Coca-Cola Bottlers Japan Holdings Inc

TSE:2579

Earnings Call Transcript 2023-Q2

[ゴミ マサオミ, executive]

Good afternoon. I am Masaomi Gomi, Head of Investor Relations for Coca-Cola Bottlers Japan Holdings. Thank you for joining us today for our second quarter 2023 earnings and strategic business plan announcement for analysts and investors. Today, we have President Calin Dragan, CFO, Bjorn Ulgenes; and President Jorge Garduño and Su Choi from the Coca-Cola Japan Company. Also joining us today are Executive Officer and Chief Commercial Officer, Costin Mandrea, Execute and Executive Business Manager, Maki Kado, and Executive and Chief Supply Chain Officer, Andrew Ferret.

Following prepared remarks, we will be happy to take your questions. Simultaneous importation in both Japanese and English is being provided for both today's call and during the Q&A. Before we begin, let me remind you that today's presentation contains forward-looking statements, including statements concerning annual and long-term earnings objectives and should be considered together with cautionary statements contained in our presentation.

With that, I'd like to turn the call over to Calin Dragan. Calin-san?

[Calin Dragan, executive]

Good afternoon, everyone, Calin Dragan here. Thank you for joining us today for this presentation of our first half financial results as well as our new strategic business plan. With the announcement of this new strategic business plan, we are now ready to take the next step forward. I'm very pleased to directly share our forward strategy with you at this event.

First, before I go into the details of the strategic plan, I would like to touch on our strong second quarter results. Please turn to Slide #3 of the presentation for today's highlights. Sales revenue for the first half grew strongly by 7.5% over the previous year. This was a result of commercial activities that captured traffic recovery, achieving a volume growth of 3%. It was also the result of price revision benefits materializing to improve wholesale revenue per case significantly. Business income improved by approximately JPY 11.5 billion versus the previous year. In addition to profit contribution from top-line growth, successful cost management efforts across wide areas, including marketing costs, led to improved profits. The price revisions we have implemented since last year as the priority initiatives are steadily producing positive results through quick careful management and disciplined sales activities.

In May of this year, we implemented price divisions for cans and large PET, which were also executed as planned. In the first half, wholesale revenue per case improved by more than double-digit yen across all channels. Although the market environment remains uncertain in the second half, we aim to maintain the positive momentum of the first half to achieve our full year forecast. The key highlights for today is our strategic business plan towards 2028. And I will explain the fine details later, but we have developed a plan to fully leverage the foundation build to date and broadly move into sustainable profitable growth.

Now let me ask CFO Bjorn Ulgenes to take you through the detailed results for the first half.

[Bjorn Ulgenes, executive]

Thank you, Calin. Hello, everyone. This is Bjorn. Please turn to Slide #5. As Calin stated before, in the first half, sales volume grew by 3% and revenue growth by 7.5%. Gross profits grew 8.4%, exceeding revenue growth. Better profitability through price revisions and other measures led to an improvement in the gross profit margin despite the impact of external factors, such as higher commodity and energy prices, along with the weakening of the yen. Business income to a loss of JPY 6.8 billion. However, this was a major improvement of JPY 11.5 billion on the previous year. Factors behind this change will be detailed on the next slide. Operating income improved by JPY 7.9 billion from the previous year. This was mainly due to a year-on-year increase in business income, but a decrease in other incomes from the cycling of gains on sales of property, plants and other equipment recorded in the first half of the previous year. We will continue our efforts to improve our balance sheet for the year. As a result, net income improved by JPY 6 billion from the previous year.

On Slide #6, you will see our primary business income drivers. From the left are volume, price and mix. This shows the year-on-year change in marginal profit from commercial activities, an improvement of JPY 17.5 billion on the previous year. This includes the contribution of volume growth and the significant benefits improved wholesale revenue per case from price revisions. Next is transformation, which has achieved recurring cost savings of JPY 2.9 billion. These savings were in the main supply chain, operational efficiency improvements, including the use of the Mega distribution centers.

Marketing expenses decreased JPY 2.2 billion from the previous year. This is a result of cost effective marketing activities strategically invested to fully capture recovered traffic demand. In manufacturing costs, although we benefited from increased production volumes that improved manufacturing efficiency, cost increased by JPY 2.5 billion on the previous year because of a shift in consumption trends from small to large packages following the price revisions.

Other costs increased by approximately JPY 3.1 billion from the previous year. This includes the cycling impact of onetime cost savings of approximately JPY 3 billion achieved in the first quarter of the previous year. Despite this, cost-saving efforts are steadily progressing, including a decrease in logistics costs through an efficient supply network that leverages sales and operations planning and our Mega distribution centers.

Last is commodity and utilities costs. These were significant significantly impacted by external factors. Cost increased by JPY 5.5 billion from the previous year. The impact of commodity prices, including forex was JPY 3.8 billion, affected by the yen's depreciation and higher raw material prices of resources such as PET resin. In addition, utility costs increased by JPY 1.7 billion with higher electricity costs resulting from higher crude oil and natural gas prices. Although we continue to face a challenging cost environment, we have confidence that our disciplined profitability-focused commercial efforts are making a significant contribution to improving overall business performance. This concludes the main drivers of business income.

Please turn to Slide #7 for volume performance by major channels and categories. NARTD volume in the first half of the year was up 3% from the previous year, capturing opportunities stem from increased demand with traffic recovery. We continued to achieve volume growth in the second quarter despite the previous year space being higher than in the first quarter as we cycle the heat wave of the same period last year. In addition, wholesale revenue per case improved by more than double-digit yen over the previous year in all channels with the benefits of price revisions. In vending, we implemented price revisions in May this year for our mainstay can products. While volume impact was unavoidable, the market share foundation built to date and the strength of the Coke ON smartphone app contributed to 1% volume increase, continuing the trend of the first quarter. Wholesale revenue per case improved significantly by JPY 161 through speedy price reflections in our vending machines. In retail food, volume grew by 14%, benefiting from a return to eating out.

Convenience stores, CVS continue to see severe competition, but maintain flat volumes compared to the previous year. Most categories achieved growth, except Tea and Sports, which were significantly impacted by price revisions. Sparkling grew 3% with growth centered around the traffic recovery and Coca-Cola at vending and restaurants. Water grew by double digits, supported by the effects of the renewed bottle design and seasonal flavors. Coffee was positive with the Georgia THE Black, launched together with the Georgia brand renewal and contributions from medium PET, which is targeting at-home demand.

Slide #8 highlights market share and retail price trends. Total channel value share for the full year grew by 0.2 points from last year. This was led by a 0.6-point value share growth in vending. For OTC, retail prices, the benefits of the price revisions are materializing with both small and large PET exceeding the previous year's levels. The smaller increase in the retail price for large PET compared to the growth of small PET is mainly due to a change in the package mix with increased composition of water. Both small PET and large PET have maintained their price premiums to the industry average. The detailed status of the price revisions will be explained in the next slide.

