How much did Q1 sales and operating income differ from your assumptions?

Market conditions in the Positioning Business deteriorated more than expected at the beginning of the period. IT Agriculture in Europe, the U.S. and Japan deteriorated. Surveying instruments in Japan also deteriorated. These had an approximately negative 2.7 billion yen impact on the business, compared to the internal plan, excluding the impact of exchange rates. Cost reductions were more successful than expected.
In Eye Care Business, sales in China fell more than expected, having an approximately negative 1 billion yen impact on the business compared to the internal plan, excluding the impact of exchange rates. Operating income was in line with the internal plan as a result of aggressive cost reduction efforts.
On a consolidated basis, sales were worse than our internal plan, but operating income was not significantly different from our internal plan.

What are the factors affecting the recovery in the second half of the year?

There are signs that the Positioning Business will do well in the area of ICT Construction. IT Agriculture expects to see benefits from the second half of the year onwards, based on a comprehensive assessment of the demand stimulus from strategic product launches planned for the second half of the year, as well as the acquisition of sales networks and OEM customers from other companies. We will comprehensively assess the situation and we expect that our efforts will begin to bear fruit in and after the second half of the year.
In Eye Care Business, we expect that sales will grow, especially in the U.S., offsetting the decline of sales to China.

You mentioned that IT Agriculture is weak globally. What is your outlook for the future?

Lower grain prices and higher-than-expected interest rates have had a greater-than-expected impact on the business, and agricultural machinery manufacturers’ forecasts are low. We expect the business environment in IT Agriculture to have a difficult time recovering this fiscal year.

What is the basis for your thinking that there are signs that the ICT Construction aftermarket will recover, especially in the U.S. ? Also, is there any risk that OEMs will make adjustments? What is the current outlook and how likely is a recovery in the second half of the year?

The ICT Construction aftermarket is already recovering in our main markets in the U.S. and Europe, with Q1 sales up 10% year on year (excluding the effects of FX). This tone is expected to continue.
On the other hand, OEM sales are expected to be negative YoY in the first half and flat in the second half (excluding the effects of FX) due to the expected impact of the reduction of interest rates in the US.
Although sales in Q1 will not deteriorate significantly from this assumption, construction machinery manufacturers’ outlooks are severe for the North American, European and Chinese markets. We expect that this will have some impact in the future.

How much of the amount that you plan to invest in growth will be invested annually?

We expect to invest 3-4 billion yen per year in growth, as forecast at the beginning of the fiscal year.

Operating income in Q1 is in line with expectations, but I think the progress is low compared to the full year outlook. Are the sales in regions other than China on track?

There are no areas other than China where sales have fallen sharply, and some areas have improved above the plan. We are also on track to achieve the planned operating income while controlling expenses.

Regarding China, we are aware that the tight local government finances and the anti-corruption campaign have been talked about in the past, but why did they affect the current financial results?

The impact of the unpaid premiums to public hospitals due to the deterioration of local government finances and the anti-corruption campaign were greater in Q1 than we expected at the beginning of the period. It will continue to affect our full-year plan, especially for ophthalmology.