Phc Holdings Corp

Thank you for joining the PHC Holdings Corporation Financial Results Briefing for the second quarter of the fiscal year ending March 2026. My name is Hirai from IR and Public Relations. I will be moderating today's session. I will explain how to participate in the meeting. Simultaneous interpretation in Japanese and English is provided. You can select your language for the slides. Instructions are available in the Zoom chat box if you need help. Please note that due to audio equipment settings, the microphones of our presenters are muted. Audio will be streamed from a separate account rather than from the presenters themselves. Now, let me introduce today's presenters. Kyoko Deguchi, President and CEO. Kaiju Yamaguchi, Director, Senior Managing Executive Officer and CFO. After their presentations, we will hold a Q&A session.

Now, Ms.

Deguchi, please begin. Good morning, ladies and gentlemen. I'm Dezuchi, President and CEO. Today, I will present the summary of the financial results for the second quarter of the fiscal year ending March 2026 and the full year forecast. These forecasts have been revised this time. I will present the executive summary and CFO Yamaguchi will explain the financial results and full year forecasts. First, financial highlights for the second quarter to date. Revenue was 173.4 billion yen. Although this was slightly lower than in the same period last year due to yen appreciation against the dollar, revenue increased when impact of exchange rates was excluded.

Overall, as in the first quarter, the BGM business performed well.

Despite the ongoing market construction, strong performance was maintained in Europe and the United States. Very new from diabetes management increased from last year. Presque Solutions also saw an increase in revenue, driven by sales of electronic medical records and medical receipt systems, despite a decline in sales in electronic prescriptions business. This offset the ongoing stagnation in equipment demand within the diagnostics and life sciences sector. which was affected by an appreciation against the dollar and the U.S. market environment. Operating profit increased by 1.2 billion yen year-on-year to reach 10.4 billion yen. Driven by revenue growth in high-margin developed markets and significant contributions from profit-improvement measures, the Lijian business exceeded internal targets. Meanwhile, due to the yen depreciating against the euro at the end of September, we recorded foreign exchange losses similar to those in the first quarter. The cumulative valuation loss for the second quarter was 6.8 billion yen, resulting in a net loss of 600 million yen for the owners of the parent company. The interim dividend is decided at ¥21 per share in line with previous forecasts. Next are the full-year forecasts. Considering the fact that results through the second quarter exceeded internal plans and the impact of the CGM business transfer announced in September, we are evising our full-year forecast upwards by 2.6 billion yen in operating profit. The assumed exchange rates have been revised to 171 yen per euro, 146 yen per dollar, reflecting the current market conditions. Negotiations regarding the transfer of GGM are currently ongoing, primarily focusing on practical matters, with the aim of concluding a business transfer agreement. Assuming to maintain the planned transfer date of January 2026, the anticipated impact has been reasonably factored in at this stage. Full-year revenue is expected to remain at the same level. By segment, diabetes management incorporates the assumption that CGM business will be excluded from consolidation from the fourth quarter onwards. For BGM, we have revised our forecast upwards, taking into account strong performance throughout the second quarter and anticipating increased revenue, which includes favorable impacts from exchange rates. The health care solutions must be revised downwards to reflect the current order situation in the CRO business. The diagnostics and life sciences was revised downwards due to continued weak demand for equipment resulting from the stagnant US market situations.

