Seven & i Holdings Co Ltd

TSE:3382

Earnings Call Transcript 2023-Q3

[Yoshimichi Maruyama, executive]

Good afternoon, everyone. My name is Maruyama, Director and Managing Executive Officer at Seven & i Holdings. Thank you for taking the time off your busy schedules to participate in today's presentation for the third quarter of fiscal year 2022. I would now like to begin today's presentation.

Firstly, Page 2 contains today's executive summary. Both revenues and each income line item in the third quarter year-to-date consolidated financial results exceeded the forecasts and achieved record highs. We continued seeing rising energy costs in the third quarter, which had a negative impact on the results for each operating segment. But we were nevertheless able to absorb these cost increases to achieve the forecasts.

Regarding existing store sales for 7-Eleven Japan, a variety of measures and initiatives started showing results, allowing us to deliver further growth from a second quarter baseline. This is indicative of this business' strength even amidst a challenging business environment.

Income at 7-Eleven, Inc. expanded significantly as we enhanced fresh food and private brand merchandise, rationalized and carried out the stricter management of expenses and expenditures, registered strong fuel revenues and, lastly, also thanks to solid progress in the PMI of Speedway. In light of these factors, we have issued an upward revision of the full year forecasts.

Before going over to the operating results, I would like to give you an overview of the external environment in Japan and the United States. The graphs shown on the top and bottom left corners of Page 5 represents the trend in the domestic and U.S. consumer price and producer price indices. While both countries are seeing rising consumer and producer prices in the United States, the differential between the rise in consumer and producer prices is not that large as retailers have been able to execute cost pass-throughs.

In Japan, on the other hand, the differential is large, underscoring the difficulty in carrying out cost pass-throughs in the country. As shown in the graphs in the center and the top and bottom right corner, rising crude oil prices and the weaker yen have translated into rising electricity costs. Additionally, labor shortages have led to surging personnel costs. These are the main factors behind the rise in operating costs.

With that being said, in terms of foreign exchange, a weaker yen also had a positive effect on our results as it led to an increase in profits on a Japanese yen basis. I will be delving into this topic in greater detail when going over the operating results.

Allow me to preface today's discussion of the results for the third quarter and full year forecasts by saying that we are facing a very challenging business environment this fiscal year with high levels of uncertainty going forward.

Page 6 contains the third quarter year-to-date consolidated results highlights. Revenues from operations stood at JPY 8,823.7 billion for a year-on-year increase of 43.5% and an overperformance of 0.8% versus the revised forecast announced in October 2022. Operating income stood at JPY 394.8 billion for a year-on-year increase of 30.4% and an overperformance of 6.0% versus the revised forecast. Net income attributable to owners of parent stood at JPY 234.7 billion for a year-on-year increase of 34.2% and an overperformance of 9.5% versus the revised forecast. As such, we registered an increase in revenue and income as well as record income highs.

Consequently, both EPS and EBITDA grew year-on-year and exceeded the revised forecasts. Furthermore, the impact amount resulting from a weaker yen was JPY 34.9 billion of the JPY 91.9 billion in year-on-year operating income growth.

On Page 7, I will be discussing revenues from operations and operating income by operating segment. Driving this record income performance were domestic and overseas convenience store operations. Revenues from domestic convenience store operations increased by 1.5% year-on-year while operating income increased by 4.6% year-on-year. Revenues from overseas convenience store operations increased by 88.3% year-on-year while operating income increased by 82.3% year-on-year. These represent significant growth. On the other hand, revenue and operating income from superstore operations decreased by 20.4% and 87.2% year-on-year, respectively. This operating segment therefore faced a challenging business environment.

Furthermore, these decreases in year-on-year change in revenues from operations for the segments of superstore operations and department and specialty store operations are, as you are aware, the results in no small part from the adoption of the new accounting standard starting in the current fiscal year. On Page 34 in the appendix, we have included an overview of the impact of these changes in accounting standards. So we welcome you to refer to this information at your convenience.

The slide on Page 8 details the impact of energy cost increases on the operating income results of the Seven & i Group's major operating companies in Japan. While 7-Eleven Japan was able to offset rising utility expenses to deliver an operating income increase, had this increase in utility expenses not materialized, this operating company would have been able to post JPY 198.6 billion, exceeding the record results we delivered in fiscal year 2019. Superstore operations, which includes Ito-Yokado and York-Benimaru as operating companies, registered a reactionary sales decline following special demand amidst the COVID-19 pandemic. These segments were therefore unable to offset to the negative impact of rising utility expenses.

