significant growth in both sales and profit due to contributions from the new Niigata production line and higher production of AI-related products.

For display-related business, anti-reflective film is expected to achieve higher revenue and profit due to the installation of line, while color filters are expected to see lower revenue and profit due to business downsizing. This concludes the explanation of the full year forecast for fiscal 2026.

Finally, I'd like to explain the impact of the Middle East situation. Page 22. The largest impact is on the Living & Industry segment, but company-wide, we will minimize the impact through price pass-throughs and procurement of alternative products. Our policy is to pass through all cost increases to mitigate the impact of our businesses.

As part of our current initiatives, we are reviewing prices monthly and negotiating with customers in a timely manner. Negotiations are generally progressing smoothly. As for supply concerns, although we have generally secured enough inventory for Q1, the status for Q2 and beyond remains uncertain. So we will secure procurement channels, including using alternatives. Based on the current situation, the impact of the Middle East situation has not been factored into the earnings forecast. We will continue to closely monitor the situation and its potential impact on future performance. That concludes my presentation.

Next, President, Oya will explain Medium-term Management Plan 2028.

I am Oya, and I assumed the position of President and Representative Director of TOPPAN Holdings, Inc. in April as COO. Since taking on the role of President, I have come to appreciate even more strongly the importance of dialogue with the capital markets. Going forward, we will strive to provide even more transparent disclosure than before while deepening constructive dialogue with all of you and further strengthening our relationship of trust. I sincerely look forward to your continued support.

With that, I would now like to explain the details of our new medium-term plan beginning in the current fiscal year 2026. First, I would like to review the previous medium-term plan. This slide shows the trends in our key management indicators over the past 5 years, including the 3 years covered by the previous MTP.

Looking first at the trend in the operating profit on the left-hand side, operating profit for FY 2025 declined on both non-GAAP and GAAP basis due to factors, including increases in goodwill and intangible assets amortization and onetime expenses associated with M&A as well as the deconsolidation of the photomask business from the second half of the fiscal year. On the other hand, as shown on the right-hand side, non-GAAP ROE has steadily improved over the 3 years of the previous MTP.

Next, in regard to the 3-year trend in our key management indicators. Operating profit in the final year fell short of the original plan shown on the right-hand side. In addition, SG&A expense ratio has been trending upward, and we recognize controlling this ratio as an important management challenge. Regarding ROE, while we had targeted achieving a core business base ROE of 5%, non-GAAP ROE was 5.4%, allowing us to achieve the target. However, we also recognize that our current ROE level remains insufficient.

Next, I would like to review the results by segment. In the Information Solutions segment, although we promoted a shift toward the digital businesses and expanded revenue, costs related to reallocating personnel and developing solutions incurred ahead of revenue conditions, leaving profitability improvement only partially achieved. In addition, because we focus on developing and proposing customized solutions tailored to individual customers, improving profitability remained a challenge to be fully realized. We have reviewed this strategy, and we intend to go for the results during the current medium-term plan.

In the Living & Industry segment, we carried out M&A primarily in the packaging business to accelerate the expansion of SX-related operations and secured strong overseas footprint. While the full realization of global synergies still lies ahead, non-GAAP operating profit expanded significantly. In the Electronics segment, although the photomask business was deconsolidated following its IPO aimed at maximizing business value, semiconductor-related business grew substantially due to the expansion of the FC-BGA market.

Next is an overall assessment of the previous MTP. Based on our review at both the company-wide and segment levels, we have identified 3 key challenges. The first is to raise business profitability. The second is to control SG&A ratio. The third is to enhance capital efficiency. We have positioned these 3 items as key challenges and through the addressing them in the current medium-term plan, we'd like to aim to maximize our corporate value.

From here, I would like to explain the new medium-term plan. First, let me discuss the vision that the TOPPAN Group aims to achieve as a whole. For the 6-year period covering this medium-term plan as well as the following one, we have newly defined our aspirational vision as true value transformation, optimizing businesses, human assets and capital to deliver true value to the world. In addition, to realize this vision, we have also redefined our materiality.

Across our 3 segments, we will practice sustainability-driven management by delivering valuable products and services through the businesses developed under the approaches outlined here. Through these efforts, we aim to address both customers and social challenges while enhancing both social value and economic value.

Next, I would like to explain our management indicators and the key initiatives. Under the current MTP, we are targeting for FY 2028, the full year of the plan, non-GAAP ROE 9%; GAAP ROE, 8%; non-GAAP operating profit, JPY 145 billion; and GAAP operating profit, JPY 130 billion. To achieve these targets, we will pursue initiatives aimed at dramatically improving profitability and thoroughly enhancing capital efficiency. We will then connect these efforts to sustainable growth beyond the current plan period, targeting by FY 2031, non-GAAP ROE, 11.5%; GAAP ROE, 10%; non-GAAP operating profit, JPY 210 billion; and GAAP operating profit, JPY 200 billion levels.

To accomplish this, we have consolidated the key initiatives to be executed over the next 3 years into 3 major pillars. The first is to achieve high profitability for each segment through business portfolio transformation. The second is to control company-wide SG&A ratio through corporate reform. The last and the third one is to improve asset efficiency through the balance sheet reform. By certainly advancing these 3 initiatives, we would like to achieve our management targets.

Next, the composition of non-GAAP operating profit by segment. By FY 2031, we aim to achieve a balanced profit composition across all segments at a comparable scale. In the Electronics segment, although the overall growth appears modest by FY 2028 due to upfront investment costs for next-generation semiconductor packaging development, profits, excluding the upfront costs are expected to expand steadily through growth in the existing FC-BGA business.

In FY 2031, the seeds planted during this MTP are expected to bear fruit, resulting in the significant expansion in Electronics segment profits. In addition, as shown at the bottom of the slide, during the current MTP period, we will implement structural reforms, including business divestitures equivalent to approximately JPY 170 billion in sales and JPY 10 billion in profit, demonstrating our serious commitment to portfolio transformation.

Next, this table summarizes the positioning of our key businesses within each segment. Our overarching approach is to allocate the cash generated from businesses categorized as businesses for stable expansion shown in the third tier from the top, to 12 -- in the 2 upper categories, priority growth businesses and strategic focus businesses. At the same time, we will promote structural reforms focused primarily on the businesses for improvement and transformation shown at the bottom with the goal of improving profitability and operational efficiency.

Regarding the structural reforms, we will consider and execute all possible options, including internal improvement efforts and the best owner perspective. Furthermore, beginning this April, we reorganized our structure into business axis organization with nationwide visibility. As visibility into performance and resources improves, we will further strengthen ROIC-based business management and expand its use in the performance management, investment decision-making.

Next, I would like to explain our segment strategy. First, Information Solutions. Our performance targets for FY 2028 are net sales of JPY 985 billion, non-GAAP operating profit, JPY 78 billion and operating margin being 8%. Profit growth over the next 3 years will be driven by the profit expansion of the subsegments shown here.

In terms of the business environment for the Information Solutions segment, we are focusing on the advancement of AI, Japan's declining population and expansion of the ID solutions market. In this environment, our strength lies in our ability to combine real-world products and services such as IC cards, tags and in-store promotional support with digital services, enabling us to design optimal business operations based on a deep understanding of on-site operations and customer challenges.

Using the primary on-site data collected through these services, we will run together while providing end-to-end support raising from analytics, consulting to operational assistance. In addition, our security and authentication technologies enable us to provide the secure infrastructure necessary for accumulating and managing data.

Based on this business environment and these competitive advantages, our strategy in the Information Solutions segment has 2 major pillars. The first is to further combine real and digital services with AI to sharpen our competitive advantage and improve profitability. The second is to thoroughly improve profitability and efficiency in our existing printing businesses.

Next, I would like to explain our subsegment strategies. In Security business, we are targeting a non-GAAP operating margin of 10% by FY 2028. Our strategy is, first, to expand government-related ID services globally, including election solutions while leveraging our domestic track record to capture market growth in media manufacturing and issuance services such as ID and IC cards. In Japan, we will continue capturing stable demand. Based on stable domestic and overseas businesses, we will establish ID infrastructure for managing IDs and credential information, including authentication, authorization and audit trails and further enhance profitability by providing service packages that combine physical media with digital services.

In the IoT Solutions business, we aim to achieve non-GAAP operating margin of approximately 8% by FY 2028. We position this business as a strategic focus area with the goal of establishing the foundation for high profitability business model during the current medium-term plan period and achieving the full-scale earnings contributions in the following plan period. Our strategy is to establish a recurring revenue model through the integrated provision of IoT devices such as RFID and operational services for ID management systems. We aim to establish this revenue model across the 4 areas shown here while also pursuing global expansion.

Next is the Marketing business. We are targeting a non-GAAP operating margin of 10% by FY 2028. Our strategy is to establish a differentiated market position by implementing marketing services that integrate real and digital experiences.

In a society where AI becomes a common place, we believe the value of real-world experiences will become even more important. We have accumulated extensive expertise and operational know-how in promotional support at real-world customer touch points such as retail stores. Based on this foundation, we believe we can establish a unique competitive position unmatched by our competitors. Through integrated proposal based on customers' management challenges, we'd like to increase the transaction value per client. In addition, we'd like to improve the profitability through greater in-house production and cost reductions driven by AI utilization.

In the BPO business, we aim to achieve a non-GAAP operating margin of about 6% by FY 2028. Our strategy is to focus resources on highly complex and sophisticated operations that simply cannot be fully implemented by AI alone. We also like to implement AI into our operational infrastructure to automate workflows and provide higher added value through AI operational assurance. In addition, we'd like to improve the profitability by consolidating overlapping functions across our nationwide BPO sites.

Next are the Securities & Business Printing business and the Information Printing business. By FY 2028, we aim to achieve a non-GAAP operating margin of 10% for the Securities & Business Printing business and 4% for the Information Printing business. The strategic direction for both businesses is fundamentally the same. As the domestic market is expected to continue shrinking, we will thoroughly promote selective order acceptance and improve transaction conditions in order to enhance profitability.

In the Securities & Business Printing business, we'd like to apply the TOPPAN's management methods to the former TOPPAN Edge operations and strengthen profit management in order to improve margins. We also like to implement further structural reforms, including reducing the number of the production facilities and reorganize the business locations, thereby reducing fixed cost and optimize capital investment.

Next, I would like to explain the strategy for the Living & Industry segment. Our performance targets for this segment in FY 2028 are net sales, JPY 915 billion; non-GAAP operating profit, JPY 86 billion; and operating margin being 9%. Profit growth over the next 3 years will be driven primarily by the expansion of overseas businesses as shown here.

In terms of the business environment for the Living & Industry segment, we are focusing on the advancement of the circular economy, growth in the mainstream markets and geopolitical risks. While the current geopolitical developments such as the Middle East situation create risks indicating higher raw materials costs and procurement concerns, they also create opportunities for SX expansion such as increasing demand for solvent-free technologies. Within this business environment, our strength include our ability to develop differentiated SX products that contribute to solving environmental challenges, our global supply structure that enables worldwide deployment of competitively advanced products and our global network that mitigates procurement risks. Leveraging this strength, we aim to build a business segment that simultaneously enhances both social value and economic value.

Based on the business environment and our competitive advantages, the key strategic pillar for the Living & Industry segment are strengthening profitability through the promotion of SX strategies, capturing stable demand and creating synergies through global collaboration.

Next are the strategies for each subsegment. In the packaging business, we aim to achieve non-GAAP operating margin of about 9% by FY 2028. Our strategy is to secure stable earnings growth through organic expansion centered on the Asia Pacific region, where economic growth and population growth are expected as well as the Americas, where our customer bases have been strengthened through large-scale M&A.

