Bridgestone Corp Ord

Ladies and gentlemen, thank you very much for listening to the earnings call hosted by Bridgestone Corporation. Let me introduce to you the members from Bridgestone. Global CEO and Representative Executive Officer, Shu Ishibashi. Global CAO, Global CSO Yasuhiro Morita. Global CFO, Global Financial Division Head Naoki Hishinuma. So three executives from Bridgestone will explain the matters. First, I would like to begin by asking Global CEO Shu Ishibashi to talk on the summary of financial results for the first half 2025 and fiscal 2025 guidance. Hello to everyone. I am Ishibashi, Global CEO. Today, I will provide an overview of the financial results for the first half of 2025 and the four-year guidance. Bridgestone has designated 2025 as the year of emergency and crisis management. Amid a global environment marked by the heightened uncertainty due to factors such as US tariffs, we are advancing our management, strategy by anticipating the business structural changes on a country and market specific basis. So that we can turn changes into our opportunities going forward. First half performance saw the revenue of over 2.1 trillion yen, adjusted operating profit of approximately 235 billion yen, and an adjusted operating margin of 11.1%, representing an increase compared to the prior year. The impact of U.S. tariffs in the first half was minimal due to the maritime transportation and also inventory lead times. Results are in line with the plan announced back in February 2025. Net income from continuing operations includes business rebuilding cost, booked as adjustment items, resulting in decrease compared to the prior year. In terms of sales, strong sales of tires for passenger cars, trucks, and buses, as well as mining and aircraft premium tires, and improvements in the sales mix continued. Additionally, the effects of the second stage of business rebuilding have begun to contribute to performance, primarily in Europe and the US. Global business cost reductions have achieved results exceeding the plan, contributing approximately 35 billion yen in profits during the first half, and they're steadily supporting performance under challenging conditions. We will continue to carry through what we have decided to do, and starting from the second half, we will start growth with quality from markets to growth. We will provide detailed explanations by area of management priority. The North American business achieved a profit increase across the entire premium tire segment. The commercial truck and bus replacement market business, which is a strong business foundation, continued to expand sales ever since the first quarter and improved profitability. Looking ahead to the second half, we anticipate a decrease in low-priced imports due to U.S. tariffs and an increase in demand for major brands. We will leverage both the Bridgestone and Firestone brands to capture further sales expansion opportunities. In the consumer tire business, We are accelerating business rebuilding and multi-brand strategies for Bridgestone and Firestone, and while progress is gradual, results are beginning to emerge. Progress on these initiatives will be explained later. Next, regarding Latin American business, which is a key management issue. Argentina has improved its adjusted operating margin to 12%, while the business in Brazil continues to face significant losses exceeding our expectations. Since May, we have refreshed our management structure, prioritizing the improvements in management and operational quality, and have improved operations based on Genbutsu Genba. A global team is driving initiatives to enhance productivity and reduce costs, and we were able to slightly reduce the loss margin in the second quarter compared to the first quarter when we hit the bottom. Going forward, we will continue to focus on rebuilding from production to sales and aim to achieve profitability by the final quarter. The European business has strictly adhered to the principle of focusing on quality. We have steadily focused on business rebuilding and achieved year-on-year profit growth for the second consecutive quarter. In the truck and bus tire business, We implemented measures such as optimizing production facilities and achieved break-even levels in the first half, excluding retreads. The retail business also continued to achieve year-on-year profit growth and narrowed its loss margin. Both for truck and bus, tires and retail, the tire operations aim to achieve sustained profitability for the four-year. In the passenger carbon tire business, we achieved both higher revenue and profit compared to the prior year, continuing to expand sales focused on higher rim diameter tires. The premium tire business as a whole achieved a profitability level of approximately 5%. By the end of 2025, we will thoroughly complete business rebuilding, and in the next phase, we will strive to achieve growth with quality. The Asia Pacific, India and China business are the second home market. We achieved a solid operating profit margin of 12% after adjustments and reported an increase in operating profit compared to the prior year. Consumer tire business in India positioned as a gross market achieved expanded sales and increased market share in the premium segment of high rim diameter tires compared to the prior year. Additionally, Thailand is strengthening its business rebuilding efforts and improving profitability. The specialty tire and solutions business maintained robust sales in mining and aviation, sustaining a high-profit structure with an adjusted operating margin of 20%. Furthermore, B2B solutions are steadily expanding through co-creation with customers. However, rising raw material prices, Time lag and price adjustments linked to raw material and exchange rate indices for mining tires and significant declines in profits and losses for agricultural machinery tires have dragged down performance, resulting in a year-on-year decline in profits. Next, I will explain the progress of our defense and offense activities for 2025.

