Earnings Call: Q2 2026

Aug 7, 2026

Summary

Sales and profit exceeded projections in Q2 FY2026, led by strong Oral Healthcare growth and overseas recovery. Despite a JPY 5 billion raw material cost headwind expected in H2, price increases and cost reductions are set to offset impacts, with full-year targets and dividend growth reaffirmed.

Good afternoon, ladies and gentlemen. I am Takemori, President of Lion Corporation. Thank you very much for your precious time despite your busy schedule. Before I begin, I would like to offer my deepest condolences to those who lost their lives in the recent 2026 Kumamoto earthquake and extend my heartfelt sympathies to everyone affected by the disaster. The Lion Group has already begun providing relief supplies and other assistance to people in the affected areas. We sincerely hope for the earliest possible recovery and reconstruction. With that, now allow me to begin my presentation. In the second quarter for FY 2026 December, despite increasing uncertainty in the business environment due to developments in the Middle East, both sales and profit exceeded the levels we had initially projected at the beginning of the year. Today, I would like to explain the factors behind this and how we intend to deliver growth in the second half and beyond. First, let me highlight the key points. In the first half of the year, we achieved the targets we had announced and confirmed the steady progress toward strengthening our earnings power, one of the key objectives of our 2nd STAGE. In Japan, Oral Healthcare, our highest priority business, drove top-line growth. At the same time, our efforts to develop high-value-added products and our investments in strengthening our brands are also translating into tangible improvements in profitability. Overseas, in addition to the new consolidation effects from Merap Lion in Vietnam and PNB in Australia, both of which operate in highly profitable businesses, there is another key point I would like to emphasize here. Our major markets are now on a recovery trend. As a result, core operating income margin increased by more than 20% year-on-year. We believe this demonstrates that our initiatives to transform our business portfolio shift toward high-value-added products and manage our overseas businesses with a greater focus on profitability are steadily delivering results. In the second half onwards, as you are well aware, various cost increases resulting from developments in the Middle East are becoming more pronounced than they were in the first half. We intend to offset these changes in the business environment through a combination of measures, and we remain committed to achieving the full-year targets we announced at the beginning of the year. Today, I'd like to cover these four key points. First, let me review our consolidated results. In the second quarter, net sales increased 8.7% year-on-year, while core operating income increased 21.3%. EBITDA margin, one of our key KPIs, reached 11.8%, an improvement of 1.1 percentage points year-on-year, demonstrating steady progress in profitability as well. Next, allow me to explain the factors behind the JPY 2.7 billion year-on-year increase in core operating income. There are two key messages I would like you to take away from this slide. First, the primary driver of profit growth overall was the increase in gross profit resulting from our progress in shifting toward high-value-added products. Second, underneath each factor, we have shown in the parentheses the amount of change for the April through June period. As you can see, gross profit growth accelerated during April through June. In other words, our momentum is improving. At the same time, we incurred a JPY 1 billion negative impact from the higher raw material costs in the first half due to the developments in the Middle East, but were able to offset this impact. In terms of competitive spending, we are now continuing our investment in areas where we should go for further growth, particularly Oral Healthcare in Japan and our overseas businesses. At the same time, these investments are generating solid returns in the form of higher gross profit. You will also notice that the JPY 9.7 billion positive impact from higher sales on the far left and the JPY 5.3 billion increase in other expenses on the far right are larger than in a typical year. Please let me now turn to performance by segment. Both consumer products and overseas businesses deliver higher sales and profit. Please look at the figures highlighted in red. In consumer products, our focus on developing high-value-added products drove sales growth of 1.6%. In addition, measures to reform our earnings structure contributed to a 0.4 percentage point improvement in the profit margin. Overseas business sales and profit both increased significantly, reflecting not only the impact of newly consolidated businesses, but also recovery in our existing markets and our continued focus on profitability-oriented management. Next, allow me to break down the consumer product business. In Oral Healthcare, our core toothpaste and toothbrush brands continue to grow. In addition, the premium-priced Systema toothpaste line, which we renewed in April, has performed strongly. As a result, Oral Healthcare maintained a strong growth of 9.6%. In beauty care, Body Soft, which struggled during the earlier part of the year, are now benefiting from the effects of product renewals centered on high-value added offerings. Home care, although the top-line sales were below the previous year, we have placed a greater emphasis on profitability while working to enhance the brand value. For categories such as fabric softeners, which have been affected by intensified competition, we are planning product initiatives in the second half. I will discuss this in greater detail later. While conditions vary by category, overall, we are able to grow a solid 2.9%, excluding the impact of the transfer of the Lead brand. Next, allow me to turn to overseas businesses. In the Southeast and the South Asian & Oceania, performance was driven not only by the impact of newly consolidated businesses, but also by strong results in Malaysia, which contributed significantly to both sales and profit. In Northeast Asia, China has returned to a recovery trend. Combined with a strong performance in South Korea, this resulted in underlying growth in both sales and profit. This slide shows the performance of our four major overseas markets. Sales momentum has improved in all four countries. I would particularly like you to look at the underlying sales trends for January through March and April through June, shown in the notes for each country. In Thailand, structural challenges remain, including lower exports and weak domestic consumption. However, as part of our efforts to transform the business structure, we have been strengthening initiatives in oral healthcare. These efforts are beginning to produce results, and the overall rate of the sales decline in Thailand narrowed