Earnings Call: Q4 2020

May 13, 2020

It is now time for us to start the Sony Corporation consolidated financial results Briefing for Fiscal Year 2019. I am acting as the moderator. My name is Kato from the Corporate Communications Department. This briefing is being held for the media analyst and institutional investors who have been informed in advance. And the audio and presentation will be posted on our company's website. Today, 1st of all, we will hear from Hiroki Toto Executive Vice President. He will be explaining the consolidated financial results for fiscal year 2019 and the forecast for fiscal year 2020 using the briefing materials that are posted on our website. And then after that, there will be a Q and A period. We expect that it will take about 60 minutes in total. This time, we are going to accept questions anytime by e mail. Those of you who have a question, please send them according to the method that we have informed you in advance, and it will be up to 2 questions per person. And our time is limited. Therefore, it may be that we may not be able to answer all your questions. Now Mr. Totoki, please. Thank you very much. We are holding this results briefing via webcast in order to prevent the spread of the new coronavirus infection. We apologize for any inconvenience and ask for your understanding. As we continue to conduct business at Sony, we are prioritizing the safety of all our stakeholders, including our employees and their families as well as our customers. Today, I will explain the consolidated results for the fiscal year ended March 31, 2020, and the recent impact of the coronavirus. At the corporate strategy meeting that we will be holding on May 19, our President, Mr. Yoshida, will explain our strategy for managing Sony with a longer term view. For fiscal year 2019, consolidated sales decreased 5% compared to the previous year to JPY 8259,900,000,000, and operating income decreased JPY 48,800,000,000 year on year to JPY 845,500,000,000 Net income attributable to Sony Corporation stockholders decreased JPY 334,100,000,000 to JPY 502,200,000,000. Excluding extraordinary items, operating income would have increased JPY 4,600,000,000 year on year to JPY 814,000,000,000 and net income attributable to Sony's shareholders would have decreased JPY 28,200,000,000 year on year to JPY 550,300,000,000. The extraordinary items that impacted net income are shown here. The operating cash flow, excluding the Financial Services segment for the fiscal 2019, was an inflow of JPY 762,900,000,000, slightly higher than the previous fiscal year. And investing cash flow, excluding the Financial Services, was an outflow of JPY 363,100,000,000. Cash flow for each business segment is shown on this slide. The free cash flow was positive in all segments. The fiscal 2019 results for each business segment are shown on this slide. Now I will discuss the estimated impact of the spread of the disease of the virus on the operating income of each segment for fiscal 2019. As the last earnings results briefing, when speaking about JPY 40,000,000,000 upward revision in the operating income forecast for fiscal 2019, I explained that the impact of the coronavirus might be large enough to eliminate this upward potential revision amount. We estimate that the actual impact exceeded the amount of the upward revision. But due to other factors which improved profitability, overall operating income was within the range that I mentioned. The speed at which the impact of the coronavirus had and will appear in our results differs by business. The Electronics Products and Solutions, or EP and S segment, is seeing the impact of Alios, and we expect the impact to expand to other segments going forward. The impact on the results of the Pictures segment will take some time to become conspicuous, but it might last a long time. While most business segments will endure a negative impact, some of our segments such as Game and Network Services will see a positive impact on their results. And later, I will explain in as much detail as possible the recent impact on each of our businesses and the risks that we currently see for fiscal year 2020. I will now talk about the Game and Network Service segment for the fiscal 2019. The sales decreased 14% to JPY 1,977,600,000,000, mainly due to a decrease in PlayStation 4 hardware sales and game software sales as well as the negative impact of foreign exchange rates. Operating income decreased JPY 72,700,000,000 year on year to JPY 238,400,000,000, mainly due to the decrease in gaming software sales and the negative impact of the foreign exchange, partially though offset by an increase in sales from network services, including PlayStation Plus and the benefit of cost reductions. Compared with the previous fiscal year when we had major hit titles such as God of War and Marvel's Spider Man, the contribution from 1st party software free to play titles decreased. Now I will discuss the impact that the virus is having on the Game and Network Services segment. Although production of PS4 hardware has been slightly impacted by issues with the supply chain for certain components, we are meeting demand in the short term with inventory, and sales are trending well. Recently, network services revenue has increased significantly as gameplay hours on the PlayStation Network have reached 1.5 times that of the Christmas season, and sales of games