On top of this stable earnings foundation, we will further enhance profitability by developing and globally supplying high value-added SX packaging through a vertically integrated strategy, combining film coating and barrier technologies. We will also improve margins through the cost synergies generated by global raw materials procurement and higher in-house film production ratio.

Decor Materials aims to achieve a non-GAAP operating profit margin of about 9% in fiscal '28. Our strategy is to expand market share by strengthening quality and design and launching a new factory in Turkey. We will also pursue higher added value by strengthening overseas sales of film-based decorative sheets and repositioning the domestic business as a designer of spaces. Also, we will continue to improve profit margins through cost reductions such as in-house ink manufacturing and deploying production technologies overseas.

Next is the segment strategies for Electronics. We aim for net sales of JPY 230 billion, non-GAAP operating profit of JPY 37 billion and a profit margin of about 16% in fiscal '28. Total profit growth over 3 years will appear small because of the negative profit impact of the photomask business IPO and development costs for advanced packaging, but profit in semiconductor-related business will expand substantially due to growth in the existing FC-BGA business. For advanced semiconductor packaging, this MTP will be a strategic investment phase. And in the next MTP, it will be a major growth driver.

Our focus in the business climate for electronics is semiconductor market long-term growth, rising technological and quality requirements and FPD panel upsizing. Against that, we will develop and supply cutting-edge key devices driven by technological superiority. Also, we will use our strong partnerships with customers and material manufacturers who drive technology advancements and concentrate resources on the semiconductor packaging business, including advanced packaging.

Our strategic direction is achieve high margins and high growth in semiconductor packaging business and restructure low-profit businesses.

Next, strategies by subsegment. The Semiconductor business aims to achieve non-GAAP operating profit margin of about 19% in fiscal '28. Excluding development costs for advanced packaging, fiscal '28 profit margin will be around 27%. Our strategy is to maintain high margin and growth in the existing FC-BGA business. We will target 3 key focus areas: high-end switches, AI ASICs and server CPUs. We will significantly boost sales and profits through higher operating rate by high value-added products, including at new lines in Niigata launched in fiscal '25, and Singapore launched in fiscal '26.

We will also make strategic investments in advanced semiconductor packaging toward profit contribution in the next MTP. Specifically, these are investments in development and mass production of glass cores and interposers.

The Display business will aim for non-GAAP operating profit margins of about 5% in fiscal '28. Our strategy is to expand anti-reflective film margin through investment in the ultra-wide line and establish next-generation displays like light control devices and QD materials. Also, we plan to restructure and phase out the small- and medium-sized TFT LCD display solutions business in fiscal '27. That concludes the segment strategies. Further details regarding the strategies for each segment will be explained again at IR Day on June 12.

Next, I will explain the investment strategy for achieving our profit targets. We plan to invest a total of JPY 500 billion over the 3 years of this MTP. We will actively invest in priority growth businesses and strategic focus businesses, allocating JPY 265 billion, more than half of the total amount. The breakdown of business investment and capital investment in priority growth businesses and strategic focus businesses totaling JPY 335 billion are on the right.

We will make strategic investments in semiconductors, including advanced packaging and FC-BGAs, with the Electronics segment accounting for 60%.

Next is the second priority initiative, corporate reform. Over the 3 years of this MTP, we will work to control the SG&A ratio, which has been rising. We will work to improve SG&A ratio by around 2 percentage points in 3 years from 19.8% in fiscal '25. Our approach includes personnel deployment in indirect departments of holding company and business divisions and streamlining and consolidation of indirect departments. For the latter, we will consider consolidating personnel and operations, aiming to reduce workload by 30%.

We will also reduce outsourcing costs. For that, we will promote talent management reform for optimal replacements and company-wide AI adoption to streamline and enhance operations in indirect departments. In talent management reform, we will clarify talent requirements and headcount based on business strategy and promote optimal placement.

To this end, we will introduce a talent management system and visualize skills. We are also pursuing company-wide AI adoption to streamline and enhance operations. To this end, we will link and standardize data and processes for company-wide operations, including at holdings and construct AI transformation network for company-wide operations.

The target for improving the SG&A ratio includes not only streamlining of indirect departments, but also the effects of structural reforms such as business development.

Next, I will explain the third priority initiative, balance sheet reform. Under this medium-term plan, we will thoroughly reevaluate owned assets through balance sheet reform. Specifically, we will reduce liquidity on hand, optimize the circulation of working capital like accounts receivable and inventory assets, consolidate production bases and downscale or withdrawal from noncore businesses and accelerate the reduction of strategic shareholdings.

With these 4 main measures, we will work to reduce owned assets with a target of reducing total assets by 20% by fiscal '28. With funds generated by these measures and through structural reforms, we will pursue additional equity reduction and carefully manage the overall balance sheet by controlling the absolute amount of interest-bearing debt based on progress of profit plan and the investment plan as a key indicator.

Next is the cash allocation policy. The basic policy remains unchanged from the previous MTP. Based on the policy during the 3 years of this MTP, we will target ROE of 8% in fiscal '28 through growth investment, reevaluation of businesses and balance sheet optimization.

Three major approaches will be taken to achieve this. First, we will implement shareholder returns with a total payout ratio of 100% as a lower limit. As disclosed today, we will conduct JPY 50 billion of treasury share purchase for this fiscal year. Second, we will target a 20% reduction in total assets through balance sheet reforms that I explained earlier. Third, we will reduce strategic shareholdings to less than 7% of consolidated net assets.

The 3-year allocation based on these measures is shown on the right. We will use operating cash flow of over JPY 450 billion and cash generated from balance sheet optimization and allocate them to JPY 500 billion of investment and shareholder returns. That concludes initiatives for the 3 priority measures. I show our management targets again. By committing fully to these 3 priority initiatives, we aim to achieve ROE of 8% in fiscal '28 and 10% beyond that.

Next, I talk about the strengthening management foundations. First, initiatives for new business creation. In this new MTP, we will achieve early-stage business development and scaling by enhancing market development perspectives. There are 3 actions. First is enhancing marketing capabilities and talent in business development. We will assign highly specialized personnel to identify customer needs and promote business development. Second, we will standardize the commercialization process, increase feasibility and accelerate early scaling.

Finally, we will make company-wide assets transparent to allow for concentrated investment in promising areas. With these initiatives, we aim to scale the new business themes shown on the right in the next MTP.

Next, promoting company-wide AI initiatives. Our vision is to establish AI infrastructure for operational and business transformation and utilize it on a company-wide scale to achieve a superior high-profit business model. To achieve this, we will promote 2 priority initiatives. The first initiative is to establish an environment that allows maximum use of data by building advanced AI infrastructure and a global governance framework. The second initiative is enabling autonomous processes across the company and creating new businesses comprised of 2 pillars: One is business process reengineering to decide focus areas and introduce data-driven sales and AI agents in SCM for dramatic productivity improvements and resource shifts in indirect departments.

The other pillar is business transformation, where we utilize the resources created to improve operational quality and reduce cost in BPO with AI, and apply AI to business development processes, thereby increasing the added value of existing businesses and creating new businesses. Through these initiatives, we will realize sustainable enhancement of corporate value with AI and data as sources of competitiveness.

Next, reinforcing governance. As disclosed on April 28, we will revise the executive compensation system to strongly motivate achievement of the new MTP and medium- to long-term enhancement of corporate value and solutions to social issues.

Specifically, for the Representative Director and President, the proportion of variable compensation will be raised from 30% to roughly 50%, greatly increasing the performance-linked pay. For bonuses, which are short-term incentives, in addition to financial indicators such as non-GAAP operating profit and ROE, ESG indicators such as CO2 reduction and employee engagement will be introduced. Furthermore, for stock compensation, which is a long-term incentive, TSR or total shareholder return will be incorporated. Through this, we will clarify our commitment to sustainable growth from the same perspective as shareholders.

Of these, the revision of the performance-linked restricted stock compensation system is subject to approval at the 180th Ordinary General Meeting of Shareholders to be held in June.

Next are our initiatives regarding human capital. We will promote enhancement of competitiveness through an optimal talent portfolio aligned to our business.

Specifically, we will implement 4 priority initiatives. First is optimization of the human asset portfolio and enhancement of career autonomy. Through formulation of personnel plans aligned with business strategies and improvement of work quality through AI utilization, we will build up and optimally deploy our talent.

Second is raising talent and organizational competitiveness by pursuing the Deshika strategy. We will strengthen recruitment and development to refine our unique strengths and establish talent management essential for strategy execution.

Third is strengthening talent base and governance to support sustainable growth of global business. We will accelerate the development of HR infrastructure at overseas subsidiaries and expand our -- and develop global talent.

Fourth is creating the foundations for human capital management that supports diverse working style, providing safety and peace of mind and culture conducive to taking on challenges. Through these 4 priority initiatives, we will define required talent and skills and map employee skills to shape a talent portfolio aligned to business and raise business competitiveness by securing the talent needed for business strategy through talent management, including recruitment, development and deployment to ensure sustainable growth and achievement of the MTP.

Finally, our initiatives regarding natural capital. For this, we will promote activities based on the TOPPAN Group Environmental Vision 2050. To contribute to decarbonization, we have set a target of net zero GHG emissions by fiscal 2050. And as an interim target for fiscal 2030, we aim to reduce emissions by 54.6% from fiscal 2017 level.

For Scope 1 and 2 initiatives within our operations, we will thoroughly promote energy conservation and aggressively procure renewable energy. For Scope 3, which covers impacts across the entire supply chain, we will further deepen collaboration with suppliers through promotion of DX and adoption of low-carbon materials. We position contribution to sustainability of the global environment as our growth foundation and will accelerate decarbonization management.

Next is contributing to resource circulation. We are aiming for zero waste emissions in fiscal 2050 by reducing discharge and reusing and recycling waste. For this, we have set fiscal 2030 targets for reducing final waste landfill volume and improving recycling rates for waste plastics, and we will promote initiatives utilizing technologies from sites in various countries.

In preserving biodiversity, we will aim to increase nationally certified sustainably managed sites at our facilities and strive to procure paper materials verified to be free from illegal logging. For water resources, we will work from every aspect to reduce environmental impact and restore nature, including strict management of water intake restrictions and wastewater quality at high-risk sites.

We will position these efforts to strengthen management foundation as an unwavering foundation for the TOPPAN Group to pioneer a sustainable future. This concludes the explanation of the medium-term plan. Thank you very much.

This is Kurobe, the CFO. Thank you very much for taking time out of your busy schedules to attend our fiscal 2025 third quarter results briefing. I will now explain the financial results for the 9-month period.

Please turn to Page 2. For the cumulative third quarter, our consolidated results were as follows: net sales increased year-on-year by 5.2% to JPY 1,322.8 billion. Non-GAAP operating profit, excluding impact from acquirement costs, increased 7.5% to JPY 65.6 billion. Consolidated operating profit for the entire company and by each segment generally met our plans. Non-GAAP income, excluding the impact of extraordinary gains and losses, such as gains on the sales of securities, increased 37.9% to JPY 52.5 billion. Key financial points are listed on the right. Both GAAP and non-GAAP results show increased revenue and profit for Information Communication and Living & Industry. Electronics saw decreased revenue and profit due to the deconsolidation of Tekscend Photomask, though FC-BGA profit margins continue to improve. I will explain segment performance in detail later on.

Page 3. As Tekscend Photomask transitioned to an equity method entity starting in the third quarter, I will provide a supplementary explanation regarding the profit impact. Due to this transition, the light blue bar showing cumulative company-wide operating profit for Q3 decreased by 15% on a GAAP basis. Conversely, green representing equity method investment profit expanded approximately 3.7x year-on-year.

