Teijin Ltd

TSE:3401

Earnings Call Transcript 2021-Q3

[Yoshihisa Sonobe, executive]

This is Yoshihisa Sonobe, Senior Executive Officer and Representative Director of the Board. I would like to present the results of FY 2020 Q3 and outlook for FY 2020.

Page 1 summarizes the impact of COVID-19. Compared to the previously announced outlook, recovery since Q3 has been slightly stronger. As you can see in the chart, in Q3, shown in purple, the recovery trend was slightly stronger than anticipated at the time of Q2 earnings briefing, at which time it was projected that the recovery trend would slow down following a very strong recovery in Q2.

More specifically, recovery trends continued mainly for automobiles, while aircraft demand remains weak. In the meantime, medical protective equipment, such as gowns made only a limited contribution to business performance. As for Q4, we expect overall recovery trend to continue, but we need to pay close attention to the impact of the further spread of COVID-19 infection. While overall recovery trend continues, the effects of the shortage of semiconductors for automobile parts and the further spread of COVID-19 warrant close attention. Aircraft demand remains weak.

Next, trends in main markets. In automotive, during the 9 months period, demand dropped significantly in Q1, but has been recovering since Q2. We expect recovery to continue in Q4. Our mainstay products, materials for SUVs and pickup trucks in the U.S. enjoyed a rapid recovery in Q2 and are maintaining the momentum. Europe also recovered from Q2 onward. They are contributing to the strong performance of Aramid Fibers.

Aircraft suffered a significant decrease in demand in Q1. Demand remained weak in Q2 and onward. We expect this stage to continue over a medium to long term.

Health care remains firm, but expect a slight slowdown in Q4 due to seasonal factors, including concentration of SG&A expenses as well as a decline in sales. Still, overall, sales of mainstay pharmaceuticals and Home Healthcare device rentals remain strong.

Medical protective gowns made contribution during the 9 months period by supplying a large quantity to satisfy urgent need at medical frontlines facing shortages. But in Q4, supply-demand balance is expected to relax with government demand resolved for the time being. IT continues to enjoy strong performance as a growing stay-at-home economy drives demand for e-comics services.

Page 3, key points of both Q3 cumulative results and full year forecast. Materials was seriously affected by COVID-19, primarily during the first half, but increased supply of medical protective gowns in fibers and products converting -- contributed to the overall results. Demand for automotive-related products recovered, especially during the second half of 9 months. Healthcare remained solid despite drug price revisions. IT was also strong. One concern is the impact of lingering weak aircraft demand on the medium to long-term outlook of our Carbon Fibers business. Results for 9 months were net sales JPY 609.7 billion, down 6% year-on-year and operating income, JPY 45.2 billion, down 6%. Materials has posted profit since Q2 despite COVID-19, with significant contributions from Fibers & Product Converting.

As for full year outlook in light of results for 9 months and anticipated subsequent performance trends, we have revised upward the forecast for net sales, operating income and ordinary income. We revised downward forecast for profit attributable to owners of parent in light of possible recognition of losses on fixed assets in the Carbon Fibers. We now expect a loss. Annual dividend forecast remains unchanged at JPY 50 per share with an interim dividend of JPY 25 per share.

Moving on to the details of the results for 9 months. Page 6 shows the highlights. I have covered most of these already. Net sales were down 5.8%, and operating income was down 6.2%. Profit attributable to owners of parent totaled JPY 26.8 billion, down 11.1% year-on-year but this was higher than the full year forecast of JPY 25 billion, which was announced in November.

Page 7, summary of operating results. I have already explained items up to profit attributable to owners of parent. So I would like to look at some KPIs. ROE was 8.7%, down 8 percentage points. ROIC based on operating income was over 9%, down slightly. EBITDA was JPY 83.8 billion, down JPY 2.4 billion, representing a good recovery towards the previous year's level. Exchange rate and oil price, as shown in lower right, year-on-year, yen appreciated against the dollar and euro appreciated slightly against yen. Average Dubai crude oil price was lower year-on-year.

Page 8. Results for the Materials segment, year-on-year comparison, bridge chart and variance analysis. EBITDA decreased from JPY 34.7 billion to JPY 22.6 billion, down JPY 12 billion. Factors are described on the right.

