Honda Motor Company, Ltd.

Thank you very much for taking time to view our program today. Now we'd like to start Honda Motor Company Limited's fiscal year 2022 second quarter financial results presentation meeting. My name is Okamoto from Corporate Communications, facilitator for today. Allow me to introduce today's presenters. We have our director, executive vice president and representative executive officer, Mr. Seiji Kureishi. Good to see you. And director, senior managing executive director, Mr. Kohei Takeuchi. Good to see you, everyone.

I would like to begin by expressing my profound gratitude to the support given to us by our loyal customers, supporters, and all other stakeholders around the world. Currently, there are customers who are waiting harder products. We sincerely apologize for the vehicle production delay and the inconvenience caused. The drop in production attributable to a combination of Supply shortage of certain parts, including semiconductors, and lockdown in mainly Southeast Asia due to the resurgence of COVID-19 was greater than our previous forecast. As a result, FY 2022 Q2 automobile group unit sales was 917,000 units. Honda is developing alternative equivalent parts and taking other measures to promote dual source of components. We will recover production from the beginning of next year, but given the prolonged lockdown in Asia, amongst others, FY 2022 automobile group unit sales forecast is revised downward from 4.85 million units to 4.2 million units. With the cooperation from various stakeholders, we will strive to keep impact on production to a minimum, and we will work to deliver our products to our customers as early as possible. I'll move on to present the outline of FY 2022 second quarter financial results and fiscal year 2022 financial forecast. FY 2022 six-month unit sales was motorcycles, 8,173,000 units, automobiles, 1,915,000 units, Life creation business, 3,230,000 units.

Next, the main markets.

Japan's six-month industry demand exceeded the same period last year, but the three-month sales was hard-hit by semiconductor supply shortage and was below the same period last year. Despite strong sales of vessel, Honda's three-month unit sales was down from the same period last year. N-Box series set number one sales in minicar segment for the first half of FY 2022. Forecast for FY 2022 industry demand is expected to be strong despite semiconductor shortage. Honda has revised the previous forecast given the current production situation. Next is the United States. Industry demand recovered due to stimulus package and others. Fiscal six months total was above the same period of the previous year. Second quarter three months was lower due to semiconductor supply shortage.

Honda performed the market growth with light trucks as the main driver. Passport updated its single month sales record.

It set an all-time monthly sales record in September. In June, we announced the name of the first Honda brand volume EV SUV in North America. The name is Prologue. FY 2022 industry demand forecast, despite semiconductor supply shortage, Honda has revised the previous forecast reflecting the current production situation. Next, China. Industry demand recovered primarily due to economic stimulus measures, but semiconductor shortage resulted in a demand lower than the same period last year. Honda also saw strong sales of XRV, amongst others, but the Q2 three-month sales underperformed the same period last fiscal year. Calendar year 2021 industry demand forecast expected to stay strong, exceeding last calendar year.

Honda will increase its EV lineup and offer attractive products.

In October, we announced our electrification strategy in China. Our first Honda brand China EV car EN series was unveiled. Honda's omnidirectional advanced driver assistance system Honda Sensing 360 will be deployed in China in 2022. Moving on to our motorcycle business, industry demand. In many countries, demand recovered and exceeded the same period last year. Honda's Q2 six-month total exceeded the previous year, but regarding the second quarter three-month total, wholesales dropped from the same period last year in Vietnam and Thailand due to resurgence of COVID-19. FY 2022 forecast, industry demand, though there is still concern over a COVID-19 resurgence, demand is expected to increase steadily. Honda revised upward its forecast, primarily based on the current sales in India and Indonesia. Outline of FY 2022 forecast, three months' results. Despite the impact of semiconductor supply shortage and increase in raw material costs due to positive effects of unit sales increase, cost reduction and currency, operating profit increased 272.9 billion yen to 442.1 billion yen. Also, the earnings per share attributable to owners of the parent due to increase in share profit investments accounted for using the equity method increased by 229.1 billion yen to 389.2 billion yen. Unit sales and income statement are as shown. And next, FY 2022 financial forecast. COVID-19 resurgence, shortage of certain parts, including semiconductors and rise in raw material prices are expected to continue. Although we anticipate a harsh external environment, reduction in SG&A, cost reduction, and other profit enhancement efforts are expected to result in maintaining operating profit at 660 billion yen, equivalent to last fiscal year. Unit sales and income statement are as shown. Next, about dividends. FY 2022 interim dividend is 55 yen per share. annual dividend outlook remains unchanged. Honda will strive to continue to realize stable shareholders' return aiming towards a payout ratio of around 30%.