Slide #9 is an update on price revisions. Since last year, our price revisions implemented 3x as a pivotal initiative to improve profitability, have produced significant outcomes. This is thanks to quick market execution and disciplined commercial activities, leading to a favorable trend in retail prices. The graph on the left side of the slide shows the trend of retail prices per CAD from our vending machines. Following the May 1 price revisions, we have been applying the price at our vending machines. And thanks to our strength in quick operations, about 85% of our vending machines have already reflected these revisions. We believe that this rapid response has led to early realization of the price improvement benefits. The graph on the right side shows the trend of retail prices of large-sized PET in the OTC channel.

In the OTC channel, we revised the price of large-sized PET in May of this year for the second time, following the price revisions of May of last year. Retail prices have steadily increased since the shipping price revisions and have remained at elevated levels since then. In addition, this price revision has widened the price premium against the industry average. We will continue our efforts to ensure disciplined sales activities.

Now let me hand over to Su-san from Coca-Cola Japan to take us through the marketing update. Su, please?

[Su Choi, executive]

Thank you, Bjorn. Hello. I'm Su Choi from CCJC. Today, I would like to take you through a review of 2023 second quarter and highlights of our marketing initiatives in the third quarter of this year. Starting with second quarter performance of 2023, the business grew ahead of the market. Our value share in soft drink market grew by + 0.1 points, driven by strong renewals and activations in the core and new innovation to successfully attract new drinkers enabled by digital centric new ways of marketing.

First, we continue to focus and strengthen the core by revitalizing our core brands through renewals and -- and one of the key priority of this year is a full relaunch of Georgia brand with new brand logo, product and positioning under new recruitment strategy. This relaunch at the end of March is showing positive years year-to-date. And to continue the strong relaunch in March, we launched a summer campaign with [indiscernible] as a brand ambassador, appearing for the first time in Georgia communication in order to attract new users to the brand. Moving on to innovation. In April, we launched Aquarius NEWATER, a completely new hydration drink with superior hydration functions as well as zero sugar and 0 calories. Our proprietary technology, which uses amino acid instead of sugar provides superior hydration than water, absorbing water faster and longer than water, with 0 sugar and 0 calories. We successfully recruited new users through a new hydration drink option offering to support their daily life.

Next, Jack Daniel's & Coca-Cola was launched in April. This is a Coca-Cola's first ready-to-drink alcoholic beverage that mixes Coca-Cola and Jack Daniels, one of America's leading Tennessee whiskey brands as the perfect partner. This innovation shows initial success with strong NSR and incremental value share in ARTD by increasing trial among consumers. In marketing transformation as an effort to continue the transformation to better connect with their consumers and to drive trial, Coca-Cola brand launch, which great case do you like with national promotions through first time under the cap promotion with unique code printed in each cap of the bottle. By registering this code using the Coke ON app, users can vote to win 1,000 years supply of Coca-Cola. They successfully recruited new users into Coca-Cola trademark, growing both Coke regional and Coke syrup.

Slide #12, please. Next, I would like to take you through the key initiative highlights in the third quarter of this year. In tea, Yakan Barkey was one of the core drivers of growth of total tea portfolio year-to-date and launched a summer campaign in July to maximize the highest summer season opportunity. To achieve this, we are implementing the receipt promotion to increase frequency and have live experiential to build brand connection for core target.

In innovation, we launched Fanta Mystery Sweets in June and continue the momentum throughout Q3 as a second flavor of what the Fanta series and launched last year in Japan, which was one of the most successful innovation platform globally and in Japan. This innovation platform targets Dense Insight, surprising them with the flavor, that's not obvious from the packaging itself. This has created more trial and brand engagement with core target. In marketing transformation, Coke Studio campaign started in June and throughout Q3 as a key campaign for the company as a holistic marketing plan with packaging, promotion, communication and live experiential concerts, all integrated and connected.

We are partnering with local artists like Ms. Green Apple and Wednesdays Campanella and global famous artists that show global campaign scale and impact to the local consumers to recruit new users and maximize summer sales opportunity. That's it from my end, with our mission to refresh the world, make a difference, we will continue to pursue to deliver refreshing moments and make a positive difference through our brands. Thank you.

[Operator]

Thank you, Su, for your presentation. Calin here again.

[Calin Dragan, executive]

Slide #14 shows the outlook for the year. Although we expect tailwinds to continue in the second half of the year in terms of traffic, we believe that the business environment will remain uncertain. High volume volatility is expected due to the market likely being affected this year by the weather factors, cycling the previous year's extremely hot summer. We are also entering the first peak demand period in a situation where prices for most products have increased since the revision for small PET in October last year and May of this year.

With that said, the first half of the year is progressing on a positive trend, and we intend to continue this momentum through commercial activities focused on profitability and high-quality operations. For profitably focused commercial activities, we will continue to maximize price revision benefits through disciplined commercial activities while capturing the demand created by the traffic recovery. We will also continue preparations for the newly announced October price revisions. In addition, as a high-quality operation, we will strive to ensure stable and low-cost operations through advanced responses to demand fluctuations during the peak demand season by fully utilizing the S&OP process and our Mega DCs. And that is the situation for this year. We have communicated 2023 the year to focus on profit, and our major initiatives are showing steady results. By continuing the positive trend of the first half of the year into the second half, we intend to achieve our full year earnings target and start the newly announced strategic business plan strongly.

Now I would like to talk about our newly formulated strategic business plan. Please see Slide #16. Firstly, I'd like to present the leadership team responsible for developing and driving the strategic business plan. This includes myself, CFO, Bjorn Ulgenes, our Head of Commercial, Costel Mandrea; and the President of the Coca-Cola Japan Company Jorge Garduño. From here, I would like to present our plan together with my colleagues.

To begin, I would like to look back on our journey since we have announced our previous strategic business plan in August 2019. The last plan period started in 2020 with the principle that business as usual is not an option. However, shortly after its commencement, we faced the unprecedented challenge of the COVID pandemic. Coupled with the sustained decline in traffic, this led to a substantial feedback on our business in 2020. Sales revenues fell by more than JPY 100 billion compared to the previous year. While there has been a gradual recovery in traffic since last year at the same time, we have encountered challenges on the earnings side. Escalating global commodity prices have led to increased costs for raw materials and energy. The depreciation of the yen has also led to cost increases.

