Thank you very much. Today it will be a long session. Thank you very much for your kind understanding. First of all, I will explain Shiseido's current and future prospects. First of all, our current position regarding the sales momentum, which is the most important factor for our company, I believe we have emerged from the tunnel. For a long period of time, our growth rate fluctuated significantly from quarter to quarter amid a worsening macroeconomic environment in China, shrinking travel retail market, and a sharp decline in Drunk Elephant sales. After a prolonged reset, we finally achieved a positive return in Q3. I believe we have established a foundation for Shiseido to return to a growth trajectory. We have prioritized speed in our structural reforms and have been implementing them with determination as reforms to shape Shiseido's future.
With the implementation of the voluntary retirement program at our global headquarters announced at 3:30 P.M. today, the major initiatives planned by the Global Transformation Committee have been completed as planned. All actions will be completed by the end of 2025, and we are on track to realize JPY 25 billion in benefits in 2026. Regarding profitability, thanks to the benefit of structural reforms and strengthened financial discipline, cumulative core operating profit for the third quarter exceeded the JPY 30 billion, bringing us closer to achieve our initial target of JPY 36.5 billion. Furthermore, strengthened investment discipline also contributed, and free cash flow is expected to exceed our initial forecast. We have recorded a known cash goodwill impairment loss for our Americas business. Hence, we make a downturn revision of our operating profit and net profit forecast for 2025.
We take seriously the harsh reality of net loss, and for this reason, we will vigorously promote growth and improved profitability in the Americas region going forward. The difficult restructuring period up to now has been a process of building a foundation for a new growth trajectory. We will now once again set course for robust growth. As you can see, momentum for a focused brand improved significantly in Q3. In the first half, we are significantly impacted by the significant decline in Drunk Elephant revenue and the shrinking travel retail market. However, these factors generally subsided in Q3, and strong innovation and new product performance also contributed, finally turned around as a company-wide positive result. Starting here, we will drive growth. Next, action plans. The goal is to become a company that can continue to invest in people, brands, and innovation.
To achieve this, we first need to build a solid foundation that can generate the necessary capital for reinvestment. Hence, we have promoted structural reform in each region, starting with our Japan business last year. We have also decided to implement a voluntary early retirement program, the next career support plan, at the global headquarters. This will affect approximately 200 people, and we plan to record a structural reform cost of approximately JPY 3 billion in the first fourth quarter. We will also reorganize our group companies and our NGO organization by optimizing the group as a whole. We will focus resources on maximizing brand value and accelerating sales. Our Americas business will steadily advance our growth and profitability improvement. Thanks to the structural reform and fixed cost reduction implemented this year, we are on track to achieve profitability in 2026.
Furthermore, Alberto Noe, who has led our Americas business as interim CEO since April this year, will officially assume the role of CEO for the Americas in January 2026. Having led fundamental cost improvements while building a strong transformation-minded team, Alberto will continue to demonstrate leadership across Europe and the U.S. We have attracted a brand portfolio in the Americas. Drunk Elephant will be in the next page. NARS is our largest brand in the Americas. In 2026, we plan to launch the brand's largest new product line to accelerate growth. Fragrances also have big potential. The introduction of Max Mara has received extremely positive feedback from retailers and other fragrance brands primarily offered in Europe. We also drive growth in the U.S. Dr. Dennis Gross has successfully completed its PMI and will leverage its strong partnership with Sephora, the largest retailer, to achieve robust growth.
Brand Shiseido is the second largest brand in Europe's major skincare market, with Vital Perfection boasting a strong presence in the anti-aging category. Going forward, we will maximize our knowledge gain in Europe to further leverage our growth in the U.S. Drunk Elephant is scheduled to have a full-scale brand repositioning next year. This year, we have been steadily reducing channel inventory and optimizing costs. Inventory levels still vary by region and by retailer, and we are in the process of optimizing overall inventory. We will continue to closely monitor the situation in the fourth quarter, which also marks the holiday season. The four pillars listed here will be our future strategy. We are already in discussions with major retailers regarding our brand reset campaign with a very positive response. A project team jointly formed by our global headquarters and Americas will closely monitor the situation and ensure solid results.
Next, I will explain our outlook and Q3 financial results. First, the focus. Following the recording of the impairment losses in our Americas business, we make a downward revision of operating profit before taxes and net profit. Regarding net sales, we are also revising our underlying growth to a -1%, reflecting the downward risk we announced in August. Meanwhile, we will maintain our core operating profit target of JPY 36.5 billion through our risk-adjusted cost management and company-wide cost review. We also continue to strengthen our investment discipline, improving our working capital and carefully reviewing capital expenditure. As a result, we expect free cash flow to reach JPY 35 billion, JPY 20 billion higher than the initial expectation. We will maintain the Annual dividend as JPY 40 per share. Due to the impairment loss recorded in the Americas, we plan to record appraisal loss on shares on the U.S. subsidiary on a consolidated financial statement for Q4. However, that will not affect the consolidated earnings.
Next, on page nine is a summary for Q3. Cumulative net sales for the first nine months of fiscal year 2025 was JPY 693.8 billion, a decline of 3% like for like. This was mainly due to lower sales in China and travel retail and Drunk Elephant. Core operating profit was JPY 30.1 billion, an increase of JPY 2.7 billion, primarily driven by stronger company-wide cost management and the positive effects of structural reforms. Non-recurring items totaled to JPY 63.4 billion, mainly due to goodwill impairment losses in Americas business and structural reform expenses. As a result, the company posted a net loss of JPY 44 billion for the quarter, while free cash flow was JPY 31.6 billion. Next, on page ten, I will explain the details of core operating profit. The COGS ratio was 23.2%, roughly in line with the previous year.
While the improvement in brand and SKU mix continued, the lower production volume of Drunk Elephant led to a slight increase in the COGS ratio in the third quarter compared to the first half. The marketing investment ratio rose by 0.9 percentage points to 28.4%, reflecting our continued investment in priority brands under our selection and concentration strategy. Personnel expenses decreased by JPY 13.2 billion year on year, improving the ratio by 0.9 points. This was driven by cost reductions in Japan and China travel retail, as well as the impact of the structural reforms implemented in Americas in July. In addition, since last year's bonus assumptions were set at a lower level due to weak performance, personnel expenses would have decreased by over JPY 20 billion on a comparable bonus basis.
