Honda Motor Co Ltd

TSE:7267

Earnings Call Transcript 2023-Q1

[Operator]

I thank you very much for taking time out of your busy schedule to attend our briefing today. We would now like to start Honda Motor Company Limited's Financial Results Briefing for the first quarter of fiscal year to March 2023.

First of all, allow me to introduce the attendees today. Mr. Kohei Takeuchi, Director, Executive Vice President and Representative Executive Officer. Good to see you. Mr. Eiji Fujimura, Operating Executive and Head of Accounting and Finance Supervisory Unit. Thank you, good to see you. Then Mr. Takeuchi will first present the overview of the first quarter financial results and the forecast for fiscal year to March 2023. Then, Mr. Fujimura will present the details.

Over to you, Mr. Takeuchi.

[Kohei Takeuchi, executive]

[ To each of you ], we'd like to express our deepest gratitude to our loyal customers around the world and all stakeholders who are supporting Honda. Thank you very much indeed.

Currently, we have a number of customers waiting for the delivery of our vehicles. We will do our utmost to deliver products to our customers as soon as possible. We hope to gain your understanding.

I'd now like to explain our fiscal year '23 first quarter financial results and FY '23 financial forecasts. First, FY '23 first quarter financial results. Automobile production and unit sales, despite semiconductor supply shortage and Shanghai lockdown bringing down unit sales from the same quarter last year in mainly in China and North America, and -- they were in line with the previous forecast. Operating profit was down from the same quarter last year. However, despite drop in Automobile unit sales and soaring raw material costs, Motorcycle unit sales were up and company-wide efforts were made to improve profit, resulting in operating margin equivalent to that of the same period last year.

Next, FY '23 financial forecast. The outlook remains uncertain due to semiconductor supply shortage and inflation. Honda's Group unit sales plan for FY '23 remains unchanged from the previous forecast. But given the profit increase effect of the currency rate and forecasted cost increase due to inflation, we have revised upward our sales revenue and operating profit forecast.

At today's Board meeting, a decision was made to acquire our own shares up to JPY 100 billion. Honda will continue to accelerate efforts to enhance corporate value and promote electrification and other new growth initiatives.

Next, I will explain our main market, Automobile sales. Despite the effect of new model launches, such as the Step WGN in Japan and HR-V in the United States, shortage of chips and the Shanghai lockdown effect resulted in unit sales lower than the same quarter last fiscal year in the respective markets. In the United States, though, there was solid demand. Sales were down from the same period last year because last year, dealers had inventory to sell.

FY '23 sales forecast remain unchanged. Though we expect demand to stay strong, outlook remains uncertain due to semiconductor supply shortage and resurgence of COVID-19. Honda will actively launch new models to the market, such as CR-V and ZR-V, so as to boost sales.

Next, Motorcycle business. Due to semiconductor shortage, unit sales dropped from the same period last year in some countries, but unit sales increased significantly in our largest market, India. And overall, we exceeded the same period last year.

Regarding FY '23 sales, taking into account semiconductor shortage, we decided to stick to the previous forecast. However, by placing some models on sale and utilizing alternative parts, we will aim to further increase unit sales.

Next, FY '23 3 months results summary consolidated. Despite drop in unit sales due to semiconductor supply shortage and Shanghai lockdown, combined with rising raw material costs due to price cost impacts, reduction in incentives and currency effects, operating profit was JPY 222.2 billion. Profit for the period was JPY 149.2 billion due to a decrease in China's investment profits under the equity method. Unit sales and income statement are as shown.

Next is the FY '23 consolidated financial forecast. In the forecast announced last time, despite uncertainty attributable to semiconductor supply shortage and COVID-19 resurgence, given the currency and inflation impact and cost increase, we revised upward operating profit to JPY 830 billion. The assumed U.S. dollar-yen currency rate in the first half is JPY 130, second half, JPY 120, annually JPY 125. The forecast profit for the period remains unchanged from the previous forecast at JPY 710 billion. Unit sales and income statement are as shown.

Next, FY '23 annual dividend is JPY 120, unchanged from the last announcement. At today's Board meeting, a resolution was adopted to acquire our own shares. In order to improve efficiency of capital structure [ and ] implement a flexible capital strategy, Honda will acquire its own shares. Total amount of shares to be acquired will be maximum JPY 100 billion.