Our defense involves business rebuilding, which is the second stage. Bridgestone West has consolidated European retread production facilities, reduced production capacity of European truck and bus tire business, closed La Verne plant in the United States, and optimized workforce across various functions in North America. Bridgestone East has announced the transfer of shares of a domestic logistics subsidiary and the transfer of the in-house carbon black business in Thailand and Mexico. We will continue to review and implement measures for 2025, including streamlining the multi-layered structure of the Japanese tire business and rebuilding of diversified product business. At the core of our offensive strategy is the expansion of our Danto II products. Without Danto II products, there can be no growth with quality as our guideline, we are enhancing the Danto II product power globally. In 2025, in the premium tire segment for passenger cars in North America, we launched two models of Taranza equipped with Enlighten in the first half of the year, and in September, we plan to launch a new Alenza product. Firestone also launched the new Affinity as all-season Affinity in April. In India, we launched a new product last year that led to sales increase in 2025. In Japan, Under the premium tire brand Regno and the winter tire Blezac, we will launch new Dantotsu products to improve the sales mix, expand sales, and market share. In the truck and bus tire segment in North America, Japan, and Europe, we expanded Dantotsu products by launching new products equipped with Enlighten in 2025. expanding our product lineup. We would strengthen our business in collaboration with retread and fleet business expansion. We are continuously pursuing and strengthening steady global business cost reduction to support performance. For the full year of 2025, we anticipate an effect of approximately 61 billion yen over the previous year. Cumulatively, from 2024, the overall effect of these activities is projected to reach around 136 billion yen, which is one year ahead of the target of approximately 100 billion yen set in the 2024 Mid-Term Business Plan. In BCMA, we are focusing on improving production costs through the Genbutsu-Genba approach. We anticipate an annual effect of approximately 1.5 billion yen over the previous year, and in 2026, we will expand the benefits to procurement and logistics, accelerating the increased contribution to performance. Turning to markets to grow. In our U.S. business, we are anticipating changes in market structure and are promoting consumer-tired business rebuilding. The Bridgestone brand will maintain its premium focus and will link the expansion of Danto to products and strategic customer channels to drive growth. Regarding the Firestone brand, in the better and good plus segments where we anticipate changes caused by U.S. tariffs, we aim to expand our presence. Firestone is a traditional American brand founded in 1900 and celebrating its 125th anniversary in August 2025. Under the theme, Since 1900, we would re-strengthen collaboration with the U.S. Indy Series Motorsports and other initiatives, enhance brand strength, and promote enhancement of Dantosu products, including the launch of new products. Starting in 2026, we plan to expand new products equipped with Enlighten. Regarding channels, we are advancing the development of new family channels. The Firestone brand channels have 2,200 outlets nationwide. Firestone Complete Auto Care equity retail network and Firestone family channel dealers ratio exceed 80%, which is a key strength of our company. In the second quarter, direct retail sellout of the Firestone brand expanded year on year, and we will comprehensively reinforce the Firestone brand for the second half of 2025 and beyond. For commercial B2B solutions with mining and aviation solutions at the core, we are expanding our offerings based on call creation with our customers. In the mining sector, we deployed our Danto2 product Bridgestone Master Corps to approximately 130 mines and driving the expansion of our solutions through Genbutsu Genba approach. In aviation solutions, as a new co-creation initiative, we launched a new solution with Cebu Pacific Air. For the first time, we have officially launched our proprietary individual tire management system, Easy Track, supporting the efficiency and accuracy of tire inventory management. Going forward, we'll continue to expand our solutions by fusing real and digital capabilities and amplify the value of Danto to products while increasing its contribution to the company's business performance. This is the first half of the financial results summary by business portfolio reflecting these activities. The premium tire business achieved adjusted operating profit margin of 13.5%. The solutions business, which is our growth business, continued to improve profitability. It achieved a 145% increase in adjusted operating profit over the previous year, an improvement of adjusted profit margin of 2.2%. In breakdown, commercial B2B solutions saw an adjusted operating profit increase of 149% year-on-year. Retail and services also saw an increase of profit driven by improved European retail operations, an increase of 143% of the previous year. On the other hand, the diversified products business maintained profitability but continues to face significant challenges. Strengthening and accelerating business rebuilding efforts are now urgent priorities. Finally, I shall give you the fiscal 2025 guidance. Assuming that we counter the direct impact of U.S. tariffs, There is no change in the fiscal guidance announced in February with adjusted operating profit of 505 billion yen and profit from continuing operations of 253 billion yen. The dividend per share forecast remains at 230 yen. Capital policy is being implemented as originally planned. Regarding U.S. tariffs, while uncertainty remains high, the impact on adjusted operating profit due to direct effects was estimated to be around 45 billion yen in the May guidance. But based on our latest assumptions as of August 5, this has been revised to approximately 25 billion yen. In the first half, the impact was minor due to maritime transportation and inventory lead time, but the second half is expected to see