In aramid fibers, sales volume declined for most applications, particularly for automotive, such as tire reinforcement and friction materials and optical fibers. But sales have kicked up in line with recovery in the respective markets.

In polycarbonate resin, despite special demand for laptop computers, sales volume decreased due to lower demand in office appliance and automotive applications. Due to a sharp rise in the market price of bisphenol A, there was a slight slowing down in the second half of the 9 months period.

In carbon fibers, the sales volume decreased overall, particularly for aircraft applications. Efforts are made to enhance sales for wind power generation and recreation applications. And efforts continue on intermediate materials development and preparation for commercial production at new carbon fiber plants in North America.

In composites, a big improvement as the U.S. automotive market has recovered since Q2, mainly for SUVs and pickup trucks. With the substantial recovery in plant operations, we are taking measures to improve the employee retention in response to generous unemployment benefits provided by the government.

Lower left bridge chart for EBITDA variance analysis. Volume, minus JPY 17.5 billion, accounting for a majority of the decline. Strongest impact felt by aramid fibers, followed by carbon fibers as well as resins and composites. The entire Materials segment was affected. Sales price and mix and raw material and fuel cost had a net effect of minus JPY 1 billion, reflecting deterioration in price spread of polycarbonate resins, carbon fibers and others, as well as price/mix deterioration. SG&A reduction positive JPY 7.5 billion, added with fixed cost reductions at plants, which partially made up for the decline in volume.

Page 9, Healthcare segment. EBITDA decreased from JPY 38.1 billion to JPY 34.8 billion, down JPY 3.3 billion. The biggest adverse impact came from drug price revisions, which amounted to approximately JPY 5 billion year-on-year difference in 9 months. Volume difference had a net impact of minus JPY 1 billion, between minus JPY 3 billion overseas due to patent expiration and a positive JPY 2 billion in Japan marked by steady progress. Others were positive with a decline in R&D costs and SG&A expenses due to restricted activities, which largely made up for the adverse impact of drug price revisions and others. Altogether, EBITDA decline was kept at JPY 3.3 billion.

By subsegment. In pharmaceuticals, FEBURIC felt the impact of drug price revisions, but sales volume of FEBURIC and Somatuline expanded steadily. In Home Healthcare, COVID-19 caused a decline in the number of sleep apnea patients hospitalized for examination, but CPAP market itself continued to grow. The relaxation of medical fee calculation requirements for accounting, remote monitoring, led to increased adoption of treatment support tools such as NemLink. In the home oxygen therapy market with more patients selecting Home Healthcare to avoid COVID infection at hospitals, the number of rented units increased.

Page 10, Fibers & Products Converting segment. About 2/3 of operating income were attributable to the early large volume supply of protective gowns for health care professionals. Recovery was observed elsewhere as well, including strong sales of health care products for infection control and polyester staple fiber for water treatment membrane applications. The automotive parts struggled in Q1, but recovered in Q2 onward. The business in textiles and heavy clothing remained sluggish. SG&A expenses decreased amid restricted activities and cost reduction efforts. In the IT segment, e-comics distribution services in the e-commerce field remained strong, owing to demand coming from stay-at-home economy.

Page 11, nonoperating items. Always rather complicated, and I would like to comment on gain or loss on foreign exchange and Others. As always, I ask you to look at the net effect of foreign exchange gains and losses and gain and loss on valuation of derivatives. Gains and losses on foreign exchange and on valuation of derivatives on a net basis for the cumulative 9 months in fiscal 2019 was a positive JPY 0.4 billion and negative JPY 3 billion in fiscal 2020. Especially notes and accounts receivable trade in dollars received by each group affiliate, cash and deposit tend to have foreign exchange gains and losses recognized.

In general, under weaker dollar and stronger euro and renminbi for notes and accounts receivable trade in dollars at Teijin Polycarbonate China and Teijin Aramid B.V. in the Netherlands, foreign exchange losses were recorded. Thus, on balance, there was a deterioration of slightly more than JPY 3 billion. But on the other hand, equity and earnings of affiliates increased and interest expenses decreased. Therefore, on a net basis, there was a deterioration of JPY 1.6 billion.