Additionally, while noncontrolling interests were deducted in the consolidated figures up to the second quarter, the transition to an equity method in Q3 resulted in a significant year-on-year decrease in the gray shaded noncontrolling interest. Profit from core operations reflecting these adjustments maintained a level comparable to the previous year as shown by the lines.

Next, Page 4. The graphs show changes in the non-GAAP operating profit versus the prior year. From the operating profit of JPY 60.8 billion of last fiscal year, JPY 7.7 billion impact from the transition of Tekscend Photomask to an equity method entity is excluded, resulting in a base figure of JPY 53.1 billion. Foreign exchange impact reduced profit by JPY 1 billion and infrastructure development cost was an impact of minus JPY 1.8 billion. Among growth segments, Erhoeht-X contributed JPY 3.2 billion and Japan SX Overseas Living contributed JPY 12.4 billion, while semiconductors was minus JPY 6.2 billion. Cyclical businesses was minus JPY 1 billion. Existing businesses was positive JPY 6.9 billion due to the effects of structural reforms implemented last fiscal year. These factors resulted in non-GAAP operating profit of JPY 65.6 billion. Next, I will explain the situation for each segment.

Please turn to Page 5. Information and Communications segment recorded sales of JPY 663.8 billion, a 2% increase year-on-year, and non-GAAP operating profit increased by 23.3% to JPY 30.7 billion. Overall, for the 3 months in Q3, all subsegments returned to profit growth. In the subsegments, digital business revenue increased due to the new consolidation of HID and dzcard in overseas Secure, contributions from government ID business and growth in Marketing DX and domestic security in Japan. Profit increased driven by stronger sales in Marketing DX and Security in Japan. Profit increased on a non-GAAP basis as well. BPO saw sales growth in the financial sector, but overall revenue and profit declined due to residual effects from onetime large-scale projects in the previous year for public and private sector projects. BPO is steadily expanding order intake for ongoing projects based on its targeted BPO approach and profit turned positive in Q3. Secure Media saw a turnaround to revenue growth driven by strong performance in smart cards and DPS. Profits increased significantly due to higher revenue, improved DPS earnings and contributions from overseas financial printing. Communication Media continues to see an ongoing contraction of the publication and commercial printing markets as well as the impact from the cyclical nature of textbook business, resulting in a sales decline. However, this was offset by the effects of structural reforms, making the profit margin comparable to the previous year.

Page 6 summarizes the results for Erhoeht-X for reference. Q3 saw sales increase due to Marketing DX and secure business growth. Profits also increased overall as scaling progressed steadily. Non-GAAP profit increased in all categories.

Next is Living & Industry segment. Please see Page 7. Sales in Living & Industry segment increased 27.1% year-on-year to JPY 525.5 billion, while non-GAAP operating profit rose 41.1% to JPY 39.8 billion. Overall, non-GAAP operating profit increased substantially. On a GAAP basis, profitability improved, resulting in a slight profit increase. In Packaging, overseas revenue increased due to the new consolidation of Sonoco TFB business and Irplast, along with a strong performance in Asia. Profit decreased due to a decline in demand in the U.S. food market, a delay in full-scale adoption of SX packaging by European customers in the Barrier Film business and the posting of onetime M&A costs. In Japan, SX packaging saw steady expansion, resulting in increased sales and profits. Decor materials, though the overseas market is still recovering, saw steady sales of decorative sheets in Europe and South America. Profit increased due to higher revenue, cost reductions and structural reform effects. In Japan, profit growth was secured through increased decorative sheet market share and growth in the spatial design business. Next, Page 8. This shows overall packaging and SX packaging sales by region. In overall packaging on the left, the new consolidation of Sonoco TFP business in the Americas, the new consolidation of [indiscernible] Irplast in Europe and the expansion of Barrier Film business increased the overseas ratio from approximately 35% to over 50%. On the right, for SX packaging, both domestic and overseas are expanding, driving overall profitability.

Next, the Electronics segment. Page 9, please. Sales for the Electronics segment decreased 28.7% year-on-year to JPY 150.7 billion, and non-GAAP operating profit decreased 36.1% to JPY 26.9 billion, resulting in lower sales and profits. Note that this includes approximately JPY 1.3 billion in negative impact from foreign exchange fluctuations. For the subsegments, the semiconductors saw overall revenue and profit declines due to the deconsolidation of Tekscend Photomask starting from Q3. While FC-BGA revenue and profit decreased for the 3 months in Q3, the comp set of high unit price network switches and server CPUs expanded and profit margin improvements continue. However, changes in product mix have also led to more complex manufacturing processes requiring lower tag time, including existing lines. The new line in Niigata began operations in January, and we plan to gradually increase tag time and expect to reach full capacity by the third quarter of fiscal year 2026. Qualification for new products is progressing as planned. Some are expected to contribute from Q4 and next fiscal year, we will further increase the composition of high unit price products to expand sales and profits. Display saw overall revenue decline and flat profits. Anti-reflective films experienced reduced revenue and profits due to inventory adjustments in the first half, but the trend of improved profit margin continues. Display Solutions centered on color filters and TFT-LCD saw increased profits.

Next, Page 10. This shows the performance trend for electronics, excluding our Photomask business, Tekscend Photomask. The left shows overall electronics. Tekscend Photomask sale and profit ratio plays a significant portion. And with the structural reforms in TFT-LCD resulting in sales decline this period, sales shown in the bars and profits shown in the line graphs, you see a recent dip. However, looking at the quarterly trend on the right, sales and operating profit, primarily driven by FC-BGA is improving after bottoming out in Q1. That concludes the performance overview for each segment. Please turn to Page 11. I will explain the key points of the income statement for Q3. Gross profit margin, though impacted by the deconsolidation of Tech and Photomask, improvements were seen in each segment and was flat year-on-year at 23.5% SG&A increased by 0.8 percentage points. The main factors were M&A-related expenses for newly consolidated entities and increased amortization of goodwill and intangible assets. For nonoperating income expenses, in accordance with Tekscend Photomask becoming an equity method entity, equity in earnings of affiliates increased to JPY 4.2 billion. On the other hand, quarterly profit attributable to noncontrolling interest decreased by JPY 4.4 billion.

Please turn to Page 12. These figures represent the full year plan and remain unchanged from the half year guidance. For Information and Communication, the outlook is as previously announced. For Living & Industry, with the downturn in the European and American markets for overseas packaging, we were weaker than anticipated, but we expect domestic packaging and decor materials to offset this. For Electronics, while operations at the new Niigata line are proceeding more cautiously than expected, we anticipate positive contributions from other businesses, including displays. Although uncertainties remain in the segments from Q2, we will strive to achieve the company-wide operating profit target of JPY 70 billion, including cost reductions in adjustment segments.

Finally, Page 13. These are our upcoming schedules. At the May 14 earnings call, we will also announce our new midterm plan. On June 12, in conjunction with our new midterm plan, we will have our IR Day where we will outline our growth strategy for each segment and new businesses along with our financial strategy. We look forward to your participation. This will conclude my presentation. Thank you for your attention.

This is Ueki speaking, and I will talk about the strategy of the Electronics business. I am Ueki, Head of the Electronics Division. Today, the presentation will be divided into 5 parts, which you see on the screen. First, we start with the overview of Electronics business. The overall picture and the direction of the overall business will be given. That will be followed by the overview and strategy of semiconductor packaging business, our growth driver and its focus areas. That will be followed by trends in focus areas of semiconductor packaging business. And fourth, technology road map and background of semiconductor packaging business will be discussed. And lastly, specific activities in semiconductor packaging business to realize the technology road map will be introduced.

Let me start with the overview of Electronics business. Net sales in fiscal year 2024 was JPY 283.3 billion. Non-GAAP operating profit was JPY 53.4 billion. Non-GAAP operating margin was 18.9%. The Electronics business accounted for 16% of consolidated net sales of TOPPAN Holdings. Semiconductor-related sales was JPY 194.8 billion, led by semiconductor packaging. Sales in displays was JPY 88.5 billion, led by anti-reflective films, light control films and small- and medium-sized TFT LCDs.

Next is the 2025 forecast for the Electronics business. For photomasks, no sales or operating profit is posted from fiscal year 2025 with Tekscend Photomask transitioning to an equity method company. For the remainder, it is the same as what we discussed at the financial results briefing, so I will not go into the details here. Next, using this slide, let me talk about the direction of the Electronics business. Today, we will be discussing the semiconductor packaging business in detail. This business is positioned as a focus area. We will focus on the high-end FC-BGA market centered on AI applications. At the same time, we will develop and launch advanced semiconductor packaging business like glass core substrates and organic RDL interposers.

In the Display business, for anti-reflective films, we will launch an ultra-wide production manufacturing line in 2026. And for quantum dots, we will launch nanomaterial business centered on materials. And for light control films, we will expand business of new products for automotive applications. We aim to promote initiatives for business expansion and drive structural reform of low-profit businesses. Through these initiatives, the electronics business will concentrate management resources on the high value-add semiconductor packaging business and drive transformation into a business portfolio that capitalizes upon our proprietary technology to accelerate business expansion.

Next, let me talk about the Electronics business medium- to long-term outlook. We position the semiconductor business as the growth driver and will firmly maintain high profitability by supplying cutting-edge key devices, leveraging technical superiority. As you see on the slide, for the semiconductor business, by expansion of AI-related applications for FC-BGAs and the launch of advanced semiconductor packaging business, sales CAGR of 26% and non-GAAP operating margin of 30% will be aimed at. For the Electronics business as a whole, we will achieve a sales CAGR of 22%. And in fiscal 2030, we will significantly expand our business to reach sales of JPY 350 billion.

From here, I will talk more in detail about the focus area of semiconductor packaging business. I will start with the overview and strategy of the business. Our main product is FC-BGA, but what is it? Let me explain. FC-BGA substrates are high-density semiconductor packaging substrates that enable high-speed multifunctional LSI chips that are used in network devices, server CPUs, generative AI, consumer and automotive devices. If you are to liken IC chips to the brain, FC-BGAs can be likened to the neural network. So they transmit huge amounts of information and energy. By developing substrates with ultra-high-density interconnect structures based on our microfabrication and buildup wiring board technologies, we provide products that support semiconductor process miniaturization.

Next, let me talk about our current FC-BGA business domains. The pie chart on the left-hand side shows the 2024 FC-BGA market by application. High-end applications like high-end switches and servers account for 25% of the market. Consumer, automotive and others account for about 75% of the market. On the right-hand side is TOPPAN's business by application. High-end applications account for a much larger share of 83% compared to the general market. We have focused on high value-add markets like high-end switches and servers. Here, we show TOPPAN's position in FC-BGA substrates for high-end switches. In high-end switches that aggregate network communication and process it at high speed and stability, we secured the #3 position globally in fiscal year 2024 due to our high technical capabilities and stable supply.

From here, we will explain TOPPAN's focus areas in the semiconductor packaging business strategy, including FC-BGA. As organized on the left table, we have designated 3 areas: high-end switches, AI accelerators and server CPUs as our next phase focus areas. As for AI accelerators, as shown in the upper tier of the triangular diagram on the right, we will target AI ASIC applications, in particular, as a domain where customization is required more than scale. Using technological superiority as a source of our competitiveness, we will target high-end areas where we can leverage our competitiveness.

Along with this, regarding the business domains that we have previously described as for communications and servers or AI and non-AI, we will, going forward, explain them based on the definitions shown on this diagram. The diagram on the right schematically illustrates the configuration of a large-scale network at a data center. Lower left shows a network centered on general purpose servers centered on conventional CPUs, while the right side represents a network based on AI servers using GPUs and AI ASICs, which have been expanding in recent years.