impact across the board. In response, we are advancing additional business rebuilding measures as well as optimizing global sourcing. In addition, we've started compiling and implementing strategies tailored to each country and market in response to changes in business structures. At the same time, in the second half of 2025, we will reinforce commercial business, rebuild the consumer tire business in the United States, promote premium and mass strategy in the Indian consumer business, expanding sales of mid and small tire of OR, expand ORAC solutions. So we will begin growth with quality and the markets to grow. In the Asian market, we will further strengthen our solid business foundation to adapt to changes. In our home market, For the Japanese REP, we will expand sales centered on our Dantotu products while enhancing sales power through the Genbutsu-Genba approach. And we would thoroughly defend the family channel by reinforcing the best, better, good categories. Additionally, we will pursue steady global business cost reductions, business rebuilding and other additional rebuilding initiatives, and carry through what we have decided to do, turning changes into opportunities. Meanwhile, given the ongoing high level of uncertainty in the business environment, we are also anticipating risks and opportunities. These factors are not incorporated in our fiscal guidance. As for risks in our May guidance, we reflected potential economic slowdown in the U.S. economy and anticipated an indirect negative impact of around 20 billion yen on adjusted operating profit. This estimate has been scrutinized based on the latest U.S. GDP growth rate and other factors and revised this to approximately 10 billion yen. Additionally, we view delay in business rebuilding of diversified products business as a risk factor. Of course, we will closely monitor changes in the business environment and take appropriate measures promptly. Regarding opportunities, we will primarily focus on further accelerating the initiatives we have previously outlined, and we would strengthen our business quality to counter risks. I've summarized our performance for the first half and our outlook for the full year. First, in 2025, the year that we have designated as emergency and crisis management, we will carry through what we have decided to do and launch growth with quality starting in the second half so as to evolve into a strong bridge stone that can thrive in turbulent times. I kindly ask for your continued understanding and support. Thank you very much for your attention.

So that was Mr. Ishiboshi, our global CEO on the first half results and the guidance on the four-year basis. Next, we move on to global CFO, Mr. Naoki Hishinuma, to talk on the financial results for the first half fiscal 2025. Hello, everyone. I am Hishinuma in charge of finance. This is my agenda today. So I now begin with an explanation of the consolidated financial results for the first half of 2025. For the first half of 2025, consolidated revenue decreased year-on-year, while operating profit increased. The adjusted operating margin improved by 0.6 percentage points year-on-year, landing at 11.1%. Net income attributable to the owners of the parent amounted to 115.5 billion yen. We have steadily advanced the second stage of business rebuilding. aimed at reinforcing business quality while recognizing approximately ¥70 billion in related expenses as adjustment items. However, due to factors such as the recognition of approximately ¥63 billion in gains from the sales of fixed assets in the prior year, the net income decreased in the year-on-year. I will now explain the factors contributing to the year-on-year change in adjusted operating profit. Cost increases due to rising raw material prices, particularly natural rubber, and inflation, as well as reduced profits in the Brazil business and the UPI for the inventory were offset by improvements in selling prices and product mix. steady progress in business rebuilding to reinforce business quality and the effects of global business cost reductions, resulting in year-on-year increase in adjusted operating profit. Consolidated financial results by segment. In Japan segment, sales remained steady, particularly in mining tires, resulting in an increase in revenue. However, the segment was impacted by reduced profits in the chemical and industrial products business and the sports and cycle business, as well as the effects of the strong year and overseas export transactions, resulting in year-on-year decrease in profits. In the three overseas segments outside Japan, Business cost reductions along with business quality reinforcement through business rebuilding contributed to the increased profits compared to the prior year. Even in a business environment where inflation in raw materials and costs continued and profitability also improved. In the Americas, the North American truck and bus tire business contributed to increased profits and improved profitability. Europe increased sales of passenger car tires for the aftermarket segment, particularly high rim diameter tires, and improvements in the sales price mix contributed to improved profitability. Performance by product. Passenger car and light truck tires saw sales of aftermarket tires remaining at the previous year's level. But the decrease in sales volume of original equipment tires led to a decline in revenue. With the higher raw material costs, the segment reported a year-on-year decline in profit. However, the expansion of premium tires such as high-room diameter tires and an increase in their weightings in the overall sales mix continued. profit margin of over 10% on par with the prior year. Truck and bus tires saw continued sales growth centered on North American retail tires, resulting in an increase in profits compared to the prior year. The effects of business rebuild income are also emerging gradually. Specialty segments saw a significant decline in sales volume of agricultural machinery tires, resulting in a decrease in profits. Sales of mining tires remained steady, and B2B solutions expanded. Though the impact of rising raw materials were there, overall, the specialty segment maintained a high profitability of 21.2%. Diversified products and business do follow.

