Mitsui & Co Ltd Ord

Good morning. I'm Keng Ichihori, CEO. Thank you for joining us today. I will begin with an overview of the first half operating results and the full year forecast, and I will then hand over to Masao Kurihara, General Manager of the Global Controller Division, who will speak on this in more detail. During the first half, the overall global economy continued to slow. Even in such an environment, Mitsui has been able to generate earnings exceeding the figures laid out in our business plan that we announced in May through our global business portfolio that spans across a wide range of industries. I will now summarize the operating results for the first half of this fiscal year. Cooperating cash flow, COCF, decreased by 136.4 billion yen year-on-year to 475.1 billion yen, and profit decreased by 82.8 billion yen to 456.3 billion yen. However, both made solid progress against the business plan. In light of this progress, we revised up the four-year forecast. Compared to the business plan, we have increased our forecast for COCF by 90 billion yen to 960 billion yen and profit by 60 billion yen to 940 billion yen. Furthermore, as we were able to reconfirm the robustness in our cash flow, which was enhanced through the previous medium-term management plan, MTMP, we have raised the full-year dividend by 20 yen per share to 170 yen, which will be the new minimum level during the current MTMP. ending in fiscal year March 2026. In addition, as we made progress with several asset sales, including a large-scale one, we have decided to implement additional share repurchase of up to 50 billion yen. I will now explain our progress against the business plan. In the machinery and infrastructure segment, there was a gain on sale of the electric locomotive leasing business in Europe and good performance in the automotive business. In the lifestyle segment, a re-evaluation gain on previously held equity in AIM services was recorded. These and other factors have led to these segments maintaining a high rate of progress against the business plan. In the chemicals and iron and steel products segments, the rate of progress was low due to the decrease in demand associated with the slowing of the global economy and the impact of the falling prices. In the energy segment, profit contribution from LNG trading and dividends will be weighted towards the second half and on a four-year basis, we expect earnings to be above those set out in the business plan. As I mentioned at the start of my presentation, we have revised up our full year COCF forecast to 960 billion yen. Mineral and metal resources segment was revised up by 30 billion yen, mainly due to an increase in dividends from associated companies. Energy, machinery and infrastructure and lifestyle segments were each revised up by 10 billion yen. 870 billion yen in the business plan. We have also revised up our full-year profit forecast to 940 billion yen. Based on the progress in the first half, the revised forecast for iron and steel products segment is lower than the business plan, whereas it is higher for machinery and infrastructure, energy and lifestyle segment. COCF for the company as a whole was revised up by 60 billion yen compared to 880 billion yen in the business plan. In this section, I will discuss cash flow allocation for the first half. In the first half, we steadily made gross investments in line with the key strategic initiatives set out in the MTMP and also had major asset sales. Cash in for the period was 758 billion yen, comprising COCF of 475 billion yen and asset recycling of 283 billion yen. Out of the assets recycling carried out in the first half, in particular, we view the electric locomotive leasing business in Europe, MRCE, as a well-timed large-scale asset sale, that will also contribute to ROIC improvement. Cash out will be 771 billion yen, comprising investments and loans of 572 billion yen and shareholder returns of 199 billion yen. The main investments and loans in the first half included gross investments, such as acquisition of shares in Nutrinova, which manufactures and sells functional food ingredients. AIMS services becoming a wholly owned subsidiary and completing the additional acquisition of shares in Relia. There was a business integration between Relia and KDDI Evolver, and a new company known as Altius Link was formed on September 1st. As I just mentioned, Mitsui is actively executing growth investments in the key strategic initiatives specified in MTMP. The start of contribution to profit by these new projects is also progressing as planned. The projects shown on this slide, in bold, have started to contribute to profit. As you can see, most of the new projects that were scheduled to start contributing to profit in FY March 2024 have already been implemented. Furthermore, for projects that are expected to start contributing to profit from FY March 2025 onwards, investment executions or investment policy decisions have also been proceeding as planned. In the second quarter, we announced investment in a shrimp farming business, IPSB, in Ecuador, and a final investment decision on an offshore wind power project in Taiwan.