Next, Mr. Fujimura, Operating Executive and Head of Accounting and Finance Supervisory Unit, will explain the details of the results and forecast.

[Eiji Fujimura, executive]

Okay. Allow me to start the explanation.

To begin with, Honda Group's unit sales for first quarter of fiscal year to March 2023. In Motorcycle operations, unit sales grew year-on-year, particularly in Asia, and it came to 4,251,000 units. Automobile came to 815,000 units, mainly due to declines in China and North America. In Power Products, volume came to 1,546,000 units, mainly due to a decline in North America.

Next, I'd like to explain the factor analysis of pre-tax profit for quarter 1 compared to the same period last year. Pre-tax profit was JPY 237.4 billion, which was lower by JPY 73.9 billion compared to the first quarter last year. Operating income was JPY 222.2 billion, which was lower by JPY 20.9 billion on the year.

To give you a breakdown of the substantive decline of our -- sorry, JPY 85.1 billion net of the currency impact, impact on sales came, too. Though there were a reduction in incentives, decline in Automobile sales volume and other factors led to a decline of JPY 89.4 billion.

Selling price and cost factors, while there was impact from surging material prices, we strove to raise our selling prices and to reduce costs. We reached an increase in profit by JPY 14.4 billion.

Expenses due to increase mainly in quality-related expenditures, this gave us a negative impact of JPY 12.0 billion.

Next, to explain sales revenues and operating income by business segment. For Motorcycles, operating income was JPY 97.8 billion. Automobile income was -- sorry, JPY 38.2 billion. Operating income from Financial Services was JPY 78.8 billion. The sum of the Automobile business is operating income and that, associated with Automobile sales included in Financial Services, is estimated to be JPY 113.9 billion.

Next, for Power Products business and Other Businesses, operating profit came to JPY 7.3 billion. Of this amount, the operating loss from aircraft and aircraft engines was JPY 3.8 billion.

Next, I will explain the cash flow. Free cash flow of the operating entities for fiscal year, for the first quarter of our fiscal year 2023, came to minus JPY 149.3 billion, and the end of term balance of net cash came to JPY 2,310.1 billion.

Next, I'd like to talk about the consolidated financial forecast for the FY ending in 2023. Firstly, speaking of Honda Group's unit sales, we are keeping the previous forecast unchanged, so the forecast in motorcycle is 18,560,000 units. In Automobiles, 4.2 million units. And in Power Products, 5,665,000 units.

And next, I'd like to explain the factor analysis of pre-tax profit compared to the actual results from last fiscal year. Pre-tax profit is forecast at JPY 1.040 billion, down by JPY 30.1 billion from the previous year's results. Operating income is forecast at JPY 830.0 billion, down by JPY 41.2 billion from the previous year's results.

I will explain the substantial decline of JPY 207.2 billion. Net of currency effects, impact from sales was positive JPY 169.8 billion due to increase in Motorcycle and Automobile sales volume. Selling price and cost impact is negative JPY 146.0 billion due to impact of sourcing material prices. Expenses impact is expected to be negative, JPY 148.0 billion due to increase of quality-related expenses and selling expenses.

Next, the changes compared to our previous forecast are positive JPY 5.0 billion for pre-tax profit and positive JPY 20.0 billion for operating income. The decline of JPY 60.0 billion net of the currency effects is because the impact from inflation has been taken into account.

Lastly, compared to our previous forecast, ForEx impact has been incorporated in the forecast for capital expenditure, depreciation and R&D expenditure for full year to March 2023.

This completes my presentation. Thank you very much for your attention.

[Unknown Executive]

Thank you very much for your attention. Then we'd like to move on to the Q&A session. [Operator Instructions]

So the first question from Nikkei, Mr. Tanabe, please.

[Unknown Analyst]

Ms. Tanabe, excuse me, and this is Tanabe from Nikkei speaking.

About my first question about the semiconductor situation, in the first quarter, and there was a Shanghai lockdown, and there was this impact and then there was a reduction in production volume. But currently, the Shanghai lockdown, how much of the effect is still with you now?

And about the shortage of semiconductor supply, when about do you think that this can be resolved? And also, if you are seeing some improvements, and what initiatives that Honda is taking is resulting in these good results?

[Kohei Takeuchi, executive]

May I? Tanabe-san, thank you very much.