Now for extraordinary items, among the extraordinary gains is gain on step acquisitions. In China, there is an equity method applied group affiliate called CSP Victall, a joint venture between CSP and Victall, which produces composites for automobiles. In making a wholly owned subsidiary, the equity stake originally held has been mark-to-market and extraordinary gain out of it has been recognized here. On the other hand, extraordinary losses include loss on valuation of investment securities. If any of the listed securities we hold drops by at least 50% in valuation, we charge extraordinary losses. And those losses almost offset the extraordinary gains recorded.

With regard to the financial position, changes in the total assets are shown in the graph below, were tangible and intangible assets of JPY 8.6 billion is listed. This includes not just capital investments, but the goodwill obtained by making CSP Victall a wholly owned subsidiary and consolidation of CSP Victall's fixed assets pushed up the total assets. Investment securities of JPY 12.3 billion means evaluation of listed shares went up. Free cash flow increased only slightly, and there was not a major change here.

Secondly, let me explain the performance outlook. Please turn to Page 14, where you can see highlights of comparison to the year before and to the previous outlook. Revenue will decrease and profit will slightly decrease from fiscal 2019 due to the impact of COVID-19 in Materials and drug price revisions in Healthcare. For the full fiscal year, net sales were expected to drop 5% from JPY 853.7 billion to JPY 810 billion and operating income to fall slightly from JPY 56.2 billion to JPY 55 billion year-on-year, respectively. Our forecast for net sales and operating income has been revised upward because of the recovery of automotive markets and the decline in distribution and R&D expenses expected to exceed the previous outlook.

Net sales are forecasted to be JPY 810 billion, JPY 10 billion ahead of the previous outlook of JPY 800 billion. And operating income is now expected to be JPY 55 billion, revised upward from the previously forecasted JPY 50 billion. On the other hand, our concern about impairment losses on the Carbon Fibers business have been incorporated, not in the third quarter, but in our full year forecast for the profit attributable to owners of parent. Our previous outlook was JPY 25 billion, which was -- has now been revised to be loss of JPY 10 billion. The dividend forecast has not been changed from the previous outlook at JPY 25 in interim dividend per share and another JPY 25 in year-end dividend per share, totaling JPY 50 per share for the full year.

This table summarizes what I just shared with you. The top part has already been explained, and therefore, will be skipped. The bottom chart shows ROE falling into a negative 3% and ROIC based on operating income at 9%. EBITDA is expected to drop slightly year-on-year but managed to reach JPY 106 billion, almost unchanged from the previous year. Free cash flow is expected to be negative JPY 7 billion as compared to a positive JPY 6 billion in previous outlook. This includes the planned investment amount for the tender offer for shares in Japan Tissue Engineering Co., Ltd. CapEx is forecasted to be JPY 60 billion instead of the JPY 70 billion estimated in the previous outlook.

Let me now explain about the net sales and operating income by segment. First, in terms of the comparison with the fiscal 2019, in Materials, revenues and profits are expected to decrease due to a decline in the sales volume for automotive and aircraft applications under the impact of the COVID-19. In Fibers & Products Converting, gallons are expected to push up profit significantly. In Healthcare, revenue and profit will decrease due to the impact of drug price revisions. However, sales volume of fabric and rental business of Home Healthcare devices are expected to remain strong. In IT, e-comics distribution services are performing well and leading to increases in revenues and profits.

Now in comparison to the previous outlook by segment, in Materials, while the previous outlook assumed operating income to be 0, almost breakeven, the forecast has been revised upward to JPY 1 billion due to an accelerated recovery and demand for automotive applications, especially in aramid fiber. In Fibers & Products Converting, though demand for gowns have subsided, the forecast has been revised upward due to a stronger-than-expected recovery in demand for automotive applications and expansion of home wear applications. The forecast for Healthcare has been slightly revised upward to JPY 1 billion, as distribution and R&D expenses decreased due to limited activities. For IT, there is no change from the previous forecast.

This slide shows changes in the operating income by segment on a quarterly basis from fiscal 2019 to 2020. The lower left bar chart, there's 2 bars per quarter with 1 on the left indicating fiscal 2019 and the 1 on the right, fiscal 2020 and different colors showing different segments, Materials, Health Care, Fibers & Products Converting, IT and Others. Overall, in the first quarter, compared to JPY 17 billion in fiscal 2019, it decreased to JPY 12.6 billion for fiscal 2020, significantly affected by COVID-19. However, from the second quarter onward, it was mostly unchanged from or exceeded the result of the previous year. The total operating income, thus, has been on the recovery track.

