We would like to start the earnings call for LIXIL Corporation for fiscal year ending March 2026. This briefing is streaming live online. The materials for this briefing were disclosed in the Investor Relations page, so please take a look at those materials. I would like to introduce to you the presenters for today. Director, Representative Executive Officer, President and CEO, Kinya Seto. Next is Executive Vice President and CFO, Mariko Fujita. Vice President and Leader of Investor Relations Office, Aya Kawai. Well, I will be serving as your MC from IR. My name is Setoguchi. Next, I would like to explain to you how we proceed with today's briefing. First, CFO Ms. Fujita will provide you with the overview of the financial results.
CEO Seto will be giving you the outlook for the performance as well as the progress of the management strategy. That will be followed by question -and -answer session. We expect to finish at 3:45 P.M. First, I would like to invite CFO Ms. Fujita to give you the overview of the results of fiscal year ending March 2026.
Hello, everyone. My name is Fujita, I would like to give you the summary of results for fiscal year ending March 2026. These are the key highlights. This is the overview of the results for fiscal year ending March 2026. Core earnings was JPY 38.5 billion. EBITDA was JPY 121.6 billion. The core earnings exceeded the forecast. For the Japan market, all segments achieved year-on-year growth in core earnings. In the international business, core earnings have significantly improved. For Americas, the structural reform had seen the deriving of fruitful results. In the month of March, core earnings had become profitable. Next, I would like to talk about the differences from initial forecasts for fiscal year ending March 2026.
The core earnings exceeded the forecast. In terms of the profit, it was in line with the initial plan. As for others, other income and expenses, in addition to the initially planned structural reforms, additional expenses were recognized, including further restructuring costs in the U.S. and impairment losses on fixed assets. In terms of the finance income and costs, there were some recognition of foreign exchange losses and tax expenses. There were impact from the change in the corporate tax rate. I would like to talk about the status of international businesses. As for Europe, we worked on the growth of the GROHE brand. EMEA. In EMEA, we will ensure stable supply. For Asia Pacific region, we will work on for market recovery and sales network expansion. In China, the market remains sluggish.
Under that situation, we will work to expand the sales of differentiated products, including the GROHE brand. I would like to now dig deeper into the progress on future initiatives in the Americas business. With regards to Americas business turnaround. There are effects of the various measures that we have taken and didn't materialize at first. Even though there was a recovery lag, we were able to see the results of what we have done. We have worked on optimizing workforce allocation, restructuring the supply chain, optimizing the business portfolio, and we would now focus on the premium toilets and growth of GROHE and the expansion of Saraya toilets, and leveraging on ASB strength. I would like to talk about performance highlights.
Revenue was JPY 1,510.7 billion, up JPY 6 billion year-on-year. Core earnings was JPY 38.5 billion, up JPY 7.2 billion year-on-year. EBITDA was up JPY 7.1 billion year-on-year, and profit was up JPY 6.1 billion year-on-year. The core earnings had improved and that had impacted positively to our profitability. This is the consolidated business results. Please take a look at the margin. The other core earnings, EBITDA, compared to last year, we were able to see improvements.
This, as said at the start, at all segments compared to the previous year, the businesses are showing improvement. The details are listed here. It is the same information under the previous reporting segment. I would like to skip the explanation. Consolidated financial position, the impact of the foreign exchange impacts and recognition of profit for FY 2026, equity increased. The equity ratio is 35.3%. The net interest-bearing debt has landed as flat compared to the previous year. The cash flow status. Operating cash flow has declined year-on-year. However, the free cash flow has maintained positive. Last year is JPY 91.9 billion. This year is JPY 59.1 billion. It has remained positive. That is the explanation from the CFO, Fujita.
I would like to conclude now. Thank you very much, Fujita-san. Next, we would like to invite Mr. Seto, the CEO, to explain the full year forecast for fiscal year ending 2027 and progress of management strategy. Seto-san, please go ahead.
Outlook for the fiscal year ending March 2027 is what I would like to talk about. Year ending March 2027, the revenue, JPY 1.6 trillion, core earnings, JPY 45 billion, and the profit attributable for owners of the parent, the profit, JPY 12 billion is the forecast. However, the impact of the situation in the Middle East, there are many variables, so it is difficult to reasonably factor in at this time. That is why that part is not included.