Next, I will explain the progress on enhancement of base profit as laid out in the MTMP. This slide shows the FY March 2023 profit excluding the one-time factors and adjusted for commodity prices and exchange rates based on our FY March 2026 assumptions. Based on these assumptions, we will increase the base profit by 170 billion yen over the three years of MTMP. With regard to the enhancement of base profit from existing businesses, we aim to improve this by 110 billion yen over the three years of MTMP. Specific initiatives aimed at strengthening existing businesses are progressing mainly in mobility, healthcare, and retail. As an example of enhancement of base profit through efficiency improvements and turning business around is the steady progress being made in improvement of operations in the coffee business that recorded a loss in the previous fiscal year. Furthermore, progress was also made in initiatives aimed at exiting of several loss-making businesses. As explained earlier, growth investments in new businesses are proceeding according to plan in each key strategic initiative. Based on the current progress, we have already accounted for around half of the 60 billion yen contribution to profit from the new businesses expected in FY March 2026. Regarding our shareholder returns policy, as we were able to reconfirm the robustness in our cash flow, we will raise the interim dividend by 10 yen to 85 yen, raising the minimum four-year dividend by 20 yen to 170 yen throughout the period covered by the current MTMP. Furthermore, as part of our flexible shareholder returns, based on the progress made in asset recycling, we have decided to make additional share repurchase of up to 50 billion yen. We will continue to consider the enhancement of shareholder returns, offering both stability and flexibility with a view to sustainably increasing ROE. That completes my part of presentation today. I will now hand over to General Manager of the Global Controller Division, Masao Kurihara, for the details of the performance in the first half. I am Masao Kurihara, General Manager of the Global Controller Division. I will now provide details of our operating results for the first half. First, I will explain the main changes in COCF by segment compared to the first half of the previous year. COCF for the first half was 475.1 billion yen a year-on-year, decrease of 136.4 billion yen. In minerals, metal resources, COCF decreased by 91.7 billion yen to 177.8 billion yen, mainly due to the decline in metallurgical coal and iron ore prices and the fall in dividends from associated companies in and about it. Thank you very much. In machinery and infrastructure, although taxes associated with asset sales increased, COCF increased by 23.1 billion yen to 115.7 billion yen, mainly due to a higher dividend income from associated companies. In chemicals, COCF decreased by 26.6 billion yen to 24.3 billion yen, mainly due to a fall in prices of fertilizers, fertilizer raw materials and feed additives. In iron and steel products, COCF decreased by 6.1 billion yen to 1.2 billion yen, mainly due to the lower dividend income from associated companies. In lifestyle, COCF increased by 10.7 billion yen to 29.7 billion yen, mainly due to higher dividend income from associated companies. In innovation and corporate development, COCF increased by 1 billion yen to 19.2 billion yen. Other factors, such as expenses, interest, taxes, and others, which are not allocated to business segments, totaled 29.7 billion yen. Please turn to page 14. I will now explain the main changes in profit by segment compared to the first half of the previous fiscal year. Profit for the first half decreased by 82.8 billion yen to 456.3 billion yen. In minerals and metal resources, profit decreased by 112.6 billion yen to 134.6 billion yen due to the fall in prices of metallurgical coal and iron ore. The decrease in profit contribution following the sale of SMC, the metallurgical coal business in Australia, in Q3 of the previous fiscal year, and the impairment losses on copper business in Chile.