If you just focus on Materials, as shown in the line chart on the right, in the first quarter of fiscal 2020, partly due to the impact from Composites, the operating income fell significantly to post losses of JPY 1.4 billion. However, from the second quarter onward, against the backdrop of a recovery for automotive-related applications, the amount of surplus has been on the rise quarter-by-quarter.

Page 18 shows factors of changes in EBITDA forecast, since it is easier to understand if we separate Materials and Healthcare. I will explain on Page 19.

This is a slide showing factors of changes in EBITDA forecast in fiscal 2020 for Materials and Healthcare. First, on Materials, the EBITDA of JPY 44.9 billion in fiscal 2019 decreased to JPY 30.5 billion in fiscal 2020. The biggest factor was volume, which contributed a JPY 17.5 billion drop. Demand is falling in all areas, but in terms of the degree of impact, aramid fiber was affected most, followed by carbon fibers and plastics processing and composites. On the other hand, sales price and mix had a net negative impact of JPY 2 billion. In carbon fiber, in particular, sales for use in airplanes declined, while those for general industry and recreation increased in sales mix. Resin and plastics processing had a slight negative impact from its spreads before the third quarter. Aramid fibers saw its sales for automotive applications recover in sales mix, which in turn resulted in a slight drop in the average unit price. SG&A expenses in the headquarters and fixed costs in the factories were reduced, thereby pushing up the EBITDA.

As for Healthcare, the situation is almost the same as in the third quarter. In terms of volume, there was an increase in the FEBURIC and Home Healthcare in Japan, while overseas business fell due to the impact from generic drugs, which turned out to be a slight net increase in total. In sales price and mix, drug price revisions and a slight increase by price adjustments for overseas sales resulted a negative impact of JPY 4.5 billion. In Others, there was decreases in SG&A and R&D expenses due to restraint on activities.

Please turn to Page 20. You can see the full year forecast the profit attributable to owners of parent, which reflects the concern for impairment losses on the Carbon Fibers business' fixed assets. However, overall, the businesses other than Carbon Fibers are expected to maintain the basic profitability. The business plan was put together with the aircraft market expected to remain sluggish for a long time. As factories are struggling to resume their operations, we're reviewing our business plan for possible revisions while trying to determine when the operation can be resumed. Although we're still in the process of reviewing the business plan, since we anticipate a significant impact on the business, we have decided to incorporate in our forecast the potential impairment losses related to our fixed assets of the Carbon Fibers business. As a result, the outlook for fiscal 2020 for the profit attributable to owners of parent was revised downward by JPY 35 billion from JPY 25 billion to negative JPY 10 billion.

Now our dividend policy is to target a dividend payout ratio of 30% of the profit attributable to owners of the parent over the medium term and to consider stable and sustainable dividends. We have maintained our profitability in terms of operating income despite the impact of the COVID-19. We have also protected our financial health, while continuously making growth investments. Therefore, a year-end dividend of JPY 25 and annual dividend of JPY 50 per share is maintained as forecasted previously.

This is a summary of financial KPIs. ROE is expected to be negative 3%, while ROIC based on operating income, 9%. From the perspective of the final target year of the medium-term management plan, ROE is expected to start recovering in fiscal 2021 and reach 10% in fiscal 2022. ROIC based on operating income has almost achieved the target level for now. EBITDA is expected to fall slightly from fiscal 2019 to JPY 106 billion. We will put in our efforts to reach JPY 150 billion over a medium term. That is all from me.

[Jun Suzuki, executive]

This is Jun Suzuki, President and CEO, Representative Director of the Board. As main topics, I would like to talk about 2 things: situation in the Carbon Fibers business and the tender offer for shares in Japan Tissue Engineering Co., Ltd. First, on Carbon Fibers business, we announced that there is a strong likelihood of impairment losses. So let me give you the background and how we view the carbon fiber business.

Please turn to Page 24. On the upper left is the global market demand forecast of carbon fiber for the period between 2018 and 2025. This is our own estimate. Applications shown in different colors. General industry, which includes wind power generation and pressure vessels and then sports and recreation and aircraft in orange. As you can see, total demand in 2019 was about 90,000 tonnes. It is projected that the total amount is not likely to return to that level before 2023 or 2024.