Sogo and SEIBU was able to deliver a significant year-on-year improvement in terms of operating losses, thanks to improved foot traffic, which allowed it to offset rising utility expenses.

I will now be going over the results for each of the Seven & i Group's major operating companies, starting with 7-Eleven Japan. The waterfall chart on the left-hand side of the page shows the factors for year-on-year change in operating income. Sales promotion initiatives, such as fair events, which we started in January 2022, as well as coordination between merchandise and the application of sales floor areas were more successful in motivating customers to visit stores. As such, in the third quarter, we registered an operating income increase of JPY 5 billion and of JPY 8.5 billion on a third quarter year-to-date basis.

The graph on the right shows the trend in existing store sales growth and change in gross profit margin. In the third quarter, we registered existing store sales growth of 4.9%, representing a significant increase. Additionally, the dotted line shows an existing store sales growth comparison versus fiscal year 2019. This fiscal year results have exceeded fiscal year 2019 levels, and we will continue enhancing our efforts in order to realize further growth.

In terms of gross profit margin in the third quarter, we were able to deliver a significant increase of 0.3% even against the backdrop of rising prices of raw materials and ingredients as we worked together with delicatessen manufacturers and made available to customers merchandise offering a balance between value and price by carrying out the development of merchandise to offer within the scope of our fair events and by enhancing the customer appeal of Seven Premium merchandise.

Page 10 shows the trends in year-on-year change for selling, general and administrative expenses and income for franchised stores. The line graph on the left shows the trend in selling, general and administrative expenses, showing a cost increase across various areas such as utility expenses. Despite this backdrop, through initiatives like efficient sales promotions and the optimization of operations at directly operated stores, we were able to contain the year-on-year increase in selling, general and administrative expenses, which stood at 100.0% of the previous period. Even under the previous accounting standard, selling, general and administrative expenses would have been contained at 104.9% of the previous fiscal year.

Additionally, the vertical bar graph on the right shows the trend in income for franchised stores. Initiatives to tackle the various challenges and issues we identified in fiscal year 2021 bore fruit this fiscal year. Naturally, these translated into an increase versus not only fiscal year 2021 but also the period prior to fiscal year 2020.

Page 11 contains a summary of the main factors which have allowed 7-Eleven Japan to deliver strong results even against the backdrop of a challenging business environment. Toward realizing sustainable growth during the current fiscal year, we are executing coordinated initiatives pertaining to merchandise, sales promotions and sales floors as we seek to increase the frequency with which existing customers visit our stores as well as to motivate customers who rarely visit our stores to do so.

Firstly, starting in January 2022, 7-Eleven Japan has been holding fair events on a monthly basis. Within the scope of this initiative, in each month, we have been offering high value-added merchandise fitting a particular theme with these initiatives involving the coordination between merchandise development and sales promotions.

Additionally, towards responding to increasingly diverse needs, we are focusing our efforts on expanding our merchandise assortment, offering an appropriate balance between value and price. Within the scope of expanding merchandise assortment, we are also executing initiatives to increase the number of merchandise items found on store sales floors, which only have a finite amount of space available.

These efforts have translated into an increase in average spending per customer. And starting in August, the number of customers has also increased on a year-on-year basis.

We believe that these results underscore market and customer approval and satisfaction, indicating pricing is in line with the value of the merchandise offered. We believe that 7-Eleven Japan's strong results are the result of a number of initiatives carried out up until now having materialized and continuing to be felt. As such, we have hopes for continued growth in the future.

Page 12 contains an example of the aforementioned efforts to expand merchandise featuring a balance between value and price. More specifically, it deals with initiatives within the scope of Seven Premium. Last fiscal year, we have been carrying out item refinement on Seven Premium. And this fiscal year, we are executing renewal plans for approximately 1,200 items.

As of the end of November, 933 items of Seven Premium had been renewed, corresponding to a strong progress rate of 77.8%. Price increases by a large number of national brands due to worsening inflation have led to a rethinking of the value of private brand merchandise when compared to price.

In terms of Seven Premium, since the time of launch, we have always been committed to developing merchandise with quality that matches or exceeds national brands, which we offer to consumers and below market price. In light of a string of price increases by national brands, this has further increased Seven Premium's competitive advantage in its balance between value and price. As such, we are carrying out initiatives so that we can offer these highly attractive merchandise items at prices that don't weigh too heavily on consumers' wallets.