Other expenses declined by JPY 8.7 billion, reflecting the positive effects of structural reforms in the Americas and company-wide cost management initiatives. As a result, while maintaining marketing investments at the same level as before, the company achieved improved profitability despite lower sales, steadily progressing toward a healthier and more balanced P&L structure. Next, on page 11 is a trend of the net sales by region. After recording negative growth through the second quarter, sales turned positive in the third quarter, showing a 4% increase. China and travel retail grew by 8%, partly supported by advanced shipments ahead of the Double 11 shopping event. EMEA also showed strong performance, rising 22% year on year. While this includes the impact of a low comparison base in the third quarter of last year due to the focused system implementation, even excluding this effect, the region achieved double-digit growth.
Next, on page 12, I will explain the performance by region. In Japan, although inbound demand, particularly in the department store channel, remained challenging, innovation drove growth, and local core brands continued to perform steadily. To highlight here is the success of new products from our focused brands. The renewed Shiseido Ultimune launched in the first half continued to perform strongly, while the newly launched Clé de Peau Beauté Key Radiance Care lotions and emulsions in July and Elixir lotions and emulsions in August both had very strong starts. Another to highlight is the growth in E-commerce sales, which rose by mid-20% in the third quarter, accelerating further from the first half. This growth was driven by increased purchases from loyal users on our direct online platform, as well as the success of strategic investments into the EC exclusive channels. As a result, core operating profit increased by JPY 11.7 billion.
Despite differences in bonus assumptions from the previous year, cost reductions through early retirement programs, and greater marketing efficiency from structural reforms contributed to maintaining a healthy profit margin in the low teens. Next, on page 13, I will explain the China and travel retail businesses. In the China prestige market, E-commerce continued to perform strongly, while offline channels also showed signs of recovery, indicating an improvement trend overall. For the consumer purchase in China, Sales grew in the low single digit in the third quarter. However, looking only at mainland China, growth was in the high single digits, driven particularly by strong and sustained momentum in Clé de Peau Beauté and NARS, both continuing their robust performance from the first half. Elixir and IPSA both recovered to growth, contributing to the overall sales. Also, on a shipment basis, Q3 realized a strong double-digit growth in mainland China.
In the travel retail market, the environment remains challenging, affected by weaker spending among Chinese travelers and intensified price competition from discount promotions. Our consumer purchases decreased by high teens %. Net sales turned positive, partly due to the low comparison base from last year's sharp decline. We continue to carefully monitor and manage inventory levels to prevent excessive stock buildup at retailers. Meanwhile, the share of travelers in overall sales is steadily increasing, and we will continue to shift toward a traveler-focused business model. Despite lower sales and less favorable business mix in the first nine months, core operating profit reached JPY 46.7 billion, with an operating margin of 19.3%, maintaining a high level of profitability through fixed cost reductions and cost management resulting from structural reforms. Next, on page 14, I will explain the Americas business. Consumer purchases, excluding Drunk Elephant, turned positive.
Strong sales of new products, such as the renewed Shiseido Ultimune, along with significant growth of Clé de Peau Beauté, particularly in the base makeup category, contributed to this recovery. On the cost side, the structural reforms implemented in July have started to deliver tangible results. Core Operating Profit decreased by JPY 4 billion on a cumulative basis. While the effects of structural reforms contributed positively, profitability was impacted by lower sales, tariff-related costs, and a higher COGS due to increased inventory write-downs associated with Drunk Elephant's weak performance. Next, on page 15, I will explain the Asia-Pacific and EMEA business. Starting with Asia-Pacific, although the overall market, particularly in Taiwan, showed signs of contraction, we continue to expand our market share across the region. Major new product launches, such as Clé de Peau Beauté Key Radiance Care lotions and emulsions, and NARS the Multiple made strong contributions to growth.
Turning to EMEA, sales increased significantly. Fragrance drove the expansion, with Zadig & Voltaire up over 70% in Q3, and both Narciso Rodriguez and Issey Miyake maintained their double-digit growth. Core Operating Profit increased by JPY 200 million as higher sales were offset by increased marketing investment. While the first half recorded a loss due to upfront investment in priority brands, the business returned to profitability in the third quarter.
Next, on page 16, the progress on the global cost structure transformation. Cumulative cost reduction for Q3 2025 totaled JPY 21 billion as planned. While we are achieving approximately JPY 7 billion in cost reductions every quarter, the benefit of reduced labor costs due to early retirement program in Japan will end in Q4. We are expecting a full-year reduction of over JPY 25 billion.
Furthermore, as CEO Sugihara mentioned earlier, the implementation of the voluntary retirement program at our global headquarters will mark the completion of key actions toward achieving the JPY 25 billion cost saving for 2026. From here, I would like to explain the new midterm strategy. After the large-scale structure reforms under our action plans, we will now set our course for a new growth trajectory by maximizing brand value. We have heard many people point out that Shiseido has a strong brand and technological capabilities, yet is content with the low growth and low profitability. Our goal in this midterm strategy is to change these situations and demonstrate that our true strengths lie beyond this. Especially now, in a rapidly changing world, consumers face a variety of changes in today's rapidly changing society.
Amid an unstable world, extended human lifespan and accelerating pace of digitization, feelings of division and isolation are also increasing. That is why we believe Shiseido has a significant role to play. We see the current era as a great opportunity to create essential new value in beauty and contribute to society as a company that is close to consumers. That is why we set our vision for 2030 as by connecting with people, we pursue, create, and share new beauty, enriching everyone's lives. Now, more than ever, we want to be a company that explores, discovers, and delivers new beauty in moving forms for people without being influenced by the times. That is our unique strength and our path to essential growth. We believe that this path will lead you to the realization of our mission, beauty innovation for a better world.
We are once again adopting in every moment, in every life, beauty as our slogan once again to embody this vision. This phrase was launched in 2005. This expresses our hope that the people Shiseido interacts with, that we ourselves will be beautiful every moment and every life. In today's society, these words resonate with even deeper meaning. We hope that each and every person will find beauty in every moment in their lifetime, and we work to achieve the goal. We believe that this slogan is especially relevant in today's time. To realize this vision, our originality and changing strength has to be refined, which is expressed in this page. I want all employees to be the people who care about others, challenge the real things, and pursue beauty. In terms of both beauty creation, value creation, and communication capabilities, our company has unique strengths.
We approach humans throughout their lifespan and conduct research targeting the entire skin, body, and mind. We propose a new culture that appeals to the senses and delivers it to our customers with the spirit of hospitality. No other beauty company does this. We will revisit these strengths to enhance our brand and maximize our corporate value. In order to integrate financial and non-financials, we have also reviewed our materiality from a business perspective. Please see the Appendix for details. Based on these strategic pillars, accelerate growth with brand power, evolve global operations, and drive sustainable value creation, we will accelerate the creation of corporate and social value built on our strengths. Our ultimate goals are to achieve above-market growth, sustainable profitability improvement, and double-digit core OP margin through our effort.
