Panasonic Holdings Corp
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Panasonic Holdings Corp
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Ladies and gentlemen, thank you very much for joining us. The Q2 financial results for fiscal 2019 is something that I'd like to explain to you. First of all, this is the summary of Q2 results. The Q2 sales increased, driven mainly by Energy and Automotive. Operating profit decreased due to the impact of one-off patent income recorded in the previous year, ramp-up expenses at the automotive battery factories, weakening demand for capital investment related to Industrial in China, and sluggish sales of consumer electronics. For the full year forecast, segment forecast have been revised. However, the company-wide sales operating profit and net profit forecasts are unchanged.
So let's look at the Q2 financial results. This is a consolidated Q2 results. Sales increased by JPY 6.9 billion to JPY 1,999.5 billion. Operating profit decreased by JPY 17.5 billion to JPY 95.2 billion. And net profit decreased by JPY 13.9 billion to JPY 56.2 billion. This shows our analysis of sales by businesses, whose sales are disclosed. Q2, we can see the impact of the patent income recorded in the previous year. Energy and Automotive continued to have significant increases in sales.
AVC decreased due to sluggish TV sales in Europe. Industrial decreased due to the impact from a slowdown in demand for capital investment in China. Overall, sales increased by 1% in real terms, excluding ForEx impact.
Total sales of the 4 divisional companies, excluding factors such as one-off income in the previous year, increased by 4% and continued on the growth path.
Now let's look at the year-on-year changes in operating profit. Profit from sales expansion increased by JPY 16.1 billion due to the higher sales even when considering the impact from one-off patent income in the previous year.
Fixed costs increased by JPY 19.3 billion due mainly to increased development expenses and expansion of the automotive battery business. Losses related to price hikes in materials and price decline pushed down the profit by JPY 26.1 billion. Other income and loss improved by JPY 13.2 billion due mainly to reduced business restructuring expenses. Overall, operating profit decreased by JPY 17.5 billion to JPY 95.2 billion. This is a year-on-year changes in operating profit by businesses, whose sales are disclosed. Process Automation and Commercial Refrigeration & Food Equipment increased due to stable sales. Energy decreased due to ramp-up expenses for the automotive battery factories. Automotive decreased due to increased development expenses. Industrial decreased due to decreased sales in Electromechanical Control.
Now let's look at the results by segment. I will explain the details from the next page.
Let me touch on the results for appliances based on the consolidated production in sales. Sales decreased by 1% in real terms, excluding ForEx impact. In Air-Conditioner and small and built-in appliances, sales increased. In major appliances, sales increased due to large sales expansion in washing machines, despite decreased sales of refrigerators. In Commercial Refrigeration & Food Equipment, sales increased due to stable sales in North America.
In AVC, sales decreased due mainly to sluggish performance of TV in Europe and India. Overall, operating profit decreased. This is due to losses from the sales decline in refrigerators and impact of hikes in material prices such as resin, which could not be offset by sales increases from air-conditioners, washing machines and Commercial Refrigeration & Food Equipment.
Next is Eco Solutions. Sales increased by 6% year-on-year in real terms, excluding ForEx impact. In energy systems, sales of overseas construction materials increased in key regions such as India. Sales in Panasonic Ecology Systems increased due to the large scale orders being received, and sales in Panasonic Homes increased due to the stable results of the Indian already-built housing business. Operating profit, despite the sales decline in Housing Systems and price hikes in raw materials, overall profit increased due to increased sales, mainly from overseas construction materials in Panasonic Homes as well as a rebound from the temporary expenses recorded in the previous year. Next is Connected Solutions. Sales decreased by 2% year-on-year in real terms, excluding ForEx impact. In Process Automation, favorable sales continued in mounting machines and welding equipment for the automotive industry. In Panasonic System Solutions Japan, sales increased due to sales growth for public services and local governments.
On the other hand, sales decreased in Avionics and also immediate entertainment. Good business was affected by natural disasters. Operating profit increased due to increased sales mainly in Process Automation and improved product mix in media entertainment, in addition to a rebound from temporary expenses in the previous year in Avionics.
Lastly, but not the least, Automotive & Industrial Systems, sales increased by 7% year-on-year on constant currency, excluding the effect of exchange rates. Although sales in industry decreased, sales in automotive and energy were favorable and overall sales increased. Operating profit decreased due mainly to increased automotive-related expenses and the impact of the sales decline in Electromechanical Control.
