LIXIL Corporation

We will now begin the LIXIL Corporation The first quarter for fiscal year 2026, ending in March 2027, financial results briefing. This information session is conducted via live internet streaming. Materials for this briefing are available on our website under information for shareholders and investors. Please refer to the materials. Let me introduce today's presenter, Kinya Seto, Director, Representative Executive Officer, President, and CEO. Thank you. Next, Mariko Fujita, Director, Senior Managing Executive Officer and CEO. Thank you. Next, Aya Kawai, Managing Executive Officer and Head of the IR Department. Thank you very much. I am Kobayashi from the IR department and I will be your moderator today. Thank you very much. Now, I will explain today's agenda. First, our CFO Fujita will give us an overview of our financial results. Following this, we will have a Q&A session. During the Q&A session, CEO Seto will also join to answer your questions. This briefing session will be ended at 2.45. 3.40. Now we'd like to ask Fujita-san to start explanation.

Hello, everyone. At the beginning of this meeting, I would like to express our condolences on the part of the company to the victims of the Kumamoto earthquake. We will work together with business partners and with our employees to support the reconstruction of the affected area. Let me begin with the earnings result. Today I would like to focus on the full-year focus mainly. First of all, the Q1 results will be introduced. Revenues increased and earnings declined. The LHD aluminum price increased and the renovation ratio has declined overall. That is the reason why we ended with lower earnings. Regarding aluminum price, please refer to the right-hand side. Next, I would like to talk about the forecast. After consideration, we have remained with no change in terms of full-year forecast. From the second quarter, cost impact will be full-fledged, and price divisions will gradually take effect from Q3 onwards. There is a lag in terms of the impact. Therefore, for the full-year forecast, We believe that original plan can be achieved overall. For Q1 and Q2, cost increase will occur and with less earnings. But in the second half, we believe that recovery can be achieved. And there's no change in terms of dividend forecast as well. Next, I'd like to talk about the impact of the recent situation in the Middle East and our countermeasures. First of all, in terms of manufacturing supply, cost inflation as well as supply concerns existed. However, the price provisions have been made, the cost reductions have been made, and hedging have been implemented in order to implement countermeasures. In terms of product lead times, in the recent past, there is no concern in terms of supply. and Delivery. Please look at the chart below. It is clear to see that against the plan at the beginning of the fiscal year, additional measures have been implemented in terms of profit provisions as well as cost measures. And therefore, in March 2027, we have maintained the forecast of 45 billion. Next, I would like to talk about the supply side impact. Petroleum-based materials, aluminum as well as copper, are subject to supply shortages leading to price increase, cost increase. However, with price revision, we will gradually implement measures in terms of price revisions in July and August and October. Depending on the type of business, timing will differ, but and revision will be made accordingly. For Q1, there was some supply concerns and therefore the new housings was prioritized and renovation rate came down and the subsidy details have been delayed which has had an impact on the renovation going forward. The cost increase of new housing is likely to become higher. Therefore, this will have an impact on new housing and we believe that this will require close monitoring going forward. At the risk of repeating myself, I'd like to emphasize that regarding cost increase for the fiscal year, price revision and other cost reduction will offset the impact for the new housing demand. We have to monitor this on a long-term basis. Next, let me talk about the highlight of Q1. Regarding revenues, we entered 379.2 billion yen, core earnings 1.7 billion yen. In terms of profit for the quarter, minus 3.5 billion yen. Here are the details. As you can see, in terms of SGA, there was an increase. This is mainly because of the foreign exchange impact.

This is the business results by segment. LWT in Japan, no international bosses, businesses' core earnings remain flat, and LHD, as I mentioned at the outset, due to the soaring raw material costs, CE declined. For living, due to foreign exchange impact and higher material costs, CE declined. Consolidated financial position here, the equity ratio which was about 35% last year and this year 33.8%. And factors for this, as you see at the bottom notes, this was due to the surplus funds utilized for the short-term investment. Therefore, net interest bearing debt increased of temporality. But in the next quarter, in the second quarter, this is expected to be improved. Next, cash flow status and cash balance. Because of the slight increase in working capital and also the short-term investment of the cash reserves, as I mentioned earlier, due to these, investing cash flow worsened for us one time. But similarly, this is expected to improve in the second quarter, and free cash flow recorded as negative. So this concludes my presentation on the financial results. Thank you very much. Fujita-san, thank you very much. Now we would like to open the floor for Q&A session. If you have a question, please press the raise hand button displayed at the bottom of this screen. The host will call on those who raise their hands utilizing this function in order. Please utilize Zoom's audio and camera functions to ask your questions directly via voice. In order to allow more people to ask questions, we ask that you limit your questions to two per person at one time. If you wish to ask further questions, please raise your hand again. And if you accidentally press the raise hand button, press the same button again. You will be able to cancel it. If you have any questions, please utilize the raise hand button.