In the chemical and industrial products business, sales volume dropped over the previous year in the hydraulic hose and crawler business due to a decline in demand for construction and agricultural machinery, leading to a decline in both sales and profit. In sports and cycle business, while the domestic golf business remained steady, reduced sales in the United States significantly impacted the top and bottom line, resulting in a decrease in revenue and profit. In the cycle business, although the sales volume exceeded previous year's level, the impact of the rising COGS due to the exchange rate led to an operating loss. As for the diversified products business in the Americas, despite the continued challenging business environment, profitability of business for new cars improved. This is the adjustment items of the total up to the first half restructuring business rebuilding cost of approximately 70 billion yen were accounted for. The main breakdown was, for example, including the Laverne factory in the United States and other expenses for business rebuilding in America, South America and Europe. Turning to balance sheet and cash flow highlights, total assets decreased to 5.4811 trillion yen compared to the end of the previous year, partly due to the yen's appreciation. The ratio of cash and cash equivalents to monthly sales is temporarily high at the end of the first half due to the impact of fundraising in April. We will continue to promote lean management to achieve the year-end target of 1.5 months. For finished products, continued lean inventory management and excluding the FX impact saw a reduction over the previous year. Free cash flow amounted to 158.2 billion yen with an improvement of operating cash flow over the previous year and selective investments, and increased by 49.4 billion yen year-on-year. Regarding the capital policy announced in February, we are steadily advancing share buybacks and debt utilization. The Shared Repurchase Program has progressed to approximately 47% as of the end of July, in line with our plan. Turning to the 2025 fiscal guidance. As previously explained by our CEO, the four-year guidance remains unchanged from the figures announced in February. The dividend forecast also remains unchanged at 230 yen per share. Even if risks such as economic downturn in the United States that hasn't been incorporated in our guidance materialize, resulting in a risk of about 10 billion yen impact, we plan to maintain the dividend of 230 yen per share, and we will maintain these implement the capital policy. And this concludes my presentation. Thank you for your attention.