Here are results by businesses as sales are disclosed. In Automotive, favorable performance continued with infotainment systems for Japanese and North American car manufacturers and ADAS and electrification-related equipment. However, operating profit decreased due mainly to increased costs such as development expenses. In Energy, sales increased owing to significant growth in automotive batteries, mainly cylindrical types, along with stable performance in storage battery systems. Operating profit decreased due mainly to ramp-up expenses for the automotive battery factories. In Industrial, sales decreased due to the significant decrease in Electromechanical Control resulting from a slowdown in demand for capital investment in China. Yet, an increase in operating profit was secured owing to increased sales of passive components such as capacitors, in Device Solutions and the improvement from other income and loss.
Next, the fiscal 2019 full year forecast. Forecast for company-wide sales operating profit and net profit are unchanged from the initial forecast. However, other income and loss used in the breakdown of operating profit as well as forecast by segment have been revised. These are the details of the revised figures in each segment. I ask you to look at the screen in appliances and Eco Solutions, which were expecting sales and profit increases in the initial forecast. Both sales and operating profit are revised downward. In Automotive & Industrial Systems, sales are revised upward and profit is revised downward.
However, these 3 divisional companies are expected to secure year-on-year increase in sales and profit. In Connected Solutions, which we're expecting a decrease in sales and profit at the beginning of the fiscal year, both sales and profit are revised upward.
In addition, for eliminations and adjustments, factors such as the impact of gains from the sale of land, income from intellectual property and partial revision of pension schemes have been taken into consideration. Forecast by segment have been revised, but company-wide forecasts remain unchanged.
Next, the details for the 3 divisional companies for which operating profit forecast have been revised downward.
First, appliances. Both sales and operating profit are revised downward. Our forecast reflects such factors as the challenges faced in air-conditioners in Asia, refrigerators in Japan and the overall AVC business, mainly TVs, in addition to the negative impact of exchange rates in emerging countries and cost of materials such as resin remaining high. Going forward, we will take the following countermeasures. For Air-Conditioner, and as our competitiveness by strengthening our sales structure to specialize in air-conditioners; for refrigerators, launch new large capacity models, which are less affected by competitors' price-driven approach; and for TV, accelerate our shift to premium products. We expect to secure the same level of full year operating profit as the previous year with thorough fixed cost reduction and rationalization, particularly in the second half.
Next, Eco Solutions. We expect sales and profit growth year-on-year. However, sales are revised downward from the initial forecast due to weak performance in the Housing Systems in Japan, and new construction orders for Panasonic Homes. Operating profit is also revised downward. Efforts to improve fixed costs were unable to offset impacts, including sales decline and a weakened product mix. To improve marginal profit, which is one of our challenges, we will make the following efforts: for Housing Systems, expense sales of new products in the mid- to- high-end segment and revise the prices of building materials; for Panasonic Homes, seek increased orders for new construction. In Automotive & Industrial Systems, which is expected to achieve overall sales and profit growth year-on-year in light of the current market environment and business conditions, the sales forecast is revised upward while the operating profit forecast is revised downward. For Automotive and Energy, sales are revised upward and operating profit is revised downward, respectively. For Industrial, both sales and operating profit are revised downward, in line with business conditions in China, where the sentiment for capital investment is weakening.
This is the revised forecast for Automotive. Automotive Infotainment Systems is performing favorably in Japan and the U.S., but it is sluggish in Europe and China. In addition, development expenses and fixed costs are increasing. Other factors such as U.S. tariff risks are also considered in the revised operating profit forecast.
A challenge for Automotive Infotainment Systems is managing development processes, in particular, the ability to control development expenses in Europe. The countermeasures to this challenge is to strengthen our initiatives to improve profitability by optimizing our global development management structure and accelerating the common use of platforms. For information, last year's manufacturing operations-related issues in Automotive Infotainment Systems have been settled.
In Energy, both sales and operating profit are expected to exceed last year's figures. However, the operating profit forecast for the full year is revised downward. This is due to additional expenses in line with the rapid ramp-up at the automotive battery factory in North America as far as operational loss due to temporarily inefficiencies resulting from rapid expansion of production. Taking these issues into consideration, we will probably take action to maintain stable production operations at the battery factory in North America. By the end of the current fiscal year, we will reach production capacity equivalent to 35 gigawatt-hour at the North American factory. From the second half onward, we will aim to steadily reap the benefits of sales expansion. In addition, we will further promote material rationalization and fixed cost reduction to achieve growth with stability.
