Lixil Group Corp Ord

We would like to start the earnings call for Lexal Corporation for fiscal year ending March 2026. This briefing is streamed live online. The materials for this briefing is disclosed in the investor relations page, so please take a look at those materials. I would like to introduce to you the presenters for today. Director, Representative Executive Officer, President and CEO, Kinya Seto. Next is Executive Vice President and CFO, Mariko Fujita. Vice President and Leader of Investor Relations Office, Aya Kawaii. Well, I will be serving as your emcee. From IR, my name is Seto Buji. Next, I would like to explain to you how we proceed with today's briefing. First, CFO Ms. Fujita will provide you with the overview of the financial results. And CEO Seto will be giving you the outlook for the performance as well as the progress of the management strategy. That will be followed by question and answer session. We expect to finish at 3.45 p.m. First, I would like to invite CFO Ms. Fujita to give you the overview of the results of fiscal year ending March 2026. Hello, everyone. My name is Fujita and I would like to give you the summary of results for fiscal year ending March 2026. These are the key highlights. This is the overview of the results for fiscal year ending March 2026. Core earnings was 38.5 billion yen. EBITDA was 121.6 billion yen. The core earnings exceeded the forecast. For the Japan market, all segments achieved year-on-year growth in core earnings. In the international business, core earnings have significantly improved. For America, the structural reform had seen the deriving of fruitful results, and in the month of March, core earnings had become profitable. Next, I would like to talk about the differences from initial forecasts for fiscal year ending March 2026. Core earnings exceeded the forecast, and in terms of the profit, it was in line with the initial plan. As for other income and expenses, in addition to the initially planned structural reforms, there were additional expenses were recognized, including further restructuring costs in the U.S. and impairment losses of fixed assets. In terms of the finance income and costs, there were some recognition of foreign exchange losses and tax expenses. There were impact from the change in the corporate tax rate. I would like to talk about the status of international businesses. As for Europe, we worked on the growth of the growing brand. In EMEA, we will ensure stable supply. For Asia-Pacific region, we will work on for market recovery and sales network expansion. In China, the market remains sluggish. Under that situation, we will work to expand the sales of differentiated products including the growy brand. I would like to now dig deeper into the progress on future initiatives in the Americas business. With regards to the Americas business turnaround, so there are effects of the various measures that we have taken. It didn't materialize at first, but even though there was a recovery lag, we were able to see the results of what we have done. So we have worked on optimizing workforce allocation, restructuring the supply chain, optimizing the business portfolio, and we would now focus on the premium toilets and growth of GROWE and the expansion of shower toilets and leveraging on ASB strength. I would like to talk about performance highlights. Revenue was 1 trillion 510.7 billion yen, up 6 billion yen year-on-year. Core earnings were 38.5 billion yen, up 7.2 billion yen year-on-year. Evita was up 7.1 billion yen year-on-year, and profit was up 6.1 billion yen year-on-year. The core earnings had improved and that had impacted positively to our profitability. This is the consolidated business results. Please take a look at the margin. The core earnings, EBITDA, compared to last year, we were able to see improvements.