And as a result, our costs have surged by more than JPY 30 billion during these 2 years since 2022. This was an extremely difficult business environment. In this situation, we responded to a rapid change in the environment by taking pronged business decisions. We focused on protecting the business. In addition, we accelerated efforts to transform the company as outlined in our strategic business plan. This way, we could achieve greater profitability when the market returns to a more normalized state. This transformation is projected to generate over JPY 30 billion in cost savings over 4 years. We have also taken measures to revise product prices to rebuild our earnings foundation. As you are likely aware, the beverage sector in Japan is a severely competitive environment. Despite this, we have successfully carried out 3 price revisions since last May. We were the first in the industry to implement a major PET price division, and we are seeing significant results in our efforts to recover business performance.

We achieved significant results and gain learnings that will facilitate our progression to the next stage. Drawing on our achievements and learnings, I'm confident that our strategic path is the right one. These achievements are valuable resources for future growth. The external landscape is now showing a degree of stability. While we may not label it as normalization, we believe that this is the right moment to capitalize on our game knowledge and successes to propel us towards growth. The ongoing transformation has resulted in a stronger business foundation. And as the business environment shows signs of stabilizing, our earnings have been steadily recovering since 2022. This year, as I previously mentioned, we are maintaining a good momentum. I believe that now is the time to further accelerate our efforts towards sustainable growth. With fresh medium-term objectives established, we aim to achieve future sustainable growth by setting out a road map aligned with its goals and steadily executing it.

Please turn to Slide #19. Here is the outline of our new strategic business plan, Vision 2028. This plan is geared towards achieving sustainable and profitable growth, focusing on profitability and capital efficiency. Key benchmarks include annual revenue growth of 2% to 3%, a business profit margin at over 5% and the ROIC of over 5% by 2028. In our commercial area, we will execute highly profitable activities to achieve growth with a solid bottom line. Within supply chain, back office and IT, we will leverage the foundation we have built to enhance value and deliver greater efficiency. In addition, by driving company-wide transformation, we will achieve further cost savings of JPY 25 billion to JPY 35 billion over the 5-year period from 2024 to 2028. In the previous strategic business plan, this transformation was generated in the process of creating a framework for post-merger integration and streamlining duplicated functions. The transformation in our new plan will be based on the foundation that has been built to date and will create new value by combining innovation and new technology to bring positive results.

In addition to improving profitability, we intend to emphasize the efficiency of invested capital. Through appropriate management and control of capital, we will work to improve asset turnover, such as inventory and fixed assets as well as optimizing capital, including financial leverage to improve ROIC. And to promote this Vision 2028 in a comprehensive approach to further solidify the foundation for continued growth in the future, we will firmly engage in ESG management and human capital management. By promoting these initiatives and achieving the key targets of Vision 2028, we intend to greatly enhance our corporate value.

Slide #20 shows the core elements of our strategic business plan, Vision 2028. Our approach involves 3 strategies: commercial excellence, supply chain optimization and back office and IT optimization. These are coupled with our focus on ESG strategy, human capital strategy and financial strategy, all collectively reinforcing the groundwork for executing our business plan to achieve profitable growth and to build a cost structure that is resilient to change.

Now I would like to start with commercial excellence in detail. Please see Slide #21. Before I explain our strategy, I would like to share with you some insights on the current macro environment and consumer trends. The economic indicators we have been monitoring are displaying positive trends. Beverage prices are on the rise in Japan, something that has been difficult to achieve for a long time. This indicates a major shift in the Japanese beverage market, and I believe there is a significant opportunity for growth here. Consumption trends in the soft drink industry are constantly changing and by closely monitoring and responding to trends, sustainable growth can be achieved. The strong recovery in demand at restaurants and entertainment facilities, which have been heavily impacted by COVID, continues as a result of increased average consumption occasion with a recovery in traffic. This can be seen from our steady volume growth as well.

In terms of consumer preferences, in addition to the growing preference for authenticity and health, there is a growing interest in sustainability conscious product, which we are responding to with our broad lineup, including our high value-added products. The trend towards digital engagement in which consumers are directly connected with apps, it's rapidly accelerating, and we believe that this is creating an environment in which Coon can take full advantage of its strength. A strong partnership with Coca-Cola Japan is very important for growth in a business environment that is changing dramatically. As the first pillar of commercial excellence, I am pleased to have Jorge Garduño, the President of Coca-Cola Japan Company to explain to us how the Coca-Cola system works together and what our category and brand strategies are. Okay, thank you for being with us today.

[Jorge Garduño, executive]

Thank you, Calin, and hello, everyone. Before getting into further details, I would like to highlight on behalf of the Coca-Cola Company, our strong partnership with CCBJI in Japan. We work together on the common vision as one team, one system with clear role sourcing, the Coca-Cola company in charge of consumer insights and brand building and CCBJI in charge of customer collaboration and market execution. Ours is a partnership with purpose. We exist and work to refresh Japan while we create a positive impact in society to work as one team to reach our common dreams to nurture a growth mindset internally and importantly, to shape healthy industry dynamics, aiming at growing the pie sustainably. CCBJI and the Coca-Cola Company work together to drive growth and value creation.

The Coca-Cola system in Japan owns the leading beverage portfolio with strong brands in each category that reflect the diverse life types and preferences of our consumers. In the sparkling category, the Coca-Cola brand with 137 years history and the most beloved beverage brands around the world, Fanta canal drive complement our sparkling proposition. In Tea, our portfolio of brands caters to the diversified needs of our consumers. I LOHAS TM, Sokenbi-cha, Georgia TM among other brands. For the [indiscernible] category, we implement a dual brand strategy with Georgia and Costa, providing a variety of products that range from mass to premium segments.

In addition, we offer other solid and sizable brands such as I LOHAS, Aquarius, Minute Maid, Coke that meet consumer hydration and nutritional needs. By leveraging this portfolio, we have secured a substantial market share in each category, and yet we still see ample room for growth. And more importantly, the market size of packaged beverages continues to grow year-over-year, creating significant headroom for growth. In a few words, the opportunity for expansion is still significant.

We operate combining the advantages of global strength and local capabilities to create a sustainable edge. This is unique to our system and a proven competitive advantage. Our strategy is sustained on 3 pillars. First, we focus on accelerating our core brands. Second, we expand our footprint through fewer and bigger innovations. And third, we have embarked on a marketing transformation journey. By leveraging experiential and digital understanding, we are creating programs that engage consumers faster and in more meaningful and efficient way. That's it from my end. Next are the details of the CCBJH component of the SPP and over to costing.

[Costel Mandrea, executive]

Thank you, Jorge. Hello, everyone. This is Costel Mandrea. I would like to explain one of the key strategic pillars of our strategic business plan, which is commercial excellence. First, we have a channel strategy supporting growth. We will execute a disciplined profitability-focused strategy while leveraging the growth foundation we have built to date. In the OTC channel, a strong business foundation has been built through the commercial transformation to date, and it was supported by steady market execution on strong brands such as the ones Jorge just described. We will accelerate our offerings to increase the purchase rate of our products by tailoring them to drinking opportunities and needs, accelerating the creation of sales floors and building strategic partnership with key customers to promote sales opportunities.