In energy, although there was an absence of the valuation loss on derivatives that was recorded in LNG training in the previous fiscal year, profit decreased by ¥29.4 billion to ¥26 billion, mainly due to the impact of oil production facility maintenance, as well as a drop in oil and gas prices and a decrease in LNG dividends. In machinery and infrastructure, profits increased by 74.7 billion yen to 164.4 billion yen, mainly due to the gain on sale of European electric locomotive leasing business and good performance of multiple businesses such as ships, VLI and construction machinery. In chemicals, although a valuation gain was posted, profit decreased by ¥25 billion to ¥14.3 billion, mainly due to a fall in prices of fertilizers, fertilizer raw materials, and feed additives. In iron and steel products, profit decreased by ¥11.3 billion to ¥3 billion, mainly due to impairment loss in associated companies and a lower demand. In lifestyle, although there was an absence of the valuation gain on our farm, put options recorded in the same period of the previous fiscal year, profits increased by 43.7 billion yen to 69.4 billion yen, mainly due to valuation gain on the fair value of M services and good performance of the processed food business in North America. In innovation and corporate development, although a valuation gain on the fair value for Altios Link was recorded, profits decreased by 9.4 billion yen to 26.1 billion yen, mainly due to a year-on-year decrease in profit from asset sales. Other factors such as expenses, interest, taxes, etc., which are not allocated to business segment, totaled 18.5 billion yen. This page shows the main factors that impacted year-on-year changes in profit. Base profit decreased by approximately 61 billion yen. Although there was absence of the derivative valuation loss in the previous fiscal year in LNG trading and performance improvements in IPP business as well as coffee trading, there was an increase in interest expenses, a decrease in profit contribution following the sale of SMC in the previous fiscal year, and lower profit from trading mainly in chemicals. Resources cost volume decreased by approximately 32 billion yen, mainly due to a decrease in production volume resulting from maintenance of some production facilities, as well as an increase in exploration costs in energy upstream businesses and increases in fuel and labor costs in mineral and metal resources business. Asset recycling resulted in an increase of approximately 62 billion yen, mainly due to gains from the sale of MRCE, a European electric locomotive leasing business. In commodity prices and forex, profit decreased by approximately 53 billion yen. For commodity prices, profit decreased by approximately 41 billion yen. due to lower oil and gas prices and 40 billion yen due to a fall in metallurgical coal, iron ore and copper prices which resulted in profit decrease by approximately 81 billion yen in total. For forex, profit increase by approximately 28 billion yen mainly due to the weaker yen. Finally, for valuation gain loss and special factors, although there was an impact of impairments in the corporate business in Chile and the renewable energy business, there were also valuation gains through new growth investments leading to an increase of approximately 1 billion yen. Here we have a comparison of the newly announced full-year forecast against the business plan announced in May with a summary of the factors involved. Base profit is expected to increase by 12 billion yen, although we expect lower dividends from the LNG business plan. Good performance in the automotive business as well as contribution from LNG training and the ship-related business should lead to higher profits. For resources cost volume, although we anticipate cost improvements in exploration and other areas in the upstream energy business, inflation in Australia and Chile is continuing and there has been lower production volume in the Australian iron ore business. mainly due to the above factors, we expect a ¥4 billion decrease. For asset recycling, we expect an increase of approximately ¥39 billion, mainly due to an increase in gains from the sale of MRCE, a European electric locomotive leasing business, as well as timely sale of Thorn Health Tech, among others. Commodity prices forex is expected to generate a profit increase of approximately ¥67 billion. In forex, an increase in profit of approximately 64 billion yen is expected, mainly due to the weak yen. Finally, for valuation gain loss and special factors, mainly owing to impairments in the first half, we expect a decrease of approximately 54 billion yen. Now let's take a look at the balance sheet as of the end of the first half of the current fiscal year. Compared to the end of March 2023, net interest in bearing debt increased by approximately 200 billion yen to 3.4 trillion yen. Meanwhile, shareholder equity increased by approximately 700 billion yen to 7.1 trillion yen. As a result, net DER is 0.48 times. That concludes my presentation.

Now we'd like to open the floor for questions. I have two questions. First is on slide 10, base profit earnings power expansion. As President Hori said, on the right, the new project's contribution to profit, 60 billion yen, and you said that half of them has already been accounted for. But it is somewhat difficult looking from outside to see the green portion on the left, how you would make this look. Of course, efficiency improvement and turnarounds, 110 billion yen. To what extent you are making progress? I do understand that it's difficult to quantify the progress, but if it is difficult, then you may have mentioned specific examples like coffee business, but... with how much certainty you can have a dialogue with the share market. I think that would be reflected in your real earnings power and also dividend in the future. So at this moment, including specific examples, how much progress have you made? at this moment on the green portion. If you can share that with us, that would be appreciated. And the second question is just for clarification. The philosophy behind shareholder returns. At the outset, as President said, The dividend increase has been based on the cash flow and also share buyback has been also considered. But you have made this decision by looking at the past. But what about forward-looking prospects? Well... for example, base profit, earnings profit power is increasing because of new projects, you are also taking that into account to make decision on dividend increase. For example, if you are in trouble in the future, if you can confirm that you can also earn profits in projects. We can expect the dividend increase to remain valid. For