This said at the start, at all segments compared to the previous year, the businesses are showing improvement, and the details are listed here. And as for, it's the same information under the previous reporting segment, so I would like to skip the explanation. Consolidated financial position, the impact of the foreign exchange impacts on recognition of profit for FY ending 2026, equity increase, the equity ratio is 35.3%, and the net interest-bearing debt has landed as flat compared to the previous year. And the cash flow status, operating cash flow has declined year-on-year. However, the free cash flow has maintained positive. Last year, it was 91.9. This year, it's 59.1 billion, but it has remained positive. That is the explanation from the CFO, Fujita. I would like to conclude now. Thank you very much, Fujita-san. Next, we would like to invite Mr. Saito, the CEO, to explain The full year forecast for fiscal year ending 2027 and progress of management strategy. Sitafan, please go ahead. Outlook for the fiscal year ending March 2027 is what I would like to talk about. Year ending March 2027, the revenue, 1,600 billion yen, core earnings of 45 billion yen, and the Profit attributed for owners of the parent, the profit, the 12 billion yen is the forecast. However, the impact of the situation at the Middle East, there are many variables, so it is difficult to frequently factor in at this time. That is why that part is not included. And that is why at the next timing of disclosure of the information, I would like to share with you with the plan members, including the impact, the annual dividend, 90 yen per share is forecasted, which is the same amount up to now. The business environment and outlook. Later on, I would like to touch upon the Middle East situation in more detail, but for the other statuses for America, as Fujita explained previously, FY 2025, they have struggled. However, at the ending of The transition service agreement has ended and we had the major structural reforms and as a result the last three months recovered and especially for the last three months it finally turned into profit making. Regarding the U.S. economy, we were forecasting that it will be better than what it is right now. However, unfortunately, from the challenge of affordability. The demand is strong and the wide demand is apparent, but the housing prices became too high, so people are not able to purchase it. So some sort of a government policy measures will be necessary, is what I think. However, that is why for America, for the near-sharing improvement, and the details are listed here. And as for the same information, under the previous reporting segment, so I would like to skip the explanation. Consolidated financial position, the impact of the foreign exchange impacts on recognition of profit for FY ending 2026, equity increase, the equity ratio is 35.3% and the net interest bearing debt has landed as flat compared to the previous year. And the cash flow status, operating cash flow has declined year on year, however, the free cash flow has maintained positive. Last year is in 91.9. This year is 59.1 billion, but it has remained positive. That is the explanation from the CFO Fujita. I would like to conclude now. Thank you very much, Fujita-san. Next, we would like to invite Mr. Saito, the CEO, to explain. the full year forecast for fiscal year ending 27 and progress of management strategy. Siddhasan, please go ahead. Outlook for the fiscal year ending March 2027 is what I would like to talk about. Year ending March 2027, the revenue, 1,600,000,000,000 yen, core earnings of 45,000,000,000 yen and the Profit attributed for owners of the parent, the profit, 12 billion yen is the forecast. However, the impact of the situation at the Middle East, there are many variables, so it is difficult to reasonably factor in at this time. That is why that part is not included. And that is why at the next timing of disclosure of the information, I would like to share with you with the plan numbers, including the impact, the annual dividend, 90 yen per share is forecasted, which is the same amount up to now. The business environment and outlook. Later on, I would like to touch upon the Middle East situation in more detail, but for the other statuses for America, as Fujita explained previously, FY 2025, they have struggled. However, at the ending of The transition service agreement has ended, and we had the major structural reforms, and as a result, the last three months recovered, and especially for the last three months, it finally turned into profit making. Regarding the U.S. economy, we were forecasting that it will be better than what it is right now. However, unfortunately, from the challenge of affordability the demand is strong and the wide demand is apparent but the housing prices became too high so people are not able to purchase it so some sort of a government policy measures will be necessary is what I think however that is why for America for the near future we will probably not see a major recovery however we were able to turn into black ink therefore the loss-making business up to now is now not going to become a burden anymore, which is a positive news. And for Europe, this was the most disappointing part. Starting this fiscal year, we thought the economic situation is going to largely turn around. However, from the mid-last year, I think everybody has a consensus that that was the bottom. And each country or major markets like Germany, France, Italy, and the Netherlands, which are the major markets, the housing prices have started to go up. And also the number of housing starts. Also for the lease property, it is starting to increase. So it is showing recovery. However, the recovery pace is about a year behind than what we have originally