Well, about your question about the Shanghai impact and also the impact of the semiconductor supply shortage, allow me to try to explain to you what the situation is. [ Definitely, they ] have lockdown in China. Well yes, in April, I'm thinking you've already seen the numbers, but the Shanghai lockdown compared to the same quarter last year, and we have seen a significant negative number. That is true. But when we made our forecast announcement for Automobile, group sales was 4.2 million units. And we had factored in the prolonged Shanghai lockdown. So compared to our plan, we think that things were within the scope of our assumption. So please understand that this is the case.

And in fact, the Shanghai lockdown has almost been totally lifted. And in June, July, compared to the same period or the same month of the previous year, there were positive numbers. And therefore, I think things have normalized. That is how we understand this. And in the second half, we want to work hard to recover.

Now about the semiconductors themselves, currently, as you have seen in the newspapers and others, other industries like computers and cell phones. In those sectors, there is some excess supply, and we think that semiconductors will become available.

But when it comes to the Automobile industry, that is not the impression that we are getting. For the time being, we think that we will continue to see a shortage. This is our current understanding. There are different types of semiconductors and there are different types, and we have to manage the semiconductors depending on the type, and we are continuing to allocate based on what is available.

Now, when about do you think that we can resolve this? We think that until end of this fiscal year, we'll continue to see the impact of this semiconductor shortage. So until the end of this fiscal year, we need to handle the situation and taking into consideration that there will continue to be this shortage. We want to make every effort to deliver our products to our customers as soon as possible.

Now, how are we going to recover this shortage? As we said earlier, with our suppliers, that we are negotiating one on one, have them hold inventory where possible and also try to develop alternative parts. And also, depending on the type, I think that we have to sense and do risk management depending on the different types of semiconductors. And therefore, with some of the suppliers, including the price, we are entering into a long-term contract so as to secure the necessary supply of semiconductors. But as I've explained, we are continuing to see this situation of shortage.

That is all. Thank you.

[Operator]

Thank you very much, Ms. Tanabe.

The next question, I'd like to move on to the next question. From Asahi Newspaper, Mr. Kamiyama, please.

[Unknown Analyst]

Okay. This is Kamiyama from Asahi Newspaper. I hope you can hear me. Yes. I have 2 questions.

The first one is, in the presentation earlier, you talked about -- it looks like you've raised some of your selling prices. So I would like to know specifically what prices you raised and which region? And that I believe other companies are trying to raise prices as well. But I guess, transferring the raw material prices hikes, I think that is becoming an issue. So I would just like to know if you are considering that kind of a transfer? So that's what I'd like to know. That was my first question.

Second question concerning production. So from April to June, you said you were on plan, your 2 plan. But compared to the previous year, when would you say you will be recovering compared to year-on-year, so starting this term? Or do you think your recovery will come from third quarter? What would you say?

[Kohei Takeuchi, executive]

Okay. Thank you. About the selling price, let me answer that one.

So going back to previous year, previous fiscal year, the 2 previous years ago, we have started -- we have started seeing impact from JPY 270 billion or so from 2 years ago to the previous year. And then we did have some impacts, including inflation as well, and then the transportation and labor would raise. We were thinking JPY 290 billion raise is expected. So -- plus, we have JPY 60 billion in addition. So sourcing raw prices and then the cost inflation, everything included. We have accounted for those.

And then from 2 years ago to last year, we have made the efforts to reduce cost. And as Mr. Kamiyama, mentioned, we have raised prices. That was the biggest area, was the North Americas and USA, so we have been recovering that.

For this year, actually, from previous year to this year, we do -- we cannot absorb like a cost increase of JPY 300 billion each year. But we do have -- we have launched -- we will have -- we have a new model, a 20 model -- year '23 models launched in there, so we would somehow hope to manage absorbing those costs.

I guess you must be interested in Japan. In Japan, we have the competitors. We need to monitor the situation, how it plays out with others. We will consider raising prices if there's an opportunity.

Next question, your production. So we said that 4.2 million units at the beginning of the fiscal year. And then this was still -- so well, the first quarter, we had the impact from the Shanghai lockdown, so it was like 0.8 million. And then we -- if we would raise stages and then get better per quarter. But this quarter -- sorry, the first quarter, we had to -- we have struggled with the semiconductor supply. So we were -- we are short by about 20,000 units or so compared to the original plan, so we can't catch up with this. We can cover this up. And -- with the second quarter, and then we should be able to recover this in the second and the third quarter so that we should be able to build up. So we should reach 1 million in the quarter so that we can reach 4.2 million total.