At the top are the switches that comprise networks in these data centers, which we define as general purpose switches. Meanwhile, the components on the lower right that interconnect multiple AI servers and enhance the AI processing capabilities are defined as AI switches. Within these AI servers, the items shown in blue squares represent AI ASICs, which have particular strength in inference AIs. The components shown in green squares, which are used in both general purpose and AI servers are the CPUs. Among these, we will particularly target the domain based on ARM architecture, which is superior in power consumption efficiency.

Let me explain the market outlook of these focus areas. The 3 focus areas that we target, high-end switches, AI ASICs and server CPUs are the blue bars in the right FC-BGA substrate market. Strong growth that will drive the overall market expansion is expected. We will focus on high-profit, high-end domains that are expected to grow against the backdrop of development of AI and expand our business. Finally, as a point to evolve from the conventional FC-BGA center business, I will explain about our proposal for solutions geared towards social issues.

For the focus areas, as shown in the center, while the conventional FC-BGAs themselves are need to be more sophisticated, there's a demand to evolve towards new trends such as photonics-electronics convergence. In addition, supporting materials like glass core or interposers, a new package format will become key technologies. In response to these challenges, in addition to FC-BGA micro interconnect and layering technologies, we will bring together know-hows in glass transfer cultivated through the display business, LSI design and process cleanup acquired through the semiconductor business and CMP slurry technology helped by our group company, TOPPAN Infomedia.

At the same time, through collaboration with customers, partner companies and universities, we will advance technological development while grasping new needs. In parallel with this, in terms of the expansion of business scale, we will open new production lines in and out of Japan while carefully examining customer needs and building production structure. In this way, as we eye the societal issues that accompany the advancement of AI by creating solutions that capture the entire semiconductor packaging domain, we will shift from the FC-BGA business to a semiconductor packaging solutions business. That is all from me.

I am Katsumura, Deputy Head of the Electronics Business Division. From here, I will explain the market trends that form the background for our focus areas and strategies that Mr. Ueki just explained. This shows the proportion of AI semiconductors within the global chip demand. The AI semiconductor market is expected to grow by approximately sevenfold over the 8 years from 2022 to 2030, driving the overall market. Cloud demand centered on servers, which is related to our focus areas, is also expected to grow accordingly. The rise of AI brings about a dramatic expansion in data traffic. The world is entering an era in which everything generates data. The global data traffic is estimated to increase 100-fold over the 20 years from 2020 to 2040.

In order to process this enormous volume of data, the structure of data centers themselves is also changing. In AI model development, the scale of computation has exceeded the capacity of the GPUs in a single AI server. To process this efficiently, data centers now connect multiple GPU servers in parallel and operate them as one large computer. AI processing involves constant synchronization across multiple servers, leading to greater volume of communication through network switches outside the servers than in conventional networks. As a result, communication performance becomes a key factor in AI performance.

Along with this, networks are changing to support both scale up, which boosts the performance of individual AI servers and scale out, which enables distributed processing by connecting a large number of servers in parallel. The performance demanded of network switches is becoming increasingly sophisticated. As a result, in the data center switch market, one of our focus areas, the shipment volume for AI servers is projected to grow by 3.2x over the 6 years from 2024 to 2030. And both unit prices and shipment values are also forecast to trend upward. In this way, driven by switches for AI servers, the network switch market is expected to expand.

Next, I will explain the demand trends for AI ASICs, which are another focus area. In the use of AI, 2 phases are required, the training phase in which foundation models are developed and the inference phase in which trained models are used. The performance required of AI servers differs in each phase. In the training phase, enormous computational power is required in the process of improving models by feeding back calculation results, whereas the inference phase uses already trained models to rapidly calculate the results. As trained foundation models accumulate, the demand is expected to gradually shift towards inference applications toward 2030.

As the required AI applications change, what is required of the AI semiconductors that enable them also change. The CPUs and GPUs shown on the left-hand side of the diagram use software control to exchange data with memory and compute step by step. Consequently, while they offer high versatility, they are not optimized for specific applications. On the other hand, the custom circuit on the right, namely the ASIC, is designed from the outset to be optimized for specific processing tasks such as inference. This enables high-speed operation by minimizing software control while simultaneously optimizing and shortening interconnects to achieve significant reductions in power consumption.

From the perspective of speed and efficiency, there are increasing needs in the market to use high-performance GPUs for training that requires huge computing power and use AI ASICs for inference. Consequently, as inference AI expands, the volume of more power-efficient AI ASICs is projected to grow at a high annual rate of 16% between 2024 and 2030. Furthermore, the customization required for AI ASIC development is another reason why we have designated this area as a focus area.

Lastly, the trend for server CPUs, one of our focus areas will be explained. Traditionally, the x86 architecture CPUs adopted by Intel, AMD, IBM and others held an overwhelming market share. In recent years, as AI servers with high power consumption, in particular, are frequently employed, the proportion of CPUs utilizing the more power-efficient ARM architecture is increasing. Thus, the 3 focus areas or company targets, high-end switches, AI ASICs and server CPUs have all been chosen with an eye on the social challenges arising from expanding AI needs.

I am Furuya, Head of the Semiconductor Subdivision. And so far, we have explained the background to our focus areas expanding in line with AI requirements. Now we will talk about our technology road map with these changes in mind and the background, the technical background. Here, the evolution of our semiconductor packaging technology is shown as a road map. At the bottom is the conventional FC-BGA substrate. In addition to our ongoing response to large-scale high-layer count packaging, we will enhance our technological value by addressing the transition to board-level optical interconnects for the ION 2.0 generation and further to chip-to-chip optical interconnects.

Concurrently, we will launch a new line at our Niigata factory and commence mass production at our Singapore factory. At the top is the advanced semiconductor packaging. We shall continue to develop technologies such as glass cores, glass interposers and organic RDL interposers alongside the chiplet structure incorporating a silicon interposer on FC-BGA to create high value-add products. The current plan is to do development at the advanced semiconductor packaging development center and mass production at the Ishikawa plant.

We shall contribute to the supply of semiconductor packages utilizing new technologies to address the societal challenges of increased data traffic and low power consumption demanded by network switches and AI. From this point on, let me explain the background to our technology road map, specifically focusing on the performance required of semiconductor packages in 2030 and the associated challenges. First, next-generation AI network transmission performance projection. Currently, Gen AI is not becoming commonplace. But going forward, we will see an increase in next-generation use cases requiring real-time capabilities and high information density such as autonomous driving and telemedicine.

Our estimates indicate that by 2030, data centers will require transmission speeds 32x faster than in 2020, reaching 800 terabps, demanding ultra-high speed and low latency performance. Let me introduce the technological trends enabling transmission speed of 800 terabps. First, miniaturization of interconnects. As the performance of AI semiconductors improves, the miniaturization of interconnect becomes an extremely critical issue for achieving heterogeneous chip integration and the chiplet structures that enable it. Performance-wise, maximizing interconnect density and securing high bandwidth are essential to complement Moore's Law and address the narrowing pitch of IOs.

Regarding power efficiency, minimizing parasitic capacitance and reducing die-to-die resistance and capacitance characteristics are required. Simultaneously, this contributes to reducing the physical size of the system, supporting miniaturization and form factor reduction. Thus, from the perspectives of performance, power consumption and area, value enhancement through interconnect miniaturization is anticipated with requirements for both line widths and spacing to fall below 1 micron by 2030. The next challenge is semiconductor packaging structure required in 2030.

Conventionally, as shown on the left, the predominant approach involved packing all necessary functions onto a single chip. However, the performance gains achieved through chip miniaturization and scaling up are now facing barriers related to fabrication complexity and cost increases. The breakthrough for this challenge lies in the chiplet structure shown on the right. This technology involves dividing and manufacturing separately by function, the chips and memory and reintegrating them in high density on a large interposer and a large FC-BGA substrate.

As you see, achieving large-scale integration and co-packing of optical elements, which was impossible with single chips requires support from the scaling of packaging components such as interposers and FC-BGA substrates. Specifically, the size of FC-BGA substrates is projected to exceed 200 millimeters by 2030. However, with the currently predominant silicon-based interposers, while excelling in miniaturization performance, die count goes down with scaling due to their circular shape, which poses scaling up constraints from an economic efficiency perspective.

Consequently, there is a growing expectation for next-generation interposer technologies that can scale and offer miniaturization performance that rivals that of silicon interposers. Another challenge is photonics-electronics convergence. I mentioned that the transmission speed required by 2030 will reach 800 terabps. However, attempting to achieve the speed using conventional electrical signals and transmission distances would result in transmission losses exceeding acceptable limits, rendering the system unfeasible. One configuration proposed as a solution to suppress transmission loss to levels demanded by the market is transmission using light.

Please look at the right-hand side, future diagram. By positioning the OE converter close to the semiconductor chips, we reduce the electrical transmission distance. Simultaneously, we need to develop a configuration that minimizes transmission loss by using low-loss optical transmission between chips, employing fiber ribbons and optical waveguides. Thus far, we have outlined the major technological trends required for advanced semiconductor packaging, miniaturization, new interposers and photonics-electronics conversion. Let us now detail our specific initiatives and solutions to address these market demands.

Against the backdrop of advances in AI, we believe that enhancing the performance of semiconductor packaging requires changes in the specifications of interposers and FC-BGA substrates as shown in the center of the slide. Among these, interposers are required to offer larger body size and high flatness for mounting chiplets as well as high-speed large capacity transmission and low power consumption. In response to this, we are designing and developing manufacturing technologies for glass imposers and organic imposers of submicron RDLs for large panel formats using damascene process.

Regarding the requirements for FC-BGA substrates, we will address miniaturization and embedded components through further technological pursuit based on the FC-BGA manufacturing technologies we have cultivated to date. For high flatness, high rigidity, low CTE and low transmission loss, we will respond through the development of glass core as a new core material. For high-speed transmission, we will respond primarily through support for optical transmission.

Today, we will explain in detail on the following slides, the 3 key technologies for realizing our strategy, submicron organic RDL interposers, glass cores and support for optical transmission. Our first initiative is the design and manufacturing technology development for submicron organic RDL interposers. Toward achieving a chiplet structure for the coming era of 800 TBps high-capacity data transmission, we aim for the world's first social implementation of a large imposer with submicron RDLs using the damascene process on a panel 500-millimeter square or larger.

This R&D project has been selected for NEDO's research and development project of enhanced infrastructure for post-5G information and communication systems administered by METI. To realize this, we will proceed in 2 development steps. Please refer to the figure at the lower left. In the semi-additive process commonly used in FC-BGA, if wiring is made finer down to the submicron level, there is a risk of wiring patterns collapsing during the manufacturing process. Meanwhile, in the damascene process, trenches are first formed in the insulating film, copper is embedded into those trenches. And finally, excess copper is removed through CMP polishing, eliminating the risk of wiring pattern collapse.

We are using this method to design and develop process and inspection technologies for organic RDL interposers. In manufacturing validation, we have already applied the damascene process and verify the formation of fine wiring with 2-micron line width and spacing on a 510 x 515-millimeter panel format, which is larger than a silicon wafer. Based on this technology, we will expand into the submicron domain and realize the next-generation interposer that achieves both large size and miniaturization.

Our second initiative is the development of glass core FC-BGA. As chiplet adoption progresses, the number of chips mounted on FC-BGA substrates increases and package sizes become larger, raising the requirements for low warpage and high rigidity for the FC-BGA core, the supporting structure. To address this, we are developing FC-BGAs that use glass, which exhibits low warpage and high rigidity as the core material in place of conventional resin cores. Our strength lies in our ability to apply the large glass handling technology cultivated over many years in the Display business.