expected. but for the last two years, which was really bad. During that time, we were able to increase our market share, and the growers' average profit also was able to increase. So this part, if it does grow, we will be able to enjoy a large positive impact. India and Middle East, there are various concerns. However, currently, we're not seeing any negative impact. The area that is called Aimea, Basically, you can break it down into four areas, and the sales is kind of divided equally in those areas, which are Saudi Arabia and the Gulf area, including UAE and India and Africa. First of all, what we can foresee most of the impact will be the Gulf area, mainly led by Dubai. Basically, the foreign residence has left the area, Regarding the future projects, there are major concerns of the progress, but currently we are not seeing any decline. On the other hand, for Saudi Arabia, moving forward, if they have further attacks from Iran, the situation may change, but they are performing strongly. Regarding Saudi Arabia, there is a negative factor, and because of the confusion, the financing for large-scale projects may be delayed. However, the crude oil price is going to go up, which means that it will give some room for the government. So related to the public type of projects that we are involved, there's no impact at this point. And for India and Africa areas, the fuel prices are increasing, so there may be an impact from that, but it is not a major impact. So for now, out of the four areas regarding the three areas, we do not have a negative forecast. However, for the Gulf area, we have to keep a close monitoring. And also moving forward, if the attacks from Iran expanded, there will be a certain impact is what we are thinking. In terms of economic situation and negative impact of Southeast Asia, Thailand, which was in the trajectory of recovery, is still a concern. And for China, the bad situation is continuing. But it's not just APEC in China, but at each region, for Grohe, it is performing strongly. Even China, the sales for Grohe is increasing. And that's bright news, and we're able to launch many differentiated products. And for Japan business, this is Goyer. Looking at the new housing starts up to now, from April to February, I don't think that anyone decided more than 10% of decline. There was a forecast that it will decline, but it actually declined more than what people expected. Given that situation, we're able to offset that weakness with the renovation demand. And we believe that the New Housing Starts weakness is going to continue for a while. The background on that is that one thing, The insulation materials, there's a shortage on that, so new housing starts will be delayed. And due to the Article 4 special exemptions, the licensing or permits that are submitted by the SMEs, the submission itself is delayed and granting the license and permit is going to delay. And that adjustment of the timings have not been completed. But Japan's new housing starts is going to continue to decline is our outlook. However, having said that, next year we think that it is going to go up once. Reason being is that there is an accumulation of the permits and license that is going to actually be realized. And for the insulation material, I'll touch upon it later, but this shortage is not going to last forever. But these recoveries, I believe, is going to be next year. But in Japan, the new housing start is not that strong. But this year, the decline was more than 10%. But within that, we're able to offset that through renovation. So we do have a confidence towards renovation to a certain level.

This is the forecast of the performance. In addition to what was discussed earlier, in terms of the dividend, because EBITDA had grown steadily, we are maintaining it at 90 yen per share. Risk related to the Middle East situation. It is difficult to predict. There are a lot of variables regarding the Middle East situation. Because of this, it would be too misleading to talk about the future relating to the Middle East. So we decided not to factor that in, and we will continue to scrutinize the situation. The supply concern is the biggest factor for us Currently, the crude oil-derived products, we have been able to secure the products that we need. And after July, we don't have too big of a concern. As for aluminum, 80% is scrap aluminum. So we are not in a situation where we have zero material at hand. However, the prices of these commodities are going up. We will work to transfer the cost to our pricing, also related to raw materials. Rather than buying from the same suppliers, we need to increase the variety of suppliers, and that's what we did in COVID, and that's what we will do now. These prices are going up not because of the Iranian war, but for other fundamental factors. What makes the reading of the future difficult is as follows. So there are many cases where you predict that this price increase will continue in the long term, but I don't feel that way. As for the crude oil-based products, even before the Iran war, from the end of last year to the beginning of this year, there was a concern about excessive supply. And in Japan and South Korea, there were adjustments to production. And in 2027, there are NAFTA and plastic-related facilities which were to come online in the U.S., China, and Middle East. Those facilities... are coming online even with the excessive supply, and I think that there are many reasons behind that. In the case of the U.S., they need to use it because they would not be able to export the natural gases as is, and they need to create NASA. And in the case of China, as Lynn and Evelyn process, APSA is used a lot, so P-E-S-P-P. If we consider the global supply and demand, it's in excessive supply, and how