Now we'd like to have Mr. Takeuchi, our director and senior managing executive officer, to provide details for our quarter financial results and forecasts. Okay, allow me to explain. Looking at the results of the second quarter for the three-month, unit sales of Honda Group showed declines in Vietnam and Thailand in motorcycle operations, declines in China and the U.S. in automobile operations, and an increase in the U.S. and other markets in life-creation operations. Turning our eye to the earnings, sales revenues due to lower sales and automobile operations declined from the second quarter last year to ¥3,404.3 billion. Operating profit was, due to reduced profit from lower sales revenues and model mix, ¥198.9 billion. And equity in earnings of affiliates was, due to reduced profit in China, it was 51.3 billion yen. Next, I would like to explain the different factors affecting profit. Pre-tax profit for the second quarter was 249 billion yen, which was down by 96.6 billion yen compared to the same period last year. operating profit was, even though there was an increase due to currency effects, due to decreased sales revenue and model mix leading to lower profit, it was 198.9 billion yen, down by 83.9 billion yen versus same period last year. Next, going to our financial results by business segment. Operating profit for motorcycle operations was due to reduced profit due to volume fluctuation model mix. It was 67.4 billion yen. Next, going to operating profit from automobile operations and operating profit related to automobile sales included in financial services operations is expected at 127.7 billion yen added together. Operating profit from automobile operations was due to volume decrease and lower margin from model mix, it was 46.4 billion yen. Operating profit from financial services operations was due to difference in the amount posted as provision for credit losses, 84.5 billion yen. Next, looking at the operating profit for life creation operations and other operations, it was 500 million yen. Of this amount, the operating loss from aircraft and aircraft engine was at 7.2 billion yen. Next, the earnings for the first half of the fiscal year are shown on the slide. To explain the factors affecting the profit, pre-tax profit was 560.3 billion yen, which is up 288.1 billion yen versus the same period last year. Operating profit was, due to sales change and model mix impact, increased as well as currency effect, 442.1 billion yen, which was 272.9 billion yen up from the same period last year. Next, the free cash flow for the non-financial services operations for the first half of the fiscal year was minus 18.7 billion yen, and the balance of cash and cash equivalents at the end of second quarter was 2 trillion and 310.6 billion yen. Now I'd like to explain the full year forecast for the consolidated performance for the 2022. First, the sales volume, the unit sales of the Honda Group Our forecast for motorcycle operations is 17.5 million units, which is up 100,000 units compared to the previous forecast. In automobile operations, considering the impact from shortages in parts supply, including semiconductors, our estimates are 4.2 million units, down 650,000 units. In life creation operations, our prospects are for sales of 6.1 million units. The financial forecast for fiscal year 2022 on a consolidated basis is shown here. To explain the factors affecting the forecast, pre-tax profit is expected at 860 billion yen, down 54 billion yen compared to last fiscal year. For operating profit, there have been a positive effect from currency effect, sales revenues, and model mix, but this was offset by surging raw material prices and differences from both sellers' provision for credit losses and other SGA expenses increased so that the operating profit is expected to be flat as last fiscal year. Equity in earnings of affiliates was, because in the previous fiscal year we had posted a temporary one-off impact of 56.8 billion yen due to TOBO3 affiliates, it is expected to be lower by 72.7 billion yen. Comparing our new forecast to our earlier forecast in August, pre-tax profit is expected to be lower by 140 billion yen. In operating profit, though, SGA reduction and currency effect generate positive impact. This would be offset by reduction in earnings due to sales about a revenue decline and model mix. Now the forecast is for 660 billion yen, down 120 billion yen compared to the previous forecast. Lastly, our prospects for capital expenditure depreciation R&D expenses are as shown on the slide. This concludes my presentation. Thank you very much.

Thank you for your listening. And now we would like to proceed to questions and answers. To the media, we ask you to use the Zoom that we have informed you in advance when asking questions. In the interest of time, please limit your questions to two per person. Anyone have any questions, please press the raise hand button. Thank you.

The first question.