So that was our CFO, Mr. Naka Hishinuma, talking on the financial results for the first half fiscal 2025. Let us have questions and answers. In order to proceed, We are going to designate, ask the questions from the previously designated analysts, and then we will move on to take questions from the media members. In the interest of time, one question per person to ask question. So I will call your name, so please unmute your microphone. If you're able to do so, please turn on the camera and then start asking questions. So first, let's start with Mr. Maki from SMBC Nikko Securities, please. Maki from SMBC Nikko. Thank you. Thank you. So... I have two points that I should like to raise here. First of all, trucking must tie your business. It's been a while since you had such positive numbers to report in the US. The last minute demand before the US tariffs would start to take effect. But would you analyze the reasoning behind and the good performance in the truck and bus tires or any concerns. Is it okay that I ask, Well, rather than going into the second question, let me answer the first question. You basically are asking about our North American business. Last minute demand before the U.S. interiors were enforced. That did not happen. It's business as usual. So North America as a whole, as I explained, truck and bus type of business. with such new tires, retread, national fleet, maintenance service. We have a very strong package from the offerings. So whereas last year and the year before last, they did not come to really They give us the best anticipated results. It is turning around so that we are starting to enjoy the better performance. Customers are coming back to us. The growth of our business exceeds the market growth. And also, the structural changes of the market I talked about. For the truck and bus tires, the major brands and known major brands For the major brands, the demand started to increase in the first half. In the second half, we anticipate the trend to become even more preeminent. So the tailwind will continue to blow for us as we continue in the truck and bus tire business in North America. Thank you. and also no measure. The ratio between the two does not really change. Of course, the sense of the level of U.S. tariffs, we feel it more clearly. However, we really do not anticipate your changes in the structure. Rather, between Tier 2 and Tier 3, between those tiers, there probably will be changes which will become more noticeable in the second half. The overall weighting or compositions between the different tiers may not change, but between the Tier 2 and Tier 3, that is where the changes will become much more noticeable. That is the tiers of our strengths. Regardless of whichever tier, there are particular competitors who are really honing into the particular tier that they focus on. So we are aware of that, be it commercial tires or consumer tires. It's been a while, but the good performance was there in the first half, whose trend will continue in the second half. Now, the second half, North America, whatever, will be the operating profit margin. Either constant or a little bit better than in the first half is our sense. So the truck and bus tire business will continue to perform strongly. And for the consumer tire business in the second half, that is the segment where we will put further emphasis to grow. I would like to ask Mr. Hishinuma to share the numerics. Right. Basically, as the CEO explained, the market conditions as such, the business, the rebuilding, the continuing. And we talked about the beginning of the good benefits from the rebuilding of the efforts, whose benefits will become bigger in the second half than what we experienced in the first half. Okay, so the trucking bus tie-in business, environment changes, be it U.S. tariff. So I guess there have been, there will be certain trigger points which should move the members. I talked about the racial changes between members, non-members, sort of different tiers. So really, you know, the total number of truck and bus tires in the market, such as in North America, is gigantic. So it's within the gigantic database of automobiles. And also, each company has its own areas of strength and areas to adapt. Well, thank you. I think I understand. And as you move on to the 26th Mid-Term Business Plan, what factors do you have in mind? and they tie your business with diversified products and business. There are different sets of manufacturers. And the structural changes and rebuilding, the rebuilding efforts are starting to yield well. And you said that the benefits will accrue even more largely in the second half than in the first half. Then what about the next year? 13 percent, whatever will be the roundabout percentage that you have in mind. I don't think I am prepared yet to quote any particular numerics, but the final year of the O2-24 mid-term business plan is next year, and we have been making various efforts to make better the business quality, to enhance the business quality. And then North America and Europe, the business rebuilding has been attended to. And for isolated Asia, Brazil, the diversified products, there are remaining issues to be tackled. So for the business in Brazil, our expectation is that it will improve to the break-even level by the end of the final quarter. But macro view is that as 24, 25 years were spent with deployment of resources for business rebuilding, Next year, which is the final year of the current round of MBP, we all enjoyed the good fruits of that. And then we move on to the next round of MBP. So it is not only the defense, but also the mental health offense as well. So the kind of, from the products and services which you are, be a good match to our aspiration next year, and we'll be there. And then North America and Europe. In Europe, India's mining and aircraft premium values, towards the end of next fiscal year, we believe that we will start to see the growth with profit. Right now, they're still attending to the needs for business rebuilding. And then going beyond that phase, what to do specifically, we have to work that out. So that's the overall landscape to make it better, obviously. Thank you.

Thank you very much. I place great expectation on the outcome. Mr. Markey, thank you very much. So please limit your question to just one because of the interest of time. Now, turning to Mr. Sakamaki of VOA Securities. Thank you. Good afternoon. My name is Sakamaki. Can you hear me? Yes. Good afternoon. I have a question about the changing market structure. Looking at the material of Mr. Hishinuma in the first half, the indices are linked. increase in profit is the majority. So to counter the tariff is what you said. And what specifically do you plan to do to counter the tariff? Because the price increase may be more modest than your competitor. So you produce locally and sell locally. And so are you adapting better to the changing market structure? How specifically are you going to counter U.S. tariffs? And if you can do that well, do you think you can expand the market share? What do you anticipate by countering U.S. tariff direct impacts? I'm sorry, Mr. Sakamaki, about pricing. I cannot really disclose in detail. There are various reasons, especially in relation to the European business. So I cannot be specific about pricing. But the market situation and market environment is carefully monitored to take action. And of course, we are always carefully balancing pricing with the volume. Firestone branding. starts with better zone to good plus of tier two so to cover this better and good plus and we can have volume here we're going to increase the Bridgestone brand and also the Firestone brand in the first half Bridgestone brand for consumer tires Well, talking about the Firestone brand, it is increasing dramatically, and I anticipate that this would grow even more in the second half. For truck and bus, in the first half for both Bridgestone and Firestone, the volume has increased. So it's exactly what our CEO had stated. So I hope this answer would suffice. Okay, understood. Thank you very much. Mr. Sakamaki, thank you for your question.