that would be reflected in Japan is something that we need to consider. So there are cases where China would not export it because of the dual use, but the oil-derived products, There are many types of it, and some of it may stop and become a bottleneck, but I don't think that the price of those commodities will be going up in a linear way. As for aluminum, the price had come up because Mazara and Century, which are the big players for supply for Europe, decided to shut down for maintenance for a year, and in Bahrain and UAE, The aluminum plants in Abu Dhabi had been stopped, and even though Japan had been buying 10% of the aluminum from this area. Santeria Mozart will resume its operations next year, and in Middle East, the facilities would probably restart their operations sometime next year. and the aluminum may become $4,000 from $3,600. But next year, some of the sources expect it will come down to around $2,800 to $3,000. The current panic is not something that would linearly continue, in my opinion. However, I think that the copper price will be going up. It goes without saying that the fuel prices will be going up. There are many assumptions, but if the oil prices had stayed around $80 per barrel, I don't foresee that the plastic prices will be going up indefinitely. So there may be some bottlenecks which may occur for the Japanese market. And also there are some bottlenecks in the area of solvent supply. And these things may occur. So we need to diversify where we get the supply from. Our suppliers and their suppliers. There may be some bottlenecks which occur in the products that we don't buy or at our customers for products that we don't sell to them and it may cause a problem. Because the oil prices are going up, the cost is going up and also because of the route suspension, there are distribution costs added, but we will be taking measures to counter that. Sorry, I'm going on for a long time in my talk, but I would like to talk about core earnings. We did not factor in the Middle East situation. The cost increase and the price revision. The The bar on the right will be higher if we factor that in. But rather than just simply increasing the prices, we will increase the productivity using AI and bringing the cost down. We will work to sell differentiated products which have higher margin. The methodology that we succeeded in Europe, we would like to use that in other parts of the world as well. In the mid-term, we will work to pursue improvement in the CE margin to 10% and ROIC to 10% as well as a long-term target, and we will turn around where necessary and divest where necessary as well. We will continue to work on these initiatives. The inflation which occurred in COVID as well as due to Ukraine war what will happen in the Middle East would probably impact us even more from that perspective. But we are increasing our revenue compared to the previous years, so we have been able to take necessary measures under these difficult situations. And last year, We have said that we would like to get to 65 billion yen, but we have revised it down to 45 billion yen in terms of the core earnings. There are a variety of negative factors. And also, we have identified positive factors that would fix it. The biggest negative factors included the lagging behind of the recovery in European housing market. Our profit center is the European market. and when it's not recovering, our business overall would not recover. Also, towards the end of the fiscal year, the commodity prices started going significantly up rapidly, and we have not been able to pass that on to our prices. So those are the two key factors which led us to revise the outlook down. On the other hand, Europe is having the same kind of revenue, but we were able to improve the margin. So once the housing market gets better in Europe, we would be able to spread that positivity to other areas. And also the Middle East, even though there are concerns, there are good things coming out of the market, like improvement in the market share of growing. Also, The Japanese renovation business had done well even in the face of decrease by 10% in the new housing starts. European market, the commodity prices. From next year, I think that there would be a virtuous cycle. we should not be pessimistic about seeing the business coming down a bit. So in terms of the risk, the biggest risk is Middle East, and most of what's on here would be multiplied by what's happening in the Middle East. The European market was bottoming out last year, and our main markets are getting better, but because of the issues in the Middle East, the inflation is increasing and the interest rate is going up. In the U.S. and China, the real estate market and the housing market have deteriorated. However, those have bottomed out, so I think that we are in a wait-and-see mode for recovery. Also, what would impact us is what kind of policies Donald Trump will be implementing towards the midterm elections. If the Trump administration would work on the affordability of the housing issue, I think it would impact us for the better. As for Japan, there are some specific concerns for Japan. So last year, there was a significant and rapid decrease in the new housing starts, more than we had expected. We are expecting it to get better next fiscal year. The reason it had come down is because of the Article 4 exemption factor and the SMEs had difficulties in improving their businesses previously. the short term the heat insulation materials are short in supply so because of that the housing starts is sluggish so this fiscal year we are facing a challenge but that will work towards recovery and next fiscal year in terms of the cost I think that we may be able to increase the prices by transferring it for next fiscal year.