This is Abe from Nikkei. First, about the group sales unit and the revision that you've made. Well, there's a new number, 4.2 million. What is the accuracy, the outlook of semiconductor shortage and the prospect of being able to secure the semiconductors? What measures you're taking to enhance the prospect? And also, from April to September, the world production, how much reduction in production did you see compared to the original plan? The second question. Well, currently there is the shortage of semiconductors, but the profit that has been undermined, be it the automobile reform or investment in EV vehicles, does not have any negative impact on your future plans. So can you elaborate on your views as to how the current shortage will impact future plans? First, let me talk about the impact of semiconductor shortage. First, last time, some of the suppliers experienced a fire and there was a shortage of supply as well as the low temperature in the United States and lockdown in Southeast Asia. Therefore, we believe that It was a one-time impact, but we decided to reduce our prospect to 4.8 million from the 5 million originally anticipated. But we now see that the shortage, the supply shortage, has even more serious and will last longer than the lockdown has likewise. So it's been reduced to 4.2. Well, we were anticipating that we will see a recovery in supply from the third quarter, but regrettably, because of the long duration of the lockdown in Southeast Asia, we were unable to do so. We are planning to make a recovery from the beginning of next year, but we believe that it will be difficult to achieve the recovery by the end of this fiscal year. As for the prospect of being able to secure the necessary semiconductors, we have yet I'm trying to look into this now. As for the future prospect, due to the shortage of semiconductors, we don't know what the challenges will be in the future. We are starting to see improvements now, and we are also working to ensure dual sourcing so as to gain toughness against these incidents and cope with the supply chain situation. So we are currently preparing for next fiscal year. And in addition to recovery production in the next fiscal year, our model cycle will be at a very good timing, and therefore we will do our very best to meet the demands. And also, about the April-September production, Well, I'll explain about that later. And whether the current drop in production will have an impact on our future strategies, that part of your question. As I said earlier, from next fiscal year, we believe that the semiconductor supply will improve.

And this fiscal year, well, this negative,

Operating profit. Whether this will have a direct impact on automobile reform EV? No, we do not think so. Thank you.

Thank you very much for the global production. Corporate Communications will provide an answer later. Okay, the next question is from a Yomiuri newspaper. Mr. Katagiri, over to you. This is Katagiri from Yomiuri Newspaper. I hope you can hear me. Yes.

Okay, thank you. The impact from reduced production

Japan and China, it's okay. Sorry, it was lower than expected. But in the States, there was a good demand. But probably other than the models, was there any reason for the better demand in the U.S.? And then if you could share with me the regional differences about the demand going forward for the rest of the fiscal year. So I guess I think for November, so still the demand is very low, but I just wonder how the demand are for the rest of the world. My second question is a prospect for the future, but the raw materials, prices, and then the risk for China, how do you view the risks in China? Okay, thank you. Okay, I'm repeating myself. But with the COVID-19 impact, and then the harbor traffic congestion, the lockdown in Asia impacting the ports, there are various factors impacting the supply chain. That is the current situation. Particularly the lockdown in Asia, those are having a prolonged impact compared to our initial estimate, but we'd like to continue to minimize the impact we suffer. So about stock inventory allocation, and we are reviewing our allocation and production stock situation on a weekly basis. And then we are trying to monitor the supply, particularly the semiconductor. And if there's any shortage, we will adjust. We are adjusting production on a global basis. Maybe we need to monitor the balance across different regions and then consider we are doing allocating the semiconductors. But the semiconductor, of course, there are many different types. And depending on our parts and components, There are available ones and not so available ones that there are differences. So I can't say generally, but basically our stance is that along with the sales planning, we do proper allocation, but because different models are there, so there are differences between different regions as a result. But in principle, going forward as well for different regions, We will continue to monitor the sales situation on a weekly basis and continue our timely allocation. That's our strategy. And then for the power shortage in China, Currently, as of now, for the two joint ventures in China, we have not seen any impact due to the power shortage, including their suppliers. So we will closely monitor the future conditions and then take actions if needed. But currently... the Guangxi, Honda, and then the other entity as well. Those are important production sites in those regions, in this region. So they are closely monitoring the situation. So we would like to continue to monitor the situation closely together with the central government to monitor the situation. Thank you.

Thank you. The next question. Asahi Shimbun. Mr. Kamiyama, please. Asahi Shimbun newspaper. Kamiyama, can you hear me? Yes. Two questions.

First, you said the group...

Unit sales have been reduced from 4.85 million to 4.2 million. I think that we are already seeing delivery delays now. But as a result of this reduction, what impact will it have on sales? And also, how long do you think the current situation will continue? That's the first question. The second question. Well, on the one hand, production is declining, but the United States is seeing a drop in sales incentive, and this is a positive for your performance. So how much incentives have been reduced, and what impact has it had on your corporate performance?