So we will go gradually, and then try to reach 4.2 million that was forecasted at the very beginning of the [ term ]. Thank you.

[Operator]

Thank you very much, Mr. Kamiyama.

Next question. Yomiuri Shimbun, Mr. Nakamura, please.

[Unknown Analyst]

Nakamura from Yomiuri Shimbun newspaper. I have 2 questions.

About the Shanghai lockdown impact, well, to the extent that you can disclose, what components have been impacted? And if you're seeing some improvements, which components are you seeing improvements in?

The second question, well, the raw material costs are continuing to rise. But what kind of components do you see a significant impact of the raw material price increase?

[Kohei Takeuchi, executive]

Well, about the lockdown impact, which component was mostly impacted? Well, it's very difficult for me to specify any specific components because we have in Wuhan and Guangzhou our factories, and there are many of the suppliers in the Shanghai area. And many of the manufacturers we're producing in Shanghai are being -- the components or subcomponents, they have all seen a reduction in production, and this is the impact of the Shanghai lockdown and in June of -- July compared to the previous month. And thanks to the lifting of the lockdown, these numbers have improved, and they're in the positive.

So I think that overall in China our factories, because they are located in these locations, our suppliers have been impacted by the lockdown. So please understand that, that is the case.

And about the raw material price increase, rather than any specific component from the past 2 fiscal years and the precious metal can allot -- those [ are degrees ] for catalyzers. There's precious materials -- metals, and these are the ones that have been impacted. And from last fiscal to this fiscal year, well, from last year -- the fourth quarter of last fiscal year, in North America, still prices -- because of the revision in January, we've seen an increase of 150%. So that was 3 months for last fiscal year and 12 months for this fiscal year, and I think that this is the area that we're seeing a major impact.

Other raw materials, likewise, we are seeing the impact, not just around materials but due to inflation and there are increases in prices overall. But the precious grade metals. I think compared to the past, the increase is less, and it's more or less plateaued, but it's not going down to the extent that it's having a positive impact on our profit. So from last fiscal to this fiscal year, I think the biggest impact is steel prices in North America. That would be the biggest from last fiscal year to this fiscal year. Thank you.

[Operator]

Thank you very much, Mr. Nakamura. The next questions are from Toyo Keizai, Mr. Yokoyama, please, from Weekly Toyo Keizai. Yes, we can hear your voice.

[Unknown Analyst]

Okay. I have 2 questions as well.

My first question is, you announced this sales of Honda Lock to Minebea Mitsumi. So could you let me know the background? Why, what's your aim or the background to it? And then related to that, among your subsidiaries and related companies, I guess you do have some internal combustion-related suppliers. But are you considering some support to them? Why do you shift to electrification?

And then my second question also relates to suppliers. So I believe we heard about the -- well, there's a lot of cost pressure to the suppliers. Are you thinking of any support? If you have any specific plans for them, please let us know.

[Kohei Takeuchi, executive]

Okay.

First about Honda Lock, sales of Honda Lock, this will be from Minebea Mitsumi. So originally, this company Honda Lock, the supplier, this is not -- is a related lock. So keys, door mirror outer, those parts manufacture rather than internal combustion-related. But Mitsumi, Minebea Mitsumi, they were not dedicated automotive supplier, but they wanted to utilize our technological advantages of the Honda Group. So they can -- they feel that they can be able to expand their business horizon. So that is why they approached us, so we started discussing. So it's nothing to do with the internal combustion suppliers at all.

So for those suppliers related to internal combustion systems, we would like to discuss individually. We will be discussing, so we would like to see what technological expertise each supplier has and what can be utilized for EV. So that's something up to the individual discussions.

About the price reduction to suppliers. So another manufacturer said that they are not going to try to pressure to reduce cost of suppliers. But to us, our suppliers, our business partners, which help us in delivering good products to our customers. Of course, the oil prices that the supplier needs to buy, that the prices are going up. And then logistical cost is going up, for example, for the -- in the States, the inflation is pushing up the labor cost as well.

So of course, there -- would need -- we need to work together to enhance the efficiency and reduce costs due to competition. But we still will need to discuss individually with the suppliers, trying to take actions as appropriate and necessary with individual suppliers. That is our approach.

