Special factors (component shortages and tightening supply chains): Special factors were negative 3.5 billion yen for the full year. How much of this is attributable to 1H and what is the breakdown by segments?

The impact in 1H was limited to only several hundred million yen. The Positioning Company accounts for roughly half of the 3.5 billion yen, and the remaining half is divided between the Smart Infrastructure Business and the Eye Care Business.

Special factors (component shortages and tightening supply chains): Is the 3.5 billion yen of special factors based on the maximum consideration for risk, or an average assumption with the current situation?

As there are many uncertain factors, the negative 3.5 billion yen is a figure based on our best estimate as of now. We acknowledge that there could be greater cost burdens in some cases.

OP Margin: What are the reasons for the deteriorating OP margin in 2H compared to 1H? Is it due to component shortages and the surge of logistics costs, or do you expect any changes in demand or the sales mix?

This is mainly due to problems in supply chains, and factors such as demand and changes in the sales mix are minimal. In addition to the supply chain problems, we assume that investment in the construction DX business will push down profits for smart infrastructure in the second half.

Outside Director: What role do you expect Mr. Yoshiharu Inaba will play, and what contributions do you expect from him?

The primary reason for appointing him as an Outside Director is his knowledge of the systematization of industrial machinery. FANUC introduced computer-aided control in general-purpose lathes and machine tools for factory automation 50 years ago. I would like such a great business professional with this knowledge and experience to advise us on our products for the automation of machinery, so that we can accelerate the expansion of our IT Construction and IT Agriculture businesses.

2H forecast: Concerning the slight drop in sales forecast in 2H compared to 1H, could you explain whether the problem lies in the supply or the demand factor? Do you expect an inability of some shipments in 2H or a reactionary decrease due to a surge in 1H sales?

We see no downturn in demand, but we expect some delay in shipments and sales due to the tightening supply chains.

Demand outlook: With regard to demand prospects, is it correct to understand that customers’ investment appetite continues to fluctuate cyclically in response to economic fluctuations, or is it better to understand that demands are expanding thanks to certain change in introducing automation technology in the wake of COVID-19?

It is true that COVID-19 pandemic has led to an increase in demands for introducing the automation technology. However, we think it’s because of significant demands for infrastructure globally.

Expanding OEM partners and joint development: I think the construction machinery market is an industry with little changes in OEM relationships. Are there any negotiations in progress with the new partners?

Since there are still many manufacturers those who do not have lineup of machinery with IT Construction feature, the number of joint development projects are increasing.

OP margin: Why was the OP Margin for Q2 alone so high?

The margin tends to fluctuate in a short period of time due to factors such as differences in sales mix and unrealize gain/loss. We would highly appreciate if you could look at our performance in a longer period such as six months.

Investments in DX business for building construction: Do you plan to cease the investments by the end of this fiscal year, or continue towards the next fiscal year?

We plan a certain amount of investment in the next fiscal year and onward with consideration of cost-effectiveness.

IT Construction & IT Agriculture: Could you explain in detail about “expanding sales of machine guidance system for medium to small sized construction sites” and “launch of strategic new products” (ref. p20) and what are your expectations?

We have already launched “KUI-NAVI SHOVEL”, a machine guidance system for medium to small sized construction sites, and the sales trend is favorable. With regard to strategic new products, we are going to launch a new Auto Steering System for IT Agriculture on November 1. I’m afraid we have to refrain from announcing the details before the official release. The product will be a successor to the current product with some improvements.

Screening Business: What are the prospects for sales in the next fiscal year and onward? Also, how do you see the expansion of recurring business hereafter?

We would say that the sales for current fiscal year is entering a growth mode rather than recovery mode. We believe we can keep it up in the next fiscal year. We are confident that our differentiating factors of the IT solutions based on our IoT platforms will continue to play a huge role in winning orders from new optical chain stores. The profit contribution from the recurring revenues is not large yet in the next fiscal year. However, it is certainly effective as a differentiating factor, and will greatly contribute to the growth of the Screening Business.

Factors for OP margin deterioration: When do you expect the OP margin to exceed 10% as before? Will it be in a few years after the upfront investment is over?

There have been no significant changes in the market between before and after COVID-19, rather we receive a tailwind from increasing demands for social distancing and automation. Although there has been negative impact from our upfront investment in new organization development to enhance our IT solution capabilities back in 2017 in New Jersey, U.S., the positive effects of the investment are beginning to appear. We expect our profits to grow in line with the sales growth.

Factors for OP margin deterioration: Could you explain the impact of VISIA acquisition on the bottom line?

We cannot give you clear answer because we have not even announced the guidance for the next fiscal year. We see the sales are steadily growing, and the sales forecast for this fiscal year is record high with 52 billion yen. As we do not plan to make significant upfront investments in the near future, we expect the profit to increase in line with the sales growth.

Large Orders: How long will it take to recognize the sales for the large orders of Maestro 2 and NW 400 (ref. p24)? Will it be mainly in Q3, until Q4, or to the next fiscal year?

The sales of this large order were already recognized in Q2. We have been constantly receiving orders not only from large optical chain stores, but also from small and medium size chain stores.

Factors for the recovery in 2H: Is it correct to understand that the factors for the recovery in 2H are the expansion of sales of Chronos and the accumulation of various orders?

Yes.