That is why at the next timing of disclosure of the information, I would like to share with you with the planned numbers, including the impact. The annual dividend is JPY 90 per share is forecasted, which is the same amount up to now. The business environment and outlook. Later on, I would like to touch upon the Middle East situation in more detail. For the other statuses for Americas, as Fujita explained previously, FY 2025, they have struggled. However, at the ending, the transition service agreement has ended, and we had the major structural reforms. As a result, the last three months recovered, and especially for the last three months, it finally turned into profit-making.
Regarding the U.S. economy, we were forecasting that it will be better than what it is right now. Unfortunately, from the challenge of affordability, the demand is strong and the wide demand is apparent. The housing prices became too high, so people are not able to purchase it. Some sort of a government policy measures will be necessary, is what I think. That is why for Americas, for the year showing improvement and the details are listed here. It is the same information under the previous reporting segment. I would like to skip the explanation. Consolidated financial position, the impact of the foreign exchange impacts and recognition of profit for FY ending 2026, equity increased.
The equity ratio is 35.3%, and the net interest-bearing debt has landed as flat compared to the previous year. The cash flow status. Operating cash flow has declined year-over-year. However, the free cash flow has maintained positive. Last year is JPY 91.9. This year is JPY 59.1 billion, but it has remained positive. That is the explanation from CFO Fujita. I would like to conclude now.
Thank you very much, Fujita-san. Next, we would like to invite CEO Seto to explain the full -year forecast for fiscal year ending 2027 and progress of management strategy. Seto-san, please go ahead.
Outlook for the fiscal year ending March 2027 is what I would like to talk about. Year ending March 2027, the revenue, JPY 1.6 trillion, core earnings, JPY 45 billion, and the profit attributable for owners of the parent, the profit, JPY 12 billion is the forecast. However, the impact of the situation in the Middle East, there are many v-variables, so it is difficult to reasonably factor in at this time. That is why that part is not included. That is why at the next timing of disclosure of the information, I would like to share with you with the planned numbers, including the impact. The annual dividend is JPY 90 per share is forecasted, which is the same amount up to now. The business environment and outlook. Later on, I would like to touch upon the Middle East situation in more detail.
For the other statuses for Americas, as Fujita explained previously, FY 2025, they have struggled. At the ending, the transition service agreement has ended, and we had the major structural reforms. As a result, the last three months recovered, and especially for the last three months, it finally turned into profit-making. Regarding the U.S. economy, we were forecasting that it will be better than what it is right now. Unfortunately, from the challenge of affordability, the demand is strong and the wide demand is apparent. The housing prices became too high, so people are not able to purchase it. Some sort of a government policy and measures will be necessary, is what I think.
That is why for Americas, for the near future, we will probably not see a major recovery. We were able to turn into black ink. The loss-making business up to now, is now not going to become a burden anymore, which is a positive news. For Europe, this was the most disappointing part. Starting this fiscal year, we thought the economic situation is going to largely turn around. From the mid last year, I think everybody has a consensus that that was the bottom. Each country or major markets like Germany, France, Italy, and the Netherlands, which are the major markets, the housing prices have started to go up.
Also the housing starts, number of housing starts are also for the lease property, it is starting to increase. It is showing a recovery. The recovery pace is going, is about a year behind than what we have originally expected. For the last two years, which was really bad, during that time, we were able to increase our market share, and GROHE's, average profit also was able to increase. This part, if it does grow, we will be able to enjoy a large positive impact. EMEA, that's India and Middle East, there are various concerns. Currently, we're not seeing any negative impact.
The area that is called EMEA, basically, you can break it down into four areas, and the sales is kind of divided equally in those areas, which are Saudi Arabia and the Gulf area, including UAE and India and Africa. First of all, what we can foresee in most of the impact, will be the Gulf area, mainly led by Dubai. Basically, the foreign residents have left the area. Regarding the future projects, there are major concerns of the progress. Currently, we are not seeing any decline. On the other hand, for Saudi Arabia, moving forward, if they have further attacks from Iran, the situation may change. They are performing strongly.