downloaded from network as well as network subscriber numbers have increased significantly process and qualification of production lines, primarily due to employees working from home, having to work from home and restrictions on international travel. But we are addressing these issues, and preparations are on track for the launch of the console during the holiday season of this calendar year. At this point in time, no major issues have arisen in the game software development pipelines of either our in house games or those of our partners. Next is the Music segment. For the year 2019, sales increased 5% to JPY 849,900,000,000 from the previous year, and this increase was mainly due to higher sales for music publishing, resulting from the concentration of EMI Music Publishing as a wholly owned subsidiary and higher streaming revenues in recorded music, partially offset by lower sales of FateGrand Order, a game application for mobile. Operating income decreased JPY 90,100,000,000 to JPY 142,300,000,000, mainly due to the absence of a remeasurement gain resulting from the consolidation of EMI in the previous fiscal year, but partially offset by the impact of the increased sales, including the extraordinary items associated with the consolidation of VMI as a full subsidiary, operating income would have increased JPY 15,200,000,000 year on year. The profit contribution from game applications for mobile was in the mid teens as a percentage of the operating income of this segment. Now we will discuss the impact that the coronavirus is having on the music segment. The release of new music is being delayed mainly because some artists are unable to record songs and music videos. The impact of the delays in new music is limited at this time in countries like the U. S. Where the proportion of music that is streamed is high. But in countries like Japan and Germany, where a proportion of music that is streamed is relatively low, sales of CDs and other packaged media sales are decreasing due to restriction on outings. Ticket revenues, merchandise revenue and video revenues are decreasing, especially in Japan, where over 400 events have been postponed or canceled since February through the end of May. Due to a global reduction in advertising spending, revenues from advertising supported streaming services is decreasing, and revenue from the licensing of music and TV commercials is decreasing. A delay in production of motion pictures and TV shows is also causing a decline in music licensing revenue. Next is the Pictures segment. FY 2019 sales increased 3% year on year to 1,000,000,000,000,000,000,000 yen due to an increase in Motion Pictures and television production revenue. Motion Pictures released this fiscal year included Spider Man: Far From Home and Jumanji: The Next Level. These franchise films, which levered Sony's IP, performed better than expected. Operating income increased JPY 13,600,000,000 year on year to JPY 68,220,000,000 mainly due to the benefit of a channel portfolio review in Media Networks conducted in the previous fiscal year and improved profitability of catalog product in Motion Pictures, partially offset by program development costs and production cost on newly released shows in television productions. Now I will discuss the impact of the coronavirus on Pictures segment. Box office revenue has been significantly impacted mainly due to the closure of movie theaters around the world. At Sony, we are unable to release films that have been completed like Peter Rabbit 2: The Runaway. Due to restrictions on the outings, the production schedule of new motion Pictures and TV shows around the world, especially in the U. S, has significantly delayed. As a result, in Motion Pictures, theatrical revenue and revenue generated after theoretical release, including the rental and sales of videos, are expected to decrease. On the other hand, digital revenue from Bad Boys for Life and Bloodshot, which we released in theaters prior to the spread of the coronavirus disease, has been strong. Revenue for television production is also being impacted due to delay in the delivery of shows to TV networks and digital distribution services. Due to the global reduction in advertising spending, advertising revenue in media networks is decreasing significantly, especially in India. Next is the EP and S segment. FY2019 sales decreased 14% year on year to JPY 1,991,300,000,000, mainly due to a decrease in unit sales of smartphones and TVs and negative impact of exchange rates. Operating income increased JPY 10,800,000,000 year on year to JPY 80 7,300,000,000 yen mainly due to operating cost reductions in mobile communications, partially offset by the impact of the decrease in sales. Of all businesses, we expect the EP and S segment to be impacted the most from the coronavirus. First, I will explain the supply side, which includes manufacturing and procurement. Of the 4 major manufacturing sites for our TV business, we ceased production in stages from mid March at the factory we own in Malaysia and at the factories we outsourced to in Mexico and Slovakia, which went to local government policy. These 3 factories have returned to partial production, but a portion of supply continues to be unable to meet demand. In the camera and smartphone businesses, the factories we own in China and Thailand are currently operating as usual. Some of our partners in Malaysia