Despite an uncertain market environment, in first 2026, adhere to the 7% profit margin target set out in our action plan. Furthermore, optimize our cost structure to add 3 percentage points to our margin, achieving 10% margin. Profit generated through efficiency improvement will be reinvested in our brands, leading to high-quality growth. We expect growth to be between 2% and 5% and achieve a target of 2023 as the 10% or more OP margin.
From here, I will go through each of the strategic pillars in detail. First, let me begin with accelerated growth of brand power. Going forward, we will concentrate our resources on categories where our R&D strength and competitive advantages can be maximized, and which also offer attractive market size and growth potential. At the core of this focus will be skincare and sun care, followed by makeup, fragrance, medical beauty, and derma, and lifestyle.
In addition, we will explore new value creation opportunities in areas such as elderly and beauty checkup businesses. For other categories, we will adopt a more efficiency-driven approach tailored to the characteristics of each market. We will not pursue M&A or diversification merely for the sake of expanding scale. We are defining category-specific strategies grounded in market dynamics and our competitive advantages. Skincare, our largest and core category, will continue to deliver stable growth and strong profitability with strategic deployment of cutting-edge technologies. Preparations are complete to launch high-impact new products that will drive future growth. In sun care, we will aim for higher growth, leveraging both the market environment and the advantages of our proprietary technologies. We will actively pursue expansion into new markets. In makeup, we will challenge ourselves to create new categories, exemplified by innovations such as serum foundations.
In fragrance, we will strengthen the brand portfolio while accelerating global expansion. In medical and derma, we will reinforce existing brands and create new growth opportunities in medical areas where our technological leadership can be fully leveraged. In lifestyle, we will sharpen brand concepts, enhance product offerings, and nurture growth. We will allocate brands aiming to position as category champions to each growth area to ensure solid growth. We will continue the thinking of the core brands, those exceeding JPY 100 billion in sales, as well as next brands, which target to be the next JPY 100 billion brand. At the same time, we are reassessing the positioning of each brand based on their cultural current situations. Shiseido will leverage its established scientific strength to explore expansion into the medical and derma area. NSL will capitalize on its strong foothold in Asia to pursue global expansion.
Fragrance, which was traditionally EMEA-centric, will now aim for accelerated growth across all regions. Additionally, in high-growth areas such as medical and derma and lifestyle, the program and BAUM will be strategic investment targets and nurtured for growth. Brands with unique value propositions, such as Drunk Elephant and IPSA, will have their growth and profit models reassessed, guiding future investment decisions. Breaking down growth by brand through 2030, the core brands will aim to expand profits with their high profitability and stable growth, leveraging their scale. Next brands will focus on accelerated growth, with fragrance and NSL contributing through expanded regional presence as well. Across all focused brands, we will ensure growth that consistently outpaces the market. This slide illustrates how we will achieve the growth.
Instead of relying on favorable market conditions, our growth strategy is fundamentally about creating growth with our own hands, built on the strength of our technology and research and development capabilities. About 70% of the growth through 2030 will come from further development of new in-hero products through innovation. In addition, we will supplement growth through geographic expansion and ventures into new categories and areas. We will also continue brand and SKU optimization to maximize profitability from growth. Going forward, our growth will be driven by overwhelming innovation. We will lead the market with our innovation. Our proprietary research and technology strength will deliver greater and more impactful value to consumers quickly through two approaches. First, leveraging technology at the core of specific brands. For example, Elixir represents collagen science. We will deploy distinctive technologies in our focus brands to sharpen brand value. Secondly, corporate-wide application of technology.
The strongest technologies will be applied across multiple brands and products, generating scale and making the technology itself a source of competitive advantage. We have already identified more than 10 technologies to be deployed company-wide by 2028, with a concrete new product pipeline in place. Even in an uncertain market environment, we are confident that by realizing market creation through this lineup of compelling new products, we will be able to emerge as a winner. We will also accelerate growth by expanding global reach. In fragrance, we will capture growth opportunities in the Americas and Asia-Pacific, strengthening our global presence. In sun care, we will pursue expansion into the EMEA and Americas. Kentaro Fujiwara will leverage its differentiated brand value as a luxury brand to deliver unparalleled brand experiences to affluent consumers worldwide.
The next is to expand into new categories. Niche in the derma and medical markets are becoming more fragmented and diverse. We intend to further strengthen our approach toward aesthetic medicine and believe we can expand our business to over JPY 100 billion in the future. Lifestyle is an exciting area for Shiseido, which has led the way in creating a new cosmetic culture with BAUM and IPSA. We aim to establish a brand structure that satisfies not only the skin but also the body and mind. We will expand into a new domain by using our proprietary asset, one of which is to provide value tailored to each life stage. By 2030, one in three people in Japan will be over 65 years old. This generation has high disposable income and desire to spend, enjoying active lifestyles. If we can encourage this generation to enjoy beauty more, a new and big market can be built.
As a leader in anti-aging care in Japan, we are determined to establish an overwhelming presence here. Furthermore, we will promote further beauty checkups as our competitive advantage based on accumulative knowledge. Thirty-three million women undergo health checkups in Japan, of which, assuming that 10% of them will regard beauty and wellness holistically and spend on our beauty checkup service, it is possible to create a market worth tens of billions of JPY. We will aim to increase sales of ancillary products by endorsing behavioral change triggered by beauty checkups. Next, we will promote strongly a new business and value creation model leveraging our asset. In order to capture latest diversifying needs and rapid environmental change, a new value creation mechanism will be introduced, which is not driven by brands.
This approach is driven by technologies, social media trends, and co-creation with other industries, and will quickly commercialize and launch products while monitoring consumer reactions to expand our business. This team will directly report to CEO, pursuing business opportunities and models that differ from existing businesses with speed. Customer touchpoint with brands will evolve from just the product sales to a deeper brand experience. Maintaining and expanding a strong brand loyalty base is essential to the sustainable growth of our business through experience. Here again, we will leverage Shiseido's strength to create deeper connections between each consumer and the brand, achieving high-quality growth and improved marketing efficiency through a multifaceted approach. We will manage our portfolio with discipline and strategy, streamlining non-focused brands to ensure overall efficiency and further strengthening core brands. While maintaining appropriate financial discipline, boldly take on new challenges in order to respond quickly to market trends.