These are the results for the second quarter and the full year forecast for FY '19. The environmental changes from the beginning of this term and the business outlook have been reflected in each segment's forecast. To achieve these revised forecasts, we will take the following initiatives during the second half. For the consumer electronics and housing business, fixed cost reduction and rationalization will be promoted. For Automotive Infotainment Systems, the management structure for development will be strengthened. For automotive batteries, initiatives towards stabilizing operations will be enhanced. In addition, aiming for sustainable growth, we will enhance and maintain our competitiveness as well as adjust to changes in the business environment. We will also continue to execute business strategies based on a mid- to long-term perspective. We appreciate your continued support and understanding. Thank you for your attention.
Okazaki from Nomura Securities. First question, as for the full year forecast, you keep it at the same level, and in its segment, there are some differences. So the operating profit is not going to be achieved and how do you evaluate that? And as for the upward and downward changes, is it all due to the temporary reasons? Or the average, do you think that in the coming years, these will be recovering and improved so the income of others would improve in the following year? Next question is about the Automotive. In the categorization, I think that the biggest downward revision was in the Automotive. So higher development cost, I think, at the beginning of that year, probably, you could have expected this as a overall trend. So what changed in the past 6 month? It is true that if you look at your competitors, for example, setting the subsidiaries and getting the extra capital, I think we are seeing some changes in the industry. So how do you see the automotive business as a whole at this moment?
To your first question, I would ask Mr. Umeda to answer your question.
About the JPY 50 billion revision in the businesses, in Energy, startup cost was higher than what we expected, and Tesla-related is the major factor. And in Q1, we were in red and we made improvements since that. But the improvement was not as big as what we expected, and that is linked to the downward revision for the full year. As I mentioned quickly, 35 gigawatt-hour will be starting up within the end of this fiscal year. Then the startup cost and the production loss will be reduced. So this is a delay and we will be able to correct this. In Q2, Energy -- for Tesla Energy, it's flat or a little improved. The prismatic battery on in Himeji, we are making investments. So as I mentioned at the Q1, that is the expansion of the red figures. And toward Q3, that will be improved. Now JPY 50 billion, concerning that number, the adjustment and at AP company, the challenging business, more unprofitable business. So the decline in profit and concerning that, we would be more selective in our businesses. We believe that it would be necessary. As for AIS, there was a downward revision. This is due to 2 reasons: the high-growth business that is Energy and Automotive, and also, the Electromechanical Control in Industrial. Now Electromechanical Control, the impact of the U.S.-China friction led to the lower investment on the part of our customer. So it was a indirect impact.
So we are continuing to make the upfront investments for that. So we are trying to go along with the changes in the environment. As for the auto and Energy, this has to do with the operational capability. And with the higher operation, we could not catch up with the growth, and we now know that. So if you look at the AP and AIS, we now see the clear challenges and we know that what needs to be done. I hope that answers your question.
As to your second question, about the Automotive business, the development cost increase. On Page 19, you see a graph and in -- we see the higher sales in Japan and U.S. In Europe and China, we see the lower sales. And there is a relationship with other common manufacturers and their characteristic of the market. And there are some differences depending on the countries. So infotainment, there are 2 reasons for lower sales. First, is that the cockpit system, we deliver them to the common manufacturers and their sales are not going well. So if that happens, the -- we did the investments and we procured material, but in fact, the demand was not as high as what we expected. And because of that, the fixed cost is high but the marginal profit is low or lower than expected. So this was a miscalculation. And car manufacturer OEM, we have to, of course -- in principle, we have to work with the winners. But if that does not happen, we suffer from the major negative number. So that was one of the reasons. And another is in Chinese market. The product specifications which are needed are changing. And because of that, depending on the manufacturers, they are changing the manufacturers that they come -- buy from or they're changing the suppliers. So display audio that we deliver, we used to have the smartphone capability, which was not added. And they needed that additional function, so they changed the supplier. So that led to the decline in sales in Europe and China. And as for the higher development cost of the infotainment, now display audio is the category and with a certain navigation system but there has to be a good display, that type of product is the main product. And in that segment, the next generation product is something that they want to have. So linkage to the smartphone and the software development. The demand from the customer was much bigger than what we have. So the development cost was too high.