Operating profit is revised downward for diagnostics and life sciences reflecting lower revenue. For diabetes management, the forecast is revised upward due to the higher revenue of strong BGM, especially in highly profitable US and European markets through Q2. As a result, overall operating profit forecast is revised upward to 20 billion yen, up 2.6 billion yen from the previous forecast. With 6.8 billion yen unrealized FX losses due to the recent weaker yen against euro, full-year profit attributable to owners of the parent forecast is 4.4 billion yen. Since FX losses are unrealized, dividend forecast remains unchanged. ¥21 for interim dividend and ¥21 for year end. Total annual dividend forecast is ¥42 per share, which is unchanged. Next is the progress of businesses. To strengthen profit base and portfolio management under the value creation plan, the other day we announced the basic agreement about the CGM business transfer. As mentioned earlier, we are currently negotiating the business transfer contract. As soon as we sign the contract, we will report to you. And on October 1st, healthcare IT solution business WEMEX merged with its subsidiary WEMEX Healthcare Systems. In October 2023, Fujifilm Healthcare Systems' EMR and medical risk systems businesses were transferred to us. Since then, both companies promoted optimization through product integration, office consolidation, and exchange of personnel. This integration aims for faster decision-making and improved operational efficiency to accelerate synergy creation. It expands the customer base to over 55,000 accounts and establishes a structure to maximize management resources. We would ensure support for Healthcare DX led by the government and will contribute to Japan's healthcare, extending beyond clinics to include pharmacies, hospitals, telemedicine and health management. On the right-hand side is an example of focus on GMLS, the third key initiatives of body creation plan, showing latest new products and external evaluations. Major products of biomedical and IVD incubator and path-based immunoanalyzer were newly launched after functional improvement and improvement of ease of use. The products that we developed and manufactured received multiple awards in this order for their concepts, technological capabilities, design, and quality. This exemplifies our steady progress toward sustainable growth centered on diagnostic and life sciences. 2025 integrated report was published in October. With our new vision announced in VCP last year, be a leader in precision technology that powers the future of healthcare. The report showcases the PHC Group's long-standing expertise in precision technologies and features specific experiences of employees in our value creation efforts in three areas, monitoring, examination, diagnostics, treatment, and R&D. We will be grateful if you take the time to read it. That concludes my presentation. Now I would hand it over to Yamaguchi CFO.

First, I will explain the results for the second quarter, and then the full year forecasts, which were revised this time. First, an overview of our second quarter results to date. Revenue for the first half of the fiscal year decreased slightly due to the yen appreciating against the dollar. However, when the impact of foreign exchanges excluded, revenue increased. Operating profit rose by 12.7% year-on-year, exceeding our initial internal plan for the second consecutive quarter. We'll explain the details of sales and operating profit by segment later. The trends were generally similar to those in the first quarter. While there were variations across businesses, overall progress was strong. Financial expenses included 2.7 billion yen in interest paid and 6.8 billion yen in foreign exchange variation losses. resulting in a pre-tax profit of 0.9 billion yen. This loss was primarily due to the yen weakening against the euro, falling from 161 yen to 174 yen. Please refer to page 28 for details. Due to the foreign exchange law, profit attributable to owners of the parent was 600 million yen negative. ABDA remained the same as last year. The 1.2 billion yen difference from the increase in operating profit was decrease in depreciation and amortization. Adjusted EBITDA increased by 1.0 billion yen. The difference from the increase in EBITDA was due to one-time income of 600 million yen recorded last year. For the second quarter to date, the exchange rates applied were 168 yen to the euro and 146 yen to the dollar. Compared to last year, Europe weakened, but dollars strengthened, which had a negative impact on varying. Page 11 shows the quarterly trends in sales and operating profit. Due to the nature of our business, sales tend to increase in the second half of the fiscal year. In the second quarter, sales increased in all segments compared to the first quarter. operating profit decreased by 9.1% year-on-year due to reduced high-margin electronic prescriptions business and unfavorable market conditions affecting diagnostics and life sciences segment. However, compared to the first quarter, driven by stronger sales in high-margin businesses such as BGM and healthcare IT solutions, profit margin improved, resulting in a 70% increase in profit. Page 12 explains sales by segment and business. Diabetes management grew by 0.9% year on year despite the impact of yen appreciation against the dollar. This represents 2.0% increase when currency effects are excluded. Following the first year, BGM sales were strong in Europe and the United States, while CGM also grew year on year. Although market contraction in developed countries is having an impact, securing revenue growth despite this remains positive progress towards stabilizing BGM, which is a key focus of our mid-term plan. healthcare solutions saw an increase of 1.9% in revenue. Although sales related to electronic prescriptions decreased, driven by strong performance in electronic medical records and medical receipt systems, healthcare IT solutions grew 6.1% year-on-year. This offset the decline in revenue from CRO business. Diagnostics and life sciences revenue decreased by 5.5%. Excluding currency effects, the pathology business saw an increase in revenue, however, biomedical was impacted by stagnant market conditions in the U.S., and IBD by one-time revenue effects both saw decrease in revenue.