Please.

Well, first I will respond to the unit sales, the semiconductor supply delay. has resulted in us having our customers wait for the delivery of our products. We apologize for the delay. Currently, based on the plan that we have for the unit sales, we are coming to communication to ensure the delivery date. We don't think that we'll see any further delays. But COVID-19 impact, we have to see what impact will continue. So observing the situation, we will try everything to try to deliver our cars to our customers as early as possible. So as for semiconductors, as I said, from the fourth quarter, we believe, that we will start to see a recovery, and we can enter into a recovery production phase. That is all. Thank you. Allow me to explain about the incentives in the United States and what impact it has on our performance, especially the incentives Because of the large volume and the amount of money spent, the biggest part is in the United States. But as you know, because of the delay in component supply, production is down, and the inventory at dealers are really short. And because of this, in the past, at the dealers, there were these incentives had to be reduced significantly because of that from the unit sales. And this declined. This has turned out to be a positive.

In North America, the last fiscal year, there's the auto rater data.

There was about a 200,000 yen incentive per vehicle, but this fiscal year it will be slightly above half of that. The incentive includes the loan incentives, and it cannot offset the drop in unit sales, but still it is positive for us.

Thank you very much. Then the next question will be from Nikkan Daily Automotive. Mr. Mizutori, please. Good afternoon. This is Mizutori from Daily Automobile Newspaper. I have two questions. My first one is raw material price surging. At the beginning of the term, I think you were expecting a 250 billion yen impact throughout the year. But by changing your forecast, any impact? I mean, of course, sourcing prices, that's something you need to take into consideration. Would you consider repricing the final product? Another one is the RCEP that's starting in January. Do you have any expectations for that? Of course, vehicles and other parts, all of those are localized, I'm sure, in your case, but I would just like to know what your expectations are. Thank you. Okay, let me answer about the raw material prices. Oh, it's true. As Mr. Mizutori said, at the beginning of this fiscal year, we said that 250 to 260 billion yen are surging, higher prices for the full year. And that included the metals. precious metals that's used in the catalyst because the prices are really so so that's why that's why we came up with that expectation but the precious metals unit price has of course there are some intervention for the government and they are coming down somewhat from the peak but aluminum and steel those other materials for those So we are still expecting the higher prices of those. And then, so we still incorporated those increasing prices of those other materials. But right now, still we are expecting a 260 billion yen or so impact. But any incorporation into the selling prices? No, we cannot transfer all those cost increases to our vehicle prices, but we will monitor what the competitors are doing, and then we might, we will monitor what the competitors are doing, and we might include the increase of prices if it's okay with the customers. Okay, so for RCEP, we are far advanced with the localization because we want to produce where the demand is. So we don't think there's going to be that bad impact, but we will monitor the situation and take actions necessary. Thank you.

Thank you very much. Next, automotive news.

Hans, please.

Yes, please. Thank you. I have two questions. One is about the foreign exchange rate. It's been a real tailwind for a lot of Japanese automakers lately. I think you're keeping it steady for the rest of the fiscal year. Do you expect this exchange rate to maybe help you improve your full year results in the end if it keeps moving in this direction? And the second question is, is about your provisions for the shift to electric vehicles. When will we start to see some kind of investment or outlays or announcements from Honda about your investments in batteries or new electric vehicle lines or factories? Already we hear from other Japanese automakers about their investments in electric vehicles. but yet they don't even have as ambitious of plans of total makeover for electric vehicle only as Honda. When can we start to see or expect some announcements or provisions from Honda?

I have two questions. First, I would like to ask about the wind. I think this is the wind that is blowing for car manufacturers right now. I think you are assuming that the wind will continue to move forward in the future, but do you think that if the wind moves in this direction, it will lead to considerable improvement? The first is the effect of carbon dioxide. The second is that EV cars are shifting more and more. When will there be a specific announcement about investment? Investment on batteries, investment on new EV lines, investment on factories, etc. すでに他の自動車メーカーなどは EVに対する投資を発表しています しかもこれらのメーカーは ホンダほど野心的な完全なEV化といったような 目標を設定していないにもかかわらず そのような発表をしております ですのでホンダはいつごろ 具体的な投資等に関する発表をされるのでしょうか

Well, let me try to answer your foreign exchange question.