Regarding Saudi Arabia, there is a negative factor because of the confusion, the financing for large-scale projects may be delayed. However, the crude oil price is going to go up, which means that it will give some room for the government. Related to the public type of projects that we're involved, there's no impact at this point. For India and Africa areas, the fuel price, prices are increasing, there may be an impact from that, but it is not a major impact. For now, out of the four areas, regarding the three areas, we do not have a negative forecast. However, for the Gulf area, we have to keep a close monitoring. Also moving forward, if the attacks from Iran expanded, there will be a certain impact is what we are thinking.
In terms of economic situation, a negative impact of Southeast Asia, Thailand, which was in the trajectory of recovery is still a concern. For China, the bad situation is continuing. It's not just APAC and China, but at each region for GROHE is performing strongly. Even China, the sales for GROHE is increasing. That's bright news, and we're able to launch many differentiated products. For Japan business, this fiscal year, looking at the new housing starts up to now from April to February, I don't think that anyone decided it more than 10% of decline. There was a forecast that it will decline, but it actually declined more than what people expected.
Given that situation, we're able to offset that weakness with the renovation demand. We believe that the new housing starts weakness is going to continue for a while. The background on that is that one thing, the insulation materials are, there's a shortage on that, so new housing starts will be delayed. Due to the Article IV special exemptions, the licensing or permits that are submitted by the SMEs, the submission itself is delayed, and the granting of the license and permit is going to delay. That adjustment of those timings have not been completed. Japan's new housing starts is going to continue to decline is our outlook. However, having said that, next year, we think that it is going to go up once.
Reason being is that, there is a accumulation of the permits and license that is going to actually be realized. For the insulation material, I'll touch upon it later, but this shortage is not going to last forever. These recoveries, I believe, is going to be next year. In Japan, the new housing starts is not that strong. This year, the decline was more than 10%. Within that, we're able to offset that through renovation. We do have a confidence towards renovation to a certain level.
This is the forecast of the performance. In addition to what was discussed earlier, in terms of the dividend, because EBITDA had grown steadily, we are maintaining it at JPY 90 per share. Risk related to the Middle East situation. It is difficult to predict. There are a lot of variables regarding the Middle East situation. This, it would be too misleading to talk about the future relating to the Middle East. We decided not to factor that in, and we will continue to scrutinize the situation. The supply concern is the biggest factor for us. Currently, the crude oil-derived products, we have been able to secure the products that we need. After July, we don't have too big of a concern. As for aluminum, 80% is a scrap aluminum.
We do not, we are not in a situation where we have a zero material at hand. However, the prices of these commodities are going up. We will work to transfer the cost to our pricing. Also related to raw materials, rather than buying from the same suppliers, we need to increase the variety of suppliers, and that's what we did in COVID, and that's what we will do now. These prices are going up not because of the Iran-Iranian war, but for other fundamental factors. What makes the reading of the future difficult is as follows. There are many cases, where you predict that this price increase will continue in the long term, but I don't feel that way.
As for the crude oil-based products, even before the Iran war, from the end of last year to the beginning of this year, there was a concern about excessive supply. In Japan and South Korea, there were adjustments to production. In 2027, there are naphtha and plastic-related facilities which were to come online in the U.S., China, and Middle East. Those facilities are coming online even with the excessive supply, and I think that there are many reasons behind that. In the case of the U.S., they need to use it because they would not be able to export the natural gases as is, and they need to create naphtha.
In the case of China, ethylene and ethylene process, the naphtha is used a lot, so PE, PS, PP. If we consider the global supply and demand, it's in excessive supply, and how that would be reflected in Japan is something that we need to consider. There are cases where China would not export it because of the dual-use, but the oil-derived products are. There are many types of it, and some of it may stop and become a bottleneck, but I don't think that the price of those commodities will be going up in a linear way. As for aluminum, the price had come up because Mozal and Century Aluminum, which are the big players, for supply for Europe, decided to shut down for maintenance for a year.