From Morgan Stanley MUFG Securities, Mr. Kakeuchi? Yes, Kakeuchi. They're from Morgan Stanley MUFG Securities. So listening to you, you covered a broad front. about the North American passenger car tire business with a particular emphasis on Firestone brand. It sounds quite interesting because obviously you feel encouraged. You see strong prospects going forward for that brand, and you introduced some numbers with us, to us as well. Can you become a little bit more specific? Where in particular do you feel particularly encouraged about the prospect of the brand? Is it the product? Is it the relationships with your customers? I'm sure that you cover a wide spectrum of the factors as you move towards next year. What particular areas would you focus more? Firestone revival, if I may. This is the last half or second half of last year, and we've been working on that. The U.S. data meeting, national data meeting I attended was in the U.S., and I met with quite a few data indeed. And then we had active interactions and I made a commitment to them saying that, yes, we're going to do it. And they directly owned and operated the family channel. And those stories are doing quite well, much better. And I met with them as well. the new modality in the open business, we can work with them. So in all regards, that was the better level of customer satisfaction. Everyone is working. So the Firestone network is going to be re-ignited. So that per store, the revenue and profitability will be boosted. And at the same time, I would like to increase the total number of directly owned and operated stores. That's in the US, family channel stores. And then we need the new products, not enlightened yet, but firestone. Delfinity is the new motor tire, which is going to be deployed. so inclusive of what we can look to for next year. Those are all the opportunities with the Firestone. 80% of the Firestone business comes from the family channel. So why not focusing on the family channel or the stores to make them stronger as they become much stronger and then the brand gets stronger. And the Indy, the car racing, that's a very strong opportunity. The Indy 500 and the US and the Trade America, there is a closer ties in between the two. As I go to many places, I listen to the linkage ideas and arrangements more and more. I talked about the national need of family channel stores and the need for the new products, step by step. And then also the Indy 500. And also, please do not remember the Firestone. is enjoying 125th anniversary. That's a big celebration. This is the best zone that's going to be covered by Bridgestone, but better and good for us. I believe that Firestone is going to have opportunities there. So that is what we mean by turning changes into our opportunities going forward. Thank you. Okay, so why Firestone so much? Is that perhaps because you feel that that is the brand where there are certain missing pieces still? Yeah, actually last summer, I had a sense of urgency because that is when I started to feel that relationships with dealers were perhaps starting to wane a little bit. So that made me think that first of all, we need to regain trust from those family dealers. And a new product in April, that was fine, but not sufficient. So one after another, those leaders need Firestone branded new products. The same for Bridgestone. So we have to expedite, we have to enhance the speed of the launch of new products in R&D as well. We are allocating more and more resources to the R&D operations. U.S., after all, is a growing market, so new products, the channel relationships and dealers, whatever that we can do, we should. It's very clear. Thank you very much.

Thank you very much, Mr. Kakeuchi. Now, Mr. Sakaguchi of Mizuho Securities, please. Thank you. Thank you very much for your support. My name is Sakaguchi of Mizuho Securities. So adjusted operating profit of 505 billion yen, that is the fiscal guidance. How confident are you to realize this? So in implementing various measures, what do you think are effective? And I think there are some measures that don't have enough effect. In the second quarter, 45 billion yen was a direct impact coming from U.S. tariffs, and you said that this would counter implementing this direct impact. And this has been reduced to 25 billion yen. So if you have continued implementing measures against this 505 billion yen of adjusted operating profit, there may be accumulated effect that you have realized. Or maybe the impact coming from tariffs are now getting smaller. So what is the certainty of this achievement of the fiscal guidance? The point is with the better market structure, I believe the profit would be able to cover a higher volume of business. So what do you anticipate? 45 billion yen of direct impact coming from tariffs was reduced to 25 billion yen, and the major impact would be coming in the second half. So changing the tariffs rate means that the terms of competition is going to change. And with the changing terms of competition, there would be a change in the business environment. We are not the only company to take measures to counter this direct impact of 45 billion yen. We have to adapt to the changing market structure and implement a series of measures. Therefore, this 25 billion yen direct impact, of course, this would be countered, but this requires measures that would be most appropriate for the changing terms of competition. About the level of certainty, as mentioned earlier, OR, the tires, mining tires, and APIC Asia and India. have this solution that is growing very smoothly. And also in North America, it is improving finally, and truck and bus and also for the second half, the consumer tires would improve further. And last year, the European business had a very tough situation, but we promoted business restructuring. And on an annualized basis, the European business outcome would be better. However, Brazil and also diversified products still have challenges. Therefore, we have to really offset the negative impact coming from these challenging businesses so that we are committed to this adjusted operating profit and our fiscal guidance. I talked about risks and opportunities towards the end of my presentation. For opportunities, in addition to what you see on the screen, We are accumulating various positive impacts coming from various business units and possible economic slowdown in the United States is unforeseeable. But even if this would materialize, we are accumulating effects on various aspects of our business so that we can surely counter these negative impacts. Understood. Thank you very much. Mr. Sakaguchi, thank you for your question.