Page 13 shows the analysis of revenue and operating profit growth. Top half is revenue. As yen strengthened against dollar, there was 1.7 billion yen negative FX impact. Excluding that, the growth was 0.7%. The revenue of diabetes management, LSIM, healthcare IT solution, and also the other segment, there was higher than expected revenue from production for third party, and the others revenue increased. Lower half is operating profit. The significantly higher profit of diabetes management driven by high margin BGM pushed up the profits. Year-on-year growth was 11.3%, even excluding forex impact. As explained in the previous earnings call following the review of our corporate functions, some headquarters roles were transferred to each business. As a result, some HQ and others' expenses decreased and expenses of each business increased. Showing this graph is the positive 700 million yen for HQ and others, and negative 600 million yen for diagnostic and life sciences. The details are shown on page 27. Now let me explain each segment, starting with the business management. Despite no major changes in the market environment, such as market contraction in developed countries and shifts toward the low-price channels, The euro maintains steady sales. The revenue against the strong yen, including the foreign exchanges, increased by 0.9%. The operating profit significantly grew by 46.6%. The margin improved by 6.0%, near to 19.2%. Europe maintained steady sales and in U.S. revenue increased due to the growth initiatives such as pricing initiatives along with some front-loaded demand. These developed countries performed exceptionally well. The 365-day CGM product sales contributed to year-on-year revenue increase. With the effect of profitability improvement measures in U.S. and brisk sales in developed countries, overall profitability went up significantly. Also, with the effect of the ongoing structural reforms and lower depreciation and amortization expenses, operating profit substantially grew. Nexus Healthcare Solutions revenue grew by 1.9% year-on-year. Operating profit was down by 600 million yen. The margin is improved from Q1 but stayed at 4.7%. The general examination demand was stable, and the impact of the precision control charts issue on the revenue was smaller than expected. With higher revenue from genetic testing, which is one of our growth areas that we focus, LSIM revenue was up by 2%. Healthcare IT solutions in the previous fiscal year in Q2, the prescription demand grew, but this time it went down. EMR and medical receipt systems core business were strong, and the revenue went up by 1.5 billion yen, offsetting the lower revenue of CRO. CRO last year, LSI medians, ISO certification was revoked. The clinical trials, mainly the orders have been coming down. But as we reported previously, LSI medians have applied for ISO recertification, which is under review. Higher revenue of LSIM, EMR, and medical systems could not offset the lower revenue of high-margin e-prescription and higher procurement costs operating profit decreased by 700 million yen.

Finally, diagnostics and life sciences.

Sales decreased by 5.5%, including impact of stronger EN against the donor. The pathology business performed steadily in Europe, with large orders for digital pathology products in Q1, as well as robust demand for slight glasses, and consumables. Asia also performed well, which expanded local production in Asia, offsetting stagnant instrument demand in the U.S., excluding the effects of currency sales were on a par with the previous year. Biomedical saw a recovery in Europe and Japan, but stagnant instrument demand persisted in the U.S. due to policy impacts. IVD revenue declined due to the absence of one-time gains in the previous year, reduced reagent sales to China and Russia, and lower demand for digital injectors compared to the strong previous year. Operating profit decreased by 2.2 billion yen, which includes 1.9 billion yen in special factors, 800 million yen from tariffs, 630 million yen from one-time gains in the previous year, and 550 million yen from reviews of the headquarters functions. Conversely, there was 500 million yen in other income due to changes in the classification of affiliated companies. The pathology business saw improved profitability due to price revisions and cost reductions. However, this was not enough to offset the impact of revenue decline from biomedical and IVD businesses, partly due to the impact of tariffs. Page 17 shows sales by region. Japan experienced a modest rise with growth in LSIM and healthcare IT solutions, offsetting declines in CRO and IVD businesses. Europe achieved a 4.7% increase in sales, driven by strong performance in BGM and pathology, as well as a recovery trend in biomedical. North America experienced decrease in revenue due to the continued impact of exchange rates and stagnant equipment demand in diagnostics and life sciences despite growth in BGM. Other regions experienced a slight increase in revenue driven by growth in Indonesia despite declines in BGM and other diagnostics and life sciences. Page 18 provides details of the adjustments made to operating profit through calculated adjusted EBITDA. These adjustments include depreciation, amortization, as well as one-time income expenses. Depreciation and amortization decreased by 1.0 billion yen due to completion of amortization for certain intangible assets and the impact of young appreciation. Adjustments from EBITDA to adjusted EBITDA include Destruction costs of 300 million yen in the previous year and 500 million yen in the current year. Additionally, the previous year included 600 million yen of one-time income. Next is consolidated balance sheet. Below is a brief explanation of the main assets and liabilities. Goodwill balance was 212.1 billion yen, an increase of 5.6 billion yen. This was due to the weakening yen against the euro. There was no change on a local currency basis. Interest bearing debt decreased by 7.6 billion yen to reach 247.7 billion yen, despite repaying the 11.9 billion yen due to foreign exchange effect. Furthermore, existing borrowings maturing in June 2026 were reclassified as current liabilities. However, these are structured with re-wallet financing as a prerequisite. Discussions with financial institutions will continue during this fiscal year. ROE, calculated based on profits over the most recent 12 months, was 4.2% for the quarter due to year-on-year decrease in profit attributable to owners of the parent. Cash and cash equivalents decreased by 6.3 billion yen during the second quarter. Operating cash flow was 12.1 billion yen, while capital expenditure was 4.4 billion yen. Financial cash flow, including repayments of borrowings and lease liabilities, dividend payments and others, resulted in an outflow of 17.6 billion yen. This concludes the explanation of the results. Next, I will explain the revised full-year forecasts.