and the Philippines, who supply components to several of our businesses, have reduced their operations, causing a delay in the production of some of our products due to component shortages. On the demand side, due to the closure and shutdown of retail stores globally, retail sales have decreased significantly. The severity of the impact on a geographical basis is changing frequently, but deterioration of market conditions in Europe is currently the most severe. Our television business is being significantly impacted in areas like India and Vietnam, where our scale is significant as well as in Europe. And sale and profit from digital cameras are being significantly impacted by a substantial slowdown in demand around the world. We are concerned that this might continue for a long time. Next is the Imaging and Sensing Solutions segment. FY 2019 sales increased 22% year on year to 1,000,000,000,070 point 6,000,000,000,000, mainly due to an increase in image sensors unit sales for mobile devices and an improvement in product mix. Operating income increased a significant JPY 91,700,000,000 year on year to JPY 235,600,000,000 mainly due to the impact of the increase in sales, partially offset by an increase in depreciation expenses and research and development costs as well as the negative impact of the foreign exchange rate due to several positive factors occurring simultaneously such as strong demand, acceleration of the shift to life size high value added products and our introduction of a highly competitive new product, which fit those specification. The image shows the business products results that significantly exceeded our expectations at the beginning of the fiscal year. Now I will discuss the impact of coronavirus on the INDSS segment. As of today, there has been no major impact from the coronavirus on our manufacturing facilities in Japan, which are operating as usual. Moreover, we understand that the factory operations and supply chains of our major mobile customers have been recovering. On the other hand, we believe that the decrease in shipments of our image sensors was relatively minor compared to the impact the coronavirus had on the manufacturing and sales of our mobile customers in the Q4 ended March 31, 2020. So there is a possibility that inventory in the supply chain of these customers has increased. In addition, we are monitoring how much the final outlet for our products, the smartphone market, may decelerate going forward. Now I would like to discuss the current state of our eye and SS business. Considering the deceleration of the smartphone market due to the impact of the coronavirus, there is a possibility that image sensor sales this fiscal year will be flat year on year. At this point in time, there is no change to our view that image sensors will drive improvements in the functionality of cameras, which are a major differentiating factor for smartphones or our view as to the expansion of demand over the mid- to long term. Thus, we have already decided to invest more than 80% of the cumulative capital expenditure we plan to make over the 3 years of our mid range plan. However, given the uncertain operating environment, we will postpone as long as possible decisions regarding the remaining capital expenditures so we can make appropriate and timely decisions after gathering more market information. In addition, we will be disciplined in our prioritization of research and development spending, but we plan to maintain the current level of spending as we manage Sony for the mid- to long term. Lastly is the Financial Services segment. FY 2019 Financial Services revenue increased 2% year on year to JPY 1,307,700,000,000, primarily due to higher insurance premium revenue, mainly from single premium insurance, partially offset by a deterioration in net gains and losses on variable insurance investments in the separate account of Sonang Life. Operating income decreased JPY 31,900,000,000 year on year to JPY 129,600,000,000 primarily due to an increase in the provision of policy reserves related to variable insurance at Sony Life, reflecting a deterioration in market conditions towards the end of the fiscal year and valuation losses on certain securities held by Sony Bank resulting from a decline in prices mainly due to growing concerns about credit risk. Now I will explain the impact of the coronavirus on the Financial Services segment. Pursuant to the announcement of a state of emergency by the Japanese government, we have stopped all in person sales activity of the life planners at Sony Life. If these conditions persist for a long period of time, there is a possibility that the profitability of Sony Life could be significantly negatively impacted primarily because the acquisition of new insurance policies would decrease and expenses for provisions to account for this would increase. Ingesta will discuss the consolidated results for fiscal year 2020. Since we cannot reasonably predict the impact of the spread of the coronavirus disease, including when it will diminish, our consolidated results forecast for FY 2020 is undetermined at this time. We plan to issue a consolidated results forecast for fiscal year 2020 when we announce the earnings for the Q1 in early August. The best we can do is make certain hypotheses regarding the trajectory of the coronavirus disease and estimate FY 2020 operating income for each of our segments