And what I strongly felt this time is that I did share this at the COVID pandemic. Inflation or the product delivery difficulty, what's important is to recycle the materials, especially in a country like Japan, which has not much of a natural resources. And Premier L, the product, were able to use 80%. of the overall scrap material. But we don't have to face the problem of procurement. But on the other hand, Libya, what was considered to be waste, we can use that as a material and make it into a product. I think this is going to become important for a country like Japan. And also there was subsidy that was provided for like Implus and Reshant. Of course, the crude oil prices are going up, and we have to reduce the energy costs in Japan. When we face that time, these products are going to become an important product. And this time, at the very start, in this industry, we were told that there's going to be a shortage of what's going to be the insulation material and ethylene polymer that is used for the bathtubs. And what can replace that is this fabric of bathtub. And for the bathtub material, we do have visibility on the procurement of the material, so we're not causing any trouble to the customers. But I think moving forward, being able to procure the materials within Japan is going to become important. I did speak for a bit long time, but I would like to open the floor to questions and answers. Thank you very much, Seto-san. Thank you very much. Now I would like to take questions. So the questions from the participants, I would like to take them now. When you would like to ask a question, please press the Raise Your Hand button, which is at the bottom of your screen. The MC will be appointing those questions in the order that they come in. When you're appointed, please use the Zoom audio and turn on your camera. if you like. And in order to receive as many questions as possible, we kindly ask you to limit your questions to two questions at a time. If you have any additional questions, we kindly ask you to raise your hand once again. If you press the Raise Your Hand button by mistake, if you press it once again, you'll be able to cancel it. So I would like to receive the first question from Nomura Securities. Fukushima-san, please go ahead. Please turn on your audio and for the camera, you can turn it on if you like. Please go ahead with your question. This is Fukushima from Nomura Securities. I have two questions. The first question is related to the Middle East and the risk related to that on the supply chain, the procurement of materials, and for your company, can you truly manufacture the products, and also the cost issues. You did explain, but once again, the supply concern. Up to June, the materials Up to there, you have visibility, and from April onwards, you said that you don't have a major concern. But even though you say that, from July onwards, what kind of risks do exist? Probably you can't really say much at this point. However, at this point, can you elaborate on the risks that you can foresee at this point? And my second question is related to the Americas business. Looking at the single month of March, you said that it turned to profit-making. And the bathtub business, in March you completed what you need to do. But moving forward, you're going to the sanitary products, the toilet business mainly. But the business in Americas, your competitiveness, And the outlook, is this profit-making situation going to continue or not? Can you share your thoughts? Thank you. Well, first of all, regarding the raw materials, we do have visibility. Well, given the current situation, depending on the company, there may be worries or the volume may go down. So in a very short term, we kind of diversified our source of supply, so we're okay on that point. If there are some worries against or concerns against the supply, maybe there's some things that we didn't foresee beforehand. The most recent situation for a specific product, there's a plastic screw and the supplier of that screw, there was a situation where they may not be able to supply. So if we just look at this case, the material itself, the plastic manufacturer has a formula, a special formula for this plastic material. And for us, regarding that raw material, the original material, we do know that, but it's not that the formula can be completed right away. And at that time, can they replace that ingredient? There are cases that they're not able to do that right away. Well, in that case, we solved it by consulting the parent company of that supplying company. So generically speaking, this particular product, there's a shortage to it. That situation is being resolved. The government is putting efforts into that, and we are looking at many vendors. So there are areas that there's a bottleneck, buying it from China or South Korea or Taiwan, we have such cases, and we're able to do that. However, for example, within the solvents that we use, for this paint, we need to use this specific solvent. Companies that have that, they do struggle. So the suppliers may face problems And also, as I have explained, our customers may buy something from other places, and because of that, may not be able to build the houses right away. So the challenge we're facing regarding installation material, similar challenges may occur. However, everybody's making their own efforts. So the procurement is now starting to normalize. So the panic situation that started at the outset of this situation I think it's starting to calm down. But we do have the experience during the COVID pandemic. At that time, what took the longest time and what we struggled for the procurement and did not have sufficient level of the product is the rubber resin material that's used for the bathtub to prevent vibration. But something that we are concerned at this point. We have reached the point that we don't have to be worried about it. That is due to the efforts made by the employees. And also regarding the second question about the America's business, which is the faucet products and toilet or sanitary products. As a market, there is Home Depot or Fortune Brands. all of them for this fiscal year has quite a difficult outlook. So the market itself is not so good. And the month March is a month that volumes go out. So it doesn't mean that because March was a profit-making that the following months will be the same, so we need to continue our efforts. But this transition service agreement, we don't have that. additional cost anymore. So we'll be able to reduce the number of distribution centers moving forward. And in terms of headcount, we are able to optimize this month. Therefore, in this sense, of course, if the market further worsens, we do not know what is going to happen. But once we turn into blank ink, of course, still concerns will continue. And it's not that we don't have any concerns, but I think we're able to make a certain level improvement to maintain profit-making. Thank you very much.

