LIXIL Corporation

It is time for us to start. Lixell Corporation's first financial results for the fiscal year ending March 31st, 2026. This briefing is streamed live online. The material for this briefing is on our website in the investor relations page. First, I would like to introduce to you our presenters. Director, Representative Executive Officer and President and CEO, Kinya Seto. Next, Executive Officer, Executive Vice President and CFO, Mariko Fujita. Senior Vice President, Leader of the Investor Relations Office, Aya Kawai. I will be serving as the moderator. My name is Seto Gucci from IR office. Next, I would like to explain how we proceed. First, Fujita, the CFO, will give you the overview of the financial results. It would be followed by a Q&A session. During the Q&A, CEO Seto will join and entertain your questions. We expect to conclude at 3.45pm. Ms. Fujita, the CFO, will give you the overview of the financial results. Fujita-san, please. Hello, ladies and gentlemen. My name is Fujita. I would like to give you the financial results for the first half for the fiscal year ending March 31st, 2026. This is the overview of the results. Revenue decreased while core earnings and EBITDA increased year-on-year. As for the Japanese market, in Q1, there was a surge in demand. So in Q2, we saw reactionary slowdown. However, the renovation sales of water-related products remained solid. LHD's core earnings remained flat due to additional costs associated with the ceramic siding business. Because of this, the core earnings were flat, but renovation sales were trending upward from September onwards, driven by promotional efforts. As for the international market, the revenue decrease but the profits substantially improved Europe and Middle East and India has seen strong performance as for America's and China housing markets remain sluggish as for others in Germany there was a change in a corporate tax rate because of this the tax expenses decreased The four-year earnings forecast remains unchanged. We are now scrutinizing various elements currently. There is no change in the full-year dividend forecast. So resolved interim dividend remains to be 45 yen per share. Next is business environment outlook for fiscal year 26. the Japan business so the new housing starts remain sluggish but renovation sales is driving strong performance each business is facing facing different situation but as for LWT in Japan showroom visitor numbers saw upward trend in August and September as for LHT we have conducted the promotion for products eligible for the window renovation subsidy and the sales is expected to increase from quarter three onwards in the living segment we are focusing on the higher end products So next is the international market. There is a global trend of interest rate cuts. But in Europe, because of the instability in the government in Europe, there has been delays in policy decisions to promote housing construction. So I would like to go one by one in terms of the region. First is the U.S. U.S. will be entering an interest rate cut phase. Mortgage rates are declining somewhat compared to peak levels. However, the tariffs and immigration policies are slowing down the housing market recovery. So we believe that the difficult circumstances to last through this fiscal year. However, we have worked on the price optimization as well as structural reforms. And we expect the result of that to materialize gradually. And we believe that the sluggish situation has bottomed out in the first half. Next is Europe and IMEA regions. In Europe, we expect a full market recovery to happen next year onwards. Sales improved, and the color products have improved, and the sales improved by 5% year on year. So you see in the bottom graph the composition ratio of color products to total faucet sales, and the revenue grew 32% year-on-year. As for Asia Pacific and China, I would like to talk about China for this region. China is sanitary where market remains challenging due to weak economic condition and intense competition. However, growing products are a strong point, and we are focusing in that, and we saw improvement of the sales of the growing product by 25%. This is the performance highlights for the first half. Revenue was 735.9 billion yen, core earnings 16.9 billion yen. So there was revenue decrease and core earnings increase. EBITDA and profit has improved as well.

Next is the consolidated business result for the first half of the year. The numbers have been explained on the previous page, but if you look at the gross profit ratio, it has picked up by 1.6 percentage point year-on-year. And this is a point that I wanted to highlight on this page. Next page is the business results by segment. For LWT, both for Japan and international business, we saw profit increase. and this was due to high profitability. The Europe and Middle East showing recovery in sales making contribution. LHD, the sales did come down slightly, but price optimisation and renovation increases has enabled profit to remain flat, leaving the sales for renovation has progressed strongly. As a consequence, we were able to see both revenue and profit increase. This page is essentially The previous page described based on the previous reporting segment, so allow me to skip this page. Next page is the situation concerning balance sheet, consolidated financial position. For total assets, this increased slightly. And this is due to the assets held in Europe increasing due to foreign currency translation. The foreign currency impact is 46.6 billion yen. And the final page, and this is the cash flow and the cash balance. As for the free cash flow, we have been able to remain positive. As for the operating cash flow, this did come down year on year. However, this was due to the increase in inventory assets, so we considered this to be only temporarily. And that completes my explanation for today. Thank you.

Fujita-san. Thank you very much, Ms. Fujita. We will move on to Q&A session now. But before taking your questions, Mr. Seto, the CEO, will give supplementary comments about the financial results. Mr. Seto, the floor is yours. Middle East, Near East, and India, excluding those regions, the situation was not so good, but even facing that situation we were doing relatively well in japan there was there was a last-minute demand in april and the new housing starts had deteriorated after that april to september there was a decline by 18 in the new housing starts this was the record high decline however we were able to improve our profitability and we were able to grow both revenue and profit that was good news for us in the area of renovation the only weak area was a window renovation but september from september we are seeing a very speedy recovery so in japan the situation overall is bad but we were able to do well In the international market, the biggest concern is the U.S. In the first half, we are confident that we have bottomed out in that market. Towards the second half, we would be seeing the results of our structural reform materialize. and the structural reform in the bathtub that we have conducted as a significant reform. We will see fruitful results in the second half, so we believe the situation has bottomed out in the US market. As for Europe, the color products have seen increase in the share. compared to the first half the one concern that we have is that well so we had expected the interest rate will be cut and the policy decisions will be made for the construction area but we are seeing delay in the policy decisions made by the government In the European countries, there are a lot of instability in the government. There are right-wing governments, left-wing governments, and because of this fluctuation, there has been no policy decision being made. However, what we can say is that the demand is high. However, because of the increase in the cost of supply has been insufficient. The customers in the mass segment to below, they cannot buy the houses. And this applies in the U.S. as well. So there needs to be some policy decisions made by the government in this area. As for China, we believe that the market will face difficult situation for quite some time. However, even in that situation, growth is growing 25% year on year. The high-end products have been faring well even under difficult circumstances. As for the Aimea region, we have been doing better and the market share is growing. The second half concerns If we look in the longer term, it will be the policy decision made by the government in Europe and U.S. So we want to see a better situation for that. Thank you very much, Mr. Sato.