based on the assumptions you see here. The estimated results are expressed as a percentage range of actual FY 2019 operating income. Based on these assumptions, we estimate that consolidated operating income would decrease at least 30% compared to the FY 2019 result. These figures are merely an estimate based on certain assumptions, and we are continuing to work to improve our profit level. Now I will discuss operating cash flow, excluding the Financial Service segment and capital allocation through the end of fiscal year 2019. We generated approximately 1,500,000,000,000 yen of cumulative operating cash flow over the last two fiscal years. Approximately 0,200,000,000,000 yen in cash flow was generated from the sale of businesses and assets. We prioritized using this cash to make growth investments such as increasing image sensor manufacturing capacity and acquiring EMI. In addition, as a strategic investment, we repurchased a total of 300,000,000,000 yen of Sony stock. We will update you on our forecast for FY 2020 operating cash flow to include the impact of the coronavirus when we announced earnings for the Q1. Lastly, I would like to explain the state of our balance sheet. In order to reliably procure capital even when the financial markets are in turmoil, Sony has managed its balance sheet with a high degree of financial discipline while closely monitoring our credit ratings. As of the end of March 2020, we maintained our strong financial underpinnings with a 42.8 percent equity ratio excluding the Financial Services segment. No debt is coming due in FY 2020, and we had approximately JPY 960,000,000,000 of cash on hand as of the end of March 2020 for consolidated Sony, excluding the Financial Services segment. In addition, we have a JPY 570,000,000,000 included lines of credit from major banking institutions inside and outside of Japan and approximately JPY 1,000,000,000,000 commercial paper facility and uncommitted lending facilities from several banks. As of today, none of these facilities were being utilized. Thus, we believe that we have sufficient liquidity to continue to conduct business in a smooth manner even if the economic environment were to deteriorate conspicuously going forward. There is no change to our policy of steadily increasing our dividend over the long term. Moreover, we believe we are in a position to proactively consider strategic investments aimed at growth opportunities in the post corona world. This concludes my remarks. Thank you very much. So consolidated finance results financial results brief briefing and the forecast for fiscal year 2020 were explained. Now let us go on to the Q and A session. In the first half 20 minutes, there will be questions from the media. And in the latter half twenty minutes, there will be questions from analysts and our institutional investors. Questions can be asked at any time using e mail, so kindly follow the method that has been informed to you in advance. And the questions that we have received will be read as submitted. If the question is in English, then the interpreter will translate into Japanese, and we will reply in Japanese. So now we would like to entertain questions from the media. We have Mr. Totoki, Senior Executive Vice President and Chief Financial Officer Naomi Matsuka, Senior Vice President and General Manager, Financial Department, Corporate Planning, Executive Department and Mami Imada, Manager, Corporate Communications, to answer your questions. The first question was received from Mr. Shimizu of Nikkei about the novel coronavirus, the game, pictures, the music, businesses, how do you think the consumer demand will change because of the adverse impact? And creative entertainment on the strengths of technology, Sony, you are an entertainment company. How are you going to overcome the difficulties such as delay in productions? The second question is about PlayStation 5. What is your forecast for the demand of PlayStation 5 and actual number of deliveries? Will there be any quantitative impact due to the COVID-nineteen? Thank you. This is Mr. Totoki speaking. I will answer 2 questions. Firstly, the demand on digital equipment actually has been increasing. That's the behavior of the consumer currently, and I think this trend is likely to continue for some time. And also, the creative attainment on the strength of Sony's technology, as far as we're concerned, at times, being such, I believe we have to support the entertainment business earlier in April. We created a relief fund amounting JPY 200,000,000 to fight against the impact of the virus for pictures and music because of the sales system, live entertainment or the delay and suspension of the productions, they are affecting lives of the creators and our partners. And with the creation of this fund, we decided to help support their well-being going forward. And also about the PlayStation 5, as I mentioned in the speech, the production is proceeding basically according to our schedule. In the meantime, the actual delivery and actual demand, I'd like to refrain from commenting on that as of this time. So that's the extent of what I can say at this particular moment. Thank you. Next from NHK, Inomata san. New coronavirus, what kind of FX would it have on the performance in terms of monetary value? You mentioned the impact so far, but what's the forecast of the impact on this fiscal year as much as you