In Bahrain and UAE, the aluminum plants in Abu Dhabi had stopped. Even though Japan had been buying 10% of the aluminum from this area, Century and Mozal will resume its operations next year. In Middle East, the facilities would probably restart their operations sometime next year. The aluminum may become $4,000 from $3,600. Next year, some of the sources expect it will come down to around $2,800-$3,000. The current panic is not something that would linearly continue, in my opinion. I think that the copper price will be going up. It goes without saying that the fuel prices will be going up. There are many assumptions.
If the oil prices had stayed around $80 per barrel, I don't foresee that the plastic prices will be going up indefinitely. There may be some bottlenecks which may occur for the Japanese market. Also, there are some bottlenecks in the area of solvent supply. These things may occur, so we need to diversify where we supply, we get the supply from. Our suppliers and their suppliers.
There may be some the bottlenecks which occur in the products that we don't buy, or at our customers, for products that we don't sell to them, and it may cause a problem. Because the oil prices are going up, the prices, the cost is going up and also because of the route suspension, there are distribution costs added, but we will be taking measures to counter that. Sorry, I'm going on for a long time in my talk, but I would like to talk about core earnings. We did not factor in the Middle East situation. The cost increase and the price revision. The bar on the right will be higher if we factor that in. Rather than just simply increasing the prices, we will increase the productivity using AI and bringing the cost down.
We will work to sell differentiated products which have higher margin. The methodology that we succeeded in Europe, we would like to use that in other parts of the world as well. In the midterm, we will work to pursue improvement in the CE margin to 10% and ROIC to 10% as well as a long-term target, and we will turn around where necessary and divest where necessary as well. We will continue to work on these initiatives. The inflation which occurred in COVID as well as due to Ukraine war. What will happen, what happened in the Middle East would probably impact us even more from that perspective. We are increasing our revenue compared to the previous years. We have been able to take necessary measures under the difficult situations.
Last year, we have said that we would like to get to JPY 65 billion, but we have revised it down to JPY 45 billion in terms of the core earnings. There are a variety of negative factors. We have identified positive factors that would fix it. The biggest negative factors included the lagging behind of the recovery in European housing market. Our profit center is the European market, and when it's not recovering, our business overall would not recover. Towards the end of the fiscal year, the commodity prices started going significantly up rapidly, and we have not been able to pass that on to our prices. Those are the two key factors which led us to revise the outlook down.
On the other hand, Europe is having the same kind of revenue, but we were able to improve the margin. Also the Middle East, even though there are concerns, there are good things coming out of the market, like improvement in the market share of GROHE. Also, the Japanese renovation business had done well even in the face of decrease by 10% in the new housing starts. European market, the commodity prices. From next year, I think that there would be a virtuous cycle, so we should not be pessimistic about seeing the business coming down a bit.
In terms of the risk, the biggest risk is Middle East, and most of what's on here would be multiplied by what's happening in the Middle East. The European market was bottoming out last year. Our main markets are getting better. Because of the issues in the Middle East, the inflation is increasing and the interest rate is going up. In the U.S. and China, the real estate market and the housing market had deteriorated. However, those bottom out, so I think that we are in a wait-and-see mode for recovery. Also, what would impact us is what kind of policies Donald Trump will be implementing towards the midterm elections. If the Trump administration would work on the affordability of the housing issue, I think it would impact us for the better.
As for Japan, there are some specific concern for Japan. last year, there was a significant and rapid decrease in the new housing starts, more than we had expected. We are expecting it to get better next fiscal year. The reason it had come down is because of the Article IV exemption factor and the SMEs had difficulties in improving their businesses. In the short term, the heat insulation materials are short in supply, so because of that, the housing starts is sluggish. This fiscal year, we are facing a challenge, but that will work towards recovery next fiscal year. In terms of the cost, I think that we may be able to increase the prices by transferring it for next fiscal year.
What I strongly felt this time is that I did share this at the COVID pandemic. Inflation or the product delivery difficulty, what's important is to recycle the materials, especially in a country like Japan, which has not much of a natural resources. For me, the product, we're able to use 80% of the overall material through of scrap material. We don't have to face the problem of procurement. On the other hand, revia, what was considered to be waste, we can use that as a material and make it into a product. I think this is now going to become important for a country like Japan. Also there was subsidy that was provided for like M plus and RICHELLE.