Fukushima-sama. Thank you very much, Fukushima-san. So please ask only two questions, and we would like to go one by one for those two questions. Next is Fukuhara-san from Jeffrey Securities. Please click on the Participate as Panelist button. Please ask your question. Thank you very much for taking my question. My name is Fukuhara from Jefferies. There are two questions. The first question, how you created your plans? If you look at page 40 on your slide, there is a $14.8 billion of the And I think this is because of the copper and aluminum price issues. But if you look at the other page, compared to February, there is an increase, so $24.8 billion. Is it possible that it would be further increasing? And also, in addition to that, the revenue plan. on page 28. So it's in yen base, but if we look in the local currencies, I think that there is a significant increase. So from the cost perspective and the top line, how did you use the numbers to create the plan? We expect the cost to go up. especially plastics and aluminum, we believe that it, and also copper, it would go up compared to the original plan. We are working on to revise the price and increase the price even more. If the product is limited, the price increase will be limited, but we believe that we would need to increase the prices generally across the board. And I am not able to give you the specific numbers in terms and also when it will happen, but we would like to work on that as quickly as possible. Copper price issues had already been identified. been clear and that we were to increase the price on July 1st and as for sash products so for aluminum we were to increase the prices in April and May but we need to do that once more we would like to do that as quickly as possible so that we can cover the cost that has been increased with regards to the revenue Currently, excluding China, all of the markets had bottomed out. There are, of course, differences market by market. And in the Middle East, it's growing more than 10% year on year. In terms of Japan, if we look just at April, compared to other companies, we were able to secure the products quicker. and because of this we are growing about three to four percent year-on-year so the current situation is not bad but we need to see how the problem in Iran would spread and whether it would impact inflation would it be impacting the interest rate that's our concern and our biggest concern is whether the new housing starts in Japan will again significantly go down. So currently, revenue-wise, I think that we are faring well. Thank you very much. I would like to go to the second question. Please look at page 14. I would like to check the numbers. The core earnings and the In between agro-earnings and operating profit, there is something in between, and I think it was around $10.1 billion for fiscal year 2025, and the plan is $7.5 billion. And I was wondering how you came up with $7.5 billion, if this involves structural reform. I want to know your progress for the structural reform at this point in time. Currently, there is no specific residual items that we need to work on for structural reform. But in China, the speed of the deterioration has been quicker. And also we have to think about the contingency like in the Middle East. So that's why we have this number. So this is not a cumulative number of what we have at hand. But in other words, it's like a buffer. Is my understanding correct? Yes, because something would happen. And so it's not a structural reform figure, but because we are in a situation where the situation changes very quickly and also we probably need to close some of the plants in Japan considering the market situation. So thank you very much for your response. That's all from me.