substantially during the April through June period. In Malaysia, in addition to strong top-line performance, our pricing strategy for laundry detergents has led to a significant improvement in profitability. As we explained during the first quarter, we had been working to normalize distribution inventories in China. That process has now been completed. Since April, China has returned to sales growth, improving from 21.6% decline in January through March to 14% growth in April through June. We are therefore beginning to see a clear double-digit recovery trend. South Korea also delivered sales growth, led primarily by our highly profitable businesses. Against this backdrop, let me now discuss our full-year consolidated earnings forecast. Let me start with the conclusion. We will not change the earnings forecast announced at the beginning of the year. We remain firmly committed to achieving it. In the second half, we expect the business environment to become even more challenging than in the first half, primarily due to developments in the Middle East. However, based on the solid progress we achieved during the first half and the benefits we expect from our initiatives, I believe as president that we are fully capable of offsetting these headwinds. At the same time, we will continue making steady progress toward strengthening our earnings power as set out in the 2nd STAGE strategy. Our decision to maintain the forecast should not be viewed as simply leaving our guidance unchanged. It reflects our determination to achieve the targets we originally set. It shows our strong will, and this is not simply a matter of determination. As president, I believe we have now built sufficient underlying strength and resilience in order to deliver these targets. In regard to shareholder returns, we will also continue to aim for our 11th consecutive year of dividend increase. This is one of the key slides regarding our responses to developments in the Middle East. We have revised our assumptions regarding the factors affecting core operating income, including the impact of raw material price increases that are expected to become more significant going forward, and the measures we intend to take to counter them. The table compares our initial assumption on the left, and the overall total remains unchanged. The largest change relates to raw materials prices. We have revised the expected impact from negative JPY 1 billion initially to negative JPY 7 billion, representing additional negative impact of JPY 6 billion. Of this amount, JPY 1 billion has already materialized in the first half, with the remaining negative JPY 5 billion expected to take place in the second half. To counter this, we intend to build additional gross profit through further price increases and cost reductions, while also improving the efficiency of SG&A expenses, including competitive spending. Our revised assumptions also incorporate the impact of foreign exchange movements. What I have just described will by no means be easy. However, it is precisely because of the progress we have made in reforming our earnings structure that Lion has become a company capable of responding flexibly and swiftly to changes in the external environment. Next, I would like to provide some more details on the measures we will implement in the second half in order to counter the specific challenges. As I mentioned earlier, we expect the impact of higher raw materials prices in the second half to be approximately JPY 5 billion. Taking procurement lead time and other factors into account, we expect the impact on the results to peak in the third quarter, as illustrated in the chart on the right. We will address this from both the gross profit and SG&A sides. First, with regard to gross profit, we will implement appropriate price pass-through measures in Japan and overseas, while simultaneously pursuing a number of other initiatives, including the development of high value-added products and improvements in the product mix. In Japan, we plan to revise prices across a broad range of products for shipments from October onward. Overseas, we are also implementing price increases progressively, primarily in categories where we have a strong market position. In addition, through further cost reduction, we aim to offset approximately 80% of this JPY 5 billion impact through improvements in gross profit. Naturally, we will proceed carefully while closely monitoring market conditions and the competitive environment. At the same time, we believe that achieving appropriate pricing that reflects the value of our brands will not only support earnings this year, but also help strengthen our earnings foundation for next year and beyond. We would like to further expand on the actual efforts in order to improve our profit margin. So we would like to allocate our resources in a better way. I would like to emphasize that sustainable growth simply cannot be achieved through the cost reduction alone. This is the most fundamental point I would like to emphasize. We will continue making investments that will generate further earnings while relentlessly improving efficiency where appropriate. By maintaining the right balance between the investment and efficiency, we intend to offset the impact of governments in the Middle East. From here, I'll talk about some key measures based on the policy we announced at the beginning of the year. First, let me review our first half results. We are steadily advancing the transformation into a highly profitable business portfolio. For our top priority, Oral Healthcare, we have achieved group-wide growth of over 10%. Overseas, we are seeing a continued shift toward the personal care area. In addition, the consolidation of Merap Lion and the Australian business has made a major contribution to improving our growth margin and the core operating income ratio. We see these results as reflecting the effects of the management process transformation, moving to a business unit system that integrates the value chain, along with a greater delegation of authority, which has increased the speed of decision-making and execution. We hope to carry this momentum into the second half and translate it firmly into execution. Let me go into a bit more detail on the status of each business. First, Oral Healthcare in Japan. The biggest achievement of the first half was outgrowing the market in the high-end toothpaste segment, priced above JPY 1,000, which continues to grow. Please look at the graph on the left. The yellow line represents the overall high-end segment priced over JPY 1,000. This segment itself continues to grow strongly, but the green line, our own high-end product, has outpaced it, showing the major growth of 131% year-on-year in the first half. The high-end line of Systema, launched in April, is also performing well, up roughly 1.4 times year-on-year for April to June. In the second half, as shown on the right, we will substantially upgrade the regular line of the DentHealth brand, priced around JPY 1,500. At