We believe that vending despite its strong market share base still has great potential in terms of profitability, and we will continue to work on transforming its business model. We'll explain this in more details later. In Food services, the post-COVID turnout recovery has led to a strong volume recovery as well and steady implementation of measures to improve profitability. Even during the spread of COVID, our efforts to stay close to customers and maintain strong relationships have been effective in the face of market recovery.

Going forward, in addition to expanding the number of stores carrying our products, we aim to improve the profitability of our self-equipment. Online, it became a significant market during COVID, and our sales revenue has grown rapidly. We have a strong presence in the online beverage market, and we believe that the strength of ours will continue to be a driver for achieving growth. In online, we have developed exclusive products such as labelless bottles.

We will continue to strengthen the development of products suitable for the online channel to meet the unique needs of this market. In working with customers, we'll strengthen our logistical collaboration in addition to our sales and promotional activities.

On Slide #26, we present our profitability focused, disciplined commercial initiatives. The first is in packaging and channel mix. In packaging, we will accelerate growth in image consumption packages and aim to optimize and maintain pricing by package. While focusing on growth in the immediate consumption channel, we will also improve the accuracy of our channel-specific profitability analysis and execute our channel-specific strategy more efficiently and effectively than ever before.

Second, we will look at pricing strategies. We aim to implement pricing strategies that reflect market trends. And market trends refers to not only the cost environment, but also to the competitive environment and would like to make comprehensive decisions. Even if we do not revise the suggested retail price uniformly, we'll implement an appropriate pricing strategy, considering the channel, package, location and other factors while balancing competitiveness and profitability. Regarding marketing investments, we'll carefully assess cost effectiveness and make optimal investments while maintaining competitiveness.

The third initiative is our product portfolio. We'll strengthen high value-added products through product lineups and innovations that match consumption trends. We will continue to steadily capture diversifying consumer needs, while ensuring profitability by strengthening profitable categories and enhancing product lineups in each price range. Fourth initiative in productivity improvement, we will increase opportunities to improve profitability by collaborating with customers to resolve the supply chain.

In addition, we'll improve operational efficiency by further promoting digital transformation and utilizing advanced market insights, leveraging data. What can be said about all the above is that profitability it is our top priority. We believe that disciplined commercial activities, each focused on profitability will make a significant contribution to improving the business.

Please turn to Slide #27. Let me introduce the transformation that will take vending to even greater heights. In commercial, the core of our transformation efforts is in the vending business. We have been leading the industry in digitizing our vending operations since integration. The transformation we have undertaken since 2020 has resulted in significant efficiency gains, including a reduction of over 20% of our vending machine operating routes. Towards 2028, we'll expand the value we provide in vending and further improve the efficiency of our operations through transformation that fully leverages the latest technologies based on the business model we have built to date.

Specifically, we'll work to optimize placement locations, direct consumers to vending machines, optimized product assortment and pricing and improve operational productivity. While some of the optimization efforts using the latest technology will be shared in the following pages, vending continues to be an important sales channel for us, and we aim to provide a seamless experience through end-to-end digitization and increase contact with our consumers. Now on the next page, I will share more specific digital innovation initiatives.

Please turn to Slide #28. Technology is a key driver of transformation. Going forward, we will evolve our vending machine into a fully technology-enabled online-based business. For optimization of placement locations, we'll utilize big data and self-support systems to improve the accuracy and speed of identifying placement locations with high sales per unit. This will allow us to optimize vending machine placements in a shorter cycle. We expect this to be a powerful tool in an environment where consumption behavior and traffic flow are constantly changing. About guiding consumers to vending machines, we aim to maximize service opportunities by increasing engagement with consumers, including the Coke ON app, which continues to see increasing downloads and of QR code-based payments, which have a high compatibility with inbound tourists. This strategy is in line with the trend of digital engagement with consumers, introduced by Calin at the beginning of the presentation.

In our efforts to optimize assortment and pricing, we'll promote the optimization of product assortment according to location and seasonality using artificial intelligence. We'll also work to introduce dynamic pricing in which prices are set in accordance with market supply and demand. To improve operational productivity, we will build a sales and restocking planning process that fully utilizes artificial intelligence. We also intend to optimize sales routes, aiming to organize routes that consider area characteristics through real-time vending machine inventory status. We have been working on a vending transformation, and we'll continue to improve our competitiveness and profitability through the implementation of new technologies that are constantly evolving.

This is all from me. I now pass the baton back to Bjorn.

[Bjorn Ulgenes, executive]

Thank you, Costel. Now I will explain it from here. Please look at Slide #29. I will share how we are accelerating and optimizing our advantage for supply chain stability. We will promote transformation, including digital innovation to further accelerate the advantage we have built to provide high-quality products and services at the lowest cost. Through digitization, we will build a system that can support prompt and accurate management decisions with visualize data and advanced information analysis.

In supply chain, we have achieved a great deal with the 2 Mega distribution centers in operation, optimization of the entire supply chain have made steady progress, including the effect of consolidating product inventory at the Mega distribution centers. This has allowed us to close more than 40 distribution centers since integration.

Inventory management efficiency has improved significantly. Additionally, initiatives to optimize logistics network have contributed to a significant reduction in logistics costs in 2022 compared to the previous year, reducing the transportation distance per case by up to 25% in per case, where the number of cases handled increased.

In this medium-term plan, we aim to achieve seamless product supply based on the 4 strategies of agile logistics, flexible manufacturing, end-to-end process and digitization. We will promote a model of local production for local consumption by leveraging the foundation and advantages of our 17 plants in our business area. We will build an optimized network based on the idea of overall optimization rather than looking separately in manufacturing and logistics. This will create a more stable and low-cost supplier products. The improved accuracy of the sales and operation planning process, which produced significant results last year is helping us to better manage inventory levels and optimize our supply chain network.

To tackle the 2024 problem in the logistics industry, we will work not only work to optimize our own logistics network, but also to optimize the logistics network, including that of external partners. We will also work to optimize delivery routes through initiatives to reduce transportation distances, which have already yielded positive at and further promoting digitization.

Slide #30, please. Efforts in the area of back office and IT will include the optimization of company-wide operations and IT functions through the promotion of data-driven management. Sustainable business growth requires advanced data-driven decision-making. To promote this, we agreed to establish a joint venture with Accenture. In the rapidly changing markets, BJI must continue to deliver high-quality products and attentive services to all customers. To achieve this, we aim to grow into a cost-effective and profitable world-class bottler. The establishment of this joint venture with Accenture will greatly contribute to the further strengthening of our business foundations. Through these efforts, we aim to continue to provide value to all our stakeholders, including customers, shareholders, partners and employees. The scale of this joint venture is one of the largest for Accenture in Japan for enterprise-wide transformation projects to date. And we are very excited for what this will bring for us in our future. The new company will be launched in January of next year.