Regarding initiatives within merchandise development, which include these merchandise renewals, resources from superstore operations, including human resources, making significant contribution. As such, the Seven & i Group is experiencing a positive feedback loop toward further quality improvements.

Allow me to discuss an actual example resulting from these initiatives on Page 13. The table on the left shows the year-on-year change in terms of the top 10 for single merchandise sales for the week of November 21 in the category of instant noodles. In 2021, only 3 Seven Premium merchandise items made it to the top 10. However, in 2022, Seven Premium dominated the first 8 positions.

While the fiscal year started with a year-on-year sales decrease for Seven Premium merchandise due to refinement initiatives in terms of merchandise item numbers, this trend has since then reversed and sales have been on a strong upward trend. Sales broke the value for the previous year in August, and in November, sales grew 8.9% on a year-on-year basis.

Amidst rising pressure to raise prices on account of higher prices for raw materials and ingredients, we have been able to offer a merchandise assortment addressing a variety of diverse customer needs. And the joint organization shared by the Seven & i Group has birthed significant sustained initiatives contributing to growth for food for 7-Eleven and the Seven & i Group as a whole.

Page 14 contains a status update for 7NOW. Within 7NOW, we are currently carrying out a variety of tests and improvements so that we can put in place mechanisms allowing for profitability improvements by realizing improvements to customer convenience, the optimization of the logistics system and the minimization of the operating burden borne by stores. By further improving this service and expanding the areas in which it is available, we have been able to deliver a strong sales growth.

A defining characteristic of 7NOW is the fact that both the average number of items purchased and the average spending per customer are extremely high compared to the figures for in-store purchases. We analyzed the data for customers who previously only made in-store purchases in fiscal year 2021 and who started using 7NOW alongside in-store purchases in fiscal year 2022. Our analysis shows there is virtually no sales cannibalization and that these customers spend the same in-store plus the amount they purchase through 7NOW. We therefore have hopes for 7NOW as a growth driver for both stores and Seven & i Group going forward.

As of the end of November, we offered this initiative at 1,401 stores. By the end of December, this number had exceeded 2,000, and we are carrying out efforts to further improve store operations and the preparation of a logistics network in areas where we are newly offering 7NOW so that we can reach the target of approximately 5,000 stores by the end of February 2023. Things are going according to plan and following the schedule for a nationwide rollout in fiscal year 2024. So this is an area we believe stakeholders have good reason to be hopeful about going forward.

Starting on Page 15, I will be discussing the results for 7-Eleven, Inc. The waterfall chart on the left shows the change in operating income. Here, enhanced merchandise development for fresh food and private brand merchandise had a positive impact on operating income as did fuel gross profit, which remained at high levels. To this, we added the positive results in curbing selling, general and administrative expenses resulting from initiatives carried out by the Cost Leadership Committee.

In light of these factors, third quarter year-to-date operating income increased significantly, growing by JPY 138.6 billion year-on-year. Furthermore, another factor that made a significant contribution was strong progress in terms of the PMI of Speedway and the synergy effects for which exceeded expectations.

The graph on the right shows the trend in existing store sales growth and change in gross profit margin. Existing store sales continue trending at strong levels even following the incorporation of Speedway into the results starting in June, achieving double-digit growth versus fiscal year 2019 results. The impact on gross profit margin for 7-Eleven, Inc. as a whole, resulting from the integration of Speedway and to the impact of the introduction of 7-Eleven, Inc. merchandise to Speedway stores, persisted through to the end of the first half of fiscal year 2022. However, starting in June, this negative impact started to dissipate as gross profit margin showed definite signs of improvement in the third quarter also thanks to efforts to enhance fresh food merchandise as well as the sales expansion of private brand merchandise.

Page 16 contains a progress report on the integration synergy effects with Speedway. The third quarter year-to-date synergy effects stood at USD 465.5 million, which corresponds to an overperformance of USD 162.4 million versus the plan. Since we already exceeded in the third quarter the full year target for fiscal year 2020, which stood at USD 450 million, we have then raised the target by USD 200 million to USD 650 million. Achieving this target means we will have achieved the synergy originally targeted for the third year following the acquisition, approximately 1.5 years ahead of schedule.

