To what extent did 1H earnings fall below expectations?

Net sales were about 9 to 10 billion yen, lower than expected. Accordingly, operating income was down 5 to 6 billion yen.

The initial plan stated that fixed costs would increase about 2 billion yen from the previous year. What is the current plan?

At the beginning of the fiscal year, we forecast an increase of 2 to 3 billion yen from the previous year. We explained that it will increase slightly from the initial forecast at the Q1 financial results. At the moment, we expect fixed costs to increase several hundred million yen over the 3 billion yen forecast.

The inventory is increasing, did you adjust production in Q2? Also, how much production adjustment do you expect after Q3?

We adjusted production in Q2 in response to the decrease in sales in Q1, but inventory increased further in Q2 because the decrease in sales in North America was greater than expected. Taking into account the increase in sales in 2H, we expect a production adjustment of about 10% and plan to reduce inventory.

Please explain your analysis of the increase/decrease in operating income from the previous year in the revised plan.

The 13 billion yen after this downward revision represents a decrease of 6.5 billion yen from 19.5 billion yen in FY22. We expect a decrease of 4.5 to 5 billion yen due to sales and Mix, a decrease of 3.5 to 4 billion due to increased fixed costs, a gain of 1 to 1.5 billion yen due to foreign exchange, and a gain of several hundred million yen due to reduced materials costs.

Are distributor inventories still at a higher level than usual?

Although distributor inventories remain high, they have improved compared to Q1. On the other hand, holding off purchases have been continued due to rising interest rates in the U.S..

The initial plan explained the demand for infrastructure was stable while considering a decline in housing starts in North America. Does this downward revision of Positioning Business mean that demand for infrastructure, in addition to housing, is also affected by the higher interest rates?

I see the same situation of holding off purchases in both housing construction and infrastructure. The aftermarket is particularly affected by high interest rates. On the other hand, in the growth business field, sales of unique products such as MC-Mobile continue to be strong and stimulate new and replacement demand.

Fixed costs increased significantly in 1H. Is the 1.7 billion yen reduction in 2H, mainly in Positioning Business, really feasible?

We have already started to reduce personnel costs, SGA expenses, etc.

In Q2, there was both an increase in sales and a decrease in profit. To what extent does this include the upfront investment, and what are your future plans?

Fixed costs in Q2 increased by 1 to 1.5 billion yen YoY. We expect an increase in fixed costs such as personnel expenses due to upfront investments in Shared Care.

In Q2, Operating income was particularly low. Is it possible for operating income to recover after Q3?

We expect sales to increase in 2H, and we expect an operating income of 5 billion yen per year will cover fixed costs.