example, the share buyback, if the Python is going well as planned, then the share buyback is also expected Thank you for the question. For the first question, on slide 10, on the left. the existing business improving efficiency and turnarounds, the strengthening existing business and improving efficiency and turnarounds, the progress that we have made. So as you said, to explain on a quantitative basis is... It may be inaccurate if we explain this on a quarterly basis, but if we explain on a full year basis, then the accuracy may be better. But as we completed the first half, as far as we can say, for example, in the retail and the food, There is a Ventura in the U.S., and if you look at the existing business and the most recent performance, the business has been strengthened steadily, but aside from the core business, Thank you very much. continue to have sustainable profit. So the investee companies within our group as associate companies and including business restructuring or is easier to understand. But the trading business that we do as a parent company basis, the coffee, you reduce the management resources to increase return. So you reduce risks and increase the return. So that's what we are seeing in this fiscal year. So there's ingenuity in the business field. And so this is going to be one of the steady factors to achieve 110 billion yen. But to an extent, it is certain our progress has been made. At the end of the fiscal year, it would be better to share the information at that point because of better accuracy. But in healthcare, in IHH, Aside from the core business, the educational business is also part of them, but that has been sold out. If you look at the whole IHH business, the business foundation as a whole has been more organized. This is one of the investee companies, but that's what has happened. And a dividend income from IHH is expected to increase because of that. So these are one of the fundamental projects, which is part of one of the examples of 110 billion in worth of investment improvement on a full-year basis. And as for mobility business, the existing business strengthening is what we are doing. And in the medium-term management plan announcement, we have shared with you the business cluster strategy was shown for mobility. And in the peripheral businesses of what we do, that is what is happening as part of the progress. So we like to make steady progress in these fields. After six months, if you ask me if I'm satisfied, Well, there has been a certain progress made, that's for sure. But there are several more initiatives that has already been agreed internally to be executed. And so we'd like to execute them steadily. And on the interval that I just mentioned, we'd like to keep you posted on the progress. And as for the second question, for the shareholder return policy, Throughout the MTMP period, the philosophy is not going to be changed. So on the core operating cash flow, 37% is going to be achieved, and that should be achieved in the span of three years, and that is the basic. And sometimes we use share buyback, or we produce a dividend steadily, and hopefully... would like to increase the dividend. So that's the combination that we have in mind. And whether dividend is decided based on the past performance or with a forward-looking perspective, well, the progress toward cash flow increase in the medium-term medicine plan, that is what we are looking at. And also, 60 billion yen contribution with new projects on the right, There are many projects that have immediate profit contribution. So by accumulating those, how much we can achieve throughout the span of the medium-term management plan is what we're looking at. So the minimum dividend could be increased. to increase dividend. Whether we have the actual foundation to be able to do that, that is what we're looking at before we make announcements on the potential dividend. And both investment and asset recycling projects, they are numerous. And in this quite difficult to foresee business environment, the strength of balance sheet matters. So that is always taken into account in deciding share buyback. So if there is any good projects, then we would do the share buyback. No, not that sort of direct linkage. So if there is a divestiture, a good opportunity for us. We have to take a comprehensive judgment. And if we decide that this is appropriate to fund the share buyback compared to other testing items, if we decide that this is significant or this is sound in terms of business management, then we make decisions. So we are making such comprehensive decisions. And that's what I'd like you to understand.

Thank you. In energy, there was a decline. And if you only look at Q2, there are segments which are in red. So because of the forex situation, it's very difficult to see the underlying profit. the revised 170 billion yen. So what is the level of the profit or quarterly profit or others, excluding the one time? I think that the underlying profit is about 145 billion yen level. So what is the current level of the underlying profit at this moment, if you have such an understandable image? My second question is kind of overlapping. So chemicals and iron and steel products, we are seeing some weaknesses. On page 16, you have changed the forecast. So I think that 12 billion is the change you mentioned. So there are some differences among the segments. So what I would like to know is that some weakening segments, are you clearly seeing them? Are you seeing some slowing down? If you only look at the numbers, it gives me the impression that there are some slowing down. So are there any segments which we need to be more careful about? Do you see such a tendency? That's my second question. Thank you for your questions. You asked multiple questions about our underlying profit. If I may talk about the macroeconomic situation, I think that the tendency is going to intensify. I think that when you look at our earnings as a whole, logistics distribution and also that we have investees and the group companies and trading and we steadily increased the flow business and also by replacing the portfolio there could be some profit and in some cases through exiting There are probably pluses and minuses, but we have to look at the net number. And as for the business model, rather than the earnings while we are holding, we can also get profit through exits. And we already have a model of that. So if you look at the comprehensive picture, I think you really need to look at this model. So as a trading company, especially in our case, we have trading and investing and others. So as a trading company, especially in our case, we have trading and investing and others. I think we really