The second strategic pillar is global operations. We will pursue overall optimization through the value chain from two perspectives. First, global optimization, and two, lead time reduction, by clearly defining the categories and brands to reinforce. We will clarify priorities across the company and achieve overall optimization. To achieve this, cross-functional teams across regions and functions will be organized, aiming to maximize speed and effectiveness of problem-solving. The use of digitization and AI technologies is essential to achieving overall optimization. First, a unified global IT systems and advanced business management will be built through the stable operations of focus. This will improve planning and demand forecasting accuracy and reduce uneven inventory distribution. We will also carefully select and optimize IT investment, such as reducing outsourcing costs and eliminating legacy systems.
Further, strengthening the AI investments to enhance our technological assets and value development capabilities, advance and Automate back office operations, and improve customer experience and loyalty. Our global organizational operations will be changed into a structure to reinforce our functionality and overall optimization, and evolve into a highly agile global organization. To date, regional headquarters have operated their business independently, but going forward, we will strengthen collaboration between region and functional departments of global headquarters. This change will make the global headquarters structure more compact and focused in leading company-wide strategies. The new executive structure announced today will further deepen global unity. The third strategic pillar is drive sustainable value creation. Employees' growth is the most important focus in our talent strategy.
By expanding opportunities to take on new challenges, we will develop global leaders and refine and instill Shiseido's value, fostering a sense of unity within the organization and a passion for value creation. By implementing these measures based on the organizational evolution described earlier, we will strongly advance talent development. Over the next five years, we will invest three times the level of 2025 in developing leadership, including global mobility. Creating value through DE&I directly improves our business activities. Therefore, we promote gender equality and respect on human rights, as well as empowering people through the power of beauty. Goals for each activity are set and promoted across the company. Each activity contributes to improving brand Equity and strengthening our operational efficiency, enhancing risk management, directly enhancing the corporate value.
With respect to the environment, the Shiseido circular model will be built to enhance sustainability for both people and the planet and contribute to the realization of a rich natural environment. We will promote environmentally conscious manufacturing, sustainable product development, and sustainable and responsible sourcing. KPIs are shown. We embody the motto of our company name. How wonderful it is, the virtue of the earth. Everything comes from here.
From here, I would like to explain about our financial strategy. Our target for 2030 is a core operating margin above 10%, ROIC above 10%, ROE above 12%, and free cash flow exceeding JPY 100 billion. A major theme of this midterm strategy is to transform the company into one that can consistently generate ROIC above its cost of capital. The current action plan focuses on strengthening financial discipline and fostering an organizational culture that aggressively pursues returns.
Based on past trends, we believe we have clearly shifted course and are steadily on an improvement trajectory. We have described fiscal year 2025 to be a critical year, and it indeed proved to be just that. While the path was far from easy, we are confident that the structural reforms implemented to date were necessary and correct steps to build Shiseido's future. Over the course of this midterm plan, we will take further steps to lift core operating profit margin, ROIC, and ROE into double-digit levels, while continuing efforts to reduce the cost of capital and maximize corporate value. Even in the 2026 plan, which already incorporates the effects of structural reforms, the SG&A ratio remains above 70%, reflecting a high fixed cost burden and a structure we recognize as vulnerable to external environmental changes.
Looking toward 2030, we will maintain the current levels of marketing investment ratio and R&D and brand development ratio, while reducing the COGS ratio, personnel expenses, and other operating expenses. Strategic investment to maximize brand value and accelerate sales will continue. Part of the cash generated from past structural reforms and cost efficiency initiatives will be redirected to proactive investments in marketing and human capital. The R&D ratio will remain around 3% of sales, but with a focus on further improving returns. Investment allocation will be more targeted and prioritized in line with category strategies and brand portfolio strategies. The cost optimization measures listed on the right are additional to the current action plan and are scheduled to be implemented from 2026 onward, with effects expected mainly from 2027 onward.
Key initiatives include optimization of the value chain and brand portfolio, cost efficiency through Standardization and Centralization following an organizational and reporting line restructuring. This is not merely cost-cutting; rather, through disciplined, return-focused investments, we will enhance brand value and strongly support the transition to a new growth trajectory. Next, I will explain our regional strategy. For sales, our goal is to achieve growth above the market in all regions. On the profit side, we are targeting double-digit margins in every region. We also aim to correct the profit structure skewed toward Japan and China in travel retail and establish a more balanced and resilient earnings structure. In Japan, we have moved away from a former loss-making structure and currently achieve margins in the low teens. However, fluctuations in inbound demand remain significant, making it essential to strengthen the profitability of local business.
We will continue initiatives such as improving workforce productivity and enhancing marketing efficiency through higher E-commerce penetration. In China and travel retail, margins already exceed 20%, but we aim to further increase profitability. The key is improving marketing efficiency. The brand value reconstruction initiatives implemented to date will now enter a phase of tangible results. Offline stores will be optimized selectively to provide differentiated brand experiences. Additionally, we will maximize growth and cost synergies through integrated management of China and travel retail. In EMEA, Americas, and Asia, our market share remains in the single digit, so presence is still limited. However, we are confident that our strong brands and technologies provide significant growth potential. By maximizing growth opportunities in priority areas and optimizing costs, we will drive profit improvement.
We are often asked, "Shiseido is strong in Asia, but can it really win in Europe and the U.S.?" With this midterm plan, we intend to address and overcome that doubt. Next, I will explain our cash allocation strategy. Operating cash flow will be primarily driven by improved profitability and inventory turnover, combined with cash inflows from asset-light initiatives, targeting JPY 500 billion-JPY 600 billion in cash generation over five years. This cash will be allocated with a clear priority order: capital expenditures, debt repayment, and dividends. CapEx have historically been 5%-6% of sales, but with the completion of IT investment cycles and strengthened investment discipline, we expect this to decline to around 4% next year and approximately 3% by 2030, with a focus on within-depreciation investments going forward.
For interest-bearing debt, we will maintain a target credit rating of A and manage net debt over EBITDA around a multiple of 0.5. Regarding dividends, we plan a total of JPY 130 billion over five years, averaging JPY 26 billion per year, up from the current JPY 16 billion, aiming for stable and sustainable dividend growth in line with business recovery. In the second half of the midterm plan, we plan to have enough cash reserves to remain after dividends, enabling flexible share buybacks and strategic M&A under disciplined financial management. Strengthening financial discipline is central to enhancing Shiseido's corporate value. We have structured the M&A framework, integrating the Americas team into the global headquarters, and established an investment and divestment committee to clarify criteria and screening rules for investment and exit decisions. This will enable the company to execute disciplined and agile decision-making.