Against this backdrop, we will continue carrying out initiatives toward unlocking further synergies. Additionally, a year-on-year comparison, including the results for Speedway, is only possible for the period between July and September.

In terms of merchandise, thanks to efforts to enhance fresh food and to synergy effects resulting from the rapid introduction of merchandise to Speedway, existing store sales increased by 4.2%, gross profit margin improved by 0.5%, and gross profit by 5.0%, respectively.

Regarding fuel operations, while fuel sales volume per store decreased due to the impact of the COVID-19 pandemic and rising crude oil prices, structural changes in the fuel market led to an increase in cents per gallon of $0.091, offsetting the decrease in sales volume. Consequently, gross profit increased significantly by 19.6%.

In terms of selling, general and administrative expenses, while total gross profit increased by 9.8% in the third quarter, the review of all expenses by the Cost Leadership Committee allowed 7-Eleven, Inc. to keep the increase in selling, general and administrative expenses low for an increase of 3.5%. This represents a significant contribution to an improvement in profitability. As a result, operating income was able to post a growth of 27% in the third quarter on a U.S. dollar basis.

On Page 17, I would like to discuss our initiatives to enhance fresh food and private brand merchandise. On the left side of the page, we discuss the supply chain, which forms the support basis for enhancing fresh food. Ensuring that the positive effects of 7-Eleven, Inc.'s initiatives in the category of fresh food remain in effect on a permanent basis requires a robust supply chain. The United States market continues experiencing labor shortages and logistics issues resulting from the COVID-19 pandemic, leading to a situation in which it is impossible to supply adequate amounts of merchandise to retailers.

Against this backdrop, we have introduced 7-Eleven Japan's consolidated distribution system at 7-Eleven, Inc., making possible the efficient execution of supply chain operations. The number of stores supplied by the consolidated distribution center increased by 8% year-on-year, with over 70% of overall stores being supplied via this distribution center. As such, we now have in place an even more robust structure, allowing for the stable supply of merchandise.

As a result of this, year-to-date, as of September 2022, fresh food sales had increased significantly by 14.6% year-on-year, also in part thanks to efforts of fresh food enhancement. We have plans for the start of operations at commissaries with large scale attached to distribution centers, this year in Virginia and next year in Ohio. Through this, we will aim for the further introduction of high-quality merchandise and to the execution of efficient and stable supply chain operations.

Additionally, as shown on the right side, there has been an increase in demand for private brand merchandise in the United States as well on account of rising prices. Private brand merchandise at 7-Eleven, Inc. follow the same concept as in Japan, namely that of offering high-quality merchandise at adequate prices. As of the end of September 2022, the number of private brand items stood at 936, but we have plans to add a further 150 items in fiscal year 2023 as we will be accelerating the introduction of high-quality items to address growing demand.

I would now like to give you a progress report on selling, general and administrative expenses on Page 18. Allow me to refer to the table on the left as I go over the positive effects of Cost Leadership Committee initiatives, which we started carrying out this fiscal year.

We are promoting initiatives in a wide range of domains, not just for the purpose of realizing short-term reductions but also of obtaining long-term efficiency improvements. As a result, the third quarter year-to-date savings and cost avoidance amount stood at USD 175 million with the full year forecast for fiscal year 2022 being USD 265 million.

As you can see from the graph on the right, through these initiatives, the ratio of selling, general and administrative expenses to total gross profit is on a definite downward trend. Going forward, we will continue accelerating our efforts in this area.

The 2 graphs on Page 19 show the trend of fuel business-related indicators with 2019 as the starting point. The graph on the left shows fuel sales volume per store and cents per gallon. 2020, which was the first year of the pandemic, saw a significant reduction in mobility led to a large slump in sales volume. However, as you can see, cents per gallon rose significantly during the same period, offsetting this decrease. Approximately 65% of all convenience store operators in the United States are small- and medium-sized enterprises with 10 stores or fewer. Against the backdrop of seismic changes to the business model brought about by the pandemic, fuel margins rose and acquired an inverse correlation with sales volume.

The graph on the right shows the trend in the consumer price index and fuel gross profit. As shown by the gray line, which corresponds to the Consumer Price Index, a drastic surge in inflation has led to further changes in the business model when it comes to fuel operations. In light of this and as you can see, fuel gross profit, represented by the orange bars, is on an upward trend. This dynamic is expected to continue for the foreseeable future. In other words, we believe we have entered a new normal when it comes to fuel gross profit.