can? 2nd question, the impact of the coronavirus in order to contain or minimize the effect, in order to protect the employees, many companies are changing the way to manage business or work lifestyle. And there may be 4 day work week and other new ideas, but does Sony have new ideas and initiatives as a new way to for work? Allow me to answer these two questions. First, this the impact of the coronavirus in monetary value to the performance. FY 'nineteen for FY 'nineteen, the outbreak of the coronavirus and others, it's difficult to delineate these 2. But for the consolidated results, JPY 68 1,000,000,000 negative impact was felt. For this fiscal year, the impact on this fiscal year is so difficult to predict or forecast any impact. But including that, we came up with the estimate, as I showed you earlier. I would like to take a look at that again. Your second question, the impact of the coronavirus, how to minimize it, Any new measures to minimize the impact? I would like to invite Imada san to answer. The measures for the new work style, I do not have any specific measures precisely for that, but we prioritize the safety of the employees. The tender work is one way to do that. And the work from home, regardless of where you stay, they can work. And through this measure, new way of work is being promoted, and I'm sure it will proceed. At this moment, pursuant to the government policy, we try to put highest priority to the safety and the health of the employees. Thank you. Let's go on. From Reuters, Yamazaki san. We have a question. First, a question about PS5. The impact if there is an impact on the supply chain, I'd like to know what it is. 2nd, about not limited to games, after this coronavirus, do you have a plan to review the supply chain? That's the 2 questions. First question about PS5, the supply chain impact on supply chain. Basically, we have worked from home and restrictions on international travel, those constraints. So some testing process and the qualification of production lines may be constrained, but necessary measures are being taken for this. So towards the end of the year, we believe that we can prepare without problem for the launch. And review of the supply chain, do we have any plans for the review? From before, for the manufacturing sites, there have been consideration of various business risks, and we have made study. And so for this expansion of new coronavirus, this is a global issue. And so changing the production sites at this present time is not being considered. Thank you. Let us continue with the next question. Let me read this next question. Nishida san, freelancer, asked this question firstly. But again, Pictures and Music, the contents business and also in Electronics business, has there been impact in terms of the delivery and the supply? It's a delay due to the COVID-nineteen. And also, do you think the impact of COVID is limited? What will be your outlook of impact after next year? Second question is about game business. Hardware sales, are they according to your plans? Or will there be impact of the COVID-nineteen? Is it larger or less than last year? And under the current situation, it's even lower than your expectations. Mr. Totoki speaking. Regarding your first question, in most of our businesses, the impact of COVID-nineteen, what is the delay situation that we are suffering? And also after this year, what will be the outlook? Will there be an impact? Speaking about the game business, for instance, for the 1st party and third party games in terms of game development, currently, there are no problems that are manifest as of now. But still, development activity is underway with a lot of restrictions. So efficiency may be lower, which means that there's going to be a delay in scheduling. There's a risk as such, and we have to monitor that risk very carefully. About the contents business, pictures and music, they have suspended all shooting activities. And therefore, the contents production in pictures or music, particularly music where the visual contents producing them is now very difficult. So that's what we are already observing. And during this year, as I said before, we will continue to feel some impact going forward. As far as the game business is concerned, hardware sales. So as the unit sales of hardware is concerned, the PS4, the existing model, the sales are smooth going, I would say, doing very well. Particularly, the year just ended. In the Q4 of last fiscal year, the results were basically exactly as we'd expected. And more recently, demand is rather very strong, we are informed. Thank you. Well, the time is running out. So this concludes the Q and A session for media people. In order to change the participants, We will take a break, short break before we start the sessions for analysts and institutional investors. Thank you for your patience. From now, for about 20 minutes, we will entertain questions from analysts and institutional investors. The respondents are Hiroki Totoki, Senior Executive Vice President and CFO. We also have Naomi Matsuoka, Senior General Manager of Finance Department and Corporate Planning and Control Department. And we have Hiroshi Korenaga, who is VP, Senior General Manager of Global Accounting Division. Now first question, please. From Morgan Stanley, Securities. At the time of Lehman shock, for 6 quarters, more than JPY 100,000,000,000 of restructuring