We have already established the process for stable formation of cavities for embedded components, which have been a challenge and have also found solutions for suppressing [indiscernible] cracks by optimizing, manufacturing and processing methods. We are currently examining the construction of a production line while promoting sample evaluation with customers. Third is support for photonics-electronics convergence. In package structure supporting this convergence, it's extremely important to not only achieve low-loss optical transmission, but to minimize losses in the remaining electrical transmission section connecting chips to OE converter. We are working with partner companies to develop technologies for forming optical waveguides within FC-BGA substrates and interposers and establish technological superiority.

At the same time, as an FC-BGA supplier with strengthening electrical signal quality, we are pursuing high-speed transmission technology that minimizes loss in the remaining last few millimeters of electrical transmission, thereby supporting networks in the AI era. The advanced technology development described thus far cannot be accomplished by our company alone. For the development of new technologies, in addition to our own resources such as FC-BGA mass production, LCI design and glass handling processing as the core, we will build a strong ecosystem with domestic and international partners to accelerate and streamline R&D. Through partnerships in consortia such as U.S. Joint, we will also respond flexibly to market changes and step up collaboration with North American customers to provide them with development results and create true customer value.

Finally, we will explain our site strategy for developing and mass producing the new technologies described earlier. At Niigata plant and Singapore AST, our overseas base, we will expand production capacity by installing new lines and promote development of next-generation semiconductor packaging, primarily at Ishikawa plant. Construction of the new plant in Singapore is progressing smoothly with the opening ceremony planned for around summer 2026 and operations scheduled to begin towards the end of 2026. Our Electronics business will accurately assess the growing demand for AI and data centers by providing new solutions across the full spectrum of semiconductor packaging, leveraging trends such as miniaturization, chiplets and photonics-electronics convergence. These efforts will drive sustainable growth centered on our semiconductor packaging business.

This concludes the explanation of the business strategy for our Electronics business.

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

This is Kurobe, the CFO. Thank you for taking the time out of your busy schedules to join our fiscal 2025 half year results briefing. I will now explain the details of the first half results. Please turn to Page 3. In the first half, consolidated net sales increased 4.3% year-on-year to JPY 863.6 billion and non-GAAP operating profit, which excludes mainly the effects of acquisition-related costs, rose 14% to JPY 38.6 billion. While consolidated operating profit was generally in line with the plan, the Information & Communication and Living & Industry segments fell short of plan, whereas the Electronics segment and adjustment items exceeded plan.

Non-GAAP operating profit, net of onetime costs such as gains on sale of investment securities increased 41.5% to JPY 24.5 billion. The key points of the results are shown on the right. On a non-GAAP basis, Information & Communication had flat sales and higher profit. Living & Industry had higher sales and profit and Electronics posted lower sales and profit. However, profit grew compared with Q1. I will explain the performance of each segment later. Now from this fiscal year, for exchange rate processing, we changed to yearly average rate from year-end rate. Accordingly, prior year figures have been retrospectively revised. Unless otherwise stated, the prior year figures in the following pages are modified retrospectively.

Next, please turn to Page 4. From this briefing, we will explain year-on-year changes in operating profit on a non-GAAP basis. From the previous year's operating profit of JPY 33.9 billion, foreign exchange impact was negative JPY 1.6 billion and infrastructure development cost, negative JPY 1.4 billion. Amid our growth businesses, Erhoeht-X impact was plus JPY 1 billion and the Japan SX and overseas living was a significant positive of JPY 8.6 billion due mainly to the consolidation of Sonoco TFP business.

On the other hand, the semiconductors were minus JPY 3.3 billion. In existing business, structural reform conducted last year had a positive impact of JPY 3.2 billion. As a result of these factors, non-GAAP operating profit amounted to JPY 38.6 billion. Next, I will explain the status of each segment. Please turn to Page 5. Net sales in the Information and Communications segment were JPY 425.4 billion, essentially flat year-on-year, while non-GAAP operating profit increased 6.5% to JPY 14.5 billion. Overall, profit increased due mainly to structural reforms in existing businesses, but results fell short of plan due to shortfalls in overseas security and BPO.

By subsegment, digital business sales increased overseas due to the HID and dzcard business, joining the scope of consolidation and growth in the government ID business and Marketing DX. Profit was higher for Marketing DX, while in overseas security, it was down due to deferrals of large projects to the second half. Nevertheless, on a non-GAAP basis, profit increased. Overseas security is expected to meet its full year plan. In BPO, although sales to the financial sector increased, sales and profit decreased because there were less large-scale public and private sector projects than the previous year.

In Secure Media, smart cards performed well, but overall sales decreased due to a decline in the financial printing business following U.S. election solution projects in the previous year. Profit increased due to higher smart card sales and improved DPS profitability. In Communication Media, sales decreased due to the continued contraction of the publication and commercial printing markets and the impact of the cyclical nature of the textbook business, but similar profit level to the previous year was maintained as the effect of structural reform offsetting the lower sales.

Next page summarizes the first half results and full year outlook for Erhoeht-X for your reference. In the first half, while Security and Hybrid BPO fell short of the previous year's results and of the plan, overall, the business recorded higher sales and profit. For the full year, we revised the second half plan based on the first half performance. Sales and profit are expected to grow over the full year with the progress of scaling in second half.

Moving on to the Living & Industry segment, Page 7. Net sales were up 19.9% year-on-year to JPY 330.5 billion and non-GAAP operating profit increased 41.5% to JPY 24.7 billion. Overall, non-GAAP operating profit grew significantly. However, in the Sonoco TFP business, newly consolidated from the second quarter, demand in the North American market fell and onetime start-up costs were higher than initially expected, so results fell short of plan.

In the Packaging business, overseas sales increased significantly due to the consolidation of the TFP business and Irplast as well as strong performance in barrier film for Europe. In terms of profit, Europe and Asia saw roughly higher profit, while in the U.S., profit fell due to lower demand in the food market and the recording of onetime M&A costs. In Japan, SX packaging continued to grow steadily, resulting in higher sales and profit. In the decor material business, while the market recovery is still ongoing, sales of decorative sheets in Europe and South America remained strong. Profit increased due to cost reductions and structural reforms. In Japan, both decorative sheet market share and the spatial design business grew, resulting in higher profit.

Next, Page 8. On the left, we show performance impact of the packaging business M&A leading to new consolidations in Q2. In the first half of fiscal 2025, sales grew by JPY 55 billion from adding Sonoco TFP business and Irplast. Negative profit impact came from M&A-related costs of JPY 4.5 billion, onetime start-up costs of JPY 1.7 billion and amortization of goodwill and intangible assets of JPY 3.9 billion. Excluding these items, operating profit increased by JPY 5.8 billion.

Similarly, for the full year of fiscal 2025, sales will increase by JPY 160 billion and profit by JPY 16 billion, and we are essentially adding businesses that have operating margins of around 10%. For the next fiscal year, M&A-related costs will be 0 and onetime start-up costs will also be 0 from the second quarter onward, making these significant drivers of profit growth. On the right-hand side, we have listed the sales by region for the entire packaging business and for SX packaging in the first half. For SX packaging, sales are steadily expanding in Japan, Europe and Asia.

Next is the Electronics segment. Please turn to Page 9. Net sales in the Electronics segment were down 14.4% year-on-year to JPY 118.9 billion, and non-GAAP operating profit was down 19% to JPY 20.6 billion, but overall results exceeded the plan. This includes an approximately JPY 1.5 billion negative impact from foreign exchange effects. In the subsegments, semiconductors had flat sales and lower profit overall. Although FC-BGA posted lower sales and profit, it has been on a recovery trajectory since Q2. In Q1, although in network switches, there was impact from inventory adjustments of some customers. We catered to demand from the rapidly recovering consumer market.

In Q2, profit margin improved on the back of higher share of products with high unit prices for applications such as server CPUs. Photomasks performance was strong globally, driven by demand for cutting-edge products in Asia, Europe and North America. In Displays, sales dropped overall, while profit remained flat. Anti-reflective films had lower sales and profit due to inventory adjustments, but we see recovery trend from Q2. For Display Solutions, profit increased due to the effects of structural reforms. This concludes the performance review of each segment.

Please turn to Page 10. I will explain the main points of the first half income statement. Gross profit margin improved by 0.4 points year-on-year to 23.5%, driven by the expansion of high value-added products such as SX packaging and by structural reforms. The ratio of SG&A expenses increased by 1 percentage point. The main factor was consolidation of new entities, including M&A expenses and increased amortization of goodwill and intangible assets. Of this, M&A-related expenses are onetime costs limited to this fiscal year. Nonoperating income and expenses decreased to a positive JPY 1.3 billion from positive JPY 4.1 billion a year ago due mainly to higher interest paid with more borrowings and lower dividends received due to divestment of securities.

Page 11 presents the status of the balance sheet for your reference. Regarding liabilities, I will explain the items disclosed in today's earnings report. At the end of the fiscal year ending March 2025, we executed a new short-term borrowing of JPY 270 billion for the Sonoco TFP business acquisition. Of this short-term borrowing, JPY 120 billion has already been refinanced to a longer-term syndicated loan in Q2. In addition, JPY 80 billion will be financed through the issuance of unsecured straight bonds announced in today's earnings report. Next is the status of producing strategic shareholdings. Please turn to Page 12.

We continue to reduce our strategic shareholdings in the first half. As a result, the ratio of strategic shareholdings to consolidated net asset was 14.8% at the end of September, achieving our current medium-term plan target of below 15%. We will continue to reduce these holdings aiming to be below 15% at the end of March 2026 and to achieve below 10% early in the next medium-term plan period. This concludes my presentation.

Oya will now explain the full year results forecast.

I am Oya, the COO. I will explain the full year forecast and provide an outline of next fiscal year's performance. Page 14. As we made a timely disclosure today, we have revised our full year plan based on the first half results and the business environment expected in the second half. I will first give you an overview. The revised full year figures, net sales, JPY 1.79 trillion; operating profit, JPY 70 billion on a GAAP basis, JPY 97.2 billion on a non-GAAP basis; profit attributable to owners of parent, JPY 70 billion on a GAAP basis, JPY 82.5 billion on a non-GAAP basis. The revised ROE, 5.4% on a GAAP basis, 6.4% on a non-GAAP basis. We have also revised our assumed exchange rates based on the recent market environment. U.S. dollar from JPY 140 to JPY 145 per dollar and from JPY 154 to JPY 169 per euro.

Page 15, the revisions by segment. The table compares the initial plan, the revision announced on October 16 following the new listing of Tekscend Photomask and the revision announced today. Operating profit is shown on a GAAP basis. First, for the Information and Communications segment, we revised sales downward by JPY 5 billion and operating profit by JPY 4 billion from the initial plan. This reflects the impact of continued market contraction of Communication Media and the revision based on Erhoeht-X' first half performance. For overseas security business, the deferral of large projects are included as positive factors for the second half.

For the Living & Industry segment, we revised sales downward by JPY 16 billion and profit by JPY 4.5 billion. Following the inclusion of the Sonoco TFP business, onetime start-up costs are being incurred this fiscal year, resulting in numbers higher than initial plan. However, as Kurobe explained earlier, these onetime start-up costs will be gone from the second quarter of next fiscal year, becoming a profit driver next year. From a market standpoint, in the packaging business, we have factored in continued demand weakness in the U.S. food market and lower film and barrier film demand due to deferral of full-scale SX packaging adoption by European customers suffering from sluggish performance.