The total revenue forecast is unchanged. Operating profit forecast is revised upward by 2.6 billion yen. I will explain each segment changes on the following pages. As an assumption, the foreign exchange rate based on the recent trend is 171 to the euro and 146 yen to the dollar. In September, we announced the transfer of CGM business, and currently we are in the final stage of the agreement negotiation. As planned, we plan to close this in January 2026. So in this forecast, we included impact amount reasonably expected at this time. In September, we communicated the signs of the possible impairment and potential need for the impairment, but this time we have implemented the impairment test, and currently we do not believe it is necessary to book the impairment loss, and this has already been audited by the auditor. Profit and profit forecast is revised upwards by 2.6 billion yen, and 6.8 billion yen FX losses recorded through Q2 was factored in. And the pre-profit before tax, 8 billion yen, is down 4.2 billion yen. After adjusting the tax impact, the profit that is available to owners or parents is revised to 4.4 billion yen, down 3 billion yen. FX losses are unrealized and devaluation loss, so it does not impact the cash. So we maintain the annual dividend forecast. Page 23 shows the comparison to previous forecast by segment. In diabetes management, for CGM, we factored in its planned transfer and deconsolidation in Q4 and onwards. For BGM, the strong results through Q2 and favorable for exchanges are included. Overall segment revenue revised upwards. Revenue of the healthcare solution is revised downward based on the CRO business results and the recent orders. Revenue of diagnostics and life sciences is revised downward based on the assumption that the sluggish equipment demand affected by the market stagnation due to the tariff and reduced government subsidy mainly in U.S. will persist. In others, upward revision is made as negative risk on the revenue we expected was eliminated. With higher BGM revenue and planned deconsolidation of the CGM, the BDSR management of building profit is expected to increase by 4.2 billion yen. For healthcare solutions, our assumption is to offset lower revenue with cost reduction and others. Diagnostics and life sciences, lower revenue will lead to lower utilization. Operating profit is revised down by 2.6 billion yen. Revenue impact and one-time cost review included, the overall operating profit forecast is revised upward by 2.6 billion yen to 20 billion yen. Phase 24 shows newly revised forecast compared to the previous forecast as of August and November. Finally, updates on U.S. direct impact. P&L impact year-to-date including additional direct impact was about 800 million yen. Progress of countermeasures to optimize supply chain including review of the production is on track. Based on defects of the already implemented price increases in Q3 onwards, and cost reduction, full-year forecast of ¥1 billion to ¥1.5 billion impact remains unchanged at this point.

That concludes my presentation.

We will now move on to Q&A session. Joining us as responder is Senior Executive Vice President and COO CSO Koichiro Sato. If you have questions, please click the raise hand button. When your name is called out, your microphone setting is changed. Please unmute, state your name and affiliation, and ask questions.