Of course, the crude oil prices are going up, and we have to reduce the energy cost in Japan. When we face that time, these products are going to become an important product. This time, at the very start, in this industry, we were told that there's going to be a shortage of the insulation material and ethylene polymer that is used for the bathtubs. What can replace that is this fabric bathtub. For the bathtub material, we do have visibility on the procurement of the material, so we're not causing any trouble to the customers. I think moving forward, being able to procure the materials within Japan is going to become important. I did speak for a bit long time, but I would like to open the floor to questions and answers.
Thank you very much. Seto-san, thank you very much. Now I would like to take questions. The questions from the participants, I would like to take them now. When you would like to ask a question, please press the Raise Your Hand button, which is at the bottom of your screen. The MC will be appointing those questions in the order that they come in. When you're appointed, please use Zoom audio and turn on your camera if you like. In order to receive as many questions as possible, we kindly ask you to limit your questions to two questions at a time.
If you have any additional questions, we kindly ask you to raise your hand once again. If you press the Raise Your Hand button by mistake, if you press it once again, you'll be able to cancel it. I would like to receive the first question from Nomura Securities. Fukushima-san, please go ahead. Please turn on your audio. For the camera, you can turn it on if you like. Please go ahead with your question.
This is Fukushima from Nomura Securities. I have two questions. The first question is related to the Middle East and the risk related to that on the supply chain, the procurement of materials, and for your company, can you truly manufacture the products? Also the cost issues. You did explain, but once again, the supply concern.
Up to June, the materials up to there, you have visibility. From April onwards, you said that you don't have a major concern. Even though you say that, from July onwards, what kind of risks do exist? Probably you can't really say much at this point. However, at this point, can you elaborate on the risks that you can foresee at this point? My second question is related to the Americas business. Looking at the single month of March, you said that it turned to profit-making. The bathtub business. In March, you completed the what you need to do. Moving forward, you're going to the sanitary products, the toilet business mainly. The business in Americas, your competitiveness and the outlook, is this profit making a situation going to continue or not? Can you share your thoughts? Thank you.
Well, first of all, regarding the raw materials, we do have visibility. Well, given the current situation, depending on the company, there may be worries or the volume may go down. In a very short term, we kind of diversified our source of supply, so we're okay on that point. If there are some worries against or concerns against the supply, maybe there's some things that we didn't foresee beforehand. The most recent situation, if for a specific product, there's a plastic screw, and the supplier of that screw, there was a situation where they may not be able to supply.
If we just look at this case, the material itself, the plastic manufacturer has a formula, a special formula for this plastic material. For us, regarding that raw material, the original material, we do know that, but whether it's not that the formula can be completed right away. At that time, can they replace that ingredient? There are cases that they're not able to do that right away. In that case, we are, we solved it by consulting the parent company of that supplying company. Generically speaking, this particular product is, there's a shortage to it. That situation is being resolved. The government is putting efforts into that, and we are looking at many vendors. There are areas that there's a bottleneck, buying it from China or South Korea or Taiwan.
We have such cases, and we're able to do that. However, for example, within the solvents that we use for this paint, we need to use this specific solvent. Companies that have that, they do struggle. The suppliers may face problems. Also, as I have explained, our customers may buy something from other places and because of that may not be able to build the houses right away. The challenge we're facing regarding installation material, similar challenges may occur. However, everybody's making their own efforts, so the procurement is now starting to normalize. The panic situation that started at the outset of this situation, I think is starting to calm down. We do have the experience during the COVID pandemic.
At that time, what took the longest time and what we struggled for the procurement and did not have sufficient level of the product is the rubber resin material that's used for the bathtub to prevent vibration. Something that we are concerned at this point, we have reached a point that we don't have to be worried about it. That is due to the efforts made by the employees. Also regarding the second question about the Americas business, which is the faucet products and toilet or sanitary products. As a market, there's The Home Depot or Fortune Brands. All of them for this fiscal year has a quite of a difficult outlook. The market itself is not so good.