the same time, we will continue to build up our highest price line, launched in the second half of the last year. Periodontal disease prevention is a category we naturally expect to keep expanding. As a category leader, we will keep strengthening various actions to broaden our brand base and drive growth in the high-end segment. Through this, we aim to further expand the group's sales and profit. Overseas in Oral Healthcare, rather than applying uniform measures, we are, of course, pursuing strategies and tactics tailored to the characteristics of each country and region. On the left, in China, we are launching products in the growing high-end segment and strengthening our focus on priority channels that continue to grow. In the middle, Thailand, even though overall domestic consumption remains weak, the toothpaste market continues to grow steadily. We are expanding our customer base by revamping our brand image and having re-examined the target for each brand. We are expanding distribution in our stronghold areas. On the right, in Malaysia, unit prices, including the general purpose price range, continue to rise. Amid this, we added value in mainstay brands. Across Asia as a whole, the Oral Healthcare market is growing and the unit prices, in particular, continue to rise. We will keep strengthening our efforts to continue outpacing market growth. From the next page, let me give a supplementary explanation on China and Thailand. First, China. In Q1, sales declined due to optimization of distribution inventory. In Q2, the launch of new highest priced products under our mainstay brand and cross-brand marketing initiatives resulted in a double-digit recovery of +15% in sales. We were also able to improve profitability. Building on this momentum in the second half, we aim to raise the presence in high-varietic products. We will further strengthen momentum by strengthening our engagement with the emerging e-commerce platforms that performed well in the first half and doubling the number of key managed retailers carrying our products compared with the end of the previous fiscal year. While the macro environment remains challenging, we will keep working to build mid to long-term brand value so that we can sustain profitable growth. In Thailand, there are structural macroenvironment challenges. That said, the effects of initiatives we have pursued since last year, such as results, rebranding, and expansion of Systema distribution, are starting to show up in sales. Sales growth has increased from +4% in January to March to +10% for April to June. Systema sales shown in the graph at the bottom left are also rising month by month. As with China, we will build on the first half results and in the second half, further advance key measures that we need to promote expanding brand penetration among young customers and expanding distribution. Next challenge for growth, the beauty care and pharmaceutical products business. In Vietnam and Australia, initiatives to realize post-consolidation synergies are taking concrete shape in each case. In Vietnam, in addition to stable growth in the pharmaceuticals business, we are also expanding our personal care business by leveraging various capabilities across the group's sales network. The SUQQU business in Australia is progressing steadily. Going forward, we focus on expansion into Asia, including Japan. The recently announced establishment of SUQQU in Japan marks the first step in this effort. Leveraging our strong brand value, we press forward by developing their business while firmly securing profitability. Next, home care. In Japan, we are steadily executing product initiatives in line with our business portfolio strategy. We are working to build up high value-added products. As customer needs diversify, rather than competing on price and capital strengths for the mass market, we continue product initiatives that create distinctive value, using test marketing to create new needs and propose new habits that meet them. As shown on the left, the NANOX washing tab anti-mold wall, launched through test marketing in the first half, showed approximately 3 times of the planned sales. In the second half, we are also strengthening our lineup of distinctive value fabric softeners and dishwasher detergent. By continuing these initiatives, we aim to improve profitability even with increased raw material cost. Finally, let me talk about the progress on the 2nd STAGE growth strategies. Over the medium to long term, we aim to create value continuously, focusing on healthcare needs, mainly in Oral Healthcare. To achieve this, as I have discussed, 2nd STAGE has clearly set strengthening profitability as a core theme. What matters here is not chasing short-term results alone, but shifting our focus toward growth accompanied by profitability and capital efficiency. Situations like this may occur again, but we are working to transform into a company that can generate profit even as the environmental changes in various ways. I feel real traction in our business portfolio transformation. First, on the left, accelerating growth in Oral Healthcare. In Japan, we are achieving high growth accompanied by profitability. In Thailand and Malaysia, through a review of management resource allocation, we are rebuilding our business foundation in market with substantial room for growth. This is progressing well. As mentioned earlier, results delivered. In China, on the other hand, external environmental changes have caused a divergence from our original plan. I see this not as a temporary issue, but as a phase where we need to reallocate management resources towards areas where we can win. Now and going forward, we're sharpening our strategy and tactics further by clearly identifying the subcategories where our strengths can be leveraged in each country or region. For example, periodontal disease and aesthetics. At the same time, by creating a virtual cycle between healthcare products and services, we will expand profit opportunities beyond simply selling products. Next on the right, overseas growth. Overseas, we are advancing initiatives to create synergies. In major countries, due to geopolitical effects, we have seen some challenges on the top line relative to our original plan, but as I mentioned earlier, we are currently on a recovery momentum. In addition, I'm personally glad to feel that we are able to manage swiftly and flexibly with an emphasis on profitability. We continue to promote proactively our shift toward profitability-focused growth and optimization of our regional portfolio. Also, starting this year, we have newly established a department to explore new export destinations. By pursuing new market development in countries where we have not entered, we expand future growth options while accelerating our overseas growth initiatives. To summarize today's content, the first half was a period in which growth in our high profit business centers on Oral Healthcare, drove steady progress in transforming our profit structure. Overseas