Fukuhara-san, thank you very much. We are receiving many questions from many people. So for now onwards, we would like to limit one question per person. Next question from Goldman Sachs Securities, Okada-san, please go ahead. When you see the confirmation screen, please click as panelists and ask your question. Okada-san, can you please click as a panelist? Please turn on your audio and the camera on if you like. Please go ahead with your question. This is Okada from Goldman Sachs Securities. Hello. Regarding the Japan business, I have a question. Just before you said that various raw materials price is increasing. and whether that's going to last for the medium to long term, and you do not know about that. But the thinner price has gone up by 75%, and also paint and other products' prices are also increasing. So probably the price of the house itself will increase. And if that is the case, the new housing starts... I believe that there will be some people that will give up on the idea of purchasing a house. You are increasing the price, and if the overall industry increases their prices, I think there's a risk that the consumers themselves will not be able to catch up to that. So can you share your thoughts on this situation? I may deviate from your main purpose of the question. However, the shortage we experience is like tolerant, acetone, and thinner, which is the solvent-related products. They are used in large quantities at the semiconductor manufacturing stage. And for manufacturing, they use acetone to cleanse or wash the molds. And if there's a shortage, they will not be able to move forward So they kind of bought an excessive volume all at once. That is why this price increase has started. But how long is this going to last? I'm not sure. They're not just making one thing, but by various things being manufactured, the necessity of these raw materials will differ. Looking at solvents, yes, at the very first, solvent-related products are the ones that at the start experienced a shortage. But having said that, it is for sure that we need to increase the prices. And as a result of that, as we experience it post-COVID, because the overall prices are going up for those, the first-time homebuyers, meaning that affordable price housing, that is going to be difficult to be built online. As a result, what the speed of that is going to be for such a situation to occur, the number of new housing starts, the declining speed may be quicker than what we expect. So when we do face those times, what are we going to do? Well, Japan, as you know, Against the population we have, the new housing starts, we have a large number. So the demand towards our houses is high, and we're able to grasp that good. So even though there's a 10% decline in the new housing starts, we're able to maintain a certain level of business. They gave up on building a new house, but they will do more of an insulation material in their house, but they gave up on building a new house, but they will renovate their kitchen and others. So it's how we're going to bring in that demand and doing such a thing. So they say that they have $30 million that they want to spend on a new house, but they can use the concrete or steel instead of using it for those materials. This $30 million budget, they'll use it for kitchen or windows or using several existing house equipment. If they do that, our share within that 30 million is going to increase. So as this housing material or construction material manufacturers, how are we going to create the market? Through that, we'll be able to respond to the given situation. But the new housing starts itself, as you have pointed out, we expect that to go down. and we need to make a, we need to do in a way that we'll be able to offset those negative factors. So we need to increase the margin of the business, but towards the small-scale businesses, we'll use AI or BI so that we'll be able to suppress the overhead costs. So last fiscal year, we were able to kind of embody that situation. Thank you. But I do understand your concern. And this fiscal year, regarding the installation of materials, the supply is stopping it. And in the long term, if it's going to decline, so in the short term, such a situation may happen. But thinking under the assumption that there's going to be difficulty of procurement for a long time and all the products are priced going up to 50%, 70%, Setting that as an assumption, I think that's too extreme and misleading. Thank you very much.

Okada-sama, arigato. Okada-san, thank you very much. We would like to go to the next question from SMBC New Coast Securities, Kawashima-san. Please click on Participate as Panelist. please put your audio on, and if you would like, please put your video on as well. Please ask your question. This is Kawashima from Michiniko. So there may be some overlap with other questions. The international LWT, how did you assume that there will be a significant increase? So in the U.S., I don't know whether the red ink will be gone or significantly improved and if that happens there will be an improvement to the profitability by billions but it seems that the plan is not that high so do you expect other negative factors so I want to understand what the balance is between the increase in the revenue and the profitability the U.S. business of American standard, breaking even in that business would be conducive to improvement in the profitability. We had thought that we would be able to do more, but because European market had not done so well, we were not able to get to the level that we wanted to be. So that's the biggest factor for the situation for the profit. So the contribution to the profitability was not so high. It had gone from negative to zero. And last year, we were able to improve the volume added in Europe. We don't believe that we can continue it like that for this year. This is Kawai from IR. I would like to make a supplementary comment. As you have seen, Kawashima-san, in the waterfall chart of page 40, a 9.2 billion yen increase for OWT. And this is coming from the break-even in the U.S., And it was 55 million negative in the previous fiscal year. And also there are some positives from the European market. So the recovery in the Americas market is something that's positively impacting this business. So in terms of the revenue, was it too big in your assumption? So we have a lot of business from Europe. and the exchange rate positives impact a lot. So I don't think that the revenue plan is not too big. So the unit is not increasing so much, but the revenue is increasing, and that would impact the full year. Thank you. Thank you very much, Kawashima-san.