The month March is a month that volumes go out. It doesn't mean that because March was a profit-making, that the following months will be the same. We need to continue our efforts. There's a transition service agreement. We don't have that additional cost anymore, so we'll be able to reduce the number of distribution centers moving forward. In terms of headcount, we are able to optimize this month. Therefore, in this sense, of course, if the market further worsens, we do not know what is going to happen. Once we turn into black ink, of course, still concerns will continue. It's not that we don't have any concerns, but I think we're able to make a certain level of improvement to maintain profit-making.
Thank you very much.
Thank you very much, Fukushima-san. Please ask only two questions. We would like to go one by one for those two questions. Next is Fukuhara-san from Jefferies Securities. Please click on the Participate As panelist. Please ask your question.
Thank you very much for taking my question. My name is Fukuhara from Jefferies. There are two questions. The first question, how you created your plans? If you look at page 40 on your slide, there is a JPY 40.8 billion of the negatives. I think this is because of the copper and aluminum price issues. If you look at the other page compared to February, there is an increase, so a JPY 24.8 billion. Is it possible that it would be further increasing? Also in addition to that, the revenue plan on page 28. It's in yen base. If we look at, in the local currencies, I think that there is a significant increase. From the cost perspective and the top line, how did you use the numbers to create the plan?
We expect the cost to go up. Especially plastics and aluminum, we believe that it and also copper, it would go up compared to the original plan. We are working on to revise the price and increase the price even more. If the product is limited, the price increase will be limited, but we believe that we would need to increase the prices generally across the board.
I am not able to give you the specific numbers in terms and also when it will happen, but we would like to work on that as quickly as possible. Copper price issues had already been clear, and that we were to increase the price on July 1st and as for sash products. For aluminum, we were to increase the prices in April and May, but we need to do that once more. We would like to do that as quickly as possible so that we can cover the cost that has been increased. With regards to the revenue. Currently, excluding China, all of the markets had bottomed out. There are, of course, differences market by market and in the Middle East it's GROHE more than 10% year-on-year.
In terms of Japan, if we look just at April compared to other companies, we were able to secure the products quicker and because of this, we are GROHE about 3%- 4% year-over-year. The current situation is not bad. We need to see how the problem in Iran would spread and whether it would impact inflation. Would it be impacting the interest rate? That's our concern. Our biggest concern is whether the new housing starts in Japan will again significantly go down. Currently, revenue-wise, I think that we are faring well.
Thank you very much. I would like to go to the second question. Please look at page 14. I would like to check the numbers. The core earnings and the in between core earnings and operating profit, there is something in between, and I think it was around JPY 10.1 billion for FY 2025. It's the plan is JPY 7.5 billion. I was wondering how you came up with JPY 7.5 billion, if this involves structural reform. I want to know your progress for the structural reform at this point in time.
Currently, there is no specific residual items that we need to work on for structural reform. In China, the speed of the deterioration has been quicker. Also, we have to think about the contingency like in the Middle East. That's why we have this number. This, so this is not a cumulative number of what we have at hand. In other words, it's like a buffer. Is my understanding correct? Yes, because something would happen. It's not a structural reform figure, but because we are in a situation where the situation changes very quickly, and also we probably need to close some of the plants in Japan considering the market situation.
Thank you very much for your response. That's all from me.
Thank you very much. We are receiving many questions from many people. For now, onwards, we would like to limit one question per person. Next question from Goldman Sachs Securities, Okada-san, please go ahead. If you see, when you see the confirmation screen, please click as panelist and ask your question. Okada-san, can you please click as a panelist? Please turn on your audio and the camera on if you like. Please go ahead with your question.
This is Okada from Goldman Sachs Securities. Hello. Regarding the Japan business, I have a question. Just before you said the various raw materials, the price is increasing and whether that's going to last for the medium to long term and you do not know about that. The thinner price has gone up by 75% and also paint and other products' prices are also increasing. Probably the price of the house itself will increase. If that is the case, the new house, new housing starts, I believe that there will be some people that will give up on the idea of purchasing a house. You are increasing the price and if the overall industry increases their prices, I think there's a risk that the consumers themselves will not be able to catch up to that. Can you share your thoughts on this situation?