need to have a comprehensive perspective. dividend from the associated companies and also if you look at the timing of the exiting and so forth, there are positive for the four-year. In energy, as an underlying profit, I think you really need to look at the four-year plan or budget. In the area of the mobility, The second half, well, there is a tendency, similar tendency in infrastructure as well. But the second half, when you look at the world economy and U.S. economy, there is a tendency that the trend will calm down in the second half. That is in our assumption. So to a certain extent, when it sustains, there could be some upside here. So including all that, and in relation to your second question, more recently, the Chinese economy has been slowing down. So in consideration for that, our forecast in the second half, or the second half updated forecast. And if you include the one-time factors, you will be able to see the foundational capability that we have, and that is what you were asking in your question. I think I have answered to your first question. So in that sense, in the second half, 480 billion is expected, and that's your true capability. You have to exclude the one-time factors, and then the first half and second half, there are some differences between and you have to average that based on the fiscal year, and you get to the closer number. I want to answer to your question more specifically as possible. So as I mentioned at the outset, the revenue model that we have, there are different patterns, and I would like you to look at them comprehensively, and that is also very important. Point of clarification for this year, the asset recycling and MTMP, you also mentioned that, and we see that in the first half. And is this something that is not going to continue? It is higher this year, right? Yes, slightly higher. There is an impression, but... We are replacing the portfolio steadily so that the business foundation based on our future plan is strengthened. So in the process of that, the portfolio replacement, rather than looking, sorry, more than the past, it's increasing. So we have to be disciplined at the same time. And by having the longer term, there are some projects that we need to... have a longer time frame. So there are some differences depending on the projects. And to your second question, the chemicals and the iron and steel products and chemicals, the logistics and distribution in China were down in the second quarter. And Thank you very much. China hitting the bottom economy and also the Chinese government stimulating the economy. If you look at all of those factors, the economy in China will bottom out. So we would like to look at that and continue to discuss. As for the four-year forecast of nylon and steel products, that is due to the gas dump impairment loss. And that is how I would like you to understand. And at the same time, in chemicals, there are several loss-making projects, and we exited from some of them. They're minor projects. but there have been multiple. So as you can see in Q2, we'd like to make sure that we continue to do so to increase the flow earnings. So that is also a factor. So if you look at all of them, the four-year forecast, I think that would be the basics. But as you said, chemicals and iron and steel products, closer to the materials especially, the situation of the different regions in the world. So I think this could be a leading indicator. So we are very closely watching what would happen to those segments in Q3 and Q4. We will be sharing with you our observations on those. I hope that answers your question. Thank you.

I would like to ask two questions. My first question about the cash flow allocation. As a result, you have announced our shareholder returns, and for this fiscal year, the total return is about 39%. So I Because of the big divestments, you were able to increase that rate. But looking at the profit power and the cash flow, I think it is exceeding the plan. In other words, the cash flow that can be used is increasing. Are you going to increase the budget for investment or are you going to increase shareholder returns? Maybe you will be able to increase shareholder returns in order to keep ROE at a high level that may be needed. So maybe you are making considerations in that direction. Can you tell us your feeling first? And my second question about LNG. Okay. There are important projects, three of them. One is Sahara in two, and one is Aggego in two, and the other is Mozambique. Please, thank you. Thank you very much for your question. As for your first question, for example, in the six months, the new investments made and the investments in the pipeline projects, They are quite good and stable, so we do have many project candidates. On page 10, we are showing on the right-hand side the projects. and these are something that we have been working on since the COVID-19 outbreak. And after investments are made, what are the value-up plans that we can formulate is something that we talk with our partners. If that is not completed, we cannot go into the projects, but these projects are new, and they do embody such thoughts. So they are small, mid, and large projects projects in the pipeline But discipline-wise, I think it is working well. So, in reality, the hurdle or risk-return profile, the demand from the company is becoming stronger. So, in order to have a good flow of cash, we need to be creative to make it possible. So, if there are projects that are going to exceed our expectations, I think we'll be able to go into these projects and we'll be able to utilize the management allocation. When it comes to the core cash flow, if you can gather from the announcements made, I think it is very solid. Therefore, we believe that there is a core cash flow which we can multiply by, and we'll be able to see the shareholder returns, and they may become the sources for the returns going forward. So we'd like to make a good balance in order to move forward. But, of course, we are conscious of ROE. To the investments, we need to be enhancing the discipline against the project. So if good projects are not realized, of course, in order to improve the capital efficiency, of course, we need to improve the ROE by moving to better shareholder items. Of course, in order to improve the discipline, of course, we need to look at directly improving the ROE. So we are closely monitoring these items. So it is not as if we are tending towards either, but improving ROEs is a basis for us from both sides. So we would like to be disciplined in these projects. And as for your second question, you talked about Sahalin and ARC-II. Both of them, we need to monitor the geopolitical situation