Yakult Honsha Co.,Ltd.

I am Okada from the Finance and Accounting Department, and I will now present our company's Consolidated Financial Results for Q1 of Fiscal Year 2026. I will base my explanation on the document titled Executive Summary of Consolidated Financial Results for Q1 ended June 30, 2026, which is available in the IR Library section of our website under Financial Report. For detailed figures, please refer to the financial report and the supplementary materials posted at the same time. First, let's look at page 1, General Outline of Consolidated Financial Results. On a consolidated basis, revenue increased while operating profit decreased. Next, here are the highlights by segment. In the food and beverages in Japan, sales of dairy products declined due to factors such as a decrease in the number of bottles sold, resulting in lower revenue and profits. Revenue and profits increased for the food and beverages overseas due to an increase in the number of bottles sold, particularly in Asia and Oceania, as well as the positive impact of the weaker yen. Next on page 2 is the summary of consolidated income and expenses. Net sales increased by 3.8 billion yen year over year to 120.4 billion yen. Operating profit decreased by 800 million yen to 10 billion yen. Ordinary profit decreased by 1.5 billion yen to 15.6 billion yen. And profit attributable to owners of parent increased by 1.9 billion yen to 13.5 billion yen. In addition, as shown in blue, the impact of foreign exchange rate fluctuations was positive in each case due to the weakening of the yen. Also, the basic earnings per share figure includes the effect of the share buyback. We will discuss this share buyback later in the balance sheet section. Also, on the right side of this slide, you'll find the forecast figures announced for H1. In terms of progress against those figures, While net sales are slightly below plan, profits at each stage are generally on track. Next, let's look at page 3, the consolidated statement of income. I will explain the details from net sales to operating profit by segment later, but on a consolidated basis, raw material costs were broadly unchanged year on year in Q1. While raw material prices rose domestically, Overseas prices fell during Q1 from January to March, as this was before the situation in the Middle East deteriorated. SG&A expenses increased by 3.8 billion yen from the previous fiscal year. However, this figure includes 3 billion yen in foreign exchange effects. Next, here is an overview of non-operating income and expenses, as well as extraordinary income and expenses. In non-operating income, interest income amounted to 1.7 billion yen, a decrease of 1 billion yen from the previous fiscal year. This was primarily due to a decline in cash and deposit balances at overseas subsidiaries. In addition, foreign exchange gains totaled 2.3 billion yen, an increase of 1.1 billion yen from the previous fiscal year. These gains were primarily attributable to the depreciation of the yen at our Japanese head office. In addition, a gain of 5.2 billion yen from the sale of investment securities was recorded as extraordinary income. This resulted from the sale of a portion of the strategic equity holdings by the head office. No other significant non-operating special items occurred. Next, on page 4, is the consolidated financial position. Total assets increased by 6.3 billion yen compared to the end of the previous fiscal year to 918.9 billion yen, while net assets decreased by 2.4 billion yen to 651.8 billion yen. As with the income statement, the weak yen had an impact on foreign currency translation, resulting in a positive effect of approximately 10 billion yen Next, on page 5, is the consolidated balance sheet. On the assets side, cash and deposits decreased by ¥14.4 billion to ¥217 billion. On the other hand, total shareholders' equity also decreased by ¥10 billion. The main factors contributing to these decreases include the share buyback of ¥12 billion since April and dividend payments, among other items. In addition, property, plant, and equipment increased by a total of ¥20.3 billion, primarily due to capital expenditures such as the construction of new plants at Yakult USA and the Chiba Yakult plant. In addition, although this does not affect the change in total net assets, we retired the approximately 5.53 million shares acquired between February and June at the end of June. Regarding the details of this matter, as well as the share buyback, please refer to page 9 of the financial report. You will find a note there concerning significant changes in the amount of shareholders' equity. Next, let's move on to pages 6 and 7. These tables show a year-on-year comparison of sales by segment. Page 6 presents the data in tabular form, and page 7 displays it as a graph. Now, I'll explain this by segment. First, food and beverages in Japan. Total dairy product sales volume decreased by approximately 8% overall, due to factors such as a decline in the number of existing customers. As for the Yakult 1000 series, although it has been one year since we launched the version with reduced sweetness, Sales declined due to both a drop in new customer acquisition compared to the previous year and a decrease in the retention rate of new customers. As a result, revenue fell by ¥4.2 billion to ¥55.3 billion. Although we were unable to meet our sales targets for both Yakult 1000 and Y1000 in Q1, we intend to recover sales volume through steady efforts starting in Q2 and beyond. Next, food and beverages overseas. In the Americas