in particular, the momentum of sales growth has recovered. For the second half, we continue to expand in an uncertain environment, including the situation in the Middle East. That said, we do not see this as a phase of defense. Rather, we see it as an opportunity to accelerate value-added growth, improve profitability in our overseas businesses, and develop new growth businesses, building a profit base that is resilient to external conditions. As one group, we will further strengthen structural reform, aim to achieve the target announced at the start of the year, and continue moving forward while sharpening our focus toward the final year of the second phase. We continue to meet your expectation by sustainably building up profitable growth. We appreciate your continued understanding. That concludes my presentation. Thank you very much for your attention. We will now move on to the Q&A session. This is Hirosimi from Daiwa Securities. Can you hear me? Mr. Hirosimi, yes, we can hear you. Good afternoon. I would like to revisit page 14, which you described as a key slide, and better understand how the numbers are structured. I think this is a very interesting table. Compared with your initial assumptions, the negative impact from the raw material costs has increased by JPY 6 billion. However, you are essentially saying that you will fully offset that through the two items in the top, quantitative effects and product mix, as well as a shift in high-value-added products and upward price revision. At the same time, you are also increasing SG&A expenses. Actually, the number there is JPY 7 billion, higher than your initial assumption. Could you talk about your level of confidence in achieving these numbers? What are the specific initiatives that you have in mind? Thank you for your question. This table shows our full year outlook, and so if it is all right with you, Mr. Hirosimi, I would like to explain it in the context of what we expect in the second half. First, regarding the JPY 5 billion negative impact in the second half, roughly speaking, we expect about JPY 3 billion in the third quarter and JPY 2 billion in the fourth quarter. So the question is how we could offset the JPY 5 billion. Let me explain our thinking. We intend to offset approximately 80% or roughly JPY 4 billion through the gross profit improvement. Of this, we expect roughly JPY 1 billion from the shift toward the high-value-added products and the cost reductions, including overseas. We then expect about JPY 3 billion from the domestic price increase that we have announced. As you pointed out, Mr. Hirosimi, this is not just about this year. In particular, the JPY 3 billion benefit from the price increases will carry over in full into the first half of next year. As for the shift toward the high-value-added products, as we have discussed previously, we are shifting toward the businesses and products that generate higher margins. Therefore, the JPY 3 billion from the price pass-through and the JPY 1 billion from high-value-added products should continue to contribute in the first half of next year and beyond. That gives me greater confidence in our outlook. You have just given us a fairly detailed buildup of the numbers, JPY 4 billion and JPY 1 billion, for example. Since these are based on the specific initiatives, would it be fair for me to say that you have high confidence? Of course, we do not assume that every single initiative will deliver 100% of the expected benefits exactly as planned. We are living in the business world, but again, I happen to have strong confidence. One last question. Is the confidence partly based on the fact that you have already demonstrated your ability to execute these programs? Actually, starting from October, we are going to start working on the price and pass-through. The most important point is whether the price changes actually materialize at the retail level. Ultimately, this comes down to execution across the distribution channel. As you are well aware, Mr. Hirosimi, October is generally when the retailers revise shelf prices. We therefore timed our price increases to coincide with those changes in October. It is not simply a matter of announcing a price increase. What matters is ensuring that retail prices actually change at the point of sales and that the plan is reliably realized. With October implementation approaching, we have been coordinating with a range of measures and with many people concerned. Understood. I look forward to seeing these measures deliver the expected results. Thank you. Thank you. Next, I would like to have a question from Mizumi Osako. This is Mizumi Osako from Mizuho Securities. Thank you. Yes, I am hearing your voice. Thank you. I would like to ask about the strong performance of the domestic Oral Healthcare business. Looking just at the three months of the second quarter, how much did toothbrushes and toothpaste and the dental clinics channel grow? Also, domestic oral care achieved quite strong growth in the first half. I believe you have new products planned for the second half as well, although I do not think you have disclosed an overall growth forecast for the second half. What level of growth are you expecting? Finally, would you please share your thoughts? Of course, you are able to enjoy good growth in oral care. What is going to happen moving into the second half from the viewpoints of growth factors? Thank you. Could you share page 18? Yes. We have a number of categories, including toothpaste and toothbrushes and mouthwash and the dental floss. Broadly speaking, the growth across these categories has been around the 9.5% level, as shown here. As for Lion Dental Products, our B2B business, serving dental professionals, it recorded roughly double-digit growth in the first half. Overall, we saw the well-balanced growth across the various categories during the first half. Turning to the second half, there are a couple of factors we need to take into account. First, we expect some decline in the volume associated with the price increases that will take effect from October. In addition, the 2,000 DentHealth products shown on the right-hand side of this page will begin to lag its launch from the prior year. We are not assuming that the 9% or so growth rate will simply continue unchanged. This is one of the important points. Also, as for the core operating income margin, progress has been in line with or better than our plan. We therefore now see the core operating income margin as having improved compared with the previous year. I see. I believe the sales were ahead of the plan. Am I correct understanding that core operating income was broadly in line with the plan? I will ask Takeo, who is responsible for the finance accounting, to provide some additional detail on the figures. Thank you. This is Takeo. Thank you for your question, Mizumi-san. Regarding the core operating income margin for Oral Healthcare, strong sales of high-value added products throughout the first half result in a significant