With that being said, going forward, we will be paying close attention to the inflation trends and the economic outlook and to the changes these bring to the business environment. At the same time, we believe that the trend toward a move away from fossil fuels will definitely take place over the long term. So as a way to defend against this risk, we will be accelerating structural changes, not just addressing the shift to EVs but also as it pertains to enhancing the food business, starting with fresh food as a central pillar.

Page 20 contains an overview of the results for Ito-Yokado. The waterfall chart on the left-hand side of the page shows the factors for year-on-year change in operating income. At Ito-Yokado, we sought to achieve a strategic tenant mix. In other words, the aim has been to reduce directly operated sales floor areas for clothing and household goods, which have lost competitiveness and instead replace these with strong tenants. In doing so, we reduced costs and improved profits.

Against this backdrop, while total gross profit margin decreased, we realized large-scale cost reductions. However, this wasn't enough to offset the negative impact of rising energy costs. And ultimately, Ito-Yokado registered a year-on-year operating income decrease of JPY 3.1 billion.

We are therefore facing a challenging business environment. However, we began carrying out store structural reform starting in fiscal year 2016, and as of the end of the third quarter of fiscal year 2022, we had carried out reforms at 80 stores. Over time, we have carried out a variety of trials and, in doing so, improved the sophistication and effectiveness of store renovations. In fact, it is structurally reformed stores that are driving the recovery in sales and in the number of customers in existing stores.

Furthermore, initiatives to improve productivity are also steadily starting to bear fruit. Through the execution of DX-based initiatives for productivity improvements in store operation and personnel optimization, the labor share went from 43.2% in fiscal year 2017 to 38.1% in fiscal year 2022. Additionally, through the acceleration of tenant mix efforts, there has also been an improvement in efficiency when it comes to sales per square meter, which have grown steadily since fiscal year 2017. Going forward, we intend to continue and further accelerate these efforts.

Starting on Page 21, I would like to give you a progress report on the promotion of sustainable management for the Seven & i Group. The Seven & i Group seeks to work to create a sustainable society, as outlined in the SDGs formulated by the United Nations General Assembly. In our environmental declaration GREEN CHALLENGE 2050 announced in 2019, we outlined a vision of what kind of company we would like to become and formulated specific targets to be achieved by the years 2030 and 2050. We divided these into 4 themes, and the group has been working as a cohesive unit toward achieving a reduction in our environmental footprint. Additionally, companies worldwide will start showing their support for TNFD, Taskforce on Nature-related Financial Disclosures, beginning in 2023, and the Seven & i Group is carrying out preparations in this area as well.

The results for fiscal year 2021 were finalized in October of last year. So allow me to give you a progress report versus the targets we committed to in our environmental declaration. For the most part, we exceeded the targets for fiscal year 2021. Allow me to go over these, starting with the reduction of CO2 emissions. 95% of CO2 emissions by the Seven & i Group result from the use of electricity. So consequently, reducing electricity consumption during the course of store operations contributes to a reduction in CO2 emissions. In order to achieve this target, we are making a strong push toward better energy efficiency, energy generation and the use of renewable energy.

Within the scope of better energy efficiency, we quantify and account for electricity consumption so that we can identify issues as soon as possible. Additionally, we periodically carry out a campaign during which we reduce the level of store lighting. Customers are aware and behind this initiative.

In terms of energy generation, we have installed solar panels at 8,775 7-Eleven stores in Japan. Going forward, we will be upgrading to panels with approximately twice the power output and promote the installation of solar panels at large-scale stores like Ito-Yokado. By 2030, we seek to have solar panels installed at 11,000 stores across the Seven & i Group.

Regarding the use of renewable energy, we are advancing efforts in off-site power purchase agreement, off-site PPA, which are a form of power purchasing contracts. Regarding off-site PPA, we carried out the first initiative of this kind in Japan in June of 2021 in Chiba Prefecture in collaboration with the NTT Group. Furthermore, last year, we also started an initiative in collaboration with Hokuriku Electric Power Company. In addition to a reduction of CO2 emissions through clean and renewable energy, we have also seen benefits of an economic nature against the backdrop of the rise in electricity prices seen in recent months.

In terms of measures against plastic as well, we are making progress faster than anticipated on this front as both our customers and suppliers are behind the plan to reduce the use of plastics. Food accounts for approximately 60% of group sales in domestic operations. So we are aware of the extreme importance of initiatives to reduce food waste and promote recycling. Against this backdrop, we will be enhancing our efforts in terms of the ethical project carried out with the help of consumers and in working together with suppliers toward reducing food waste across the entire supply chain.