Slide #31 shows the business profit targets for 2028. Our earnings performance have been on a recovery trend since bottoming out in 2021. In our strategic business plan, we have positioned business profit margin as an important management indicator and have set the goal of achieving a business income margin of 5% or above by 2028. To achieve this, we aim to return to profitability by 2024 as a near-term milestone. Depending on the sales revenue situation in value terms, our target for business income in 2028 is in the range of JPY 45 billion to JPY 50 billion. Sales revenue, the source of business profit growth is targeted to grow at a CAGR of 2% to 3% through 2028, roughly a target range of JPY 900 billion to JPY 1 trillion in sales revenue.

Please look at the right-hand side of the slide for details on the breakdown of business income. Business income in 2028, will increase significantly by more than JPY 50 billion compared to the 2023 earnings guidance. Approximately 60% of this increase will come from sales excellence and 40% from optimization of supply chain and back office and IT functions. In addition, we will promote transformation across the entire company. In this regard, we aim to achieve cost savings of JPY 25 billion to JPY 35 billion on a cumulative basis by 2028. Through activities in these key areas as well as company-wide transformation efforts, we aim to achieve our business income growth targets.

Slide #32 covers initiatives to improve return on invested capital and increase shareholder value. In this strategic business plan, we intend not only to improve profitability but also to improve capital efficiency. We have set the ROIC targets as the key indicator, aiming for ROIC of 5% or higher by 2028. Regarding capital investments during the period through 2028, we will focus on only necessary investments. We will take into consideration the true necessity of the investment and its return. Considering the cash flow perspective, we will make investments within the range of depreciation at an average annual level of JPY 30 billion to JPY 35 billion. We will also continue to optimize our balance sheet. We aim to improve our asset turnover ratio by reducing product inventories and fixed assets. From the perspective of invested capital, we will also work to optimize financial leverage.

We believe that improving capital efficiency and achieving right targets will also lead to a price-to-book ratio improvement. We will continue to manage our business with a clear awareness of this aspect. To enhance shareholder value, while aiming for a payout ratio of 30%, we will place the highest priority on stable dividends and consider other value-enhancing message as necessary. We will continue to strive to enhance corporate and shareholder value through sustainable growth.

Slide #33 shows some of our ESG initiatives to foster a sustainable business. We believe the ESG initiatives are critical to achieve sustainable business. We have identified resource, communities and diversity as 3 key areas, and we have set medium-term quantitative targets for several items within these areas to promote our initiatives. Today, I would like to explain our water-related initiatives and sustainability. As a company that requires precious and irreplaceable water to conduct our business, we are dedicated to water conservation efforts. This involves minimizing water usage and waste in beverage production, recycling used water and replenishing water resources. We achieved a 100% domestic water source replenishment rate in 2016. We have continued to maintain a higher rate of achievement through water resource conservation activities at each of our clients and the surrounding water sources.

Please see Slide #34 for the key metrics and the picture of success for 2028. We aim to achieve a sales revenue growth CAGR of 2% to 3% per year through growth of 2028. By steadily implementing our strategy on focusing on profitability, we aim to achieve sales revenue growth that exceeds volume growth. Volume growth will be targeted in a manner consistent with our strategy on focusing on profitability. We aim to achieve a business profit margin of 5% or higher by 2028, with the intention of improving business income by more than JPY 50 billion compared to the 2023 earnings guidance. As the foundation for this, we aim to return to profitability by 2024. Transformation cost savings are expected to range from JPY 35 billion to -- JPY 25 billion to JPY 35 billion coming from the areas of vending and optimizing efforts, including supply chain, back office and IT. We aim to improve ROIC to over 5% by 2028. At the same time, we will target shareholder return policy that emphasize stable dividends during the strategic business plan execution.

For last slide, I would like now to invite back Calin. Thank you, Bjorn.

[Calin Dragan, executive]

Calin here again. Finally, please see Slide #35. Here is our road map for getting back on the sustainable growth trajectory. As explained earlier, our business foundation is stronger than ever. Since 2019, we have consistently promoted transformation through a challenging business environment. Leveraging this foundation and its learnings, the strategic business plan is our path for sustainable growth. Profitable growth through profitable growth and the cost structure that it is resilient to change. Achieving these targets of the strategic business plan is not the end goal. We will accelerate our growth to 2029 and after beyond returning to a growth trajectory and achieving a higher profit level. In the long run, we will also consider an ROIC that exceeds WACC and shareholders' return measures. This includes increasing the dividend payout ratio of 30% as set for and in our current plan. For that, the achievement of this new plan is crucial.

I have strong confidence in our ability to achieve these goals. And I'm committed to achieving the target of the Vision 2028 strategic business plan by taking the lead in the steady implementation of this plan and by pushing forward with strong determination as a united company. We will regularly update you on all the progress of our efforts as we move to 2028. That concludes our presentation. Thank you very much. Now let me invite back Gomi-san to take us through the question and answers.

[ゴミ マサオミ, executive]

Okay. Thank you, Calin-san. As the following Q&A session is for analysts and investors only. Members of the media are asked to refrain from asking questions at this time, we will hold a separate media Q&A session later today. Due to the constraints of simultaneous interpretation, please limit questions to one at a time. Now I would like to start the Q&A session. Operator, please begin.

[Operator]

[Operator Instructions] We will now welcome the first person with a question. We will be unmuting you. So the first question is from Ihara-san, Credit Suisse. Go ahead, please.

[Rei Ihara, analyst]

Thank you very much for the presentation. This is Ihara from Credit Suisse I have 2 questions, if I may. My first question is -- this is kind of extract question. But in the past, you were not able to achieve profitability and probably due to nonhappy profitability, you were not able to take like positive challenges. You're not able to make enough like CapEx, capital investment, and you might have, say, some initiative versus competitors. And I know my question is kind of vague, but let's say you are going to return to profitability. Will that change your approach? Like would you have like new strategies because you are now profitable? So I would like to hear about that. That's my first question, please.

[Unknown Executive]

Ihara-san, thank you very much for the first question. So since we are planning to return to profitability, what will be the difference in the actions that we're going to take. -- Bjorn, I would like to take that question.

[Bjorn Ulgenes, executive]

Thank you for the question, Ihara-san. So let me try to formulate what I think you were asking for in what is really new in this approach? And let's first quickly remind ourselves what's the foundation for this plan. As we have said in the prepared remarks, we used the COVID period to deeply transform our operations, especially in the areas of commercial excellence. In addition, we bought -- we brought in a lot of experiences and build muscle and capability in how to take pricing, as you all heard Calin say, in the prepared remarks. This, we believe, has built a very strong foundation for the new plan we are executing now called Vision 2028.