year-on-year improvement. Core operating income for the consumer products business also increased year-on-year, and I think it would be unfair to understand that increase in the absolute amount of the core operating income from Oral Healthcare was even stronger than that of the consumer products business. Thank you. I believe your full year growth assumption for Oral Healthcare this year is around 4%-5%. Given the performance so far, it is fair now to assume that you now expect to comfortably exceed that level. Looking ahead to next year, given the significant acceleration that you have achieved this year, should we expect growth next year now to be higher? Yes, we have gained considerable momentum in the first half. As president, I would like to now see us outperform the full year growth assumption. Looking ahead to next year, we are also laying the groundwork for the range of high-value added products and initiatives. Of course, we will need to now take changes in the market environment and other factors into consideration. Did I answer your question? Thank you, indeed. Thank you very much. Next, I will take a question from Akiko Kuwahara. This is Kuwahara from J.P. Morgan Securities, and thank you for the presentation. Can you hear me? Yes, no problem. I would also like to now come back to page 14, and following up on Mizu Fukushima's earlier question to confirm your strategy. If I calculate the figures for the second half alone, the contribution from quantitative effects and the product mix appears to be approximately in the negative JPY 200 million. Is that mainly the volume impact from the price increases you mentioned earlier, or does it also include an impact from the divestiture of the specialty chemicals business? Could you walk us through these components? My second question is about the contribution from high-value added products and upward price revision, JPY 1 billion. Actually, JPY 4 billion gross profit offset you mentioned earlier are accepted. Regarding JPY 3 billion contribution from domestic price increase, am I correct in assuming that you expected to realize the full JPY 3 billion through October, November, and December? If that's the case, you need to have the contribution of as much as JPY 1 billion. Is this coming from the Oral Healthcare with heavier weight, or the home care? Maybe now you like naturally improving operation performance. Non-Oral Healthcare areas will enable you now to actually go for JPY 1 billion. Is this the right interpretation? I wonder if you could help me in this regard. Thank you. I believe there are now 2 questions. First, on volume effect. Our revised full year estimate is JPY 9.5 billion. As I mentioned earlier, the first half was JPY 9.7 billion. So as you correctly pointed out, that implies a negative JPY 0.2 billion in the second half. As for the components of that negative JPY 0.2 billion, there are now positive contributions from Australia and the foreign exchange, among other factors. On the other hand, we have negative gross profit impact from the division of the chemicals business and from Lead. We are also factoring in some volume decline resulting from the price increases. So this is a response to your first question. In regard to the question on the high-value added products and upward price revision. We expect JPY 3 billion from the price increase to break down roughly into JPY 0.5 billion in the third quarter and JPY 2.5 billion in the fourth quarter, for a total of JPY 3 billion. As you pointed out, we are also expecting a little over JPY 1 billion of additional profit contribution from high-value added products. Oral Healthcare will be the main driver, but it will not the only one. We also expect contributions from the new fabric softener line. We can expect it to have a benefit. In regard to this JPY 1 billion, again, could you expand on that on the domestic market and overseas markets? I think in the overseas market, you are increasing the personal healthcare. So I wonder if you could expand on the major drivers behind it. Do you believe that, as far as this year is concerned, it is going to be the Japanese market as the major driving factor? Yes. Actually, we have included production coming in from overseas. So in domestic business, we would actually go for the higher value realizations and other high-value added products. Thank you. Thank you. Next, I will take a question from Mr. Miyazaki. This is Miyazaki from Goldman Sachs. Thank you, indeed. Yes, I'm hearing your voice. Thank you. I also have a question related to page 14, specifically regarding the price increases. First, just to confirm the numbers, you mentioned that fourth quarter contribution from the price increases will be JPY 2.5 billion. On a simple annualized basis, it would add up to approximately JPY 10 billion. Is this what you have announced the other day? You, of course, have good selling SKUs, and I believe you keep an eye on other companies' SKUs. Could you explain again the background to the price increase announced in July, the strategy behind them, and how we should think about their impact heading into next fiscal year? So I appreciate if you could actually go through these points, including the strategy, please. Certainly. As we explained in our press release, the range of the price increases varies somewhat by category. The degree of cost pressure from rising raw material prices naturally differs by category. For example, the cost headwind is relatively significant in detergents, whereas it is comparatively smaller in oral care. We have determined that the magnitude of the price increase is based primarily on 3 factors. The negative impact of raw material costs, our competitive position in each market, and how receptive each category is to price increases. Of course, we need to keep an eye on the possible impact on the volume. They are the important ingredients. As you mentioned, JPY 2.5 billion in the fourth quarter. Again, a simple calculation, times 4, is going to be JPY 10 billion. Allow me to explain in regard to next year. We have the experience, JPY 5 billion increase in the raw materials in the price, and this impact is going to continue. How we can deal with this JPY 5 billion. JPY 2.5 billion on the quarterly basis. Now 2 quarters make it JPY 5 billion. We need to be able to address this JPY 5 billion while keeping an eye on the sustainable business growth moving forward. Did I answer your question? Thank you. If that is the case, it looks as though there could potentially be some upside next year, perhaps another JPY 2.5 billion. Although I appreciate there will be various other factors, should we interpret the fact that you have adopted this pricing strategy and you are now in a position to be able to implement it, have given you the visibility of achieving JPY 40 billion in business profit next year? I wonder if you could expand on those aspects. Are you really optimistic? I would say that at present, I am not that optimistic. I mean next year will be the important final