So the medium range product, mid-end product, that development cost was higher than expectation. But after signing the contract, once we started development, we cannot stop the supply. So then, we need to make additional investments in the development and some of the capitalized cost needs to be written down. So that is the reason behind the higher development cost. And the next is the fixed cost and the rationalization, which was not fully achieved. Last year, infotainment systems, the operation was not very smooth and quality control or change in the production site, that will lead to higher fixed cost. And because of that, there was an increase of the fixed cost and that is reflected here. So the -- we do have a higher sales in Japan than U.S. for the infotainment. But because of those factors, we saw the decline. But where would be the main business here? IVI, which is the more full-fledged information platform Tier 0.5, and we are doing that with the Japanese as well as U.S. manufacturers, and development is going well, and initial models are started to utilize this. And also, the -- also it has come under the depreciation for those software -- some of the software. So for this -- at the beginning was initial stage, this is rather heavy. So the reasons are quite complicated as you can see, but the infotainment, the content of this business is changing. But IVI is the direction that we are going forward. So we would like to take necessary measures for that.
[Foreign Language] And for next year onwards, you said that this year was too good, is that true?
Yes. For operating profit, in the past, as you know, the adjusted operating profit for the term is good but all of a sudden, there could be a major loss. And so there are questions raised as to whether that's the true capacity of the business, and that's why we're looking at the operating profit. The adjusted operating profit is the result of the operations, but the siting difficulties and then, there are some other factors that are taken into consideration. And without leaving them alone, we have to make sure that there will be no sudden deterioration or sudden loss. And JPY 50 billion is the size of the downward revision, but controlling at the operating profit level, we are trying to do that through various measures. And this year's progress in the area of Electromechanical Control, as was mentioned earlier, we will continue with the necessary investments, and at the same time, secure the bottom line. And as for next year onward, as far as the operating profit is concerned, we believe that's in a level could be maintained. But what happens on a quarterly base-adjusted profit? We want to be able to adjust to changes in environment so that there are no sudden losses incurred, looking at the various conditions regarding the siting, geographical locations, et cetera.
[Foreign Language] That answers your question. And the next question, yes, the person in the front row. Thank you.
[ Adelte ] from SMBC Nikko Securities. I have 2 questions. First on Slide 5, about the various analysis. I think you covered this to a certain extent in your response, but the price decline and the materials cost soaring. In the first quarter, I think you were talking about JPY 12.1 billion for the materials price. So what was the first quarter? And well, maybe the materials in question have changed. This time around, it's risen. So it was declining but it's expanding again. Could you explain the reason why, as well as what your projection on the full year basis is? That's my first question. My second question, the Tesla business. You said that you are more in sync now. The aggressive production ramp-up, I think, is resulting in increase in the inventory. And there are, I suppose, some unintentional inventory buildup resulting from the trade conflict between the 2 countries. So the current level of JPY 1 trillion of inventory, what's the breakdown?
Thank you for your question. Materials cost hike. Here, we're looking on a year-on-year basis. Last year, in the first quarter, JPY 11 billion and second quarter, JPY 100 billion or JPY 10 billion. JPY 12 billion first quarter and JPY 14 billion in the second quarter this year. And the third quarter and fourth quarters last year, it was JPY 16 billion increasing to JPY 18 billion. So compared to that, the JPY 14 billion in the second quarter of this year, it's the peak year-on-year. And so this should go down on a year-on-year basis. On a full year basis, over JPY 50 billion -- in fact, JPY 56 billion is the projection but initially, but we believe that could be reduced to below JPY 50 billion. As for inventories, many factors are involved.
In fiscal 2017, up to the fourth quarter of fiscal 2017, we have intentionally reduced the one. And then in fiscal 2018, we tried to build up the inventory. The amount of inventory itself is increasing the value and a B2C shift would mean that we have to have a rather large inventory. And what's happening more recently is, because of the slow ramp-up in Tesla, we have seen the buildup. But now, we're trying to catch up with the demand. And the remaining inventory, mostly with the procurement of electronics becoming more difficult, so there is aspect of a strategic procurement. And in the electronic and mechanical control sales expansion, we are seeing some surplus or excess in the materials, but they could be used for various purposes. So internally, we believe that this will go down in the second half of this fiscal year. And in terms of the level of the inventory, the same as last year or even slightly lower than that, that's the projection towards the end of the fiscal year.