If you have questions, please raise your hand.

I will call on you in the order of your raising hands. First, Yamaguchi-sama, please unmute and ask questions. Do you hear me? Yes, we can hear you. Thank you. Good morning. This is City Yamaguchi. The first question is about biomedical. You revised the forecast, but Q1, Q2, there was no big impact. But including the situation in the United States, the business situation is grim. These impacts will appear stronger in the second half or already appearing in the first half or from 2026 fiscal year and beyond. Biomedical, just as you mentioned, is being impacted by the US situation. where the companies are restrained in making capital investments. And that effect is already with us in the first half, and that will also be so in the second half. And probably in FY2025, probably in the second, the equipment sales will continue, the market condition will continue to be not favorable, which is reflected in the forecast. That is why we are currently focusing on launching new recurring consumable businesses. And also at the same time, we are trying to implement measures to mitigate the tariffs, just as Yamaguchi mentioned. We are transferring the production sites and making efficiency in production so that we can ensure margins. And these are the measures that we are doing in FY25. What about if by 2026, people continue to monitor the market situations, but in Europe, some pharmaceutical companies are shifting their production sites in the United States and making capital investment in the United States. So probably within 2026, the North American market will recover. First of all, the market impact is already with us. What about in the second half? We do not think that the situation will be worse. According to our plans, compared to Q1, Q2, in the second half, because of the seasonality, sales will be up. We have our plans, and against the plans, probably there will be wider gap from the reality to our plan. And that is why we have revised downwards the forecast. What about FY2026 and beyond? This year, the market situation will not improve. But in 2026 and beyond, we will make the plans. But the only way... Deguchi mentioned, major pharmaceutical companies are investing in the United States and they have already made the announcement. Of course, we'll have to see whether these investments will be materialized. But from the second half this year through next year, if these things happen, then probably we will see the comeback of the U.S. market. Thank you. Another question. Regarding BGM and some CGM, your profit margin is good for BGM, just as you mentioned in the second quarter, but you said that that situation will continue throughout the year. But I believe that the BGM market per se... It's not favorable. So do you think that this higher profit margin for BGN will continue through FY2026 and on? Thank you for the question. Just as I explained in Q1, we are seeing the recovery in the profit margin. There are four factors behind that. The first is the COPS improvement. and SG&A improvement, and then amortization depreciation favorable, and also excluding CGM is a fourth factor. COGS improvement, that is, gross profit improvement. we succeeded in hiking prices in the United States, and that is offsetting the decrease in the volume. And also, with regard to COGS, we have been improving the operations, particularly regarding inbound logistics, we are consolidating the procurement. And also, there were meter restraints that I explained in Q1. But in Q2, we are making investments into meters, particularly in the U.S. market. On the other hand, in China, there are not profitable channels. and also some markets in the Middle East. In these low margin areas, we are restraining our investment into meters. And so we are investing in areas where there are profit gross margins, but otherwise we will not. So we are putting priorities. And with regard to SGA, we have been making efficiencies there, and we are reducing the professional fees and reducing the staff. And also amortization, depreciation are, as I have already explained, GP improvement, 25%, STA improvement, 35%, amortization, depreciation, 40%. These are some of the percentages contributing to the improvement. What about FY2026 and beyond? This situation will continue. With regard to the market, the vision market will be down by 10%, but we are the number one position in the market, so we are gaining the market share from our competitors. into the next fiscal year on will continue these initiatives. That is why our focus will not change markedly.

This has been the answer. Let me augment.

In VCP or mid-year plan, we said that VGM sales will be stabilized. And probably CAGR will be minus 2.4%. That's in our BCP. The major factor is to stabilize the situation in the United States. The measures that I have explained are... successful and these are contributing to the sales profits and cgm is also including the penetration So probably the CGM down size is a little bit smaller. So I believe that our priority is getting the market share of BGM in major markets. So we are making sure that we will be in tandem with what we mentioned in BCP. Thank you.