year of the 2nd STAGE of our plan. I would like to take this opportunity to briefly explain as for these matters. Please. Taking a broader perspective as present, I am managing the company with a very strong focus on our earnings targets for 2027 and ultimately for 2030, the final year of our medium-term plan. Achieving those targets is important evidence that Lion is capable of delivering sustainable growth. I may be repeating the same point. The impact from the Middle East is going to be JPY 5 billion moving into the full year. With that impact carrying over in full into the first half of next year. Against that backdrop, we are targeting an increase in core operating income from JPY 35 billion this year to JPY 40 billion next year, a gap of JPY 5 billion. Combined with the JPY 5 billion cost headwind I just mentioned, we need to be able to work on the following initiatives. I am going to explain. The first, the price increases, the JPY 2.5 billion quarterly benefit that begins to materialize in the fourth quarter of this year, and that should generate approximately JPY 5 billion of profit growth. Second, we will improve our product mix through the high-value added products while also increasing volumes. We are building in a range of assumptions for both Japan overseas. JPY 4 billion to JPY 5 billion of improvement from a more profitable product mix. That should enable us to bridge the JPY 5 billion gap. However, it is easier said than done. We need to be able to tighten our management and mindsets. We would like to work on JPY 5 billion, we would like to work on another JPY 5 billion. A total of JPY 10 billion. Yes. As at present, we need to be able to manage these activities as surely as possible. Thank you. Sorry to get into some of the details, but I am still slightly confused about the price increase. If you have a JPY 2.5 billion benefit in the fourth quarter of this year, and then JPY 5 billion of benefit in the first half of next year, it seems as though there should be another JPY 2.5 billion not covered. No, that is not the case. We will have JPY 2.5 billion in the fourth quarter, this year seven half. Running through three quarters to that. We will not have JPY 2.5 billion remaining. You may be thinking of the JPY 2.5 billion as related to the July through September third quarter, but we will in fact realize some of the offset in the third quarter. In addition, from a marketing perspective, we need to maintain some additional buffer rather than assuming that every benefit will follow exactly as I have explained. Thank you. Thank you very much. Next, I would like to have a question from Ms. Yamanaka. Thank you, indeed. This is Yamanaka speaking. I would like to come back now to the impact of the price increases and confirm your level of confidence in actually realizing the plan. Even if you pass through the increase in your cost to prices, I would think that it is difficult to observe how demand would respond until the new prices are actually implemented. In the second half, particularly, you will also have a number of product initiatives in areas such as public care. Other companies have already begun raising prices since July, so I assume you have been monitoring the subsequent volume trends. I wondered if you could share your insights in this area. Thank you for your question. Yamanaka-san, yes, I am hearing your voice. Good afternoon. Yes, actually, I am getting a much stronger confidence. As I have mentioned, we do expect some volume decline as a result of the price increases, and we are factoring the resulting gross profit impact into our assumptions. Actually, we believe that impact is going to be 3%-10% in detergents and around 6%-8% in Oral Healthcare. The figures I discussed earlier have been constructed after taking those expected volumes declines into account. As I mentioned earlier, the key to successfully implementing the price increases is whether retail shelf prices actually change. That is precisely why we strategically chose October as the timing for the price increases. Let me emphasize this point again. October is a time when many retailers in Japan reset their in-store merchandising. We chose October specifically so that our price changes would coincide with that timing. We have been working very closely with the wholesalers, distributors, and retailers in preparation for the October implementation. If I did not believe we had an operational capability to execute this successfully, I would not be telling you that I am confident. We have worked through the details very carefully in preparation for October, with many stakeholders concerned. Thank you indeed for explanation. From a consumer's perspective, I sometimes get the impression that the detergent section in stores is being moved around, becoming somewhat smaller. Or that the shelves for some major products are looking a little less full than they used to. You may say that, well, the consumers are moving into the e-commerce. However, I wonder how you feel about the observation I am making here. There could be certain risk factors. I don't think that you need to be overly concerned about that. We do not expect any major or drastic reduction in retail shelf space. Of course, some consumers will shift their purchase to e-commerce, but my sense is that this will not represent a particularly large proportion of customers. We believe that the majority will continue to make their purchases in physical stores. Of course, I would like to share or recommend ideas to the retailers. Again, actual implementation is going to be in the hands of retailers and distributors. I do not believe that I am receiving a negative response from those people. Thank you indeed for the information. I appreciate it. Thank you very much. Next, I would like to receive a question from Ms. Kawamoto. This is Hisae from Jefferies Securities. I also would like to ask about page 14. Before that, I would like to confirm the first half change factors. Shall we start on page 14? Before that, I would like to return to the results. Quantitative effects. In small orange print, it describes the newly consolidated subsidiaries. How much of that came from Vietnam? Based on that, in this second half, the contribution of Vietnam in the previous year will run the fourth. I also recall that the new product, DentHealth, was added last year. With those comparison base changes, do you expect a further increase in gross profit? First, for the orange figure in the first half actual results, could you tell us how much of it was the Vietnam portion? Understood. Since this concerns figures, let me have Takeo respond. This is Takeo. Kawamoto-san, thank you very much for your question. I understand you are asking how much of this +JPY 9.7 billion quantitative effects and mix change on the far left of the first half profit change factors is attributable to Vietnam. Roughly half of that is increase in gross profit from the newly consolidated Vietnam and Australian subsidiaries. In addition, that quantitative