So now let us change the gear. We would like to take questions from media reporters. Please make sure that you can show which media that you're with and your name as well. And please press the button to let us know that you have a question in the interest of time. Once again, one question per media. Yamamoto-san from Diamond, please. Yamamoto speaking from Diamond. Yes, I can hear you. Hello. Numbers were covered in the presentations as well as in the questions by analysts, and I was able to have deepened understandings, but qualitatively. So you did not suffer from business losses. And US tariff impact, it seems that you're confident enough that you'll be able to counter the tariff as a source of the pressure. But to carry out what you have decided to do, and to counter back and so on. So you seem to use particular expressions of the phrasing. And I feel that you probably have the implied meaning there is that to the internal members within the organization or to the market. Back in 2020, we were hit by COVID-19. And first time in 69 years, we suffered from business losses. And then in the subsequent two years, we were able to accomplish a V-shaped recovery. But then came 23, 24, when in North America and Europe, What happened was that the targets that we aspired for, they fell short of our executions. So the business performance was the level of 480 billion or so. They're not reaching the level that we advocated. So we've been through those experiences. to remind us of the fact that it's in North America and Europe that we have to be able to carry out much more reliable business execution so that we can generate 500 billion yen of just development profit. Now, the management and the operational quality and the focus on Genbutsu, Genba, all of those expressions that we always used in the Brisbane Corporation, the meaning and the significance was starting to weigh a little less. So I felt that that was critical. Every associate has to feel that there is a sense of commitment. and the responsibility so long as that associate belongs to this overall organization. So all the more, we have to be worthy of showing the value to the market. And the value to the market means that there are customers in the market who expect that wisdom will be able to deliver to their needs. Now, we have accumulation of various legacy aspects. Those nowadays, these days, are turning into decisions to close down the plants. So the 26th, the 25th, we have been through different phases. We are at the second phase now. so that we will be able to bid farewell to the negative legacy from the past. Only after we do that, then we will be able to truly move on to the brighter future. And in order to bid farewell to the past negative legacy, Everyone who is a member of this global team and organization has to recognize that and has to commit himself, herself to that. Those are the reasons why I've been using particular slogan words. Okay, very clear. Thank you very much. Thank you.

Mr. Yamamoto, thank you for your question. Mr. Kawahara of Nihon Keizai Shimbun. Thank you. My name is Kawahara of Nihon Keizai Shinbu. Thank you very much for your presentation. I have a question. In the previous fiscal presentation, as measures against U.S. tariffs, I think you said that you would improve, increase the production of tires by 2 million units. And I think the direct impact numbers had been revised downwards. So did you change the measures in the United States? Well, Bridgestone historically produced locally and sold and consumed locally. So for the US tariffs this time, I believe we are one of the companies with minimal negative impact. So inter-process imbalances to be rectified and we are to increase the production of tires by 2 million that is unchanged and this requires productivity improvement and the cost would be reduced and also the business quality can be improved and we can reinforce our principle of producing locally and consuming locally therefore this would allow us to improve the business quality. I believe this is a very important step. Thank you. Mr. Kawahara, thank you for your question. So with this, we would like to close off the Q&A session. Ladies and gentlemen, thank you very much for attending this presentation meeting for the financial results of the first half of fiscal 2025. Thank you very much for attending the presentation meeting.