Yes, as Hans says, the foreign exchange – well, on the one hand, we are supplying components in North America, and also we have to convert the North American profit to Japanese yen. So the foreign exchange – It has a big impact on us. The weekend is favorable for us. And if you compare the forecast last time from the second quarter, it was 105 yen, and it's actually 110 in the second quarter. And in the third quarter after... we have replaced it 110 yen against the dollar. So because of this, we are seeing an impact of some 50 billion yen on our profitability, our revenue. But as we hear, there are the quantitative easing being reviewed in the United States. And so I think that there might be a shift towards a stronger dollar And this would be a positive. But when it comes to a strong dollar, well, we're not just doing operation in the U.S. and Japan. We're doing Brazil, supplying the United States and also Thailand, et cetera. So the local currencies, if they become weak, then the imported components will see a negative impact. So we have to look at the overall situation. It's not as simple as say that we just look at the U.S. dollar and see the weekend is advantageous. No. But what we're saying is that we have to be – well, if there's a $1 swing throughout the year, then we see an impact of $1.12 billion. So in the second half – I hope that we see a tailwind. But it's not as simple as that because we have to think about other currencies other than the U.S. dollar. About the shift to EV and the specific strategies. Well, in regards to transition, yes, battery, we want to – partner with the best for the local GM in the U.S. and the CATL in China. So we are working with those partners, and we are already making the investments necessary for other regions as well. We have to look at the local conditions, et cetera, and consider various possibilities, including alliance. As for factories, the other day in China, we announced our EV strategy. And GHAC, WDHAC, we said that we will start to aim towards operation so that we can establish an environment-friendly factory. So as for the details, well, I'm not in a position to disclose them now, but we are making such preparations. And when the time comes, we will be able to announce to you, including the investment numbers, what we are doing. But please allow me not to disclose those numbers today.

Thank you very much. Then the next question is from NewsPix. Mr. Hirooka, please. Okay, thank you. My name is Hirooka from NewsPix. Yes, we can hear you. Earlier, this was mentioned about the semiconductor shortage. I would like to ask a little bit more detailed question. And at the same time, your actions for the future, for going forward. About the semiconductor shortages, you said that there are many different types, but when it comes to the most It is not that the most advanced semiconductors only are used in the automobile. So I believe some ECU contain those 200 micrometer wafer, those legacy types are used as well. So the legacy semiconductors... For the semiconductor producers, ROI is low, so they don't have a priority on producing them first. So as the shortages get resolved, that type of production might be a bottleneck. Do you agree with me? And then another question is, are you trying to do some ECU integration so that you might come up with a new technology for production, like using 28 nanometer or 22 nanometer ECU? Would you be considering integration into those types over like five years or so? I'm just wondering if you have that kind of strategy. And then my second question is concerning the prospects for the raw materials, resources, prices. I think back in 2017, there were some surging prices. So I'm sure that there is a chance that it might go down, but like copper and then rare metals, because people go to electronics, those prices, the demand will be increasing for those structurally. So I believe even if there's some fluctuation in the prices, they will be structurally, the long-term, I believe, the prices might go up. I'm just wondering if you have that kind of prospect for the prices. For the semiconductor, long-term... Of course, we need to think about how much of a stock we want to hold, and then we might think about reviewing our contracts, about purchase agreements, also relationship with the semiconductor manufacturers. We need to consider the supply chain, and also We need to maybe try to increase our toughness against semiconductor supply issues, like working with the tier one companies. So we are taking those actions at the same time. Currently, we are doing tests to use off-the-shelf semiconductors as well. And then with that, we are trying to think of different options to obtain semiconductors, secure semiconductor supplies. Of course, we believe that the semiconductor shortage will continue going forward, so we will continue to think of and then take actions in order to secure stable supply of semiconductors in different ways. That completes my answer. Okay, and then about our view on the resource prices. As I mentioned already earlier, it is true that the PGM for the precious metals at the beginning of the fiscal year, because of the speculation, there was a unit price went really surged high. And depending on the market, there are some metals. where structurally the demand could be high. So we do consider the price can stay high structurally or long-term. So how do we minimize the impact from that? So maybe we come up with alternative materials for that for certain parts in the cart, or can we review our specifications so that we can reduce the amount we use, and then the purchase contracts can maybe do long-term contracts, And then we will take actions, different actions, and if it has to be, we might transfer the cost increase to the prices. But anyway, so simply put, we do expect that there is a possibility that the prices go up. Okay, thank you.