effects and product mix and others also includes the +JPY 3.6 billion foreign exchange impact shown in the arrow. Please note that as well. Yes. Based on that, on page 14, I have the same question as others, which is about the feasibility of the price increases. Looking back in 2023 and 2024, the company achieved roughly JPY 3 billion-JPY 4 billion in annual price increase benefit. This year, we expect to achieve additional JPY 3 billion from October, which looks like a very high number. Could you give us a bit more detail? I am looking at the release now. On the Oral Healthcare breakdown, specifically, where do you plan to increase prices by item and by how much? Whether there are any concrete examples. If you give us some colors quantitatively, I think that will make it more credible. Thank you. That is a detailed point and an important one. Let me have Fukuda respond. Kawamoto-san, this is Fukuda. Thank you. On your question, the price increases we have achieved in past years have mainly been effective in-store price increase achieved by revising promotional cost, increasing the ratio of regular priced sales, and reducing the share of special sales. This time, additional price increase, however, involves raising shipment prices across an entire category all at once with external announcement and actual raising shipment prices. Because of this, as other people also asked, there is a higher risk than before that competitive dynamics could reduce volume. But we believe that if we prepare properly and execute carefully, the benefit of the price increases will materialize with certainty. I see. Then on changes in competition-related expenses, is there anything in particular we should be concerned about this? On competitive-related expenses and SG&A costs, we do expect an increase, though we have reduced the magnitude of increase from the initial plan due to the impact from the Middle East situation. For the increase in competitive related and other expenses, part of the increase reflects our foreign exchange impact, which is why the profit reduction effect appear larger here. Please understand this in this context. Thank you. Thank you very much. Next, Mr. Ohana, over to you. Thank you. This is Ohana from Nomura Securities. I would like to ask about your thinking on the first half progress in the next year. It seems that from around March, you already knew raw material cost would be rising. In the first half, core operating income was above the company's plan. Given the raw material cost increase impact expected in the second half, do you feel the first half result was good enough, or did you expect higher number to have some buffer? I would like to understand your thinking there. Also, the increase in core operating income from the newly consolidated subsidiaries is approximately JPY 1.2 billion or JPY 1.3 billion, I guess. If possible, could you break that down between Merap Lion and PNB? My understanding was that PNB was not expected to contribute much to the profit this fiscal year. Has that view changed? Earlier, there was discussion about the next year's roughly JPY 10 billion profit increase. I had the impression PNB would contribute meaningfully next year, and that with a price increase effect and so on, that number looks achievable. Is my observation correct? Sorry for asking several things at once. Thank you. Thank you. I believe there were three questions. First, looking at the slide now, with the second half in mind, the first half could have gone a bit further and how I feel about that as presented. That is the first question. Second, how much PNB or Australia and Vietnam is contributing to profit this year? Takeo will answer that. Third, since PNB Australian impact will carry into next year, whether that makes next year's targets more achievable. How do you view that? Let me have Takeo answer the figures first, and I'll give an overall summary afterward. On the first question, whether the first half could have been better. As I mentioned earlier, considering the situation in China in the first quarter and the tough fundamentals in Thailand, my assessment is that we executed fully. As shown here, our progress on the sales and core operating income compares well against the past 4 years. For example, our sales progress rate this time is 50.4% versus 48% for the last 4 years. Our core operating income progress 43% versus 37% for the past 4 years. This reflects a very strong effect, and I feel confident about it. I don't feel at all that we should have pushed forward. I'm satisfied with that, and combined with the change in the quality of our earnings I mentioned earlier, we are becoming a company that can generate profit regardless of circumstances. This is the answer to your first question. On the second, share of PNB Australia's impact this year and their impact on the next year. Let me have Takeo answer for the figures first. This is Takeo. Ohana-san, thank you for your question. On the impact through the 6 months to June, you mentioned the figure you have estimated yourself. In terms of the actual profit and loss related to Vietnam and Australia this year, while the two companies' results are positive, there is also a one-time acquisition-related expense recorded. Including that, the contribution to first half, January to June, core operating income is fairly limited compared with the figure you mentioned. Specifically, it is less than JPY 1 billion. I refrain from breaking that down between Australia and Vietnam, but the combined figure for the two companies for the first half is as I have just described. Looking ahead to next year, the one-time acquisition related expense is, of course, only for this year. So we would expect an increase from the two companies' profit contribution next year with the absence of one-time expenses of this year. That said, as Takemori mentioned before, our current plan for the next year does not yet reflect that to that extent. At the same time, there is also the factor that two chemical products subsidiaries will be deconsolidated. So we assume those two effects broadly offset each other. That's about the figure. Thank you. Was the one-time cost for Australia already incurred? Or will it come in the second half? The one-time cost has already been incurred through the second quarter. Thank you. Finally, let me sum up the strategic point as the president. To repeat what I have said before, next year is not just another year. It is the final year of the 2nd STAGE, whether we set out to strengthen our profitability. I see it as a year in which everyone will be watching us to see whether that quality has improved. I am confident with that. On the substance growth in Oral Healthcare and overseas business growth with margins, they may vary by business, but whether we can achieve group-wide strengthening of profitability is something I feel confident about. I'd be grateful if you could judge for yourself whether we have succeeded. Thank you. Thank you for the question. We are running short of time, but