expenses was planned. Are you going to take any measures from the Q1 of FY 2020? Or are you going to wait out until the coronavirus outbreak subsides? Now the risk of EPS going negative and the review of the business portfolio as a possibility, is there any possibility of positioning change? Now after Lehman, this time, it's so different from Lehman shock number of people and the fixed cost now is so different from where it was at the time of the Lehman shock. In any case, under these circumstances, the demand itself has declined than originally expected. So we reviewed the marketing expenses. And then the overhead reduction for the indirect costs and cost control, but we will not wait out until the coronavirus subsides to do this in order to secure the level of profitability? Thank you. Next question from Merrill Lynch, Hiroko san. First question. Sony's next generation game console marketing compared to Microsoft software lineup introduction is a bit inferior, some people say. It's lagging. So towards the launch of PS5, do you think that you have a passing grade? And if it is a passing grade, then what is going well? Also, the towards the launch at the end of the year, going forward, what is the theme for your advertising activity? 2nd question. For Pictures, Media Network, the portfolio review expense will be the same as previous fiscal year, that is for fiscal year 2020. Yes. So PS5, right now, we have to think strategically right now. Therefore, unfortunately, I cannot really make a comment. Is it a passing grade or not? Well, on that point, I think results will be everything. So after the launch, it will become clear. And so we are going to do our utmost make our utmost effort. Now about Pictures. In Media Network, the portfolio review expense. On a continuous basis, this is going to be studied. At the present time, we haven't made major decisions. Thank you. Next question? Mr. Nakane of Mizuho Securities asked this question. Firstly, the sales and operating income forecast for March 2021 year? I think you've created budget as of end of February. At that time, what was your forecast by different businesses segment? And also, the second question is post corona or to be with corona in game and music and pictures, do you think will be the business environment? Will there be structural change in the business environment? And will that affect or how will that affect the profitability of Sony and other peer companies? What would be the strategy of Sony to deal with such a change? Thank you. Mr. Totoki speaking. So yes, ending March 21, what will be your forecast on sales was the first question. And we created budget in February. And what was our view at that time? I think it was the question. Currently, everything has changed. Assumptions have changed. So discussing what might have been the situation without impact of the virus, we'll be discussing that will be very difficult or very impossible. But as far as we're concerned, for this year, based on the results for this year, we will make efforts to go one step further in the year after that. And that's always a practice in creating the budget based on the results of the current year, trying to do better. And also, about the change in the business environment, how is our business environment going to change, I think people are discussing a lot of things, but at least people stay at home, spend more time or spending less time outdoors. And a lot of activities are done on a remote networked basis. So that will be a poor part of the change. And as far as we're concerned, we have a lot of businesses related to networking and remote operations. PlayStation Network, for instance, it's a large online community. So I'd like to set this business up. There's a possibility, and I think there's room for the growth of this particular business. And the use of 5 gs, for instance, production of video contents, for instance, instead of physical contents can be done online. And also in medical business field, we have real time technologies, but there's a lot of fields where our technologies will be useful. So those are areas and opportunities that we'll be focusing going forward. And speaking of pictures, theatrical release is always very important. And because of the coronavirus negative impact, we are currently suffering. But once the situation settles and if we restart the theatrical operations, the people may not come to theaters to view pictures. So it may take some time. If that happens, then we have to discuss the business concerns to create new ways of releasing and showing pictures. And also, we can use online and remote technologies for the live performances going forward. Thank you. From JP Morgan, Mr. Ayada. First question for INASS about the inventory of supply chain. For smartphones, depending on the customers, some models do not sell well. But depending on the future trend, the evaluation loss which happened in the past of PS inventory, are you thinking about that? And then the image sensors price trend, larger size, multisensor trend, what is your opinion or view on this trend? Allow me to answer for the inventory. In December last year, the end of December last year, the inventory was in tight situation in the 4th quarter. Because of the outbreak of the coronavirus, sales decreased. And then compared to that, inventory size increased as of the end of March. The inventory level is