And what we will do here is building on what I just said. So you heard Costin and Jorge talk about how we will build everything on profitability-focused commercial activities with a heavy focus on vending. You heard about our excellent news of establishing a joint venture with Accenture that will help us drive further transformation. Albeit, this will take some time to implement because this will be a deep application reset of how we work. But all parts of continuing the strong transformation we have already delivered, as I said earlier, during the COVID period. We will continue to contain capital expenditure, as you also heard from my prepared remarks, keeping it below and within the depreciation levels and all of this to be supported by a strong ESG platform. So therefore, we believe the outcome is very clear as longs as and the foundation, as I said, we have built is strong and it gives us confidence we can deliver this. I hope that answers your question. Thank you.

[Rei Ihara, analyst]

So I want to know like -- sorry. So is it going to be like a different approach? How you're going to fit with your competitors? Maybe you will be facing like new options because you are profitable. So thinking about how to fight with the competitors, are you able to do something different? Would you have more options?

[Unknown Executive]

So you're asking about the competitive environment and if we're going to have different ways to fight with our competitors. So we would like to ask Bjorn to take that question.

[Bjorn Ulgenes, executive]

Okay. on again, the Ihara-san. So again, let me try to formulate your question. You're asking what will be, I think, different versus the competition. In other words, how we will go to market. And you heard both Jorge and Costin talk about the different measures we will focus on in our partnership with the Coca-Cola company that's getting stronger and stronger. We will compete in the market that the intersection of channels and categories or brands. We are investing a lot of money both in the market-facing activities and in the capital facing actions to, again, to support that growth. And by combining those 2 efforts and again, underpinned by a very, very strong commercial agenda led by excellent brands. We believe the change in how we go to market will be different and better going forward. I hope that answers your question. [indiscernible]

[Unknown Executive]

So Ihara-san, you have a second question?

[Rei Ihara, analyst]

Yes. So my second question is about ROIC and about increasing the value for your shareholders. So 2028, ROIC higher than 5% is the target here. That's what I heard in your comments. And what is the WACC that you have in mind from the first place? And if you are able to hit like 5% or higher for the ROIC, what is your ROE situation? What's the target for your ROEs and nothing that I want to ask about. And for 2029, if ROIC is going to exceed WACC. So maybe the PVR will be higher than 1. So wouldn't you be able to accelerate the speed for that? And that is my second question.

[Unknown Executive]

Thank you very much for your question. So for ROIC. This question will be answered by Bjorn again.

[Bjorn Ulgenes, executive]

Again, Ihara-san, seems to be used today. When it comes to the ROIC as you rightly said, we are aiming to deliver 5% and more by 2028. When it comes to cost of capital, it's therefore fair to assume the cost of capital is within the range of that target by the end of the vision 2028 period. However, when it comes to the TBR that you also included in the question, we aim by executing all the activities I tried to lay out in my prior response to your question that the PBR should exceed one within that time frame within that period. The aim of management, of course, is to maximize margins and capital efficiency, and we believe, therefore, that over time, the PBR will follow and significantly improve. So I hope that answered your question.

[Rei Ihara, analyst]

So you had assumed that's the answer. So another thing, if you are going to hit the ROIC, what will be the ROE at that time?

[Unknown Executive]

So again, this will be from Bjorn Ulgenes.

[Bjorn Ulgenes, executive]

Hello, Ihara-san. So we estimate that the ROE will be about the same level as the ROIC by the end of the Vision 2028 plan period. Thank you.

[Rei Ihara, analyst]

Okay, understood.

[Unknown Executive]

Okay, understood Thank you very much. Well, thank you very much for the questions. Operator, can we move on to the next question, please?

[Operator]

Next, I will unmute the next person. SMBC Nikko Securities, Takagi-san. Please go ahead.

[Naomi Takagi, analyst]

Good afternoon. This is Takagi. I hope you can hear me.

[Unknown Executive]

Yes, we can hear you, Takagi-san. Thank you.

[Naomi Takagi, analyst]

I have one question with regard to the cost reduction. You mentioned about JPY 25 billion to JPY 35 billion. So can you be more specific on how you are going to achieve these targets? And with regard to this cost reduction target I -- can I take it as a reachable target or very challenging target because you are doing very well, right? And also in the past, when you talk about the cost reduction, you are focusing more on reducing those investments for those marketing activities. That is why that wasn't translated into profitability. But with this time around, would that be different? And also the cost reduction, the way that you achieve it, are you going to post it throughout the period? Or are you going to generate that amount at the end of the period? What's the planning?

[Unknown Executive]

Thank you, Takagi-san. For those cost reduction target and planning, I would like Bjorn to pick it up.

[Bjorn Ulgenes, executive]

Thank you for the question, Takagi-san. Long question. So let me try to answer it in the sequence. So first, you rightly say, we are targeting to deliver JPY 25 billion to JPY 35 billion of transformation savings. And how will we will do that? We have laid that out in the prepared remarks that parts is included in the commercial activities and others, the 40% is included in the transformation activities. But if you could try to think of it coming in 2 waves, and I will link this to the joint venture, we have now agreed to enter into with Accenture.

In the beginning, we will. In the beginning of the planning period, we will focus on operational optimizations, as we said in the prepared remarks, coming in supply chain, in back office, et cetera. And in the second period, after 36 months or so, when we aim to finish the technology master plan or basically the resets of our application landscape, we believe to turn more and more into technology-driven transformation. And by doing both of these at the same time, we will be able, I think, to deliver your last question, will we post this as we go through the quarters yes, we will. We have a traditional showing you very transparently our transformation savings, and we will definitely continue to do so.

When it comes to the DME optimization, DME is a little bit of a different cost for an investment than the other more traditional transformation savings we planned for. Marketing has to be gauged for the revenue and market opportunities we see at any given point in time as we go through the commercial activities. We will apply strict productivity also to marketing. But again, it has to be measured against what we aim to do to deliver the profitable growth you heard Costin and Jorge talked about earlier. So long answer, but I hope I caught your endpoints. Thank you.

[Naomi Takagi, analyst]

Okay. Maybe you might mislead my question. I'm not talking about the marketing activity per se. But then in the past, you've been creating a lot of cost of action. But then some of the part maybe you have some costs coming up at the same scale. That's why it has been kind of offset it. So from going forward, will the cost reduction amount be offset with another part or not?

[Unknown Executive]

Thank you for question. You have been saying that all the cost reduction that we have achieved in the past has been offset by the marketing spending. So would that be same in the future? So this question is again for Bjorn.