we would like to take questions from two more people who have raised their hands for a while. Ms. Miyake, over to you. Thank you very much. This is Miyake from Morgan Stanley. I also would like to ask a bit about overseas. I also would like to ask about the profit. I believe Northeast Asia's margin improved in Q1 and Q2 and progressing well. But Southeast and South Asia looks roughly flat year-on-year in Q2, which does not seem to align with the improvement in sales. Could you explain what affected this? I think there is a potential for the margin to improve in the second half. Is that observation correct? I would like to have your thoughts on this. Thank you. Let me switch to another slide. In my earlier explanation, I mentioned that sales momentum overseas recovered, improving from January to March to April to June. Let me walk you through some of the underlying figures verbally, since not all of them are on the slide. On the real sales growth in the middle, excluding foreign exchange effect, Southeast and South Asia grew 11.9% in April to June. In January to March, it was 7.9%. So Southeast and South Asia, Oceania improved overall from 7.9% to 11.9% growth. For Northeast Asia, growth was 11.5% in April to June. In January to March, due to partly the reduced production in China, it was minus 7.4%. So Northeast Asia recovered from minus 7% in January to March to double-digit growth. In total, the growth was 2% in January to March and 16.1% in April to June. Momentum has clearly increased by region and on the growth basis, which is the big positive. Now, the key question is whether core operating income is following that. Let me touch on that. Please look at the right-hand column in parentheses. The overall core operating income ratio rose by 1.1 percentage point in April to June. In January to March, it was up 2.0 percentage points. The numbers, it looks like it is decelerating, but this reflects a deliberate forward-looking bet. To be specific, for Southeast and South Asia, Oceania, the core operating income ratio was down 0.1 point in April to June, versus up 1.9 points in January to March. That may look like a decline, but it reflects the upfront investment in Oral Healthcare in Thailand. In the first quarter, we deliberately kept Thailand's core operating income ratio flat. Please understand this as a healthy state. Next, Northeast Asia core operating income ratio was up 2.9 points in April to June, versus up 0.4 points in January to March. This reflects China's contribution and shows a healthy improvement in core operating income ratio. So looking at both Northeast Asia and Southeast Asia and country by country, we are deliberately growing where we have decided to grow and bet with the second half and the next year in mind. As a president, I see the way we are growing profit and the way we are growing the top line as progressing in a healthy way. That was a long answer. Thank you. To achieve the strategic expense recovery and improve margins, the top line should also need to improve accordingly. Is it fair to expect effect to show from the second half and for margin improvement to be expected for the full year in Southeast and South Asia as well? Of course, there are various factors around foreign exchanges and raw materials, but yes, that is what we are aiming for. In particular, regarding the Oral Healthcare in Thailand, even though we made upfront investment, Thailand's first half January to June core operating income ratio was unchanged from the previous year. We are investing firmly without damaging profitability. As a result, as mentioned, Thailand's Oral Healthcare top line has grown significantly. We see this as the evidence that the upfront investment is paying off. I do not see this as limited to the second half alone. I believe it will carry through into the next year, 2027. Does that answer your question? Yes. It was very clear. Thank you. Thank you. We will take the final question. Ms. Ogaki, thank you very much for waiting. Over to you. Thank you. This is Ogaki from Okasan Securities. Thank you. I would like to go back to the change factors on page 14 again. First, on the impact of raw material cost. Is JPY 6 billion for the second half essentially a fixed, confirmed number, or could it still move significantly from there? What is the assumed Dubai crude oil price behind that figure? Also, I think that you said the price increases were mainly in Japan. For the impact of the Middle East situation overseas, how do you plan to recover that? Thank you. There will naturally be some variation from the minus JPY 5 billion of raw material cost in the second half, but given the lead time lag in the procurement pricing, we do not expect a major swing. We feel we have reasonably good visibility on this. That is the first answer. Thank you. On the second point, overseas. The situation overseas differs from Japan by country. In some countries, regulations and rules make it easier to pass through cost to price in some countries, while in others it is harder. There are countries where we can talk about the price faster, as in Japan, and countries where we are pursuing an effective price increase through means such as reducing the frequency of special sales, adding value, and cutting cost. In any case, since conditions vary by country overseas, we intend to counter the raw material cost impact using the approach best suited to each country. In particular, as you know, in Southeast and South Asia, Thailand and Malaysia, for example, while detergent mix is high, how we strengthen our business there is a major theme. To do that, beyond the price increases already mentioned, we are also working on raw material cost reductions, changing formulations, and improving the profit. In Malaysia, we are shifting product mix from powder detergent to liquid detergent to help offset the raw material cost headwind. Taking these various actions, we intend and believe we can address the rising raw material cost overseas through an approach that differs from Japan. Thank you. The Dubai crude oil assumption, could you comment on that, please? On the Dubai crude assumption, we have a page for that. Let me have Fukuda respond to you. This is Fukuda. As shown here, we are assuming $85 per barrel for the full year. The first half was $91. So for the second half, we are assuming around $80. Slight decline. That said, raw material cost increase and the Dubai crude price do not necessarily move in parallel. So we do not expect the cost increase impact to change materially from what I have described earlier. But if there is a significant change in the Middle East situation going forward, that could be a different scenario, and we intend to respond flexibly. Thank you. That's all from me. Thank you very much. As we are already considerably behind the time, we close the Q&A session here. Our apologies to everyone who still has a hand raised. With that, we now close the Lion Corporation's financial results briefing. Thank you very much for joining us today.