Finally, I will discuss the establishment of ROIC-driven management. Strengthening financial discipline and embedding a ROIC-focused management approach cannot be achieved overnight. However, introducing ROIC as a long-term incentive KPI represents a significant step forward. Starting in 2026, we will also link operational KPIs tied to ROIC improvement to the annual bonuses of all executives. This will be steadily implemented as a power tool to foster a high-performance culture across the company. Lastly, for myself, I strongly recognize that transforming our organization culture is essential to executing our midterm strategy going forward. After a few years of rigorous structural reforms, opportunities to pursue new value creation and the enrichment of beauty culture have been lost, and the Essence of Shiseido's unique organizational culture has diminished, which is a significant challenge for me personally.
In our newly announced midterm plan, while achieving the financial targets is a given, we have also committed to fostering a culture that encourages challenges toward new value creation and an unrelenting focus on delivering results in order to continuously enhance Shiseido's unique corporate value. Now is the time to face people and society sincerely, to keep questioning the meaning of beauty, and even in times of difficulty, to share genuine value with the world. We aim to nurture more Shiseido people who embody the spirit and to transform our corporate culture accordingly. Through these efforts, we promise to continue achieving essential and sustainable growth, remaining a company that shares new value with consumers around the world. In every moment, in every life, beauty. Our history stands as proof that we have always faced people with sincerity, discovered new value, and continued to pursue innovative creation.
We believe this is our true strength, the source of our uniqueness that cannot be imitated. Together as one team, we will continue to engage deeply with beauty and share a culture of beauty that enriches people's lives. Thank you very much for your attention.
Thank you very much. Now we would like to move to Q&A. Now please open the floor for questions. Okay. The Ones who are wearing the scarf. JP Morgan, Kohara speaking. Thank you very much for your presentation. Structural reform must have been really tough, but you accomplished that. Very encouraging news. This time in the Midterm strategy, you explained page 24, and I would like to have different angles to ask. Average, you know, the Kagura was average sales growth is 2%-5%. It's very varied, right?
What is the situation with the 10% growth only, but what makes you achieve 5%? Is that because of the market growth opportunity or what is the positioning? What is the assumption differences? Also, the cost optimization, 3 percentage points. You said that the expense management or human resource management and also the raw cost as well. The 3 percentage point increasing, that means that JPY 30 billion must be done, must be saved, right? This is my rough estimate. In that case, SG&A is less than 70% or so. Is that what you're thinking? Or like extraordinary losses type of line item, even without such kind of extraordinary items, but still, do you think it is possible to reduce this level? Thank you.
Okay, thank you for your question. I would like to answer for the growth assumptions.
When we crafted this midterm strategy, the growth in the market, how should we assess that market opportunity for growth? As we target, we should be not influenced by the market growth. That is what we would like to aim as a resilient position. Still, we have to admit that there are certain elements that might be affected. Even if the market growth is flattened, we will grow like between 2%-5%. If the market growth is 3%, then we will achieve 5%. That is our Assumption here. With respect to your second question about the cost authorization, in the presentation, Fujiwara-san explained that so far the cost reduction we were touching for addressing the problem area, but this time we want to have a more cross-functional and more opportunity to reduce costs.
By doing such a thorough evaluation, we will see the cost of optimization. That means 7%-10%, whatever the market conditions would be, at least not a double-digit, the profitability should be ensured through this initiative. That is the financial target in the core in our midterm strategy. At that point in time, what kind of primary cost should we secure? At this point in time, we do not have any answers and do not want to disclose. However, for the temporary, sorry, not the primary, but the temporary or extraordinary costs, we do not anticipate at this point in time, but whatever happens, we will disclose at the right timing. Thank you so much. Thank you. Let me double-check.
The extraordinary costs or temporary costs you just referred to in the cash flow management and asset-light management that you referred to earlier in the profit and loss, whether that will be reflected, but in order to, while you are promoting the asset-light and there are certain losses that could be more mitigated because of the asset-light operations, then that could secure the dividend and so forth. Is that a correct understanding? Yes, that is right.
With the beige jacket, you'll go on to the next question.
My name is Mitsuko Miyasako from Mizuho. Sales, 2-5 is what I want to ask. You have talked about it from the brand axis, but you have not mentioned it from a regional axis. Could we have some kind of a metric for regional basis as well for the sales?
Regional base growth, we did not disclose today.
As Ayako Hirofuji mentioned earlier, Japan, China, and TR, we do not foresee high growth in these regions. In these regions, we will continue to aim for growth with capturing new markets as well. However, we want to look at the areas where we can grow more for profitability as well. On the other hand, for EMEA and Americas, the Shiseido share is still small. For EMEA, the brand Shiseido and Americas, the Shiseido brand has a high brand position. However, there is a lot more potential for us to grow in skincare and fragrance. We already see that opportunity for growth. For Asia, similarly, the brand Shiseido is strong, but for example, Clé de Peau Beauté compared to the competitors still is a bit weak. To say furthermore, it will be for the market going forward.
The fragrance that we carry, we see that as a great opportunity in regions like Asia. For Americas, the biggest market globally in the U.S., brand portfolio, how do we maximize our presence into the U.S. market? There is the brand Shiseido, NARS, Dr. Dennis Gross, and fragrance. Each of these brands, we do have a great opportunity for growth. We believe that the growth speed will be faster in the EMEA and Americas.
How would you be growing the Shiseido in Americas? Can you elaborate on that?
This year too, in the Americas. Yes, we do struggle with Drunk Elephant, for example. However, brand Shiseido has been having solid growth.
With that in mind, one is we will look at product allocation that matches the Americas market. Secondly, what we have announced today, Alberto Noe will be official CEO for the Americas region.
He has pushed Shiseido to be number two in Europe in this very competitive market of EMEA. With him taking over in the Americas market, we believe that he can push Shiseido's presence in the Americas. For channels, for EC, brand Shiseido still has a lot more room for growth. There are already growth opportunities that we have already set and visualized.
Thank you. Miyazaki from Goldman Sachs, thank you so much for taking my question. Again, regarding the growth of the sales, as you talk about the channel, I would like to ask a follow-up question. Between the Kagura of 2-5%, what is the ratio or composition of the E-commerce? Also in Japan, E-commerce, in the third quarter, you had quite a good result in Japan E-commerce.
Owned channel as well, but on top of that, you did some initiatives. Are there any opportunities that you are thinking, and what is the composition overall? Thank you.