Thank you. Next, Ryotaro Hayashi. Yes, Hayashi from Morgan Stanley Securities. I hope you can hear me. Yes, thank you. Two questions. First of all, about the CGM, the transfer. Originally, 26 March, the CGM's revenue and operating loss were factored in I think that the numbers were not disclosed. So this time, now the effect of the deconsolidation is included in your guidance. So at this timing, the Q4 CGM revenue and also the deficit, what were the size of them that you assumed? Maybe this time you will be able to tell us. So I would like to know that. The reason I'm asking this is that the next fiscal year, CGM revenue, that will be gone. So to what extent should we deduct that from the guidance? So that's the reason I'm asking this question. Yes, thank you. The focus and what we factor in the contract negotiation has not yet over, so it has to do with the negotiations. I cannot really talk about the numbers. But the way of thinking is that at the time of the MOU, I think we explained that as of last year, 9 billion yen operating loss is what we have. And for this fiscal year, this would be less that was included in our original plan. And Q4... only, so that means one-fourth of that number. In addition to that, the transactions incur one-time cost, so we need to deduct that, and so we reflected that in the revised forecast. So in that sense, this plan itself, we believe, is rational, reasonable, and the CGM impact itself is not increasing so much. Thank you. I see. Thank you very much. My second question is, in September, CGM business transfer was explained, and at that time, Q2, the BGM, mainly BGM, the diabetes management, the impairment, potential impairment of the good will might happen. That's what you said. But you said this time you did test the impairment, but you think that it's not necessary. So in Q4, when you close fourth quarter, making the judgment again, is there any remaining risks? And if the probability of having the impairment loss, is it the same or is it lower? If you can explain the nuance there. Yes, thank you. So in that sense, IFRS, based on the IFRS, we do the impairment test at least once a year. And as of the 1st of January, when we close the four-year period, numbers, we would have another test. So in this case, by announcing the CGM transfer, there were signs and possibilities. So at the time of the quarter end, we implemented this impairment test. So when we close the full year, we would, of course, conduct another test. And if there are any signs of the impairment, we would also do the test. So that would be the rule or process. As for the risks, this time impairment test was done, and currently looking at the BGM performance and the progress, we made a judgment. So from now on, for example, say that the interest rate going up significantly or the BGM performance comes down significantly, without those, the conclusion is not likely to change in six-month time period. But if you ask me whether it's possible or not, I have to say yes, but the risk in comparison to the September time frame is lower, I believe. I see. Thank you very much.

Thank you.

Next, Tokai Tokyo, Mr. Yoshida, please.

This is Tokai Tokyo Yoshida.

Do you hear me? Yes, we can hear you. This is the first time for me to ask questions. There are three questions. The first is on BGM.

external environment is not changed, that's what you said, but you are increasing your share. For instance,

you had initiatives and you said that these initiatives were successful. Could you please elaborate on that?

And also, are your competitors withdrawing from the BJF market or not?

Thank you for the question.

First of all, with regard to external environment, as we mentioned at the outset, BGM market per se is minus 4%, minus 5% down every year. The trend will continue in the future. The reasons are as follows. Because we have CGM, that is an alternative product, which is penetrating into a certain segment of the market. Just as Yamaguchi mentioned, the CGM segment is there, and some percentage of the patients are type 1 patients or serious type 2 diabetic patients requiring insurance. So these are the targets for CGM. In the past few years, the market accelerated. That is why the BGM market is down. Considering the current trends, we believe that the CGM penetration reached a certain level of plateau for the time being. So from this point on, the penetration will be gradual. And that's the basis of minus 4%, minus 5% for BGM. Another reason is that we have a high share in the BGM market, and there was a mentioning of competitors. competitors, particularly in the United States, because of economic reasons, they filed Chapter 11 bankruptcy filing. So we are taking the advantage of that, capturing their market in the United States. And also in Europe, we are strong already. and the competitors, some are withdrawing, some are continuing, but we are focusing on strong markets to furtherly grow our market share. That is why, although the vision market is down, we are increasing our shares in the markets where we are strong. That is how we are doing the offset, and that is the plan in our VCP, although this is the first year of mid-term plan. But so far, these initiatives are successful. So this is FY25? Well, you said Chapter 11, that Chapter 11 bankruptcy filing in the United States. Did it happen last year? No, it happened this year. Some of your competitors filed for bankruptcy protection. The second question is about biomedical. You said European pharmaceutical companies are investing in the United States. What about the competitive situation there? For instance, With a low temperature freezer, you have a certain share in the United States, and you have a share of 10% in Europe. European companies making inroads into the United States. So you have 10% share in Europe, which is not high compared to your market share in the United States. So these European companies are going to the United States. And then what about your performance in these markets? So you have 20% market share in the U.S.

market?