[Bjorn Ulgenes, executive]

Thank you, Takagi-san. So when it comes to cost increases, they come to me in 2 buckets. One, as I try to answer your earlier question about marketing, you might actually see marketing move upwards with revenue activities going forward because we need to invest in the market. But at the same time, we have included in our forecast inflation coming both from what we think might happen in the future on commodities and the yen, but also other inflation types that you hear us talk about in every quarter updates. All of these have been included in our forecast. And therefore, we think net-net, we will offset them as we go into the future periods. I hope that answers your question. Thank you.

[Naomi Takagi, analyst]

Thank you. So I would like to understand how you are going to generate or post the cost reduction. Are you going to post at the early throughout the period? Okay, cost-option planning, how you allocate the cost reduction beyond, would you like to pick it up, please?

[Bjorn Ulgenes, executive]

As I tried to say earlier, Takagi-san, we will deliver the cost savings of what we call the transformation savings throughout the plan period from 2024 through 2028. And as I said, we will continue to post them in our quarterly updates and highlight them also as part of our yearly targets that we usually post in February. Thank you.

[Unknown Executive]

Thank you very much. So operator, please put through to the next question.

[Operator]

I'm unmuting the next person. Nomura Securities Mr. Fujiwara-san, please go ahead.

[Satoshi Fujiwara, analyst]

Thank you very much. This is Fujiwara from Nomura Securities. Thank you for having me. First question. Talking about the SBP and you're thinking behind top line. So the growth rate of revenue is 2 to 3 CAGR and volume is 0.5% to 1%. So I'd like to know how you make difference between these 2. Because by channel volume growth, vending forecast is decline, but our channel mix deteriorates, it sounds like the thinking behind that idea. But you see that the price-mix will become favorable. So I do know the mechanism behind the improvement of our price mix because -- my point is that now we are facing cost inflation. So you can visit it price increase across the industry. However, once it subsides, then changing price mix may not be easy as it is now. So you may see that competitors might try to seize the timing why you are considering what to do next. So you need to be very, very sharp in observing your competitors. So volume and the value and you're thinking behind the price mix. So I'd like to ask Costin to take this question.

[Costel Mandrea, executive]

This is Costin. So first of all, we expect for the Vision 2028, we expect the total market to grow around 0.5% in volume and to grow 1% to 1.5% in value. Our target for 2020 for Vision 2028, it's 2% to 3% CAGR. So obviously, our focus is to win in market, being undisputed leader and being profitable. You heard today some of the strategies. We summarized under the commercial excellence. So basically, product portfolio initiatives working together with our partners from Coca-Cola Japan, growth plans for every channel, improving productivity. And we will monitor this. We have the metrics in terms of growth, share and profit. So we'll balance these metrics through executing all of these plants.

In the same time, for the Vision 2028, we included price increases as a pillar for profitable growth. And our pricing strategies that we include in the plan is reflecting the market and consumer trends, but also is reflecting the promo investment optimization. So keeping these 3 things in balance, gross share and profit, I think it will give us a focus to execute the plan. We are confident when we look, for example, at vending. For vending in the last 4 years, we were able to grow the channel. We were able to increase market share and keep it at the record high, but also to improve efficiency. So applying these learnings for all the channels, we are confident it will deliver our targets. Thank you, for Fujiwara, and I hope this answers your question.

[Unknown Executive]

Fujiwara-san, do you have a second question?

[Satoshi Fujiwara, analyst]

Let me confirm one thing. During the Vision 2028 period, are you factoring? Are you planning another price hike during the period?

[Unknown Executive]

Thank you very much for your question. So in the next midterm plan, do you have a plan for the -- another price hike acquisition, could you please?

[Costel Mandrea, executive]

Price increases are an effective strategy to grow profit. And we look at this algorithm for growth, which is we need to grow gross profit more than revenue and more than the transactions. And we started this positive algorithm in May 2022. We are now through 3 price increases, and we are moving in October for the fourth price increase. And we learned that with disciplined execution with close collaboration with customers and consumer activations working on plans to execute well in the market, it's bringing a positive momentum. So yes, we are keeping our focus on increasing prices. We are working the details. And obviously, we'll keep you updated when the time comes. Thank you.

[Satoshi Fujiwara, analyst]

Thank you very much. Okay. My next question, May I to Hasan-san, -- the concessions for Hasan-san. So in order to achieve Vision 2028 of Coca-Cola Bottlers Japan Holdings, you need to enhance our strength in the partnership as a system -- so the collaboration additions between JC and BGI, what will be the difference into the future based on the aim to achieve Vision 2028? That is my question. [indiscernible] So the question is to [indiscernible]. So what will be the difference between the current partnership and the future partnership [indiscernible], please?

[Costel Mandrea, executive]

Thank you for your question. Well, as you know, we are coming out of the pandemic situation, and we believe that we have emerged stronger out of that crisis, specifically in terms of our ability to perform better in the market and in terms of our ability to build edge both in our ability to build brands and also our ability to execute our business at each point of sale. There are specifically 3 things that are different. The first one has to do with the alignment that we, as a system, have built with bigger ambitions and bigger dreams. Second, we have today a team and a set of capabilities that are stronger than 3 or 4 years ago as a system. And fourth, we have built a very strong confidence internally in our ability to transform all those strengths and the learnings into market results. And I think we have seen over the last several quarters, how those strengths have been translated into advantaged performance. Thank you.

[Unknown Executive]

Thank you, Fujiwara-san, so we answered the question. Thank you. [Foreign Language] So we have many people that want to ask questions. There will be great if you can limit yourself to one question. Let's move on to the next question. Operator, please.

[Operator]

I will be unmuting the next person. From Daiwa Securities. This is Morita [indiscernible]. Morita, please go ahead.

[Makoto Morita, analyst]

Hi, this is Morita from Daiwa Securities. And I have a question on the OTC market share. So OTC market, your share has been continuously declining. But at the OTC channel, what is the reason that you have continuously dropped your share? And how can you improve the share in the future? How are you going to achieve the growth in share? What are the keys to do that? And if you have plans, when are you able to recover your share? So these are my 3 small questions.

[Unknown Executive]

Thank you, Morita, for your questions. So about the OTC share, the question will be answered by question, Costin-san, please.

[Costel Mandrea, executive]

Hi, this is Costin. I mentioned earlier, our key indicators moving forward are growth, share and profitability. So what we see in the overall business, we are able to manage this and keep it in balance. In the OTC channel, we are growing the sales. We are growing the profit, and we were the first company to take price increase last year in May. And indeed, we saw an impact to our volumes leading to marginal share loss. In the meantime, we took another 2 price increases, again, growing the total channel and growing the profitability. Moving forward, of course, we want to balance and we are focusing also on share. And here, we are working with our partners from Coca-Cola Company to make sure we have good new launches and innovations and also that we have the best execution in the market. So we are focused on this. But always, let's keep in mind, we have a balance of 3 indicators and share it's only one of them. Thank you.