In terms of the detailed composition of the E-commerce, we do not disclose, but something happening in China that is very much accelerating can be observed in Asia, Europe, or the U.S. We believe that is the trend, especially for EMEA. It is not just owned, but the retail.com or pure player also grow their results. For those, we are investing ourselves. How can we make the operations or manage that? We will begin from China, especially to internalize such operations going forward. Internalize means that we ourselves will look at the E-commerce data and do not rely on third-party data. We will create our own contents and manage the data.
Those are operated by an internal team. That will be leading to the next AI, the operations. We believe this is very essential. When we does that, if we can do that, we will be able to replicate that know-how into the U.S. or other region. The owned E-commerce is quite good. In Japan, this is very good because we will be able to approach consumers directly as owned. This is good. Also, we can expand to pure players as well. That means we can collaborate with the pure players well, and we will be able to have more resources and grow together. This is a good cycle. Roughly 20% or a little less than 20% of the composition, but we would like to grow this E-commerce channel, especially in Japan.
We have beauty equipment, so E-commerce and offline, we will have good beauty staffers as well.
Thank you.
Thank you. We'll go on to the next question in the front row.
My name is Hirozumi from Daiwa Securities. I want to talk a little bit about 2026. A year ago, what you had shown us, the core OP of 7%, it's great that you were able to keep that. But can you click? I would like you to clarify this. This fiscal year, as you have mentioned, global cost reduction. 1 trillion JPY in sales and 7% of that, so 70 billion JPY. If you achieve 35 billion JPY, how do you foresee the 70 billion JPY? To the 70 billion, how visible, how do you see that to be a reachable goal? At the same time, there's the non-ordinary income, non-recurring.
What do you see? The core OP ratio of 7%, but you have the JPY 70 billion that you're looking for. How much do you see in the non-recurring item? How do you see that going forward? That is the detailed construction of next year's numbers for fiscal years. We do not disclose the details of how the numbers were created. To your comment, GTC is something that we are pushing solidly. The things that we should see as tangible results for next year are already executed. On top, we see that as an add-on to the GTC actions. With that in mind, as for the sales growth, we are not disclosing the details, but some of the marginal profits that are achieved from what we have, yes, we want to put that onto the add-on.
Twenty-five billion, you said, is for sure.
You mentioned 25 billion to 36.5 billion. That would mean 61.5 billion. Is that for sure? That said, there's inflation, there's the tariff, and some of the costs to achieve the sales. There will be potential cost increases that may arise. Yes, there is a potential cost increase that will come. How can we offset that with the marginal profit that we achieve?
For the non-recurring items, how do we see that for 2026 and onwards?
At the moment, we do not disclose the details at the moment for that as well. Maybe if you can cooperate with me. What is this year's non-recurring items? What we have shown in the forecast, it's JPY 78.5 billion in non-recurring items. Due to the Americas depreciation, we have seen a big loss.
The JPY 78.5 billion, majority of it, about JPY 15 billion is non-cash. I would like to add on to that that part is non-cash. To that, it's not something that would impact the dividend payout. In this year's P&L, in terms of cash creation power, we actually were able to improve on that and improve on the profitability if you look at it from the cash basis. The free cash flow was actually a big improvement from what was initially forecasted. There is the impact from all the structural reforms that we have been doing, and we are seeing tangible results from it in our numbers. Thank you very much.
Thank you.
Any other investors?
Congratulations for very strong cash flow generation this year. Could you tell us for next year, 7% operating margin compared to when you set that target?
How confident do you feel you can achieve this number?
I think we would like to be firmly committed to achieve that 7%. Of course, there are various factors that we cannot foresee. Tariffs is one of them. Of course, inflation is also an issue. However, we are confident that our cost initiatives will bear results for next year. We have a much better P&L structure than compared to before. This gives us a good position to realize the growth into a firm improvement of our profitabilities. We would like to continue to be firmly committed to this target.
Yeah, in addition, the first we can realize is to the culture in the company. In this year, we also have some extraordinary negative impacts. However, it's a team's always seeking to the additional or the new opportunity in order to achieve to our commitments.
This is also one of the very strong good points to achieve for the next year targets.
Thank you very much. Now we'd like to receive some questions from the online participants from Jefferies, Kawamoto-san. Please make sure to unmute and please speak.
Thank you very much for the session. I'm Kawamoto from Jefferies. Can you hear me?
Yes. Thank you very much. Prestige skincare, looking at the future, and I want to ask a little bit about how you look at the focused items. The skincare mass items are growing in popularity. Within that, the prestige, do you think the demand will come back even with this inflation environment? Elixir, you will start to sell sales in Southeast Asia. In the midterm plan, within the 2030 sales, prestige and mass, how do you allocate the sales?
Or how do you foresee the sales allocation of prestige versus mass?
Thank you very much for your question. First of all, for skincare, prestige, it is true the mid-price range is contracting or shrinking a bit. The consumers are moving more to prestige or to the mass, especially looking at the prestige market. They're looking for more high functionality, new technology. The category that captures that is growing, specifically cream and essences and anti-aging, which we are strong at. We're seeing a high-end upgrade into high price points. For this prestige area, we do believe not just for Japan, but globally looking, there is room for growth. There's opportunity for growth. For Elixir, fortunately, in Japan, the second half as well, we've been able to capture high growth.
At the same time, in Asia, as you have briefly mentioned, we are planning to sell Elixir from a self-sales channel. We have built confidence as we have captured very high sales. It is not for us to just expand on the number of stores, but the self-sales stores. What we have succeeded in Japan, we want to deploy that into Asian countries, Asian areas. The agents that come to Japan, they are coming into Japan to purchase the Hero products. The success cases that we have had in Japan and the Hero products that we have captured great success in Japan, we want to expand that into Asian, Southeast Asian countries, especially in self channels like drugstore channels that will, without the cost, then we believe that that will give great contributions to the sales. In China, temporarily, we did have a big dip.
However, we do want to challenge Elixir in China again. And Clé de Peau Beauté, Shiseido, and Elixir are the three pillars of the skincare business. On page 58, I noticed that Japan prestige skincare, so for example, EMEA has some of its growing double-digit, but from the treated water issues, there were some issues in sales, but that's recovered. And would you say that globally looking, prestige skincare from Japan, you would say that you have solid grounds to that, and there is sustainability going forward?
Yes, in terms of some of the reputation damages that we've had, we believe that that has been recovered. And to be honest, K-beauty is progressing globally. And with that, J-beauty is something that Shiseido, we need to expand and we need to push forward as well. We feel that as a mission, as a company from Japan, that we expand on the J-beauty.
We want to continue to provide the value from Japan to the world.