It may deviate from your main purpose of the question. However, what the shortage we experience is like toluene, acetone and thinner, which is the solvent related products. They are used in large quantities at the semiconductor manufacturing stage. For manufacturing, they use acetone to cleanse or wash the molds. If there's a shortage, they will not be able to move forward. They kind of bought an excessive volume all at once. That is why this price increase has started. How long is this going to last? I'm not sure. They're not just making one thing, but by various things being manufactured, the necessity of these raw materials will differ.
Just looking at solvents, yes, at the very first, they were the solvent-related products are the ones that at the start experienced a shortage. Having said that, it is for sure that we need to increase the prices. As a result of that, as we experience it at post-COVID, because the overall prices are going up for those, the first time home buyers, meaning that affordable price housing, that is going to be difficult to be built. As a result, what the speed of that is going to be for such a situation to occur, the number of new housing starts, the declining speed, may be quicker than what we expect. When we do face those times, what are we going to do?
Japan, as you know, against the population, we have the new housing starts, we have a large number. The demand towards our houses is high, and we're able to grasp that good. Even though there's a 10% decline in the new housing starts, we're able to maintain a certain level of business. They gave up on building a new house, they will do more of an insulation material in their house. They gave up on building a new house, they will renovate their kitchen and others. It's how we're going to bring in that demand and doing such a thing.
They say that they have JPY 30 million that they want to spend on a new house, but they can use in the concrete or steel instead of using it for those materials. This JPY 30 million budget, they'll use it for kitchen or windows or using at several existing house equipment. If they do that, our share within that JPY 30 million is going to increase. As this housing material or construction material manufacturers, how are we going to create the market? Through that, we'll be able to respond to the given situation. The new housing starts itself, as you have pointed out, we expect that to go down and we need to do in a way that we'll be able to offset those negative factors.
We need to increase the margin of the business. Towards the small scale businesses, we'll use AI or BI so that we'll be able to suppress the overhead costs. Last fiscal year, we were able to kind of embody that situation. Thank you. I do understand your concern. This fiscal year regarding the insulation materials, the supply stopping it and in the long term if it's going to decline. In the short term, such a situation may happen. Thinking under the assumption that there's going to be difficulty of procurement for a long time and all the products are priced going up to 50%, 70%, setting that as an assumption, I think that's too extreme and misleading.
Thank you very much.
Okada-san, thank you very much. We would like to go to the next question from SMBC Nikko Securities, Kawashima-san. Please click on participate as panelist. Please put your audio on, and if you would like, please put your video on as well. Please ask your question.
This is Kawashima from SMBC Nikko. There may be some overlap with other questions. The international LWT, how did you assume that there will be a significant increase? In the U.S., I don't know whether the red ink will be gone or significantly improved. If that happens, there will be an improvement to the profitability by billions. It seems that the plan is not that high. Do you expect other negative factors? I want to, I want to understand what the balance is between the increase in the revenue and the profitability.
The U.S. business of American Standard, it breaking even in that business would be conducive to improvement in the profitability. We had thought that we would be able to do more, but because European market had not done so well, we were not able to get to the level that we wanted to be. That's the biggest factor for the situation for the profit. There, the contribution to the profitability was not so high. It had gone from negative to zero. Last year, we were able to improve the value added in Europe, but we don't believe that we can continue it like that for this year.
This is Kawai from IR. I would like to make a supplementary comment. As you have seen, Kawashima-san, in the waterfall chart of page 40, a JPY 9.2 billion increase for LWT. This is coming from the break-even in the U.S. It was JPY 55 million negative in the previous fiscal year. Also, there are some positives from the European market. The recovery in the Americas market is something that is positively impacting this business.
In terms of the revenue, was it too big in your assumption?
We have a lot of business from Europe and the exchange rate positives impacts a lot. I don't think that the revenue plan is not too big. The unit is not increasing so much, but the revenue is increasing, and that would impact the full year.
Thank you.
Thank you very much, Kawashima-san.