Regarding sustainable sourcing, we revised the Seven & i Group's sustainable sourcing principles and policies in April 2022, and we continue working to expand the number of merchandise items we offer with strong sustainability guarantees such as items with MSC approval.

Next, I will be discussing the revision of the full year forecasts. Page 24 contains the revised consolidated forecasts for fiscal year 2022. Despite a challenging business environment, the Seven & i Group has been posting strong results driven by domestic and overseas convenience store operations. In light of this, we have revised upward revenues from operations by JPY 166 billion to JPY 11,812 billion. Similarly, we have raised the forecast for operating income by JPY 23 billion to JPY 500 billion and the forecast for net income attributable to owners of parent by JPY 16 billion to JPY 280 billion.

With that being said, these forecasts do not include the effects of the sale of shares in Sogo and SEIBU. We continue carrying out efforts in earnest in carrying out negotiations to fulfill the contract requirements for the closing of the deal. However, as it stands, the impact of the deal on income is still unknown. For this reason, this sale has not been factored into the forecast.

Page 25 contains the revised forecasts of operating income by operating segment. Overseas and domestic convenience store operations as well as eliminations in corporate are the primary reasons for the upward revision. On the other hand, we have lowered the forecast for superstore operations and department and specialty store operations in light of results through to the end of the third quarter.

Page 26 contains the revised forecasts of operating income of the group's major operating companies. Thanks to the positive effects of a variety of initiatives through to the end of the third quarter, 7-Eleven Japan has posted strong existing store sales as we continued enhancing these initiatives. In light of this, we have raised operating income guidance.

Regarding 7-Eleven, Inc., we continued carrying out initiatives to enhance fresh food, registered revenue from strong results in fuel operations and carried out an acceleration in the implementation of structural cost reforms. In light of this, we have raised operating income guidance. The full year forecasts for Ito-Yokado, York-Benimaru and Sogo and SEIBU remain unchanged.

Starting on Page 27, I would like to give you a progress report regarding the consolidated financial KPIs announced in the medium-term management plan. First is the progress toward quantitative growth with the vertical bar graph on the left showing the trend in EBITDA and cash flow from operating activities, the red bars represent results and forecasts for operating cash flow, while the red line shows the results and forecasts for EBITDA. The graph on the right shows the trend in EPS with the red bars representing EPS results and forecasts. Excluding operating cash flow, extraordinary factors in fiscal year 2021, all items grew in excess of the forecast.

Page 28 pertains to progress in terms of qualitative improvements and a recovery in financial soundness. The line graph on the left shows the trend in ROE and ROIC with the red line representing results and forecasts for ROE and the orange line the results and forecasts for ROIC. The graph on the right shows the trend in the debt-to-EBITDA ratio with the red line of representing results and forecasts. Here, too, all items grew in excess of the forecast.

On Page 43, in the appendix, we have included a summary of the full year consolidated financial KPI targets for fiscal year 2022 and the progress evaluation. All KPI targets are expected to be achieved. Regarding quantitative growth KPIs, namely EBITDA, operating cash flow and the free cash flow level, we expect to be able to achieve the target for fiscal year 2025, the final year of the medium-term management plan, 3 years ahead of schedule.

Last is Page 29. In May 2022, we made significant changes to the composition of the Board of Directors and, with new Board members, carried out discussions regarding the medium-term management plan and other elements of the group's strategic direction. In light of requests and feedback from investors, I would like to use this opportunity to discuss the status of these initiatives and the schedule going forward.

We are continuing discussions on strategic initiatives, which contribute to group corporate value enhancement considering the efficiency and the growth of each business under the new Board of Directors and governance framework after the announcement of the management's message in April 2022.

In concrete terms, this involves formulating reports on the group strategy we had adopted up until now as well as reports on operating segments. Based on this, we also enlisted the help of independent outside advisers to reevaluate our group strategy. Discussions are therefore ongoing as we intend to consider all possibilities and strategic alternatives in terms of group operations as well as drastic group business structural reform. We are making preparations so that we can announce the results of the aforementioned discussions regarding group strategy reevaluation by March 10, 2023. So we request your understanding that details will be revealed at a later date.

This concludes today's presentation. Thank you for your time.