Thank you very much.
Next, Ohana-san from Nomura Securities.
Thank you very much. My name is Ohana from Nomura Securities. Hello. You have the revision for that was the non-recurring items, So JPY 55 billion additional, and you made the revision. The JPY 47 billion is about Americas Impairment loss. There will be a little less than JPY 8 billion. Where does this number come from? On page 5, there is the global headquarters, early retirement program. JPY 25 billion next year, so cost efficiency, that is already embedded in that JPY 25 billion. It is not new. Is that correct to understand?
Thank you. For non-recurring items, as you say, at this point in time, cumulative JPY 63.4 billion. The fourth quarter, JPY 15 billion.
That is the plan for the fourth quarter, JPY 15 billion. ERP-related costs is JPY 3 billion of which JPY 15 billion. The rest is the office rationalization or structure reform-related costs and some other initiatives going on through the global team. Those structure reform-related costs are the ones that I described earlier. Those temporary costs will lead to the fixed cost reduction in the future. We are implementing such measures. In terms of the ERP, JPY 3 billion is the temporary cost impact, but the cost reduction impact overall. Through this ERP program, it's not just only that, but the natural attrition and also carving some of the hiring numbers. Through such a reduction in the hiring, JPY 5 billion or so per annum impact is also included, not just ERP, but such natural attrition and so forth.
ERP is happening, realized in Q1 in next fiscal year. That means a little less than JPY 5 billion of the cost impact will be expected for FY 2026.
Let me double-check. JPY 47 billion ERP, JPY 3 billion, and office optimization, JPY 5 billion. Is that correct?
To come up with the JPY 55.5 billion. Right. ERP, JPY 3 billion, and the rest are which includes the temporary or cost impact for the office and so forth.
Okay. The headquarters, global headquarters rationalization or ERP, that's already embedded. Yes, you're right. That was already embedded.
That means that JPY 25 billion is already secured because you've already planned this ERP and so forth and then have a more solid focus. It's not just add-on.
That's correct. It's not the incremental. Understood. Thank you so much.
One more from online participant, SMBC Nikko, Yamanaka-san.
Hi, this is Shima Yamanaka from SMBC Nikko Securities. Thank you. What I would like to ask, growth by brand, the page with the growth by brand. Page 29.
Yes, thank you. Page 29. I want to understand this a little bit more, and I want to deepen my understanding on this page, page 29. So looking at this page 29, core profit expansion, Shiseido, Clé de Peau Beauté, the gross growth is high. From your explanation, there's China, then other big markets. Of course, you'll continue to aim for growth, but there's also the you want to grow the Hero SKUs in other areas, as you show in the other page and the next page, page 30. With all that together, you're looking at the low single digit of CAGR. Can you share with us the decomposition of this?
The numbers by brand, the details and decomposition of the numbers by brand, we do not disclose. Expanding profit and accelerating growth. For the growth rate, next brands, of course, will be higher in terms of the growth rate. For the core, the size, the scale is big. Incrementally, it will look like this chart. If you were to compare the next brands, the growth rate ratio will be higher.
Thank you. In the brands under next, the fragrance, I want to ask about fragrance. On page 28, you have the brands listed. Max Mara Parfum. That is a big launch that has high expectations. Is that correct to see? And/or each of the brands have a high growth rate? Can you elaborate a little bit on the fragrance?
First of all, for the brands, Max Mara will be starting from next year, and that, yes, will be a big incremental add-on. The growth of the existing brands, the fragrance grows primarily in Europe. Now that Alberto Noe will be looking at EMEA and Americas, we can see an acceleration of growth in the existing brands. In Americas, even for fragrance, it is a huge fragrance market, the Americas. We did not capture full investment, nor did we try to challenge growth in Americas through fragrance. That is something that we see as a big opportunity. Those will be the big drivers for the big growth in terms of global expansion as well.
Thank you very much.
Thank you. Any other questions from the floor? Kasahaya from UBS.
One question at a time, right? Yes. A total of three questions. First, China and TR.
You made the add-on revision, but you did not change your outlook for those two. It is a slight improvement compared to your original expectation. Can you describe further what is driving why the result was better than you expected? Also, the market outlook. That is my first question. For China and travel retail market, especially for China market, there were some huge volatile markets. Ups and downs are quite radical. That situation is now stabilizing. For Q3, the overall market has now turned to positive. Especially in channel, online channel is driving the growth. Therefore, for the third quarter, our business grew and we are taking some market share. We are confident in that. In fourth quarter, this trend will continue, according to our assessment. Especially double 11 will already be gone and it is almost ending.
That result looks quite good and promising. China, for sure, is recovering in terms of the market strength. The next fiscal year, almost. Of course, we cannot be complacent. Especially for offline, since the online is so good, we have to watch carefully about the offline. Brand Shiseido has been struggling this year. We expect that difficulty will be settled. That means we would like to expect some solid growth next year. Thank you so much. For my second question, is that the present page 41? This is the matrix organization and you are going to advance that. I'm sorry, I don't understand personally. Hirofuji-san, as your capacity as CFO, can you please describe in your finance division how it will look like going forward?
Okay, f or CFO, region headquarters system was adopted, for example, in finance. Region CFO was reporting to region CEO only. Therefore, no report line to me in the past. As a result of such structure, each region had adopted the decision to optimize within the region only. That is a reflection. We created the region CFO report line to headquarters CFO. We can preside over the regional financial situations and also the risk can be identified at an earlier stage and take some actions. We would like to have a good result coming from this structure reform. Of course, reporting line creation is just one of the first steps, right? All those difficulties in the past cannot be resolved only with this structure change. The first next year, we will adopt this new organization change.
Definitely, we need to uplift the skill sets locally at the same time. Of course, that has to be continuous initiatives. This is a long journey. As I speak to our team, financial governance and discipline has to be adopted going forward. Therefore, we need to pursue the overall optimization as we select as a big theme.
Thank you. なんですが。 The third question. You have announced your midterm plan today. The employees, how are your employees and your business partners? I think you are going to go into a phase where you have to change the mindset of your employees as well as your business partners. You were able to share with us. As a CEO, what kind of messaging do you give to your employees?
In order to thoroughly implement this midterm plan, what kind of management layers changes or how will the management layer take different action going forward?
Yes, to your point, when we make a plan, that's not the end. We have to penetrate this throughout the system. One thing to mention is it's not just messaging for myself, but with this midterm plan, each of the executive officers, we have shared this content before this official announcement. Also, in order to really realize this, what do we need in each of the areas?
Furthermore, what do we stop doing in areas?