If you look closely, you can see that during this period, aircraft is projected to recover gradually. But the biggest driver for growth is general industry. In particular, wind power and pressure vessels are expected to be major drivers amid growing demand for environment measures. That's the global situation. On the upper right is the breakdown of Teijin's carbon fiber sales by applications. The pie chart on the left shows FY 2019 results, and the right pie chart shows FY 2020 outlook. In each case, the size of the pie represents sales. Aircraft, in orange, in FY 2019 accounted for about 50%. In FY 2020, it's forecasted to decline by 20 points to around 30%. The decline in the aircraft application area is directly translated into a decline in overall sales, thus a smaller pie. That's the current situation.

As shown in the lower left, there are major changes in the production and operation plants for a new carbon fiber plant in North America. Our original plan was to start the operation in early fall of 2020. Construction work was underway according to that plan. But travel restrictions have prevented engineers and others from working on the plant. First, we thought maybe this would be pushed back to 2021, but now that's not very likely. Because our plan was to send a large number of engineers to work on the whole process of test runs to various production tests in a concentrated manner. But now that's not possible under the present circumstances, which means test runs could be conducted only intermittently, meaning very extended ramp-up period. Currently, we expect the start of commercial operation to be pushed back to 2022.

As you can tell by looking at the graph, we think we'll have to wait until 2023 or 2024 before the global demand to return to the level in 2019, the level prior to our capacity expansion. So we are currently revisiting the production plans for our North American operation. Generally in the aircraft application, right after the start of production, we need to immediately obtain product certification from our customers. But the delay in development of new models on the part of aircraft manufacturers is seriously affecting our operation plans. All in all, since our plan for the Carbon Fibers business is heavily focused on highly profitable aircraft demand, we are currently reviewing the plan very closely.

Trying to figure out when the demand is going to materialize and when to start production and how much. In light of depreciation period and fixed assets, it appears that a rather challenging period is likely to persist for quite some time. Thus, we concluded there is a strong likelihood of impairment losses in this business.

Moving to Page 25. Having said that, we still have great expectations for our business of carbon fiber intermediate materials. As you can see, there are accelerated trends towards a green recovery. Well for such negatives as Flygskam or flight shame movement, aircraft field has the strongest need for lighter weight materials. Therefore, we believe that demand remains strong. And in terms of the entire aircraft demand, although it may be difficult to see in that small graph, there are various potential -- there are various pertinent data available. And what I showed you earlier is our own estimates based on various publicly available data. And even with a relatively conservative projection, we expect demand to return, for sure in 2024. And there is a demand for new air mobility, such as vertical takeoff and landing aircraft, and this new demand is expected to expand. In addition, we are promoting the enhancement of functionality of carbon fiber intermediate materials, which offer such features as high intensity, high elasticity and high processability, that could lead to improved environmental friendliness and total cost reduction.

So we expect a large growth in the business of carbon fiber intermediate materials for aircraft in the next 20 years, not short term, like 3 years. But more longer-term over 20 years or so. And the aircraft manufacturers, such as Boeing and Airbus, are not only focusing on material price but have strong demand for solutions for more rapid molding and higher productivity. Our strategy in response is to prioritize the resource allocation to such areas as development of thermoplastic prepreg and base fabric material, NCF, non-crimp fabric, which will contribute to enhancement of process efficiency of aircraft manufacturers, so as to gain greater market share or more precisely, given that these are basically new materials, we are working to drive adoption of these materials.

Turning to Page 26. Now 20 years is a long time. We also need short to medium-term actions in the Carbon Fibers business while waiting for the aircraft demand to return. We see a growing demand for wind power generation. The increase in both the power generation capacity and the size of wind turbines require the use of CFRP, carbon fiber reinforced plastic, for turbine blade, especially for offshore wind power generation. The graph shows changes in the accumulated capacity of newly introduced wind power generation. We project wind power to grow by around 10% per annum. This is where demand is quite strong now. We have received a lot of requests saying they really want the products. We believe we will be able to supply our products to environment related markets for the time being. The new carbon fiber plant in North America is expected to come online around 2022, as I said. Though we really want to manufacture products for aircraft applications there, initially, the plant is scheduled to manufacture products for environmental protection, wind power generation, and recreation applications to establish its solid track record of mass production, while gradually taking steps to see qualification for aircraft applications.