Or will this be adversely impacted? What about the competitive situation and your forecast? Thank you. In the United States, we believe that we have the existing market share maintained. We have major pharmaceutical companies in Europe, biotech companies in Europe with production sites. They are investing several tens of billions of dollars to shift the production basis in the United States, and that is to avoid the tariff measures in the United States. At that point in time, we have the strong dealer sales network and direct sales channels. We have both. So we believe that these systems will have the strong base there. We have also the research base, academia, through which we will be able to utilize through our existing new channels to further expand the market share in the United States. The market share is a market share for the total North American market, but we have dealings with global pharmaceutical companies, and of course in the United States our competitor

It has a larger share, but our product is of high quality.

And we are targeting large pharmaceutical companies. So considering these, the relations with large pharmaceutical companies will be able to beat the competitors in the U.S. market. Thank you. The last question from my side. Last year, you announced BCP, and you will withdraw from CGM. I believe that that will impact the revenue, but what about profits? Will there be any change from transferring the CGM business? Thank you. This time in ECB, with regard to the figures in profit, we use profit margins and also in terms of the revenue growth rate. So we are not disclosing the absolute figures, but the percentage of growth. That is our target, and we would like to make sure that we can realize the contents of ECPs. And we believe that we are on track with the progress. If that is the case, 4 to 5% is the revenue growth. Will this figure be impacted by CGM sales, or there will be no change? Just as you said, in CGM, we said that in PCP, we said that CGM will be a priority. That is why this ought to have the impact, but we would like to make sure that this can be offset by businesses in other areas. If that is the case, the sales will be done. But the negative impact on the profit will be gone, so the profit margin will be improved. Probably it will not disclose the absolute values, but probably in the absolute, the profit... level or the margin level will not be changed. Yes, we are making sure that we strengthen our portfolio management. Our goal is achieving the percentage targets, and that is what we mentioned in BCP. At this point in time, it is exactly as you mentioned.

This is rolling? Or this will not be changed?

We are not thinking of changing the content. Thank you.

Thank you very much. We have some time left, so are there any questions? If you have any questions, please raise your hand.

Takeuchi, go ahead.

Thank you.

Takeuchi from BO Bay Securities. One minor point about the tariffs prospect I'd like to clarify. In Q1, 200 billion and 200 million and 600 million. So that means that probably it will be higher than your expectations from 10 to 1.5. So are there anything that included in the second half initiatives specifically? Yes, thank you. In that sense, now 800 million at the end of the first half, and for the four years, it's 1 to 1.5 billion. So it's at the higher level, as you pointed out correctly. And the reason for that is that we calculated based on the 10%, but there were additional tariffs, so that's one of the reasons. And as for our initiatives, already the prices were increased as of the 1st of April, and the effect of this, or the timing of it, in Q2 was not 100%. So in Q3, Q4, it would become more obvious or it would be realized. So 1 to 1.5 billion and at the high level, we are trending at that level. So we'd like to make sure that we can harvest. But the tariff impact increasing further is not something that we expect. So we'd like to control well so that we can achieve those targets. I say thank you very much. Additional comment? that child's impact is the biggest in the life science. As Yamaguchi mentioned, the price increase is done starting from Q2, and the effect of that will be fully realized in the second half, and there will be an additional price increase. And securing the margin, is in the first year of the VCP is the most important thing. So SG&A, cost reduction, especially we have multiple plants in life science, so transferring the products among those plants so that we can provide or ship products to the United States with lower tariffs. and increasing the production capacity in the United States. So that's what we are trying to do, and we accelerated in the second half. So there could be higher impact from data in the second half, but we will be taking more mitigation plans to offset that. Thank you. So price increase and supply chain initiatives will continue, I see. Thank you very much.

Are there any other questions? Thank you very much everyone who asked questions.

This concludes the briefing session. Thank you very much for taking time out of your busy schedule.