We have had the executive officers start considering this already. What I talked about was more of the overall company globally. From here on, we will start launching, Cascading the message down throughout the organization.
For this too, this is really the start for us. Now going forward, looking for next year, I would like to speak directly with the employees and travel overseas as well to speak to the employees in our Overseas offices as well. I want to continue to thoroughly penetrate and execute the midterm plan and, if needed, adjust it or make adjustments if needed, but thoroughly make sure to cascade this throughout the organization globally.
Thank you very much. We have 10 more minutes. We would like to take as many questions as possible. Okay, 10 more minutes.
I would like to, if I may, select one question to you, Hirofuji-san. As CFO, you explained your strategy toward 2030. I fully understand.
As the representative executive officer and very relatively young representative executive officer, beyond 2030 or even 2040, how would you like to see Shiseido eventually, very long term? What is your perspective?
Very expected question. Thank you. For 2040, we still were not able to consider something. However, personally, as we want to achieve the global beauty company, definitely we would like to achieve that. We have a strong mind. To this end, we undertook the structure reform in a series. We have a growth plan and also the more selective and tried to drive growth. That is our approach to craft this midterm strategy together with Fujiwara-san. Of course, the small-sized global brands can grow and shine eventually in 2030. That kind of bright future can be achieved. If that happens, the true global company can be embodied.
Thank you.
I wish you could talk about more beauty, about beauty. Maybe I'll turn to Fujiwara-san. It's a follow-up question, okay?
Like every moment, every minute, beauty. This slogan was selected. Can you please describe once again precisely? Because you have a strong determination to select this, right? In every moment and every life, beauty. When we craft that, it is very difficult for us to foresee the market future. In our way, our unique way, and try to grow the company. That means we should not be controlled by the market growth. How can we ensure that? That's the kind of discussion we had. To do that, we need to leverage our core value. What does it mean? Our new Cosmetics culture will be built through our core value. That is our strength as well as our pride.
That is back to basics. It has been the whole time. Shiseido has been not looking at the market, if I may say. We were looking at the people. We were looking at the consumers and always focusing on people. As we continue to do so, what can we do? We can be close to people or customers. Also, we want to deliver beauty in their daily lives. We will have this slogan as the most suitable from that perspective. This could be more of a trend. Sometimes people may have more dispersion or division and isolation. Maybe such a slogan, such a word, would be more relevant than in the past. Of course, this slogan, once again to reaffirm that, has a big commitment and also needs some confidence.
But we believe that this slogan is more relevant to us right now. Thank you. I love this slogan. Thank you so much. ありがとうございます。では、ご質問ございますか？
Are there any other questions? We would like to prioritize the first questions. Thank you very much. My name is Miyake from Morgan Stanley. I apologize for my raspy voice. I have a cold. Because we're talking about long-term strategy, I feel bad that I have to rewind back. But for this 2030 plan, core operating profit and operating profit is, you said that you don't want to have such a big gap between the OP and the core OP. Five years still is a longer period. The sales and core operating profit and net profit. Each of the trajectory image, can you share with us the image for your trajectory?
The reason why I ask is if the sales is, there could be a scenario where the sales is flat. As globally, it's an uncertain world. I believe that there is such a potential for next year. For the sales, the second half, maybe are you looking at it weakly or looking at it from the rebound? Are you looking for more acceleration in terms of the sales? As you add up the profit, you'll have the cost reduction impact. If that's going to happen in the back end, then what's the cost impact? I think there's going to be a time lag for that. The sales and cost, what kind of trajectory is there? Because there will be some time gaps or time differences in when you will see some results. I apologize that we can't disclose everything to you in detail.
However, we do not plan to have such a volatile forecast. For sales too, for now, we do have a quite linear target or forecast. Of course, there are different reforms and initiatives that we are doing and that we should continue doing. As for that, that is something that we will continuously do in terms of structural reform.
To do so, we have the 2030 double digit. That is what we want to achieve in 2030, the double digit. That in itself, we will start doing what we can from, we will start with what we can in the moment with agile movement. At this point, do we see any kind of expense costs that we are going to add up at this point? No. Looking at the overall optimization or global optimization, value chain overall.
As I have been doing the structural reform for the past two years, this is something that I've been feeling. When you see the big chunk of the reforms, it's easier to just go ahead and execute. While we're executing, looking at the overall value chain, we can see like, oh, if we do that, there could be more impact. This is a challenge in supply chain. If the brand holder and the R&D work together, then the impact would be much bigger. There are many items and challenges that we saw as we were working on this like that.
As we worked on the global organization, if the corporate functions were more cross-functional, the reason why we are trying to do more cross-functional is because what we see in front of us to what we see in each of the region, it is not a partial optimization. What is optimized as a whole, there is more fruit or benefit from that. Of course, yes, there could be the time gap of when the impacts are actually achieved. However, the faster we start, the impact will be quicker to be achieved. Those are the things that we will continue to do. Aiming for 2030, we set the agenda, and we would like to promote this with a cross-functional team. To that, there will be the market growth, and there is sales from our value creation that is an add-on of organic growth.
Looking at the market, yes, as the market may fluctuate or may be volatile, we want to continue to have a certain level of flexibility as we manage our company. If we set one specific number, the focus is too much on that number. Of course, we will always have an aspirational target number. We do not want to push ourselves in the wrong way so that we would end up increasing a negative debt for the future. That is why we wanted to have a little bit of flexibility going forward, and that is what you see in the 2030 target. Thank you very much. If I could just have a follow-up question. Three points cost down, the cost down by three points. Yes. There are operational aspects as well as there is some of the fixed cost reduction.
As an image, fixed cost versus some of the variable costs, what do you see an image of what the allocation will look like? As for the details to that, we do not disclose nor announce in this session. As you see on page 48, the cost optimization menu, these are the items that we will continue to work on.
The detailed numbers will be cascaded down to the organization. Is that what you just said?
Yes. To a certain level, yes, we do have the menu lineup already, and we are at a level where we are ready to cascade it down to the execution point. Moreover, we need to change the culture to really follow the profitability, to really go after the profitability.
The cultural change is something that we are changing so that the company to 2030 will definitely have a ROIC that is exceeding the WAC level. We want to make sure we have a ROIC that exceeds the WAC. That is a very strong commitment that we have in our minds. Thank you very much.
お時間になりましたので、すべて。 Now we covered all the questions because the time arrived. We would like to end today's session. Thank you very much for your attendance. We would like to end today's earnings presentation.
Thank you very much for your attendance for a long period of time. Thank you so much.