On the other hand, we actually are in the process of building a new prepreg plant in Vietnam, which is expected to start its commercial production in March 2021. We plan to make it the location to supply prepreg, the intermediate materials for recreation applications instead of for aircraft. This is because in the recreation market, basically, most of the processing work is performed in Southeast Asia. And therefore, we decided to produce and ship our products in geographical proximity, so that we can enhance our added value as much as possible.

Let me move on to Page 27, and explain about Japan Tissue and Engineering Co., Ltd. Please turn one more page to Page 28. On January 29, we disclosed that we're going to place a tender offer for shares of this company. The overview of Japan Tissue Engineering or J-TEC is described on this page. It was established in 1999 and has a history of more than 20 years. In its main business, regenerative medicine, the main products described here or Epidermis JACE and Cartilage JACC. Among the 10 such -- sale products for medical-use approved in the domestic market currently, 3 have been launched and marketed by this company. It is headquartered in Gamagori and its annual turnover last fiscal year was JPY 2.3 billion with an operating loss of JPY 0.2 billion, employing about 200 people. Over to the right table, it is listed on TSE JASDAQ Growth. The tender offer is valid until March 2, with a purchase price of JPY 820 per share. The minimum number of shares to be purchased will be 50.13%, which is the equity share Fujifilm currently holds and the maximum, 64.98%, or 2/3 of the total. Thus the takeover bid is now underway.

Please turn to Page 29. This is about why J-TEC, why are we going to buy J-TEC? As I said, J-TEC is a pioneer in regenerative medicine. Therefore, although we have been in the business of regenerative medical products to some extent, we figured we'd like to enter the business on a more serious scale. What does this mean? If you break it down into our vision for Healthcare business, and the schematic on the lower left shared for some time, creating innovative medical treatment is actually an extremely important area. And J-TEC, which already has regenerative medical products, has an enormous strength when we work to achieve that goal. As I explain later, the company has the technologies to allow them to take patients' own cells and return them in the form that are tailored to those particular individual patients. Furthermore, as I alluded to earlier, as another of its main businesses, J-TEC provides CDMO services or contract development and manufacturing organization business for regenerative medical products. We, at Teijin, have our confidence in our Healthcare and Materials businesses and the engineering that supports those businesses and we believe that with this expertise, we will be able to enter the CDMO business as well. On the lower right of the page is the conceptual diagram of our portfolio, which we have shared on various occasions, but it now has something that was not present until now, regenerative medical products area. This is a strategic focus and a new challenge for us, but with the intention to make it one of the future core businesses that will have achieved a solid growth by 2030, we're hoping to begin the business together with J-TEC.

Please turn to Page 30. Here, you can see our expectation for the collaboration. As I already referred to earlier, J-TEC has a digital cartilage called JACC as one of its regenerative medical products. While we are engaged in joint prothesis business in the medical device area at Teijin Nakashima Medical, for example. Both physicians and patients targeted in these areas are the same. And in terms of what will be the best solutions for the patients, we would be able to increase what we can offer, which I find quite meaningful. Sometime in the future, though we do not know exactly when, we have a vision to provide personalized medicine or tailor-made treatment solutions fitting to individual patients' medical conditions and needs. Therefore, in order to move forward in that direction, we hope to work together to establish a very good foothold. And as I said earlier, we can expect that J-TEC with a high level of expertise in regenerative medicine and Teijin with established technologies and business foundations in Health Care and Materials business fields, to develop their regenerative medicine business and develop and expand the CDMO services for regenerative medical products, which means that we can expect our business to expand in scale.

Moreover, in terms of productivity improvement, we can expect to reduce cost by innovating the production process and revamping the production facilities. As to sales capability complementation, as I said, in areas such as joint, we can easily imagine immediate synergistic effects. By combining our sales force with data cooperation, we can expect a variety of synergies to be generated. Currently, J-TEC has its business only in Japan, but we, Teijin, have our expertise and networking contacts in building presence overseas and therefore, we believe by working with J-TEC, we'll be able to make inroads into the overseas expansion.

We hope that as a company who has been aspiring to support future society, this collaboration will provide for a big step forward in one of the areas we are seeking to offer solutions for, i.e., demographic change and increased health consciousness.

That is all from me. Thank you for your attention.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]