For the Electronics segment, sales have been revised downward by JPY 69 billion and profit by JPY 14.5 billion from the initial plan, reflecting the application of the equity method for Tekscend Photomask and the delayed sales expansion of the new ToF sensor business. Ordinary profit has been revised downward in line with the revision of operating profit. Profit attributable to owners of parent was revised upward with the outlook for gains on sales of investment securities and structural reform costs. Please note that all negative factors expected have been incorporated into this revision.

Page 16. I will explain the year-on-year changes in non-GAAP operating profit under the revised full year plan. From last year's operating profit of JPY 97.6 billion excludes the JPY 13.1 billion impact of applying the equity method for Tekscend Photomask from the second half, and you get a base of JPY 84.5 billion. From there, the impact of bonus provision period change is negative JPY 5 billion, foreign exchange negative JPY 3.1 billion and infrastructure development cost, negative JPY 4.1 billion. Among growth businesses, Erhoeht-X will be positive JPY 6 billion, Japan SX and overseas living, a significant positive of JPY 17.1 billion with new Sonoco TFP business and other consolidations.

Semiconductor-related business is expected to be negative at JPY 0.8 billion. Cyclical businesses will be negative JPY 5.9 billion, while existing businesses will be positive JPY 8.6 billion due to the effect of structural reforms. As a result, non-GAAP operating profit is forecast to be JPY 97.2 billion. Next, I will explain the full year figures and second half outlook for each segment. Please turn to Page 17. For the Information & Communications segment, we forecast full year sales to be JPY 902 billion, down 2.5% year-on-year, and non-GAAP operating profit to be JPY 49.7 billion, down 4%.

Overall, despite lower sales and profit in existing businesses, the growth business of digital business is expected to make a meaningful profit contribution due to progress in scaling. By subsegment, digital business expects to see sales continue to grow from the first half with the consolidation of HID and dzcard and further growth in the government ID and marketing DX businesses. Profit is also expected to grow in line with sales, reflecting large overseas security projects that were deferred to be booked in the second half.

For BPO, orders are expected to increase in the focus areas of the financial, public and private sectors. Flat growth is expected for sales and profit with impact related to large-scale orders in the previous year becoming minimal. In Secure Media, smart card sales are expected to fall. Sales are expected to be lower overall due to the decline following U.S. election solution projects in financial printing last year. Profit is expected to decrease due to lower sales.

Communication Media sales are expected to fall due to a decline for publication, commercial printing and business forms as well as the impact of the cyclical nature of the textbook business. Although the effects of structural reform are expected to contribute, it won't fully offset the impact of lower sales, so profit is expected to fall. In the second half, there will be a JPY 2.4 billion negative impact from the standardization of the bonus provision period. This impact is not included in the subsegment figures, but is reflected in total segment numbers.

Moving on to the Living & Industry segment. Please turn to Page 18. For Living & Industry segment, full year net sales are expected to grow 31.4% year-on-year to JPY 723 billion. Non-GAAP operating profit is expected to increase 45.7% to JPY 56.7 billion. Overall, due to the impact of newly consolidated businesses, non-GAAP operating profit is expected to grow significantly for the full year. As for the second half forecast of the Packaging business, overseas, while the PFT business and Irplast have been newly consolidated, the impact of higher onetime start-up costs and lower demand in the U.S. food market will persist.

In barrier film, demand in Europe was strong in the first half. However, due to customers' weaker performance, environmentally oriented initiatives are being delayed by roughly 1 year. Due to environmental regulations, the trend in response in Europe will not change, but a temporary softening of demand is observed. Demand in Asia remains firm and overseas markets overall are expected to achieve higher sales and profit. In Japan, SX packaging is expected to continue its robust expansion from the first half, resulting in higher sales and profit.

In the decor materials business overseas, the market recovery is still ongoing, but sales and profit are expected to increase due to expansion of decorative sheet sales, reduction of costs and the effects of structural reforms. In Japan, sales and profit are expected to increase due to growth of the spatial design business. In the Living & Industry segment as well, bonus provision period standardization will have an impact of negative JPY 1.4 billion. Next is the Electronics segment. Please turn to Page 19.

For the Electronics segment, full year net sales are forecast to decline 32.9% year-on-year to JPY 190 billion, and non-GAAP operating profit is expected to decline 33.1% to JPY 35.8 billion. In the second half, in semiconductor, no sales of -- or operating profit will be posted for photomasks following the transition of Tekscend Photomask to the equity method. And for FC-BGA, following Q2, the proportion for server CPUs and network switches is expected to increase. We will capture strong demand through the new Niigata production line, which becomes fully operational and profit levels are expected to rise significantly in the fourth quarter.

In addition, qualifications for high-end AI server switches and AI ASIC are progressing toward mass production in the next fiscal year. In display-related business, antireflective films in the second half are expected to see a recovery trend due to taking in demand for high value-added products. For Display Solutions, profit is expected to increase due to the effects of structural reforms. Foreign exchange will have a full year negative impact of JPY 2.8 billion on the segment as a whole. Negative impact of bonus provision period standardization is expected to be JPY 0.6 billion. This concludes the performance forecast for each segment.

Please turn to Page 20. This shows the full year forecast for capital investment, depreciation and R&D expenditures from the second half, reflecting the impact of the transition of Tekscend Photomask to the equity method. Capital investment and depreciation in electronics have been revised. For the other segments, the forecast is in line with the initial plan. R&D expenditures have also been revised accordingly.

Finally, I will explain the outline of next fiscal year's performance. Please turn to Page 21. Next fiscal year, profit is expected to increase significantly due to growth in focus areas and a decrease in onetime costs incurred this year. The first half sales will be negatively affected by the absence of previous year's contribution from Tekscend Photomask, but excluding that factor, operating profit will increase.

For net profit, the impact of Tekscend Photomask is minimal. It will directly benefit from the profit growth. By segment, in Information and Communication, while we maintain profitability of the existing printing business with cost reductions, the scaling of digital business and BPO profitability stabilization will enable growth businesses to drive expansion of both sales and profit. In Living & Industry, while we need to keep a close eye on the risk of weakening consumer sentiment, the Sonoco TFP business will enter a full-scale profit contribution phase in the packaging business.

We will generate synergies through a vertically integrated synergy from films to packaging. Although higher goodwill and other amortization will continue up to Q1, the disappearance of onetime expenses in the current fiscal year will contribute about JPY 8 billion to profit growth. In Electronics, ratio of high-end products will be even higher for FC-BGA, supported by certified AI-related products and full year operation of the new Niigata production line, we expect higher sales and profit.

In parallel, we will continue to strengthen development and investment aimed at establishing next-generation package substrate technologies. At the company level, the lack of this fiscal year's bonus provision period standardization impact will grow the profit by JPY 5 billion. Details of the plan for next fiscal year will be explained in May, together with the announcement of the new medium-term management plan. We continue making every effort to enhance corporate value and meet your expectations. We appreciate your continued support. That concludes my presentation.

This is Oya, COO. Thank you for taking time out of your busy schedule today to attend the Information & Communication Business Strategy Briefing. I will focus on the growth fields within the segment and explain our strategy. We recognize that we should ideally present the overall strategy for the Information & Communication business, including existing fields. However, as we are currently in the midst of internal discussions for the next medium-term plan, we'll provide a thorough explanation of the overall picture when we announce the plan scheduled for May next year.

In that sense, while the strategic direction for the growth fields we will explain today are unlikely to change significantly, quantitative targets may be revised, particularly between businesses within the growth fields and between growth and existing fields. Therefore, please note that the quantitative information presented today reflects the current status. Now I will begin by outlining the growth fields within the Information & Communication business segment.

Turn to Page 4, please. Let me briefly reiterate the overview of the Information & Communications segment as it stands today. As shown in the materials, it consists of 4 subsegments. Of those, Digital Business and BPO are classified as growth businesses, which are collectively defined as Erhoeht-X. For fiscal 2024, total net sales of Information & Communications segment increased 3.3% year-on-year to JPY 929.3 billion with non-GAAP operating profit at JPY 50.2 billion. The performance by subsegment is as shown on the right side of the table.

Please turn to Page 5. This is the plan for fiscal 2025. We plan for sales to decrease by 2.4% year-on-year to JPY 907 billion, operating profit to increase by 1.8% to JPY 46.5 billion and non-GAAP operating profit to be JPY 50.9 billion. Measures by subsegment are as shown on the right. For this fiscal year, we anticipate profit growth driven by scaling up our Digital Business and the effects of structural reforms in existing businesses.

Please turn to Page 6. In the Information & Communication Growth Fields, we aim to establish a cyclical business model, starting with Digital Solutions, encompassing operational support, data analysis and consulting. As shown in the slide, sales have steadily expanded over the 5 years since fiscal 2020, but a large portion of sales remains only from stand-alone Digital Solutions, and we have not yet achieved profit scaling. Through our activities to date, we have focused on solving issues for a wide range of sectors and clients, generating numerous digital solutions. However, we have also identified challenges such as insufficient solution proposal activities, incorporating the operational support domain as an engine for recovery.

Please turn to Page 7. As our approach to resolving challenges, we will shift our business model from providing onetime solutions to continuous services that combine multiple solutions, including operational support. We will develop services combining multiple solutions aligned to client challenges, building long-term relationships. Through continuous operational support, we will acquire and accumulate data, leveraging it for data analysis and consulting. Specific measures include concentrating on target areas, bolstering proposal activities, optimizing resources and strengthening AI utilization and AI service development.

Please turn to Page 8. This is the first measure. We will concentrate on target areas and bolster proposal activities. We have narrowed down the areas where we can leverage our competitive advantages to 4, which were redefined as growth fields. The Security market is projected to reach about JPY 6.1 trillion by 2030 with a growth rate of 7.6%. The Marketing DX market is estimated at about JPY 2 trillion, growth rate 7.7%. BPO market, JPY 800 billion, growth rate 5%. The IoT and Auto-ID market, JPY 400 billion in 2030, growth rate of 9.9%. Furthermore, we will streamline over 500 digital solutions we own to approximately 100, thus concentrating resources on growth fields. We will establish a one-stop capabilities ranging from introduction of digital solutions to operational support in each field, strengthening our proposal activities.

Please turn to Page 9. This is the second measure. We will optimize resources. In April next year, we plan to integrate TOPPAN, TOPPAN Edge, and TOPPAN Digital. At that timing, we will consolidate overlapping functions and visualize skills of about 6,000 DX personnel and reallocate resources and bolster human resources in understaffed consulting and data analysis domains, bringing in external talent and training them.

Please turn to Page 10. This is measure #3. We will transition to framework for AI utilization and operation and practical use aligned to each business and accelerate service development. TOPPAN's advantage in AI is to provide high-quality services, incorporating AI technologies based on our expertise and understanding of clients' businesses. And our priority is based on providing services using AI that are aligned to customer needs and customized to be readily usable. By driving initiatives using AI, we would enhance internal productivity and accelerate provision of high value-added services incorporating AI.

Next is Page 11. Let me explain our advantages and strategic approach in each business. The common strength that we have is the understanding about our clients and operational capability. And based on that, we create and provide value to customers in each area. In Security DX, based upon our card issuance in DPS, we have the foundation of advanced security data and expertise. And also, we have a capability to operate in the security environment. Approach is that in Japan, we will provide high value-added services. And in overseas, we proactively enter growth markets by leveraging customer base acquired through M&A.

In Marketing DX, our strength is our real marketing consultation capability that we gained through catalog, flyers and sales promotion. And we also have marketing support track record across the entire value chain using our know-how. We will make resource shift to achieve high profit model and enhance labor productivity through AI utilization and organizational transformation.