closely. And of course, we need to follow the sanctions of various countries as well. So, in order to have a stable supply of energy, these are very important projects. So, we need to look at the current picture as well as future prospects. As for suffering, of course, we have been able to work with related parties, and we have been having discussions with them. And, of course, with joint venture partners and with different countries, we are continuing the discussion so that we'll be able to have a stable supply for the users in our country. And as for Mozambique, The other day, I actually went to Mozambique myself. The security situation has improved drastically, and the area one, an area close to area one, the people living there had to move from that area. However, Now they are returning back to that area and the administrative services, et cetera, have been recovered. And the basic infrastructure, including food services, is very important for the people, but that is progressing very well. And the operator total and the related parties we're having discussions with at the moment But as soon as possible, we would like to restart the construction, and the outlook is now more clear. But I want to give you an accurate information, so I cannot give you the timing for the moment. However, we believe the conditions for the restart is now being accumulated, so we hope that we will be able to restart in a timely manner. Thank you very much.

Thank you. Next person, please. I have two questions. First, I would like to also ask about 110 billion yen increase in base profit. In the medium term management plan, in terms of directions that you're working on, it's not just simple accumulation of numbers, but you are trying to change the mechanism inside. That is also part of that, including DX or GX. So the results of those initiatives are also part of the harvesting of the MTMP. I think that that has been also accounted for. So you may not be coming up with the numbers, including those, I understand. But in this initiative, in the case of DX, it covers a lot of ground in different segments, and you're expecting results from all these initiatives. But in the GX, new projects and also project portfolio replacement may be involved. But in the first six months, how much contribution can we expect from this? The quality of the projects, businesses, or aside from the simple combination accumulation of numbers, What you have intended initially has been started off as you expected, whether or not that was the case. That's my first question. And second question, of course, the performance has been steady, but there's also a concern in the market for the uncertainty. And in order to be on the safe side, you are actually about 55 billion yen upside, but that has been reduced to 16 billion, 1 billion. in the second half. And so how much downside do we have to take into account looking at this number? Is there any protective measures that will be necessary like cost reduction down the road? How are you looking at those aspects as well? Thank you for the questions. For the first question, Side 10 on the right, profit contribution from new projects. This is accumulation of specific projects and contribution has been accumulated. And you mentioned GX and DX as well, so I'd like to also cover that. The digital transformation, or DX, using the tools for that, we have to enhance the competitiveness of the whole company, and that's what we're doing on a company-wide basis. And it's not explicitly included in this profit contribution from new projects. If parent company project promotion headcounts have not been changed while running the larger portfolio of projects with better quality, that is what we are trying to do. And DX will be directly effective in that. So company operation level has to be enhanced using DX. That is one of the targets. So it's not included in profit contribution from new projects. But of course, we can double what we can produce without changing number of headcounts. That's where it matters. And So the number of headcounts have to be made clear with accountability so that with the DX, you can do this at less. That has to be made clearer to everybody inside the company, and that's how we are doing. And somewhere down the road, we'd like to share that with you. And as for energies... 60 billion yen for new projects. Energy transition will take time. So probably in the third year of MTMP, part of that will be leaped. But maybe the rest will be beyond that timing. So the timeframe may have to be a bit shifted. But in energy transition, what is critical in terms of materials, and if there is already a market for that, then the scarcity is something that we would like to maintain as a professional. So if the project investment in that area gets successful, because there is a market and the business is viable, then there is immediate results that we can expect. In a renewable business, it may take time, for example, but in terms of materials, there could be some projects that would have sooner effect, and so we'd like to combine all these different types of projects. to answer your second question on the whole economy in the second half the evaluation gain or loss there is a certain model that has been provided to you so what's inside So rather than business sentiment, loss-making businesses need to be sorted out, and there are many measures to be taken, and sometimes there's no other choice but to charge the evaluation loss. But then that would certainly improve the flow, and you can actually use that management resources for some other purposes. And there are some steady progress made in some projects, We cannot disclose what's inside, but it's not necessarily related to the business sentiment. But the problems that we had already been having needs to be resolved. That's what we're doing. And as for economy related initiative. We are on high alert, or that's what we are telling the whole company to be. Especially in order to respond to cost inflation, pricing strategies have to be considered. how much pricing power and price increase power do we have and how much value we can increase. And in the cost increase on the increased interest rate environment, how we can respond to that in the mobility in North America, if the interest rates go up with the combination of existing businesses that we have, how we can deploy that in the services and products. That ingenuity is really what it counts, and that is what we are doing on a whole company basis. And, of course, we are certainly cautious about the whole economy, but the operation level has to be enhanced. That is the basis, and that is what we are doing as a whole company-wide initiative. Thank you.