Next question. NHK. Mr. Tsubui, please.

from NHK. How do you do?

About the raw material, this is a follow-up to the previous question. Crude oil price is extremely high now. Well, steel, aluminum, you gave those examples, but about crude oil price, Price. Sorry. I think that this has an impact on resident manufacturers. So how much of an impact does it have? Currently, how much of an impact is it having? And going forward, if this should continue going forward, how much impact are you foreseeing? As we've been saying, yes, oil is about $85 per barrel, so it's extremely high. And resin, you said, yes, and plastic, they are being made from crude oil. And the painting, the coating on cars, again, this is made from crude oil. Currently, the prices have not gone up, but if the crude oil prices continue to soar, it will have an impact. The question then is how will we come up with alternative materials? We are currently researching that so that we would try to absorb the cost increase coming from the raw material cost increase. So we also try to offset with reducing the cost in other areas. so as to be able to offer our customers with good products. Yes, as you say, Mr. Tsuboi, the components that we use and the impact of crude oil price increase is something that we are factoring in. Thank you.

Thank you. The next question comes from Weekly Toyo Keizai. Mr. Yokoyama, please.

This is Yokoyama from Toyoke.

Thank you. I have two questions as well. First one is the profitability, profit margin in automobile business. So it's a 2.6 percentage at the end of second quarter. So it looks like it's gotten better from 1.0 for the full term, but how do you view that? You talked about the incentive coming down, but I'm just wondering if the automobile business renovation is bearing fruit. Or I'm just wondering if maybe the stock has gotten lower, but maybe that's what's boosting the profitability. My second question is about the battery. So you said you are thinking about a lot of investment. You have not made it clear whom you might team up with in Japan. I'm sure you cannot mention any name, but if you could tell me your approach. So you've got GM Estates and CATL for China, but do you have any multiple sourcing idea for those markets as well? Thank you. About the automobile business operations profitability, as Mr. Yokoyama said, the automobile business, we consider this a big challenge in our company, so we have been working to renovate, innovate. the profitability of automobile business. And then within that, in the production volume, we wanted to optimize the production volume. So in the UK and Turkey, we have compressed fixed cost in those markets. And then even amidst the COVID, we have had some good results. So for UK, let's say we have stopped the production already, and then the Sayama plant will close at the end of December. And also, we have some brought in some organizational changes that brought some efficiency at R&D. So the automobile development team used to be in R&D. We have moved it to Honda Motors organization so that we can provide better efficiencies or better products to our customers through lower prices. So we have been doing those innovation projects. So we are seeing good benefits. But this would take several years for the full benefits to come through. So by then, we will have solid profitability from automobile business. But if you think about the efficiency of development work and the optimization of production, And then I don't know how we still need to consider how we are going to do this together in the EV business. So we will need to wait to our next opportunity. So, so far we have been optimizing and then we have been getting better benefits from optimizing the existing businesses anyway. And then now the incentive is lower and then the stock level is lower, so profitability is getting higher. So do we have to bring back the incentive when the stock comes back? I guess we cannot really say no outright considering the competition. But now we've come up with a good profitability structure, foundation for structure. We probably would have to work better so that we can provide better products, better value to our customers at a lower incentive. So, you know, it's not going to be that, you know, the incentives comes right back just because the stock went back up. So we hope that we can continue to secure good profits. Okay, about the battery strategy. As I mentioned earlier, for large markets, for China and then states, like I've said, we've got GM for states and then we've got CATL for China. Those are the ideas we have. And at the same time, for Japan and for other markets, Right now, we are still considering, but our stance to that is that for Japan, we want to produce batteries in Japan and then consume them in Japan so we can contribute to the local economy. That's the consideration for the Japan market. We don't have any specific thing we can share with you. And then also for multiple sourcing for the other markets, for the States and the U.S., We need to think about the state-China relationship as well. So we need to closely monitor the situation and then make decisions. There is a possibility, I'd say. That's all I can say for now.

Thank you very much. The next question will be the last question. Nikkan Kogyo Shinbun Egami-san, please. Ms. Egami.

Ms.

Egami, can you hear us? Please check if you are unmuted. Ms. Egami, can you check whether you are unmuted?

We apologize.

She doesn't seem to be able to unmute. So with this, we would like to conclude today's FY22 second quarter financial results presentation material. And what we have presented today will appear on our website. Thank you for joining us today.