In BPO, our strength is the complex operation, design capability and secure structure that we gained in public and financial sector. We will focus on BPO for complex operations and use AI to enhance competitiveness and efficiency.

In IoT and Auto-ID, our strength is industry-leading RFID development track record and technology development capabilities in domestic market. We will differentiate by providing services, combining devices and systems and focus resources on industries with stringent quality requirements.

Page 12. 2030, we will fully leverage our strength and establish new growth driver. Right now, the sales of the growth field is about JPY 416 billion. We would like to grow that by 5% per year and achieve the percentage of the contribution by the growth field to 60% in 2030 and achieved the sales of JPY 542 billion and aim for operating margin of 10% or higher. As we mentioned at the beginning, the definition of the growth fields differs from that of Erhoeht-X and quantitative information is current working figures. So please keep that in your mind.

Page 13. So those are the 4 business-specific performance targets. In Security DX in overseas, we will leverage customer base acquired through M&A and expand the size. In Marketing DX and BPO, through the AI utilization and resource optimization, we will try to improve the productivity. In IoT and Auto-ID, we would try to expand the sales in the long term as the global market grows.

That concludes my portion. So we would like to now move on to the 4 growing business areas, starting with Security DX. Now Saito will explain our Security DX business.

First, I will briefly outline the evolution of the Security Business so far. As shown in time line, starting with securities printing using the latest technology when the company is founded in 1900, we have advanced the business providing data management, processing and implementation linked to high-security IDs for people, including data printing services, smart card production and issuance and cashless payment platforms. In recent years, we have advanced initiatives such as acquiring overseas companies and researching post-quantum cryptography and expanded our footprint globally by providing secure information management and services that utilize data.

Our Security Business until now, as shown in the diagram on the left, offered a lineup, including ID cards, payment cards and data printing services, focusing on physical media manufacturing using printing processing technologies. In recent years, leveraging these customer touch points, we have focused more on developing DX services, utilizing our strengths in providing hybrid services, combining physical and digital elements, we have expanded our business to include operational support domain. While we have expanded the line of DX services, we recognize the need to take further measures to grow the business and have also worked to acquire footprint for global expansion. We view this as a phase of shifting model from physical media to DX services and believe we have driven a business strategy that leverage our strengths in stand-alone services.

The Security DX business we present today will be rebuilt on the premise that changes in social conditions and further accelerated digital transformation should demand more advanced secure social functions. It is now based on a data management business, shifting its focus from stand-alone independent services to more digital ones, providing new value globally. As shown in the left diagram, data management is the cornerstone of the Security DX business. we will shift towards the data cycle-based business depicted here. As approaches for initiatives, what we believe is important include DX service development, strengthening functions, cutting-edge technology development and acquisition, providing implementation and operational support based on consulting and leveraging and expanding the business foundation acquired through M&As. We aim to evolve from stand-alone independent service offerings to building a data cycle-based business that delivers services that address the challenges faced by clients and industries.

Now let me recap the fiscal 2024 performance for the Security DX business. Sales reached approximately JPY 193 billion. Operating margin was 7%, and the overseas sales percentage was 20%. Sales by region is as shown in figure 2. Looking at positioning of Security DX business in numbers, notification services rank #1 domestically, and through M&As and among others, we plan to significantly enhance our global positioning in the payment card and personal ID markets this fiscal year. We anticipate overseas sales percentage approaching 30% in fiscal 2025. That said, challenges remain for business growth. Domestically, we face challenges in integrated model development and high value-added initiatives. Overseas, maximizing investment effects remains a key challenge.

Next, I will explain TOPPAN's strength and competitive edge in this business. We believe the sources of our advantage in this business lie in, first, a data management platform for securely managing sensitive information; second, bulk processing technologies for data processing match to output; third, creative design and implementation of optimal UI and UX aligned to users and media; and fourth, the ability to approach and cultivate untapped markets globally. Moreover, we have the resources to provide full support from upstream planning and development to operation. We believe few other providers can offer a combination of those capabilities.

Next, I will explain the domestic market environment. The primary markets for our Security DX business are Payment, Personal ID and Business Communications. In the Payment Market, driven by the increasing cashless transactions ratio, the digitalization of B2B payment is also expected to accelerate in recent years with future growth projected at around 5%. The Personal ID market exceeds an 8% CAGR and there is a growing demand for enhanced security measures and multifactor authentication. The Business Communication market is also anticipated to expand driven by the trends of digitization and DX as well as diversification of communication channels and increasing personalization.

Next, let me explain Security DX market potential in Japan. The SAM or SAM of 3 major markets is about JPY 1.16 trillion. As you can see in the middle of this slide, because of the changes in social and market environment, we expect that SAM to grow to about JPY 1.9 trillion in the CAGR of about 10%. So toward this target market of JPY 2 trillion, we would like to grow our businesses.

Next is the Security DX growth strategy for Japan market. As I mentioned, in Payment, Personal ID and Business Communication, we can expect the growth of the markets. Those are the 3 focus areas. We will roll out cyclical business model centered on the data management platform we have built. So for example, we have our facial recognition services, and we will link it to authentication, payment, ID management, digital employee cards as well as credentials so that we can expand our businesses centering around the face as a personal ID. In order to enhance the data management platform value, we will form the API ecosystem formation and enhance by acquiring advanced technologies such as payment technologies and blockchain. And through those, we will secure a competitive advantage by expanding the scale of projects and shift to create an operation-based continuous business model.

Next is Security DX overseas market environment. As you can see on the left, mainly in the global South, the population are expected to grow. TOPPAN Group have expanded our footprint in India, Africa and Southeast Asia through M&A. As shown on the right-hand side, in the major target of payment and personal ID-related market, as the population increases, the size of the market is expected to expand.

Next is Security DX growth strategy for overseas market. We have acquired businesses and manufacturing facilities through active M&A. Now we are finally ready to develop businesses worldwide. In Payment business, through the acquisition of dzcard in June, we would -- we have seen the increase of the sites to 16. We will enhance cost competitiveness through the joint procurement and provide value-added solutions to expand business. In Personal ID business, last fiscal year, we acquired HID’s CID business, and now we have 21 sites. And our strength is the government consulting. We have the passport business, ID services for the government, and we would also expand the businesses of the digital election services. In addition, as you can see at the bottom, we aim to roll out security technology, research and development from Japan, combined with IT services and know-how.

Lastly, let me explain vision for 2030. We would maximize DX business growth in Japan, and we expect a CAGR of about 10% from FY '25 to FY '30. As for the business expansion, there are 4 initiatives and try to improve the profitability through operational automation and process transformation. We would also work on the next-generation technology infrastructure, R&D and acquisition. As for overseas, we expect a CAGR of 17% from FY '25 to '30. So we would leverage the result of the M&A and think about the additional initiatives to expand our businesses. And overseas, we expect the size of the business to exceed JPY 310 billion in FY 2030 and aim for overseas sales percentage of 44%. As for the overseas initiatives, we will review the purchasing strategy such as joint purchasing to improve the profitability.

That concludes this part of presentation. Umekawa will explain our Marketing DX business.

Page 28, please. TOPPAN's Marketing DX business supports DX marketing operations across the entire value chain to contribute to subtraction, reducing costs through marketing BPR, and addition generating profit by enhancing customer experience in our clients' business.

Page 29, the market size. The SAM is JPY 1.3 trillion, representing a growing market with a CAGR of 7.7%. TOPPAN's sales are also rising from JPY 23 billion in fiscal 2022 to JPY 49 billion in fiscal 2024, JPY 60 billion expected in fiscal 2025 and JPY 100 billion in 2030. We view it as a market with large scope for targeting further growth as the share of DX for main customer groups such as retailers remains below 30%.

Page 30, our positioning and aims. TOPPAN aims to expand its share through real and customer-centric with client base. The market consists of 4 transformations, infrastructure, organization, business and experience with specialists making inroads in each. It is important to quickly expand our share on the horizontal axis of real and digital and vertical axis of customers and companies. The competitive landscape is intensifying because system integrators and other DX specialists are targeting the digital and company-centric areas. TOPPAN offers services across all 4 transformations while leveraging superiority in real and customer-centric areas where we have a client base.

Page 31, our business model. Creating a cycle of business streamlining and customer experience enhancement is our winning formula. We can propose efficiency improvement that lead to quick results through subtraction in existing operations contracted to TOPPAN. We drive transformation from inside the client's organization through specialist digital marketing talent and hands-on AI support. We excel at establishing robust DX infrastructure by leveraging advanced technologies for product and customer management and extensive track record in implementation. Starting from customer touch points data that can be obtained from there, we can design overall customer experience, including stores and other real elements. TOPPAN's strength is this comprehensive capability to continuously support the cycle of subtraction and addition, maximizing client profits.

Page 32, examples of proposals that resonated with executives. On the left is an example of a food manufacturer. This project advances marketing BPR and integration of global customer experience and product brand management. TOPPAN was contracted to handle product package planning, design and production. From this starting point, we came up with proposals to the client CMO for BPR or ballooning brand management person-hours for global operations. We also centralized and apply AI to information management on external vendors consigned traditionally with product creation. We provide collaborative support structure to enable manufacturer-led brand management. We also introduced a design system to streamline information management for expanding customer touch points. Then we contributed to increased profits for the client by integrating the customer experience over multiple channels to enhance brand loyalty.

Page 33, the value provided. We contribute to profit maximization for clients' businesses by evolving market operations contracted TOPPAN into continuous and cross-sectional DX support and providing subtraction and addition.

Page 34 shows profit targets and initiatives. Toward the profit margin increase of 5%, we listed the challenges as well as solutions. The first challenge is the sales increase based on the solution expansion led to an increase in contracts with low unit price and production efficiency was low. So our solution is to enhance business development functions to scale up unit prices. Secondly, focus on winning new orders led to provision of many single item products and attach rate of about 70%. We will narrow down the number of targeted clients and focus on cross-selling to achieve the attach rate of 90% or higher. Number three is the profit retention function are weak because of the high proportion of the outsourcing. So we would leverage the group resources as a solution. And number four is a onetime cost incurred due to the investment in talent to scale the business. And as a solution, we will shift from the human-dependent model to productivity-led model by using AI and reskilling. Through this, we would like to increase the profit margin.

Next page is the sales targets and initiatives. We will promote the Talent Portfolio Transformation to achieve JPY 100 billion for Marketing DX. While retaining the strength of the conventional marketing organization, we will fuse it with the Marketing DX and aim for JPY 100 billion by providing end-to-end Marketing DX. We will accelerate the talent development by dividing functions into consulting, creative production and operations. As you can see here, we would increase the Marketing DX to 100% in FY 2030.

Page 36 is maximizing project profit. We will try to increase the scale of the contracts. And when the project unit price increases, the capacity utilization rate can be kept down and profit margin increased by 5%. Right now, the average unit price is about JPY 40 million. We would like to increase that to JPY 160 million in 2030. To raise the unit price, we will bolster our offering capabilities targeting top management and launched the consulting organization capable of designing plans to expand the client earnings. And we will head hunt the senior consultants experience in Marketing DX offering to bring the business development capabilities in-house. We aim to increase the number of clients contributing more than JPY 1 billion in the annual sales to about 20 companies in 2030 and expand to JPY 30 billion pipeline.

Page 37 is securing the long-term continuous contract compared with the single item contracts project that involve cross-selling of multiple products, increase LTV to a profit margin of 10% and attach rate of 97% or more. In order to enhance the long-term continuous contract, we would strengthen the creative production organization that co-creates with the clients and aim to cross-sell at least 4 products to 200 companies in fiscal 2030 and generate JPY 3.3 billion in profit by raising LTV.