I have two questions. As the President already mentioned, the price strategy vis-à-vis the changing costs were mentioned. So when the economy is uncertain, the cost management becomes very important. So from that perspective, when you look at the results, the SCNA is up by 20% year-on-year. So in Q1... Thank you very much. From the cost perspective, is this as you expected or is it manageable or is it higher? So you need to take some additional initiatives. So I'd like you to explain costs in general. That's my first question. The second question is about the cash flow allocation. Again, so on page 8. So growth investment from Q1, it's increasing. So for the full year, vis-a-vis the target of MTMP, it excluded the management allocation in six months. I think that the progress has been about 50%. So for your company, there is a vote on investment, creating the kind of a cluster of companies. I think that's something that was included in MTMP. And the size of those, are they becoming bigger? Or is this just a matter of timing, if you can explain that? Thank you. Yes, thank you for your questions. So to your first question, the SG&A increasing, there are several reasons behind that. Of course, the inflation is clearly one of the factors, and overseas businesses, due to the forex, the SG&A has been increasing based on yen inflation. So, of course, that the revenues are up due to the forex. So that is one thing. And there are several things that are examples of the consolidated basis. For example, there are some companies which are consolidated from the equity method. So that would be included in SCNA. So that is another factor. And as a core business, the positioning could be changed and also the gross profit, everything will be accounted for. So that is how we would like you to look at. But as I said earlier, When adding the value to the projects and the employees at the headquarters or each business or projects, cost management and also the improving the leverage of the operation, those are the things that we like to work on steadily. To your second question about the capital allocation, the growth investments, So especially when there are a lot, well, it is not the case that we are seeing a lot of projects which are increasing in scale. It is always the case that we have candidates of those projects, but some of them are the ones that we don't actually do or choose not to work on. So there have been those projects like that in the past multiple years. So We will scrutinize and we will come up with the different alternatives and verify that. And when we feel confident in promoting and proceeding with it, we will be making announcement to you. So we are very selective and we continue to be selective. And for the future, in order to have a good basis for the earnings, continuously we need to pursue the different projects. And also we want to be disciplined to scrutinize each one of them. And we are in various businesses at the same time. So whether the businesses or projects are good and at certain time, we need to continuously monitor. And I think we have a mechanism to do so because there are so many candidates. So in that sense, the growth investments need to be managed by the management team. Thank you very much.