Next question from Daiwa Securities, Teraoka-san. When the confirmation screen pops up, please click Participate as a Panelist. Please turn on your audio and the videos on if you like. Please go ahead with your question.
Thank you for explanation. This is Teraoka from Daiwa Securities. This time, the impact of the Middle East, the situation is not reflected, is what you said. Once you can foresee what's going to happen that that will be reflected. This, when you reflect the Middle East situation, is the guidance going towards a revised downwards? Because you're considering the price optimization or increase that it is not necessarily the case that it will become that way. Can you share your thoughts on this?
Yes. At this point, actually, I think that there is a possibility that it will go both ways. That is why we wanted to fine-tune the numbers further before we share them. For example, as I have shared with you before, for us in April, the revenue or the sales is very strong in the Japan business. Reason being is because us, compared to the other peers at an earlier stage, we were able to normalize the procurement situation. How long is that going to last? We do not know. However, even at this point, we're receiving multiple times more of orders than usual. Within that increase, there are things that are included where the delivery date is far down the road, or it's just a temporary order, and if the other companies normalize, then this will probably disappear. We do not know what the true situation is yet.
At the beginning of April, it was not completely clear in terms of the procurement. Probably year-on-year it's about 103% or 4%, but maybe it may be higher in May, or there's a possibility it will not be that way as well. For us, it's difficult to gain visibility on this situation. Cost-wise, we are purchasing from various suppliers. Therefore, it's difficult to change from our original guidance or outlook. We have our own price optimization. That, for us, at a quick speed, we are going to apply it to a large volume of products. We need to consider what that impact is going to become. Sorry, it's not a straight answer. However, which direction are we going to go towards? We are not having the visibility on that at this point. Okay. I'm hoping that it will go towards a good direction.
Thank you.
Teraoka-san, thank you very much.
The next question from CLSA, Mochizuki-san.
My name is Mochizuki from CLSA. I can ask one question. I would like to ask about the price provision. You would like to conduct the price provision to as many products as possible, as quickly as possible. In order to absorb the cost, in the past, it took about one year or two years to do that. This time around, the uncertainty is very high. How long do you think it would take to absorb the cost, whether you would be able to absorb the cost in just one go or whether you would need to go in phases? Could you talk about the speed of how you would be able to absorb?
This is the first, so I think that you're the first one who had put the video on for this call. Thank you very much. We want to be on a different speed level. That's because we are reflecting upon what has happened in COVID. It took a lot of effort to increase the prices during COVID, and we were not able to be aligned with each other division by division, and we had to think about how the competitors would do. What has happened is that we went first and the others followed. What we need to do is to raise the price to the level that we require as quickly as possible.
How much in terms of the time period, we would be able to cover is a different question. If it's, if it's October 1st, it would be six months, if it'd be nine months, if it's July 1st. Another two factors that we need to think about is that next year I believe that the aluminum prices will be coming down. Also, the plastic prices would probably stabilize. If we think about that, if we can raise the prices to where it needed to be in one go, I think it, we, that would put us in a better situation than having to take a longer time to convince others. If I talk too much, I would be giving too much tips to the competitors, so I will not say more.
We would like to get to the level of where we would be able to absorb the increase in the cost in one go.
Thank you very much for your response.
Thank you very much, Mochizuki-san.
We'd like to take the next question from Morgan Stanley MUFG Securities, Maria-san. Once you see the confirmation screen, please participate as a panelist. Yagi-san, please turn on your audio for the camera. Please turn it on if you would like to go ahead with your question.
Thank you very much for your explanation. My name is Yagi from Morgan Stanley MUFG Securities. One question, it may be overlapping with other questions. One thing, the situation in Middle East regarding the risk of it. Listening to your explanation, it seems like basically it will depend on how it will last long or will be longer.
How much of a cost reduction can you make and how much of price increase or price revision you can pass on is the key point. For the procurement or the difficulty of procuring materials for July onwards, you do see, have a visibility as well. Is it okay to have the understanding of that set up?
Yagi-san, I'm very happy that I can see your face and speak to you. As you said, what we have the most concern at this point is what we have to think of is that what can we do on our own? What can we do on our own? There are two things. The first is to have a wide, diverse