region, although sales volume declined in Mexico, revenue increased by 4 billion yen to 25.7 billion yen, driven by price increases in Mexico and Brazil, as well as a positive foreign exchange impact of 3.6 billion yen. Next is the Asia and Oceania region. In terms of the number of bottles sold, Vietnam continued to post double-digit growth with a 10% increase, while China, Guangzhou, and Indonesia also saw year-on-year growth. As a result, total number of bottles sold across Asia and Oceania rose by 5.9%. Combined with the impact of the weaker yen, revenue increased by 4.2 billion yen The number of bottles sold in Europe also increased by 1.6% from the previous year and, aided by the weak yen, revenue rose by 400 million yen from the previous year to 3.6 billion yen. Regarding overseas operations, the number of bottles sold figures for April through June, which represent the Q2 results, are included in a separate document. specifically on page 7 of the supplementary materials for financial statements, where preliminary cumulative figures for the six-month period are presented by business unit. Looking at the figures for April through June on a net basis, many businesses are showing a recovery and growth compared to the previous year, similar to what we saw in Q1. We hope to achieve further recovery and growth starting in July. Finally, there are other businesses, Other businesses include cosmetics and the baseball team, among others. Overall, revenue from other businesses remained roughly on par with the previous year at 5.5 billion yen. That concludes the breakdown of sales by segment. Next, we'll move on to pages 8 and 9. These slides show a year-on-year comparison of operating profit by segment. Page 8 contains the tabular data, and page 9 presents that data in graph form. As you can see, consolidated operating profit decreased by 800 million yen. Now, I'll explain this by segment. First, let's look at food and beverages in Japan. In addition to a decline in gross profit due to lower sales, factors such as the increased burden of higher raw material costs had an impact, resulting in a profit of 5.6 billion yen, a decrease of 3.1 billion yen. Next, food and beverages overseas. In the Americas region, increased gross profit resulting from price hikes and the positive impact of the weaker yen offset higher expenses, leading to a 500 million yen increase in profit to 6.9 billion yen. Meanwhile, in the Asia and Oceania region, profit rose by 1.8 billion yen to 3.1 billion yen, driven by an increase in gross profit resulting from higher sales volume and a reduction in costs following the closure of the Guangzhou Plant No. 1. Including Europe, total overseas profits rose by ¥2.2 billion to ¥9.8 billion. Finally, there are other businesses. Thanks to cost reductions in each business segment, the Others segment as a whole saw a ¥200 million increase in profit. That concludes the breakdown of operating profit by segment. Next, page 10 presents a pie chart showing the breakdown of net sales by segment. Compared to the previous period, the share of revenue from overseas regions, which saw growth, increased, while the share from the food and beverages in Japan decreased. Next, on page 11, is a list of actual average number of bottles sold of dairy product, The consolidated total was 27.99 million units, representing 99.5% year-over-year. By region, the majority of business locations in Asia and Oceania and Europe reported figures exceeding 100% compared to the previous fiscal year. In addition, at our major business locations with sales exceeding 1 million units, many have outperformed the previous year. Next, page 12 presents a pie chart showing the composition of operating profit by segment. Asia and Oceania and the Americas have increased their shares of the total, even more so than their shares of net sales. Next, on page 13, we have summarized the impact of foreign exchange rates on consolidated income for the current period. The graph on the left compares the average rate for the previous period from January through March 2025 with the average rate for the current period from January through March 2026. This shows the rate of fluctuation with the currency rates of the previous period set at 100. The yen has depreciated across all major business locations, with particularly significant depreciation, more than double digits, observed in Mexico, Brazil, and Europe. Please refer to the table on the right for details on the impact on each segment. That concludes the overview of the consolidated financial results for Q1 of fiscal year 2026. Honsha Co., Ltd. As we announced today, we plan to adjust the prices of 12 dairy products in the domestic market starting this October, and we naturally expect that these price increases will result in additional profits. However, at the same time, uncertainty regarding the situation in the Middle East is mounting, making it difficult to predict the impact on future sales and profits. At this point, while there is certainly reason to expect results that exceed our previously announced forecasts, given that we are only three months into the period, we wish to carefully assess domestic and international consumer trends as well as the actual performance of each of our business units. Therefore, we have decided to maintain our forecast at this time. After conducting a thorough review at the end of Q2, we plan to revise our forecast if necessary when we announce our Q2 financial results in November. That concludes the presentation on the Q1 financial results and earnings forecasts.