So in considering -- well, we cannot really -- I cannot really say how much that would be or anything like that. But we would like to -- so we are saying it's [ 60 ] -- other real estimating cost increase that we mentioned earlier.

[Operator]

Next question. Automotive News, Mr. Hans Greimel, please.

[Unknown Analyst]

May I speak in English?

[Operator]

Yes.

[Hans Greimel]

This is Hans Greimel from Automotive News.

I'm wondering if you could give us an outlook for the recession possibilities in the United States? What the economic forecast is for a possible recession in the United States, and what Honda is doing for countermeasures there?

Also, can you give us more details about the price increases in the United States? How sensitive is the market there to price increases? And is this something that you expect to keep doing further into the rest of the fiscal year and into the possibly future -- next year as well?

[Kohei Takeuchi, executive]

Well, first about major recession, the possibility of recession in the United States and how we try to deal with that. Well, as [ Hans-san ] has mentioned, the United States, it was 9.1% inflation rate last month. And then interest rates, well, the 0.75% increase is continuing by the Fed. And also in order to curb inflation, the interest rates are continuing to increase. And eventually, in North America, I think that this will have an impact on the economy in North America. So we're keeping an eye on the developments.

But so far, well, looking at our Automotive sales with the dealers, I think [ we ] have an inventory of 20,000, which is very low inventory and as pre-orders of customers are constantly -- well, in the past, the customers would -- we would look at the inventory and try to take orders. But in Japan, we take orders and try to look into whether we can sell -- and have customers sell and buy and deliver the cars later, at a later date.

So I think that currently, we have a large back order. And we have to supply to our customers their products as soon as possible. This is the current situation. And therefore, with the recession, rather than taking immediate measures, we have to focus on delivering our cars and vehicles to our customers.

Now if there were to be a recession, well, recently due to the pandemic, we have seen a large dip in the sales -- unit sales, but we have been generating profit. So I think that we become more efficient in terms of fixed cost, et cetera. And we have to keep an eye on possibility of recession, and if necessary, we'll try to further reduce our fixed costs.

About this sales price and the selling price. And from the past 2 fiscal years, we have been doing a number of measures. But for North America this fiscal year, rather than increasing the prices, [ that with ] normal prices, we will increase it to the rate of inflation. But it's not the case where we can increase it by 9% for the 2023 model year. I think our most competitive CR-V, Accord and also Pilot, will see a model change. And therefore, with the equipment, we will increase the value of our products. And in line with the value that's being offered, we think that we can increase the price. So we will continue to seek for that possibility.

We will try to deliver quality, good products to our customers and have our customers recognize the value of our products and accept price increase. That is all, thank you.

[Operator]

Thank you very much, Mr. Greimel.

I'm going on to the next question. From NHK, Mr. Yamane, please?

[Unknown Analyst]

This is -- My name is Yamane from NSK. Yes, we can hear you. One question for you.

The decline in the first quarter, you have talked about the drop -- decline in equity in China due to equity method. So I'd like to know about it.

[Eiji Fujimura, executive]

Okay. Okay. For the first quarter, the equity method, the interest, I'd like to answer that one.

I believe you see this waterfall graph. We have this JPY 33.3 billion decline. This was at this portion. The biggest portion came from China. But as I mentioned, as we have announced already the other day, we will have to be selective for EV. So what we will do in China for the Acura business, we will discontinue the Acura business. That's what we have incorporated, so we have some losses from there. So it's temporary, and also complaints. And also, we have some domestic subsidiaries. We recently -- we had some -- due to the share prices, the equity method, we had some impairment losses due to the -- this is only some of the domestic subsidiaries. And then also the pension system was changed, amended. And then there were some losses in accounting. So those are the parts of the JPY 33.3 million, of that, half of that is -- about half of that is coming from those factors.

And then the remaining half is coming from the business operations from the first quarter, the volume unit sales impact in China as well as for the Japan as well. So this is at the same range as the operating income.

[Operator]

Okay. Thank you very much, Mr. Yamane.

Next question. [ Nikanji Daisho ], Mr. Oribe, please?

[Unknown Analyst]

[ Nikanji Daisho Shimbun ], Oribe is my name. Well, I have one question.

Well, the semiconductor shortage and others, you say that the delivery date has been delayed. But what measures is Honda trying to take to make up for this delay?