One follow-up question. Regarding the sets inventory, like TV sets, can you make any comments about that?
The sets type of products would be in the Appliance segment. We're trying to endure in terms of the production so that -- endure on the part of the sales so that they would be no excess inventory. So it's at the adequate level, but that resulted in the sales growth suffering.
[Foreign Language] Next question.
Ezawa from Citigroup Securities. First, about the revisions, the segment-wise numbers. The first half results compared to the beginning of the year target, was it higher or lower? And how much? And you revised the full year forecast. So the second half forecast, what was your forecast? So operating profit after adjustment or any other numbers that you can disclose? If you can give me those information, that would be helpful.
Thank you. The first half and second half we don't -- no longer disclose those numbers. So we cannot clearly answer your question. But this time, what we have included is that in the first half, the U.S., China, the tariff issue. After the third series of increase, we started to see the impact and because of that, Electromechanical Control had -- it was impacted. The Chinese customers don't know where to invest in. So they have refrained from making investment. That was one reason. And also, Tesla Energy-related, there is a material that we buy in China, and there will a higher tariff for those. So all of those factors are included. So in the first half, the results were something that we looked at, of course. And based on those conditions, we tried to forecast the second half and we decided that those revisions were necessary. So for the full year, what would happen in comparison to our forecast? I think that's exactly reflected in those revisions that we made.
It doesn't have to be numbers. But basically, the first half profit results, aside from CNS, were not achieved, is that correct? At Appliance, Eco Solutions, Automotive and Energy and Industrial, those 5, you did not achieve the profit targets?
Well, that is correct, yes.
Now, elimination and adjustment. As Mr. Umeda mentioned, the materials and real estate. What was the third? The pension, was it? So each one of them, could you give us the breakdown how much was it in first half and the second half? And did those factors impact the numbers of the guidance? Were they included from the beginning?
Yes, thank you. Yes, I mentioned 3 factors, the disposal of the land and IP, as well as pension system. Part of the employees, our [ pension ] system was changed. So as for the disposal, again from the land sales, that's about JPY 20 billion in Q1. And do we expect also this type of number in the second half? We cannot mention this at this moment, but land and IP and other pension, the defined contribution, system introduction. And as for the timing toward the second half, the defined contribution system, we will be shifting to that. So that is included. So all of those 3 were something were not expected from the beginning. So the JPY 49 billion, that initial adjustment, that can be explained by those 3. And about JPY 20 billion, that is the gain of the sales of the land in Q1. So JPY 29 billion is something that would be newly recognized in the second half. In that sense, there's another item that I need to add. And also, taking measures that is a negative factor to do something about the slow businesses. So those are the 4 items. Another question?
So technical part and the actual business, I think, are clearer. Air-Conditioner and infotainment, I have some questions. In Q1, those 2 businesses, relatively speaking, you gave us positive comments. You said that you were doing well and you are managing well. That was my understanding, especially Air-Conditioner in China is likely to grow. You mentioned in infotainment, you are close to the customer. So if development cost, sometimes it needs to be increased, but for the April-June, you mentioned that, that is not -- you are close to the customer so that's -- you're not suffering from it. But what is happening right now? What changed? And if it's the same as others, that's okay, but how do you try to recover from it? Air-Conditioner, I think in the second half, you expected higher profit. And do you -- can we expect that is the case?
Well, in Q1, yes, I did explain it. So I'd like to make a revision. Air-conditioner in Japan was lower than expectation. As for China, it was good. In Q2 and onwards, in Japan, it was hot summer. So we are likely to recover year-on-year, so that is exactly what happened. So air-conditioner in Japan I think is growing quite a bit. But in China, actually air-conditioner is coming down or it's becoming sluggish. So the Q2 -- the year-on-year is almost the same. As for infotainment, I think there was a question that other companies are suffering, and they are now in red, and they are doing M&A. And you mentioned that the infotainment is doing well, and what are you doing about it? And I tried to answer that question then. So in that sense, to your Tier 0.5, so we are working closely with the manufacturer. So we are generating good profit. So I think in comparison to others, we are doing well, but last year, in Mexico, there was a confusion about the manufacturing and also development cost excess or increased. So we are seeing higher sales but the fixed cost run over and that led to the lower profit. That is what happened.