Page 38 is about maximizing profit per person. In Marketing DX, talent is capital by innovating productivity, annual profit per person can be increased by 160% or more. We will develop an in-house production structure, including the group companies centered on the operation-related business process. Currently, the outsourcing is about 60%, and we would try to retain the profit internally. And to develop the in-house structure, we will strengthen the functional capabilities of the operations organization and raise production efficiency by powering all business processes with AI, intend to raise production efficiency by about JPY 1.7 billion by shifting to the production expansion that does not rely on the personnel expansion.

Next page is in specific strategies. The traditional Information & Communication business has been weighted towards the retail and manufacturing sectors. From now on, we will aim to raise the proportion of the business with contract-based services and infrastructure sectors. We are standardizing offering scenarios for each industry. We will package the subtraction and addition to address the common management challenges within each industry.

Next page is the business investment. We will take steps such as M&A to reinforce in-house structures to secure profits, strengthen the base for powering our business process with AI and launch consulting structure and rapidly develop DX base to support more sophisticated product and customer management.

And that concludes the Marketing DX business strategy. Next, Itotani from Information & Communications Division will explain our BPO business.

Please turn to Page 42. First, let me give you the big picture. Our BPO business derives its strength from highly specialized BPR consulting and business process design capabilities rooted in understanding of systems and industries cultivated in the public and financial sectors, and it delivers value by combining flexible operational infrastructure, advanced security and quality management systems. In addition to simple operations, for those that handle complex and sensitive information, we ensure a robust cycle from, step 1, BPR consulting to step 4, Improvement; and continuously contribute to streamlining clients' operations and increasing their effectiveness. Operations handled by client sector are as shown on the slide.

Page 43. Next, we will explain the market of BPO for complex operations, a key focus for us. We estimate this market to be around JPY 630 billion worth currently with an average annual growth of 5%. BPO needs are expanding due to changes in the environment, such as impacts of labor shortages and organization selection of operations to focus on. That said, we assume the evolution of DX and AI are driving a decline in the business for simple operations due to progress in automation. On the other hand, outsourcing needs are increasing for industry-specific operations, requiring specialist knowledge and complex operations for compliance with changes to laws and regulations. This is aligned with our strengths, and we see it as a business opportunity. As we target complex operations, high-growth market, as shown in the chart, we have set our sights not only on the public and financial sectors, which have been our core markets, but also on the private sector market with similar needs and a certain market size anticipated.

Page 44. This is comparison of positioning by competitors and TOPPAN. In contrast to general BPO vendors, IT companies and consultants, TOPPAN has established its positioning in its complex BPO domain. We have established an advantage not replicated by others by providing the unique value of an end-to-end service from business process design to implementation based on BPR consulting and design capabilities. We aim for turning labor-intensive operations into structure-based ones and transforming them into models that can be standardized.

Page 45 will now explain the competitive advantage that leverage the positioning just described. First, in BPR consulting and design capabilities developed in handling public sector projects, leveraging overall design capabilities based on understanding of systems and client operations, we provide a one-stop service up to improvement, standardization and operational implementation, convert even complex operations previously considered difficult to outsource into an outsourceable format.

Thus, our strength lies in facilitating both efficiency and profitability for our clients while delivering unique value, leveraging the strength in our targeted private sector growth fields as we see frequent regulatory revisions in Pharmaceutical and Medical Device Act affecting healthcare, pharmaceuticals and health foods as well as integration in the energy industry, we proactively identify them early and approach them systematically. Our advanced security system and reliability cultivated over many years in the financial industry and flexible operational infrastructure developed by handling large-scale projects help enhance the strength shown here.

In fiscal 2025, we established a cross-organizational BPO unit to coordinate nationwide operations. Through centralized national management, we have achieved reorganization and efficiency improvements across locations by efficiently investing in system development, including functional reorganization of locations, enhancing workforce mobility and establishing a nationwide production network, we are further refining these strengths. We also leverage DX and AI to achieve fundamental efficiency improvements to meet diverse digital needs, which represent our competitive edge.

Next is scenarios to keep winning in complex operations. In order to win in this area, first, we would leverage the BPR consulting and design conscious of the characteristic of the systems and industries, and support outsourcing of complex operations that have been difficult to contract out. So we will try to clarify the client operations and try to support the outsourcing of the complex operations. And then by next standardizing and implementing shared services for operational structure, we will create and enable broad rollout of stable price competitive operational platform.

And also, finally, we will realize the complex AI utilization models where AI can assist the decision-making and cross-referencing to increase the profitability as a next-generation service supporting productivity and differentiation. We are already seeing the effects of those strategies. In private sector, we handle the management of plan versus results for the regular inspections of the rental properties for real estate industry. Understanding the complex and segmented contract or content of the inspection, we contribute to streamlining the operations while proposing improvements for BPR.

In financial sector, we standardized the models for reception operations for iDeCo, which involves complex processing of multiple form types. And by rolling out a one-stop service handling application via the internet and on paper.

And in the public sector, where we lead, we would -- we use AI for complex screening operations where omissions in application data are prone to occur. And AI performs an automated check when applications are filled and to prevent the problems. And part of the screening process is also automated with AI checking consistency and identifying inappropriate entries. It also supports the screening and drives efficiency by suggesting potential responses to inquiries. And through this, we are starting to see the effects in terms of the profit improvement.

Page 48 shows the vision for 2030. We intend to expand the sales revenue from JPY 77 billion to JPY 83 billion toward 2030. We also aim to grow the growth target of complex operations at CAGR of 10% and strategically shift the proportion of the complex operations from 40% to 60%. We aim to enhance the profitability by concentrating management resources and significantly raise OP margin from 8% to 15%. In terms of the positioning by sector, we will drive the standardization in the financial sector while securing the presence and know-how in complex operations requiring specialist knowledge in public sector and leverage those strengths for the private sector to increase the sales revenue and profit.

Page 49 is the specific measures to enhance profitability. In addition to expanding the sales, we would raise the proportion of the complex operations. And there are 4 major initiatives listed here. The first is talent portfolio transformation. We would acquire, develop and expand next-generation professional talent who can drive high value-added business end-to-end the labor-intensive business.

The second is the business foundation optimization. As I mentioned -- as mentioned earlier, from this fiscal year, the nationwide integrated cross-organization BPO unit started. So we will break away from the business structure reliant on the individuals and bases. And as an action, we optimize bases and reorganize by function and standardize business process and others.

The third is AI shift acceleration. As mentioned in the case study, we will automate high difficulty intelligent operation with AI to dramatically transform the cost structure and develop the original core AI engine and AI apps that solve business challenges. We aim to increase the percentage of the complex process handled by AI from 5% to 30% in 2030. And through those measures, we will try to contribute to the sales expansion.

That concludes the BPO explanation. Now last but not least, Shibatani will explain our IoT and Auto-ID business.

Please turn to Page 51. This business has traditionally been our RFID and IC tag business, which we have pursued since the late 1990s. However, over the past 6 years, we have significantly transformed its business model. I will explain both external environment, namely the market and internal environment, namely our company's initiatives. We began this transformation in 2019. Prior to that, we had advanced as a business providing IC tags driven by large-scale RFID implementation projects overseas. However, starting in 2019, coinciding with the rapid expansion of DX needs, we shifted our strategy, moving away from focusing solely on tags as stand-alone products and aiming to become a business supporting DX in manufacturing and logistics.

Over the 6 years, we have developed digital services, expanded functionality, pursued acquisitions and formed partnerships and have built a track record of orders across industries, including automotive, semiconductors, materials and medical devices. Currently, the market needs continue to grow and our service lineup expansion is largely complete.

Moving forward, we'll deploy a continuous model based on integrated packages.

Page 52, factors improving profitability. Previously, our approach centered on single items and onetime model, resulting in profit margin of around 3%. Starting in 2019, we transformed into a DX business through upfront investment, building a business model characterized by high scalability, expanded system maintenance and operation and the ability to offer consulting proposals leveraging AI and data utilization. Going forward, we plan to promote an integrated packages business model, providing continuous service, aiming to achieve a profit margin of 13%.

Page 53. Now let me explain the details of this business. This business targets the market for streamlining related to things such as manufacturing and logistics against the backdrop of recent advancements in DX, AI and IoT technologies. Centered on data accumulation and IDs for people and things, it contributes to the realization of digital society using AI and IoT.

Please turn to Page 54. The business is defined as one that gives an ID to everything, generates data and creates customer value. The value provided is by using devices like RFID tags integrated with products and operational infrastructure for capture data, the ID management platform as a core to enable customers to streamline their supply chains and enhance trust through traceability.

Page 55. This is the overall service vision. We provide IoT integration services for domains requiring high value-added functionality and quality. Specifically, we advanced the Smart Factory business for manufacturing and the Smart Logistics business for the logistics industry, the Smart Healthcare business for the health care and pharmaceutical sectors and the Brand protection business for Premium markets like the luxury industry. Among these, Smart Factory and Smart Logistics face growing urgency in addressing critical challenges such as ensuring traceability and complying with new regulations driven by shrinking workforce, rising societal quality demands and evolving DX technologies. Smart Healthcare faces challenges in eliminating medical errors and enhancing reliability. In Brand protection, alongside preventing counterfeit distribution and enhancing user engagement, EU has mandated DPP, digital product passport compliance to enable product life cycle management. In Japan, companies exporting products to EU are also seeing growing demand for traceability solutions.

Please turn to Page 56. This shows the global market scale. Size of 4 RFID markets, including software and hardware is shown here. SAM represent the markets where we can differentiate with our IoT integration. In all of those 4 areas, we expect the continuous expansion with the development of the technologies. In 2030, the total SAM for 4 markets are expected to be JPY 400 billion.

Please turn to Page 57. This shows our competitive advantage. Our strength is in the security business expertise that we have fostered since the foundation, and we also have understanding of the clients' challenges and planning and proposal capabilities. We have been promoting this business this way. We also especially have the flexibility and scalability so that we have a various micro service lineup that we can combine to respond to the different needs of the customers in a flexible and quick manner. And we have a track record of the past 6 years being chosen from the automotive and semiconductor companies. And the approaches to the client starts with the proactive introduction of the best practices and consulting for implementation, initial implementation, convert to stock, functional expansion and data usage.

Please turn to Page 58. This is an example of contracts. In Smart Factory, we support the production DX of metal materials company. We combine the micro services, and we have a very quick delivery and we have expanded into the third factory after FY '23. In Smart Logistics, we provide the vehicle location management system for an automotive company when they transfer the finished vehicles to the vessel for export. In Smart Healthcare, we provide RFID tag for prefilled syringes to prevent the errors when the medication is administered for a medical devices company.

Page 59 shows the competitor comparison. We are #1 in terms of the market share of the -- in the Japanese high-end RFID market. Our competitors are various, including material handler, RFID provider, leading system integrators. They are basically focused on the large client individual contracts as well as a single service provision in the areas that they are strong. But these days, the market demand, the flexibility and scalability as we explained in the metal materials customer. So not replacing the current resources at one time, but gradually rationalize in the multiple years based upon the priority. So this applies not only to the SME, but to the enterprises. And currently, we are the only company who can provide both flexibility and scalability.

Lastly, Page 60 is a snapshot and vision for 2030. The FY 2025 expectation is JPY 23 billion sales and 3% operating margin. But for FY 2030, our target is JPY 44 billion in sales and operating margin of 13%. The market is being formed for this business. So the size is not so big, but we expect the market growth to be around 10%, and we expect our CAGR to be about 13.4%.

That concludes the Information & Communication Business Strategy Briefing.