[Unknown Executive]

[Foreign Language] Morita-san, thank you very much for your question. Thank you. Our next question, please.

[Operator]

[Foreign Language] I'll unmute the next person. From Mitsubishi UFJ Morgan Stanley Tomo Tsunoyama, please go ahead.

[Tomonobu Tsunoyama, analyst]

Hi, good afternoon. This is Tsunoyama speaking. I have one question. I'm also looking at JPY 25 billion to JPY 35 billion cost reduction part. Within this you talked about the asset light, right? Do you have any cost of action target in those assets? Because within your assets, like the locations and employees, number of plants and the plants, are you thinking the number to be optimum already? Or what are you going to do with these kind of numbers?

[Unknown Executive]

Thank you, Tsunoyama. Your question is about, is there any fixed asset part of the cost reduction factored in, in our plan for the cost action. So I will ask Bjorn to pick up on this question.

[Bjorn Ulgenes, executive]

Thank you, Tsunoyama-san. So let me try to answer your question. So again, correct, we are aiming to deliver a JPY 25 billion to JPY 35 billion transformation savings, which is basically doubling what we have delivered so far for the last 4 years. When it comes to links to the infrastructure, if that's how I interpret your question, we have no plans at the moment to change our plan structure, but we will continuously work to optimize our logistics, as you have heard us talk about in several of the prior quarterly calls. Logistics have invested in 2 Mega distribution centers, which we're now working to stabilize and include in our S&OP, as you also heard us talk about in the prepared remarks. And over time, get better and better in driving that process. This will, over time, also be impacted by technology more and more. Otherwise, we keep on optimizing our assets. You have heard of us earlier talking about the divestitures of non-productive assets, and we will continue that to optimize our balance sheet. So I hope that answered your question.

[Tomonobu Tsunoyama, analyst]

Thank you. Thank you for answering.

[Unknown Executive]

Thank you, Tsunoyama-san for your questions. We are close to the end time. I would like to take 2 more questions. Operator, please put through the next question.

[Operator]

I'm unmuting the next person. Morgan and MUFG Miyake-san, please go ahead.

[Haruka Miyake, analyst]

Thank you very much. This is Miyake. About your target for BI, 5% or more or JPY 45 billion to JPY 50 billion. If you can achieve both would be great, but which is your priority? Is it BI rate or the absolute amount? And as for the transformation savings, you said that it will be probably evenly distributed. But as for the BI, what will be the allocation or what your plan year-by-year plan? So as for your thinking behind BI, which is more important, the absolute amount or the growth rate? Over margin rate, sorry. Bjorn-san, could you please take this question?

[Bjorn Ulgenes, executive]

Thank you, Miyake-san, for your question. When it comes to the profit margin, first and foremost, the absolute is the most important because that's what we can convert into cash. The percentage is we use to gauge how we're progressing towards that target. So in the end, profits and cash profits for us remains the highest priority. As you know, for this year, we're still trending negative, and therefore, having a surgical focus on improving our profitability through profitable growth, as you heard, commercial and Hohe talked about earlier, remains our biggest priority, but we need to reach the absolutes. Thank you.

[Unknown Executive]

[Foreign Language] Miyake-san, we've answered the questions.

[Haruka Miyake, analyst]

Thank you. How about trajectory?

[Bjorn Ulgenes, executive]

Thank you, Miyake-san. Seeing year-on-year targets for the Vision 2028 plan. We have set out the targets for this year, returning to profitability, as we've said in the prepared remarks for next year and the 5% or more by 2028. So we will not be detailing out year-on-year targets. I hope that answers your question. Thank you.

[Haruka Miyake, analyst]

[Foreign Language] Doesn't have to be a single year, but how about the first half, like what will be the balance between the first half and the second half of the period. Can you give us a bit of a clue how the profit will actualize over this 5-year period?

[Bjorn Ulgenes, executive]

Yes, Miyake-san, just then have to repeat what I said in the first question, so we will not be publishing how the trajectory of that will work within 24 to 28. So I hope that answers your question.

[Unknown Executive]

[Foreign Language] Operator next question, please.

[Operator]

The next question, please? From Mizuho Securities Saji-san. Saji-san, go ahead.

[Hiroshi Saji, analyst]

Thank you very much. So I have one confirmation for the second half of this year. For the first half, 7.5% growth, and you were able to improve your profit by JPY 11.5 billion. And right now, in the second half, probably the revenue is going to be like plus 3%, and you're going to have like minus JPY 2 billion for the profit. And at the end, your business income is going to be having a negative number. But in the second half, if you're able to become profitable, I think the profit number should be a little bit more favorable. But business income, you still have this negative number for the full year target. Why is that? Is there any cost that you are expecting for the second half?

[Unknown Executive]

Thank you for the question. So about the second half forecast, Bjorn-san, please.

[Bjorn Ulgenes, executive]

Thank you for the question, Saji-san. So let me try to answer it. First and foremost, our philosophy as management of BJH is to build credibility. Let me say what we do and do what we say. As you heard in the prepared remarks, for now, we are not giving any change in guidance. You heard Calin, in the beginning, saying the trends are good, but we have to be cognizant that, one, we are cycling now a very hot summer last year. Two, we are now seeing the full effect of the price increases we took back last year and also now in May that we have to manage through. And three, we are still, for the first half negative. So I would like to see us working through that period in the summer and late summer period before we do any revisions of the plan. So of course, we will come back at that point in time as necessary. And we do not foresee any emerging risks as such. But as we said, we have to see how we cycle through this period before we make any determination on a full year revisions. So I hope that answers your question.

[Hiroshi Saji, analyst]

Thank you very much, and I hope that you'll be able to hit your great SVP.

[Unknown Executive]

Thank you. So lastly, Calin-san I would like to say a couple of words.

[Calin Dragan, executive]

So much to all our audience. I just wanted to pick the mic at the end also because I didn't receive any questions throughout the day, but let aside that I just wanted to say a very big thank you to all our audience today. You have been with us through a very tough journey over the last years. And you have been persistent on following our business. And I just want to say a big thank you for the trust that you place in our business and as well the way how you are evaluating and rating our business.

On our behalf, we can tell you explicitly that we are going to follow up with you on the progress of this plan. And since we consider this beginning of the journey, we invite you to be together with us onto this challenges at the moment in time in the future, encourage us and please support us achieving these results. With that, looking forward interacting with you in the following meetings, looking forward working together, passing back to Gomi-san. Thank you very much. [Foreign Language]

[ゴミ マサオミ, executive]

Thank you very much, Calin-san. The contents of today's presentation will be available on our website following this presentation. If you have any questions or feedback, please contact our IR team. Thank you very much for joining the call today.