[Foreign Language] May I add. The rapid sales increase and more businesses being secured are resulting in differences in regions as well as the development for customers. Some are successful, others are not. So we see differences, especially in Europe. That is the region where the digital development capability at Panasonic is rather weak. Japan is the strongest, followed by U.S. So in Europe, we won the deals that were a bit more demanding than the capabilities that we have and that resulted in the development cost increase. So the expansion was faster than what we could handle, is what happened.
Next person, please.
[Foreign Language] Ono from Morgan Stanley. I have 2 questions, 1 clarification question. If you could go back to Slide 15, I apologize for going back to the same slide, but the revisions to the full year forecast by segment, I think there were 2 things. For other income and loss and the elimination and adjustment, I have a question on those 2 items. As for other income and loss, if you just add the revision, JPY 8.5 billion has been added. This is not really temporary, but related to operations at each company. It is to manage this. So if this were temporary next fiscal year, we will see the recovery, but this is not that type of change, correct?
Yes.
And as for elimination and adjustment, there is JPY 41 billion. You said the sale of land, IP and the pension scheme changes. This could be the profit decreasing factors next fiscal year, am I correct?
These are not the ordinary type of income and loss. And therefore, you should not expect a repeat in the next term.
My next question is on Energy, The profit and loss in Energy. If I look at the additional documents like AIS energy operating profit, I'm looking at their supplementary information. Operating profit JPY 8.4 billion first quarter and JPY 7.3 billion red in the second quarter. You did revise the full year forecast, JPY 22.1 billion in the black, which means that for the second half, a little less than JPY 40 billion profit is being assumed. Especially third quarter, fourth quarter JPY 20 billion, JPY 20 billion, or maybe there is more bias towards either of the quarters. Now the ramp-up for the Tesla business, you said that the operational costs were higher than expectation. So you are expecting a rapid recovery in the third quarter, and therefore, for the full year, you do have a strong forecast for the full year, is that your thought?
The balance between the first half and second half, especially for AIS automotive, especially [ ASL ], higher in the second half was the assumption due to the batteries for Tesla and other prismatic batteries being the factors. In the second quarter -- after the end of second quarter, for the rapid ramp-up, we saw a large number of people being sent to U.S. to support the ramp-up activities. And accordingly, the production quality loss is taking place. So we are going to correct that so as to achieve the operating profit revised forecast. The biggest concern is whether the Tesla -- because our production would be constantly held at the level that Tesla is saying and 35 gigawatt-hour capacity by the end of this year and we do have the fast assembly line as well. So it's hard to say that these are certain because there are some uncertainties. But for now, we will be doing everything we can to fulfill the revised forecast.
I'm afraid we only have time for one final question. Anyone? [Foreign Language]
[Foreign Language] Nishimura from Crédit Suisse Securities. One question. Other income and loss, JPY 50 billion downward revision. Out of that, the external impact and internal factor, could you give us the breakdown? And the internal factor incoming next year, how will it be improved? One-off or temporary cost and startup cost are, I think, included. So what is the probability of improvement? And what kind of measures are you going to be taking?
As for the external factors, the earthquake, typhoon, there were a series of it. So these natural disasters and U.S.-China trade friction that led to the lower sentiment of the customers and higher tariff. So concerning those, JPY 10 billion or more is the impact that we included in this number. So whether they are all external factors, the U.S.-China and the series of typhoon and the earthquakes in Hokkaido, in Osaka, more than JPY 10 billion impact on PL, that is included. Also, as for other incrementals, there are different reasons, but I think we should really look at the actual numbers. So JPY 20 billion, the remaining JPY 40 billion -- the JPY 20 billion is Energy-related and infotainment, the high-growth business. There was a downward revision. So Energy, the PENA production line will be normalized, we expect. So toward next year, we should be able to achieve the production. But infotainment, as our President said, especially in Europe, we were having difficulties so the development there needs to be -- needed to be reviewed to turn this around. The remaining JPY 20 billion, this is the unprofitable business, air-conditioner and the housing challenging businesses, which is becoming more competitive. So in the short term, of course, that the fixed cost reduction and rationalization will be something that we will be doing. In the medium term, the change of the business model and the location change in the region, all of those need to be considered in the future strategy in the medium term. Thank you.