Any other question? I would like to ask two questions. My first question is on page 15 about increases and decreases. So I believe that, of course, the interest is something that is impacting. So, of course, the sensitivity and how much of a rising interest rate is going to impact the business, if you could explain that, it would be appreciated. And in addition... It was explained earlier, with a rising interest rate, how would you be able to enhance the earning power in order to improve that net profit? That is the question. And the second question, about Saharine 2. I think it was in July or August of this year, there has been some kind of... Maintenance after show has been excluded from the project, and it happens every two years. If there are no issues, that's fine. However, if there are any implications from the maintenance, please let us know. Thank you very much for the question. Well, the foreign exchange sensitivity will be answered by the CFO later. But when the cost per interest rate goes up, how are we going to transfer that to the business, I believe, is your question. Well, dependent on the industry, I think how they do it is different. However, recently... It is going well in the mobility business, and that is being maintained. But the product mix, I think, will be the deciding matter. Lease, the rental, the management of the fleets. So we are in contact with the consumers through that business, so credit giving is something that we need to look at as well. So we have to have a variety of menus, and where do we put the weight is going to be very important. Where should we have the actual assets is going to be very important as well. Therefore, we need to have a flexible decision-making, and we need to have the tools necessary. I think that is very important. And also, when we make investments, the interest rate cost is going to be higher. And if that is the case, the M&A with debt, I think that is possible. However, we need to have a good return analysis, whether that is being done. And against that debt, We need to take safe measures for that business. So, in other words, long-term stability, that needs to be looked at very carefully. So, I think we need to look at all these ideas. And, of course, the CFO unit and business units are working closely together to make that possible. Can you talk about sensitivity, please? Yes? I want to talk about procurement of the company. So it's a long-term procurement, and the interest rate is variable. That is a basis. So this is just a rough calculation that we do have in N. It's a 0.1%. Before tax, I think it's about $2 billion, plus or minus. And in U.S. dollars, basically, for foreign currency loans, it will be based on U.S. dollars, 0.1%, and before tax, about $2.5 billion. That is a test calculation that we have. But as the President said, of course, with the interest rate going up, there may be some impact on the forex and, of course, price transfer and also transferring to business is something that we need to look at as factors. And as the waterfall chart showed, if we look at the items, it will be shown on the top left on that page. But... And of course, the factors are allocated to different areas. So for each of the factors, we are seeing increases. and decreases. Therefore, I hope you'll be able to consider those factors in total. And as for your second question, of course, we had a maintenance period, but through the maintenance, I didn't see any issues. Well, this is regarding the operations, so I will not be specific, but we can say that there were no major issues. but the operation has been going on for a long time. Therefore, we have expertise from different partners' efforts from the past, and the expertise has been accumulating at the field. So that is how we are responding. Thank you. And about the sensitivity I mentioned, this is about the payer side. So please look at our numbers from the payer side.

Thank you very much. The downside of protection for a profit, as I listened to your presentation, there are management efforts to strengthen that. But as president, what are your thoughts on that? Can you just share that with us? Second question is about share buyback. 50 billion yen up to January is what you said. And this is based on cash flow, probably. But after that, on a continuous basis, more specifically by the end of this fiscal year, there could be one more round potentially. If you can also comment on that, that would be appreciated. Thank you for the questions. In today's Q&A, as for the downside protection, I mentioned several times, so I'm not going to repeat that. But as for the downside system, it is the mindset of the managers that matters in the company, especially. there are so many unexpected events happening around the world so you have to be agile and you always have to be ready with alternatives all the time and you cannot say that this is enough so you have to be always be ready for responding to those And in autumn, the whole portfolio is now being re-looked at. In the spring, the business plan is being put together. But after six months in autumn, we will revisit each one of those business projects in the business portfolio. in the company. And as for the downside risk, is there anything that we can do or is there any concern that we have in terms of scenario analysis? We're talking to corporate functions and that is exactly where we are now at this time of the year. But because of this business environment and in this age and era, we are strengthening that effort. and so those efforts have to be accumulated so fundamentally you have to keep enhancing the fundamental power of each business that is what we have to have as a mindset and bad news has to be communicated soon and if you see that bad information you have to take action so you have to always have a higher awareness and that is what we need to continue to do And with regard to the shareholder return to your second question, the share buyback was announced. But beyond that, we're not in a position to tell any more. So in the whole framework that we have shared with you, we'd like to continue to give more thoughts. And on a timely basis, as soon as we are ready, we would like to share that information with you. So throughout the future dialogues with you, we'd like to give you the information. So I don't think it's appropriate to give you any information. preview today so we just confirmed a whole framework and the progress that we've made and that is what we are going to continue to do thank you any other questions no other questions

It seems that there are no additional questions, so we'd like to end the Q&A session now. Lastly, as we announced via email, on the November 30th, Thursday from 3 p.m., we have an investor day. Our President Hori, CFO Shigeta, CSO Sato, and Daikoku Senior Executive Managing Officer will make presentations and discuss the Director Uchiyamada, and Audit and Supervisory Board Member Tamai, and President Hori and Vice President Takematsu will be in the panel discussion on human capital. It will be held at Otemachi Mitsui Hall. It will be the hybrid event, and we wait for your participation. And with that, we'd like to end today's briefing. Thank you for your participation.