approaching the appropriate level. In the FY 2020, these inventory will be shipped out. So we are not planning any evaluation loss. That's the first point. At this point in time, on the business negotiation level, from a as an bird's eye view, the impact of the outbreak of the coronavirus are 3 fold. 1, smartphone market's deceleration and the negative impact on the sales unit sales. And in the supply chain, the inventory is increasing over across the supply chain. The sales volume itself compared to the FY2019, if it increases, the increased percentage or the speed of the increase will be slower than FY2019. Basically, the market itself is decelerating from the high end smartphones to mid to low. There's a shift from high end to mid to low. That can be triggered because of the decelerating market. And then the image sensors product mix may deteriorate. Compared to FY 2019 in FY2019, the larger sized demand increased sharply. This speed may slow down. This is a big possibility. For more details, 0.58 microns product, we are in the 2nd year producing it. So the mass production started 2 years ago, and the market will proceed accordingly. Going on to the next question. SMBC Nikko Securities, Katsura san. First question, semiconductor inventory and the utilization and production capacity. This kind of results and your forecast plan, if you could let me know. And second question, cash position, present status and under the present environment, what is your stance on the view of allocation? Yes. Image sensor capacity on an installed basis, if I can answer in that way, Q4 fiscal year 2019 in the master process, 123,000 per month. And 124,000 was the previous assumption, so it's a bit of a drop. But with the process mix, there is some fluctuation, and it's not that the installation is delayed. And for fiscal 2020, at the end of Q1, KRW 133 per month. So over 3 months, capacity will go up gradually. And in the 4th quarter of last year, 3 months simple average, 122 ks for operation. And the Q1 of fiscal year 2020, 3 months average, 127 ks. So for mobile and for digital, there is slight production adjustment for the digital camera. I would say that's about it. And if I may talk a little more, at the end of fiscal 2020, master process output will be 138,000. It is going to be the output will be increased. And basically, there is no change to that plan. And for the cash position and allocation that you asked about. First of all, for fiscal 2020, as of the end of the previous year March, it is JPY 962,300,000,000 and then commitment line, JPY 570,000,000,000. And this commitment line of JPY 570,000,000,000 is not used. And in addition to that, commercial paper facility, JPY 1,000,000,000,000 and bank uncommitted line is JPY 2 30,000,000,000. So we haven't used any of this. And therefore, if you have that kind of allowance, even if the environment of the economy worsens, we believe that we can continue to be liquid. As for allocation stance, naturally, as we have been saying from before, strategic investment M and A and stock repurchase, well, we are going to have an optimal utilization, and our stance has not changed. As for convertible bonds, right now, we are not thinking so proactively. Thank you. We'll proceed to the next question. Nishimura san from Credit Suisse. Firstly, ask this question. For fiscal year 2018, operating income estimates, the impact of the virus on each of the segments and also other impacts, can you separate the various impacts? So direction in terms of increase or decrease in fixed costs, can you also refer to that as well? Second question would be about image sensors. They're getting larger so that unit price is increasing. And also because of multi lenses, volume is increasing. That has been the trend. Will there be change in that trend? So decline in end result end demand of smartphones will be a change in your plans to increase your production capacity. Firstly, our estimates for the operating income for the fiscal 2020. The coronavirus impact and other type of impact, we have not estimated those separating the 2. And whatever I would say is, but for the impact of corona, not separating the 2, corona versus non corona. So allow me not to make any reference to that. But when time comes for us to announce the results of the Q1, we will be able to give you more solid features. So please bear with that. About the emissions production, the future direction was your question. Raskaris speaking, Our midterm direction is not likely to change going forward, largely speaking. But having said that, looking at the demand for smartphones currently, yes, there's an impact of the virus, so that smartphone demand is somewhat lower now. That's a matter of fact. So as I've been explaining, the impact will be felt from the declining demand and also the negative impact due to product mix changes. For fiscal 2020, yes, these are situations that we have to observe very carefully. And with that, there will be an impact to that on our schedule plan to increase our production capacity. Well, as I said in the speech, for 3 years now, 80% of the investment plan has been decided already. The remaining 20% or so, we have the option of deferring the remaining investments. So we'll look at the current demand, and we'll make investments at appropriate timing. Thank you. Now it is time to close the briefing session. Thank you very much for your attendance.