Next question from Diver Securities, Teraoka-san. When the confirmation screen pops up, please click participate as a panelist. Please turn on your audio and the videos on if you like. Please go ahead with your question. Thank you for your explanation. This is Taro Oka from Daiwa Securities. This time, the impact of the Middle East, the situation is not reflected is what you said, and once you can foresee what's going to happen that that will be reflected. When you reflect the Middle East situation, is the guidance going towards a revised downwards or because you're considering the price optimization or increase that it is not necessarily the case that it will become that way? Can you share your thoughts on this? Yes. At this point, actually, I think that there is a possibility that it will go both ways. That is why we wanted to fine-tune the numbers further before we share them. For example, as I have shared with you before, for us, in April, the revenue or the sales is very strong in the Japan business. The reason being is because us, compared to the other peers at an earlier stage, we were able to normalize the procurement situation. How long is that going to last? We do not know. However, even at this point, we're receiving multiple times more of orders than usual. And within that increase, there are things that are included where the delivery date is far down the road or it's just a temporary order, and if the other companies normalize it, this will probably disappear. So we do not know what the true situation is yet. At the beginning of April, it was not completely clear in terms of the procurements So probably year-on-year it's about 103% or 4%, but maybe higher in May. Or there's a possibility it will not be that way as well. So for us, it's difficult to gain visibility on this situation. And cost-wise, we are purchasing from various suppliers. Therefore, it's difficult to change from our original situation guidance or outlook, but we have our own price optimization. And that, for us, at a quick speed, we are going to apply it to a large volume of products. So we need to consider what that impact is going to become. Sorry, it's not a straight answer. However, which direction are we going to go towards? We are not having the visibility on that at this point. Okay, I'm hoping that it will go towards a good direction. Thank you. Teraoka-san, thank you very much.

The next question from CLSA, Mochizuki-san. Please click on Participate as a Panelist. Mochizuki-san? Please click participate as a panelist. Please put your audio on and video as well if you would like. My name is Mochizuki. My name is Mochizuki from CLC. So I can ask one question. So I would like to ask about the price provision. you would like to conduct the price revision to as many products as possible as quickly as possible but in order to absorb the cost in the past it took about one year or two years to do that so this time around the uncertainty is very high so how long do you think it would take to absorb the cost if you whether you would be able to absorb the cost in just one go or whether you would need to go in phases. Could you talk about the speed of how you would be able to absorb? So this is the first. So I think that you're the first one who had put the video on for this call. Thank you very much. So we want to be on a different speed level. That's because we are reflecting upon what has happened in COVID it took a lot of effort to increase the prices during COVID and we were not able to be aligned with each other division by division and we had to think about how the competitors would do. So what has happened is that we went first and the others followed. So what we need to do is to to raise the price to the level that we require as quickly as possible. But how much in terms of the time period we would be able to cover is a different question. So if it's October 1st, it would be six months. If it's July 1st, Another two factors that we need to think about is that next year, I believe that the aluminum prices will be coming down. Also, the plastic prices would probably stabilize. If we think about that, if we can raise the prices to where it needed to be in one go, I think that would put us in a better situation than having to take a longer time to convince others. So if I talk too much, I would be giving too much tips to the competitors, so I will not say more. But we would like to get to the level where we would be able to absorb the increase in the cost in one go. Thank you very much for your response. Thank you very much, Mochizuki-san. Next question.

We'd like to take the next question from Oregon Stanley MUFJ Securities, Maria Song. Once you see the confirmation screen, please participate as a panelist. Yagi-san, please. Please turn on your audio for the camera. Please turn it on if you'd like to go ahead with your question. Thank you very much for your explanation. My name is Ayagi from Morgan Stanley MEFJ Securities. One question, and it may be overlapping with other questions. One thing, the situation of Middle East regarding the risk of it. Listening to your explanation, it seems like basically it will depend on how it will... last or will be longer. And how much of a cost reduction can you make and how much of a price increase or price revision you can pass on is the key point for the procurement or the difficulty of procuring materials for July onwards you do see have a visibility as well. So is it okay to have the understanding of that set up? Yagi-san, I'm very happy that I can see your face and speak to you. As you said, what we have the most concern at this point is what we have to think of is that what can we do on our own? And what can we do on our own? There are two things. The first is to have a wide, diverse...