[Kohei Takeuchi, executive]

Well, as for the measures, well, we are very keen to deliver our vehicles our customers as soon as possible. But depending on the model type, there are cases in which we have to keep our customers waiting for a long period of time, and in some cases, we had to suspend acceptance of orders. It's been resumed, but we are trying to avoid causing inconvenience to our customers.

As I've explained, this is a serious shortage of semiconductor supply. We are trying to resolve this. And so to the suppliers which are supplying us with semiconductors, we are talking with them. And so every -- on a weekly basis and a monthly basis, we come up with a production plan. And we are working hard to deliver our vehicles to our customers as soon as possible.

But as I earlier said, until the end of this fiscal year, we think that the shortage of semiconductors, especially automotive semiconductors, will continue. And so we have to look at which models can be delivered at an early date in which markets. And especially for those customers who are waiting long, we are trying to resolve this situation as soon as possible.

We understand that we are causing inconvenience to our customers. We are going to apologize, but we hope that people will understand the situation that we are currently placed in. Thank you.

[Operator]

Thank you very much, Mr. Oribe.

The next questions are coming from Reuters, Mr. Sugiyama.

[Unknown Analyst]

Okay. This is Sugiyama from Reuters. Yes, we can hear you. I have 2 questions.

The first question is about the semiconductor-related one. And earlier, with the -- I think there is a risk with restrictions on the Taiwan Strait. I guess now there's a focus about it, that the military practices by China. So I believe for a stable procurement of semiconductors, are you going to stay -- assume that there could be some incidents in Taiwan, so that they will try to reduce the procurement percentage from Taiwan or from China? Are you doing anything to ensure a stable supply? That's one question.

And the second question, in the States, a senator came up with a law to reduce the inflation. And then they said that they came up with a tax. They made stringent the qualification for the EV incentive -- sorry, EV incentive factory. And then, so even for the -- this will be -- if you have -- this may become a hinder adoption of the electric EV. So I would like to hear what you have about that?

[Kohei Takeuchi, executive]

Okay, geopolitical risk about Taiwan. Well, it is true that semiconductor is -- production is really concentrated in Taiwan. Outside Taiwan, this would be China and then the States. But in -- we are -- there are some semiconductor factories, new ones built in Japan, but they are still taking some time. So we need to continue try to do dual sourcing. But it's true that in other locations are different, but we need to do design changes and also keep a higher level of inventory. So those aren't really specific, maybe you might say that, but we will continue to take those actions and think of the further actions.

For the -- it is true, this geopolitical risk is difficult. But with [ Zama ] as well, we are consulting every party we can, engaging all the whole automotive industry and then considering options for the future. That's what I can tell you at this point in time.

About the senate of the States, the inflation -- to curve inflation. So it's difficult to say. What our view is that the current model may not be eligible, but we want to aim for carbon neutrality, so we would like to utilize our technology that we have. EV and -- EV and [ FCV ]. Those are the technologies available, so we would like to be able to launch EV electric vehicle.

No, that's -- before the factory becomes eligible for tax credit. But we need to be able to come up with vehicles in terms of our tank to wheel. So we will focus our efforts, all our efforts in trying to first come up with being able to launch a vehicle that will help in this carbon neutrality. Thank you.

[Operator]

Thank you, Mr. Sugiyama.

And next question will be the last question. Nikkei, Ms. [ Mazda ], please.

[Unknown Analyst]

Mazda from Nikkei. I have just one question here.

About the fiscal year outlook and forecast you've revised, the operating profit has increased and the net profit remains unchanged. What is the logic of this upward revision and retaining the net profit?

[Eiji Fujimura, executive]

Mazda-san, thank you very much for the question.

Well, about the FY '23 forecast and the relationship between network profit and operating profit. As for the operating profit, Takeuchi has explained that we are taking into account the currency of JPY 130 and JPY 120 in the first and second half. And so it's a plus JPY 20 billion for the operating profit, whereas the -- I said that the first quarter, for the equity method, the related companies in Japan, there was the impairment of the shares in Japan. And therefore, the equity profit -- method profit has been reduced. And also the operating profit, as it increases, there will be more corporate tax to be played. And so we have to factor in this negative. And therefore, the JPY 20 billion.

And also it is -- so JPY 15 billion and JPY 10 billion has been offset as a result of this, and that is the reason why we have retained the net profit as originally planned.

[Operator]

With this, we would like to end today's briefing. And as for the materials that have been used, they will be posted on our website for you to refer to. And thank you very much for your viewing.